IQVIA HOLDINGS INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Statement for Forward-Looking Information You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (our “2019 Form 10-K”). In addition to historical condensed consolidated financial information, the following discussion contains or incorporates by reference forward-looking statements within the meaning of the federal securities laws that are not historical facts but reflect, among other things, our current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such. Without limiting the foregoing, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “forecasts,” “projects,” “should,” “targets,” “will” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. We assume no obligation to update any such forward-looking information to reflect actual results or changes in our outlook or the factors affecting such forward-looking information. We caution you that any such forward-looking statements are further qualified by important factors that could cause our actual operating results to differ materially from those in the forward-looking statements, including without limitation, business disruptions caused by natural disasters, pandemics such as the COVID-19 (coronavirus) outbreak or international conflict or other disruptions outside of our control; our ability to accurately model or forecast the impact of the spread and/or containment of COVID-19, among other sources of business interruption, on our operations and financial results; most of our contracts may be terminated on short notice, and we may lose or experience delays with large client contracts or be unable to enter into new contracts; the market for our services may not grow as we expect; we may be unable to successfully develop and market new services or enter new markets; imposition of restrictions on our use of data by data suppliers or their refusal to license data to us; any failure by us to comply with contractual, regulatory or ethical requirements under our contracts, including current or changes to data protection and privacy laws; breaches or misuse of our or our outsourcing partners’ security or communications systems; failure to meet our productivity or business transformation objectives; failure to successfully invest in growth opportunities; our ability to protect our intellectual property rights and our susceptibility to claims by others that we are infringing on their intellectual property rights; the expiration or inability to acquire third party licenses for technology or intellectual property; any failure by us to accurately and timely price and formulate cost estimates for contracts, or to document change orders; hardware and software failures, delays in the operation of our computer and communications systems or the failure to implement system enhancements; the rate at which our backlog converts to revenue; our ability to acquire, develop and implement technology necessary for our business; consolidation in the industries in which our clients operate; risks related to client or therapeutic concentration; government regulators or our customers may limit the scope of prescription or withdraw products from the market, and government regulators may impose new regulatory requirements or may adopt new regulations affecting the biopharmaceutical industry; the risks associated with operating on a global basis, including currency or exchange rate fluctuations and legal compliance, including anti-corruption laws; risks related to changes in accounting standards; general economic conditions in the markets in which we operate, including financial market conditions and risks related to sales to government entities; the impact of changes in tax laws and regulations; and our ability to successfully integrate, and achieve expected benefits from, our acquired businesses. For a further discussion of the risks relating to our business, see Part I—Item 1A—“Risk Factors” in our 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”). Overview IQVIA Holdings Inc. (“IQVIA,” the “Company,” “we,” “our” and/or “us”) is a is a leading global provider of advanced analytics, technology solutions and contract research services to the life sciences industry. IQVIA applies human data science – leveraging the analytic rigor and clarity of data science to the ever-expanding scope of human science – to enable companies to reimagine and develop new approaches to clinical development and commercialization, speed innovation, and accelerate improvements in healthcare outcomes. Powered by the IQVIA CORE™, we deliver unique and actionable insights at the intersection of large scale analytics, transformative technology and extensive domain expertise as well as execution capabilities. With approximately 67,000 employees, we conduct operations in more than 100 countries. 22 Table of contents We manage our business through three reportable segments, Technology & Analytics Solutions, Research & Development Solutions and Contract Sales & Medical Solutions. Technology & Analytics Solutions provides critical information, technology solutions and real-world insights and services to our life science customers. Research & Development Solutions, which primarily serves biopharmaceutical customers, is engaged in research and development and provides clinical research and clinical trial services. Contract Sales & Medical Solutions provides contract sales to both biopharmaceutical customers and the broader healthcare market. Recent Developments 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 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. We have accelerated and expanded a variety of cost containment actions to reduce the impact to profitability. We have activated business continuity plans, including remote delivery capabilities in technology and analytics, remote monitoring and virtual trials in Research & Development Solutions and virtual commercial activity with clients wherever possible. We anticipate an acceleration of business momentum when the crisis subsides as delayed trial activities will still need to be performed. The Company continues to maintain strong liquidity. We do not expect COVID-19 to have a significant impact on our overall liquidity position and outlook. 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 Total revenues are comprised of revenues from the provision of our services. We do not have material product revenues. 23 Table of contents Costs and Expenses Our costs and expenses are comprised primarily of our costs of revenue, which include reimbursed expenses, and selling, general and administrative expenses. Costs of revenue include compensation and benefits for billable employees and personnel involved in production, data management and delivery, and the costs of acquiring and processing data for our information offerings; costs of staff directly involved with delivering technology-related services offerings and engagements, related accommodations and the costs of data purchased specifically for technology services engagements; costs related to facilities; costs related to training and expenses for information technology (“IT”), reimbursed expenses that are comprised principally of payments to investigators who oversee clinical trials and travel expenses for our clinical monitors and sales representatives; and other expenses directly related to service contracts such as courier fees, laboratory supplies, professional services and travel expenses. Selling, general and administrative expenses include costs related to sales, marketing, and administrative functions (including human resources, legal, finance and general management) for compensation and benefits, travel, professional services, facilities and training and expenses for IT. Foreign Currency Translation 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. The revenue and expenses of our foreign operations are generally denominated in local currencies and translated into United States dollars for financial reporting purposes. Accordingly, exchange rate fluctuations will affect the translation of foreign results into United States dollars for purposes of reporting our condensed consolidated results. As a result, we believe that reporting results of operations that exclude the effects of foreign currency rate fluctuations on certain financial results can facilitate analysis of period-to-period comparisons. This constant currency information assumes the same foreign currency exchange rates that were in effect for the comparable prior-year period were used in translation of the current period results. Consolidated Results of Operations For information regarding our results of operations for Technology & Analytics Solutions, Research & Development Solutions and Contract Sales & Medical Solutions, refer to “Segment Results of Operations” later in this section. Revenues Three Months Ended June 30, Change (in millions) 2020 2019 $ % Revenues $ 2,521 $ 2,740 $ (219) (8.0) % 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) 2020 2019 $ % Revenues $ 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. 24 Table of contents Costs of Revenue, exclusive of Depreciation and Amortization Three Months Ended June 30, Six Months Ended June 30, (in millions) 2020 2019 2020 2019 Costs of revenue, exclusive of depreciation and amortization $ 1,704 $ 1,799 $ 3,528 $ 3,547 % of revenues 67.6 % 65.7 % 66.9 % 65.4 % 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 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 $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 June 30, Six Months Ended June 30, (in millions) 2020 2019 2020 2019 Depreciation and amortization 308 294 624 589 % of revenues 12.2 % 10.7 % 11.8 % 10.9 % 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 June 30, Six Months Ended June 30, (in millions) 2020 2019 2020 2019 Restructuring costs $ 16 $ 14 $ 30 $ 26 The restructuring costs incurred during 2020 were due to ongoing efforts to streamline our global operations. The remaining actions under these plans are expected to occur throughout 2020 and into 2021 and are expected to consist of consolidating functional activities, eliminating redundant positions, and aligning resources with customer requirements. 25 Table of contents Interest Income and Interest Expense Three Months Ended June 30, Six Months Ended June 30, (in millions) 2020 2019 2020 2019 Interest income $ ( 1 ) $ ( 2 ) $ ( 3 ) $ ( 4 ) Interest expense $ 108 $ 114 $ 214 $ 224 Interest income includes interest received primarily from bank balances and investments. 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 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 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 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 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 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. 26 Table of contents Equity in Earnings of Unconsolidated Affiliates Three Months Ended June 30, Six Months Ended June 30, (in millions) 2020 2019 2020 2019 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 June 30, Six Months Ended June 30, (in millions) 2020 2019 2020 2019 Net income attributable to non-controlling interests $ ( 2 ) $ ( 11 ) $ ( 11 ) $ ( 20 ) Net income attributable to non-controlling interests primarily included Quest Diagnostics Incorporated’s interest in Q 2 Solutions. Segment Results of Operations The Company’s revenues and profit by segment are as follows: Three Months Ended June 30, 2020 and 2019 Segment Revenues Segment Profit (in millions) 2020 2019 2020 2019 Technology & Analytics Solutions $ 1,109 $ 1,102 $ 276 $ 258 Research & Development Solutions 1,235 1,435 162 288 Contract Sales & Medical Solutions 177 203 11 16 Total 2,521 2,740 449 562 General corporate and unallocated ( 63 ) ( 57 ) Depreciation and amortization ( 308 ) ( 294 ) Restructuring costs ( 16 ) ( 14 ) 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. These costs primarily consist of stock-based compensation and expenses related to integration activities and acquisitions. We also do not allocate depreciation and amortization or impairment charges to our segments. 27 Table of contents Technology & Analytics Solutions Three Months Ended June 30, Change (in millions) 2020 2019 $ % Revenues $ 1,109 $ 1,102 $ 7 0.6 Costs of revenue, exclusive of depreciation and amortization 655 656 (1) (0.2) Selling, general and administrative 178 188 (10) (5.3) Segment profit $ 276 $ 258 $ 18 7.0 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 Revenues 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%. 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 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 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 $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. 28 Table of contents Research & Development Solutions Three Months Ended June 30, Change (in millions) 2020 2019 $ % Revenues $ 1,235 $ 1,435 $ (200) (13.9) % Costs of revenue, exclusive of depreciation and amortization 898 971 (73) (7.5) % Selling, general and administrative expenses 175 176 (1) (0.6) % Segment profit $ 162 $ 288 $ (126) (43.8) % Six Months Ended June 30, Change (in millions) 2020 2019 $ % Revenues $ 2,676 $ 2,851 $ (175) (6.1) % Costs of revenue, exclusive of depreciation and amortization 1,886 1,917 (31) (1.6) % Selling, general and administrative expenses 360 357 3 0.8 % Segment profit $ 430 $ 577 $ (147) (25.5) % Backlog 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. Revenues 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%. 29 Table of contents 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 June 30, Change (in millions) 2020 2019 $ % Revenues $ 177 $ 203 $ (26) (12.8) % Costs of revenue, exclusive of depreciation and amortization 151 172 (21) (12.2) % Selling, general and administrative expenses 15 15 — — Segment profit $ 11 $ 16 $ (5) (31.3) % Six Months Ended June 30, Change (in millions) 2020 2019 $ % Revenues $ 373 $ 396 $ (23) (5.8) % Costs of revenue, exclusive of depreciation and amortization 321 341 (20) (5.9) % Selling, general and administrative expenses 30 30 — — % Segment profit $ 22 $ 25 $ (3) (12.0) % Revenues 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. 30 Table of contents Liquidity and Capital Resources Overview We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source of liquidity is operating cash flows. In addition to operating cash flows, other significant factors that affect our overall management of liquidity include: capital expenditures, acquisitions, investments, debt service requirements, dividends, equity repurchases, adequacy of our revolving and other credit facilities and access to the capital markets. We do not expect to have a significant impact on our overall liquidity position and outlook as a result of COVID-19. We manage our worldwide cash requirements by monitoring the funds available among our subsidiaries and determining the extent to which those funds can be accessed on a cost-effective basis. The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences; however, those balances are generally available without legal restrictions to fund ordinary business operations. We have and expect to transfer cash from those subsidiaries to the United States and to other international subsidiaries when it is cost effective to do so. We had a cash balance of $1,109 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. We regularly evaluate our debt arrangements, as well as market conditions, and from time to time we may explore opportunities to modify our existing debt arrangements or pursue additional financing arrangements that could result in the issuance of new debt securities by us or our affiliates. We may use our existing cash, cash generated from operations or dispositions of assets or businesses and/or proceeds from any new financing arrangements or issuances of debt or equity securities to repay or reduce some of our outstanding obligations, to repurchase shares from our stockholders or for other purposes. As part of our ongoing business strategy, we also continually evaluate new acquisition, expansion and investment possibilities or other strategic growth opportunities, as well as potential dispositions of assets or businesses, as appropriate, including dispositions that may cause us to recognize a loss on certain assets. Should we elect to pursue any such transaction, we may seek to obtain debt or equity financing to facilitate those activities. Our ability to enter into any such potential transactions and our use of cash or proceeds is limited to varying degrees by the terms and restrictions contained in our existing debt arrangements. We cannot provide assurances that we will be able to complete any such financing arrangements or other transactions on favorable terms or at all. Equity Repurchase Program 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 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. Debt Senior Secured Facilities On March 11, 2020, we entered into an amendment to the Credit Agreement to borrow $900 million in additional U.S. Dollar denominated term A loans due 2023. 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 31 Table of contents 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. Senior Notes 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. Six months ended June 30, 2020 and 2019 Cash Flow from Operating Activities Six Months Ended June 30, (in millions) 2020 2019 Net cash provided by operating activities $ 635 $ 504 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 Six Months Ended June 30, (in millions) 2020 2019 Net cash used in investing activities $ (369) $ (510) 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 Six Months Ended June 30, (in millions) 2020 2019 Net cash provided by financing activities $ 34 $ 28 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 We do not have any off-balance sheet arrangements. 32 Table of contents Contractual Obligations and Commitments We have various contractual obligations, which are recorded as liabilities in our consolidated financial statements. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to our quantitative and qualitative disclosures about market risk as compared to the quantitative and qualitative disclosures about market risk described in our 2019 Form 10-K.