IQVIA HOLDINGS INC. - Quarter Report: 2022 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________
FORM 10-Q
_________________________________________________________
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended September 30, 2022
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from to .
Commission File Number: 001-35907
_________________________________________________________
IQVIA HOLDINGS INC.
(Exact name of registrant as specified in its charter)
_________________________________________________________
| Delaware | 27-1341991 | |||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
4820 Emperor Blvd., Durham, North Carolina 27703
(Address of principal executive office and Zip Code)
(919) 998-2000
(Registrant’s telephone number, including area code)
_________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x | Accelerated filer | ☐ | ||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
Emerging growth company | ☐ | ||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol | Name of Each Exchange on which Registered | ||||||||||||
Common Stock, par value $0.01 per share | IQV | New York Stock Exchange | ||||||||||||
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.
Class | Number of Shares Outstanding | |||||||||||||
| Common Stock $0.01 par value | 185,740,023 | shares outstanding | as of October 21, 2022 | |||||||||||
IQVIA HOLDINGS INC.
FORM 10-Q
TABLE OF CONTENTS
Page | ||||||||
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
IQVIA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Revenues | $ | 3,562 | $ | 3,391 | $ | 10,671 | $ | 10,238 | ||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | 2,321 | 2,253 | 6,975 | 6,869 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 517 | 498 | 1,488 | 1,422 | ||||||||||||||||||||||
| Depreciation and amortization | 248 | 336 | 773 | 1,002 | ||||||||||||||||||||||
| Restructuring costs | 4 | 2 | 15 | 15 | ||||||||||||||||||||||
| Income from operations | 472 | 302 | 1,420 | 930 | ||||||||||||||||||||||
| Interest income | (4) | (2) | (7) | (4) | ||||||||||||||||||||||
| Interest expense | 108 | 92 | 288 | 285 | ||||||||||||||||||||||
| Loss on extinguishment of debt | — | 1 | — | 25 | ||||||||||||||||||||||
| Other expense (income), net | 8 | (62) | 51 | (128) | ||||||||||||||||||||||
| Income before income taxes and equity in (losses) earnings of unconsolidated affiliates | 360 | 273 | 1,088 | 752 | ||||||||||||||||||||||
| Income tax expense | 70 | 12 | 212 | 104 | ||||||||||||||||||||||
| Income before equity in (losses) earnings of unconsolidated affiliates | 290 | 261 | 876 | 648 | ||||||||||||||||||||||
| Equity in (losses) earnings of unconsolidated affiliates | (7) | — | (12) | 5 | ||||||||||||||||||||||
| Net income | 283 | 261 | 864 | 653 | ||||||||||||||||||||||
| Net income attributable to non-controlling interests | — | — | — | (5) | ||||||||||||||||||||||
| Net income attributable to IQVIA Holdings Inc. | $ | 283 | $ | 261 | $ | 864 | $ | 648 | ||||||||||||||||||
| Earnings per share attributable to common stockholders: | ||||||||||||||||||||||||||
| Basic | $ | 1.52 | $ | 1.36 | $ | 4.59 | $ | 3.38 | ||||||||||||||||||
| Diluted | $ | 1.49 | $ | 1.34 | $ | 4.52 | $ | 3.32 | ||||||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | 186.5 | 191.5 | 188.3 | 191.5 | ||||||||||||||||||||||
| Diluted | 189.4 | 195.3 | 191.3 | 195.0 | ||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
IQVIA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net income | $ | 283 | $ | 261 | $ | 864 | $ | 653 | ||||||||||||||||||
| Comprehensive income adjustments: | ||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax expense of $2, $—, $10, $— | 6 | (4) | 29 | — | ||||||||||||||||||||||
Defined benefit plan adjustments, net of income tax expense of $2, $—, $2, $— | 10 | — | 4 | — | ||||||||||||||||||||||
Foreign currency translation, net of income tax expense of $84, $28, $195, $66 | (218) | (117) | (539) | (237) | ||||||||||||||||||||||
| Reclassification adjustments: | ||||||||||||||||||||||||||
Reclassifications on derivative instruments included in net income, net of income tax benefit of $—, $1, $4, $2 | 1 | 3 | 14 | 7 | ||||||||||||||||||||||
| Comprehensive income | 82 | 143 | 372 | 423 | ||||||||||||||||||||||
| Comprehensive income attributable to non-controlling interests | — | — | — | (5) | ||||||||||||||||||||||
| Comprehensive income attributable to IQVIA Holdings Inc. | $ | 82 | $ | 143 | $ | 372 | $ | 418 | ||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
IQVIA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| (in millions, except per share data) | September 30, 2022 | December 31, 2021 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 1,274 | $ | 1,366 | ||||||||||
| Trade accounts receivable and unbilled services, net | 2,640 | 2,551 | ||||||||||||
| Prepaid expenses | 176 | 156 | ||||||||||||
| Income taxes receivable | 47 | 58 | ||||||||||||
| Investments in debt, equity and other securities | 87 | 111 | ||||||||||||
| Other current assets and receivables | 528 | 521 | ||||||||||||
| Total current assets | 4,752 | 4,763 | ||||||||||||
| Property and equipment, net | 507 | 497 | ||||||||||||
| Operating lease right-of-use assets | 333 | 406 | ||||||||||||
| Investments in debt, equity and other securities | 64 | 76 | ||||||||||||
| Investments in unconsolidated affiliates | 87 | 88 | ||||||||||||
| Goodwill | 13,177 | 13,301 | ||||||||||||
| Other identifiable intangibles, net | 4,718 | 4,943 | ||||||||||||
| Deferred income taxes | 97 | 124 | ||||||||||||
| Deposits and other assets | 488 | 491 | ||||||||||||
| Total assets | $ | 24,223 | $ | 24,689 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable and accrued expenses | $ | 2,971 | $ | 2,981 | ||||||||||
| Unearned income | 1,842 | 1,825 | ||||||||||||
| Income taxes payable | 124 | 137 | ||||||||||||
| Current portion of long-term debt | 151 | 91 | ||||||||||||
| Other current liabilities | 165 | 207 | ||||||||||||
| Total current liabilities | 5,253 | 5,241 | ||||||||||||
| Long-term debt, less current portion | 12,243 | 12,034 | ||||||||||||
| Deferred income taxes | 560 | 410 | ||||||||||||
| Operating lease liabilities | 259 | 313 | ||||||||||||
| Other liabilities | 561 | 649 | ||||||||||||
| Total liabilities | 18,876 | 18,647 | ||||||||||||
| Commitments and contingencies (Note 8) | ||||||||||||||
| Stockholders’ equity: | ||||||||||||||
Common stock and additional paid-in capital, 400.0 shares authorized as of September 30, 2022 and December 31, 2021, $0.01 par value, 256.3 shares issued and 185.8 shares outstanding as of September 30, 2022; 255.8 shares issued and 190.6 shares outstanding as of December 31, 2021 | 10,853 | 10,777 | ||||||||||||
| Retained earnings | 3,107 | 2,243 | ||||||||||||
Treasury stock, at cost, 70.5 and 65.2 shares as of September 30, 2022 and December 31, 2021, respectively | (7,715) | (6,572) | ||||||||||||
| Accumulated other comprehensive loss | (898) | (406) | ||||||||||||
| Total stockholders’ equity | 5,347 | 6,042 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 24,223 | $ | 24,689 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
IQVIA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Nine Months Ended September 30, | ||||||||||||||
| (in millions) | 2022 | 2021 | ||||||||||||
| Operating activities: | ||||||||||||||
| Net income | $ | 864 | $ | 653 | ||||||||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 773 | 1,002 | ||||||||||||
| Amortization of debt issuance costs and discount | 11 | 14 | ||||||||||||
| Stock-based compensation | 136 | 128 | ||||||||||||
| Losses (earnings) from unconsolidated affiliates | 12 | (5) | ||||||||||||
| Loss (gain) on investments, net | 35 | (9) | ||||||||||||
| Benefit from deferred income taxes | (52) | (83) | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Change in accounts receivable, unbilled services and unearned income | (88) | 663 | ||||||||||||
| Change in other operating assets and liabilities | 9 | (113) | ||||||||||||
| Net cash provided by operating activities | 1,700 | 2,250 | ||||||||||||
| Investing activities: | ||||||||||||||
| Acquisition of property, equipment and software | (503) | (456) | ||||||||||||
| Acquisition of businesses, net of cash acquired | (1,012) | (994) | ||||||||||||
| Purchases of marketable securities, net | (4) | (9) | ||||||||||||
| Investments in unconsolidated affiliates, net of payments received | (14) | (3) | ||||||||||||
| Proceeds from sale of equity securities | — | 5 | ||||||||||||
| Other | 4 | 1 | ||||||||||||
| Net cash used in investing activities | (1,529) | (1,456) | ||||||||||||
| Financing activities: | ||||||||||||||
| Proceeds from issuance of debt | 1,250 | 1,951 | ||||||||||||
| Payment of debt issuance costs | (5) | (40) | ||||||||||||
| Repayment of debt and principal payments on finance leases | (86) | (2,068) | ||||||||||||
| Proceeds from revolving credit facility | 1,500 | 410 | ||||||||||||
| Repayment of revolving credit facility | (1,600) | (300) | ||||||||||||
| Payments related to employee stock option plans | (70) | (51) | ||||||||||||
| Repurchase of common stock | (1,103) | (202) | ||||||||||||
| Acquisition of Quest's non-controlling interest | — | (758) | ||||||||||||
| Contingent consideration and deferred purchase price payments | (22) | (39) | ||||||||||||
| Net cash used in financing activities | (136) | (1,097) | ||||||||||||
| Effect of foreign currency exchange rate changes on cash | (127) | (41) | ||||||||||||
| Decrease in cash and cash equivalents | (92) | (344) | ||||||||||||
| Cash and cash equivalents at beginning of period | 1,366 | 1,814 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 1,274 | $ | 1,470 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
IQVIA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
| (in millions) | Common Stock Shares | Treasury Stock Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive (Loss) Income | Non- controlling Interests | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 255.8 | (65.2) | $ | 3 | $ | 10,774 | $ | 2,243 | $ | (6,572) | $ | (406) | $ | — | $ | 6,042 | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 0.4 | — | — | (67) | — | — | — | — | (67) | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | (1.7) | — | — | — | (403) | — | — | (403) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 35 | — | — | — | — | 35 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 325 | — | — | — | 325 | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gains on derivative instruments, net of tax | — | — | — | — | — | — | 30 | — | 30 | |||||||||||||||||||||||||||||||||||||||||||||||
| Defined benefit plan adjustments, net of tax | — | — | — | — | — | — | (2) | — | (2) | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation, net of tax | — | — | — | — | — | — | (40) | — | (40) | |||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification adjustments, net of tax | — | — | — | — | — | — | (1) | — | (1) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | 256.2 | (66.9) | 3 | 10,742 | 2,568 | (6,975) | (419) | — | 5,919 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 0.1 | — | — | (2) | — | — | — | — | (2) | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | (2.8) | — | — | — | (590) | — | — | (590) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 47 | — | — | — | — | 47 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 256 | — | — | — | 256 | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized losses on derivative instruments, net of tax | — | — | — | — | — | — | (7) | — | (7) | |||||||||||||||||||||||||||||||||||||||||||||||
| Defined benefit plan adjustments, net of tax | — | — | — | — | — | — | (4) | — | (4) | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation, net of tax | — | — | — | — | — | — | (281) | — | (281) | |||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification adjustments, net of tax | — | — | — | — | — | — | 14 | — | 14 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | 256.3 | (69.7) | 3 | 10,787 | 2,824 | (7,565) | (697) | — | 5,352 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | (1) | — | — | — | — | (1) | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | (0.8) | — | — | — | (150) | — | — | (150) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 64 | — | — | — | — | 64 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 283 | — | — | — | 283 | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gains on derivative instruments, net of tax | — | — | — | — | — | — | 6 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||
| Defined benefit plan adjustments, net of tax | — | — | — | — | — | — | 10 | — | 10 | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation, net of tax | — | — | — | — | — | — | (218) | — | (218) | |||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification adjustments, net of tax | — | — | — | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | 256.3 | (70.5) | $ | 3 | $ | 10,850 | $ | 3,107 | $ | (7,715) | $ | (898) | $ | — | $ | 5,347 | ||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
IQVIA HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
| (in millions) | Common Stock Shares | Treasury Stock Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive (Loss) Income | Non- controlling Interests | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 254.7 | (63.5) | $ | 3 | $ | 11,092 | $ | 1,277 | $ | (6,166) | $ | (205) | $ | 279 | $ | 6,280 | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 0.7 | — | — | (57) | — | — | — | — | (57) | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | (0.3) | — | — | — | (62) | — | — | (62) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 30 | — | — | — | — | 30 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 212 | — | — | 5 | 217 | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gains on derivative instruments, net of tax | — | — | — | — | — | — | 6 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation, net of tax | — | — | — | — | — | — | (178) | — | (178) | |||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification adjustments, net of tax | — | — | — | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | 255.4 | (63.8) | 3 | 11,065 | 1,489 | (6,228) | (376) | 284 | 6,237 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 0.2 | — | — | 1 | — | — | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | (0.2) | — | — | — | (45) | — | — | (45) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 42 | — | — | — | — | 42 | |||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of Quest's non-controlling interest, net of tax | — | — | — | (415) | — | — | (10) | (284) | (709) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 175 | — | — | — | 175 | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized losses on derivative instruments, net of tax | — | — | — | — | — | — | (2) | — | (2) | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation, net of tax | — | — | — | — | — | — | 58 | — | 58 | |||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification adjustments, net of tax | — | — | — | — | — | — | 3 | — | 3 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 255.6 | (64.0) | 3 | 10,693 | 1,664 | (6,273) | (327) | — | 5,760 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | 4 | — | — | — | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | (0.5) | — | — | — | (125) | — | — | (125) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 48 | — | — | — | — | 48 | |||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of Quest's non-controlling interest, net of tax | — | — | (1) | — | — | — | — | (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 261 | — | — | — | 261 | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized losses on derivative instruments, net of tax | — | — | — | — | — | — | (4) | — | (4) | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation, net of tax | — | — | — | — | — | — | (117) | — | (117) | |||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification adjustments, net of tax | — | — | — | — | — | — | 3 | — | 3 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | 255.6 | (64.5) | $ | 3 | $ | 10,744 | $ | 1,925 | $ | (6,398) | $ | (445) | $ | — | $ | 5,829 | ||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
IQVIA HOLDINGS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Summary of Significant Accounting Policies
The Company
IQVIA Holdings Inc. (together with its subsidiaries, the “Company” or “IQVIA”) is a leading global provider of advanced analytics, technology solutions and clinical research services to the life sciences industry. With approximately 85,000 employees, IQVIA conducts business in more than 100 countries.
Unaudited Interim Financial Information
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the Company’s financial condition and results of operations have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements of the Company, but does not include all the disclosures required by GAAP.
Recently Issued Accounting Standards
Accounting pronouncements adopted
In October 2021, the Financial Accounting Standards Board ("FASB") issued new accounting guidance that requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under previous GAAP, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with ASC 606, at fair value on the acquisition date. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The Company adopted this new accounting guidance effective January 1, 2022. The adoption of this new accounting guidance did not have a material impact on the Company's consolidated financial statements for the three and nine months ended September 30, 2022. The impact of this guidance on the Company's consolidated financial statements for the remainder of the year will depend on the size and nature of future acquisitions, if any.
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2. Revenues by Geography, Concentration of Credit Risk and Remaining Performance Obligations
The following tables represent revenues by geographic region and reportable segment for the three and nine months ended September 30, 2022 and 2021:
| Three Months Ended September 30, 2022 | ||||||||||||||||||||||||||
| (in millions) | Technology & Analytics Solutions | Research & Development Solutions | Contract Sales & Medical Solutions | Total | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Americas | $ | 746 | $ | 960 | $ | 91 | $ | 1,797 | ||||||||||||||||||
| Europe and Africa | 503 | 488 | 40 | 1,031 | ||||||||||||||||||||||
| Asia-Pacific | 151 | 531 | 52 | 734 | ||||||||||||||||||||||
| Total revenues | $ | 1,400 | $ | 1,979 | $ | 183 | $ | 3,562 | ||||||||||||||||||
| Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||
| (in millions) | Technology & Analytics Solutions | Research & Development Solutions | Contract Sales & Medical Solutions | Total | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Americas | $ | 647 | $ | 942 | $ | 94 | $ | 1,683 | ||||||||||||||||||
| Europe and Africa | 529 | 448 | 42 | 1,019 | ||||||||||||||||||||||
| Asia-Pacific | 161 | 463 | 65 | 689 | ||||||||||||||||||||||
| Total revenues | $ | 1,337 | $ | 1,853 | $ | 201 | $ | 3,391 | ||||||||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||
| (in millions) | Technology & Analytics Solutions | Research & Development Solutions | Contract Sales & Medical Solutions | Total | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Americas | $ | 2,143 | $ | 2,772 | $ | 270 | $ | 5,185 | ||||||||||||||||||
| Europe and Africa | 1,639 | 1,527 | 129 | 3,295 | ||||||||||||||||||||||
| Asia-Pacific | 465 | 1,564 | 162 | 2,191 | ||||||||||||||||||||||
| Total revenues | $ | 4,247 | $ | 5,863 | $ | 561 | $ | 10,671 | ||||||||||||||||||
| Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||
| (in millions) | Technology & Analytics Solutions | Research & Development Solutions | Contract Sales & Medical Solutions | Total | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Americas | $ | 1,882 | $ | 2,911 | $ | 258 | $ | 5,051 | ||||||||||||||||||
| Europe and Africa | 1,684 | 1,398 | 133 | 3,215 | ||||||||||||||||||||||
| Asia-Pacific | 472 | 1,303 | 197 | 1,972 | ||||||||||||||||||||||
| Total revenues | $ | 4,038 | $ | 5,612 | $ | 588 | $ | 10,238 | ||||||||||||||||||
No individual customer represented 10% or more of consolidated revenues for the three and nine months ended September 30, 2022 or 2021.
Transaction Price Allocated to the Remaining Performance Obligations
As of September 30, 2022, approximately $27.9 billion of revenue is expected to be recognized in the future from remaining performance obligations. The Company expects to recognize revenue on approximately 30% of these remaining performance obligations over the next twelve months, with the balance recognized thereafter. The customer contract transaction price allocated to the remaining performance obligations differs from backlog in that it does not include wholly unperformed contracts under which the customer has a unilateral right to cancel the arrangement.
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3. Trade Accounts Receivable, Unbilled Services and Unearned Income
Trade accounts receivables and unbilled services consist of the following:
| (in millions) | September 30, 2022 | December 31, 2021 | ||||||||||||
| Billed | $ | 1,145 | $ | 1,275 | ||||||||||
| Unbilled services | 1,526 | 1,309 | ||||||||||||
| Trade accounts receivable and unbilled services | 2,671 | 2,584 | ||||||||||||
| Allowance for doubtful accounts | (31) | (33) | ||||||||||||
| Trade accounts receivable and unbilled services, net | $ | 2,640 | $ | 2,551 | ||||||||||
Unbilled services and unearned income were as follows:
| (in millions) | September 30, 2022 | December 31, 2021 | Change | |||||||||||||||||
| Unbilled services | $ | 1,526 | $ | 1,309 | $ | 217 | ||||||||||||||
| Unearned income | (1,842) | (1,825) | (17) | |||||||||||||||||
| Net balance | $ | (316) | $ | (516) | $ | 200 | ||||||||||||||
Unbilled services, which is comprised of approximately 61% and 63% of unbilled receivables and 39% and 37% of contract assets as of September 30, 2022 and December 31, 2021, respectively, increased by $217 million as compared to December 31, 2021. Contract assets are unbilled services for which invoicing is based on the timing of certain milestones related to service contracts for clinical research whereas unbilled receivables are billable upon the passage of time. Unearned income increased by $17 million over the same period resulting in an increase of $200 million in the net balance of unbilled services and unearned income between December 31, 2021 and September 30, 2022. The change in the net balance is driven by the difference in timing of revenue recognition in accordance with ASC 606, Revenue from Contracts with Customers, primarily related to the Company’s Research & Development Solutions contracts (which is based on the percentage of costs incurred) versus the timing of invoicing, which is based on certain milestones.
Bad debt expense recognized on the Company’s receivables and unbilled services was de minimis for the three and nine months ended September 30, 2022 and 2021.
4. Goodwill
The following is a summary of goodwill by reportable segment for the nine months ended September 30, 2022:
| (in millions) | Technology & Analytics Solutions | Research & Development Solutions | Contract Sales & Medical Solutions | Consolidated | ||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | 11,337 | $ | 1,802 | $ | 162 | $ | 13,301 | ||||||||||||||||||
| Business combinations | 503 | 236 | — | 739 | ||||||||||||||||||||||
| Impact of foreign currency fluctuations and other | (802) | (46) | (15) | (863) | ||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | 11,038 | $ | 1,992 | $ | 147 | $ | 13,177 | ||||||||||||||||||
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5. Derivatives
The fair values of the Company’s derivative instruments and the line items on the accompanying condensed consolidated balance sheets to which they were recorded are summarized in the following table:
| (in millions) | Balance Sheet Classification | September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Assets | Liabilities | Notional | Assets | Liabilities | Notional | |||||||||||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange forward contracts | Other current assets and liabilities | $ | — | $ | 15 | $ | 125 | $ | — | $ | 3 | $ | 110 | |||||||||||||||||||||||||||||||
| Interest rate swaps | Other current assets, other assets and liabilities | 49 | — | 1,800 | 4 | 24 | 1,800 | |||||||||||||||||||||||||||||||||||||
| Total derivatives | $ | 49 | $ | 15 | $ | 4 | $ | 27 | ||||||||||||||||||||||||||||||||||||
The pre-tax effect of the Company’s cash flow hedging instruments on other comprehensive income is summarized in the following table:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Foreign exchange forward contracts | $ | (5) | $ | (5) | $ | (12) | $ | (9) | ||||||||||||||||||
| Interest rate swaps | 14 | 4 | 69 | 17 | ||||||||||||||||||||||
| Total | $ | 9 | $ | (1) | $ | 57 | $ | 8 | ||||||||||||||||||
The amount of foreign exchange gains related to the net investment hedge included in the cumulative translation adjustment component of accumulated other comprehensive (loss) income (“AOCI”) for the nine months ended September 30, 2022 and 2021 was $807 million and $332 million, respectively.
6. Fair Value Measurements
The Company records certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is described below. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
•Level 1 — Quoted prices in active markets for identical assets or liabilities.
•Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3 — Unobservable inputs that are supported by little or no market activity. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The carrying values of cash, cash equivalents, accounts receivable and accounts payable approximated their fair values as of September 30, 2022 and December 31, 2021 due to their short-term nature. As of September 30, 2022 and December 31, 2021, the fair value of total debt approximated $11,603 million and $12,255 million, respectively, as determined under Level 1 and Level 2 measurements for these financial instruments.
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Recurring Fair Value Measurements
The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured and reported at fair value on a recurring basis as of September 30, 2022:
| (in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Marketable securities | $ | 112 | $ | — | $ | — | $ | 112 | ||||||||||||||||||
| Derivatives | — | 49 | — | 49 | ||||||||||||||||||||||
| Total | $ | 112 | $ | 49 | $ | — | $ | 161 | ||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Derivatives | $ | — | $ | 15 | $ | — | $ | 15 | ||||||||||||||||||
| Contingent consideration | — | — | 95 | 95 | ||||||||||||||||||||||
| Total | $ | — | $ | 15 | $ | 95 | $ | 110 | ||||||||||||||||||
Below is a summary of the valuation techniques used in determining fair value:
Marketable securities — The Company values trading and available-for-sale securities using the quoted market value of the securities held.
Derivatives — Derivatives consist of foreign exchange contracts and interest rate swaps. The fair value of foreign exchange contracts is based on observable market inputs of spot and forward rates or using other observable inputs. The fair value of the interest rate swaps is the estimated amount that the Company would receive or pay to terminate such agreements, taking into account market interest rates and the remaining time to maturities or using market inputs with mid-market pricing as a practical expedient for bid-ask spread.
Contingent consideration — The Company values contingent consideration related to business combinations using a weighted probability calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows. Assumptions used to estimate the fair value of contingent consideration include various financial metrics (revenue performance targets and operating forecasts) and the probability of achieving the specific targets. Based on the assessments of the probability of achieving specific targets, as of September 30, 2022 the Company has accrued approximately 73% of the maximum contingent consideration payments that could potentially become payable.
The following table summarizes the changes in Level 3 financial assets and liabilities measured on a recurring basis for the nine months ended September 30:
| Contingent Consideration | ||||||||||||||
| (in millions) | 2022 | 2021 | ||||||||||||
| Balance as of January 1 | $ | 76 | $ | 119 | ||||||||||
| Business combinations | 54 | 39 | ||||||||||||
| Contingent consideration paid | (18) | (37) | ||||||||||||
| Revaluations included in earnings and foreign currency translation adjustments | (17) | (25) | ||||||||||||
| Balance as of September 30 | $ | 95 | $ | 96 | ||||||||||
The current portion of contingent consideration is included within accrued expenses and the long-term portion is included within other liabilities on the accompanying condensed consolidated balance sheets. Revaluations of contingent consideration are recognized in other expense (income), net on the accompanying condensed consolidated statements of income. A change in significant unobservable inputs could result in a higher or lower fair value measurement of contingent consideration.
Non-recurring Fair Value Measurements
As of September 30, 2022, assets carried on the balance sheet and not remeasured to fair value on a recurring basis totaled approximately $18,021 million and were identified as Level 3. These assets are comprised of cost and equity method investments of $126 million, goodwill of $13,177 million and other identifiable intangibles, net of $4,718 million.
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7. Credit Arrangements
The following is a summary of the Company’s revolving credit facilities as of September 30, 2022:
Facility | Interest Rates | |||||||
$1,500 million (revolving credit facility) | LIBOR in the relevant currency borrowed plus a margin of 1.25% as of September 30, 2022 | |||||||
$110 million (receivables financing facility) | LIBOR Market Index Rate (3.14% as of September 30, 2022) plus 0.90% | |||||||
The following table summarizes the Company’s debt at the dates indicated:
| (dollars in millions) | September 30, 2022 | December 31, 2021 | ||||||||||||
| Revolving Credit Facility due 2026: | ||||||||||||||
U.S. Dollar denominated borrowings—U.S. Dollar LIBOR at average floating rates of —% | $ | — | $ | 100 | ||||||||||
| Senior Secured Credit Facilities: | ||||||||||||||
Term A Loan due 2026—U.S. Dollar LIBOR at average floating rates of 4.92% | 1,361 | 1,415 | ||||||||||||
Term A Loan due 2026—Euribor at average floating rates of 2.44% | 290 | 351 | ||||||||||||
Term A Loan due 2027—U.S. Dollar SOFR at average floating rates of 4.90% | 1,234 | — | ||||||||||||
Term B Loan due 2024—U.S. Dollar LIBOR at average floating rates of 4.87% | 510 | 510 | ||||||||||||
Term B Loan due 2024—Euribor at average floating rates of 3.19% | 1,072 | 1,242 | ||||||||||||
Term B Loan due 2025—U.S. Dollar LIBOR at average floating rates of 4.87% | 670 | 670 | ||||||||||||
Term B Loan due 2025—U.S. Dollar LIBOR at average floating rates of 5.42% | 860 | 860 | ||||||||||||
Term B Loan due 2025—Euribor at average floating rates of 3.19% | 512 | 592 | ||||||||||||
5.0% Senior Notes due 2027—U.S. Dollar denominated | 1,100 | 1,100 | ||||||||||||
5.0% Senior Notes due 2026—U.S. Dollar denominated | 1,050 | 1,050 | ||||||||||||
2.875% Senior Notes due 2025—Euro denominated | 412 | 476 | ||||||||||||
2.25% Senior Notes due 2028—Euro denominated | 706 | 817 | ||||||||||||
2.875% Senior Notes due 2028—Euro denominated | 697 | 807 | ||||||||||||
1.750% Senior Notes due 2026—Euro denominated | 539 | 624 | ||||||||||||
2.250% Senior Notes due 2029—Euro denominated | 882 | 1,021 | ||||||||||||
Receivables financing facility due 2024—U.S. Dollar LIBOR at average floating rates of 4.02%: | ||||||||||||||
| Revolving Loan Commitment | 110 | 110 | ||||||||||||
| Term Loan | 440 | 440 | ||||||||||||
| Principal amount of debt | 12,445 | 12,185 | ||||||||||||
| Less: unamortized discount and debt issuance costs | (51) | (60) | ||||||||||||
| Less: current portion | (151) | (91) | ||||||||||||
| Long-term debt | $ | 12,243 | $ | 12,034 | ||||||||||
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Contractual maturities of long-term debt are as follows as of September 30, 2022:
| (in millions) | ||||||||
| Remainder of 2022 | $ | 38 | ||||||
| 2023 | 152 | |||||||
| 2024 | 2,283 | |||||||
| 2025 | 2,605 | |||||||
| 2026 | 3,017 | |||||||
| Thereafter | 4,350 | |||||||
| $ | 12,445 | |||||||
Senior Secured Credit Facilities
On June 16, 2022, the Company entered into Amendment No. 1 to the Company’s Fifth Amended and Restated Credit Agreement (the “Credit Agreement”) to borrow $1,250 million in additional U.S. Dollar denominated term A loans due 2027 (the “Additional Term A Loans”). The Additional Term A Loans bear interest based at the Secured Overnight Financing Rate term rates (“Term SOFR”), plus a credit spread adjustment of 0.10% plus a margin ranging from 1.125% to 2.00%, with a Term SOFR floor of 0.00% per annum. The proceeds from the Additional Term A Loans were used to repay approximately $950 million of outstanding revolving credit loans under the Company’s Credit Agreement and for general corporate purposes.
As of September 30, 2022, the Company’s Credit Agreement provided financing through several senior secured credit facilities of up to approximately $8,009 million, which consisted of $6,509 million principal amounts of debt outstanding (as detailed in the table above), and $1,500 million of available borrowing capacity on the $1,500 million revolving credit facility and standby letters of credit. The revolving credit facility is comprised of a $675 million senior secured revolving facility available in U.S. dollars, a $600 million senior secured revolving facility available in U.S. dollars, Euros, Swiss Francs and other foreign currencies, and a $225 million senior secured revolving facility available in U.S. dollars and Yen.
Restrictive Covenants
The Company’s debt agreements provide for certain covenants and events of default customary for similar instruments, including a covenant not to exceed a specified ratio of consolidated senior secured net indebtedness to Consolidated EBITDA, as defined in the senior secured credit facility agreement and a covenant to maintain a specified minimum interest coverage ratio. If an event of default occurs under any of the Company’s or the Company’s subsidiaries’ financing arrangements, the creditors under such financing arrangements will be entitled to take various actions, including the acceleration of amounts due under such arrangements, and in the case of the lenders under the revolving credit facility and term loans, other actions permitted to be taken by a secured creditor. The Company’s long-term debt arrangements contain other usual and customary restrictive covenants that, among other things, place limitations on the Company’s ability to declare dividends. As of September 30, 2022, the Company was in compliance in all material respects with the financial covenants under the Company’s financing arrangements.
8. Contingencies
The Company and its subsidiaries are involved in legal and tax proceedings, claims and litigation arising in the ordinary course of business. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. For those matters where management currently believes it is probable that the Company will incur a loss and that the probable loss or range of loss can be reasonably estimated, the Company has recorded an accrual in the consolidated financial statements based on its best estimates of such loss. In other instances, because of the uncertainties related to either the probable outcome or the amount or range of loss, management is unable to make a reasonable estimate of a liability, if any.
However, even in many instances where the Company has recorded an estimated liability, the Company is unable to predict with certainty the final outcome of the matter or whether resolution of the matter will materially affect the Company’s results of operations, financial position or cash flows. As additional information becomes available, the Company adjusts its assessments and estimates of such liabilities accordingly.
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The Company routinely enters into agreements with third parties, including its clients and suppliers, all in the normal course of business. In these agreements, the Company sometimes agrees to indemnify and hold harmless the other party for any damages such other party may suffer as a result of potential intellectual property infringement and other claims. The Company has not accrued a liability with respect to these matters generally, as the exposure is considered remote.
Based on its review of the latest information available, management does not expect the impact of pending legal and tax proceedings, claims and litigation, either individually or in the aggregate, to have a material adverse effect on the Company’s results of operations, cash flows or financial position. However, one or more unfavorable outcomes in any claim or litigation against the Company could have a material adverse effect for the period in which it is resolved. The following is a summary of certain legal matters involving the Company.
On February 13, 2014, a group of approximately 1,200 medical doctors and 900 private individuals filed a civil lawsuit with the Seoul Central District Court against IMS Korea and two other defendants, the Korean Pharmaceutical Association (“KPA”) and the Korean Pharmaceutical Information Center (“KPIC”). The civil lawsuit alleges KPA and KPIC collected their personal information in violation of applicable privacy laws without the necessary consent through a software system installed on pharmacy computer systems in Korea, and that personal information was transferred to IMS Korea and sold to pharmaceutical companies. On September 11, 2017, the District Court issued a final decision that the encryption in use by the defendants since June 2014 was adequate to meet the requirements of the Korean Personal Information Privacy Act (“PIPA”) and the sharing of non-identified information for market research purposes was allowed under PIPA. The District Court also found an earlier version of encryption was insufficient to meet PIPA requirements, but no personal data had been leaked or re-identified. The District Court did not award any damages to plaintiffs. Approximately 280 medical doctors and 200 private individuals appealed the District Court decision. On May 3, 2019, the Appellate Court issued a final decision in which it concluded all of the non-identified information transferred by KPIC to IMS Korea for market research purposes violated PIPA, but did not award any damages to plaintiffs (affirming the District Court’s decision on this latter point). On May 24, 2019, approximately 247 plaintiffs appealed the Appellate Court’s decision to the Supreme Court. The Company believes the appeal is without merit and is vigorously defending its position.
On July 23, 2015, indictments were issued by the Seoul Central District Prosecutors’ Office in South Korea against 24 individuals and companies alleging improper handling of sensitive health information in violation of, among others, South Korea’s Personal Information Protection Act. IMS Korea and two of its employees were among the individuals and organizations indicted. Although there is no assertion that IMS Korea used patient identified health information in any of its offerings, prosecutors allege that certain of IMS Korea’s data suppliers should have obtained patient consent when they converted sensitive patient information into non-identified data and that IMS Korea had not taken adequate precautions to reduce the risk of re-identification. On February 14, 2020, the Seoul Central District Court acquitted IMS Korea and its two employees of the charges of improper handling of sensitive health information, and the Prosecutor's Office appealed. On December 23, 2021, the appellate court affirmed the judgment of the Seoul Central District Court. The Prosecutor's Office has appealed to the Supreme Court. The Company intends to vigorously defend its position on appeal.
On January 10, 2017, Quintiles IMS Health Incorporated and IMS Software Services Ltd. (collectively “IQVIA Parties”), filed a lawsuit in the U.S. District Court for the District of New Jersey against Veeva Systems, Inc. (“Veeva”) alleging Veeva unlawfully used IQVIA Parties intellectual property to improve Veeva data offerings, to promote and market Veeva data offerings and to improve Veeva technology offerings. IQVIA Parties seek injunctive relief, appointment of a monitor, the award of compensatory and punitive damages and reimbursement of all litigation expenses, including reasonable attorneys’ fees and costs. On March 13, 2017, Veeva filed counterclaims alleging anticompetitive business practices in violation of the Sherman Act and state laws. Veeva claims damages in excess of $200 million, and is seeking punitive damages and litigation costs, including attorneys’ fees. We believe the counterclaims are without merit, reject all counterclaims raised by Veeva and intend to vigorously defend IQVIA Parties’ position and pursue our claims against Veeva. Since the initial filings, the parties have filed additional litigations against each other, primarily concerning the use of IQVIA data with various other Veeva products. The parties are engaged in the discovery process in connection with these lawsuits.
On May 7, 2021, the Court issued an order and opinion (the “Order”) in which it found significant evidence that Veeva had (1) misappropriated IQVIA data and unlawfully used it to improve Veeva data offerings, (2) engaged in a cover-up by deleting significant evidence of its theft of IQVIA’s trade secrets, and (3) improperly withheld certain evidence in furtherance of a crime and/or fraud against IQVIA. The Court imposed five sanctions against Veeva, including ordering three separate adverse inference instructions be issued to the jury and that IQVIA be permitted to present evidence to the jury of Veeva’s destruction efforts. Veeva is currently appealing the Order.
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In 2016, IQVIA acquired Dimensions Healthcare LLC (“Dimensions”), a company operating in the Middle East that was engaged in a joint venture with MedImpact International LLC (“MedImpact International”). The joint venture was terminated in late 2017, and on January 23, 2018, MedImpact International brought an arbitration in Dubai against Dimensions alleging that Dimensions had obtained access to its intellectual property through its prior joint venture with MedImpact International and had used that access to misappropriate and misuse MedImpact International’s intellectual property. Dimensions was ordered to pay an immaterial amount of damages and attorneys’ fees, and enjoined from future use of certain claimed MedImpact International intellectual property.
On September 26, 2019, MedImpact Healthcare Systems, Inc., MedImpact International, MedImpact International Hong Kong Ltd (collectively, “MedImpact”) filed suit in the U.S. District Court for the Southern District of California alleging that various IQVIA entities (IQVIA Inc., IQVIA AG, and IQVIA Ltd.) and two IQVIA employees in the Middle East misappropriated its intellectual property, in violation of, among other things, the U.S. Defend Trade Secrets Act (“DTSA”) and the Racketeer Influenced and Corrupt Organizations Act (“RICO”). In particular, MedImpact alleges that IQVIA acquired Dimensions to obtain access to MedImpact’s intellectual property and then used that access to misappropriate and misuse MedImpact's intellectual property. MedImpact claims damages of approximately $100 million and is seeking the trebling of its damages and reimbursement of its litigation expenses, including its attorneys’ fees. MedImpact further seeks to enjoin IQVIA from continuing to misuse its intellectual property. On October 7, 2022, the Court dismissed MedImpact’s RICO claims as well as all claims against IQVIA Inc., IQVIA Ltd., and one of the individual employee defendants. A trial date on the remaining claims is anticipated in 2023. IQVIA rejects all of the claims raised by MedImpact and is vigorously defending IQVIA’s position.
On December 13, 2021, IQVIA filed suit against MedImpact in the same California federal court, alleging that MedImpact and a former executive misappropriated and misused IQVIA’s intellectual property received in the same prior joint venture, in violation of, among other things, the DTSA and RICO. IQVIA seeks treble damages in an unspecified amount, reimbursement of litigation expenses, including attorneys’ fees, and to enjoin MedImpact from continuing to misuse its intellectual property.
9. Stockholders’ Equity
Preferred Stock
The Company is authorized to issue 1.0 million shares of preferred stock, $0.01 per share par value. No shares of preferred stock were issued or outstanding as of September 30, 2022 or December 31, 2021.
Equity Repurchase Program
On February 10, 2022, the Company’s Board of Directors (the “Board”) increased the stock repurchase authorization under the Company's equity repurchase program (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. 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 nine months ended September 30, 2022, the Company repurchased 5.3 million shares of its common stock for $1,143 million under the Repurchase Program. These amounts include approximately 0.2 million of shares valued at approximately $40 million, which were accrued for as of September 30, 2022 based on when the trade and settlement dates occurred. As of September 30, 2022, the Company has remaining authorization to repurchase up to approximately $1.4 billion of its common stock under the Repurchase Program. In addition, from time to time, the Company has repurchased and may continue to repurchase common stock through private or other transactions outside of the Repurchase Program.
10. Business Combinations
The Company completed several individually immaterial acquisitions during the nine months ended September 30, 2022. The Company’s assessment of fair value, including the valuation of certain identified intangibles, and the purchase price allocation related to these acquisitions is preliminary and subject to change upon completion. Further adjustments may be necessary as additional information related to the fair values of assets acquired and liabilities assumed is assessed during the measurement period (up to one year from the acquisition date). The Company recorded goodwill from these acquisitions, primarily attributable to assembled workforce and expected synergies. The condensed consolidated financial statements include the results of the acquisitions subsequent to their respective closing dates. Pro forma information is not presented as pro forma results of operations would not be materially different to the actual results of operations of the Company.
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The following table provides certain preliminary financial information for these acquisitions:
| (in millions) | September 30, 2022 | |||||||
| Assets acquired: | ||||||||
| Cash and cash equivalents | $ | 25 | ||||||
| Other assets | 105 | |||||||
| Goodwill | 739 | |||||||
| Other identifiable intangibles | 403 | |||||||
| Liabilities assumed: | ||||||||
| Other liabilities | (87) | |||||||
| Deferred income taxes, long-term | (90) | |||||||
| Net assets acquired (1) | $ | 1,095 | ||||||
(1) Net assets acquired includes contingent consideration and deferred purchase price of $58 million for the nine months ended September 30, 2022.
The portion of goodwill deductible for income tax purposes was preliminarily assessed as $30 million.
The following table provides a summary of the preliminary estimated fair value of certain intangible assets acquired:
| (in millions) | Amortization Period | September 30, 2022 | |||||||||||||||||||||
| Other identifiable intangibles: | |||||||||||||||||||||||
| Customer relationships | 1 | - | 17 | years | $ | 311 | |||||||||||||||||
| Software and related assets | 3 | - | 5 | years | 58 | ||||||||||||||||||
| Backlog | 1 | - | 4 | years | 14 | ||||||||||||||||||
| Databases | 5 | years | 11 | ||||||||||||||||||||
| Trade names | 2 | - | 3 | years | 6 | ||||||||||||||||||
| Non-compete agreements | 3 | years | 3 | ||||||||||||||||||||
| Total Other identifiable intangibles | $ | 403 | |||||||||||||||||||||
11. Restructuring
The Company has continued to take restructuring actions in 2022 to align its resources and reduce overcapacity to adapt to changing market conditions and integrate acquisitions. These actions include consolidating functional activities, eliminating redundant positions, and aligning resources with customer requirements. These restructuring actions are expected to continue into 2023.
The following amounts were recorded for the restructuring plans:
| (in millions) | Severance and Related Costs | |||||||
| Balance as of December 31, 2021 | $ | 30 | ||||||
| Expense, net of reversals | 15 | |||||||
| Payments | (22) | |||||||
| Foreign currency translation and other | (2) | |||||||
| Balance as of September 30, 2022 | $ | 21 | ||||||
The reversals were due to changes in estimates primarily from the redeployment of staff and higher than expected voluntary terminations. Restructuring costs are not allocated to the Company’s reportable segments as they are not part of the segment performance measures regularly reviewed by management. The Company expects that the majority of the restructuring accruals as of September 30, 2022 will be paid in 2022 and 2023.
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12. Income Taxes
The effective income tax rate was 19.4% and 4.4% in the third quarter of 2022 and 2021, respectively, and 19.5% and 13.8% in the first nine months of 2022 and 2021, respectively. The effective income tax rate in the third quarter and the first nine months of 2022 and 2021 was favorably impacted by the Company recording a benefit related to the 2021 and 2020 U.S. Federal tax return position associated with Foreign Derived Intangible Income (“FDII”) and Global Intangible Low-Taxed Income (“GILTI”) tax credits of $6 million and $29 million, respectively. Additionally, the effective income tax rate in the third quarter and in the first nine months of 2022 and 2021 was favorably impacted as a result of excess tax benefits recognized upon settlement of share-based compensation awards. For the third quarter of 2022 and 2021 this impact was $1 million and $3 million, respectively, and for the first nine months of 2022 and 2021 this impact was $15 million and $26 million, respectively.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. The Company is assessing these impacts on its condensed consolidated financial statements.
13. Accumulated Other Comprehensive (Loss) Income
Below is a summary of the components of AOCI:
| (in millions) | Foreign Currency Translation | Derivative Instruments | Defined Benefit Plans | Income Taxes | Total | |||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | (570) | $ | (21) | $ | 5 | $ | 180 | $ | (406) | ||||||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | (344) | 39 | 6 | (207) | (506) | |||||||||||||||||||||||||||
| Reclassification adjustments | — | 18 | — | (4) | 14 | |||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | (914) | $ | 36 | $ | 11 | $ | (31) | $ | (898) | ||||||||||||||||||||||
Below is a summary of the adjustments for amounts reclassified from AOCI into the condensed consolidated statements of income and the affected financial statement line item:
| (in millions) | Affected Financial Statement Line Item | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||
| Derivative instruments: | ||||||||||||||||||||||||||||||||
| Interest rate swaps | Interest expense | $ | (9) | $ | (5) | $ | (16) | $ | (14) | |||||||||||||||||||||||
| Foreign exchange forward contracts | Revenues | 8 | 1 | (2) | 5 | |||||||||||||||||||||||||||
| Total before income taxes | (1) | (4) | (18) | (9) | ||||||||||||||||||||||||||||
| Income taxes | — | (1) | (4) | (2) | ||||||||||||||||||||||||||||
| Total net of income taxes | $ | (1) | $ | (3) | $ | (14) | $ | (7) | ||||||||||||||||||||||||
14. Segments
The following table presents the Company’s operations by reportable segment. The Company is managed through three reportable segments, Technology & Analytics Solutions, Research & Development Solutions and Contract Sales & Medical Solutions. Technology & Analytics Solutions provides mission critical information, technology solutions and real world insights and services to the Company's life 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.
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 related to integration activities and acquisitions. The Company also does not allocate depreciation and amortization or impairment charges to its segments. Asset information by segment is not presented, as this measure is not used by the chief operating decision maker to assess the Company’s performance. The Company’s reportable segment information is presented below:
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| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
| Technology & Analytics Solutions | $ | 1,400 | $ | 1,337 | $ | 4,247 | $ | 4,038 | ||||||||||||||||||
| Research & Development Solutions | 1,979 | 1,853 | 5,863 | 5,612 | ||||||||||||||||||||||
| Contract Sales & Medical Solutions | 183 | 201 | 561 | 588 | ||||||||||||||||||||||
| Total revenues | 3,562 | 3,391 | 10,671 | 10,238 | ||||||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | ||||||||||||||||||||||||||
| Technology & Analytics Solutions | 828 | 795 | 2,490 | 2,415 | ||||||||||||||||||||||
| Research & Development Solutions | 1,335 | 1,291 | 4,005 | 3,967 | ||||||||||||||||||||||
| Contract Sales & Medical Solutions | 158 | 167 | 480 | 487 | ||||||||||||||||||||||
| Total cost of revenues, exclusive of depreciation and amortization | 2,321 | 2,253 | 6,975 | 6,869 | ||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||
| Technology & Analytics Solutions | 213 | 199 | 628 | 579 | ||||||||||||||||||||||
| Research & Development Solutions | 199 | 198 | 614 | 576 | ||||||||||||||||||||||
| Contract Sales & Medical Solutions | 17 | 14 | 48 | 41 | ||||||||||||||||||||||
| General corporate and unallocated | 88 | 87 | 198 | 226 | ||||||||||||||||||||||
| Total selling, general and administrative expenses | 517 | 498 | 1,488 | 1,422 | ||||||||||||||||||||||
| Segment profit | ||||||||||||||||||||||||||
| Technology & Analytics Solutions | 359 | 343 | 1,129 | 1,044 | ||||||||||||||||||||||
| Research & Development Solutions | 445 | 364 | 1,244 | 1,069 | ||||||||||||||||||||||
| Contract Sales & Medical Solutions | 8 | 20 | 33 | 60 | ||||||||||||||||||||||
| Total segment profit | 812 | 727 | 2,406 | 2,173 | ||||||||||||||||||||||
| General corporate and unallocated | (88) | (87) | (198) | (226) | ||||||||||||||||||||||
| Depreciation and amortization | (248) | (336) | (773) | (1,002) | ||||||||||||||||||||||
| Restructuring costs | (4) | (2) | (15) | (15) | ||||||||||||||||||||||
| Total income from operations | $ | 472 | $ | 302 | $ | 1,420 | $ | 930 | ||||||||||||||||||
15. Earnings Per Share
The following table reconciles the basic to diluted weighted average shares outstanding:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||
| Net income attributable to IQVIA Holdings Inc. | $ | 283 | $ | 261 | $ | 864 | $ | 648 | ||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
| Basic weighted average common shares outstanding | 186.5 | 191.5 | 188.3 | 191.5 | ||||||||||||||||||||||
| Effect of dilutive stock options and share awards | 2.9 | 3.8 | 3.0 | 3.5 | ||||||||||||||||||||||
| Diluted weighted average common shares outstanding | 189.4 | 195.3 | 191.3 | 195.0 | ||||||||||||||||||||||
| Earnings per share attributable to common stockholders: | ||||||||||||||||||||||||||
| Basic | $ | 1.52 | $ | 1.36 | $ | 4.59 | $ | 3.38 | ||||||||||||||||||
| Diluted | $ | 1.49 | $ | 1.34 | $ | 4.52 | $ | 3.32 | ||||||||||||||||||
Stock-based awards will have a dilutive effect under the treasury method when the respective period's average market value of the Company's common stock exceeds the exercise proceeds. Performance awards are included in diluted earnings per share based on if the performance targets have been met at the end of the reporting period.
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For the three and nine months ended September 30, 2022 and 2021, the weighted average number of outstanding stock-based awards not included in the computation of diluted earnings per share because they are subject to performance conditions that have not been met at the end of the reporting period or the effect of including such stock-based awards in the computation would be anti-dilutive was 0.4 and 0.9 million, and 0.5 and 0.9 million, respectively.
16. Subsequent Events
On October 13, 2022, the Company elected to prepay $510 million, the entire outstanding balance, of its U.S. Dollar Term B Loan due 2024.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement for Forward-Looking Information
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, 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,” “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, 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; the market for our services may not grow as we expect; we may be unable to successfully develop and market new services or enter new markets; 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 future changes to data protection and privacy laws; breaches or misuse of our or our outsourcing partners’ security or communications systems; failure to meet our productivity or business transformation objectives; failure to successfully invest in growth opportunities; our ability to protect our intellectual property rights and our susceptibility to claims by others that we are infringing on their intellectual property rights; the expiration or inability to acquire third party licenses for technology or intellectual property; any failure by us to accurately and timely price and formulate cost estimates for contracts, or to document change orders; hardware and software failures, delays in the operation of our computer and communications systems or the failure to implement system enhancements; the rate at which our backlog converts to revenue; our ability to acquire, develop and implement technology necessary for our business; consolidation in the industries in which our clients operate; risks related to client or therapeutic concentration; government regulators or our customers may limit the number or scope of indications for medicines and treatments or withdraw products from the market, and government regulators may impose new regulatory requirements or may adopt new regulations affecting the biopharmaceutical industry; the risks associated with operating on a global basis, including currency or exchange rate fluctuations and legal compliance, including anti-corruption laws; risks related to changes in accounting standards; general economic conditions in the markets in which we operate, including financial market conditions, inflation, and risks related to sales to government entities; the impact of changes in tax laws and regulations; and our ability to successfully integrate, and achieve expected benefits from, our acquired businesses. For a further discussion of the risks relating to our business, see Part I—Item 1A—“Risk Factors” in our 2021 Form 10-K, as updated in our subsequently filed Quarterly Reports on Form 10-Q.
Overview
IQVIA is a leading global provider of advanced analytics, technology solutions and clinical research services to the life sciences industry. IQVIA creates intelligent connections across all aspects of healthcare through its analytics, transformative technology, big data resources and extensive domain expertise. IQVIA Connected Intelligence™ delivers powerful insights with speed and agility — enabling customers to accelerate the clinical development and commercialization of innovative medical treatments that improve healthcare outcomes for patients. With approximately 85,000 employees, we conduct operations in more than 100 countries.
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We are a global leader in protecting individual patient privacy. We use a wide variety of privacy-enhancing technologies and safeguards to protect individual privacy while generating and analyzing information on a scale that helps healthcare stakeholders identify disease patterns and correlate with the precise treatment path and therapy needed for better outcomes. Our insights and execution capabilities help biotech, medical device and pharmaceutical companies, medical researchers, government agencies, payers and other healthcare stakeholders tap into a deeper understanding of diseases, human behaviors and scientific advances, in an effort to advance their path toward cures.
We are managed through three reportable segments, Technology & Analytics Solutions, Research & Development Solutions and Contract Sales & Medical Solutions. Technology & Analytics Solutions provides mission critical information, technology solutions and real world insights and services to 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 any material product revenues.
Costs and Expenses
Our costs and expenses are comprised primarily of our cost of revenues including reimbursed expenses and selling, general and administrative expenses. Cost of revenues includes 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; and other expenses directly related to service contracts such as courier fees, laboratory supplies, professional services and travel expenses. Reimbursed expenses, which are included in cost of revenues, 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 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. The revenues 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. 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. This constant currency information assumes the same foreign currency exchange rates that were in effect for the comparable prior-year period were used in translation of the current period results. As such, the differences noted below between reported results of operations and constant currency information is wholly attributable to the effects of foreign currency rate fluctuations.
Consolidated Results of Operations
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.
Revenues
| Three Months Ended September 30, | Change | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Revenues | $ | 3,562 | $ | 3,391 | $ | 171 | 5.0 | % | ||||||||||||||||||
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For the third quarter of 2022, our revenues increased $171 million, or 5.0%, as compared to the same period in 2021. This increase was comprised of constant currency revenue growth of approximately $355 million, or 10.5%, reflecting an $155 million increase in Technology & Analytics Solutions, an $198 million increase in Research & Development Solutions, and a $2 million increase in Contract Sales & Medical Solutions.
| Nine Months Ended September 30, | Change | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Revenues | $ | 10,671 | $ | 10,238 | $ | 433 | 4.2 | % | ||||||||||||||||||
For the first nine months of 2022, our revenues increased $433 million, or 4.2%, as compared to the same period in 2021. This increase was comprised of constant currency revenue growth of approximately $830 million, or 8.1%, reflecting a $414 million increase in Technology & Analytics Solutions, a $399 million increase in Research & Development Solutions, and a $17 million increase in Contract Sales & Medical Solutions.
Cost of Revenues, exclusive of Depreciation and Amortization
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | $ | 2,321 | $ | 2,253 | $ | 6,975 | $ | 6,869 | ||||||||||||||||||
% of revenues | 65.2 | % | 66.4 | % | 65.4 | % | 67.1 | % | ||||||||||||||||||
The $68 million increase in cost of revenues, exclusive of depreciation and amortization, for the three months ended September 30, 2022 as compared to the same period in 2021 included a constant currency increase of approximately $237 million, or 10.5%, reflecting an $86 million increase in Technology & Analytics Solutions, an $144 million increase in Research & Development Solutions, and a $7 million increase in Contract Sales & Medical Solutions.
The $106 million increase in cost of revenues, exclusive of depreciation and amortization, for the nine months ended September 30, 2022 as compared to the same period in 2021 included a constant currency increase of approximately $466 million, or 6.8%, reflecting an $188 million increase in Technology & Analytics Solutions, a $250 million increase in Research & Development Solutions, and a $28 million increase in Contract Sales & Medical Solutions.
Selling, General and Administrative Expenses
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 517 | $ | 498 | $ | 1,488 | $ | 1,422 | ||||||||||||||||||
% of revenues | 14.5 | % | 14.7 | % | 13.9 | % | 13.9 | % | ||||||||||||||||||
The $19 million increase in selling, general and administrative expenses for the three months ended September 30, 2022 as compared to the same period in 2021 included a constant currency increase of approximately $54 million, or 10.8%, reflecting a $34 million increase in Technology & Analytics Solutions, a $9 million increase in Research & Development Solutions, a $4 million increase in Contract Sales & Medical Solutions, and a $7 million increase in general corporate and unallocated expenses.
The $66 million increase in selling, general and administrative expenses for the nine months ended September 30, 2022 as compared to the same period in 2021 included a constant currency increase of approximately $137 million, or 9.6%, reflecting a $90 million increase in Technology & Analytics Solutions, a $55 million increase in Research & Development Solutions, a $9 million increase in Contract Sales & Medical Solutions, offset by a $(17) million decrease in general corporate and unallocated expenses.
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Depreciation and Amortization
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Depreciation and amortization | $ | 248 | $ | 336 | $ | 773 | $ | 1,002 | ||||||||||||||||||
% of revenues | 7.0 | % | 9.9 | % | 7.2 | % | 9.8 | % | ||||||||||||||||||
The $88 million and $229 million decrease in depreciation and amortization for the three and nine months ended September 30, 2022 as compared to the same periods 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 2022 as well as higher capitalized software balances.
Restructuring Costs
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Restructuring costs | $ | 4 | $ | 2 | $ | 15 | $ | 15 | ||||||||||||||||||
The restructuring costs incurred during 2022 and 2021 were due to ongoing efforts to streamline our global operations. The remaining actions under these plans are expected to occur throughout 2022 and into 2023 and are expected to consist of consolidating functional activities, eliminating redundant positions and aligning resources with customer requirements.
Interest Income and Interest Expense
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Interest income | $ | (4) | $ | (2) | $ | (7) | $ | (4) | ||||||||||||||||||
| Interest expense | $ | 108 | $ | 92 | $ | 288 | $ | 285 | ||||||||||||||||||
Interest income includes interest received primarily from bank balances and investments. The increase is primarily a result of higher deposit rates.
Interest expense during the three and nine months ended September 30, 2022 was higher than the same period in 2021 due primarily to higher base rate interest costs across the floating rate debt portfolio.
Loss on Extinguishment of Debt
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Loss on extinguishment of debt | $ | — | $ | 1 | $ | — | $ | 25 | ||||||||||||||||||
During the three and 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 Expense (Income), Net
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Other expense (income), net | $ | 8 | $ | (62) | $ | 51 | $ | (128) | ||||||||||||||||||
Other expense (income), net for the three and nine months ended September 30, 2022 increased as compared to the same periods in the prior year, primarily due to foreign currency losses and losses on investments.
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Income Tax Expense
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Income tax expense | $ | 70 | $ | 12 | $ | 212 | $ | 104 | ||||||||||||||||||
Our effective income tax rate was 19.4% and 4.4% in the third quarter of 2022 and 2021, respectively, and 19.5% and 13.8% in the first nine months of 2022 and 2021, respectively. Our effective income tax rate in the third quarter and the first nine months of 2022 and 2021 was favorably impacted by recording a benefit related to the 2021 and 2020 U.S. Federal tax return position associated with FDII and GILTI tax credits of $6 million and $29 million, respectively. Additionally, our effective income tax rate in the third quarter and in the first nine months of 2022 and 2021 was favorably impacted as a result of excess tax benefits recognized upon settlement of share-based compensation awards. For the third quarter of 2022 and 2021 this impact was $1 million and $3 million, respectively, and for the first nine months of 2022 and 2021 this impact was $15 million and $26 million, respectively.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. We are assessing these impacts on our condensed consolidated financial statements.
Equity in (Losses) Earnings of Unconsolidated Affiliates
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Equity in (losses) earnings of unconsolidated affiliates | $ | (7) | $ | — | $ | (12) | $ | 5 | ||||||||||||||||||
Equity in (losses) earnings of unconsolidated affiliates for the three and nine months ended September 30, 2022 decreased as compared to the same periods 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, | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net income attributable to non-controlling interests | $ | — | $ | — | $ | — | $ | (5) | ||||||||||||||||||
Net income attributable to non-controlling interests included Quest Diagnostics Incorporated's ("Quest") interest in Q2 Solutions. On April 1, 2021 the Company acquired the 40% non-controlling interest in Q2 Solutions from Quest which resulted in a decrease in the net income attributable to non-controlling interests for the nine months ended September 30, 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, 2022 and 2021 | ||||||||||||||||||||||||||
| Segment Revenues | Segment Profit | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Technology & Analytics Solutions | $ | 1,400 | $ | 1,337 | $ | 359 | $ | 343 | ||||||||||||||||||
| Research & Development Solutions | 1,979 | 1,853 | 445 | 364 | ||||||||||||||||||||||
| Contract Sales & Medical Solutions | 183 | 201 | 8 | 20 | ||||||||||||||||||||||
| Total | 3,562 | 3,391 | 812 | 727 | ||||||||||||||||||||||
| General corporate and unallocated | (88) | (87) | ||||||||||||||||||||||||
| Depreciation and amortization | (248) | (336) | ||||||||||||||||||||||||
| Restructuring costs | (4) | (2) | ||||||||||||||||||||||||
| Consolidated | $ | 3,562 | $ | 3,391 | $ | 472 | $ | 302 | ||||||||||||||||||
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| Nine Months Ended September 30, 2022 and 2021 | ||||||||||||||||||||||||||
| Segment Revenues | Segment Profit | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Technology & Analytics Solutions | $ | 4,247 | $ | 4,038 | $ | 1,129 | $ | 1,044 | ||||||||||||||||||
| Research & Development Solutions | 5,863 | 5,612 | 1,244 | 1,069 | ||||||||||||||||||||||
| Contract Sales & Medical Solutions | 561 | 588 | 33 | 60 | ||||||||||||||||||||||
| Total | 10,671 | 10,238 | 2,406 | 2,173 | ||||||||||||||||||||||
| General corporate and unallocated | (198) | (226) | ||||||||||||||||||||||||
| Depreciation and amortization | (773) | (1,002) | ||||||||||||||||||||||||
| Restructuring costs | (15) | (15) | ||||||||||||||||||||||||
| Consolidated | $ | 10,671 | $ | 10,238 | $ | 1,420 | $ | 930 | ||||||||||||||||||
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 related to integration activities and acquisitions. We also do not allocate depreciation and amortization or impairment charges to our segments.
Technology & Analytics Solutions
| Three Months Ended September 30, | Change | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Revenues | $ | 1,400 | $ | 1,337 | $ | 63 | 4.7 | % | ||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | 828 | 795 | 33 | 4.2 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 213 | 199 | 14 | 7.0 | ||||||||||||||||||||||
| Segment profit | $ | 359 | $ | 343 | $ | 16 | 4.7 | % | ||||||||||||||||||
| Nine Months Ended September 30, | Change | |||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Revenues | $ | 4,247 | $ | 4,038 | $ | 209 | 5.2 | % | ||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | 2,490 | 2,415 | 75 | 3.1 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 628 | 579 | 49 | 8.5 | ||||||||||||||||||||||
| Segment profit | $ | 1,129 | $ | 1,044 | $ | 85 | 8.1 | % | ||||||||||||||||||
Revenues
Technology & Analytics Solutions’ revenues were $1,400 million for the third quarter of 2022, an increase of $63 million, or 4.7%, over the same period in 2021. This increase was comprised of constant currency revenue growth of approximately $155 million, or 11.6%, reflecting revenue growth across all regions.
Technology & Analytics Solutions’ revenues were $4,247 million for the first nine months of 2022, an increase of $209 million, or 5.2%, over the same period in 2021. This increase was comprised of constant currency revenue growth of approximately $414 million, or 10.3%, reflecting revenue growth across all regions.
The revenue growth for the three and nine months ended September 30, 2022 was driven by higher technology, real-world and consulting and analytical services.
Cost of Revenues, exclusive of Depreciation and Amortization
Technology & Analytics Solutions’ cost of revenues, exclusive of depreciation and amortization, increased $33 million, or 4.2%, in the third quarter of 2022 over the same period in 2021. This increase included a constant currency increase of approximately $86 million, or 10.8%.
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Technology & Analytics Solutions’ cost of revenues, exclusive of depreciation and amortization, increased $75 million, or 3.1%, in the first nine months of 2022 over the same period in 2021. This increase included a constant currency increase of approximately $188 million, or 7.8%.
The constant currency increase for the three and nine months ended September 30, 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 $14 million, or 7.0%, in the third quarter of 2022 as compared to the same period in 2021, which included a constant currency increase of approximately $34 million, or 17.1%.
Technology & Analytics Solutions’ selling, general and administrative expenses increased $49 million, or 8.5%, in the first nine months of 2022 as compared to the same period in 2021, which included a constant currency increase of approximately $90 million, or 15.5%.
The constant currency increase for the three and nine months ended September 30, 2022 was primarily related to an increase in compensation and related expenses.
Research & Development Solutions
| Three Months Ended September 30, | Change | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Revenues | $ | 1,979 | $ | 1,853 | $ | 126 | 6.8 | % | ||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | 1,335 | 1,291 | 44 | 3.4 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 199 | 198 | 1 | 0.5 | ||||||||||||||||||||||
| Segment profit | $ | 445 | $ | 364 | $ | 81 | 22.3 | % | ||||||||||||||||||
| Nine Months Ended September 30, | Change | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Revenues | $ | 5,863 | $ | 5,612 | $ | 251 | 4.5 | % | ||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | 4,005 | 3,967 | 38 | 1.0 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 614 | 576 | 38 | 6.6 | ||||||||||||||||||||||
| Segment profit | $ | 1,244 | $ | 1,069 | $ | 175 | 16.4 | % | ||||||||||||||||||
Backlog
Research & Development Solutions’ contracted backlog increased from $24.8 billion as of December 31, 2021 to $25.8 billion as of September 30, 2022 and we expect approximately $7.1 billion of this backlog to convert to revenue in the next twelve months.
Revenues
Research & Development Solutions’ revenues were $1,979 million in the third quarter of 2022, an increase of $126 million, or 6.8%, over the same period in 2021. This increase was comprised of constant currency revenue growth of approximately $198 million, or 10.7%, reflecting revenue growth across all regions.
Research & Development Solutions’ revenues were $5,863 million in the first nine months of 2022, an increase of $251 million, or 4.5%, over the same period in 2021. This increase was comprised of constant currency revenue growth of approximately $399 million, or 7.1%, reflecting revenue growth in the Europe and Africa and Asia-Pacific regions, partially offset by a decrease in COVID-19 related work in the Americas region.
The revenue growth for the three and nine months ended September 30, 2022 was primarily the result of volume-related increases in clinical services and lab testing.
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Cost of Revenues, exclusive of Depreciation and Amortization
Research & Development Solutions’ cost of revenues, exclusive of depreciation and amortization, increased $44 million, or 3.4%, in the third quarter of 2022 over the same period in 2021. This increase included a constant currency increase of approximately $144 million, or 11.2%.
Research & Development Solutions’ cost of revenues, exclusive of depreciation and amortization, increased $38 million, or 1.0%, in the first nine months of 2022 over the same period in 2021. This increase included a constant currency increase of approximately $250 million, or 6.3%.
The constant currency increase for the three and nine months ended September 30, 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 $1 million, or 0.5%, in the third quarter of 2022 as compared to the same period in 2021, which included a constant currency increase of approximately $9 million, or 4.5%.
Research & Development Solutions’ selling, general and administrative expenses increased $38 million, or 6.6%, in the first nine months of 2022 as compared to the same period in 2021, which included a constant currency increase of approximately $55 million, or 9.5%.
The constant currency increase for the three and nine months ended September 30, 2022 was primarily related to an increase in compensation and related expenses.
Contract Sales & Medical Solutions
| Three Months Ended September 30, | Change | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Revenues | $ | 183 | $ | 201 | $ | (18) | (9.0) | % | ||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | 158 | 167 | (9) | (5.4) | ||||||||||||||||||||||
| Selling, general and administrative expenses | 17 | 14 | 3 | 21.4 | ||||||||||||||||||||||
| Segment profit | $ | 8 | $ | 20 | $ | (12) | (60.0) | % | ||||||||||||||||||
| Nine Months Ended September 30, | Change | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Revenues | $ | 561 | $ | 588 | $ | (27) | (4.6) | % | ||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization | 480 | 487 | (7) | (1.4) | ||||||||||||||||||||||
| Selling, general and administrative expenses | 48 | 41 | 7 | 17.1 | ||||||||||||||||||||||
| Segment profit | $ | 33 | $ | 60 | $ | (27) | (45.0) | % | ||||||||||||||||||
Revenues
Contract Sales & Medical Solutions’ revenues were $183 million in the third quarter of 2022, a decrease of $18 million, or 9.0%, over the same period in 2021. This decrease included a constant currency revenue growth of approximately $2 million, or 1.0%, reflecting revenue growth in the Europe and Africa region.
Contract Sales & Medical Solutions’ revenues were $561 million in the first nine months of 2022, a decrease of $27 million, or 4.6%, over the same period in 2021. This decrease included a constant currency revenue growth of approximately $17 million, or 2.9%, reflecting revenue growth in the Americas and Europe and Africa regions.
The constant currency revenue growth for the three and nine months ended September 30, 2022 was largely due to volume increases in services performed.
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Cost of Revenues, exclusive of Depreciation and Amortization
Contract Sales & Medical Solutions’ cost of revenues, exclusive of depreciation and amortization, decreased $9 million, or 5.4%, in the third quarter of 2022 as compared to the same period in 2021. This decrease included a constant currency increase of approximately $7 million, or 4.2%.
Contract Sales & Medical Solutions’ cost of revenues, exclusive of depreciation and amortization, decreased $7 million, or 1.4%, in the first nine months of 2022 as compared to the same period in 2021. This decrease included a constant currency increase of approximately $28 million, or 5.7%.
The constant currency increase for the three and nine months ended September 30, 2022 was primarily related to an increase in compensation and related expenses and reimbursed expenses.
Selling, General and Administrative Expenses
Contract Sales & Medical Solutions’ selling, general and administrative expenses increased $3 million, or 21.4%, in the third quarter of 2022 as compared to the same period in 2021, which included a constant currency increase of approximately $4 million, or 28.6%.
Contract Sales & Medical Solutions’ selling, general and administrative expenses increased $7 million, or 17.1%, in the first nine months of 2022 as compared to the same period in 2021, which included a constant currency increase of approximately $9 million, or 22.0%.
The constant currency increase for the three and nine months ended September 30, 2022 was primarily related to an increase in compensation and related expenses and IT related expenses.
Liquidity and Capital Resources
Overview
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source of liquidity is operating cash flows. In addition to operating cash flows, other significant factors that affect our overall management of liquidity include: 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. The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences; however, those balances are generally available without legal restrictions to fund ordinary business operations. 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 $1,274 million as of September 30, 2022 ($512 million of which was in the United States), a decrease from $1,366 million as of December 31, 2021.
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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. 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 assets. Should we elect to pursue any such transaction, we may seek to obtain debt or equity financing to facilitate those activities. Our ability to enter into any such potential transactions and our use of cash or proceeds is limited to varying degrees by the terms and restrictions contained in our existing debt arrangements. We cannot provide assurances that we will be able to complete any such financing arrangements or other transactions on favorable terms or at all.
Equity 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. 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 nine months ended September 30, 2022, we repurchased 5.3 million shares of our common stock for $1,143 million under the Repurchase Program. These amounts include approximately 0.2 million of shares valued at approximately $40 million which were accrued for as of September 30, 2022 based on when the trade and settlement dates occurred. As of September 30, 2022, we have remaining authorization to repurchase up to approximately $1.4 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.
Debt
As of September 30, 2022, we had $12.4 billion of total indebtedness, excluding $1,500 million of additional available borrowings under our revolving credit facility. Our long-term debt arrangements contain customary restrictive covenants and, as of September 30, 2022, we believe we were in compliance with our restrictive covenants in all material respects.
Senior Secured Credit Facilities
On June 16, 2022, the Company entered into Amendment No. 1 to the Company’s Credit Agreement to borrow $1,250 million in Additional Term A Loans. The proceeds from the Additional Term A Loans were used to repay approximately $950 million of outstanding revolving credit loans under the Company's senior secured credit facilities and for general corporate purposes. 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, 2022, the Company’s Fifth Amended and Restated Credit Agreement provided financing through the senior secured credit facilities of up to approximately $8,009 million, which consisted of $6,509 million principal amounts of debt outstanding, and $1,500 million of available borrowing capacity on the revolving credit facility and standby letters of credit.
Receivables Financing Facility
As of September 30, 2022, no additional amounts of revolving loan commitments were available under the receivables financing facility.
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Nine months ended September 30, 2022 and 2021
Cash Flow from Operating Activities
| Nine Months Ended September 30, | ||||||||||||||
| (in millions) | 2022 | 2021 | ||||||||||||
| Net cash provided by operating activities | $ | 1,700 | $ | 2,250 | ||||||||||
Cash provided by operating activities decreased $550 million during the first nine 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 ($444 million), a decrease in cash from accounts receivable and unbilled services ($307 million), offset by an increase in cash from other operating assets and liabilities ($122 million) and cash related net income ($79 million).
Cash Flow from Investing Activities
| Nine Months Ended September 30, | ||||||||||||||
| (in millions) | 2022 | 2021 | ||||||||||||
| Net cash used in investing activities | $ | (1,529) | $ | (1,456) | ||||||||||
Cash used in investing activities increased $73 million during the first nine months of 2022 as compared to the same period in 2021, primarily driven by more cash used for acquisitions of property, equipment, and software ($47 million), acquisitions of businesses ($18 million) and investments in unconsolidated affiliates ($11 million), as well as less net proceeds from sale of equity securities ($5 million), offset by less purchases of marketable securities, net ($5 million) and an increase in cash from other investing activities ($3 million).
Cash Flow from Financing Activities
| Nine Months Ended September 30, | ||||||||||||||
| (in millions) | 2022 | 2021 | ||||||||||||
| Net cash used in financing activities | $ | (136) | $ | (1,097) | ||||||||||
Cash used in financing activities decreased $961 million during the first nine months of 2022 as compared to the same period in 2021, primarily due to a decrease in debt and principal payments ($1,982 million), the absence of cash payments for the Company's acquisition of Quest's non-controlling interest in Q2 Solutions ($758 million) and a decrease in cash payments on contingent consideration and deferred purchase price accruals ($17 million), offset by an increase in cash used to repurchase common stock ($901 million), a decrease in cash provided by proceeds from debt issuances, net of debt issuance costs ($666 million), a decrease in cash proceeds from revolving credit facilities, net of repayments ($210 million) and an increase in cash payments related to employee stock option plans ($19 million).
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements.
Contractual Obligations and Commitments
We have various contractual obligations, which are recorded as liabilities in our consolidated financial statements.
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
There have been no material changes to our critical accounting policies as previously disclosed in our 2021 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to our quantitative and qualitative disclosures about market risk as compared to the quantitative and qualitative disclosures about market risk described in our 2021 Form 10-K.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
We are party to legal proceedings incidental to our business. While the outcome of these matters could differ from management’s expectations, we do not believe that the resolution of these matters is reasonably likely to have a material adverse effect to our financial statements.
Information pertaining to legal proceedings can be found in Note 8 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and is incorporated by reference herein.
Item 1A. Risk Factors
For a discussion of the risks relating to our business, see Part I—Item 1A—“Risk Factors” of our 2021 Form 10-K. There have been no material changes from the risk factors previously disclosed in our 2021 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
Not applicable.
Use of Proceeds from Registered Securities
Not applicable.
Purchases of Equity Securities by the Issuer
On October 30, 2013, the Board approved an equity repurchase program (the “Repurchase Program”) authorizing the repurchase of up to $125.0 million of either our common stock or vested in-the-money employee stock options, or a combination thereof. The Board increased the stock repurchase authorization under the Repurchase Program with respect to the repurchase of the Company's common stock by $600 million, $1.5 billion, $2.0 billion, $1.5 billion, and $2.0 billion in 2015, 2016, 2017, 2018, and 2019 respectively. 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. The Repurchase Program does not obligate us to repurchase any particular amount of common stock or vested in-the-money employee stock options, and it may be modified, extended, suspended or discontinued at any time. The timing and amount of repurchases are determined by our management based on a variety of factors such as the market price of our common stock, our corporate requirements, and overall market conditions. Purchases of our common stock may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or in privately negotiated transactions. The Repurchase Program for common stock does not have an expiration date. 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.
From inception of the Repurchase Program through September 30, 2022, we have repurchased a total of $7.9 billion of our securities under the Repurchase Program.
During the nine months ended September 30, 2022, we repurchased 5.3 million shares of our common stock for $1,143 million under the Repurchase Program. These amounts include approximately 0.2 million of shares valued at approximately $40 million which were accrued for as of September 30, 2022 based on when the trade and settlement dates occurred. 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, 2022, we have remaining authorization to repurchase up to approximately $1.4 billion of our common stock under the Repurchase Program.
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Since the merger between Quintiles and IMS Health, we have repurchased 72.6 million shares of our common stock at an average market price per share of $109.06 for an aggregate purchase price of $7.9 billion both under and outside of the Repurchase Program. This includes shares withheld from employees to satisfy certain tax obligations due in connection with grants of stock under the Quintiles IMS Holdings, Inc. 2017 Incentive and Stock Award Plan (the “Plan”). The Plan provides for the withholding of shares to satisfy tax obligations. It does not specify a maximum number of shares that can be withheld for this purpose. The shares of common stock withheld to satisfy tax withholding obligations may be deemed to be “issuer purchases” of shares that are required to be disclosed pursuant to this Item.
The following table summarizes the monthly equity repurchase program activity for the three months ended September 30, 2022 and the approximate dollar value of shares that may yet be purchased pursuant to the Repurchase Program.
| (in millions, except per share data) | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| July 1, 2022 — July 31, 2022 | — | $ | — | — | $ | 1,530.3 | ||||||||||||||||||||
| August 1, 2022 — August 31, 2022 | — | $ | — | — | $ | 1,530.3 | ||||||||||||||||||||
| September 1, 2022 — September 30, 2022 | 0.8 | $ | 186.05 | 0.8 | $ | 1,380.3 | ||||||||||||||||||||
| 0.8 | 0.8 | |||||||||||||||||||||||||
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Item 6. Exhibits
The exhibits below are filed or furnished as a part of this report and are incorporated herein by reference.
| Incorporated by Reference | ||||||||||||||||||||||||||||||||||||||
| Exhibit Number | Exhibit Description | Filed Herewith | Form | File No. | Exhibit | Filing Date | ||||||||||||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||||||||||||||
| 32.1 | X | |||||||||||||||||||||||||||||||||||||
| 32.2 | X | |||||||||||||||||||||||||||||||||||||
| 101 | Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Statements of Income (unaudited), (ii) Condensed Consolidated Statements of Comprehensive Income (unaudited), (iii) Condensed Consolidated Balance Sheets (unaudited), (iv) Condensed Consolidated Statements of Cash Flows (unaudited), (v) Condensed Consolidated Statements of Stockholders’ Equity (unaudited) and (vi) Notes to Condensed Consolidated Financial Statements (unaudited). The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | ||||||||||||||||||||||||||||||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized on October 27, 2022.
| IQVIA HOLDINGS INC. | |||||
| /s/ Ronald E. Bruehlman | |||||
Ronald E. Bruehlman Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial Officer) | |||||
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