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 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. 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 68,000 employees, we conduct operations in more than 100 countries. 21 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 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. 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. 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 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. 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. 22 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 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. 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 September 30, Change (in millions) 2020 2019 $ % Revenues $ 2,786 $ 2,769 $ 17 0.6 % 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. Nine Months Ended September 30, Change (in millions) 2020 2019 $ % Revenues $ 8,061 $ 8,193 $ (132) (1.6) % 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%. The constant currency revenue decline was comprised of a $232 million decrease in Research & Development Solutions and a $50 million decrease in Contract Sales & Medical Solutions, offset by a $182 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. 23 Table of contents Costs of Revenue, exclusive of Depreciation and Amortization Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Costs of revenue, exclusive of depreciation and amortization $ 1,800 $ 1,852 $ 5,328 $ 5,399 % of revenues 64.6 % 66.9 % 66.1 % 65.9 % 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 $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 September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Selling, general and administrative expenses $ 460 $ 395 $ 1,298 $ 1,250 % of revenues 16.5 % 14.3 % 16.1 % 15.3 % 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 September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Depreciation and amortization 319 299 943 888 % of revenues 11.5 % 10.8 % 11.7 % 10.8 % 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. 24 Table of contents Restructuring Costs Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Restructuring costs $ 20 $ 19 $ 50 $ 45 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. Interest Income and Interest Expense Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Interest income $ (1) $ (3) $ (4) $ (7) Interest expense $ 100 $ 114 $ 314 $ 338 Interest income includes interest received primarily from bank balances and investments. 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 September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Loss on extinguishment of debt $ — $ 24 $ 12 $ 24 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, Net Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 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. 25 Table of contents Income Tax Expense Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 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 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 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 September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 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 September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Net income attributable to non-controlling interests $ (7) $ (12) $ (18) $ (32) Net income attributable to non-controlling interests primarily included Quest Diagnostics Incorporated’s interest in Q 2 Solutions. 26 Table of contents Segment Results of Operations The Company’s revenues and profit by segment are as follows: Three Months Ended September 30, 2020 and 2019 Segment Revenues Segment Profit (in millions) 2020 2019 2020 2019 Technology & Analytics Solutions $ 1,207 $ 1,095 $ 292 $ 261 Research & Development Solutions 1,400 1,466 291 287 Contract Sales & Medical Solutions 179 208 17 15 Total 2,786 2,769 600 563 General corporate and unallocated ( 74 ) ( 41 ) Depreciation and amortization ( 319 ) ( 299 ) Restructuring costs ( 20 ) ( 19 ) Consolidated $ 2,786 $ 2,769 $ 187 $ 204 Nine Months Ended September 30, 2020 and 2019 Segment Revenues Segment Profit (in millions) 2020 2019 2020 2019 Technology & Analytics Solutions $ 3,433 $ 3,272 $ 836 $ 777 Research & Development Solutions 4,076 4,317 721 864 Contract Sales & Medical Solutions 552 604 39 40 Total 8,061 8,193 1,596 1,681 General corporate and unallocated ( 161 ) ( 137 ) Depreciation and amortization ( 943 ) ( 888 ) Restructuring costs ( 50 ) ( 45 ) Consolidated $ 8,061 $ 8,193 $ 442 $ 611 Certain costs are not allocated to our segments and are reported as general corporate and unallocated expenses. These costs primarily consist of stock-based compensation and expenses related to integration activities and acquisitions. We also do not allocate depreciation and amortization or impairment charges to our segments. Technology & Analytics Solutions Three Months Ended September 30, Change (in millions) 2020 2019 $ % Revenues $ 1,207 $ 1,095 $ 112 10.2 Costs of revenue, exclusive of depreciation and amortization 727 667 60 9.0 Selling, general and administrative 188 167 21 12.6 Segment profit $ 292 $ 261 $ 31 11.9 Nine Months Ended September 30, Change (in millions) 2020 2019 $ % Revenues $ 3,433 $ 3,272 $ 161 4.9 Costs of revenue, exclusive of depreciation and amortization 2,048 1,956 92 4.7 Selling, general and administrative 549 539 10 1.9 Segment profit $ 836 $ 777 $ 59 7.6 27 Table of contents Revenues 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 $ 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 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 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%. 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 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 September 30, Change (in millions) 2020 2019 $ % Revenues $ 1,400 $ 1,466 $ (66) (4.5) % Costs of revenue, exclusive of depreciation and amortization 925 1,007 (82) (8.1) % Selling, general and administrative expenses 184 172 12 7.0 % Segment profit $ 291 $ 287 $ 4 1.4 % Nine Months Ended September 30, Change (in millions) 2020 2019 $ % Revenues $ 4,076 $ 4,317 $ (241) (5.6) % Costs of revenue, exclusive of depreciation and amortization 2,811 2,924 (113) (3.9) % Selling, general and administrative expenses 544 529 15 2.8 % Segment profit $ 721 $ 864 $ (143) (16.6) % 28 Table of contents Backlog 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. Revenues 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 $ 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 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 $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%. 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 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 September 30, Change (in millions) 2020 2019 $ % Revenues $ 179 $ 208 $ (29) (13.9) % Costs of revenue, exclusive of depreciation and amortization 148 178 (30) (16.9) % Selling, general and administrative expenses 14 15 (1) (6.7) Segment profit $ 17 $ 15 $ 2 13.3 % 29 Table of contents Nine Months Ended September 30, Change (in millions) 2020 2019 $ % Revenues $ 552 $ 604 $ (52) (8.6) % Costs of revenue, exclusive of depreciation and amortization 469 519 (50) (9.6) % Selling, general and administrative expenses 44 45 (1) (2.2) % Segment profit $ 39 $ 40 $ (1) (2.5) % Revenues 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 $ 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 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 $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 $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 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 nine months ended September 30, 2020 as compared to the same period in 2019. 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 30 Table of contents 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 $1,464 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. 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 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 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. 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 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 September 30, 2020, we had $12.4 billion of total indebtedness, excluding $1.5 billion of additional available borrowings under our revolving credit facility. 31 Table of contents 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. Nine months ended September 30, 2020 and 2019 Cash Flow from Operating Activities Nine Months Ended September 30, (in millions) 2020 2019 Net cash provided by operating activities $ 1,209 $ 834 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 Nine Months Ended September 30, (in millions) 2020 2019 Net cash used in investing activities $ (560) $ (910) 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 Nine Months Ended September 30, (in millions) 2020 2019 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 We do not have any off-balance sheet arrangements. 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. 32 Table of contents 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.