What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-10-22 compared with 2020-07-23 · 116 added, 116 removed, 258 unchanged (47% of the section changed)

32 unchanged sentences

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,” the “Company,” “we,” “our” and/or “us”) is a leading global provider of advanced analytics, technology solutions and clinical 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.

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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.

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 and deliver offerings that rely on face-to-face interaction or in-person gatherings.

These disruptions have impacted all three of our reportable segments.

We continue to see gradual improvement in the accessibility of clinical research sites in the Research & Development Solutions business.

We are seeing a return to on-site monitoring visits and similar to last quarter, on-site visits exceeded the number of remote visits.

In instances where sites remain physically inaccessible for clinical monitoring, remote monitoring and virtual solutions continue to be effective alternatives.

Site start-up activities have increased during the quarter along with patient recruitment trends.

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.

Within our Technology & Analytics Solutions segment, we have had very little interruption in data supply and demand.

Our analytics and consulting businesses have performed well despite business development being hampered by lack of in-person interactions.

Our Technology & Analytics solutio ns offerings that rely on face-to-face interactions or are dependent on in-person gatherings, events or conferences continue to experience 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.

Activity within the Contract Sales and Medical Solutions business continues to be 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.

3 unchanged sentences

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.

As of September 30, 2020, cash and cash equivalents were $1,464 million and the Company had no amounts drawn under its $1.5 billion revolving credit facility.

At September 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.

Based on the company's performance during the pandemic, continued robust demand for its offerings, solid liquidity, and strong free cash flow performance, the Company is lifting the temporary suspension of its share repurchase program.

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.

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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.

In the first nine 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 June 30, Change

Three Months Ended September 30, Change

(in millions)

$ 2,786 $ 2,769 $ 17 0.6 %

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%.

For the third quarter of 2020, our revenues increased $17 million, or 0.6%, as compared to the same period in 2019.

This increase was comprised of constant currency revenue decline of approximately $4 million, or 0.1%.

The constant currency revenue decline was comprised of a $75 million decrease in Research & Development Solutions and a $30 million decrease in Contract Sales & Medical Solutions, offset by a $101 million increase in Technology & Analytics Solutions.

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions)

$ 8,061 $ 8,193 $ (132) (1.6) %

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

For the first nine months of 2020, our revenues decreased $132 million, or 1.6%, as compared to the same period in 2019.

This decrease was comprised of constant currency revenue decline of approximately $100 million, or 1.2%.

2 unchanged sentences

Costs of Revenue, exclusive of Depreciation and Amortization

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

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

(in millions)

4 unchanged sentences

64.6 % 66.9 % 66.1 % 65.9 %

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 $52 million decrease in costs of revenues, exclusive of depreciation and amortization, for the three months ended September 30, 2020 as compared to the same period in 2019 included a constant currency decrease of approximately $62 million, or 3.3%.

The constant currency decrease consisted of a $82 million decrease in Research & Development Solutions and a $32 million decrease in Contract Sales & Medical Solutions, offset by a $52 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.

The $71 million decrease in costs of revenues, exclusive of depreciation and amortization, for the nine months ended September 30, 2020 as compared to the same period in 2019 included a constant currency decrease of approximately $19 million, or 0.4%.

The constant currency decrease consisted of a $73 million decrease in Research & Development Solutions, a $49 million decrease in Contract Sales & Medical Solutions, offset by a $103 million increase in Technology & Analytics Solutions.

Selling, General and Administrative Expenses

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

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

(in millions)

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16.5 % 14.3 % 16.1 % 15.3 %

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.

The $65 million increase in selling, general and administrative expenses for the three months ended September 30, 2020 as compared to the same period in 2019 included a constant currency increase of approximately $64 million, or 16.2%.

The constant currency increase primarily consisted of a $32 million increase in general corporate and unallocated expenses, a $13 million increase in Research & Development Solutions, a $20 million increase in Technology & Analytics Solutions, offset by a $1 million decrease in Contract Sales & Medical Solutions.

The $48 million increase in selling, general and administrative expenses for the nine months ended September 30, 2020 as compared to the same period in 2019 included a constant currency increase of approximately $62 million, or 5.0%.

The constant currency increase primarily consisted of a $25 million increase in general corporate and unallocated expenses, a $17 million increase in Technology & Analytics Solutions, a $21 million increase in Research & Development Solutions, offset by a $1 million decrease in Contract Sales & Medical Solutions.

Depreciation and Amortization

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

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

(in millions)

3 unchanged sentences

11.5 % 10.8 % 11.7 % 10.8 %

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.

The $20 million and $55 million increases in depreciation and amortization in the three and nine months ended September 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,

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

(in millions) 2020 2019 2020 2019

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Interest Income and Interest Expense

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

Three Months Ended September 30, Nine Months Ended September 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 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.

Interest expense during the three and nine months ended September 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,

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

(in millions) 2020 2019 2020 2019

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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,

Other Income, Net

Three Months Ended September 30, Nine Months Ended September 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.

Other income, net $ (14) $ — $ (59) $ —

Other income, net for the three months ended September 30, 2020 increased as compared to the same period in the prior year, primarily due to a gain on investments in mutual funds.

Other income, net for the nine months ended September 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,

Three Months Ended September 30, Nine Months Ended September 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.

Income tax (benefit) expense $ (3) $ (1) $ 9 $ 48

Our effective income tax rate was (2.9)% and (1.4)% in the third quarter of 2020 and 2019, respectively, and 5.0% and 18.8% in the first nine months of 2020 and 2019, respectively.

In the third quarter 2020, the U.S.

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

We have determined we will elect the GILTI high tax exception as allowed by the final regulations and will amend its 2018 and 2019 US Federal consolidated income tax returns resulting in a favorable impact of $24 million.

We recorded this impact in the third quarter of 2020.

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

For the third quarter of 2020 and 2019 this impact was $9 million and $3 million, respectively, and for the first nine months of 2020 and 2019 this impact was $35 million and $20 million, respectively.

Additionally, our effective income tax rate in the first nine months of 2020 was unfavorably impacted by a $10 million discrete tax expense related to 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”).

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

Treasury Department issued final regulations on the transition tax and proposed regulations on 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.

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 related to 2018 and recorded a tax expense of $20 million for this impact in the first nine months of 2019.

Equity in Earnings of Unconsolidated Affiliates

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

Three Months Ended September 30, Nine Months Ended September 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.

Equity in earnings (loss) of unconsolidated affiliates $ 3 $ (1) $ 8 $ (1)

Equity in earnings of unconsolidated affiliates for the three and nine months ended September 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,

Three Months Ended September 30, Nine Months Ended September 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 June 30, 2020 and 2019

Three Months Ended September 30, 2020 and 2019

Segment Revenues Segment Profit

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Consolidated $ 2,786 $ 2,769 $ 187 $ 204

Six Months Ended June 30, 2020 and 2019

Nine Months Ended September 30, 2020 and 2019

Segment Revenues Segment Profit

12 unchanged sentences

Technology & Analytics Solutions

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions) 2020 2019 $ %

3 unchanged sentences

Segment profit $ 292 $ 261 $ 31 11.9

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions) 2020 2019 $ %

3 unchanged sentences

Segment profit $ 836 $ 777 $ 59 7.6

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.

Technology & Analytics Solutions’ revenues were $ 1,207 million for the third quarter of 2020, an increase of $112 million, or 10.2%, over the same period in 2019.

This increase was comprised of constant currency revenue growth of approximately $101 million, or 9.2%.

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.

Technology & Analytics Solutions’ revenues were $ 3,433 million for the first nine months of 2020, an increase of $161 million, or 4.9%, over the same period in 2019.

This increase was comprised of constant currency revenue growth of approximately $182 million, or 5.6%.

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.

The constant currency growth for the three and nine months ended September 30, 2020 resulted primarily from revenue growth in the Americas and 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 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.

Technology & Analytics Solutions’ costs of revenue increased $60 million, or 9.0%, in the third quarter of 2020 over the same period in 2019.

This increase included a constant currency increase of approximately $52 million, or 7.8%.

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.

Technology & Analytics Solutions’ costs of revenue increased $92 million, or 4.7%, in the first nine months of 2020 over the same period in 2019.

This increase included a constant currency increase of approximately $103 million, or 5.3%.

The constant currency increase for the three and nine months ended September 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.

Technology & Analytics Solutions’ selling, general and administrative expenses increased $21 million, or 12.6%, in the third quarter of 2020 as compared to the same period in 2019, which included a constant currency increase of approximately $20 million, or 12.0%.

Technology & Analytics Solutions’ selling, general and administrative expenses increased $10 million, or 1.9%, in the first nine months of 2020 as compared to the same period in 2019, which included a constant currency increase of approximately $17 million, or 3.2%.

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

Research & Development Solutions

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions)

6 unchanged sentences

$ 291 $ 287 $ 4 1.4 %

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions)

6 unchanged sentences

$ 721 $ 864 $ (143) (16.6) %

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.

Research & Development Solutions’ contracted backlog increased from $19.0 billion at December 31, 2019 to $21.7 billion at September 30, 2020 and we expect approximately $5.8 billion of this backlog to convert to revenue in the next twelve months.

Research & Development Solutions’ revenues were $ 1,400 million in the third quarter of 2020, a decrease of $66 million, or 4.5%, over the same period in 2019.

This decrease was comprised of constant currency revenue decline of approximately $75 million, or 5.1%.

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.

Research & Development Solutions’ revenues were $ 4,076 million in the first nine months of 2020, a decrease of $241 million, or 5.6%, over the same period in 2019.

This decrease was comprised of constant currency revenue decline of approximately $232 million, or 5.4%.

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.

The constant currency decline for the three and nine months ended September 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.

Research & Development Solutions’ costs of revenue decreased $82 million, or 8.1%, in the third quarter of 2020 over the same period in 2019.

This decrease included a constant currency decrease of approximately $82 million, or 8.1%.

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.

Research & Development Solutions’ costs of revenue decreased $113 million, or 3.9%, in the first nine months of 2020 over the same period in 2019.

This decrease included a constant currency decrease of approximately $73 million, or 2.5%.

The constant currency decrease for the three and nine months ended September 30, 2020 was primarily related to a decrease in compensation and related expenses as a result of reduced volume in clinical services and lab testing impacted by COVID-19.

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.

Research & Development Solutions’ selling, general and administrative expenses increased $12 million, or 7.0%, in the third quarter of 2020 as compared to the same period in 2019, which included a constant currency increase of approximately $13 million, or 7.6%.

Research & Development Solutions’ selling, general and administrative expenses increased $15 million, or 2.8%, in the first nine months of 2020 as compared to the same period in 2019, which included a constant currency increase of approximately $21 million, or 4.0%.

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

Contract Sales & Medical Solutions

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions)

3 unchanged sentences

Selling, general and administrative expenses

14 15 (1) (6.7)

Segment profit

$ 17 $ 15 $ 2 13.3 %

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions)

4 unchanged sentences

Segment profit $ 39 $ 40 $ (1) (2.5) %

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.

Contract Sales & Medical Solutions’ revenues were $ 179 million in the third quarter of 2020, a decrease of $29 million, or 13.9%, over the same period in 2019.

This decrease included a constant currency revenue decline of approximately $30 million, or 14.4%.

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.

Contract Sales & Medical Solutions’ revenues were $ 552 million in the first nine months of 2020, a decrease of $52 million, or 8.6%, over the same period in 2019.

This decrease included a constant currency revenue decline of approximately $50 million, or 8.3%.

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.

The constant currency decline for three and nine months ended September 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.

Contract Sales & Medical Solutions’ costs of revenue decreased $30 million, or 16.9%, in the third quarter of 2020 as compared to the same period in 2019.

This decrease included a constant currency decrease of approximately $32 million, or 18.0%.

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.

Contract Sales & Medical Solutions’ costs of revenue decreased $50 million, or 9.6%, in the first nine months of 2020 as compared to the same period in 2019.

This decrease included a constant currency decline of approximately $49 million, or 9.4%.

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.

The constant currency decrease for the three and nine months ended September 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.

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

Liquidity and Capital Resources

6 unchanged sentences

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.

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.

We had a cash balance of $1,464 million at September 30, 2020 ($780 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 September 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

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.

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

Based on the Company's performance during the pandemic, continued robust demand for its offerings, solid liquidity, and strong free cash flow performance, the Company is lifting the temporary suspension of its share repurchase program.

During the nine months ended September 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.

As of September 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.

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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.

As of September 30, 2020, we had $12.4 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 September 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

Nine months ended September 30, 2020 and 2019

Cash Flow from Operating Activities

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2020 2019

Net cash provided by operating activities $ 1,209 $ 834

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 provided by operating activities increased $375 million during the first nine 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 ($495 million), offset by less cash from other operating assets and liabilities ($99 million) and lower cash-related net income ($21 million).

Cash Flow from Investing Activities

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2020 2019

Net cash used in investing activities $ (560) $ (910)

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

Cash used in investing activities decreased $350 million during the first nine 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 ($343 million).

Cash Flow from Financing Activities

Six Months Ended June 30,

Nine Months Ended September 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).

Net cash (used in) provided by financing activities $ (19) $ 67

Cash provided by financing activities decreased $86 million during the first nine months of 2020 as compared to the same period in 2019.

The decrease in cash provided by financing activities was primarily due to a decrease in cash provided by proceeds from revolving credit facilities, net of repayments ($140 million), a decrease in cash provided by proceeds from debt issuances, net of repayments and debt issuance costs ($212 million), less cash proceeds from employee stock option plans ($58 million), offset by less cash used to repurchase common stock ($333 million).

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis