What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-23 compared with 2020-04-30 · 176 added, 102 removed, 198 unchanged (58% of the section changed)

7 unchanged sentences

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

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

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

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

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and our ability to successfully integrate, and achieve expected benefits from, our acquired businesses.

For a further discussion of the risks relating to our business, see Part I—Item 1A—“Risk Factors” in our 2019 Form 10-K, as updated in this Quarterly Report on Form 10-Q.

For a further discussion of the risks relating to our business, see Part I—Item 1A—“Risk Factors” in our 2019 Form 10-K, as updated in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “1Q 2020 Form 10-Q”).

IQVIA Holdings Inc.

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With approximately 67,000 employees, we conduct operations in more than 100 countries.

Table of co ntents

We manage our business through three reportable segments, Technology & Analytics Solutions, Research & Development Solutions and Contract Sales & Medical Solutions.

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Recent Developments

IQVIA began 2020 with the same financial and operational momentum with which it closed 2019, with all three of the Company’s reportable segments performing to expectations in January and February.

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

These disruptions impacted all three of our reportable segments, with a disproportionate impact to our Research & Development Solutions business.

Research & Development Solutions exited the first quarter of 2020, with approximately 70 percent of global sites being temporarily inaccessible.

This led to a reduction in on-site monitoring visits from the expected activity in the period pre-COVID-19 and operational disruption to the clinical research sites which impacted patient recruitment, patient study participation, limitations on our ability to travel and access clinical research sites and reduced sample volumes in our clinical trial laboratory and research services business, all of which had a direct impact on revenue.

We were able to implement remote and risk-based monitoring as a partial offset to the impact.

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

These disruptions have impacted all three of our reportable segments, with a disproportionate impact to our Research & Development Solutions business.

During the second quarter, global site access improved from approximately 20 percent in April to 40 percent at the end of June.

The average site accessibility for the second quarter was approximately 30 percent.

These limitations on site accessibility impacted patient recruitment, patient study participation, and our ability to travel and access clinical research sites which resulted in reduced sample volumes in our clinical trial laboratory and research services business, all of which had a direct impact on revenue.

We were able to implement remote and risk-based monitoring as a partial offset to these impacts.

Additionally, new trial start-up activities have been delayed as a result of these sites being inaccessible;

however, the Company has not experienced any COVID-19 related trial cancellations.

Similarly, in our Technology & Analytics Solutions segment, the portion of our Real-World business that requires site monitoring activity also experienced a decline in the month of March as a result of sites being inaccessible, which led to a reduction in the associated revenue.

however, the Company has not experienced any material COVID-19 related trial cancellations.

Patient recruitment for new trials has improved, but it still remains slightly above 25 percent of historical levels.

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

During the second quarter we had access to 70 percent of our global Real-World sites, on average.

Further, certain of our aforementioned Technology & Analytics Solutions offerings that rely on face-to-face interactions or are dependent on in-person gatherings, events or conferences experienced significant disruption, and where we were unable to execute on our commitments due to COVID-19, we were not able to recognize the associated revenue in the period.

During the second quarter, the sale of information offerings, analytics and consulting projects have resumed as clients have adjusted to working virtually.

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

However, for the first quarter of 2020, the impact to Contract Sales and Medical Solutions revenue was immaterial.

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

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We do not expect COVID-19 to have a significant impact on our overall liquidity position and outlook.

As of March 31, 2020, cash and cash equivalents were $$ 927 million and the Company had available borrowing capacity of $1.4 billion under its $1.5 billion revolving credit facility.

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

As of June 30, 2020, cash and cash equivalents were $ 1,109 million and the Company had no amounts drawn under its $ 1.5 billion revolving credit facility.

At June 30, 2020, the Company was in compliance with the financial covenants under its debt agreements in all material respects and does not have material uncertainty about ongoing ability to meet the covenants of our credit arrangements.

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

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

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

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

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

Sources of Revenue

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We do not have material product revenues.

Table of co ntents

Costs and Expenses

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Foreign Currency Translation

In the first three months of 2020, approximately 35% of our revenues were denominated in currencies other than the United States dollar, which represents approximately 55 currencies.

In the first six months of 2020, approximately 35% of our revenues were denominated in currencies other than the United States dollar, which represents approximately 60 currencies.

Because a large portion of our revenues and expenses are denominated in foreign currencies and our financial statements are reported in United States dollars, changes in foreign currency exchange rates can significantly affect our results of operations.

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For information regarding our results of operations for Technology & Analytics Solutions, Research & Development Solutions and Contract Sales & Medical Solutions, refer to “Segment Results of Operations” later in this section.

Three Months Ended March 31, Change

Three Months Ended June 30, Change

(in millions)

$ 2,521 $ 2,740 $ (219) (8.0) %

For the first quarter of 2020, our revenues increased $70 million, or 2.6%, as compared to the same period in 2019.

This increase was comprised of constant currency revenue growth of approximately $98 million, or 3.7%.

The constant currency revenue growth was comprised of a $59 million increase in Technology & Analytics Solutions, a $34 million increase in Research & Development Solutions and a $5 million increase in Contract Sales & Medical Solutions.

See Part I—Item 2—“Recent Developments" in this Quarterly Report on Form 10-Q for a discussion of the impact from COVID-19 on first quarter business activity.

For the second quarter of 2020, our revenues decreased $219 million, or 8.0%, as compared to the same period in 2019.

This decrease was comprised of constant currency revenue decline of approximately $194 million, or 7.1%.

The constant currency revenue decline was comprised of a $191 million decrease in Research & Development Solutions and a $25 million decrease in Contract Sales & Medical Solutions, offset by a $22 million increase in Technology & Analytics Solutions.

Six Months Ended June 30, Change

(in millions)

$ 5,275 $ 5,424 $ (149) (2.7) %

For the first six months of 2020, our revenues decreased $149 million, or 2.7%, as compared to the same period in 2019.

This decrease was comprised of constant currency revenue decline of approximately $96 million, or 1.8%.

The constant currency revenue decline was comprised of a $157 million decrease in Research & Development Solutions and a $20 million decrease in Contract Sales & Medical Solutions, offset by a $81 million increase in Technology & Analytics Solutions .

See Part I—Item 2—“Recent Developments" in this Quarterly Report on Form 10-Q for a discussion of the impact from COVID-19 on our business activity.

Costs of Revenue, exclusive of Depreciation and Amortization

Three Months Ended March 31,

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

(in millions)

2020 2019 2020 2019

Costs of revenue, exclusive of depreciation and amortization

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67.6 % 65.7 % 66.9 % 65.4 %

The $76 million increase in costs of revenues, exclusive of depreciation and amortization, for the three months ended March 31, 2020 as compared to the same period in 2019 included a constant currency increase of approximately $104 million, or 5.9%.

The constant currency increase consisted of a $41 million increase in Technology & Analytics Solutions, a $61 million increase in Research & Development Solutions and a $2 million increase in Contract Sales & Medical Solutions.

Table of co ntents

The $95 million decrease in costs of revenues, exclusive of depreciation and amortization, for the three months ended June 30, 2020 as compared to the same period in 2019 included a constant currency decrease of approximately $61 million, or 3.4%.

The constant currency decrease consisted of a $52 million decrease in Research & Development Solutions and a $19 million decrease in Contract Sales & Medical Solutions, offset by a $10 million increase in Technology & Analytics Solutions .

The $19 million decrease in costs of revenues, exclusive of depreciation and amortization, for the six months ended June 30, 2020 as compared to the same period in 2019 included a constant currency increase of approximately $43 million, or 1.2%.

The constant currency increase consisted of a $51 million increase in Technology & Analytics Solutions and a $9 million increase in Research & Development Solutions offset by a $17 million decrease in Contract Sales & Medical Solutions.

Selling, General and Administrative Expenses

Three Months Ended March 31,

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

(in millions)

2020 2019 2020 2019

Selling, general and administrative expenses

$ 431 $ 436 $ 838 $ 855

% of revenues

17.1 % 15.9 % 15.9 % 15.8 %

The $12 million decrease in selling, general and administrative expenses for the three months ended March 31, 2020 as compared to the same period in 2019 included a constant currency decline of approximately $7 million, or 1.7%.

The constant currency decline primarily consisted of a $14 million decrease in general corporate and unallocated expenses, offset by a $1 million increase in Technology & Analytics Solutions, and a $6 million increase in Research & Development Solutions.

The $5 million decrease in selling, general and administrative expenses for the three months ended June 30, 2020 as compared to the same period in 2019 included a constant currency increase of approximately $5 million, or 1.1%.

The constant currency increase primarily consisted of a $7 million increase in general corporate and unallocated expenses and a $2 million increase in Research & Development Solutions, offset by a $4 million decrease in Technology & Analytics Solutions.

The $17 million decrease in selling, general and administrative expenses for the six months ended June 30, 2020 as compared to the same period in 2019 included a constant currency decrease of approximately $2 million, or 0.2 %.

The constant currency decrease primarily consisted of a $7 million decrease in general corporate and unallocated expenses, a $3 million decrease in Technology & Analytics Solutions, offset by a $8 million increase in Research & Development Solutions.

Depreciation and Amortization

Three Months Ended March 31,

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

(in millions)

2020 2019 2020 2019

Depreciation and amortization 308 294 624 589

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12.2 % 10.7 % 11.8 % 10.9 %

The $21 million increase in depreciation and amortization in the three months ended March 31, 2020 as compared to the same periods in 2019 was primarily due to higher intangible asset balances as a result of acquisitions occurring in 2019, increased amortization due to higher capitalized software balances, and accelerated depreciation on an internal-use software asset.

The $14 million and $35 million increases in depreciation and amortization in the three and six months ended June 30, 2020, respectively, as compared to the same periods in 2019 was primarily due to higher intangible asset balances as a result of acquisitions occurring in 2019, increased amortization due to higher capitalized software balances, and accelerated depreciation on an internal-use software asset in the first quarter of 2020.

Restructuring Costs

Three Months Ended March 31,

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

(in millions) 2020 2019 2020 2019

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Interest Income and Interest Expense

Three Months Ended March 31,

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

(in millions) 2020 2019 2020 2019

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

Interest expense during the three months ended March 31, 2020 was lower than the same periods in 2019 due to lower interest rates attributed to lower LIBOR rates and the redemption of the $800 million of 4.875% senior notes due 2023, partially offset by an increase in the average debt outstanding.

Other Expense (Income), Net

Three Months Ended March 31,

Interest expense during the three and six months ended June 30, 2020 was lower than the same periods in 2019 due to lower interest rates attributed to lower LIBOR rates and the redemption of the $800 million of 4.875% senior notes due 2023, partially offset by an increase in the average debt outstanding.

Loss on Extinguishment of Debt

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

(in millions) 2020 2019 2020 2019

Other income, net $ ( 13 ) $ ( 7 )

Other income, net for the three months ended March 31, 2020 increased as compared to the same periods in the prior year, primarily due to foreign currency gain, partially offset by loss on investments in mutual funds.

Table of co ntents

Loss on extinguishment of debt $ 12 $ — $ 12 $ —

During the second quarter of 2020, we recognized loss on extinguishment of debt for fees and expenses incurred related to the refinancing of our 3.500 % senior notes due 2024.

Other (Income) Expense , Net

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

(in millions) 2020 2019 2020 2019

Other (income) expense, net $ ( 32 ) $ 7 $ ( 45 ) $ —

Other income, net for the three and six months ended June 30, 2020 increased as compared to the same periods in the prior year, primarily due to a decrease in fair value of acquisition-related contingent consideration, mark-to-market gains on equity securities, a decrease in foreign currency losses, and a gain on investments in mutual funds.

Income Tax Expense

Three Months Ended March 31,

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

(in millions) 2020 2019 2020 2019

Income tax expense $ ( 5 ) $ 8 $ 12 $ 49

Our effective income tax rate was 16.7 % and 37.6 % in the first quarter of 2020 and 2019, respectively.

Our income tax expense in the first quarter of 2020 and 2019 was favorably impacted by $21 million and $9.4 million, respectively, as a result of excess tax benefits on share-based compensation awards.

Also, our effective income tax rate in the first quarter of 2020 was unfavorably impacted by a $10 million discrete tax expense related to change in the measurement of the U.S.

Our effective income tax rate was 20.0 % and 10.3 % in the second quarter of 2020 and 2019, respectively, and 15.6 % and 26.2 % in the first six months of 2020 and 2019, respectively.

Our effective income tax rate in the second quarter and first six months of 2020 and 2019 was favorably impacted as a result of excess tax benefits recognized upon settlement of share-based compensation awards.

For the second quarter of 2020 and 2019, this impact was $ 5 million and $ 8 million, respectively, and for the first six months of 2020 and 2019, this impact was $ 26 million and $ 17 million, respectively.

Also, our effective income tax rate in the first six months of 2020 was unfavorably impacted by a $10 million discrete tax expense related to a change in the measurement of the U.S.

tax on undistributed foreign earnings.

In the first quarter of 2019 the U.S.

In the first six months of 2019, the U.S.

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

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

Although the proposed guidance for FDII is not authoritative and subject to change in the regulatory review process, we reversed a portion of the tax benefit recorded in 2019 by recording a tax expense of $20 million for this impact.

It is expected that during 2020 the U.S.

Treasury Department will issue final regulations on FDII.

Although the proposed guidance for FDII was not authoritative and subject to change in the regulatory review process, we reversed a portion of the tax benefit recorded in 2019 by recording a tax expense of $20 million for this impact.

In July of 2020, the U.S.

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

We are in the process of reviewing these regulations to determine if there will be an impact on the effective income tax rate in the subsequent period.

Equity in Earnings of Unconsolidated Affiliates

Three Months Ended March 31,

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

(in millions) 2020 2019 2020 2019

Equity in earnings (loss) of unconsolidated affiliates $ 6 $ ( 1 )

Equity in earnings of unconsolidated affiliates for the three months ended March 31, 2020 increased as compared to the same periods in the prior year, primarily related to higher earnings from our investment in NovaQuest Pharma Opportunities Fund III.

Equity in (loss) earnings of unconsolidated affiliates $ ( 1 ) $ 1 $ 5 $ —

Equity in earnings of unconsolidated affiliates for the three months ended June 30, 2020 decreased as compared to the same period in the prior year, primarily related to losses from our investment in unconsolidated affiliates.

Equity in earnings of unconsolidated affiliates for the six months ended June 30, 2020 increased as compared to the same period in the prior year, primarily related to higher earnings from our investment in NovaQuest Pharma Opportunities Fund III.

Net Income Attributable to Non-controlling Interests

Three Months Ended March 31,

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

(in millions) 2020 2019 2020 2019

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

Three Months Ended March 31, 2020 and 2019

Three Months Ended June 30, 2020 and 2019

Segment Revenues Segment Profit

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Consolidated $ 2,521 $ 2,740 $ 62 $ 197

Six Months Ended June 30, 2020 and 2019

Segment Revenues Segment Profit

(in millions) 2020 2019 2020 2019

Technology & Analytics Solutions $ 2,226 $ 2,177 $ 544 $ 516

Research & Development Solutions 2,676 2,851 430 577

Contract Sales & Medical Solutions 373 396 22 25

Total 5,275 5,424 996 1,118

General corporate and unallocated ( 87 ) ( 96 )

Depreciation and amortization ( 624 ) ( 589 )

Restructuring costs ( 30 ) ( 26 )

Consolidated $ 5,275 $ 5,424 $ 255 $ 407

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

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

Table of co ntents

Technology & Analytics Solutions

Three Months Ended March 31, Change

Three Months Ended June 30, Change

(in millions) 2020 2019 $ %

3 unchanged sentences

Segment profit $ 276 $ 258 $ 18 7.0

Technology & Analytics Solutions’ revenues were $ 1,117 million for the first quarter of 2020, an increase of $42 million, or 3.9%, over the same period in 2019.

Six Months Ended June 30, Change

(in millions) 2020 2019 $ %

Revenues $ 2,226 $ 2,177 $ 49 2.3

Costs of revenue, exclusive of depreciation and amortization 1,321 1,289 32 2.5

Selling, general and administrative 361 372 (11) (3.0)

Segment profit $ 544 $ 516 $ 28 5.4

Technology & Analytics Solutions’ revenues were $ 1,109 million for the second quarter of 2020, a increase of $7 million, or 0.6%, over the same period in 2019.

This increase was comprised of constant currency revenue growth of approximately $22 million, or 2.0%.

The constant currency growth for the three months ended March 31, 2020 resulted primarily from revenue growth in the Americas region as well as the Europe and Africa region.

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

See Part I—Item 2—“Recent Developments" in this Quarterly Report on Form 10-Q for a discussion of the impact from COVID-19 on first quarter Technology & Analytics Solutions business activity.

Technology & Analytics Solutions’ revenues were $ 2,226 million for the first six months of 2020, an increase of $49 million, or 2.3%, over the same period in 2019.

This increase was comprised of constant currency revenue growth of approximately $81 million, or 3.7%.

The constant currency growth for the three and six months ended June 30, 2020 resulted primarily from revenue growth in the Europe and Africa region.

The revenue growth in this region was driven by higher real-world and analytical services.

See Part I—Item 2—“Recent Developments" in this Quarterly Report on Form 10-Q for a discussion of the impact from COVID-19 on Technology & Analytics Solutions business activity.

Costs of Revenue, exclusive of Depreciation and Amortization

Technology & Analytics Solutions’ costs of revenue increased $33 million, or 5.2%, in the first quarter of 2020 over the same period in 2019.

Technology & Analytics Solutions’ costs of revenue decreased $1 million, or 0.2%, in the second quarter of 2020 over the same period in 2019.

This decrease included a constant currency increase of approximately $10 million, or 1.5%.

Technology & Analytics Solutions’ costs of revenue increased $32 million, or 2.5%, in the first six months of 2020 over the same period in 2019.

This increase included a constant currency increase of approximately $51 million, or 4.0%.

The constant currency increase for the three ended March 31, 2020 was primarily due to an increase in compensation and related expenses to support revenue growth.

The constant currency increase for the three and six months ended June 30, 2020 was primarily due to an increase in compensation and related expenses to support revenue growth.

Selling, General and Administrative Expenses

Technology & Analytics Solutions’ selling, general and administrative expenses decreased $(1) million, or (0.5)%, in the first quarter of 2020 as compared to the same period in 2019, which included a positive impact of approximately $2 million from the effects of foreign currency fluctuations.

The constant currency decrease for the three months ended March 31, 2020 was primarily related to cost saving initiatives.

Technology & Analytics Solutions’ selling, general and administrative expenses decreased $10 million, or 5.3%, in the second quarter of 2020 as compared to the same period in 2019, which included a constant currency decrease of approximately $4 million, or 2.1%.

Technology & Analytics Solutions’ selling, general and administrative expenses decreased $11 million, or 3.0%, in the first six months of 2020 as compared to the same period in 2019, which included a constant currency decrease of approximately $3 million, or 0.8%.

The constant currency decrease for the three and six months ended June 30, 2020 was primarily related to cost saving initiatives.

Research & Development Solutions

Three Months Ended March 31, Change

Three Months Ended June 30, Change

(in millions)

6 unchanged sentences

$ 162 $ 288 $ (126) (43.8) %

Research & Development Solutions’ contracted backlog increased from $19.0 billion at December 31, 2019 to $19.6 billion at March 31, 2020 and we expect approximately $4.9 billion of this backlog to convert to revenue in the next twelve months.

Table of co ntents

Research & Development Solutions’ revenues were $ 1,441 million in the first quarter of 2020, an increase of $25 million, or 1.8%, over the same period in 2019.

This increase was comprised of constant currency revenue growth of approximately $34 million, or 2.4%.

The constant currency growth for the three months ended March 31, 2020 primarily included volume-related increases in clinical services, data management, global functional resourcing and lab testing.

See Part I—Item 2—“Recent Developments" in this Quarterly Report on Form 10-Q for a discussion of the impact from COVID-19 on first quarter Research & Development Solutions business activity.

Six Months Ended June 30, Change

(in millions)

$ 2,676 $ 2,851 $ (175) (6.1) %

Costs of revenue, exclusive of depreciation and amortization

Research & Development Solutions’ costs of revenue increased $42 million, or 4.4%, in the first quarter of 2020 over the same period in 2019.

This increase included a constant currency increase of approximately $61 million, or 6.4%.

The constant currency increase for the three months ended March 31, 2020 was primarily related to an increase in compensation and related expenses to support revenue growth.

1,886 1,917 (31) (1.6) %

Selling, general and administrative expenses

Research & Development Solutions’ selling, general and administrative expenses increased $4 million, or 2.2%, in the first quarter of 2020 as compared to the same period in 2019, which includes a constant currency increase of approximately $6 million, or 3.3%.

The constant currency increase for the three months ended March 31, 2020 was primarily related to an increase in compensation and related expenses from higher headcount to support growth.

360 357 3 0.8 %

Segment profit

$ 430 $ 577 $ (147) (25.5) %

Research & Development Solutions’ contracted backlog increased from $19.0 billion at December 31, 2019 to $20.5 billion at June 30, 2020 and we expect approximately $5.4 billion of this backlog to convert to revenue in the next twelve months.

Research & Development Solutions’ revenues were $ 1,235 million in the second quarter of 2020, a decrease of $200 million, or 13.9%, over the same period in 2019.

This decrease was comprised of constant currency revenue decline of approximately $191 million, or 13.3%.

Research & Development Solutions’ revenues were $ 2,676 million in the first six months of 2020, a decrease of $175 million, or 6.1%, over the same period in 2019.

This decrease was comprised of constant currency revenue decline of approximately $157 million, or 5.5%.

The constant currency decline for the three and six months ended June 30, 2020 primarily included volume-related decreases in clinical services and lab testing.

See Part I—Item 2—“Recent Developments" in this Quarterly Report on Form 10-Q for a discussion of the impact from COVID-19 on Research & Development Solutions business activity.

Costs of Revenue, exclusive of Depreciation and Amortization

Research & Development Solutions’ costs of revenue decreased $73 million, or 7.5%, in the second quarter of 2020 over the same period in 2019.

This decrease included a constant currency decrease of approximately $52 million, or 5.4%.

The constant currency decrease for the three months ended June 30, 2020 was primarily due to a decrease in compensation and related expenses as a result of reduced volume in clinical services and lab testing.

Research & Development Solutions’ costs of revenue decreased $31 million, or 1.6%, in the first six months of 2020 over the same period in 2019.

This decrease included a constant currency increase of approximately $9 million, or 0.5%.

The constant currency increase for the six months ended June 30, 2020 was primarily related to an increase in compensation and related expenses.

Selling, General and Administrative Expenses

Research & Development Solutions’ selling, general and administrative expenses remained flat, in the second quarter of 2020 as compared to the same period in 2019, which included a constant currency increase of approximately $2 million, or 1.1%.

Research & Development Solutions’ selling, general and administrative expenses increased $3 million, or 0.8%, in the first six months of 2020 as compared to the same period in 2019, which included a constant currency increase of approximately $8 million, or 2.2%.

The constant currency increase for the three and six months ended June 30, 2020 was primarily related to an increase in compensation and related expenses.

Contract Sales & Medical Solutions

Three Months Ended Three Months Ended March 31, Change

Three Months Ended June 30, Change

(in millions)

5 unchanged sentences

$ 11 $ 16 $ (5) (31.3) %

Contract Sales & Medical Solutions’ revenues were $ 196 million in the first quarter of 2020, an increase of $3 million, or 1.6%, over the same period in 2019.

This increase includes a constant currency revenue increase of approximately $5 million, or 2.6%.

The constant currency increase for the three months ended March 31, 2020 was largely due to volume increases in the Asia-Pacific region.

See Part I—Item 2—“Recent Developments" in this Quarterly Report on Form 10-Q for a discussion of the impact from COVID-19 on first quarter Contract Sales & Medical Solutions business activity.

Six Months Ended June 30, Change

(in millions)

Revenues $ 373 $ 396 $ (23) (5.8) %

Costs of revenue, exclusive of depreciation and amortization

Contract Sales & Medical Solutions’ costs of revenue increased $1 million, or 0.6%, in the first quarter of 2020 as compared to the same period in 2019.

This increase included a constant currency increase of approximately $2 million, or 1.2%.

The constant currency increase for the three months ended March 31, 2020 was due to an increase in compensation and related expenses to support revenue growth.

321 341 (20) (5.9) %

Selling, general and administrative expenses 30 30 — — %

Contract Sales & Medical Solutions’ selling, general and administrative expenses remained flat in the first quarter of 2020 as compared to the same period in 2019.

Table of co ntents

Segment profit $ 22 $ 25 $ (3) (12.0) %

Contract Sales & Medical Solutions’ revenues were $ 177 million in the second quarter of 2020, a decrease of $26 million, or 12.8%, over the same period in 2019.

This decrease included a constant currency revenue decline of approximately $25 million, or 12.3%.

Contract Sales & Medical Solutions’ revenues were $ 373 million in the first six months of 2020, a decrease of $23 million, or 5.8%, over the same period in 2019.

This decrease included a constant currency revenue decline of approximately $20 million, or 5.1%.

The constant currency decline for three and six months ended June 30, 2020 was largely due to a volume decrease in the Americas region, partially offset by a volume increase in the Asia-Pacific regions.

See Part I—Item 2—“Recent Developments" in this Quarterly Report on Form 10-Q for a discussion of the impact from COVID-19 on Contract Sales & Medical Solutions business activity.

Costs of Revenue, exclusive of Depreciation and Amortization

Contract Sales & Medical Solutions’ costs of revenue decreased $21 million, or 12.2%, in the second quarter of 2020 as compared to the same period in 2019.

This decrease included a constant currency decrease of approximately $19 million, or 11.0%.

Contract Sales & Medical Solutions’ costs of revenue decreased $20 million, or 5.9%, in the first six months of 2020 as compared to the same period in 2019.

This decrease included a constant currency decline of approximately $17 million, or 5.0%.

The constant currency decrease for the three and six months ended June 30, 2020 was due to a decrease in compensation and related expenses as a result of reduced volume in the Americas region.

Selling, General and Administrative Expenses

Contract Sales & Medical Solutions’ selling, general and administrative expenses remained flat for the three and six months ended June 30, 2020 as compared to the same period in 2019.

Liquidity and Capital Resources

8 unchanged sentences

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

We had a cash balance of $927 million at March 31, 2020 ($342 million of which was in the United States), an increase from $837 million at December 31, 2019.

We had a cash balance of $1,109 million at June 30, 2020 ($501 million of which was in the United States), an increase from $837 million at December 31, 2019.

We also had $1.5 billion of additional available borrowings under our revolving credit facility at June 30, 2020.

Based on our current operating plan, and after considering the likely future impacts of COVID-19, we believe that our available cash and cash equivalents, future cash flows from operations and our ability to access funds under our revolving and other credit facilities will enable us to fund our operating requirements and capital expenditures and meet debt obligations for at least the next 12 months.

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Equity Repurchase Program

During the three months ended March 31, 2020, we repurchased 2,106,403 shares of our common stock for approximately $321.4 million under the Repurchase Program.

Since the COVID-19 outbreak became a pandemic in March, the company temporarily suspended share repurchase activity.

During the six months ended June 30, 2020, we repurchased 2,106,403 shares of our common stock for approximately $321.4 million under the Repurchase Program.

These amounts include 1,000,000 shares of our common stock repurchased from certain Selling Stockholders in a private transaction for an aggregate purchase price of approximately $164.3 million.

See Note 9 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details regarding the Repurchase Program.

As of March 31, 2020, we have remaining authorization to repurchase up to approximately $1.0 billion of our common stock under the Repurchase Program.

As of June 30, 2020, we have remaining authorization to repurchase up to approximately $1.0 billion of our common stock under the Repurchase Program.

In addition, from time to time, we have repurchased and may continue to repurchase common stock through private or other transactions outside of the Repurchase Program.

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The proceeds from the additional term A loans were used to repay outstanding revolving credit loans under our senior secured credit facilities.

On March 30, 2020, we prepaid $100 million of the additional term A loans.

On March 30, 2020, we prepaid $100 million of the additional

term A loans.

See Note 8 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details regarding our credit arrangements.

Table of co ntents

As of March 31, 2020, we had $12.1 billion of total indebtedness, excluding $1.4 billion of additional available borrowings under our revolving credit facility.

Our long-term debt arrangements contain customary restrictive covenants and, as of March 31, 2020, we believe we were in compliance with our restrictive covenants in all material respects.

On June 24, 2020, we completed the issuance and sale of €711,000,000 in gross proceeds of the Issuer’s 2.875% senior notes due 2028 (the “2.875% Notes”).

The proceeds from the 2.875% Notes offering were used to redeem all of the Issuer’s outstanding 3.500% senior notes due 2024 (the “3.500% Notes”), including the payment of premiums in respect thereof, to repay a portion of the existing borrowings under the Issuer’s revolving credit facility and to pay fees and expenses related to the Notes offering.

See Note 8 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details regarding our credit arrangements.

As of June 30, 2020, we had $12.2 billion of total indebtedness, excluding $1.5 billion of additional available borrowings under our revolving credit facility.

Our long-term debt arrangements contain customary restrictive covenants and, as of June 30, 2020, we believe we were in compliance with our restrictive covenants in all material respects.

We do not have material uncertainty about ongoing ability to meet the covenants of our credit arrangements.

Three months ended March 31, 2020 and 2019

Six months ended June 30, 2020 and 2019

Cash Flow from Operating Activities

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2020 2019

Net cash provided by operating activities $ 635 $ 504

Cash provided by operating activities increased $50 million during the first three months of 2020 as compared to the same period in 2019.

The increase is primarily due to higher receipts associated with loyalty card programs we administer on behalf of our clients and normal fluctuations in accounts payable.

Cash provided by operating activities increased $131 million during the first six months of 2020 as compared to the same period in 2019.

The increase was primarily due to an increase in cash collections from clients and the impact of COVID-19 resulting in a decrease in accounts receivable and unbilled services compared to an increase in the prior period ($260 million), partially offset by lower cash-related net income ($105 million).

Cash Flow from Investing Activities

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2020 2019

Net cash used in investing activities $ (369) $ (510)

Cash used in investing activities decreased $165 million during the first three months of 2020 as compared to the same period in 2019.

This decrease was comprised primarily of lower cash used for the acquisition of businesses, net of cash acquired ($160 million).

Cash used in investing activities decreased $141 million during the first six months of 2020 as compared to the same period in 2019.

This decrease was primarily driven by lower cash used for the acquisition of businesses, net of cash acquired ($109 million).

Cash Flow from Financing Activities

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2020 2019

Net cash provided by financing activities $ 34 $ 28

Cash provided by financing activities decreased $121 million during the first three months of 2020 as compared to the same period in 2019.

The decrease in cash provided by financing activities was primarily due to an increase in cash used in repayment of revolving credit facility, net of proceeds ($665 million), an increase in cash used to repurchase common stock ($200 million) and less cash from employee stock option plans ($50 million) partially offset by an increase in cash provided by proceeds from debt issuances, net of repayments ($789 million).

Cash provided by financing activities increased $6 million during the first six months of 2020 as compared to the same period in 2019.

The increase in cash provided by financing activities was primarily due to an increase in cash provided by proceeds from revolving credit facilities, net of repayments ($260 million), and a decrease in cash used to repurchase common stock ($35 million), offset by a decrease in cash provided by proceeds from debt issuances, net of repayments and debt issuance costs ($237 million) and less cash from employee stock option plans ($53 million).

Off-Balance Sheet Arrangements

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We have various contractual obligations, which are recorded as liabilities in our consolidated financial statements.

With the exception of new senior secured credit facilities disclosed in Note 8 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our 2019 Form 10-K.

With the exception of new senior secured credit facilities and senior note disclosed in Note 8 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our 2019 Form 10-K.

Application of Critical Accounting Policies

There have been no material changes to our critical accounting policies as previously disclosed in our 2019 Form 10-K.

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Quantitative and Qualitative Disclosures About Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis