Syneos Health, Inc. - Annual Report: 2022 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2022

or

For the transition period from _______ to ______

Commission File Number: 001-36730

SYNEOS HEALTH, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (919) 876-9300

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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 ☒ 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 ☒ 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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, based on the closing sale price of $71.68 on June 30, 2022, was approximately $7,342,569,400.

As of February 9, 2023, there were approximately 103,241,365 shares of the registrant’s Class A common stock outstanding.

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SYNEOS HEALTH, INC.

FORM 10-K

For the Fiscal Year Ended December 31, 2022

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward-looking statements reflect, among other things, our business plans and strategy, market trends, beliefs regarding our competitive strengths, current expectations, future capital expenditures, and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such, including statements regarding future financial and operational results, our business strategy, the future impact of macroeconomic trends, such as inflation and increased interest rates, and the ongoing COVID-19 pandemic on our business, financial results, and financial condition, benefits of acquisitions, and planned capital expenditures. Without limiting the foregoing, the words “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “projects,” “should,” “would,” “targets,” “will” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. Unless legally required, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.

As used in this report, the terms “Syneos Health, Inc.,” “Company,” “we,” “us,” and “our” mean Syneos Health, Inc. and its subsidiaries unless the context indicates otherwise.

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Summary of Principal Risk Factors

In evaluating our Company, you should consider carefully the summary risks and uncertainties described below together with the other information included in this Annual Report on Form 10-K.

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PART I

Item 1. Business.

Overview

We are a leading fully integrated biopharmaceutical solutions organization built to accelerate customer success. We translate unique clinical, medical affairs and commercial insights into outcomes to address modern market realities.

We bring together a talented team of professionals, who work across more than 110 countries, with a deep understanding of patient and physician behaviors and market dynamics. Together, we share insights, use the latest technologies, and apply advanced business practices to speed our customers’ delivery of important therapies to patients.

Syneos Health supports a diverse, equitable, and inclusive culture that cares for colleagues, customers, patients, communities, and the environment.

Our operations are divided into two reportable segments, Clinical Solutions and Commercial Solutions. Our Clinical Solutions segment offers comprehensive global services for the development of diagnostics, drugs, biologics, devices, and digital therapeutics that span Phase I to IV of clinical development. This segment offers individual services including regulatory consulting, project management, protocol development, investigational site recruitment, clinical monitoring, technology-enabled patient recruitment and engagement, clinical home health services, clinical trial diversity, biometrics, and regulatory affairs, all across a comprehensive range of therapeutic areas.

Our Commercial Solutions segment provides commercialization services, including deployment solutions, communications solutions (public relations, advertising, and medical communications), and consulting services. We integrate our clinical and commercial capabilities into customized solutions by sharing knowledge, data, and insights. We believe this collaboration across the development and commercialization continuum facilitates unique insights into patient populations, therapeutic environments, product timelines, and the competitive landscape.

Founded more than three decades ago as an academic organization dedicated to central nervous system research, we have translated that knowledge into a global organization with deep therapeutic expertise, as well as full data services and regulatory advisory and implementation support capabilities. Over the past decade, we have built our scale and capabilities to become a leading global provider of Phase I to Phase IV clinical development services, as well as a full range of commercialization and other complementary services. We were established as INC Research in 1998, and our corporate headquarters are located in Morrisville, North Carolina. INC Research Holdings, Inc. was incorporated in Delaware in August 2010. We changed our name to Syneos Health, Inc. after our 2017 merger (the “Merger”) with Double Eagle Parent, Inc. (“inVentiv”), the parent company of inVentiv Health, Inc.

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Our Market

The market for our solutions is primarily the biopharmaceutical industry that utilizes outsourced clinical drug development and commercialization services. We believe we are well-positioned to benefit from the following market trends:

Expected growth of clinical drug development market. Biopharmaceutical companies continue to prioritize the outsourcing of Phase I to Phase IV clinical trials to Contract Research Organizations (“CROs”).

We believe that, based on industry sources and management estimates, the Phase I – IV clinical development market for CRO services will grow at a compound average annual rate of 4% to 7% through 2024, driven by a combination of R&D budget increases and further outsourcing spend. We estimate the total addressable clinical development market to be $120 billion, of which $64 billion was outsourced to CROs in 2022.

Trends in commercialization outsourcing. We believe that, based on industry sources and management estimates, the market for biopharmaceutical commercial outsourcing will grow at a compound average rate of approximately 4% to 7% through 2024. We believe this potential growth is supported by: (i) increased preference for digital engagement strategies, scientifically enabled representatives driving biopharma partners to use Contract Sales Organizations (“CSOs”) to leverage their infrastructure, and flexibility to scale as needed; (ii) increased expectations for data generation and data-driven insights from biopharmaceutical companies; (iii) increased demand for field facing teams that can engage in highly specialized conversations around complex scientific information associated with innovative therapies; and (iv) an evolving industry landscape illustrated by a shift to more strategic relationships, particularly where economies of scale can reduce costs.

Increasingly challenging clinical development and commercialization environment. The biopharmaceutical industry is currently facing several challenges, including: (i) margin deterioration; (ii) reimbursement and provider access hurdles; (iii) significant decline in funding, market valuations, and mergers & acquisitions (“M&A”) activity; (iv) fewer blockbuster and high profitability drugs; (v) continued pressure from generic brand exposure; and (vi) the consolidation of payers, healthcare systems, providers, and pharmacies. These challenges also make it more complicated to engage physicians and patients, making new product launches more difficult. At the same time, the industry is experiencing growing demand for specialty drugs, pressure to improve R&D productivity, the transition of the healthcare industry worldwide from a volume-based to a value-based reimbursement structure, and growing political and pricing pressures.

Globalization of clinical trials. Clinical trials have become increasingly global as biopharmaceutical companies seek to accelerate patient recruitment, particularly within protocol-eligible, treatment-naïve patient populations without co-morbidities that could skew clinical outcomes. Biopharmaceutical companies are also increasingly seeking to expand the commercial potential of their products by applying for regulatory approvals in multiple countries, including fast-growing economies that are spending more on healthcare.

Management of increasingly complex clinical trials. The biopharmaceutical industry operates in an increasingly sophisticated and highly regulated environment and has responded to the demands of novel therapeutics by adapting efficient drug development processes. Complex clinical trial design expertise has emerged as a significant competitive advantage for select CROs that have a track record of successfully navigating country-specific regulatory, clinical trial protocol, and patient enrollment barriers, including sometimes subjective, evolving clinical endpoints.

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Rapid adoption of remote technology-enabled platforms. Accelerated by the ongoing COVID-19 pandemic, we have observed a significant increase in the adoption of remote and digital solutions to facilitate continued healthcare delivery to patients and support to healthcare providers (“HCPs”) for our customers’ products. Technology and data that help power site- and patient-centric solutions have been on the rise and include risk-based and remote monitoring, home health, and virtual personal and non-personal outreach to medical facilities and clinics.

Our Business Strategy

Our goal is to be the partner of choice to the biopharmaceutical industry by translating our unique clinical and commercial insights into superior customer outcomes. We believe our ability to strategically integrate clinical development, medical affairs, and commercial capabilities is unique, allowing for clinical insights to inform commercialization and for commercial insights to improve clinical trial design and execution. The key elements of our business strategy include:

Transform our organization to improve customer engagement, increase innovation, and achieve operating efficiencies. We are pursuing business transformation initiatives that include enhancing customer engagement and infusing innovation and insights throughout our operations, integrating artificial intelligence and predictive analytics to drive faster data insights and patient outcomes, leveraging tools and automation to simplify processes and improve real-time visibility, optimizing our operational footprint, and streamlining the organization and outsourcing where we believe appropriate. We also seek to improve our productivity, flexibility, quality, functionality, and cost savings by investing in the development and implementation of global platforms and integration of our business processes and functions to achieve economies of scale.

Capitalize on industry trends favoring outsourcing. We believe our Clinical Solutions and Commercial Solutions segments can benefit from specific industry trends that are expected to drive attractive growth rates over the long term. Higher costs and increased complexity are driving our customers to seek efficiency and expertise through outsourcing services. We believe outsourcing both clinical development and commercialization services optimizes returns on invested R&D for biopharmaceutical companies.

Further penetrate the large pharmaceutical market. We believe one of the largest opportunities to increase our market share and improve our market position is to further penetrate large pharmaceutical companies. Large pharmaceutical companies have increasingly focused on partnering with larger outsourcing vendors that offer a full suite of service capabilities. We have invested in expanding our global scale, breadth of services, and infrastructure to build up our service capabilities for this customer sector.

Continued penetration of the small and mid-sized (“SMID”) biopharmaceutical market. We believe there is opportunity to grow in the SMID biopharmaceutical market segment. Our 2020 acquisition of Synteract further enhanced our position for serving SMID customers, diversifying our customer base and expanding support to emerging biopharmaceutical companies. We aim to leverage our full suite of clinical and commercialization services, our Syneos One® solutions, and our therapeutic expertise and organizational alignment down to the CRA level, as well as our Trusted Process® operating model to further penetrate the SMID biopharmaceutical market.

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Bring differentiated solutions to the market that accelerate customer outcomes. We believe we are uniquely positioned to address our customers’ evolving needs as a leading fully integrated biopharmaceutical solutions organization. We translate unique clinical, medical affairs and commercial insights into outcomes to address modern market realities. Our breadth of services enables us to provide customized solutions designed to successfully accelerate the time to market for our customers’ clinical and commercial projects. We believe sharing commercial insights during the early phases of clinical trials can lead to better informed decisions around clinical trial design and strategies. Similarly, we believe our therapeutic and clinical trial expertise can lead to improved decisions about regulatory and payer approvals, market access, reimbursement and formulary inclusion, field team development, and other steps that are critical to the commercial success of our customers.

Strengthen our geographic footprint. We have developed a global platform with a presence in the major biopharmaceutical markets and intend to further expand our business outside of the United States (“U.S.”), targeting regions where we are underpenetrated and that offer significant growth opportunities. We have added geographic reach through both acquisitions and organic growth in Asia-Pacific, Latin America, the Middle East and Africa, and Europe. We believe these regions are critical to obtaining business awards from large and mid-sized biopharmaceutical companies. Through our business transformation initiatives, we plan to progress to a more country-based business delivery model.

Drive acceleration of commercial outsourcing with Syneos One®. We believe our Syneos One® solutions are uniquely positioned to determine the appropriate mix of clinical and commercial services to help customers optimize the development process of their assets and maximize the return on their investment. In addition, Syneos One® enables multiple selling points along the operational timeline of asset development. The need for a full suite of asset development services is particularly strong with our SMID customers in the near-term, given their need to efficiently deploy capital during the asset development process coupled with their limited internal resources. Large biopharmaceutical companies may represent a long-term opportunity if market pressures to reduce fixed-cost infrastructures further intensify. Given our strong relationships in both customer segments and our breadth of services, including our focus on medical affairs, we believe we are well positioned to capitalize on the needs of both customer types.

Successfully acquire and integrate companies and continue to evaluate and pursue other strategic initiatives to augment our organic growth. As part of our ongoing business strategy to enhance our services, capabilities, and geographic presence, we regularly evaluate new opportunities for growth through strategic initiatives, including potential acquisitions, investments, dispositions, or other transformative transactions.

Our Services

We provide services through two reportable segments: Clinical Solutions and Commercial Solutions.

Clinical Solutions

Our extensive range of clinical solutions supports the entire clinical development process from Phase I to Phase IV and allows us to offer our customers an integrated suite of investigative site support and clinical development services. We have strengths in the complex therapeutic areas such as neuroscience and hematology/oncology, with the latter representing the largest and fastest growing therapeutic area. Our solutions can be delivered on a full-service project basis, on a functional or resource basis (see FSP 360 below), or through a hybrid approach depending on the needs of our customers. We are able to customize our services to provide support to customers within an individual clinical study, a single function, multiple functions within a single therapeutic area, or across a customer’s entire product portfolio. Our comprehensive suite of clinical development services includes the following, among others:

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Full-service Clinical Development

Our full-service clinical development offering provides comprehensive solutions to address the clinical development needs of our customers for Phase I to Phase IV clinical trials. Our comprehensive suite of clinical development services includes the following, among others: patient recruitment and retention; site start-up services; project management; clinical monitoring; decentralized solutions (e.g., remote engagement and mobile research nursing clinical trial services); drug safety and pharmacovigilance; quality assurance; regulatory and medical writing; clinical data management; electronic data capture; and biostatistics. We run full-service clinical trials globally.

FSP 360

Our Functional Service Provider (“FSP”) 360 offering helps sponsors review their approach to key functional areas of clinical research, specifically those areas not core to their clinical development business or in areas where they need to augment internal resources. We can customize our full-service offering to provide support to customers within an individual clinical study, a single function, multiple functions within a single therapeutic area, or across a customer’s entire product portfolio. Any of our full-service clinical solutions outlined above can be delivered on an unbundled or functional basis or on a hybrid approach, based on our customers’ specific needs. We currently operate FSP 360 hubs in North America, South America, Europe and Asia Pacific.

Early Phase

Our early phase offering provides a full range of services for Phase I to Phase IIA clinical trial conduct, bioanalytical assay development and analysis, targeted translational science offerings, and clinical pharmacology services, including modeling and simulation. We also provide validation and sample analysis services from pre-clinical development through post-marketing support and purpose-built early phase biometrics support from North America and India. We conduct clinical trial studies at our facilities located in Quebec City, Canada and Miami, Florida. We have extensive experience in first-in-human, proof-of concept, bioequivalence and bioavailability, biosimilars, and clinical pharmacology study conduct. We collaborate with leading hospitals for the conduct of early development and clinical pharmacology studies that require access to patients. We have a large base of available subjects, including patient populations with specific medical conditions and healthy volunteers, which provide efficient and rapid patient recruitment. Furthermore, we can also provide early stage and clinical pharmacology studies through our Asia-Pacific Catalyst Model with Phase I to Phase IIA conduct capabilities in Australia, New Zealand, South Korea, and Japan.

Real World Evidence (“RWE”) and Late Phase Services

Our Real World, Late Phase group conducts studies to understand how a treatment, service, or method of delivering care works when applied in real world, clinical practice environments.

The market for these services is increasing as regulatory changes are encouraging the use of RWE and payers are demanding these outcomes. Customers are using RWE to supplement clinical efficacy and safety data, to build a value story, and in designing and implementing a successful commercialization strategy. RWE shows relatively low levels of outsourcing penetration and provides both clinical and commercial benefits, offering a growth opportunity for us.

We provide both consultative and operational expertise to our customers in real world data generation, from concept through core development, launch, and commercialization. This is informed by our Dynamic Assembly® approach, which allows us to expand our data access and analytic capabilities, enhancing our ability to help customers demonstrate product value. Our services include patient registries, surveillance and observational studies, patient/health outcomes research, and economic studies.

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Commercial Solutions

Our Commercial Solutions segment provides a broad suite of complementary commercialization services including deployment solutions, communications services (advertising, public relations, and medical communications), and consulting services. Additionally, these capabilities provide behavioral and patient insights used by our Clinical Solutions segment to design smarter clinical trials and to accelerate patient recruitment. Our comprehensive capabilities portfolio also allows us to provide full-service commercialization. This integrated approach allows us to maximize product or portfolio performance for customers, by sharing insights and expertise across the integrated commercial outsourcing team.

These services are enhanced by our Kinetic offering, our modern customer engagement capability. We use an intelligent and data-enabled approach to digitally enhance our commercialization services by understanding the audiences for our customers’ products, synchronizing their experiences across multiple personal and digital channels and decoding the performance of these interactions to adapt in real-time.

Deployment Solutions

Our deployment solutions include field-based promotional and market access solutions, field-based clinical solutions, inside sales and contact center, insight and strategy design, patient support services, training, talent sourcing, and sales operations. We provide contract field promotion teams with a broad array of capabilities, support services, and non-personal engagement solutions including tele-detailing and electronic detailing (“e-detailing”). Our field-based promotional teams are supported by recruiting and training capabilities, clinical and scientific professionals who advocate for and inform markets of novel therapies, and our customized patient behavioral models built on our proprietary insights and data-driven analytics. Services offered include market research, commercial analytics, managed markets access, biotechnology and specialty managed markets, and full-service commercialization. Our field promotion teams can be supported by our communications and consulting services.

Communications Services

Our healthcare focused communications services offering provides advertising, public relations, interactive digital strategies, branding and identity consulting services, and medical communications and education services. These services are scalable, as we can support product commercialization both domestically and internationally. Communications services are deployed throughout a product’s existence, beginning well before commercial launch, encompassing regulatory approval and market introduction, and continuing throughout the life of a product.

Consulting Services

Our consulting services support critical decision points during a biopharmaceutical product’s lifecycle, from licensing, to product and portfolio strategy development, to drug commercialization. These services are centered on maximizing the commercial value of a client’s product pipeline, helping clinical leaders better deploy strategic resources, improve efficiency, and enhance the effectiveness of marketing and sales activities. Our overall consulting services capabilities include the following: commercial strategy development and planning; pricing and market access; medical affairs advisory; quality management and regulatory compliance advisory; and risk and program management.

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Customers

We have a well-diversified customer base of over 900 customers, which includes many of the world’s largest biopharmaceutical companies, which we define as the top 50 biopharmaceutical companies measured by annual R&D spend, as well as numerous emerging and specialty biotechnology companies, medical device, and diagnostics companies. We are diversified across our segments, deriving 75% and 25% of our revenue during 2022 from our Clinical Solutions and Commercial Solutions segments, respectively.

For the year ended December 31, 2022, our revenue attributable to large biopharmaceutical companies represented approximately 55% of our total revenue and revenue attributable to SMID biopharmaceutical companies represented approximately 45%. Our top five customers accounted for approximately 24% of our revenue in 2022. Additionally, we serve customers in a variety of locations throughout the world, with approximately 60% of our 2022 revenue generated from work performed in the U.S. and Canada, 25% from Europe, the Middle East, and Africa, 12% from Asia-Pacific, and 3% from Latin America. This diversification allows us to grow our business in multiple customer segments and geographies.

Sales and Marketing

Our global team of strategic business development professionals and support staff identifies needs, designs solutions, and promotes our services to the biopharmaceutical, biotechnology, and medical device industries. In addition to significant customer engagement and development experience, many of these individuals have technical and scientific backgrounds.

Our business development organization works with our leadership team to identify, develop, and maintain key customer relationships in addition to new business development activities. Teams use an integrated, customer-focused approach to develop joint engagement plans for key accounts. For many of our largest customer relationships, dedicated strategic account management teams under our Global Client and Syneos One® groups provide account leadership to meet financial goals, align delivery with strategic goals, and promote innovation.

Competition

We operate in several highly competitive markets. Our competitors include a variety of companies providing services to the biopharmaceutical industry, including large CROs and smaller specialty CROs, large global communications holding companies, smaller specialized communications agencies, contract sales organizations, and a wide range of consulting companies. Both of our reportable segments face distinct competitors within the markets they serve. Notwithstanding competitive factors, we believe that our deep therapeutic expertise, global reach, integrated model, and operational strengths differentiate us from our competitors across both of our segments.

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Clinical Solutions

Our Clinical Solutions segment competes primarily against other full-service CROs and services provided by in-house R&D departments of biopharmaceutical companies, universities, and teaching hospitals. Since 2018, large CROs have broadly taken share from smaller CROs through both scale and consolidation. This trend is likely to continue as trial complexity evolves, supporting the need for partnership and utilization of diverse capability sets. Although the CRO industry has experienced increased consolidation in the past several years, the landscape remains fragmented. We generally compete based on the following factors:

Commercial Solutions

Our Commercial Solutions segment competes primarily against the in-house sales and marketing departments of biopharmaceutical companies, other contract pharmaceutical sales and service organizations, communications holding companies and specialized agencies, and consulting firms. We generally compete based on the following factors:

Government Regulation

The biopharmaceutical industry is subject to a high degree of governmental regulation in both domestic and international markets. Regardless of the country or region in which approval is being sought, before a marketing application for a drug is ready for submission to regulatory authorities, the candidate drug must undergo rigorous testing in pre-clinical studies and clinical trials. The clinical trial process must be conducted in accordance with the Federal Food, Drug and Cosmetic Act in the U.S. and similar laws and regulations in the relevant foreign jurisdictions (e.g., the European Union Clinical Trials Regulation). These laws and regulations require the candidate drug to be tested and studied in certain ways prior to submission for approval.

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Regulation of Our Clinical Solutions Segment

In the U.S., the Food and Drug Administration (“FDA”) regulates the conduct of clinical trials of drug products in human subjects, and the form and content of regulatory applications. The FDA also regulates the development, approval, manufacture, safety, labeling, storage, record keeping, import, export, distribution, advertising, sale, and marketing of drug products. The FDA has similar authority and similar requirements with respect to the clinical testing of biological products and medical devices. In the European Union (“EU”) and other jurisdictions where our customers intend to apply for marketing authorization (of drug products) or seek certification (of medical devices), similar laws and regulations apply. Within the EU, these requirements are enforced by the EMA and competent authorities of the EU member states. Additional national requirements may vary slightly from one member state to another. In Canada, clinical trials are regulated by the Health Products Food Branch of Health Canada as well as provincial regulations. Similar requirements also apply in other jurisdictions, including Australia, Japan, and other Asia-Pacific countries, where we operate or where our customers intend to apply for marketing authorization. Sponsors of clinical trials also follow the International Council on Harmonisation (“ICH”) guidelines on Good Clinical Practice (“GCP”), which are enforced by the FDA and other comparable regulatory authorities, and may be amended from time to time.

Our services are subject to various regulatory requirements designed to ensure the quality and integrity of the clinical trial process. In the U.S., we must perform our clinical development services in compliance with applicable laws, rules, and regulations, including GCP and Good Pharmacovigilance Practice, which govern, among other things, the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials. Before a human clinical trial may begin, the manufacturer or sponsor of the investigational drug or biologic must file an investigational new drug application (“IND”) with the FDA, which contains, among other things, the results of pre-clinical tests, manufacturing information, and other analytical data. A separate submission to an existing IND must also be made for each successive clinical trial conducted during asset development. Each clinical trial conducted in the U.S. must be conducted pursuant to, and in accordance with, an effective IND. In addition, under GCP regulations, each human clinical trial we conduct is subject to the oversight of an independent institutional review board (“IRB”) which is an independent committee that has the regulatory authority to review, approve and monitor a clinical trial. The FDA, the IRB, or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the study subjects are being exposed to an unacceptable health risk.

Clinical trials conducted outside the U.S. are subject to the laws and regulations of the country where the trials are conducted. These laws and regulations might not be similar to the laws and regulations administered by the FDA and other laws and regulations regarding the protection of patient safety and privacy and the control of study pharmaceuticals, medical devices or other study materials. Studies conducted outside the U.S. can also be subject to regulation by the FDA if the studies are conducted pursuant to an IND, or in the case of a medical device, an investigational device exemption. It is the responsibility of the study sponsor or the parties conducting the studies to ensure that all applicable legal and regulatory requirements are fulfilled.

To comply with GCP and other regulations, we must, among other things:

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Similar regulations and guidelines exist in various states and in other countries. In the EU, similarly to the U.S., the various phases of non-clinical and clinical research are subject to significant regulatory controls. Clinical trials of medicinal products (drugs, biologics, and medical devices) that support or are intended to support applications for research or marketing authorization must be conducted in accordance with applicable EU and national regulations and the ICH guidelines on GCP, which are ethical principles that have their origin in the Declaration of Helsinki. If the sponsor of a clinical trial is not established within the EU, it must appoint an EU entity to act as its legal representative for clinical trials conducted in the EU. Non-clinical studies must be conducted in accordance with the principles of good laboratory practice (“GLP”) as set forth in EU Directive 2004/10/EC.

Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances. In particular, non-clinical studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported, and archived in accordance with the GLP principles, which define a set of rules and criteria for a quality system for the organizational process and the conditions for non-clinical studies. These GLP standards reflect the Organization for Economic Co-operation and Development requirements.

The regulatory landscape related to clinical trials in the EU has been subject to recent changes. The EU Clinical Trials Regulation (“CTR”), which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. Unlike directives, the CTR is directly applicable in all EU member states, as well as Norway, Liechtenstein and Iceland, without the need for member states to further implement it into national law. The CTR notably harmonizes the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which contains a centralized EU portal and database.

The UK left the EU on January 31, 2020, following which existing EU medicinal product legislation continued to apply in the UK during the transition period under the terms of the EU-UK Withdrawal Agreement. As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency (“MHRA”) is the UK’s standalone medicines and medical devices regulator. EU laws that have been transposed into UK law through secondary legislation continue to be applicable as “retained EU law.” However, new legislation such as the EU CTR is not applicable. The UK government has passed a new Medicines and Medical Devices Act 2021, which introduces delegated powers in favor of the Secretary of State or an ‘appropriate authority’ to amend or supplement existing regulations in the area of medicinal products and medical devices. This allows new rules to be introduced in the future by way of secondary legislation, which aims to allow flexibility in addressing regulatory gaps and future changes in the fields of human medicines, clinical trials, and medical devices.

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We may be subject to regulatory action if we fail to comply with applicable rules and regulations. Failure to comply with certain regulations can also result in the termination of ongoing research and disqualification of data collected during the clinical trials. For example, violations of GCP could result, depending on the nature of the violation and the type of product involved, in the issuance of a warning letter, suspension or termination of a clinical study, refusal of the FDA or other comparable regulatory authorities to approve clinical trial or marketing applications or withdrawal of such applications, injunction, seizure of investigational products, civil penalties, criminal prosecutions, or debarment from assisting in the submission of new drug applications. See Part I, Item 1A, “Risk Factors – Risks Related to Our Business – If we fail to perform our services in accordance with contractual requirements, regulatory requirements, and ethical considerations, we could be subject to significant costs, liability, or regulatory enforcement actions, and our reputation could be harmed.”

We monitor our clinical trials to test for compliance with applicable laws and regulations in the U.S. and the foreign jurisdictions in which we operate. We have adopted standard operating procedures that are designed to satisfy regulatory requirements and serve as a mechanism for controlling and enhancing the quality of our clinical trials. In the U.S. and in foreign jurisdictions where we operate, our procedures were developed to ensure compliance with GCP and associated guidelines.

In addition to its comprehensive regulation of safety in the workplace, the U.S. Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employers whose workers might be exposed to blood-borne pathogens such as HIV and the hepatitis virus. Furthermore, certain employees might have to receive initial and periodic training to ensure compliance with applicable hazardous materials regulations and health and safety guidelines. We are subject to similar regulations in Canada and Spain.

Regulation of Our Commercial Solutions Segment

The safety of medicines continues to be monitored after drug product approvals and throughout their use in healthcare practice. Post-marketing safety surveillance is therefore also subject to FDA regulations as well as the EU pharmacovigilance legislation and other countries’ regulations.

In addition, our field personnel are subject to all laws, rules and regulations governing the promotion of pharmaceutical products in the U.S. and in every other country where such personnel perform work. In particular, these rules and regulations include limitations on the indications for which a product may be promoted and on promotional spending. Additionally, these laws, rules and regulations govern the manner in which the product may be promoted, and the scientific exchange of information related to the product. Violations of these rules may leave us at risk of direct regulatory enforcement action and/or cause us to be in breach of contract with our customers.

Some of our field personnel handle and distribute samples of pharmaceutical products. In the U.S., the handling and distribution of prescription drug product samples are subject to regulation under the Prescription Drug Marketing Act and other applicable federal, state and local laws and regulations and other countries may have similar laws or regulations. These laws and regulations regulate the distribution of drug samples by mandating procedures for storage and record-keeping requirements for drug samples and ban the purchase or sale of drug samples. Further, we must comply with the requirements of the U.S. Drug Enforcement Administration, which regulates the distribution, record-keeping, handling, security, and disposal of controlled substances.

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Our communications offerings are subject to all regulatory risks applicable to similar communications businesses as well as risks that relate specifically to the provision of these services to the biopharmaceutical industry. Such regulatory risks include enforcement by the FDA and the Federal Trade Commission in the U.S., Health Canada, the Department of Health in the UK, competent authorities of the EU member states, as well as state agencies and other foreign regulators enforcing laws relating to product advertising, false advertising, and unfair and deceptive trade practices. In addition to enforcement actions initiated by government agencies, there has been an increasing tendency in the U.S. and in foreign jurisdictions among biopharmaceutical companies to resort to the courts and industry and self-regulatory bodies to challenge comparative prescription drug advertising on the grounds that the advertising is false and deceptive. There continues to be an expansion of specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to the advertising for certain products.

Data Protection Regulation

We are subject to data protection laws and regulations in the countries in which we operate that address the privacy, security, and other processing of personal information. These laws and regulations govern the collection, use, handling, and disclosure of health-related and other personal information and require that we adopt and maintain reasonable and appropriate security measures that are designed to protect the confidentiality, integrity and availability of the information. These laws and regulations also typically require the adoption and maintenance of procedures that facilitate the exercise of an individual’s rights with respect to the information about them. Certain of these laws may also contain requirements relating to the location of the personal information, or the transfer of personal information from one country or region to other countries. Examples of data protection laws and regulations to which we may be subject include Canada’s Personal Information Protection and Electronic Documents Act, the EU’s General Data Protection Regulation (“EU GDPR”), the UK General Data Protection Regulation and Data Protection Act 2018 (the “UK GDPR” and, together with the EU GDPR, “GDPR”), and the California Consumer Privacy Act (“CCPA”). We are also subject to evolving EU and UK privacy laws on cookies, tracking technologies, and e-marketing. For additional information regarding these laws and regulations and their potential impacts on our business, see Part I, Item 1A, “Risk Factors – Risks Related to Our Business – Current and proposed laws and regulations regarding the protection of personal data could result in increased risks of liability or increased cost to us or could limit our service offerings.”

Intellectual Property

We develop and use a number of proprietary methodologies, analytics, systems, technologies, and other intellectual property in the conduct of our business. We rely upon a combination of confidentiality policies, nondisclosure agreements, and other contractual arrangements to protect our trade secrets, and patent, copyright, and trademark laws to protect other intellectual property rights. We have obtained or applied for patents, trademarks, and copyright protection in the U.S. and in a number of foreign countries. Our material trademarks include Trusted Process®, PlanActivation®, QuickStart®, ProgramAccelerate®, QualityFinish®, Shortening the distance from lab to life®, Syneos One®, Dynamic Assembly®, KineticTM, Syneos Health®, and other corporate emblems. Although the duration of our intellectual property rights varies from country to country, trademarks generally may be renewed indefinitely so long as they are in use and/or their registrations are properly maintained, and so long as they have not been found to have become generic. Although we believe that the ownership of trademarks is an important factor in our business and that our success does depend in part on the ownership thereof, we rely primarily on the innovative skills, technical competence, and marketing abilities of our employees. We do not have any material patents, licenses, franchises, or concessions.

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Human Capital Resources

As of December 31, 2022, we had 29,395 employees. Of these, 28,768 employees were regular and 627 were temporary. An additional 416 contingent workers provided services for us.

Our Culture and Values. Our culture remains the cornerstone of all our human capital programs. Our shared purpose, Shortening the distance from lab to life®, aligns our employees and the customers we serve. This environment is fueled by a belief in caring for our collective well-being, which we refer to as Total Self. This belief enables employees to be their authentic selves at work, fostering a diverse, equitable, and inclusive culture where employees are empowered.

Safety and Health. The safety, health, and welfare of our employees are paramount to us. Our global Health and Safety team, with regional and operational expertise, provides for the health and safety of our employees, regardless of where they work or what they do. To support our Health and Safety professionals, we have selected and are implementing a software toolset to support our health and safety efforts. This newly organized team and new toolsets will enable our Health and Safety program to be metrics based with targeted improvements, both as the regulatory environment changes and year over year.

We have also activated our Business Continuity and Crisis Response team to help cultivate the safety of our employees in conflict zones across the world, particularly in Ukraine. This team began its work in December of 2021 and was fully prepared to offer employees support in an effort to promote safety for themselves and their families. These efforts include financial and relocation assistance, alternative working arrangements, information sharing from our intelligence partners (such as near real time border crossing wait times and procedures), and direct access to the Business Continuity and Crisis Response team to ensure employees’ needs are met to the best of our ability. We continue to provide this support to ensure our employees have the highest level of care that we can provide as an organization.

Diversity, Equity, and Inclusion (“DE&I”). We strive to lead our industry in our DE&I efforts both internally and externally. We believe that addressing complex healthcare challenges requires contributions from diverse viewpoints and an inclusive, equitable space where our employees can achieve their highest potential. We strive to foster a work environment that includes and embraces racial, ethnic, and gender diversity and other individual differences. Our policies prohibit unlawful discrimination based on race, color, creed, gender, religion, marital status, age, national origin or ancestry, genetic information, physical or mental disability, medical condition, sexual orientation, gender expression or identity, or any other characteristic protected by applicable law. The emphasis placed on DE&I by us and by our Board of Directors (“Board”) is demonstrated by the inclusion of DE&I updates and metrics in the materials for each regular meeting of the Compensation and Management Development Committee of the Board. In 2022, we also created an internal Diversity Action Collab, a peer-to-peer knowledge-sharing forum led by the Chief Scientific Officer, and an external DE&I Advisory Council where we provide our customers with actionable insights and top-tier expertise to navigate complex regulatory guidelines and mandates, and achieve corporate, healthcare, and other business initiatives.

As of December 31, 2022, 68% of our total workforce, 66% of our global new hires, and 57% of our global management roles at the Director level and above identify as women. As of December 31, 2022, 34% of our U.S. workforce, 38% of our U.S. new hires, and 22% of our U.S. management roles at the Director level and above identified as part of a traditionally underrepresented racial or ethnic group. Our DE&I strategy is managed by our DE&I Council, which oversees and strategically plans for diversity and inclusion within our organization under three pillars of focus: People, Customer, and Community.

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Throughout 2022, we grew our existing Employee Resource Group (“ERGs”) ecosystem across the globe to eight ERGs and one business community: Asian, Black, ConeXion (for our LatinX community), Developing Professionals (for both early and progressing talent), LGBTQIA+, Persons with Disabilities, Women, Veterans, and RISE (Realizing Inclusivity & Success through Inclusivity) within our commercial business. These ERGs further honor our equitable and inclusive Total Self environment by building, supporting, and creating visibility and engagement opportunities for our internal communities.

We maintain a zero-tolerance policy on discrimination and harassment and have several programs under which employees can report incidents in good faith confidentially or anonymously, and without fear of reprisal.

Recruitment, Retention and Development. The primary ways we recruit and retain employees are by (1) providing compensation and benefits that are competitive in our industry and in local labor markets, (2) designing our leadership and development programs to support our culture and values while preparing our people for the future, and (3) maintaining an effective service delivery model conducive to work-life balance and employee needs.

Our Global Talent Acquisition team leverages numerous resources including industry networks, online and social media platforms, university relations, and industry-focused career events to source talent for open positions. Candidates are thoroughly screened and evaluated against job-specific skills, experience, and education criteria. We continuously work at improving our candidate experience, which has been recognized seven times with a North American Candidate Experience Award, awarded by the Talent Board for excellence in Talent Acquisition.

In 2021, we introduced our Enabling our Talent Advantage (“ETA”) program that concentrates on increased demand for clinical resources with an ultimate focus on our talent acquisition and retention strategies. In 2022, the ETA program has resulted in a new agile talent acquisition operating model, identified opportunities for automation that elevate candidate and hiring manager experiences, and developed external talent community strategies that deliver real-time talent pools for critical in-demand skill sets. In addition, the ETA program has improved our internal mobility policy, developing feeder pools for key roles in support of our early talent strategy and developing a line manager curriculum to better and more simply equip managers to support our workforce. As an operational example of the ETA program’s impact, in the first six months of 2022, we successfully recruited, hired, and integrated approximately 500 entry level CRA’s (“CRA I’s”), dramatically expanding our site monitoring capabilities and preparedness.

We offer extensive, award-winning training programs that provide regulatory, business, foreign language, leadership, and management training and other opportunities for professional and personal development. As part of our empowered employee experience, we offer a suite of tools to assist employees to own their careers and aim to reach their highest professional potential. As an organization with services spanning clinical and commercial as well as numerous corporate functions, we encourage and enable internal mobility to support retention.

We regularly evaluate our compensation and benefit programs using external market data and feedback from our Global Talent Acquisition team and have established processes to make necessary revisions. Our Total Rewards team introduced a new global salary structure to drive consistent enterprise-wide compensation and job level practices, ensuring our compensation remains competitive in the many countries in which our employees reside.

Listening to our Employees. We are an agile and continuous learning organization, listening to employees at all levels – particularly at key moments that matter – and harvesting actionable insights to shape the employee experience. A key element of our listening strategy includes purposeful pulse surveys designed to check on key audiences at key moments. Overall, our listening includes our employee engagement survey and regular employee lifecycle surveys, including onboarding (following the first week and at 90 days of employment) and exit surveys. Ultimately, we leverage these insights to inform and improve our employee programs and services.

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Information about our Directors & Executive Officers

The following information with respect to our Board and executive officers is presented as of February 15, 2023:

Available Information

Our website address is syneoshealth.com. Information on our website is not incorporated by reference herein. Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and our proxy statements for our annual stockholders meetings, and any amendments to those reports, as well as Section 16 reports filed by our insiders, are available free of charge on our website as soon as reasonably practicable after we file the reports with, or furnish the reports to, the Securities and Exchange Commission (the “SEC”).

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Item 1A. Risk Factors.

We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. In evaluating our company, you should consider carefully the risks and uncertainties described below together with the other information included in this Annual Report on Form 10-K, including our consolidated financial statements and related notes included in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. The occurrence of any of the following risks may materially and adversely affect our business, financial condition, results of operations and future prospects.

Risks Related to Our Business

If we do not generate a sufficient number of new business awards, or if new business awards are delayed, terminated, reduced in scope, or fail to go to contract, our business, financial condition, results of operations, or cash flows may be materially adversely affected.

Our business is dependent on our ability to generate new business awards from new and existing customers and maintain existing customer contracts. Our inability to generate new business awards on a timely basis and subsequently enter into contracts for such awards could have a material adverse effect on our business, financial condition, results of operations or cash flows. For example, in our Clinical Solutions segment, we have experienced lower flow of requests for proposals. In the SMID market specifically, we have also experienced delays in award decisions. For larger pharmaceutical companies specifically, we have started experiencing slower pipelines. These headwinds have been caused by the current macroeconomic conditions and our ability to win repeat business, among other factors.

There is risk of cancelability in both the clinical and commercial businesses. The time between when a clinical study is awarded and when it goes to contract is typically several months, and prior to a new business award going to contract, our customer can cancel the award without notice. Once an award goes to contract, the majority of our customers can terminate the contract without cause with a notice period that generally ranges from 30 to 90 days. Our contracts have been and may in the future be delayed or terminated by our customers or reduced in scope for a variety of reasons, including factors beyond our control, including but not limited to:

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Our commercial services contracts typically have a significantly shorter wind down period than clinical contracts, particularly within our Deployment Solutions offerings. Furthermore, many of our communications services and consulting services projects are tied to a customer’s annual marketing budget or ad hoc service requests, which can lead to seasonal variability in revenue and less predictability in future revenues. In addition, many of our biopharmaceutical Deployment Solutions service contracts provide our customers with the opportunity to internalize the resources provided under the contract and terminate all or a portion of the services we provide under the contract. Our customers may also decide to shift their business to a competitor. Each of these factors results in less visibility to future revenue and may result in high volatility in future revenue.

Contract terminations, delays and modifications are a regular part of our business across each of our segments. Our full-service offering within our Clinical Solutions business has been, and may continue to be, negatively impacted by project delays, which impact near term revenue disproportionately. In addition, project delays, downsizings and cancellations, particularly within our Deployment Solutions and communications offerings, which are part of our Commercial Solutions business, have impacted our results in the past and might impact them in the future. The loss, reduction in scope or delay of a large project or of multiple projects could have a material adverse effect on our business, results of operations, and financial condition. In addition, we might not realize the full benefits of our backlog if our customers cancel, delay, or reduce their commitments to us.

In the event of termination, our contracts often provide for fees for winding down the project, which include both fees incurred and actual and non-cancellable expenditures and may include a fee to cover a percentage of the remaining professional fees on the project. These fees might not be sufficient for us to maintain our margins, and termination may result in lower resource utilization rates and therefore lower operating margins. In addition, cancellation of a contract or project for the reasons noted above may result in the unwillingness or inability of our customer to satisfy its existing obligations to us such as payments of accounts receivable, which may in turn result in a material impact to our results of operations and cash flow. Historically, cancellations and delays have negatively impacted our operating results, and they might again. In addition, we might not realize the full benefits of our backlog if our customers cancel, delay, or reduce their commitments to us, which may occur if, among other things, a customer decides to shift its business to a competitor or revoke our status as a preferred provider. Thus, the loss or delay of a large business award or the loss or delay of multiple awards could adversely affect our revenues and profitability. Additionally, a change in the timing of a new business award could affect the period over which we recognize revenue and reduce our revenue in any one quarter.

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Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog.

Our backlog consists of anticipated revenue awarded from contract and pre-contract commitments that are supported by written communications. Once work begins on a project, revenue is recognized over the duration of the project, provided the award has gone to contract. Projects may be canceled or delayed by the customer or delayed by regulatory authorities. To the extent projects are delayed, the timing of our revenue could be adversely affected. In addition, if a customer terminates a contract, we typically would be entitled to receive payment for all services performed up to the termination date and subsequent customer-authorized services related to terminating the canceled project. Typically, however, we have no contractual right to the full amount of the future revenue reflected in our backlog in the event of a contract termination or subsequent changes in scope that reduce the value of the contract. The duration of the projects included in our backlog, and the related revenue recognition, typically range from a few months to several years. Our backlog might not be indicative of our future revenues, and we might not realize all the anticipated future revenue reflected in that backlog. A number of factors may affect backlog, including:

The rate at which our backlog converts to revenue may vary over time. The revenue recognition on larger, more global projects could be slower than on smaller, more regional projects for a variety of reasons, including, but not limited to, an extended period of negotiation between the time the project is awarded to us and the actual execution of the contract, as well as an increased time frame for obtaining the necessary regulatory approvals. In addition, we provide certain services to our customers before they pay us. There is a risk that we may initiate a clinical trial or commercial offering for a customer, and the customer subsequently becomes unwilling or unable to fund the completion of the services. In such a situation, we may have a risk of non-payment or non-collection on invoicing. Additionally, notwithstanding the customer’s ability or willingness to pay for or otherwise facilitate the completion of the services, we may be legally or ethically bound to complete or wind down the services at our own expense.

Our backlog as of December 31, 2022 was $10.13 billion, a decrease from $11.43 billion as of December 31, 2021. A decrease in backlog may lead to lower revenue. Although an increase in backlog will generally result in an increase in revenues over time, an increase in backlog at a particular point in time does not necessarily correspond directly to an increase in revenues during any particular period, or at all. The extent to which contracts in backlog will result in revenue depends on many factors, including, but not limited to, delivery against project schedules, scope changes, customer engagement and satisfaction, contract terminations, and the nature, duration, and complexity of the contracts, and can vary significantly over time.

Our operating results have historically fluctuated between fiscal quarters and may continue to fluctuate in the future, which may adversely affect the market price of our stock.

Our operating results have fluctuated in previous quarters and years and may continue to vary significantly from quarter to quarter and are influenced by a variety of factors, such as:

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Our operating results for any particular quarter are not necessarily a meaningful indicator of future results and fluctuations in our quarterly operating results could negatively affect the market price and liquidity of our stock.

The COVID-19 pandemic and associated economic repercussions have adversely impacted our business and results of operations, and the ongoing COVID-19 pandemic or other pandemics or outbreaks of disease may do so in the future.

The ongoing COVID-19 pandemic and associated economic repercussions have significantly impacted, and may continue to impact, our business and our operations. Other pandemics or outbreaks of disease may have similar impacts in the future. With the spread of COVID-19 variants, the ongoing impacts of the COVID-19 pandemic could continue to adversely impact our business and results of operations in a number of ways, including but not limited to:

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These and other impacts of the ongoing COVID-19 pandemic or other pandemics or outbreaks of disease could also have the effect of heightening many of the other risk factors included below in this Item 1A. In addition, the continued prevalence of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty. This volatility and uncertainty has adversely affected our stock price, and may again adversely affect our stock price in the future.

Our customer or therapeutic area concentration may have a material adverse effect on our business, financial condition, results of operations, or cash flows.

If any large customer decreases or terminates its relationship with us, our business, financial condition, results of operations or cash flows could be materially adversely affected. In particular, our large pharma customer base is smaller than our peers and the loss of one large pharma customer may have an outsize impact on our results of operations or cash flows as compared to our peers. For the year ended December 31, 2022, our top ten customers, based on revenue, accounted for approximately 36% of our consolidated revenue and our top ten Clinical Solutions customers, based on backlog, accounted for approximately 40% of our total backlog. No single customer accounted for greater than 10% of our total consolidated revenue for the years ended December 31, 2022, 2021, and 2020. It is possible that an even greater portion of our revenues will be attributable to a smaller number of customers in the future, including as a result of our entering into strategic provider relationships with customers. Also, consolidation in our potential customer base results in increased competition for important market segments and fewer available customer accounts.

A significant concentration of our customers are categorized as SMID companies, which represented approximately 45% of our revenue for the year ended December 31, 2022. Economic conditions that adversely impact this customer group may have a disproportionate effect on our results of operations or cash flows as compared to our peers. In particular, a portion of our SMID customer base is pre-revenue companies that do not generate cash flows from operations and is reliant on outside funding sources, which may be limited in a recessionary environment. Additionally, conducting multiple clinical trials for different sponsors in a single therapeutic class involving drugs with the same or similar chemical action may adversely affect our business if some or all of the trials are canceled because of new scientific information or regulatory judgments that affect the drugs as a class.

Similarly, marketing and selling products for different sponsors with similar drug action subjects us to risk if new scientific information or regulatory judgment prejudices the products as a class, leading to compelled or voluntary prescription limitations or withdrawal of some or all of the products from the market.

If we are unable to successfully increase our market share, our ability to grow our business and execute our growth strategies could be materially adversely affected.

A key element of our growth strategy is increasing our market share within the biopharmaceutical services market, the clinical development market and in the geographic markets in which we operate. In addition, we continue to invest in expanding new services such as our medical affairs offerings and technology-enabled services. If we successfully grow our market share within the biopharmaceutical services and clinical development markets and as we make investments in growing our newer service offerings, we might not have or adequately build the competencies necessary to perform our services satisfactorily or may face increased competition. If we are unable to succeed in increasing our market share or realize the benefits of our investments in our new service offerings, we may be unable to implement this element of our growth strategy, and our ability to grow our business or maintain our operating margins could be adversely affected.

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If we underprice our contracts, overrun our cost estimates, or fail to receive approval for or experience delays in documentation of change orders, our business, financial condition, results of operations, or cash flows may be materially adversely affected.

We price our contracts based on assumptions regarding the scope of work required and cost to complete the work. We bear the financial risk if we initially underprice our contracts or otherwise overrun our cost estimates, which could adversely affect our cash flows and financial performance. In addition, contracts with our customers are subject to change orders, which occur when the scope of work we perform needs to be modified from that originally contemplated in our contract with the customers. This can occur, for example, when there is a change in a key study assumption or parameter or a significant change in timing. We may be unable to successfully negotiate changes in scope or change orders on a timely basis or at all, which could require us to incur cost outlays ahead of the receipt of any additional revenue. In addition, under generally accepted accounting principles in the United States of America (“GAAP”) we cannot recognize additional revenue anticipated from change orders until appropriate documentation is received by us from the customer authorizing the change. However, if we incur additional expense in anticipation of receipt of that documentation, we must recognize the expense as incurred. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Our business depends on the continued effectiveness and availability of our information systems, including the information systems we use to provide services to our customers and to store employee data, and failures of these systems may materially limit our operations or have an adverse effect on our reputation.

Our information systems consist of systems we have purchased or developed, legacy information systems from organizations we have acquired and, increasingly, web-enabled and other integrated information systems. In using these information systems, we frequently rely on third-party vendors to provide hosting and system management services, where our infrastructure is dependent upon the reliability of their underlying platforms, facilities, and communications systems. We also utilize integrated information systems that we provide customers access to or install for our customers in conjunction with our delivery of services.

As the breadth and complexity of our information systems continue to grow, we will increasingly be exposed to the risks inherent in maintaining the stability of our legacy systems due to prior customization, attrition of employees or vendors involved in their development, and obsolescence of the underlying technology, as well as risks from external cybersecurity attacks or data breaches on multi-national companies, usage errors by our employees, and software bugs. Because certain customers, clinical trials, and other long-term projects depend upon these legacy systems, we also face an increased level of embedded risk in maintaining the legacy systems and limited options to mitigate such risk. We are also exposed to risks associated with the availability of all our information systems, including:

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In addition to these availability risks, due to the interconnectedness of IT systems across platforms and hosts, we could see disruptions to our systems as “collateral damage” from attacks targeting our connected partners.

The materialization of any of these risks may impede the processing of data, the delivery of databases and services, and the day-to-day management of our business and could result in the corruption, loss, or unauthorized disclosure of proprietary, confidential, or other data. In addition, a security breach could require that we expend substantial additional resources related to the security of our technical infrastructure, databases, and services, diverting resources from other projects and disrupting our business. Despite any precautions we take, our IT systems and those of our third-party vendors, strategic partners, and other contractors are vulnerable to attack, damage, or interruption from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins, hacking, phishing attacks and other social engineering schemes, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors, or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.

Corruption or loss of data may result in the need to repeat a project at no cost to the customer, but at significant cost to us, the termination of a contract, civil or criminal enforcement actions and penalties, or damage to our reputation. Additionally, significant delays in system enhancements or inadequate performance of new or upgraded systems once completed could damage our reputation and harm our business. Finally, long-term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities and acts of terrorism, particularly involving cities in which we have offices, and cyberattacks such as those recently faced by other multi-national companies could adversely affect our businesses. As our business continues to expand globally, these types of risks may be further increased by instability in the geopolitical climate of certain regions, underdeveloped and less stable utilities and communications infrastructure, and other local and regional factors. Although we carry property, cyber incident, and business interruption insurance that we believe is customary for our industry, our coverage might not be adequate to compensate us for all losses that may occur.

We have been and expect that we will continue to be subject to attempts to gain unauthorized access to or through our information systems or those we internally or externally develop for our customers. We also rely on service providers for certain information systems who have experienced attempts to gain such unauthorized access. In addition, we and our service providers may be susceptible to physical or computer-based attacks by terrorists, nation states, or hackers due to our role in the biopharmaceutical service industry. Bad actors may be motivated by a desire to access or steal our or our clients’ intellectual property. These concerns about security are increased when information is transmitted over the Internet. Increased frequency of remote work may increase the risk of such attacks. If such attacks are not detected immediately, their effect could be compounded. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. To date these attacks have not had a significant impact on our operations or financial results. However, successful attacks in the future could result in negative publicity, significant remediation and recovery costs, legal liability and damage to our reputation and could have a material adverse effect on our financial condition, results of operations, and cash flows. We maintain cyber insurance; however, this insurance may not be sufficient to cover the financial, legal, business, or reputational losses that may result from an interruption or breach of our systems.

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Additionally, we rely on service providers for the timely transmission of information across our global data network. If a service provider fails to provide the communications capacity or services we require for similar reasons, the failure could interrupt our services. Because of the centrality of our processing systems to our business, any interruption or degradation could adversely affect the perception of our brands’ reliability and harm our business. If a service provider experiences the unauthorized disclosure of sensitive or confidential data they are processing on our behalf, whether through systems failure or employee actions, cyberattacks, fraud, or misappropriation, it could damage our reputation and cause us to lose customers. Similarly, such disclosure could result in negative publicity, significant remediation and recovery costs, legal liability, and damage to our reputation, and could have a material adverse effect on our financial condition, results of operations, and cash flows. In addition, contractual indemnity, the service provider’s liability insurance and our liability insurance might not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks, and other related breaches.

Our business is subject to international economic, political, and other risks that could have a material adverse effect on our business, financial condition, results of operations, cash flows, or reputation.

We have operations in many foreign countries, including, but not limited to, countries in the Asia-Pacific region, Europe, Latin America, and the Middle East and Africa. As of December 31, 2022, approximately 60% of our workforce was located outside of the U.S., and for the fiscal year ended December 31, 2022, approximately 44% of our revenue was earned from work performed outside of the U.S. Our international operations are subject to risks and uncertainties inherent in operating in these regions, including:

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For example, the war in Ukraine has not had a material impact on our revenue to date; however, that could change depending on the magnitude of the conflict and the imposition of additional sanctions by the U.S. and other countries or the spread of the conflict to surrounding areas. Banking and economic sanctions imposed on Russia continue to present challenges to clinical trials. We are monitoring these sanctions to ensure we are in compliance and we are adapting our operations to address both the sanctions and the increasing logistical challenges of conducting trials in Russia. At this time, we are continuing to service patients in Ukraine and Russia in existing trials where possible. Any impacts to our revenue are expected to be temporary in nature as we work with customers to explore alternate sources of recruiting new patients, including potentially activating sites in other regions.

These risks and uncertainties could negatively impact our ability to, among other things, perform large, global projects for our customers. Furthermore, our ability to deal with these issues could be affected by applicable U.S. laws. Any such risks could have an adverse impact on our business, financial condition, results of operations, cash flows, or reputation.

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Governmental authorities may question our intercompany transfer pricing policies or change their laws in a manner that could increase our effective tax rate, prevent us from being able to rely on favorable tax regimes, or otherwise harm our business.

As a U.S. company doing business in international markets through subsidiaries, we are subject to both U.S. and foreign tax and intercompany pricing laws, including those relating to the flow of funds between legal entities in various international jurisdictions. Tax authorities in the U.S. and in international markets have the right to examine our corporate structure and how we account for intercompany fund transfers. If such authorities challenge our corporate structure, transfer pricing mechanisms or intercompany transfers and the resulting assessments are upheld, our operations may be negatively impacted, and our effective tax rate may increase. Tax rates vary from country to country and if a tax authority determines that our profits in one jurisdiction should be increased, we might not be able to realize the full tax benefits in the event we cannot utilize all foreign tax credits that are generated, or we do not realize a compensating offsetting adjustment in another taxing jurisdiction. The effects of either would increase our effective tax rate. The U.S. or other jurisdictions may also change their tax laws from time to time, which could cause our effective tax rate to increase or decrease. For example, the U.S. Congress recently enacted the Inflation Reduction Act of 2022, which was signed into law by President Biden on August 16, 2022. Among other things, the Inflation Reduction Act provided funding for increased tax enforcement, imposed a 1% excise tax on certain share repurchases by publicly traded corporations, and imposed a 15% minimum tax on certain large corporations. We are unable to predict whether or when any other tax changes will be enacted.

The UK R&D tax relief regime has in recent years been, and continues to be, subject to review and amendment. On July 21, 2022, draft legislation was published setting out, among other things, details of proposed restrictions that (if enacted) could limit our ability (except in limited circumstances) to make claims under the existing relief programs with respect to accounting periods beginning on or after April 1, 2023 for expenditures incurred on foreign sub-contracted R&D work and externally provided workers that are not paid through UK payroll. These and other potential future changes to the UK research and development tax relief regime may limit the extent to which we qualify and can make claims under the regime.

Additionally, the Organization for Economic Cooperation and Development has issued certain guidelines regarding base erosion and profit shifting. As these guidelines continue to be formally adopted by separate taxing jurisdictions, we may need to change our approach to intercompany transfer pricing in order to maintain compliance under the new guidelines. Our effective tax rate may increase or decrease depending on the current location of global operations at the time of the change. Finally, we might not always be in compliance with all applicable customs, exchange control, Value Added Tax, and transfer pricing laws despite our efforts to be aware of and to comply with such laws. If these laws change, we may need to adjust our operating procedures and our business could be adversely affected.

Upgrading the information systems that support our operating processes and evolving the technology platform for our services pose risks to our business.

Continued efficient operation of our business requires that we implement standardized global business processes and evolve our information systems to enable this implementation, especially in the course of integrating acquired businesses into our company. We are in the process of upgrading our enterprise resource planning software globally. Our inability to effectively manage the implementation of new information systems or upgrades and adapt to new processes designed into these new or upgraded systems in a timely and cost-effective manner may result in disruption to our business and negatively affect our operations.

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We have entered into agreements with certain vendors to provide systems development, integration, and hosting services that develop or license to us IT platforms and capacity for programs to optimize our business processes. If such vendors or their products fail to perform as required or if there are substantial delays in developing, implementing, securing, and updating our IT platforms, our customer delivery may be impaired, and we may have to make substantial further investments, internally or with third parties, to achieve our objectives. For example, we rely on an external vendor to provide the clinical trial management software used in managing the completion of our customer clinical trials. If that externally provided system is not properly maintained, we might not be able to meet the obligations of our contracts or may need to incur significant costs to replace the system or capability. Additionally, our progress may be limited by parties with existing or claimed patents who seek to enjoin us from using preferred technology or seek license payments from us.

Meeting our objectives is dependent on a number of factors which might not take place as we anticipate, including obtaining adequate technology-enabled services, depending upon our third-party vendors to develop and enhance existing applications to adequately support our business, creating IT-enabled services that our customers will find desirable, and implementing our business model with respect to these services. Also, increased IT-related expenditures and our potential inability to anticipate increases in service costs may negatively impact our business, financial condition, results of operations, or cash flows.

Failure to meet objectives of our internal business transformation initiatives could adversely impact our competitiveness and harm our operating results.

We are pursuing business transformation and optimization initiatives to improve customer engagement, increase innovation, and improve operating efficiencies and employee engagement. As part of these initiatives, we seek to enhance our productivity, flexibility, quality, delivery, and cost savings by investing in the development and implementation of global platforms and the integration of our business processes and functions to drive economies of scale, including through the use of business process outsourcing, application and technology development, and the introduction of optimized business delivery models. These initiatives may not yield their intended gains, or be completed in a timely manner. This may impact our competitiveness and our ability to meet our growth objectives and, as a result, could materially and adversely affect our business, operating results, and financial condition.

If we fail to perform our services in accordance with contractual requirements, regulatory requirements, and/or ethical considerations, we could be subject to significant costs, liability, or regulatory enforcement actions, and our reputation could be harmed.

We contract with biopharmaceutical companies to perform a wide range of services to assist them in bringing new drugs, biologics and medical devices to market and to support the commercial activity of products already in the marketplace. Our services include monitoring clinical trials, data and laboratory analysis, project management, patient recruitment, safety reporting, product launch consulting, product deployment solutions, advertising, publications, and medical communications, and other related services. Such services are complex and subject to contractual requirements, regulatory standards, and ethical considerations. For example, we must adhere to applicable regulatory requirements such as those required by the FDA, the EMA and the competent authorities of the member states of the EU, and the MHRA in the UK, including those laws and regulations governing the promotion, sales, and marketing of biopharmaceutical products, and GCP requirements, which govern, among other things, the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials. Once initiated, clinical trials must be conducted pursuant to and in accordance with the applicable investigational new drug/device application or clinical trial application, the requirements of the relevant institutional review boards or ethics committees, and GCP requirements. For studies involving controlled substances, we are also subject to regulation by the Drug Enforcement Administration (“DEA”) which regulates the distribution, recordkeeping, handling, security, and disposal of controlled substances. If we fail to perform our services in accordance with applicable requirements, regulatory agencies may take

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action against us or our customers. Such actions may include sanctions such as injunctions or refusal of such regulatory authorities to grant marketing approval of products, imposition of clinical holds or delays, suspension or withdrawal of approvals, rejection of data collected in studies, license revocation, product seizures or recalls, operational restrictions, civil or criminal penalties or prosecutions, damages, or fines. Additionally, there is a risk that actions by regulatory authorities, if they result in significant inspectional observations or other measures, could harm our reputation and cause customers not to award us future contracts or to cancel existing contracts. Customers may also bring claims against us for breach of our contractual obligations, and patients in the clinical trials and patients taking drugs/using devices approved on the basis of those trials may bring personal injury claims against us. Any such action could have a material adverse effect on our business, financial condition, results of operations, cash flows, or reputation.

Such consequences could arise if, among other things, the following occur:

Improper performance of our services. The performance of our clinical development and other biopharmaceutical services is complex and time-consuming. For example, we may make mistakes in conducting a clinical trial that could negatively impact or obviate the usefulness of the clinical trial or cause the results of the clinical trial to be reported improperly. If the clinical trial results are compromised, we could be subject to significant costs or liability, which could have an adverse impact on our ability to perform our services and our reputation could be harmed. For example:

Large clinical trials can cost hundreds of millions of dollars and improper performance of our services could have a material adverse effect on our financial condition, damage our reputation, and result in the termination of current contracts or failure to obtain future contracts from the affected customer or other customers.

Interactive Voice/Web Response Technology malfunction. We develop, maintain, and use third-party computer-based interactive voice/web response systems to automatically manage the randomization of patients in a given clinical trial to different treatment arms and regulate the supply of investigational drugs, all by means of interactive voice/web response systems. An error in the design, programming, or validation of these systems could lead to inappropriate assignment or dosing of patients which could give rise to patient safety issues, invalidation of the trial, or liability claims against us. Furthermore, negative publicity associated with such a malfunction could have an adverse effect on our business and reputation. Additionally, errors in randomization may require us to repeat the clinical trial at no further cost to our customer, but at a substantial cost to us.

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Investigation of customers. From time to time, one or more of our customers are audited or investigated by regulatory authorities or enforcement agencies with respect to regulatory compliance of their clinical trials, programs, or the marketing and sale of their drugs. In these situations, we have often provided services to our customers with respect to the clinical trials, programs, or activities being audited or investigated, and we are called upon to respond to requests for information by the authorities and agencies. There is a risk that either our customers or regulatory authorities could claim that we performed our services improperly or that we are responsible for clinical trial or program compliance. If our customers or regulatory authorities make such claims against us and prove them, we could be subject to damages, fines, or penalties. In addition, negative publicity regarding regulatory compliance of our customers’ clinical trials, programs, or drugs could have an adverse effect on our business and reputation.

Insufficient customer funding to complete services. As noted above, clinical trials can cost hundreds of millions of dollars. There is a risk that we may initiate a clinical trial or commercial offering for a customer, and then the customer becomes unwilling or unable to fund the completion of the service. In such a situation, we may have a risk of non-payment or non-collection on invoicing. Additionally, notwithstanding the customer’s ability or willingness to pay for or otherwise facilitate the completion of the service, we may be legally or ethically bound to complete or wind down the services at our own expense. This risk is heightened in a recessionary or weak funding environment for our customers, who may be unable to raise or expend funds necessary to complete a trial, and our services may account for large portions of their budgets. Our SMID customer base, some of which are in pre-revenue operational positions, may experience heightened exposure during this environment.

In addition to the above U.S. laws and regulations, we must comply with the laws of all countries where we do business, including laws governing clinical trials in the jurisdiction where the trials are performed. Failure to comply with applicable requirements could subject us to regulatory risk, liability, and potential costs associated with redoing the trials, which could damage our reputation and adversely affect our operating results.

The operation of our early phase (Phase I and IIA) clinical facilities and the services we provide there as well as our clinical trial management, including direct interaction with clinical trial patients or volunteers, and our mobile research nursing clinical trial services, could create potential liability that may adversely affect our business, financial condition, results of operations, cash flows, and reputation.

We operate facilities where early phase clinical trials are conducted, which ordinarily involve testing an investigational drug on a limited number of individuals to evaluate a product’s safety, determine a safe dosage range and identify side effects. Additionally, our business involves clinical trial management, which is one of our clinical development service offerings, and includes the testing of investigational drugs on human volunteers. Some of these trials involve the administration of investigational drugs to known substance abusers or volunteers and patients that are already seriously ill and are at risk for further illness or death. Failure to operate any of our early phase facilities in accordance with applicable regulations could result in that facility being shut down, which could disrupt our operations and adversely affect our business, financial condition, results of operations, cash flows, and reputation.

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Additionally, we face risks resulting from the administration of drugs to volunteers, including adverse events, and the professional malpractice of medical care providers, including improper administration of a drug or device. We also directly employ doctors, nurses, and other trained employees who assist in implementing the testing involved in our clinical trials, such as drawing blood from healthy volunteers. Our mobile research nurses engage in a wide range of services, from observing clinical trial participants ingesting drugs, to administering an infusion of oncology medicine to a pediatric study participant. Our exposure with respect to these activities could exceed any contractual limits on indemnification in our contracts with customers and vendors. Any professional malpractice or negligence by such doctors, nurses, principal investigators, or other employees could potentially result in liability to us in the event of personal injury to or death of a volunteer in clinical trials. This liability, particularly if it were to exceed the limits of any indemnification agreements and insurance coverage we may have, may adversely affect our business and financial condition, results of operations, cash flows, and reputation.

If we are unable to attract suitable principal investigators and recruit and enroll patients for clinical trials, our clinical development business might suffer.

The recruitment of principal investigators and patients for clinical trials is essential to our business. Principal investigators are typically located at hospitals, clinics, or other sites and supervise the administration of the investigational drug to patients during the course of a clinical trial. Patients generally include people from the communities in which the clinical trials are conducted. Several of our competitors have purchased site networks or site management organizations as a strategy for priority access to a specific site, which could put us at a competitive disadvantage. Our clinical development business could be adversely affected if we are unable to attract suitable and willing principal investigators or recruit and enroll patients for clinical trials on a consistent basis. The expanding global nature of clinical trials increases the risk associated with attracting suitable principal investigators and patients, especially if these trials are conducted in regions where our resources or experience may be more limited. For example, if we are unable to engage principal investigators to conduct clinical trials as planned or enroll sufficient patients in clinical trials, we might need to expend additional funds to obtain access to more principal investigators and patients than planned or else be compelled to delay or modify the clinical trial plans, which may result in additional costs to us or cancellation of the clinical trial by our customer. If realized, these risks may also inhibit our ability to attract new business, particularly in certain regions.

Unfavorable economic conditions have had and could in the future have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Unfavorable economic conditions and other adverse macroeconomic factors on global and domestic markets have, and could in the future result, among other matters, in tightening in the credit and capital markets, high levels of inflation, low liquidity, and volatility in fixed income, credit, currency, and equity markets. Such conditions impacted our results during the year ended December 31, 2022 and could continue to negatively impact our business, financial condition, results of operations, or cash flows in the future. For example, our customers might not be able to raise money to conduct existing clinical trials, or to fund new drug development and related future clinical trials, particularly given a portion of our SMID customer base are pre-revenue companies that do not generate cash flows from operations. Resource-sharing customers may also scale back commercial support for their products. In addition, economic or market disruptions could negatively impact our vendors, contractors, or principal investigators which might have a negative effect on our business.

The cost of providing our services has risen in recent years and is likely to continue to rise while inflation remains elevated. Competition and fixed price contracts may limit our ability to maintain existing operating margins. Some competitors have greater resources than us to sustain periods of marginally profitable or unprofitable sales. Costs increasing more rapidly than market prices may reduce profitability and may have a material adverse impact on our business and results of operations.

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Our business could result in liability to us if a drug causes harm to a patient. While we are generally indemnified and insured against such risks, we may still suffer financial losses.

When we market drugs under contract for a biopharmaceutical company, we could suffer liability for harm allegedly caused by those drugs, either as a result of a lawsuit against the biopharmaceutical company to which we are joined, a lawsuit naming us or any of our subsidiaries, or an action launched by a regulatory body. Any claim could result in potential liability for us if the claim is outside the scope of the indemnification agreement we have with the biopharmaceutical company, the biopharmaceutical company does not abide by the indemnification agreement as required, or the liability exceeds the amount of any applicable indemnification limits or available insurance coverage. Such a result could have an adverse impact on our financial condition, results of operations, cash flows, and reputation. Furthermore, negative publicity associated with harm caused by drugs we helped to market could have an adverse effect on our business and reputation.

If we lose the services of key personnel or are unable to recruit experienced personnel, our business, financial condition, results of operations, cash flows, or reputation could be materially adversely affected.

Our success substantially depends on the collective performance, contributions, and expertise of our senior management team and other key personnel including qualified management, professional, scientific, and technical operating staff, and business development personnel, particularly as we integrate acquired businesses into our company. There is significant competition for qualified personnel, particularly those with higher educational degrees, in the biopharmaceutical and related services industries. In the year ended December 31, 2021, and to a lesser degree in the year ended December 31, 2022, we experienced increased employee turnover and challenges due to the current industry-wide labor shortage and resulting competition to retain and attract qualified personnel. In addition, the close proximity of some of our facilities to offices of our major competitors could adversely impact our ability to successfully recruit and retain key personnel. The departure of any key executive, or our inability to continue to identify, attract and retain qualified personnel or replace any departed personnel in a timely fashion, has impacted and may in the future impact our ability to grow our business and compete effectively in our industry and might negatively affect our business, financial condition, results of operations, cash flows, or reputation.

We intend to outsource certain functions, which will make us more dependent upon third parties and may adversely impact our ability to recruit and retain experienced personnel.

As part of our transformation initiatives, we intend to outsource certain administrative functions, including functions related to accounts payable, procurement, human resources operations, data analytics, and corporate IT, among others. As a result, we expect to rely on third parties to ensure that our staffing needs are appropriately met. This reliance subjects us to risks arising from the loss of control over outsourced processes and functions, changes in pricing that may affect our operating results, and potentially, termination of these services by our outsourcing suppliers. A failure of our service providers to perform services in a satisfactory manner may have a significant adverse effect on our business operations. These outsourcing and transformation initiatives could result in potential adverse effects on employee capabilities and our continued ability to recruit, hire, retain, and motivate highly skilled personnel. Such events may impact our ability to grow our business and compete effectively in our industry and might negatively affect our business, financial condition, results of operations, cash flows, or reputation.

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Foreign currency exchange rate fluctuations may have a material adverse effect on our financial condition, results of operations, and cash flows.

Approximately 23% of our revenue for the year ended December 31, 2022 was denominated in currencies other than the U.S. dollar and 34% of our direct and operating costs are incurred in countries with functional currencies other than the U.S. dollar. Our financial statements are reported in U.S. dollars and changes in foreign currency exchange rates could significantly affect our financial condition, results of operations, or cash flows. Our primary exposure to fluctuations in foreign currency exchange rates is related to the following risks:

Foreign Currency Risk from Differences in Customer Contract Currency and Operating Costs Currency. The majority of our global contracts are denominated in U.S. dollars or Euros while our operating costs in foreign countries are denominated in various local currencies. Fluctuations in the exchange rates of the currencies we use to contract with our customers and the currencies in which we incur cost to fulfill those contracts can have a significant impact on our results of operations.

Foreign Currency Translation Risk. The revenue and expenses of our international operations are generally denominated in local currencies and translated into U.S. dollars for financial reporting purposes. Accordingly, exchange rate fluctuations between the value of the U.S. dollar versus local currencies will affect the U.S. dollar value of our foreign currency denominated revenue, costs, and results of operations.

Foreign Currency Transaction Risk. We earn revenue from our service contracts over a period of several months and, in many cases, over several years, resulting in timing differences between the consummation and cash settlement of a transaction. Accordingly, profitability of the transactions denominated in foreign currencies is subject to effects of fluctuations in foreign currency exchange rates during the period of time between the consummation and cash settlement of a transaction.

We may seek to limit our exposure to these risks through inclusion of foreign currency exchange rate provisions in our service contracts, and/or by hedging certain exposures with foreign exchange derivative instruments. These measures, however, might not offset or mitigate any, or all, of the adverse financial effects of unfavorable movements in foreign currency exchange rates.

Our effective income tax rate may fluctuate, which may adversely affect our results of operations.

Our effective income tax rate is influenced by our profitability in the various taxing jurisdictions in which we operate. Changes in the distribution of profits and losses among taxing jurisdictions may have a significant impact on our effective income tax rate, which in turn could have an adverse effect on our results of operations. Factors that may affect our effective income tax rate include, but are not limited to:

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These changes may cause fluctuations in our effective income tax rate that could adversely affect our results of operations and cause fluctuations in our earnings and earnings per share.

We have only a limited ability to protect our intellectual property rights, and these rights are important to our success.

We develop, use, and protect our proprietary methodologies, analytics, systems, technologies, and other intellectual property. Existing laws of the various countries in which we provide services offer only limited protection of our intellectual property rights, and the protection in some countries may be very limited. We rely upon a combination of trade secrets, confidentiality policies, nondisclosure agreements, and other contractual arrangements, as well as patent, copyright, and trademark laws, to protect our intellectual property rights. These laws are subject to change at any time and certain agreements might not be fully enforceable, which could further restrict our ability to protect our innovations. Our intellectual property rights might not prevent competitors from independently developing services similar to or duplicative of ours or alleging infringement of their intellectual property rights in certain jurisdictions. The steps we take in this regard might not be adequate to prevent or deter infringement or misappropriation of our intellectual property or claims against us for alleged infringement or misappropriation by competitors, former employees, or other third parties. Furthermore, we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, our intellectual property rights. Enforcing our rights might also require considerable time, money, and oversight, and we might not be successful in enforcing our rights.

Our acquisition strategy may present additional risks, including the risk that we may be unable to fully realize the competitive and operating synergies projected to be achieved through any specific acquisition.

We have historically grown our business both organically and through acquisitions. We have and will continue to assess the need and opportunity to offer additional services through acquisitions of other companies. Acquisitions involve numerous risks, including the following:

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We may also spend time and money investigating and negotiating with potential acquisition targets but not complete the transaction. Any acquisition could involve other risks, including, among others, the assumption of additional liabilities and expenses, difficulties and expenses in connection with integrating and leveraging the acquired companies and achieving the expected benefits, issuances of potentially dilutive securities or interest-bearing debt, loss of key employees of the acquired companies, transaction expenses, diversion of management’s attention from other business concerns, and, with respect to the acquisition of international companies, the inability to overcome differences in international business practices, language and customs. Our failure to successfully integrate potential future acquisitions could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Stockholder activism could disrupt our business, cause us to incur significant expenses, hinder execution of our business strategy, and impact our stock price.

We may in the future be subject to stockholder activism, which can arise in a variety of predictable or unpredictable situations, and can result in substantial costs and divert management’s and our Board’s attention and resources from our business. Additionally, stockholder activism could give rise to perceived uncertainties as to our long-term business, financial forecasts, future operations, and strategic planning, harm our reputation, adversely affect our relationships with our business partners, and make it more difficult to attract and retain qualified personnel. We may also be required to incur significant fees and other expenses related to activist matters, including for third-party advisors that would be retained by us to assist in navigating activist situations. Our stock price could fluctuate due to trading activity associated with various announcements, developments, and share purchases over the course of an activist campaign or otherwise be adversely affected by the events, risks, and uncertainties related to any such stockholder activism.

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Our relationships with existing or potential customers who are in competition with each other may adversely impact the degree to which other customers or potential customers use our services, which may adversely affect our business, financial condition, results of operations, or cash flows.

The biopharmaceutical industry is highly competitive, with biopharmaceutical companies each seeking to persuade payers, providers, and patients that their drug therapies are better and more cost-effective than competing therapies marketed or being developed by competing firms. In addition to the adverse competitive interests that biopharmaceutical companies have with each other, biopharmaceutical companies also have adverse interests with respect to drug selection and reimbursement with other participants in the healthcare industry, including payers and providers. Biopharmaceutical companies also compete to be first to market with new drug therapies. We regularly provide services to biopharmaceutical companies that compete with each other, and we sometimes provide services to such customers regarding competing drugs in the market and in development. Our existing or future relationships, particularly broader strategic provider and commercial relationships, with our biopharmaceutical customers may therefore deter other biopharmaceutical customers from using our services or may result in our customers seeking to place limits on our ability to serve other biopharmaceutical industry participants. In addition, our further expansion into the broader healthcare market may adversely impact our relationships with biopharmaceutical customers, and such customers may elect not to use our services, reduce the scope of services that we provide to them or seek to place restrictions on our ability to serve customers in the broader healthcare market with interests that are adverse to theirs. Any loss of customers or reductions in the level of revenues from a customer could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Our results of operations may be adversely affected if we fail to realize the full value of our goodwill and intangible assets.

As of December 31, 2022, our goodwill and net intangible assets were valued at $5.58 billion, which constituted approximately 68% of our total assets.

Our goodwill is principally related to the acquisition of inVentiv completed in August 2017. Goodwill is tested for impairment at the reporting unit level, which is one level below the operating segment level. This test requires us to determine if the implied fair value of the reporting unit’s goodwill is less than its carrying amount. The impairment analysis requires significant judgments, estimates and assumptions. There is no assurance that the actual future earnings or cash flows of the reporting units will not decline significantly from the projections used in the impairment analysis. Goodwill impairment charges may be recognized in future periods in one or more of the reporting units to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment or industry, deterioration in our performance or our future projections, or changes in plans for one or more of our reporting units. As of December 31, 2022, our goodwill is assigned to four reporting units. We completed our annual impairment test as of October 1, 2022 for all of our reporting units and concluded that there were no impairments. However, during the fourth quarter of 2022, we performed a quantitative analysis for our Communications reporting unit, which had a goodwill balance of $529.1 million as of December 31, 2022. We concluded that the estimated fair value of our Communications reporting unit exceeded its carrying value by approximately $19.0 million, or 3%, and therefore no impairment existed. Given this small excess in the estimated fair value over the carrying value, the Company may be at increased risk of a non-cash impairment charge in the future.

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Intangible assets consist of customer relationships, acquired backlog, trade names, trademarks, patient communities, and acquired technologies. We review intangible assets at the end of each reporting period to determine if facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of the assets might not be recoverable. If such facts and circumstances exist, we assess the recoverability of identified assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives to their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets and occur in the period in which the impairment determination was made. We have experienced material impairment losses in the past, and could experience additional material impairment losses in the future. The process of testing intangible assets for impairment involves numerous judgments, assumptions, and estimates made by management including expected future profitability, cash flows, and the fair values of assets and liabilities, which inherently reflect a high degree of uncertainty and may be affected by significant variability. If the business climate deteriorates, then actual results may not be consistent with these judgments, assumptions, and estimates, and our intangible assets may become impaired in future periods. Various factors could reasonably be expected to unfavorably impact the assumptions underlying our impairment analysis, including delays in awards and the related delay in revenue, increases in termination activity, continued deterioration of macroeconomic conditions, or increases in operating costs. The deterioration of the business climate or other unanticipated changes to our business and any potential impairment losses caused as a result of such changes could in turn have an adverse impact on our business, financial condition, and results of operations.

We face risks arising from the restructuring of our operations, which could adversely affect our financial condition, results of operations, cash flows, or business reputation.

From time to time, we have implemented certain cost savings initiatives to improve operating efficiency through various means, including: (i) the reduction of overcapacity, primarily in our costs of services (billable) function; (ii) elimination of non-billable roles; and (iii) the consolidation or other realignment of our resources. During the year ended December 31, 2022, we recognized approximately $33.5 million of employee severance costs, facility closure and lease termination costs of $19.1 million, and $4.0 million of other costs related to optimizing our resources worldwide.

Restructuring actions present significant risks that could have a material adverse effect on our operations, financial condition, results of operations, cash flows, or business reputation. Such risks include:

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We operate in many different jurisdictions and we could be adversely affected by violations of the FCPA, UK Bribery Act of 2010, and/or similar worldwide anti-corruption and anti-bribery laws.

The FCPA, UK Bribery Act of 2010, and similar worldwide anti-corruption laws prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. We operate in many parts of the world that have experienced corruption to some degree and, in certain circumstances, anti-corruption laws have appeared to conflict with local customs and practices. Despite our training and compliance programs, we cannot assure that our internal control policies and procedures will protect us from acts in violation of anti-corruption laws committed by persons associated with us, and our continued expansion outside the U.S., including in developing countries, could increase such risk in the future. Violations of the FCPA or other ex-U.S. anti-corruption laws, or even allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations, cash flows, and reputation. For example, violations of anti-corruption laws can result in restatements of, or irregularities in, our financial statements as well as severe criminal or civil sanctions. In some cases, companies that violate the FCPA (or similar laws in other jurisdictions outside the U.S.) might be debarred by the U.S. government and/or lose their U.S. export privileges. In addition, U.S. or other governments might seek to hold us liable for successor liability for FCPA violations or violations of other anti-corruption laws committed by companies that we acquire or in which we invest, or by or on behalf of persons working for or representing our Company. Changes in anti-corruption laws or enforcement priorities could also result in increased compliance requirements and related costs which could adversely affect our business, financial condition, results of operations, and cash flows.

The failure of third parties to provide us support services could adversely affect our business, financial condition, results of operations, cash flows, or reputation.

We depend on third parties for support services vital to our business. Such support services include, but are not limited to, IT services, laboratory services, third-party transportation and travel providers, freight forwarders and customs brokers, drug depots and distribution centers, suppliers or contract manufacturers of drugs for patients participating in clinical trials, and providers of licensing agreements, maintenance contracts, or other services. In addition, we also rely on third-party CROs and other contract clinical personnel for clinical services in regions where we have limited resources, in cases where demand cannot be met by our internal staff, or in cases where such third-party CROs can provide services more efficiently. The failure of any of these third parties to adequately provide us critical support services could have a material adverse effect on our business, financial condition, results of operations, cash flows, or reputation.

Our embedded and functional outsourcing services could subject us to employment liability, which may cause adverse effects on our business.

With our embedded and functional outsourcing services, we place employees at the physical workplaces of our customers. The risks of this activity include claims of errors and omissions, misuse or misappropriation of client proprietary information, theft of client property, and torts or other claims under employment liability, co-employment liability, or joint employment liability. We have policies and guidelines in place to reduce our exposure to such risks, but if we fail to follow these policies and guidelines we may suffer reputational damage, loss of customer relationships and business, and monetary damages.

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Our increasing focus on environmental sustainability and social initiatives could increase our costs, and inaction could harm our reputation and adversely impact our financial results.

There has been increasing public focus by investors, customers, environmental activists, the media, and governmental and nongovernmental organizations on a variety of environmental, social, and other sustainability matters. As an organization, we understand the importance of our role in lessening our environmental footprint and supporting positive social impact. We established a cross-functional team to make commitments relating to sustainability matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability. In light of the importance of this to our culture, as well as internal and external stakeholders, if we are not effective in addressing environmental, social and other sustainability matters affecting our business, or setting and meeting relevant sustainability goals, our reputation and financial results may suffer. We may experience increased costs in order to execute upon our sustainability goals and measure achievement of those goals, which could have an adverse impact on our business and financial condition.

In addition, this emphasis on environmental, social, and other sustainability matters has resulted and may result in the adoption of new laws and regulations, including new reporting requirements. For example, the SEC has published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic reporting and has announced plans for additional rulemakings on environmental and social topics, such as human capital management. Such rules may require us to incur significant additional costs to comply, including the implementation of significant additional internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on our management and Board. If we fail to comply with new laws, regulations, or reporting requirements, our reputation and business could be adversely impacted. In addition, compliance with new laws, regulations, and reporting requirements may increase our costs, result in disclosures of potentially competitively sensitive information, or may cause us to be targeted by activists, regulators, or others who want us to take a different approach to such matters or increase our disclosures or commitments.

Moreover, investor advocacy groups, investment funds, and influential investors are increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions, and human rights. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price. In addition, certain environmental and social disclosures and commitments we make may be reliant in part or in whole on third party information, which we cannot verify the quality of, and third party performance, which we cannot guarantee. We may fail to meet our environmental and social commitments either entirely or on the schedule we commit to.

Our operations could be adversely impacted by climate change.

Our operations may be susceptible to losses and interruptions caused by extreme weather conditions such as droughts, hurricanes, floods, wildfires, and water or other natural resource shortages, occurrences of which may increase in frequency and severity as a result of climate change. Climate change may also produce general changes in weather or other environmental conditions, including temperature or precipitation levels. To the extent weather conditions continue to be impacted by climate change, our operations and facilities may be adversely impacted in a manner that we could not predict, which may in turn adversely impact our results of operations. In addition, the potential physical effects of climate change, such as increased frequency and severity of storms, floods, and other climatic events, could disrupt our operations and cause us to incur significant costs to prepare for or respond to these effects.

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We might not be able to utilize certain of our net operating loss carryforwards and certain other tax attributes, which could harm our profitability.

As of December 31, 2022, we had approximately $28.6 million of net operating loss (“NOL”) carryforwards available to reduce U.S. federal taxable income in future years. Under Section 382 and similar provisions of the Internal Revenue Code (the “Code”), if a corporation undergoes an “ownership change,” that corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited for U.S. federal income tax purposes (or similar provisions of other jurisdictions). These limitations may be subject to certain exceptions, including if there is “net unrealized built-in gain” in the assets of the corporation undergoing the ownership change.

If we redeem or repurchase shares of our stock in the future, we could be subject to a newly enacted excise tax.

President Biden recently signed into law the Inflation Reduction Act of 2022, which, among other things, imposed a new 1% excise tax on the fair market value of stock redeemed or repurchased by publicly traded corporations on or after January 1, 2023, subject to certain exceptions (including an exception that allows netting the amount of stock redemptions or repurchases against certain new issuances of stock). If we redeem or repurchase shares of our stock in the future, we could be subject to this excise tax, unless the redemptions or repurchases qualify for any of the exceptions that are provided in the Inflation Reduction Act or in future regulations or rules. Any such excise tax would be our liability and could increase the amount of tax that we are required to pay.

Downgrades of our credit ratings could adversely affect us.

We can be adversely affected by downgrades of our credit ratings because ratings are a factor influencing our ability to access capital and the terms of any new indebtedness, including covenants and interest rates. Our customers and vendors may also consider our credit profile when negotiating contract terms, and if they were to change the terms on which they deal with us, it could have a material adverse effect on our business, results of operations, cash flows, and financial condition.

Many of our vendors have the right to declare us in default of our agreements if any such vendor, including the lessors under our vehicle fleet leases, determines that a change in our financial condition poses a substantially increased credit risk. Upon default, the lessors can repossess the vehicles and require us to compensate them for any remaining lease payments in excess of the value of the repossessed vehicles. As of December 31, 2022, we had $68.1 million in finance lease obligations, primarily related to vehicles used in Deployment Solutions in the U.S. Deployment Solutions may be negatively impacted if we lose the use of vehicles for any period of time.

On November 4, 2022, we entered into an Amended & Restated Credit Agreement (“A&R Credit Agreement”) that extended and refinanced the then-existing credit agreement, dated August 1, 2017, as amended, among us, the lenders party thereto, JPMorgan, as administrative agent and collateral agent, and each of the other parties thereto (“Credit Agreement”). The A&R Credit Agreement matures in November 2027 and includes a $1.35 billion term loan A facility (“Term A Facility”) and a $1.00 billion revolving credit facility (the “Revolver”).

The A&R Credit Agreement contains covenants that may restrict our ability to, among other things, borrow money, pay dividends, make capital expenditures, make strategic acquisitions, and effect a consolidation, merger, or disposal of material intellectual property or of all or substantially all of our assets. Refer to “Risks Related to Our Indebtedness – Covenant restrictions under the A&R Credit Agreement may limit our ability to operate our business” for further details on our covenant restrictions.

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Risks Related to Our Industry

The biopharmaceutical services industry is highly competitive and our business could be materially impacted if we do not compete effectively or rapidly adapt to technological change.

The biopharmaceutical services industry is highly competitive. Our business often competes with other biopharmaceutical services companies, internal discovery departments, development departments, sales and marketing departments, IT departments, and other departments within our customers, some of which could be considered large biopharmaceutical services companies in their own right with greater resources than ours. To the extent that our clients choose to internally perform the clinical development and commercialization tasks that we provide or to work with our competitors, our business will suffer. We also compete with universities, teaching hospitals, governmental agencies, and others. If we do not compete successfully, our business will suffer. The industry is highly fragmented, with numerous smaller specialized companies and a handful of companies with global capabilities similar to certain of our own capabilities. Increased competition has led to price and other forms of competition (such as acceptance of less favorable contract terms) that could adversely affect our operating results. There are few barriers to entry for companies considering offering any one or more of the services we offer. Because of their size and focus, these companies might compete effectively against us, which could have a material adverse impact on our business.

In recent years, our industry has experienced increased consolidation which may continue and might put us at risk of growing more slowly than our competitors that make acquisitions. This trend is likely to produce more competition from the resulting larger companies, and ones without the cost pressures of being public, for both customers and acquisition candidates. One specific aspect of this consolidation competition involves CROs entering into transactions to attempt to control more access to clinical trial participants, like acquisition of site networks and data. These trends could make it harder for us to compete successfully.

In addition, the emergence of the use of RWE and new approaches such as machine learning and artificial intelligence that capitalize on the availability of large data sets may reduce the time and costs of the discovery and development process, may allow our clients to more readily perform clinical development tasks and services that we provide themselves, or may cause price competition. More broadly, our current competitors or other businesses might develop technologies or services that are more effective or commercially attractive than, or render obsolete, our current or future technologies and services. We may also fail to fully leverage the technologies available to us or develop technologies quickly enough to be competitively useful, which we have experienced to a certain degree. Our failure to develop and offer competitive services that address these and other technological advances in a timely, cost-effective manner or to keep pace with rapid technological change could adversely affect our competitive position and our results of operations.

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Our future growth and success will depend on our ability to successfully compete with other companies that provide similar services in the same markets, some of which may have financial, marketing, technical, staffing, and other advantages. We also expect that competition will continue to increase as a result of consolidation among these various companies. Large technology companies with substantial resources, technical expertise, and greater brand power could also decide to enter or further expand in the markets where our business operates and compete with us. If one or more of our competitors or potential competitors were to merge or partner with another of our competitors, or if a new entrant emerged with substantial resources, the change in the competitive landscape could adversely affect our ability to compete effectively. We compete on the basis of various factors, including breadth and depth of services, customer engagement, reputation, reliability, quality, innovation, security, price, and industry expertise and experience. In addition, our ability to compete successfully may be impacted by the growing availability of health information from social media, government health information systems, and other free or low-cost sources. In addition, consolidation or integration of wholesalers, retail pharmacies, health networks, payers, or other healthcare stakeholders may lead any of them to provide information services directly to customers or indirectly through a designated service provider, resulting in increased competition from firms that may have lower costs to market (e.g., no data supply costs). Any of the above may result in lower demand for our services, which could result in a material adverse impact on our operating results and financial condition.

Outsourcing trends in the biopharmaceutical industry and changes in aggregate spending and R&D budgets could adversely affect our operating results and growth rate.

Our revenues depend on the level of R&D and commercialization expenditures, size of the drug-development pipelines, and outsourcing trends of the biopharmaceutical industry, including the amount of such R&D and commercialization spend that is outsourced and subject to competitive bidding amongst us and our competitors. Accordingly, economic factors and industry trends that affect biopharmaceutical companies affect our business.

Biopharmaceutical companies continue to seek long-term strategic collaborations with global CROs with favorable pricing terms. Competition for these collaborations is intense and we might not be selected, in which case a competitor may enter into the collaboration and our business with the customer, if any, may be limited. Our success depends in part on our ability to establish and maintain preferred provider relationships with large biopharmaceutical companies. Our failure to develop or maintain these preferred provider relationships could have a material adverse effect on our business and results of operations. Furthermore, in order to obtain preferred provider relationships or other large contracts for commercialization services, we may have to reduce the prices for our services, which could negatively impact our gross margin for these services.

Our SMID biopharmaceutical company clients may rely on funding from venture capital and other sources to drive their business. During the year ended December 31, 2022, this funding was lower than historical periods. When this funding is reduced, our SMID biopharmaceutical company clients have been and may in the future be forced to reduce their outsourced R&D and commercialization expenditures or may be unable to pay for services rendered, which could have a material adverse effect on our business and results of operations.

In addition, when the biopharmaceutical industry reduces its outsourcing of clinical trials or commercialization services or such outsourcing fails to grow at projected rates, our business, financial condition, results of operations, and cash flows could be materially and adversely affected. We may also be negatively impacted by consolidation and other factors in the biopharmaceutical industry, which may slow decision making by our customers, result in the delay or cancellation of existing projects, cause reductions in overall R&D expenditures, or lead to increased pricing pressures. Further, in the event that one of our customers combines with a company that is using the services of one of our competitors, the combined company could decide to use the services of that competitor or another provider. All of these events could adversely affect our business, financial condition, cash flows, or results of operations.

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Actions by government regulators or customers to limit a prescription’s scope or withdraw an approved product from the market could adversely affect our business, results of operations, and financial condition.

Government regulators have the authority, after approving a biopharmaceutical product, to limit its indicated use, impose restrictions on its marketing, or withdraw it from the market completely based on safety or other concerns. Similarly, customers may act to voluntarily limit the sales of biopharmaceutical products or withdraw them from the market. Actions by payers to limit a product on a formulary list or restrict coverage or reimbursement for a product can influence customer decisions to withdraw or limit market support for a product. In the past, we have provided services with respect to products that have been limited or withdrawn. If we are providing services to customers for products that are limited or withdrawn, we may be required to narrow the scope of or terminate our services with respect to such products, which would prevent us from earning the full amount of revenues anticipated under the related contracts with negative impacts to our business, results of operations, cash flows, and financial condition.

If we fail to comply with federal, state, and foreign healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, financial condition, results of operations, cash flows, and prospects could be adversely affected.

Even though we do not and will not order healthcare services or bill directly to Medicare, Medicaid, or other third-party payers, certain federal and state healthcare laws and regulations pertaining to fraud and abuse are and will be applicable to our business. We could be subject to healthcare fraud and abuse laws of both the federal government and the states in which we conduct our business. Because of the breadth of these laws and the narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment, and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business, our financial results, and our reputation.

We may be affected by healthcare reform and potential additional reforms which may adversely impact the biopharmaceutical industry and reduce the need for our services or negatively impact our profitability.

Numerous government bodies are considering or have adopted healthcare reforms and may undertake, or are in the process of undertaking, efforts to control healthcare costs through legislation, regulation, and agreements with HCPs and biopharmaceutical companies, including many of our customers. As governmental administrations change and reforms take place, we are unable to predict what legislative proposals, if any, will be adopted in the future. If regulatory cost-containment efforts limit the profitability of new drugs by, for example, continuing to place downward pressure on pharmaceutical pricing and/or increasing regulatory burdens and operating costs of the biopharmaceutical industry, our customers may reduce their commercialization and R&D spending, which could reduce the business they outsource to us. In addition, if regulatory requirements are relaxed or simplified drug approval procedures are adopted, the demand for our services could decrease.

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Government bodies have adopted and may continue to adopt new healthcare legislation or regulations that are more burdensome than existing regulations. For example, product safety concerns and recommendations by the Drug Safety Oversight Board could change the regulatory environment for drug products, and new or heightened regulatory requirements may increase our expenses or limit our ability to offer some of our services. We might have to incur additional costs to comply with these or other new regulations, and failure to comply could harm our financial condition, results of operations, cash flows, and reputation, and result in adverse legal action(s). Additionally, new or heightened regulatory requirements may have a negative impact on the ability of our customers to conduct industry-sponsored clinical trials, which could reduce the need for our post-approval development services. For instance, in the EU, the Clinical Trials Regulation (“CTR”), which was adopted in April 2014, became applicable on January 31, 2022. While the Clinical Trials Directive required a separate clinical trial application (“CTA”) to be submitted in each member state, to both the competent national health authority and an independent ethics committee, the CTR introduces a centralized process and only requires the submission of a single application to all member states concerned. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed. The CTR foresees a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. For clinical trials whose CTA was made under the Clinical Trials Directive before January 31, 2022, the Clinical Trials Directive will continue to apply on a transitional basis for three years. Additionally, sponsors were permitted to choose to submit a CTA under either the Clinical Trials Directive or the CTR until January 31, 2023 and, if authorized, those were governed by the Clinical Trials Directive until January 31, 2025. By that date, all ongoing trials will become subject to the provisions of the CTR. Compliance with the CTR requirements by us and our third-party service providers, such as CROs, may impact our development plans.

It is currently unclear to what extent the UK will seek to align its regulations with the EU. The UK regulatory framework in relation to clinical trials is derived from existing EU legislation (as implemented into UK law, through secondary legislation).

On January 17, 2022, the MHRA launched an eight-week consultation on reframing the UK legislation for clinical trials. The consultation closed on March 14, 2022 and aims to streamline clinical trials approvals, enable innovation, enhance clinical trials transparency, enable greater risk proportionality, and promote patient and public involvement in clinical trials. The outcome of the consultation will be closely watched and will determine whether the UK chooses to align with the regulation or diverge from it to maintain regulatory flexibility. A decision by the UK not to closely align its regulations with the new approach that has been adopted in the EU may have an effect on the cost of conducting clinical trials in the UK as opposed to other countries and/or make it harder to seek a marketing authorization in the EU for product candidates on the basis of clinical trials conducted in the UK.

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Current and proposed laws and regulations regarding the protection of personal data could result in increased risks of liability or increased cost to us or could limit our service offerings.

The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements, and regulations governing the collection, use, disclosure, retention, and security of personal information, such as information we may collect about individuals in the U.S., the EEA, the UK, and other countries where we have operations, including but not limited to Japan, China, South Korea, Brazil, and Singapore. Federal, state, and foreign governments may propose or have adopted additional legislation governing the collection, possession, use, storage, or disclosure of personal data, including but not limited to health and financial data, as well as security breach notification rules for loss or theft of such data. Additional legislation or regulation of this type might, among other things, require us to implement additional security measures and processes or to anonymize or de-identify health or other personal data in excess of what we are already obliged to do, each of which may require substantial expenditures or limit our ability to offer some of our services. Failure to comply with these data protection and privacy laws, rules, and regulations, or to resolve any privacy or security complaints, could subject us to regulatory sanctions, fines, delays in clinical trials, criminal prosecution, or civil liability, as well as reputational damage.

In the U.S., we are subject to certain state privacy and data security laws and regulations in the states in which we operate, such as the CCPA, which became effective as of January 2020, and creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Further, the California Privacy Rights Act (the “CPRA”) recently passed in California. The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Similar laws have passed in Virginia and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the U.S. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In the event that we are subject to or affected by the CCPA, the CPRA, or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

In the EEA, we are subject to the EU GDPR, and in the UK, we are subject to the UK data protection regime consisting primarily of the UK General Data Protection Regulation, or UK GDPR, and the UK Data Protection Act 2018, (collectively, the GDPR), in each case in relation to our collection, control, processing, sharing, disclosure, and other use of data relating to an identifiable living individual (personal data). The GDPR contains provisions specifically directed at the processing of health data, rights of data subjects, data breach notification, and extra-territoriality measures intended to extend the applicability of the law to certain activities performed by non-EEA/UK organizations (such as the targeting or monitoring of individuals located in the EEA/UK by organizations located in other locations). Failure by us, or by our partners, our service providers, or our employees or contractors, to comply with the GDPR could result in regulatory investigations, reputational damage, orders to cease/ change our use of data, enforcement notices and/ or fines of the greater of €20 million/£17.5 million or 4% of total global annual revenue, as well as potential civil claims including class actions where individuals suffer harm. These changes may lead to additional compliance costs and could increase our overall risk. As we expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.

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In addition to data protection laws and regulations, regulators are considering (or are adopting) other laws, regulations and guidelines that impact the processing of personal information. For example, the evolving landscape surrounding the use of artificial intelligence and online advertising may lead to additional compliance costs and could increase our overall risk.

In addition, we operate on a global basis and may transfer personal data to our affiliates and service providers in the course of administering our business and performing our services. As a result, we are subject to legal requirements that govern the cross-border transfer of personal data. For example, the GDPR prohibits the transfer of personal data outside the EEA and the UK to third countries that have not been found to provide adequate protection to such personal data, including the U.S., in the absence of certain safeguards. We rely upon Standard Contractual Clauses (“SCCs”) and other appropriate safeguards or derogations for such transfers of personal data.

The European Commission issued revised SCCs on June 4, 2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board. The revised SCCs must be used for relevant new data transfers from September 27, 2021; existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022. The new SCCs apply only to the transfer of personal data outside of the EEA and not the UK; the UK’s Information Commissioner’s Office launched a public consultation on its draft revised data transfers mechanisms in August 2021. There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR.

As noted in prior disclosures, certain of our clinical entities relied in part on the EU-U.S. and Swiss-U.S. Privacy Shield frameworks to transfer certain personal data from the EU and Switzerland, respectively, to the U.S. On July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU-US Privacy Shield. Similarly, on September 8, 2020, Switzerland’s Federal Data Protection and Information Commissioner (“FDPIC”) issued an opinion concluding that the Swiss-US Privacy Shield Framework does not provide an adequate level of protection to transfer Personal Data from Switzerland to the U.S. Because of these developments, we no longer leverage these frameworks to support the transfer of personal data from the EU and Switzerland to the U.S., although we continue participation in them, in an effort to demonstrate our commitment to the protection of personal data.

We are accountable for the acts and omissions of our third-party service providers we engage to process personal data on our behalf, subject to limitations and exclusions provided by law. There is no assurance that contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage, and transmission of such information. Any violation of data protection laws by our third-party processors could have a material adverse effect on our business and result in the fines and penalties outlined above.

Although we work to comply with applicable laws, regulations and standards, our contractual obligations, and other legal obligations, these requirements are evolving and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply. Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators, or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could result in additional cost and liability to us, damage our reputation, and adversely affect our business and results of operations.

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Our customers face intense competition from lower cost generic products and other competing products, which may lower the amount that they spend on our services and could have a material adverse effect on our business, results of operations, cash flows, and financial condition.

Our customers face increasing competition from competing products and, in particular, from lower cost generic products, which in turn may affect their ability to pursue clinical development and commercialization activities. In the U.S., the EU and Japan, political pressure to reduce spending on prescription products has led to legislation and other measures which encourage the use of generic products. In addition, proposals emerge from time to time in the U.S. and other countries for legislation to further encourage the early and rapid approval of generic products. Loss of patent protection for a product typically is followed promptly by generic substitutes, reducing our customers’ sales of that product and their overall profitability. Availability of generic substitutes for our customers’ products or other competing products may cause them to lose market share and, as a result, may adversely affect their results of operations and cash flow, which in turn may mean that they would not have adequate capital to purchase our services. If competition from generic or other products impacts our customers’ finances such that they decide to curtail our services, our net revenues may decline and this could have a material adverse effect on our business, results of operations, and financial condition.

The biopharmaceutical industry has a history of patent and other intellectual property litigation and we might be involved in costly intellectual property lawsuits.

The biopharmaceutical industry has a history of intellectual property litigation and these lawsuits will likely continue in the future. Accordingly, we may face patent infringement suits or be called upon to provide documentation by companies that have patents for similar business processes or other suits alleging infringement of their intellectual property rights. Legal proceedings relating to intellectual property could be expensive, take significant time, and divert management’s attention from other business concerns, regardless of the outcome of the litigation. In the event an infringement lawsuit was brought against us and we did not prevail, we might have to pay substantial damages and we could be required to stop infringing activity or obtain a license to use technology on unfavorable terms.

Risks Related to Our Indebtedness

Our substantial debt could adversely affect our financial condition and cash flows from operations.

As of December 31, 2022, our total principal amount of indebtedness was $2.69 billion, which consisted of: (i) a $1.35 billion Term A Facility; (ii) $121.0 million under our Revolver; (iii) $600.0 million of 3.625% senior notes (the “Notes”); (iv) borrowings of $550.0 million under our accounts receivable financing agreement; and (v) $68.1 million in current and non-current finance lease obligations. Our substantial indebtedness could adversely affect our financial condition and cash flows from operations and thus make it more difficult for us to satisfy our obligations with respect to our senior secured facilities. If our cash flow is not sufficient to service our debt and adequately fund our business, we may be required to seek further additional financing or refinancing or dispose of assets. We might not be able to influence any of these alternatives on satisfactory terms or at all. Our substantial indebtedness could also:

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Despite our level of indebtedness, we have been and may in the future be able to incur more debt and undertake additional obligations. Incurring such debt or undertaking such additional obligations could further exacerbate the risks to our financial condition.

We also may be able to incur additional indebtedness in the future. Although covenants under the A&R Credit Agreement limit our ability to incur certain additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. To the extent we incur additional indebtedness, the risks associated with our leverage, including our possible inability to service our debt obligations, would increase.

Servicing our debt will require a significant amount of cash, and our ability to generate sufficient cash depends on many factors, some of which are beyond our control.

Our ability to make payments on and refinance our debt, make strategic acquisitions, and fund capital expenditures depends on our ability to generate cash flow in the future. To some extent, our ability to generate future cash flow is subject to general economic, financial, competitive, and other factors that are beyond our control. We cannot assure you that:

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We also may experience difficulties repatriating cash from foreign subsidiaries and accounts due to law, regulation, or contracts which could further constrain our liquidity. If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, marketing efforts, strategic acquisitions, investments and alliances, selling assets, restructuring or refinancing our debt, or seeking additional equity capital. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable or favorable terms, or at all, or that they would permit us to meet our scheduled debt service obligations. Any inability to generate sufficient cash flow or refinance our debt on favorable terms could have a material adverse effect on our financial condition.

Covenant restrictions under the A&R Credit Agreement, our other financing arrangements, and lease agreement may limit our ability to operate our business.

The A&R Credit Agreement and our indentures governing our Notes contain covenants that may restrict our ability to, among other things, borrow money, incur liens, pay dividends, make capital expenditures, make strategic acquisitions, and effect a consolidation, merger, or disposal of material intellectual property or all or substantially all of our assets. Although the covenants in the A&R Credit Agreement and our other debt instruments are subject to various exceptions, we cannot assure you that these covenants will not adversely affect our ability to finance future operations, capital needs, or to engage in other activities that may be in our best interest. The A&R Credit Agreement requires us to maintain a First Lien Leverage Ratio (as defined in the A&R Credit Agreement) of no more than 4.5 to 1.0 as of the last day of each fiscal quarter. In addition, in certain circumstances, our long-term debt requires us to maintain a specified financial ratio and satisfy certain financial condition tests, which may require that we take action to reduce our debt or to act in a manner contrary to our business objectives. A breach of any of these covenants could result in a default under our senior secured facilities or our indentures governing our senior unsecured notes. If an event of default under the A&R Credit Agreement or our other debt instruments occurs, the lenders thereunder or holders of the defaulted debt could elect to declare all amounts outstanding, together with accrued interest, to be immediately due and payable. In such case, we might not have sufficient funds to repay all the outstanding amounts. In addition, the A&R Credit Agreement is secured by first priority security interests on substantially all of our real and personal property, including the capital stock of certain of our subsidiaries. If an event of default under the A&R Credit Agreement occurs, the lenders thereunder could exercise their rights under the related security documents. Any acceleration of amounts due under the A&R Credit Agreement or the substantial exercise by the lenders of their rights under the security documents would likely have a material adverse effect on us. Our receivables facility also contains covenants customary in such facilities that may restrict our ability to operate our business.

Under the terms of the lease agreement for our corporate headquarters in Morrisville, North Carolina we may be required to issue a letter of credit (“LOCs”) to the landlord based on our debt rating issued by Moody’s Investors Service (or other nationally-recognized debt rating agency, such as S&P Global Ratings). As of December 31, 2022, our debt rating was such that no LOC is currently required. Any LOCs issued in accordance with the aforementioned requirements could be issued under our Revolver under the A&R Credit Agreement, and, if issued under our Revolver, would reduce our available borrowing capacity by the same amount accordingly.

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Interest rate fluctuations may have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Because we have substantial variable rate debt, fluctuations in interest rates may affect our business, financial condition, results of operations, or cash flows, particularly in the current rising interest rate environment. We currently utilize interest rate swaps to limit our exposure to interest rate fluctuations; however, such instruments may not be effective. As of December 31, 2022, we had approximately $2.69 billion of total principal indebtedness consisting of a $1.35 billion Term A Facility, $121.0 million under our Revolver, $600.0 million under the Notes, borrowings of $550.0 million under our accounts receivable financing agreement, and $68.1 million in current and non-current of finance lease obligations, of which $988.8 million (excluding finance leases) was subject to variable interest rates. The amount of debt subject to variable interest rates is expected to increase significantly upon expiration of the swaps in March 2023, however we plan to continue to hedge a portion of our variable interest rate exposure.

A portion of our indebtedness bears interest at variable interest rates, primarily based on the Secured Overnight Funding Rate (“SOFR”), which may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences.

A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.

Our debt currently has a non-investment grade rating, and any rating assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of our debt. Credit ratings are not recommendations to purchase, hold, or sell the Notes. Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing.

Risks Related to Ownership of Our Common Stock

We do not expect to pay any cash dividends for the foreseeable future.

We do not anticipate that we will pay any dividends to holders of our stock for the foreseeable future. Any payment of cash dividends will be at the discretion of our Board and will depend on our financial condition, capital requirements, legal requirements, earnings, and other factors. Our ability to pay dividends is restricted by the terms of the A&R Credit Agreement and might be restricted by the terms of any indebtedness that we incur in the future. Consequently, you should not rely on dividends in order to receive a return on your investment.

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Provisions of our corporate governance documents and Delaware law could make an acquisition of our company more difficult and may prevent attempts by our shareholders to replace or remove our current management, even if beneficial to our shareholders.

Provisions of our certificate of incorporation and our amended and restated bylaws contain provisions that delay, defer, or discourage transactions involving an actual or potential change in control of us or change in our management that shareholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our stock, thereby depressing the market price of our stock. In addition, these provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of the Board. Because the Board is responsible for appointing the members of our management team, these provisions could in turn affect any attempt to replace current members of our management team. Among others, these provisions include: (i) our ability to issue preferred stock without shareholder approval; (ii) the requirement that our shareholders may not act without a meeting; (iii) requirements for advance notification of shareholder nominations and proposals contained in our bylaws; (iv) the absence of cumulative voting for our directors; and (v) requirements for shareholder approval of certain business combinations.

Additionally, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested shareholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the merger in which the person became an interested shareholder, unless the business combination is approved in a prescribed manner. The existence of the foregoing provision could also limit the price that investors might be willing to pay in the future for shares of our stock, thereby depressing the market price of our stock.

Our certificate of incorporation, as amended, provides, subject to certain exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or stockholders.

Our certificate of incorporation, as amended, provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty owed by, or any wrongdoing by, any of our directors, officers or stockholders to us or our stockholders; (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation, as amended, or our amended and restated bylaws; (4) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation, as amended, or our amended and restated bylaws or (5) any action asserting a claim governed by the internal affairs doctrine. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act, Securities Act, or, in each case, the rules and regulations thereunder, or any other claim for which the U.S. federal courts have exclusive jurisdiction. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our certificate of incorporation, as amended, described above. This exclusive forum provision may increase the costs associated with bringing a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers or stockholders, any of which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the exclusive forum provision in our certificate of incorporation, as amended, to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations.

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The outcome of the putative class action lawsuit filed against us could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

On January 25, 2018, a complaint was filed in the Eastern District of North Carolina on behalf of a putative class of shareholders who purchased our common stock during the period between May 10, 2017 and November 8, 2017. The complaint names us and certain of our executive officers as defendants and alleges violations of the Securities Exchange Act of 1934, as amended, based upon allegedly inaccurate or incomplete information regarding, among other things, the financial performance and business outlook for inVentiv’s business prior to the Merger and with respect to the combined company following the Merger. The plaintiffs seek awards of compensatory damages, among other relief, and their costs and attorneys’ and experts’ fees. We are presently unable to predict the duration, scope, or result of this putative class action, or any other related lawsuit or investigation.

Our internal control over financial reporting is required to meet all the standards of Section 404 of Sarbanes-Oxley, and failure to achieve and maintain effective internal controls over financial reporting could have a material adverse effect on our stock price, reputation, business, financial condition, results of operations and cash flows.

Section 404 of Sarbanes-Oxley requires management and our independent registered public accounting firm to assess and attest to the effectiveness of internal control over financial reporting on an annual basis. The rules governing the standards that must be met to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation of our existing controls and could result in incurring significant additional expenditures. We are required to design, implement, and test our internal control over financial reporting in order to comply with this obligation. The effort necessary to meet these requirements is time consuming, costly, and complicated, and we must continually evaluate and refine these processes on an ongoing basis. We might encounter problems or delays in completing the implementation of any required improvements and therefore fail to receive a favorable attestation provided by our independent registered public accounting firm.

Further, we have previously had material weaknesses or significant deficiencies in our internal control over financial reporting and new material weaknesses or significant deficiencies may exist or otherwise be discovered in the future. If we fail to maintain an effective internal control environment, such failure could limit our ability to report our financial results accurately and timely, resulting in misstatements and/or restatements of our consolidated financial statements, which may cause investors to lose confidence and have a material adverse effect on our stock price, reputation, business, financial condition, results of operations, and cash flows.

We are a holding company and rely on dividends and other payments, advances, and transfers of funds from our subsidiaries to meet our obligations and pay any dividends.

We have no direct operations and no significant assets other than ownership of 100% of the capital stock of our subsidiaries. Because we conduct our operations through our subsidiaries, we depend on those entities for dividends and other payments to generate the funds necessary to meet our financial obligations, and to pay any dividends with respect to our stock. Legal and contractual restrictions in the A&R Credit Agreement and other agreements, which may govern future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. The earnings from, or other available assets of, our subsidiaries might not be sufficient to pay dividends, make distributions, or loans to enable us to pay any dividends on our stock or other obligations. Any of the foregoing could materially and adversely affect our business, financial condition, results of operations, and cash flows.

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General Risk Factors

Our stock price is subject to volatility, which could have a material adverse impact on investors and employee retention.

Since our initial public offering in November 2014 (the “IPO”), the price of our stock, as reported by Nasdaq, has ranged from a low of $19.61 on November 7, 2014 to a high of $104.18 on November 12, 2021. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could affect stock price in ways that may be unrelated to our operating performance. The trading price of our stock is subject to significant price fluctuations in response to many factors, including:

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These and other factors may cause the market price and demand for shares of our stock to fluctuate substantially, which could result in reduced liquidity and a decline in the price of our stock. When the market price of a stock is volatile, security holders often institute class action litigation against the company that issued the stock. If we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs and our management’s attention could be diverted from the operation of our business, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Any litigation or government investigation against us could be costly and time-consuming to defend.

We are subject to and may become subject, from time to time, to additional legal proceedings and claims that arise in the ordinary course of business or pursuant to governmental or regulatory enforcement activity. While we do not believe that the resolution of any currently pending lawsuits against us will, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations, or cash flows, we might be wrong, and future litigation might result in substantial costs and divert management’s attention and resources, which might seriously harm our business, financial condition, results of operations, and cash flows. Insurance might not cover such claims, provide sufficient payments to cover all of the costs to resolve one or more such claims, or continue to be available on terms acceptable to us. In particular, any claim could result in potential liability for us if the claim is outside the scope of the indemnification agreement we have with our customers, our customers do not abide by the indemnification agreement as required or the liability exceeds the amount of any applicable indemnification limits or available insurance coverage. A claim brought against us that is uninsured or underinsured could result in unanticipated costs and could have a material adverse effect on our financial condition, results of operations, cash flows, or reputation.

If our insurance does not cover all of our indemnification obligations and other liabilities associated with our operations, our business, financial condition, results of operations, or cash flows may be materially adversely affected.

We maintain insurance designed to provide coverage for ordinary risks associated with our operations and our ordinary indemnification obligations that we believe to be customary for our industry. The coverage provided by such insurance might not be adequate for all claims we make or may be contested by our insurance carriers. If our insurance is not adequate or available to pay all claims or exposures associated with our operations, or if we are unable to purchase adequate insurance at reasonable rates in the future, our business, financial condition, results of operations, or cash flows may be materially adversely affected.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

As of December 31, 2022, we had 96 active operating facilities located in 46 countries. Most of our facilities consist solely of office space. We lease all of our facilities, except for non-material office space owned in Madrid, Spain and Tiraine, Latvia. Our corporate headquarters and principal executive offices are in Morrisville, North Carolina, where we operate in approximately 258,250 square feet. The lease will expire in January 2032.

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In addition, we lease substantial active operating facilities in Quebec City, Canada; Somerset, New Jersey; Gurgaon, India; Columbus, Ohio; New York, New York; Belgrade, Serbia; Buenos Aires, Argentina; Hyderabad, India; Biot, France; Seoul, South Korea; Princeton, New Jersey; Pune, India; Tokyo, Japan; and Farnborough, UK. We also maintain offices in various other Asian-Pacific, European, Latin American, and North American locations, as well as the Middle East and Africa. Our leases are not individually material to our business model and all either have options to renew or are in major markets where we believe there are adequate opportunities to continue business operations at terms satisfactory to us.

Item 3. Legal Proceedings.

We are party to legal proceedings incidental to our business. While our management currently believes the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our financial condition and results of operations.

Please refer to “Note 16 – Commitments and Contingencies” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for information pertaining to legal proceedings.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrants’ Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

Holders of Record

On February 9, 2023, there were 20 shareholders of record of our common stock as reported by our transfer agent. Shareholders of record are those who have the rights, benefits, and responsibilities of ownership of shares registered in their own names. This number does not include shareholders for whom shares are held in “nominee” or “street” name or beneficial owners of common stock whose shares are held in the names of brokers, dealers, or clearing agencies outside of our transfer agent.

Dividend Policy

Since becoming a public company, we have not declared or paid cash dividends on our common stock, nor do we intend to pay cash dividends on our common stock in the foreseeable future. However, in the future, subject to the factors described below and our future liquidity and capitalization, we may change this policy and choose to pay dividends.

We are a holding company that does not conduct any business operations of our own. As a result, our ability to pay cash dividends on our common stock is dependent upon cash dividends, distributions, and other transfers from our subsidiaries. Our ability to pay dividends is currently restricted by the terms of our A&R Credit Agreement, and other financing agreements, and may be further restricted by any future indebtedness we or our subsidiaries incur. In addition, under Delaware law, the Board may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year.

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Any future determination to pay dividends will be at the discretion of the Board and will take into account restrictions in our debt instruments, including the A&R Credit Agreement, general economic business conditions, our financial condition, results of operations and cash flows, our capital requirements, our business prospects, the ability of our operating subsidiaries to pay dividends and make distributions to us, legal restrictions, and such other factors as the Board may deem relevant. For additional information on these restrictive covenants, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and “Note 4 – Long-Term Debt Obligations” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Recent Sales of Unregistered Equity Securities

We did not have any sales of unregistered equity securities during 2022.

Purchases of Equity Securities by the Issuer

On November 17, 2020, the Board authorized the repurchase of up to an aggregate of $300.0 million of our Class A common stock, par value $0.01 per share, to be executed from time to time in open market transactions effected through a broker at prevailing market prices, in block trades, or through privately negotiated transactions through December 31, 2022 (the “2021 Stock Repurchase Program”). The 2021 Stock Repurchase Program took effect on January 1, 2021.

On May 25, 2022, our Board approved a new stock repurchase program (the “2022 Stock Repurchase Program”) that took effect immediately and replaced the 2021 Stock Repurchase Program. The 2022 Stock Repurchase Program authorizes the repurchase of up to an aggregate of $350.0 million of our Class A common stock, par value $0.01, and will expire on December 31, 2024. Share repurchases are funded primarily with our working capital, cash flow from operations, and funds available through various borrowing arrangements.

The 2022 Stock Repurchase Program does not obligate us to repurchase any particular amount of our Class A common stock, and may be modified, extended, suspended, or discontinued at any time. The timing and amount of repurchases will be determined by our management based on a variety of factors such as the market price of our Class A common stock, our corporate cash requirements, and overall market conditions. The 2022 Stock Repurchase Program is subject to applicable legal requirements, including federal and state securities laws and applicable Nasdaq rules. We may also repurchase shares of our Class A common stock pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit shares of our Class A common stock to be repurchased when we might otherwise be precluded from doing so by law.

For the year ended December 31, 2022, we repurchased 1,928,923 shares of our Class A common stock for a total purchase price of $150.0 million under the 2021 Stock Repurchase Program. We immediately retired all of the repurchased common stock and charged the par value of the shares to common stock. The excess of the repurchase price over the par value was applied on a pro rata basis against additional paid-in capital, with the remainder applied to accumulated deficit.

There were no share repurchases during the three months ended December 31, 2022. As of December 31, 2022, we have remaining authorization to repurchase up to $350.0 million of shares of our Class A Common Stock under the 2022 Stock Repurchase Program.

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Stock Performance Graph

The information included under the heading “Stock Performance Graph” is “furnished” and not “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed to be “soliciting material” subject to Regulation 14A or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended.

Our common stock is traded on the Nasdaq under the symbol “SYNH.” From November 7, 2014 through January 7, 2018, our common stock was listed on the Nasdaq under the trading symbol “INCR.” The Stock Price Performance Graph set forth below compares the cumulative total shareholder return on our common stock for the period from December 31, 2017 through December 31, 2022, with the cumulative total return of the Nasdaq Composite Index and the Nasdaq Health Care Index over the same period. The comparison assumes $100 was invested on December 31, 2017 in our common stock, in the Nasdaq Composite Index, and in the Nasdaq Health Care Index and assumes reinvestment of dividends, if any.

The stock price performance shown on the graph above is not necessarily indicative of future price performance. Information used in the graph was obtained from the Nasdaq Stock Market, a source believed to be reliable, but we are not responsible for any errors or omissions in such information.

Item 6. [Reserved]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and the related notes included in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. This discussion contains forward-looking statements related to future events and our future financial performance that are based on current expectations and subject to risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors, including those described in Part I, Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

This section of the Form 10-K generally discusses our results of operations for the years ended December 31, 2022 and 2021, including a year-to-year comparison between 2022 and 2021. For a full discussion related to the results of operations for the year ended December 31, 2020, including a year-to-year comparison between 2021 and 2020, refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the year ended December 31, 2021.

Overview of Our Business and Services

We are a leading fully integrated biopharmaceutical solutions organization built to accelerate customer success. We translate unique clinical, medical affairs and commercial insights into outcomes to address modern market realities.

Our operations are divided into two reportable segments, Clinical Solutions and Commercial Solutions. Our Clinical Solutions segment offers comprehensive global services for the development of diagnostics, drugs, biologics, devices, and digital therapeutics that span Phases I to IV of clinical development. Our Commercial Solutions segment provides commercialization services, including deployment solutions, communications services (public relations, advertising, and medical communications), and consulting services. We integrate our clinical and commercial capabilities into customized solutions by sharing knowledge, data, and insights. This collaboration across the development and commercialization continuum facilitates unique insights into patient populations, therapeutic environments, product timelines, and the competitive landscape. For further discussion, refer to Part I, Item 1, “Business” in this Annual Report on Form 10-K.

In our Clinical Solutions segment, we have experienced lower flow of requests for proposals. In the SMID market specifically, we have also experienced delays in award decisions. For larger pharmaceutical companies specifically, we have started experiencing slower pipelines. In our Commercial Solutions segment, we have experienced lower flow of requests for proposals from the SMID market. Also, requests for proposals from larger pharmaceutical companies have begun to slow. Additionally, net new business awards, backlog, and revenue have been, and we expect will continue to be affected by the broad effects of the current macroeconomic environment on the global economy and major financial markets, including but not limited to interest rate increases, inflation, and the ongoing COVID-19 pandemic. Additionally, we continue to experience lower reimbursable out-of-pocket expenses as a percentage of revenue relative to pre-pandemic levels in both of our segments due to reduced travel as the COVID-19 pandemic accelerated adoption of virtual engagement with sites and patients.

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We are pursuing business transformation initiatives to improve customer engagement, increase innovation, and achieve operating efficiencies. These initiatives include enhancing customer engagement and infusing innovation and insights throughout our operations, integrating artificial intelligence and predictive analytics to drive faster data insights and patient outcomes, leveraging tools and automation to simplify processes and improve real-time visibility, optimizing our operational footprint, and streamlining the organization and outsourcing where we believe appropriate. We also seek to improve our productivity, flexibility, quality, functionality, and cost savings by investing in the development and implementation of global platforms and integration of our business processes and functions to achieve economies of scale. These various initiatives, in particular Project Velocity, are expected to incur material costs over the medium- to long-term and may not yield their intended improvements, or be completed in a timely manner, which may impact our competitiveness and our ability to meet our growth objectives and, as a result, materially and adversely affect our business, operating results, and financial condition. See Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K for further discussion of these and other risks relating to our business.

Prior period segment results have been recast to conform to insignificant changes to management reporting in 2022.

New Business Awards and Backlog

We add new business awards to backlog when we enter into a contract or when we receive a written commitment from the customer selecting us as a service provider, provided that:

In addition, we continually evaluate our backlog to determine if any of the previously awarded work is no longer expected to be performed, regardless of whether we have received formal cancellation notice from the customer. If we determine that any previously awarded work is no longer probable of being performed, we remove the value from our backlog based on the risk of cancellation. We recognize revenue from these awards as services are performed, provided we have received proper authorization from the customer.

We report new business awards for our Clinical Solutions and Commercial Solutions segments as well as backlog for our Clinical Solutions segment and the deployment solutions offering within our Commercial Solutions segment. We do not report backlog for the remaining service offerings in the Commercial Solutions segment.

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Backlog

Our backlog consists of anticipated future revenue from business awards that either have not started, or that are in process and have not been completed. Our backlog also reflects any cancellation or adjustment activity related to these awards. The average duration of our contracts will fluctuate from period to period based on the contracts comprising our backlog at any given time. The majority of our contracts contain early termination provisions that typically require notice periods ranging from 30 to 90 days.

Our backlog as of December 31 was as follows (in millions):

We expect approximately $4.36 billion of our backlog as of December 31, 2022 will be recognized as revenue during 2023. We adjust the amount of our backlog each quarter for the effects of fluctuations in foreign currency exchange rates.

Net New Business Awards

New business awards, net of cancellations, were as follows (in millions):

New business awards have varied and may continue to vary significantly from year to year. Fluctuations in our net new business award levels often result from the fact that we may receive a small number of relatively large orders in any given reporting period. Because of these large orders, our backlog and net new business awards in a reporting period may reach levels that are not sustainable in subsequent reporting periods.

We believe that our backlog and net new business awards might not be consistent indicators of future revenue for a variety of reasons, including, but not limited to, changes to the scope of work during the course of projects, including the variable size and duration of projects, and our ability to win repeat business. Additionally, projects may be canceled or delayed by the customer or regulatory authorities. We generally do not have a contractual right to the full amount of the awards reflected in our backlog. If a customer cancels an award, we might be reimbursed for the costs we have incurred. As we increasingly compete for and enter into large contracts that are more global in nature, the rate at which our backlog and net new business awards convert into revenue may decrease, and the duration of projects and the period over which related revenue is recognized may lengthen. For more information about risks related to our net new business awards and backlog see Part I, Item 1A, “Risk Factors – Risks Related to Our Business – Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog” and “ – If we do not generate a sufficient number of new business awards, or if new business awards are delayed, terminated, reduced in scope, or fail to go to contract, our business, financial condition, results of operations, or cash flows may be materially adversely affected” of this Annual Report on Form 10-K.

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Results of Operations

The following table sets forth amounts from our consolidated financial statements along with dollar and percentage changes (in thousands, except percentages):

Revenue

For the year ended December 31, 2022, our revenue increased by $180.1 million, or 3.5%, to $5.39 billion from $5.21 billion for the year ended December 31, 2021. This increase was primarily driven by growth from increased project start-ups in both our Clinical Solutions and Commercial Solutions segments partially offset by lower reimbursable out-of-pocket expenses in our Clinical Solutions segment.

No single customer accounted for greater than 10% of our total consolidated revenue for the year ended December 31, 2022 or 2021. Revenue from our top five customers accounted for approximately 24% and 22% of revenue for the years ended December 31, 2022 and 2021, respectively.

Revenue for each of our segments was as follows (dollars in thousands):

Clinical Solutions

For the year ended December 31, 2022, revenue attributable to our Clinical Solutions segment increased compared to the prior year, primarily driven by increased project start-ups related to large pharmaceutical customers and, to a lesser extent, recent acquisitions. This increase was partially offset by decreases in revenue from projects related to COVID-19, which generally experience higher reimbursable out-of-pocket expenses. For the year ended December 31, 2022, revenue was negatively impacted by $98.7 million from fluctuations in foreign currency exchange rates compared to the prior year.

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The war in Ukraine has not had a material impact on our revenue; however, that could change depending on the magnitude of the conflict and the imposition of additional sanctions by the U.S. and other countries. We continue to adapt our strategic approach as the crisis persists and we are continuing our risk assessments in neighboring countries to be proactive about potential future challenges. Banking and economic sanctions imposed on Russia continue to present challenges to clinical trials. We are monitoring these sanctions to ensure we are in compliance and we are adapting our operations to address both the sanctions and the increasing logistical challenges of conducting trials in Russia. At this time, we are continuing to service patients in Ukraine and Russia in existing trials where possible. Any impacts to our revenue are expected to be temporary in nature as we work with customers to explore alternate sources of recruiting new patients, including potentially activating sites in other regions.

Commercial Solutions

For the year ended December 31, 2022, revenue attributable to our Commercial Solutions segment increased compared to the prior year, primarily driven by increased project start-ups, including new deployments of field teams, and higher reimbursable out-of-pocket expenses. For the year ended December 31, 2022, revenue was negatively impacted by $22.8 million from fluctuations in foreign currency exchange rates compared to the prior year.

Direct Costs

Direct costs consist principally of compensation expense and benefits associated with our employees and other employee-related costs, and reimbursable out-of-pocket expenses directly related to delivering on our projects. While we have some ability to manage the majority of these costs relative to the amount of contracted services we have during any given period, direct costs as a percentage of revenue can vary from period to period. Such fluctuations are due to a variety of factors, including, among others: (i) the level of staff utilization on our projects; (ii) adjustments to the timing of work on specific customer contracts; (iii) the experience mix of personnel assigned to projects; (iv) the service mix and pricing of our contracts; and (v) the timing of the incurrence of reimbursable out-of-pocket expenses. Relative to pre-pandemic levels, we continue to experience reduced travel and other reimbursable out-of-pocket expenses related to lower physical monitoring visits for Clinical Solutions, as well as fewer field team visits to healthcare providers and investigator meetings for Commercial Solutions. As discussed above, we expect reimbursable out-of-pocket expenses to remain lower relative to pre-pandemic levels.

Direct costs were as follows (dollars in thousands):

For the year ended December 31, 2022, our direct costs increased by $144.3 million, or 3.6%, compared to the year ended December 31, 2021.

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Clinical Solutions

Direct costs for our Clinical Solutions segment, excluding share-based compensation expense, were as follows (dollars in thousands):

For the year ended December 31, 2022, our Clinical Solutions segment direct costs increased by $13.6 million, or 0.4%, compared to the year ended December 31, 2021. This increase was primarily driven by increased billable headcount to support revenue growth, partially offset by positive impacts from fluctuations in foreign currency exchange rates, lower reimbursable out-of-pocket expenses related to COVID-19 projects, and our margin enhancement initiatives.

Gross margins for our Clinical Solutions segment were 25.6% and 25.0% for the years ended December 31, 2022 and 2021, respectively. Gross margin was higher during 2022 as compared to the prior year primarily due to lower reimbursable out-of-pocket expenses and positive impacts from fluctuations in foreign currency exchange rates, partially offset by increased billable headcount costs and contract labor.

Commercial Solutions

Direct costs for our Commercial Solutions segment, excluding share-based compensation expense, were as follows (dollars in thousands):

For the year ended December 31, 2022, our Commercial Solutions segment direct costs increased by $131.4 million, or 13.9%, compared to the year ended December 31, 2021. This increase was primarily driven by increased billable headcount to support revenue growth and higher reimbursable out-of-pocket expenses.

Gross margins for our Commercial Solutions segment were 18.4% and 20.7% for the years ended December 31, 2022 and 2021, respectively. Gross margin was lower during 2022 as compared to the prior year primarily due to a less favorable revenue mix, driven by new deployments of field teams and higher reimbursable out-of-pocket expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were as follows (dollars in thousands):

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Selling, general, and administrative expenses for the year ended December 31, 2022 decreased compared to the prior year primarily due to lower transaction, integration-related, and other expenses and positive impacts from our margin enhancement initiatives.

Restructuring and Other Costs

Restructuring and other costs were $56.6 million and $22.8 million for the years ended December 31, 2022 and 2021, respectively. The costs incurred were primarily related to our margin enhancement initiatives and specific actions focused on streamlining the operations of our Clinical Solutions segment to optimize efficiency and enhance the delivery of customer projects.

Restructuring and other costs consisted of the following (in thousands):

We expect to continue to incur costs related to our business transformation initiatives, including the potential outsourcing of certain administrative functions during 2023 and beyond as we continue the ongoing evaluations of our global workforce and facilities infrastructure needs to improve customer engagement, increase innovation, and achieve operating efficiencies.

Depreciation and Amortization Expense

Total depreciation and amortization expense was $247.2 million and $235.6 million for the years ended December 31, 2022 and 2021, respectively. The increase in total depreciation and amortization expense in 2022 compared to 2021 was primarily due to vehicle fleet leases and internal-use software.

Total Other Expense, Net

Total other expense, net consisted of the following (dollars in thousands):