- Adjusted Net Income for the quarter
totaled $125 million and Adjusted Diluted Earnings per Share was
$0.37
- Revenue up 5.4 percent and Adjusted
EBITDA increased 10.5 percent on a constant currency basis
IMS Health Holdings, Inc. (“IMS Health”) (NYSE:IMS), a
leading global provider of information and technology services to
the healthcare and life sciences industries, today announced
results for the quarter ended September 30, 2014.
Third-Quarter 2014 Operating Results
Revenue for the third quarter increased 5.4 percent on a
constant currency basis, or 3.7 percent on a reported basis, to
$656 million, compared with the third quarter of 2013. The
company’s strong revenue performance in the third quarter was
driven by a 10.8 percent increase in technology services revenue on
a constant currency basis, or 9.3 percent on a reported basis.
Information offerings revenue was up 1.8 percent on a constant
currency basis, or flat on a reported basis. Revenue grew across
all regions. Emerging markets revenue increased 10.4 percent on a
constant currency basis, or 4.6 percent reported, and developed
markets revenue grew 4.3 percent on a constant currency basis, or
3.5 percent reported, versus the same period last year.
Adjusted EBITDA increased 10.5 percent on a constant currency
basis, or 6.1 percent reported to $221 million, compared with the
third quarter of 2013. This reflected both the drop-through from
revenue growth to Adjusted EBITDA and the impact of continued cost
reduction initiatives. Adjusted EBITDA as a percentage of revenue
for the quarter improved by 159 basis points on a constant currency
basis, or 76 basis points on a reported basis to 33.7 percent.
Reported revenue and Adjusted EBITDA growth for the quarter was
tempered by the strengthening of the U.S. dollar against key
foreign currencies and the lower U.S. dollar results from the
company’s Venezuelan operations due to the significant revaluation
of the Venezuelan Bolivar effective June 30, 2014.
“We delivered another strong quarter of revenue and Adjusted
EBITDA growth, highlighted by continued double-digit increases in
technology services and emerging markets on a constant currency
basis,” said Ari Bousbib, chairman and CEO, IMS Health. “During the
quarter, our IMS OneTM intelligent cloud and NexxusTM Commercial
Application Suite gained additional traction within the
marketplace, as we won important contracts with life sciences
clients.”
Third-quarter 2014 net income was $47 million, compared with a
net loss of $20 million in last year’s third quarter. Reported
Adjusted Net Income was $125 million, down $9 million from $134
million in the prior year’s quarter, as the benefit of Adjusted
EBITDA growth and lower interest expense was more than offset by a
$47 million tax refund received in 2013.
Diluted earnings per share was $0.14 in the third quarter,
compared with a loss of $0.07 per share in the third quarter of
2013. Adjusted Diluted Earnings per Share was $0.37 in the third
quarter, compared with $0.47 in the prior-year period. Excluding
the impact of last year’s $47 million tax refund, Adjusted Diluted
Earnings per Share would have increased $0.07 per share compared
with the prior-year quarter.
Year-to-Date 2014 Operating Results
Revenue for the nine months ended September 30, 2014 increased
5.8 percent on a constant currency basis, or 5.0 percent to $1,963
million on a reported basis, compared with the same period last
year. Adjusted EBITDA increased 9.8 percent on a constant currency
basis, or 7.5 percent to $664 million on a reported basis, compared
with the first nine months of 2013. The year-to-date net loss was
$197 million, compared with breakeven results in the prior-year
period, with the decline due to one-time IPO-related charges.
Adjusted Net Income was $329 million, up $23 million from $306
million in the prior-year period.
Financial Position
As of September 30, 2014, cash and cash equivalents and
short-term investments were $355 million and the principal amount
of debt was $3,923 million, resulting in net debt of $3,568
million. IMS Health’s Gross Leverage Ratio was 4.5 times the last
twelve months Adjusted EBITDA at September 30, 2014 compared with
6.1 times at December 31, 2013. The principal amount of debt
declined by $1,104 million, and net debt declined by $730 million
during the first three quarters, primarily due to the use of IPO
proceeds to reduce leverage.
Cash Flow
Net cash provided by operating activities was $191 million in
the third quarter. Capital expenditures and additions to deferred
software totaled $40 million, up $10 million versus the prior year
as the company continued to invest for future growth. Unlevered
Free Cash Flow for the third quarter was $216 million.
Full-Year Guidance
Consistent with previous guidance, on a constant currency basis,
IMS Health now expects revenue growth of 5.5 to 5.7 percent,
Adjusted EBITDA growth of 9.0 to 9.8 percent, and Adjusted Net
Income growth of 20 to 21 percent.
As a result of the headwind created by the broad strengthening
of the U.S. dollar against foreign currencies, on a reported basis
IMS Health now expects revenue growth of 3.8 to 4.0 percent,
Adjusted EBITDA growth of 5.8 to 6.6 percent, Adjusted Net Income
growth of 15 to 16 percent, and Adjusted Diluted Earnings per Share
of $1.34 to $1.36.
Unlevered Free Cash Flow is now projected to be 70 to 75 percent
of Adjusted EBITDA, excluding the investment for the company’s new
global delivery center in Bangalore.
Constant Currency
IMS Health reports results in U.S. dollars, but does business on
a global basis. Exchange rate fluctuations affect the U.S. dollar
value of foreign currency revenue and expenses and may have a
significant effect on results. The discussion of IMS Health’s
financial results in this release includes comparisons with the
prior year in constant currency terms, using consistent exchange
rates. Management believes this information facilitates comparison
of underlying results over time.
Non-GAAP Measures
This release presents certain “non-GAAP Measures” and other
statistical measures, including Adjusted EBITDA, Adjusted Net
Income, Adjusted Diluted Earnings per Share, Gross Leverage Ratio
and Unlevered Free Cash Flow because management believes these
measures provide additional information regarding the company’s
performance and its ability to service debt. In addition,
management believes that these measures are useful to assess the
company’s operating performance trends because they exclude certain
material non-cash items, unusual or non-recurring items that are
not expected to continue in the future and certain other items. The
non-GAAP Measures are not presented in accordance with U.S. GAAP,
and IMS Health’s computation of these non-GAAP Measures may vary
from those used by other companies. These measures have limitations
as an analytical tool, and should not be considered in isolation or
as a substitute or alternative to net income or loss, operating
income or loss, cash flows from operating activities, total
indebtedness or any other measures of operating performance,
liquidity or indebtedness derived in accordance with GAAP.
Reconciliations of these non-GAAP Measures to the most directly
comparable GAAP measures and related notes are presented at the end
of this release.
The non-GAAP Measures used in our full-year guidance will differ
from U.S. GAAP net income, earnings per share and net cash used in
operating activities, respectively, in ways similar to those
described in the reconciliations at the end of this press
release.
Conference Call and Webcast
IMS Health’s management team will host a conference call and
webcast to discuss the company’s third-quarter 2014 results at 9:00
a.m. Eastern Time on October 24. The audio and slide presentation
for the call can be accessed live by webcast on IMS Health’s
Investor Relations website at http://ir.imshealth.com. The
discussion also will be available by dialing +1-800-732-8470 in the
U.S. and Canada, or +1-212-231-2915 for international callers. A
replay of the webcast will be available on the company’s Investor
Relations site at http://ir.imshealth.com following the live
call.
Forward-looking Statements
Reported numbers are preliminary and not final until the filing
of IMS Health’s Form 10-Q with the Securities and Exchange
Commission and, therefore, remain subject to adjustment. This press
release includes “forward-looking statements” including statements
regarding future financial and operating results, especially those
set forth under the heading “Full-Year Guidance.” The words
“guidance,” “ongoing,” “believes,” “expects,” “may,” “will” and
similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain
these identifying words. Forward-looking statements are not
guarantees that the future results, plans, intentions or
expectations expressed or implied will be achieved. Matters subject
to forward-looking statements involve known and unknown risks and
uncertainties, including regulatory, competitive and other factors,
which may cause actual financial or operating results or the timing
of events to be materially different than those expressed or
implied by forward-looking statements. Important factors that could
cause or contribute to such differences include, but are not
limited to: imposition of restrictions on our use of data by data
suppliers or their refusal to license data to us; failure to meet
our productivity objectives; failure to successfully invest in
growth opportunities; imposition of restrictions on our current and
future activities under data protection and privacy laws; breaches
or misuse of our or our outsourcing partners’ security or
communications systems; hardware and software failures, delays in
the operation of our computer and communications systems or the
failure to implement system enhancements; consolidation in the
industries in which our clients operate; 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 risks associated with operating on a global basis,
including fluctuations in the value of foreign currencies relative
to the U.S. dollar, and the ability to successfully hedge such
risks; general economic conditions in the markets in which we
operate, including financial market conditions; the successful
completion of the proposed transaction with Cegedim and our ability
to successfully integrate Cegedim’s information solutions and
Customer Relationship Management businesses, and the other factors
set forth in the “Risk Factors” section of our registration
statement on Form S-1 on file with the SEC, our Form 10-Q for the
period ending June 30, 2014 and any subsequent SEC filings. We
disclaim any obligation to update any forward-looking statements as
a result of developments occurring after the date of this press
release, even if estimates change, and you should not rely on those
statements as representing our views as of any date subsequent to
the date of this press release.
About IMS Health
IMS Health is a leading global information and technology
services company providing clients in the healthcare industry with
comprehensive solutions to measure and improve their performance.
By applying sophisticated analytics and proprietary application
suites hosted on the IMS One intelligent cloud, the company
connects more than 10 petabytes of complex healthcare data on
diseases, treatments, costs and outcomes to help its clients run
their operations more efficiently. Drawing on information from
100,000 suppliers and on insights from more than 45 billion
healthcare transactions processed annually, IMS Health’s
approximately 10,000 employees drive results for healthcare clients
globally. Customers include pharmaceutical, consumer health and
medical device manufacturers and distributors, providers, payers,
government agencies, policymakers, researchers and the financial
community.
As a global leader in protecting individual patient privacy, IMS
Health uses anonymous healthcare data to deliver critical,
real-world disease and treatment insights. These insights help
biotech and pharmaceutical companies, medical researchers,
government agencies, payers and other healthcare stakeholders to
identify unmet treatment needs and understand the effectiveness and
value of pharmaceutical products in improving overall health
outcomes. Additional information is available at
www.imshealth.com.
IMSFIN
Table 1
IMS Health Holdings, Inc.
Income Statement
(Preliminary and Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, (in millions, except
per share data) 2014 2013 2014
2013 Revenue $ 656 $
633 $ 1,963 $ 1,870 Information
382 381 1,149 1,138 Technology services 274 252
814 732 Operating costs of information, exclusive of
depreciation and amortization 164 163 502 480
Direct and incremental costs of technology
services,
exclusive of depreciation and
amortization
147 130 423 377 Selling and administrative expenses, exclusive of
depreciation and amortization 139 143 557 433 Depreciation and
amortization 109 98 331 303 Severance, impairment and other charges
4 (1 ) 29 1
Operating Income
93 100 121
276 Interest income 1 1 3 3 Interest expense (43 ) (87 )
(181 ) (241 ) Other income (loss), net 7 (54 )
(281 ) (44 )
Non-Operating Loss, Net
(35 ) (140 )
(459 ) (282 ) Income (Loss)
before income taxes 58 (40 ) (338 ) (6 ) (Provision for) benefit
from income taxes (11 ) 20 141 6
Net
Income (Loss) $ 47 $ (20 )
$ (197 ) $ —
Earnings (Loss) per Share Attributable
to Common Shareholders:
Basic
$ 0.14
$ (0.07 )
$ (0.63 )
$ —
Diluted
$ 0.14
$ (0.07 )
$ (0.63 )
$ —
Weighted-Average Common Shares
Outstanding:
Basic 332.1 280.0 314.1 280.0 Diluted 342.3 280.0 314.1 280.0
Table 2
IMS Health Holdings, Inc.
Condensed Balance Sheet
(Preliminary and Unaudited)
September 30, December 31, (in
millions) 2014 2013 Assets: Cash and Cash
Equivalents
$ 354
$ 725 Restricted Cash 24 27
Accounts receivable, net 318 313 Property, plant and equipment, net
155 117 Computer software 263 263 Goodwill & other intangibles
5,765 6,090 Other current & LT assets 511 464
Total Assets $ 7,390 $ 7,999
Liabilities and Shareholders’ Equity:
Liabilities: Accounts payable, accrued & other current
liabilities, & deferred revenues
$ 760
$ 866
Post-retirement/employment benefits 75 77 Long-term deferred tax
and other liabilities 1,020 1,213 Debt 3,899 4,960
Total Liabilities 5,754 7,116
Shareholders’ Equity:
Total Shareholders’ Equity 1,636
883 Total Liabilities and
Shareholders’ Equity $ 7,390 $
7,999
Table 3
IMS Health Holdings, Inc.
Condensed Statement of Cash
Flows
(Preliminary and Unaudited)
Nine Months Ended September 30, (in
millions) 2014 2013 Cash Flows from
Operating Activities: Net loss
$ (197 )
$ —
Adjustments to Reconcile Net Loss to
Net Cash
(Used in) Provided by
Operating Activities:
Depreciation and amortization 331 303 Deferred income taxes (197 )
(48 ) Non-cash stock-based compensation charges 52 18 Losses on
Venezuela remeasurement 49 14 Other 101 54
Change in assets and liabilities,
excluding effects from acquisitions and
dispositions:
Changes in current assets and liabilities (137 ) 16 Changes in long
term assets and liabilities (39 ) (21 )
Net Cash
(Used in) Provided by Operating Activities (37
) 336 Cash Flows from Investing
Activities: Capital expenditures (59 ) (25 ) Additions to
computer software (70 ) (53 ) Payments for acquisitions of
businesses, net of cash acquired (58 ) (74 ) Other (20 )
(22 )
Net Cash Used in Investing Activities
(207 ) (174 ) Cash Flows from
Financing Activities: Proceeds from initial public offering,
net of costs 987 — Other financing activities (1,052 )
(48 )
Net Cash Used in Financing Activities
(65 ) (48 ) Effect of Exchange
Rate Changes on Cash and Cash Equivalents (62 ) (31 )
(Decrease) Increase in Cash and Cash Equivalents (371
) 83 Cash and Cash Equivalents, Beginning of
Period 725 580
Cash and Cash
Equivalents, End of Period $ 354 $
663
Table 4
IMS Health Holdings, Inc.
Net Income (Loss) to Adjusted EBITDA
Reconciliation
(Preliminary and Unaudited)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, (in millions) 2014
2013 2014 2013 Net Income
(Loss) $ 47 $ (20 ) $
(197 ) $ — Provision for (benefit from) income
taxes 11 (20 ) (141 ) (6 ) Other (income) loss, net(1) (7 ) 54 281
44 Interest expense 43 87 181 241 Interest income (1 ) (1 ) (3 ) (3
) Depreciation and amortization 109 98 331 303 Deferred revenue
purchase accounting adjustments 1 — 3 2 Non-cash stock-based
compensation charges 6 5 52 18 Restructuring and related charges 5
2 34 7 Acquisition-related charges 7 2 19 6 Sponsor monitoring
termination / fees — 2 74 6 Non-executive phantom stock
compensation — — 30
—
Adjusted EBITDA $ 221
$ 209 $ 664 $
618 Depreciation and amortization(2) (32 ) (24 ) (94
) (79 ) Interest expense, net (42 ) (86 ) (178 ) (238 ) Royalty
Hedge Gains/(Losses) 1 — 1 — Less cash tax (payments)/refunds
(23 ) 35 (64 ) 5
Adjusted Net Income $ 125 $
134 $ 329 $ 306
(1) 2014 YTD includes
$49M FX loss due to the devaluation of Venezuelan Bolivar assets
and liabilities, $151M for debt make-whole premiums, $68M for the
write-off of debt issuance costs and discounts (2) Excludes
amortization related to purchase accounting
Table 5
IMS Health Holdings, Inc.
Net Income (Loss) to Adjusted Net
Income Reconciliation
(Preliminary and Unaudited)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, (in millions, except per share
data) 2014 2013 2014
2013 Net Income (Loss) $ 47 $
(20 ) $ (197 ) $ —
Provision for (benefit from) income taxes 11 (20 ) (141 ) (6 )
Amortization associated with purchase
accounting
77 74 230 224
Deferred revenue purchasing accounting
adjustments
1 — 3 2 Non-cash stock-based compensation charges 6 5 52 18
Restructuring and related charges(1) 5 2 41 7 Acquisition-related
charges 7 2 19 6 Sponsor monitoring termination / fees — 2 74 6
Non-executive phantom stock compensation — — 30 — Other (income)
loss, net (2) (7 ) 54 281 44
Adjusted Pre Tax Income $ 147 $
99 $ 392 $ 301 Royalty Hedge
Gains/(Losses) 1 — 1 — Less cash tax (payments)/refunds (23
) 35 (64 ) 5
Adjusted Net Income
$ 125 $ 134 $ 329
$ 306
Adjusted Earnings per Share
Attributable to Common Shareholders:
Basic $ 0.38 $ 0.48 $ 1.05 $ 1.09 Diluted $ 0.37 $ 0.47 $ 1.02 $
1.06
Weighted-Average Common Shares
Outstanding:
Basic 332.1 280.0 314.1 280.0 Diluted 342.3 285.3 323.1 287.8
(1) 2014 YTD includes $7M of
accumulated depreciation related to real estate transactions in
Q2-2014 (2) 2014 YTD includes $49M FX loss due to the devaluation
of Venezuelan Bolivar assets and liabilities, $151M for debt
make-whole premiums, $68M for the write-off of debt issuance costs
and discounts
Table 6
IMS Health Holdings, Inc.
Net Cash (Used in) Provided by
Operating Activities
to Unlevered Free Cash Flow
(Preliminary and Unaudited)
Three Months EndedSeptember 30, Nine Months
Ended
September 30,
(in millions) 2014 2013 2014
2013 Net Cash (Used in) Provided by Operating
Activities $ 191 $ 212 $
(37 ) $ 336 Capital expenditures (14 )
(8 ) (59 ) (25 ) Additions to computer software (26 )
(22 ) (70 ) (53 )
Free Cash Flow $
151 $ 182 $ (166 )
$ 258 Cash interest payments 26 61 196 201 Cash tax
payments 23 (35 ) 64 (5 ) Acquisition related charges 7 2 19 6
Sponsor monitoring termination / fees — 2 74 6 Non-executive
phantom stock compensation — — 30 — Debt extinguishment make-whole
payments — — 151 — Severance, transaction & other payments 8 13
19 33 FX hedge payments 1 (3 ) 7
(8 )
Unlevered Free Cash Flow $ 216
$ 222 $ 394 $ 491
Table 7
IMS Health Holdings, Inc.
Calculation of Gross Leverage
Ratio
as of September 30, 2014
(Preliminary and Unaudited)
(in millions)
Gross Debt as of September 30, 2014
$ 3,923 Adjusted EBITDA for the year ended
December 31, 2013
829 Less: Adjusted EBITDA for the nine
months ended September 30, 2013
(618 ) Add: Adjusted
EBITDA for the nine months ended September 30, 2014
664 Adjusted EBITDA for the twelve months ended
September 30, 2014 $ 875 Gross Leverage
Ratio (Gross Debt/LTM Adjusted EBITDA) 4.5x
IMS HealthTom Kinsley, 203-448-4691Investor
Relationstkinsley@imshealth.comorTor Constantino, 484-567-6732Media
Relationstconstantino@us.imshealth.com
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