What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-23 compared with 2025-07-22 · 67 added, 68 removed, 185 unchanged (42% of the section changed)

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We caution you therefore against relying on these forward-looking statements.

Some of the factors that could cause actual results to differ from our expectations include regional, national, or global political, economic, business, competitive, market and regulatory conditions and the other factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 in “Item 1A Risk Factors,” “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 7A Quantitative and Qualitative Disclosures About Market Risk.”

Some of the factors that could cause actual results to differ from our expectations include regional, national, or global political, economic, business, competitive, market and regulatory conditions, government shutdowns and the other factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 in “Item 1A Risk Factors,” “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 7A Quantitative and Qualitative Disclosures About Market Risk.”

We qualify all of our forward-looking statements by these cautionary statements.

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We focus on conducting clinical trials across all major therapeutic areas, with particular strength in Oncology, Metabolic Disease, Cardiology, Central Nervous System, or CNS, and Antiviral and Anti-infective, or AVAI.

Our global platform includes approximately 6,000 employees across 44 countries as of June 30, 2025, providing our customers with broad access to diverse markets and patient populations as well as local regulatory expertise and market knowledge.

Our global platform includes approximately 6,200 employees across 44 countries as of September 30, 2025, providing our customers with broad access to diverse markets and patient populations as well as local regulatory expertise and market knowledge.

How We Generate Revenue

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Net new business awards represent gross new business awards received in a period offset by total cancellations in that period.

Net new business awards were $620.5 million and $1,120.6 million for the three and six months ended June 30, 2025, respectively.

Net new business awards were $551.0 million and $1,166.5 million for the three and six months ended June 30, 2024, respectively.

Net new business awards were $789.6 million and $1,910.2 million for the three and nine months ended September 30, 2025, respectively.

Net new business awards were $533.7 million and $1,700.3 million for the three and nine months ended September 30, 2024, respectively.

Backlog represents anticipated future net revenue from net new business awards that have not commenced or are currently in process but not complete.

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dollar denominated backlog.

As of June 30, 2025, our backlog decreased by $51.3 million, or 1.8%, to $2,873.6 million compared to $2,924.9 million as of June 30, 2024.

Included within backlog as of June 30, 2025 was approximately $1,740.0 million to $1,760.0 million that we expect to convert to net revenue over the next twelve months, with the remainder expected to convert to net revenue thereafter.

As of September 30, 2025, our backlog increased by $73.2 million, or 2.5%, to $3,000.6 million compared to $2,927.4 million as of September 30, 2024.

Included within backlog as of September 30, 2025 was approximately $1,830.0 million to $1,850.0 million that we expect to convert to net revenue over the next twelve months, with the remainder expected to convert to net revenue thereafter.

The effect of foreign currency adjustments on backlog was as follows:

favorable foreign currency adjustments of $14.5 million for the three months ended June 30, 2025;

favorable foreign currency adjustments of $21.4 million for the six months ended June 30, 2025;

unfavorable foreign currency adjustments of $1.2 million for the three months ended June 30, 2024;

and unfavorable foreign currency adjustments of $8.0 million for the six months ended June 30, 2024.

favorable foreign currency adjustments of $2.6 million for the three months ended September 30, 2025;

favorable foreign currency adjustments of $24.0 million for the nine months ended September 30, 2025;

favorable foreign currency adjustments of $5.8 million for the three months ended September 30, 2024;

and unfavorable foreign currency adjustments of $2.2 million for the nine months ended September 30, 2024.

Backlog and net new business award metrics may not be reliable indicators of our future period revenue as they are subject to a variety of factors that may cause material fluctuations from period to period.

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dollars using the following average exchange rates based on data obtained from www.xe.com:

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

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

2025 2024 2025 2024

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Results of Operations

Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024

Three Months Ended June 30,

Three Months Ended September 30, 2025 compared to Three Months Ended September 30, 2024

Three Months Ended September 30,

(Amounts in thousands, except percentages) 2025 2024 Change

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Net income $ 111,135 $ 96,426 $ 14,709

Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024

Six Months Ended June 30,

Nine Months Ended September 30, 2025 compared to Nine Months Ended September 30, 2024

Nine Months Ended September 30,

(Amounts in thousands, except percentages) 2025 2024 Change

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Total revenue

Total revenue increased by $75.2 million to $603.3 million for the three months ended June 30, 2025, from $528.1 million for the three months ended June 30, 2024.

Total revenue increased by $122.7 million to $1,161.9 million for the six months ended June 30, 2025, from $1,039.1 million for the six months ended June 30, 2024.

The increase for the three and six months ended June 30, 2025 was primarily driven by growth within the Metabolic, Oncology and Central Nervous System therapeutic areas, compared to the same periods in the prior year.

Total revenue increased by $126.6 million to $659.9 million for the three months ended September 30, 2025, from $533.3 million for the three months ended September 30, 2024.

Total revenue increased by $249.3 million to $1,821.8 million for the nine months ended September 30, 2025, from $1,572.5 million for the nine months ended September 30, 2024.

The increase for the three and nine months ended September 30, 2025 was primarily driven by growth within the Metabolic, Oncology and Central Nervous System therapeutic areas, compared to the same periods in the prior year.

Total direct costs

Total direct costs increased by $49.0 million, to $423.3 million for the three months ended June 30, 2025 from $374.3 million for the three months ended June 30, 2024.

Total direct costs increased by $73.4 million, to $803.5 million for the six months ended June 30, 2025 from $730.2 million for the six months ended June 30, 2024.

Total direct costs increased by $98.7 million, to $463.0 million for the three months ended September 30, 2025 from $364.3 million for the three months ended September 30, 2024.

Total direct costs increased by $172.0 million, to $1,266.5 million for the nine months ended September 30, 2025 from $1,094.5 million for the nine months ended September 30, 2024.

The increase was primarily attributed to higher reimbursed out-of-pocket expenses and higher personnel costs to support the growth in service activities.

Reimbursed out-of-pocket expenses, which can fluctuate significantly from period to period based on the timing of program initiation and closeout, increased by $34.7 million and $52.7 million for the three and six months ended June 30, 2025, compared to the same periods in the prior year.

The higher personnel costs portion increased by $12.0 million and $17.4 million for the three and six months ended June 30, 2025, compared to the same periods in the prior year.

Reimbursed out-of-pocket expenses, which can fluctuate significantly from period to period based on the timing of program initiation and closeout, increased by $83.9 million and $136.6 million for the three and nine months ended September 30, 2025, compared to the same periods in the prior year.

The higher personnel costs portion increased by $12.4 million and $29.8 million for the three and nine months ended September 30, 2025, compared to the same periods in the prior year.

Selling, general and administrative

Selling, general and administrative expenses increased by $5.2 million, to $46.7 million for the three months ended June 30, 2025 from $41.5 million for the three months ended June 30, 2024.

Selling, general and administrative expenses increased by $19.0 million, to $104.6 million for the six months ended June 30, 2025 from $85.5 million for the six months ended June 30, 2024.

The increase was primarily attributed to higher personnel costs to support the growth in service activities.

The higher personnel costs portion increased by $4.4 million and $19.0 million for the three and six months ended June 30, 2025, compared to the same periods in the prior year.

Selling, general and administrative expenses decreased by $1.1 million, to $48.1 million for the three months ended September 30, 2025 from $49.2 million for the three months ended September 30, 2024.

Selling, general and administrative expenses increased by $17.9 million, to $152.6 million for the nine months ended September 30, 2025 from $134.8 million for the nine months ended September 30, 2024.

The decrease for the three months ended September 30, 2025 was primarily attributed to a decrease in stock-based compensation expense of $6.4 million, partially offset by higher personnel costs, excluding stock-based compensation expense, to support the growth in service activities of $3.5 million, compared to the same period in the prior year.

The increase for the nine months ended September 30, 2025 was primarily attributed to higher personnel costs to support the growth in service activities of $16.1 million, compared to the same period in the prior year.

Depreciation and Amortization

Depreciation and amortization expense of $7.0 million for the three months ended June 30, 2025, remained relatively consistent with $7.2 million for the three months ended June 30, 2024.

Depreciation and amortization expense of $13.9 million for the six months ended June 30, 2025, remained relatively consistent with $14.2 million for the six months ended June 30, 2024.

Depreciation and amortization expense of $7.0 million for the three months ended September 30, 2025, remained relatively consistent with $7.5 million for the three months ended September 30, 2024.

Depreciation and amortization expense of

$21.0 million for the nine months ended September 30, 2025, remained relatively consistent with $21.7 million for the nine months ended September 30, 2024.

Miscellaneous (expense) income, net

Miscellaneous expense, net increased by $2.7 million to $2.9 million for the three months ended June 30, 2025, from $0.1 million for the three months ended June 30, 2024.

Miscellaneous (expense) income, net changed by $9.2 million to $4.7 million of expense for the six months ended June 30, 2025 from $4.5 million of income for the six months ended June 30, 2024.

Miscellaneous expense, net decreased by $0.5 million to $0.5 million for the three months ended September 30, 2025, from $1.0 million for the three months ended September 30, 2024.

Miscellaneous (expense) income, net changed by $8.6 million to $5.2 million of expense for the nine months ended September 30, 2025 from $3.4 million of income for the nine months ended September 30, 2024.

These changes were mainly attributable to foreign exchange gains and losses that arise in connection with the revaluation of short-term intercompany balances between our domestic and international subsidiaries and from the settlement of third-party accounts receivables and payables denominated in a currency other than the local currency of the entity making the payment, third-party investment gains or losses and proceeds from the recovery of a note receivable, compared to the same periods in the prior year.

Interest income, net

Interest income, net decreased by $4.4 million to $1.1 million for the three months ended June 30, 2025, from $5.5 million for the three months ended June 30, 2024.

Interest income, net decreased by $2.0 million to $7.5 million for the six months ended June 30, 2025, from $9.6 million for the six months ended June 30, 2024.

Interest income, net decreased by $6.0 million to $1.5 million for the three months ended September 30, 2025, from $7.5 million for the three months ended September 30, 2024.

Interest income, net decreased by $8.1 million to $9.1 million for the nine months ended September 30, 2025, from $17.1 million for the nine months ended September 30, 2024.

These changes were mainly attributable to decreased interest income on Cash and cash equivalents, compared to the same periods in the prior year.

Income tax provision

Income tax provision increased by $12.1 million, to $34.3 million for the three months ended June 30, 2025 from $22.1 million for the three months ended June 30, 2024.

Income tax provision increased by $5.5 million, to $37.9 million for the six months ended June 30, 2025 from $32.3 million for the six months ended June 30, 2024.

The overall effective tax rate for the three months ended June 30, 2025 was 27.5%, compared to an overall effective tax rate of 20.0% for the three months ended June 30, 2024.

The overall effective tax rate for the six months ended June 30, 2025 was 15.6% compared to an overall effective tax rate of 14.5% for the six months ended June 30, 2024.

The increase in the income tax provision and overall effective tax rate for the three months ended June 30, 2025 was primarily attributable to an increase in pre-tax book income, a decrease in excess tax benefits recognized from share-based compensation and a decrease in the estimated tax benefits related to Foreign Derived Intangible Income (FDII) compared to the same period in the prior year.

The increase in the income tax provision and overall effective tax rate for the six months ended June 30, 2025 was primarily attributable to an increase in pre-tax book income and a decrease in the estimated tax benefits related to FDII, which was partially offset by an increase in excess tax benefits recognized from share-based compensation compared to the same period in the prior year.

Income tax provision increased by $9.4 million, to $31.7 million for the three months ended September 30, 2025 from $22.4 million for the three months ended September 30, 2024.

Income tax provision increased by $14.9 million, to $69.6 million for the nine months ended September 30, 2025 from $54.7 million for the nine months ended September 30, 2024.

The overall effective tax rate for the three months ended September 30, 2025 was 22.2%, compared to an overall effective tax rate of 18.8% for the three months ended September 30, 2024.

The overall effective tax rate for the nine months ended September 30, 2025 was 18.0% compared to an overall effective tax rate of 16.0% for the nine months ended September 30, 2024.

The increase in the income tax provision for the three months ended September 30, 2025 was primarily attributable to an increase in pre-tax book income and a decrease in the estimated tax benefits related to Foreign Derived Intangible Income (FDII) compared to the same period in the prior year.

The increase in the overall effective tax rate for the three months ended September 30, 2025 was primarily attributable to a decrease in the estimated tax benefits related to FDII compared to the same period in the prior year.

The increase in the income tax provision for the nine months ended September 30, 2025 was primarily attributable to an increase in pre-tax book income and a decrease in the estimated tax benefits related to FDII, which was partially offset by an increase in excess tax benefits recognized from share-based compensation compared to the same period in the prior year.

The increase in the overall effective tax rate for the nine months ended September 30, 2025 was primarily attributable to a decrease in the estimated tax benefits related to FDII, which was partially offset by an increase in excess tax benefits recognized from share-based compensation compared to the same period in the prior year.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S.

The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

We are currently assessing its impact on our condensed consolidated financial statements.

Where relevant, the Company has reflected any material items that were enacted in the condensed consolidated financial statements for the three and nine months ended September 30, 2025.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities.

Our principal sources of liquidity as of June 30, 2025 are operating cash flows and from borrowings under our unsecured credit facility consisting of up to a $600.0 million revolving line of credit which we entered into on September 30, 2019 (the “Credit Facility”), and has subsequently been amended.

As of June 30, 2025, we had cash and cash equivalents of $46.3 million which decreased from $669.4 million as of December 31, 2024 primarily due to repurchases of common stock.

Approximately $23.1 million of cash and cash equivalents, none of which was restricted, was held by our foreign subsidiaries as of June 30, 2025.

As of June 30, 2025, we had $600.0 million available for borrowing under the Credit Facility.

On July 17, 2025, the Company entered into Amendment No.

9 to the Loan Agreement, which decreased the aggregate principal amount that may be borrowed under the Credit Facility to up to $10.0 million.

Our principal sources of liquidity as of September 30, 2025 are operating cash flows and from borrowings under our unsecured credit facility consisting of up to a $10.0 million revolving line of credit which we entered into on September 30, 2019 (the “Credit Facility”), and has subsequently been amended.

All $10.0 million of the line of credit is available for borrowing as of September 30, 2025.

As of September 30, 2025, we had cash and cash equivalents of $285.4 million which decreased from $669.4 million as of December 31, 2024 primarily due to repurchases of common stock.

Approximately $19.7 million of cash and cash equivalents, none of which was restricted, was held by our foreign subsidiaries as of September 30, 2025.

Our expected primary cash needs on both a short and long-term basis are for investment in operational growth, including additional lease commitments, capital expenditures, share repurchases, selective strategic bolt-on acquisitions, other investments, and other general corporate needs.

We have historically funded our operations and growth with cash flow from operations and borrowings under our credit facilities.

We have historically funded our operations and growth with cash flow

from operations and borrowings under our credit facilities.

We expect to continue expanding our operations through organic growth and potentially highly selective bolt-on acquisitions and investments.

As of June 30, 2025, cash commitments to support operating business needs include lease liabilities discussed in Note 8 of the Condensed Consolidated Financial Statements, purchase commitments discussed in Note 11 of the Condensed Consolidated Financial Statements and capital expenditures primarily related to infrastructure investments in our facilities, equipment and technology.

Capital spending as a percentage of revenue decreased by 38 basis points to 1.39% in the six months ended June 30, 2025, compared to the same period in the prior year.

We expect these activities will be funded from existing cash, cash flow from operations and, if necessary, borrowings under our existing or

future credit facilities or other debt.

As of September 30, 2025, cash commitments to support operating business needs include lease liabilities discussed in Note 8 of the Condensed Consolidated Financial Statements, purchase commitments discussed in Note 11 of the Condensed Consolidated Financial Statements and capital expenditures primarily related to infrastructure investments in our facilities, equipment and technology.

Capital spending as a percentage of revenue decreased by 37 basis points to 1.47% in the nine months ended September 30, 2025, compared to the same period in the prior year.

We expect these activities will be funded from existing cash, cash flow from operations and, if necessary, borrowings under our existing or future credit facilities or other debt.

We have deemed that foreign earnings will be indefinitely reinvested and therefore we have not provided taxes on these earnings.

While we do not anticipate the need to repatriate these foreign earnings for liquidity purposes given our cash flows from operations and borrowings under existing and future credit facilities, we would incur taxes on these earnings if the need for repatriation due to liquidity purposes arises.

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows (Amounts in thousands) 2025 2024

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Cash Flow from Operating Activities

Cash flows from operations are driven mainly by net income, deferred income tax provision, stock-based compensation expense, depreciation, noncash lease expense and net movement in advanced billings, accounts receivable and unbilled, net and prepaid expenses and other current assets.

Advanced billings and accounts receivable and unbilled, net fluctuate on a regular basis as we perform our services, bill our customers and ultimately collect on those receivables.

We attempt to negotiate payment terms in order to provide for payments prior to or soon after the provision of services, but this timing of collection can vary significantly on a period by period comparative basis.

Net cash flows provided by operating activities was $274.4 million for the six months ended June 30, 2025 beginning with net income of $204.9 million.

Net cash flows provided by operating activities was $520.6 million for the nine months ended September 30, 2025 beginning with net income of $316.0 million.

Adjustments to reconcile net income to net cash provided by operating activities were $130.4 million, primarily related to deferred income tax provision of $63.4 million, stock-based compensation expense of $29.2 million, depreciation of $20.3 million and noncash lease expense of $17.3 million.

Changes in operating assets and liabilities used $13.3 million in operating cash flows and was primarily driven by increased accounts receivable and unbilled, net of $82.0 million and increased prepaid expenses and other current assets of 33.1 million, partially offset by increased advanced billings of $98.2 million.

Net cash flows provided by operating activities was $269.1 million for the six months ended June 30, 2024 beginning with net income of $190.9 million.

Adjustments to reconcile net income to net cash provided by operating activities were $28.8 million, primarily related to depreciation of $13.5 million, noncash lease expense of $11.5 million and stock-based compensation expense of $7.9 million.

Changes in operating assets and liabilities provided $49.4 million in operating cash flows and was primarily driven by increased advanced billings of $78.6 million, partially offset by increased prepaid expenses and other current assets of $11.3 million and decreased lease liabilities of $11.0 million.

Changes in operating assets and liabilities provided $74.2 million in operating cash flows and was primarily driven by increased advanced billings of $123.7 million and increased accrued expenses of $57.5 million, partially offset by increased accounts receivable and unbilled, net of $77.1 million, decreased lease liabilities of $18.1 million and increased prepaid expenses and other current assets of 15.6 million.

Net cash flows provided by operating activities was $418.1 million for the nine months ended September 30, 2024 beginning with net income of $287.4 million.

Adjustments to reconcile net income to net cash provided by operating activities were $52.4 million, primarily related to depreciation of $20.7 million, stock-based compensation expense of $19.6 million and noncash lease expense of $17.3 million.

Changes in operating assets and liabilities provided $78.4 million in operating cash flows and was primarily driven by increased advanced billings of $111.1 million, partially offset by decreased lease liabilities of $15.4 million and increased accounts receivable and unbilled, net of $13.0 million.

Cash Flow from Investing Activities

Net cash used in investing activities was $16.0 million for the six months ended June 30, 2025 primarily consisting of property and equipment expenditures.

Net cash used in investing activities was $10.3 million for the six months ended June 30, 2024 primarily consisting of property and equipment expenditures of $18.4 million, partially offset by $8.1 million in other investing activity.

Net cash used in investing activities was $26.7 million for the nine months ended September 30, 2025 primarily consisting of property and equipment expenditures.

Net cash used in investing activities was $20.7 million for the nine months ended September 30, 2024 primarily consisting of property and equipment expenditures of $28.9 million, partially offset by $8.2 million in other investing activity.

Cash Flow from Financing Activities

Net cash used in financing activities was $886.5 million for the six months ended June 30, 2025 primarily related to $912.8 million in repurchases of common stock, partially offset by proceeds from stock option exercises of $26.3 million.

Net cash provided by financing activities was $8.3 million for the six months ended June 30, 2024 related to proceeds from stock option exercises.

Net cash used in financing activities was $883.1 million for the nine months ended September 30, 2025 primarily related to $917.4 million in repurchases of common stock, partially offset by proceeds from stock option exercises of $34.3 million.

Net cash provided by financing activities was $14.6 million for the nine months ended September 30, 2024 related to proceeds from stock option exercises.

Share Repurchases

In 2022, the Company’s Board of Directors (“Board”) approved a stock repurchase program of up to $500.0 million.

In the first and second quarters of 2025, the Board approved increases of $600.0 million and $1.0 billion, respectively, to the Company’s stock repurchase program bringing the total repurchase authorization up to $2.1 billion.

During the three and six months ended June 30, 2025, the Company repurchased 1,754,264 shares and 2,947,275 shares for $518.5 million and

$908.4 million, respectively.

The Company did not execute any share repurchases during the three and six months ended June 30, 2024.

As of June 30, 2025, the Company has remaining authorization of $826.3 million under the repurchase program.

In 2022, the Company’s Board of Directors approved a share repurchase program which has been amended several times to increase the aggregate amount of the share repurchase authorization.

During the three and nine months ended September 30, 2025, the Company repurchased 14,649 shares and 2,961,924 shares for $4.5 million and $912.9 million, respectively.

The Company did not execute any share repurchases during the three and nine months ended September 30, 2024.

As of September 30, 2025, the Company has remaining authorization of $821.7 million under the repurchase program.

Repurchases under the share repurchase program are executed in the open market or negotiated transactions under trading plans put in place pursuant to Rule 10b5-1.

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Retired share repurchase amounts paid in excess of par value are reflected within Accumulated deficit/Retained earnings in the Company’s condensed consolidated balance sheets.

As of June 30, 2025, we had no indebtedness.

As of September 30, 2025, we had no indebtedness.

Refer to Note 7 of the Notes to Condensed Consolidated Financial Statements for details regarding our Credit Facility.

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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