What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-04-23 compared with 2020-10-22 · 84 added, 204 removed, 170 unchanged (63% of the section changed)

30 unchanged sentences

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”).

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.

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

IQVIA is a leading global provider of advanced analytics, technology solutions, and clinical research services to the life sciences industry.

IQVIA creates intelligent connections across all aspects of healthcare through its analytics, transformative technology, big data resources and extensive domain expertise.

IQVIA Connected Intelligence™ delivers powerful insights with speed and agility — enabling customers to accelerate the clinical development and commercialization of innovative medical treatments that improve healthcare outcomes for patients.

With approximately 72,000 employees, we conduct operations in more than 100 countries.

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.

We are a global leader in protecting individual patient privacy.

We use a wide variety of privacy-enhancing technologies and safeguards to protect individual privacy while generating and analyzing information on a scale that helps healthcare stakeholders identify disease patterns and correlate with the precise treatment path and therapy needed for better

Our insights and execution capabilities help biotech, medical device and pharmaceutical companies, medical researchers, government agencies, payers and other healthcare stakeholders tap into a deeper understanding of diseases, human behaviors and scientific advances, in an effort to advance their path toward cures.

We are managed 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 clients.

Research & Development Solutions, which primarily serves biopharmaceutical clients, is engaged in research and development and provides clinical research and clinical trial services.

Contract Sales & Medical Solutions provides contract sales to both biopharmaceutical clients and the broader healthcare market.

Sources of Revenue

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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.

In the first three months of 2021, 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 September 30, Change

(in millions)

$ 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

Three Months Ended March 31, Change

(in millions)

$ 3,409 $ 2,754 $ 655 23.8

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.

For the first quarter of 2021, our revenues increased $655 million, or 23.8%, as compared to the same period in 2020.

This increase was comprised of constant currency revenue growth of approximately $588 million, or 21.4%, reflecting a $405 million increase in Research & Development Solutions, an $8 million decrease in Contract Sales & Medical Solutions, and a $191 million increase in Technology & Analytics Solutions.

Costs of Revenue, exclusive of Depreciation and Amortization

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

Three Months Ended March 31,

(in millions)

2020 2019 2020 2019

Costs of revenue, exclusive of depreciation and amortization

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67.3 % 66.2 %

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.

The $469 million increase in costs of revenues, exclusive of depreciation and amortization, for the three months ended March 31, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $410 million, or 22.5%, reflecting a $305 million increase in Research & Development Solutions, a $14 million decrease in Contract Sales & Medical Solutions, and an $119 million increase in Technology & Analytics Solutions.

Selling, General and Administrative Expenses

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

Three Months Ended March 31,

(in millions)

2020 2019 2020 2019

Selling, general and administrative expenses

$ 460 $ 395 $ 1,298 $ 1,250

% of revenues

13.0 % 14.8 %

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.

The $35 million increase in selling, general and administrative expenses for the three months ended March 31, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $25 million, or 6.1%, reflecting a $3 million decrease in Research & Development Solutions, an $1 million decrease in Technology & Analytics Solutions, a $2 million decrease in Contract Sales & Medical Solutions, offset by a $31 million increase in general corporate and unallocated expenses.

Depreciation and Amortization

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

Three Months Ended March 31,

(in millions)

2020 2019 2020 2019

Depreciation and amortization 323 316

% 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.

The $7 million increase in depreciation and amortization in the three months ended March 31, 2021 as compared to the same period in 2020 was primarily due to higher intangible asset balances as a result of acquisitions occurring in 2020 and increased amortization due to higher capitalized software balances.

Restructuring Costs

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

Three Months Ended March 31,

(in millions) 2021 2020

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Interest Income and Interest Expense

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

Three Months Ended March 31,

(in millions) 2021 2020

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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.

Interest expense during the three months ended March 31, 2021 was lower than the same period in 2020 due to lower interest rates attributed to lower LIBOR rates and the redemption of the €1,425 million of 3.250% senior notes due 2025, partially offset by an increase in the average debt outstanding.

See “Liquidity and Capital Resources” for more information on this transaction.

Loss on Extinguishment of Debt

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

Three Months Ended March 31,

(in millions) 2021 2020

Loss on extinguishment of debt $ 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.

During the three months ended March 31, 2021, we recognized a loss on extinguishment of debt for fees and expenses incurred related to the refinancing of our 3.250% senior notes due 2025.

Other Income, Net

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

Three Months Ended March 31,

(in millions) 2021 2020

Other income, net $ (37) $ (13)

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.

Other income, net for the three months ended March 31, 2021 increased as compared to the same period in the prior year, primarily due to foreign currency gain, as well as gain on investments in mutual funds.

Income Tax Expense

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

Three Months Ended March 31,

(in millions) 2021 2020

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.

Income tax expense $ 44 $ 17

Our effective income tax rate was 17.1% and 16.7% in the first quarter of 2021 and 2020, respectively.

Our effective income tax rate in the first quarter of 2021 and 2020 was favorably impacted by $17 million and $21 million, respectively, as a result of excess tax benefits recognized upon settlement of share-based compensation awards.

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

Three Months Ended March 31,

(in millions) 2021 2020

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.

Equity in earnings of unconsolidated affiliates $ 4 $ 6

Equity in earnings of unconsolidated affiliates for the three months ended March 31, 2021 remained relatively consistent with the same period in the prior year.

Net Income Attributable to Non-controlling Interests

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

Three Months Ended March 31,

(in millions) 2021 2020

Net income attributable to non-controlling interests $ (5) $ (9)

Net income attributable to non-controlling interests primarily included Quest Diagnostics Incorporated’s interest in Q 2 Solutions.

Net income attributable to non-controlling interests included Quest Diagnostics Incorporated’s interest in Q 2 Solutions.

On April 1, 2021 the Company acquired the 40% non-controlling interest in Q 2 Solutions from Quest Diagnostics Incorporated which will result in a decrease in the net income attributable to non-controlling interests in future periods.

See Note 14 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details regarding this transaction.

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

Three Months Ended March 31, 2021 and 2020

Segment Revenues Segment Profit

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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

Three Months Ended March 31, Change

(in millions) 2021 2020 $ %

1 unchanged sentence

Costs of revenue, exclusive of depreciation and amortization 812 666 146 21.9

Selling, general and administrative 549 539 10 1.9

Selling, general and administrative expenses 187 183 4 2.2

Segment profit $ 349 $ 268 $ 81 30.2

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.

Technology & Analytics Solutions’ revenues were $1,348 million for the first quarter of 2021, an increase of $231 million, or 20.7%, over the same period in 2020.

This increase was comprised of constant currency revenue growth of approximately $191 million, or 17.1%, reflecting revenue growth across all regions.

The revenue growth in these regions was driven by higher real-world and analytical services and COVID-19 related work.

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.

Technology & Analytics Solutions’ costs of revenue increased $146 million, or 21.9%, in the first quarter of 2021 over the same period in 2020.

This increase included a constant currency increase of approximately $119 million, or 17.9%, reflecting 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.

Technology & Analytics Solutions’ selling, general and administrative expenses increased $4 million, or 2.2%, in the first quarter of 2021 as compared to the same period in 2020, which included a constant currency decrease of approximately $1 million, or (0.5)%, reflecting the impact of on-going cost containment actions.

Research & Development Solutions

Three Months Ended September 30, Change

(in millions)

$ 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

Three Months Ended March 31, Change

(in millions)

3 unchanged sentences

Selling, general and administrative expenses

544 529 15 2.8 %

Segment profit

$ 362 $ 268 $ 94 35.1

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 $ 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.

Research & Development Solutions’ contracted backlog increased from $22.6 billion as of December 31, 2020 to $23.2 billion as of March 31, 2021 and we expect approximately $6.5 billion of this backlog to convert to revenue in the next twelve months.

Research & Development Solutions’ revenues were $1,868 million in the first quarter of 2021, an increase of $427 million, or 29.6%, over the same period in 2020.

This increase was comprised of constant currency revenue increase of approximately $405 million, or 28.1%, reflecting volume-related increases in clinical services and lab testing, including incremental revenue from large COVID-19 vaccine clinical trials.

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.

Research & Development Solutions’ costs of revenue increased $333 million, or 33.7%, in the first quarter of 2021 over the same period in 2020.

This increase included a constant currency increase of approximately $305 million, or 30.9%, reflecting an increase in compensation and related expenses as a result of volume-related increases in clinical services and lab testing.

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.

Research & Development Solutions’ selling, general and administrative expenses remained flat in the first quarter of 2021 as compared to the same period in 2020, and included a constant currency decrease of approximately $3 million, or (1.6)%.

Contract Sales & Medical Solutions

Three Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions)

6 unchanged sentences

$ 20 $ 11 $ 9 81.8

Nine Months Ended September 30, Change

(in millions)

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) %

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.

Contract Sales & Medical Solutions’ revenues were $193 million in the first quarter of 2021, a decrease of $3 million, or (1.5)%, over the same period in 2020.

This decrease included a constant currency revenue decrease of approximately $8 million, or (4.1)%, reflecting a volume decrease in the Americas region, partially offset by a volume increase in the Asia-Pacific region.

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.

Contract Sales & Medical Solutions’ costs of revenue decreased $10 million, or (5.9)%, in the first quarter of 2021 as compared to the same period in 2020.

This decrease included a constant currency decrease of approximately $14 million, or (8.2)%, reflecting 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.

Contract Sales & Medical Solutions’ selling, general and administrative expenses decreased $2 million, or (13.3)%, in the first quarter of 2021 as compared to the same period in 2020.

This decrease included a constant currency decrease of approximately $2 million, or (13.3)%, reflecting a decrease in compensation and related expenses.

Liquidity and Capital Resources

3 unchanged sentences

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.

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 $1,464 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 had a cash balance of $2,305 million as of March 31, 2021 ($933 million of which was in the United States), an increase from $1,814 million as of December 31, 2020.

Based on our current operating plan, 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.

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We cannot provide assurances that we will be able to complete any such financing arrangements or other transactions on favorable terms or at all.

On April 1, 2021 the Company acquired the 40% non-controlling interest in Q 2 Solutions from Quest Diagnostics Incorporated for $760 million, financed with cash on hand.

See Note 14 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details regarding this transaction.

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.

During the three months ended March 31, 2021, we repurchased 265,809 shares of our common stock for $50.5 million under the Repurchase Program.

See Note 8 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.

As of March 31, 2021, we have remaining authorization to repurchase up to approximately $0.9 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.

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.

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.

On March 3, 2021, we completed the issuance and sale of €1,450,000,000 in gross proceeds of the Issuer's (i) €550,000,000 aggregate principal amount of its 1.750% Senior Notes due 2026 (the “2026 Notes”) and (ii) €900,000,000 aggregate principal amount of its 2.250% Senior Notes due 2029 (the “2029 Notes” and, together with the 2026 Notes, the “Notes”).

The proceeds from the Notes offering were used to redeem all of the Issuer’s outstanding 3.250% senior notes due 2025 (the “3.250% Notes”), including the payment of premiums in respect thereof and to pay fees and expenses related to the Notes offering.

See Note 7 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.

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

As of March 31, 2021, we had $12.3 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 March 31, 2021, we believe we were in compliance with our restrictive covenants in all material respects.

Three months ended March 31, 2021 and 2020

Cash Flow from Operating Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2021 2020

Net cash provided by operating activities $ 867 $ 163

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 provided by operating activities increased $704 million during the first three months of 2021 as compared to the same period in 2020.

The increase was primarily due to an increase in cash collections from clients resulting in a decrease in accounts receivable and unbilled services ($132 million), an increase in unearned income ($294 million), higher cash related net income ($165 million) and higher cash from other operating assets and liabilities ($113 million).

Cash Flow from Investing Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2021 2020

Net cash used in investing activities $ (176) $ (150)

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 used in investing activities increased $26 million during the first three months of 2021 as compared to the same period in 2020 primarily driven by lower payments received from unconsolidated affiliates ($18 million) and increased cash used for the purchase of property and equipment ($8 million).

Cash Flow from Financing Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2021 2020

Net cash (used in) provided by financing activities $ (168) $ 107

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).

Cash used in financing activities increased $275 million during the first three months of 2021 as compared to the same period in 2020 primarily due to a decrease in cash provided by proceeds from debt issuances, net of repayments and debt issuance costs ($803 million) and an increase in cash payments related to employee stock option plans ($15 million), offset by a decrease in cash used in repayments of revolving credit facilities, net of proceeds ($260 million), and a decrease in cash used to repurchase common stock ($283 million).

Off-Balance Sheet Arrangements

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

With the exception of new senior secured credit facilities 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.

With the exception of new senior notes disclosed in Note 7 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 2020 Form 10-K.

Application of Critical Accounting Policies

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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