- GAAP Revenue $1,969 million; $1,971
million before merger-related deferred Revenue adjustment
- Adjusted EBITDA $486
million
- GAAP Diluted Earnings per Share
$0.34; Adjusted Diluted Earnings per Share $1.09
- $2.7 billion of share repurchase
completed post-merger, $378 million completed during the second
quarter
- Full-year guidance reaffirmed for
Revenue and Adjusted EBITDA and raised for Adjusted Diluted
EPS
Quintiles IMS Holdings, Inc. (NYSE:Q), a leading global provider
of information, technology solutions and contract research services
to the healthcare and life sciences industries, today reported
financial results for the quarter ended June 30, 2017. On October
3, 2016, the merger of Quintiles Transnational Holdings Inc. and
IMS Health Holdings, Inc. was completed. To aid investors and
analysts with year-over-year comparability for the merged business,
we are including company financial information that combines the
stand-alone Quintiles and IMS Health financial information for
revenue and Adjusted EBITDA as if the merger had taken place on
January 1, 2016, with conforming adjustments to the current year
presentation.
Second-Quarter 2017 Operating Results
Revenue for the second quarter of $1,969 million increased 1.1
percent on a constant currency basis and was flat on a reported
basis, compared to the second quarter of 2016. Under purchase
accounting rules, a portion of IMS Health’s deferred revenue, which
would have otherwise been realized as revenue in future periods,
must be eliminated. Excluding this $2 million of deferred revenue
adjustment, and on a combined company basis, revenue for the second
quarter increased 1.2 percent on a constant currency basis.
Combined company Commercial Solutions revenue of $871 million
grew 1.9 percent in the second quarter at constant currency and 0.6
percent at actual FX rates. As expected, growth was again partially
offset by a decline in the Encore business, a legacy Quintiles
provider business. The Encore business was sold after the close of
the second quarter of 2017.
Combined company Research & Development Solutions revenue of
$896 million grew 1.7 percent on a constant currency basis and 0.4
percent at actual FX rates. Growth was impacted by a year-over-year
decline in the early clinical development business, due to a
facility closing in Europe during 2016, as well as weak bookings
and high cancellations in the third quarter of 2016.
Combined company Integrated Engagement Services revenue of $204
million was down 2.1 percent at constant currency and down 3.7
percent reported. Year-over-year comparisons for Integrated
Engagement Services were impacted by the acceleration of $9 million
of revenue in the second quarter of 2016 for the modification of a
royalty-based sales force arrangement.
Second-quarter 2017 Adjusted EBITDA was $486 million. GAAP net
income was $75 million and GAAP diluted earnings per share was
$0.34. Adjusted Net Income was $242 million and Adjusted Diluted
Earnings per Share was $1.09.
“We continue to consistently meet or exceed financial targets,”
said Ari Bousbib, chairman and CEO, QuintilesIMS. “Execution of our
integration plans is progressing well. The continued development of
our Next-Gen offering, combined with strengthened operational
discipline, position us well for accelerated growth and margin
expansion in 2018 and beyond.”
First-Half 2017 Operating Results
Revenue of $3,880 million for the first six months of 2017
increased 1.9 percent on a constant currency basis and 0.8 percent
reported, compared to the first half of 2016. Excluding $8 million
of merger-related deferred revenue adjustments, and on a combined
company basis, revenue for the first six months of 2017 increased
2.2 percent on a constant currency basis and 1.0 percent at actual
FX rates, compared with the first half of 2016.
Combined company Commercial Solutions revenue for the first six
months of 2017 of $1,724 million increased 2.1 percent on a
constant currency basis and 0.9 percent on a reported basis,
compared with the first six months of 2016.
Combined company Research & Development Solutions revenue
for the six months ending June 30, 2017 of $1,762 million grew 2.9
percent on a constant currency basis and 1.7 percent at actual FX
rates, compared with the first half of 2016. Research &
Development Solutions contracted net new business totaled $4.03
billion for the 12 months ended June 30, 2017. The last twelve
months book-to-bill ratio was 1.14, the last nine months
book-to-bill ratio was 1.21, the last six months book-to-bill ratio
was 1.24 and the last three months book-to-bill ratio was 1.30.
Contracted backlog was $9.99 billion at June 30, 2017. The company
expects approximately $3.0 billion of this backlog to convert to
revenue in the next twelve months.
Combined company Integrated Engagement Services revenue for the
first half of 2017 of $402 million was down 1.2 percent at constant
currency and 2.3 percent at actual FX rates, compared with the
first half of 2016.
For the first six months of 2017 Adjusted EBITDA was $953
million. GAAP net income was $149 million and GAAP diluted earnings
per share was $0.65. Adjusted Net Income was $480 million and
Adjusted Diluted Earnings per Share was $2.10.
Financial Position
As of June 30, 2017, cash and cash equivalents were $902 million
and the principal amount of debt was $8,986 million, resulting in
net debt of $8,084 million. At the end of the second quarter of
2017, QuintilesIMS’s Gross Leverage Ratio was 4.5 times, and Net
Leverage Ratio was 4.1 times trailing 12-month combined company
Adjusted EBITDA.
Share Repurchase
During the second quarter of 2017, QuintilesIMS increased its
post-merger share repurchase authorization to $3.5 billion from
$2.5 billion. On May 31, 2017, the company repurchased $300 million
of stock from the company’s private equity sponsors and the founder
of the legacy Quintiles organization. The company also repurchased
$78 million of its stock in the open market, for a total repurchase
of $378 million during the second quarter. QuintilesIMS had $853
million of share repurchase authorization remaining at June 30,
2017.
2017 Full-Year and Third-Quarter 2017 Guidance
Full-year 2017 guidance is reaffirmed for revenue of $8,000
million to $8,100 million and Adjusted EBITDA of $2,000 million to
$2,100 million. Full-year 2017 guidance is raised for Adjusted
Diluted Earnings per Share to $4.50 to $4.65 from $4.45 to
$4.60.
For the third quarter, QuintilesIMS expects revenue between
$2,000 million and $2,030 million, Adjusted EBITDA between $500
million and $515 million and Adjusted Diluted Earnings per Share
between $1.10 and $1.15.
This financial guidance assumes current foreign currency
exchange rates remain in effect for the remainder of the year.
Revenue guidance excludes reimbursed expenses for the Research
& Development Solutions business.
Webcast & Conference Call Details
QuintilesIMS will host a conference call at 9:00 a.m. Eastern
Time today to discuss its second-quarter 2017 financial results and
2017 guidance. To participate, please dial 1-800-672-8961 in the
United States and Canada or +1-312-429-1278 outside the United
States approximately 15 minutes before the scheduled start of the
call. The conference call and a presentation will be accessible
live via webcast on the Investors section of the QuintilesIMS
website at http://ir.quintilesims.com. An archived replay of the
webcast will be available online at http://ir.quintilesims.com
after 1:00 p.m. Eastern Time today.
About QuintilesIMS
QuintilesIMS (NYSE:Q) is a leading integrated information and
technology-enabled healthcare service provider worldwide, dedicated
to helping its clients improve their clinical, scientific and
commercial results. Formed through the merger of Quintiles
Transnational and IMS Health, QuintilesIMS’s approximately 50,000
employees conduct operations in more than 100 countries. Companies
seeking to improve real-world patient outcomes through treatment
innovations, care provision and access can leverage QuintilesIMS’s
broad range of healthcare information, technology and service
solutions to drive new insights and approaches. QuintilesIMS
provides solutions that span clinical to commercial, bringing
customers a unique opportunity to realize the full potential of
innovations and advanced healthcare outcomes.
As a global leader in protecting individual patient privacy,
QuintilesIMS uses healthcare data to deliver critical, real-world
disease and treatment insights. Through a wide variety of
privacy-enhancing technologies and safeguards, QuintilesIMS
protects individual privacy while managing information to drive
healthcare forward. These insights and execution capabilities help
biotech, medical device and pharmaceutical companies, medical
researchers, government agencies, payers and other healthcare
stakeholders in the development and approval of new therapies, and
to identify unmet treatment needs and understand the safety,
effectiveness and value of pharmaceutical products in improving
overall health outcomes. To learn more, visit
www.QuintilesIMS.com.
Cautionary Statements Regarding Forward Looking
Statements
This press release contains “forward-looking statements” within
the meaning of the federal securities laws, including Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In this context,
forward-looking statements often address expected future business
and financial performance and financial condition, and often
contain words such as “expect,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “see,” “will,” “would,” “target,” similar
expressions, and variations or negatives of these words. Actual
results may differ materially from our expectations due to a number
of factors, including, but not limited to, that our ability to
integrate the legacy IMS Health and Quintiles businesses
successfully and to achieve anticipated cost savings and other
synergies; the possibility that other anticipated benefits of the
proposed transaction will not be realized, including without
limitation, anticipated revenues, expenses, earnings and other
financial results, and growth and expansion of the combined
company’s operations, and the anticipated tax treatment; possible
disruptions from the combination of IMS Health and Quintiles
through a “merger of equals” business combination that could harm
our businesses, including current plans and operations; our ability
to retain, attract and hire key personnel; potential adverse
reactions or changes to relationships with clients, employees,
suppliers or other parties resulting from the merger; that most of
our contracts may be terminated on short notice, and we may be
unable to maintain large client contracts or to enter into new
contracts; our financial results may be adversely affected if we
underprice our contracts, overrun our cost estimates or fail to
receive approval for or experience delays in documenting change
orders; 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
communication 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; and our ability to
successfully integrate, and achieve expected benefits from, our
acquired businesses. For a further discussion of the risks relating
to the combined company’s business, see the “Risk Factors” in our
annual report on Form 10-K for the fiscal quarter ended December
31, 2016, filed with the SEC, as such factors may be amended or
updated from time to time in our subsequent periodic and other
filings with the SEC, which are accessible on the SEC’s website at
www.sec.gov. These factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary
statements that are included in this release and in our filings
with the SEC. We assume no obligation to update any such
forward-looking statement after the date of this release, whether
as a result of new information, future developments or
otherwise.
Note on Non-GAAP Financial Measures
Non-GAAP results, such as Adjusted EBITDA, Adjusted Net Income,
Adjusted Diluted EPS, and changes on a constant currency basis are
presented only as a supplement to the company’s financial
statements based on GAAP. Non-GAAP financial information is
provided to enhance understanding of the company’s financial
performance, but none of these non-GAAP financial measures are
recognized terms under GAAP, and non-GAAP measures should not be
considered in isolation from, or as a substitute analysis for, the
company’s results of operations as determined in accordance with
GAAP. Definitions and reconciliations of non-GAAP measures to the
most directly comparable GAAP measures are provided within the
schedules attached to this release. The company uses non-GAAP
measures in its operational and financial decision making, and
believes that it is useful to exclude certain items in order to
focus on what it regards to be a more reliable indicator of the
underlying operating performance of the business. As a result,
internal management reports feature non-GAAP measures which are
also used to prepare strategic plans and annual budgets and review
management compensation. The company also believes that investors
may find non-GAAP financial measures useful for the same reasons,
although investors are cautioned that non-GAAP financial measures
are not a substitute for GAAP disclosures.
Certain forward-looking guidance measures are provided on a
non-GAAP basis because the company is unable to reasonably predict
certain items contained in the GAAP measures. Such items include,
but are not limited to, merger and transaction related expenses,
restructuring and related charges, share-based compensation and
other items not reflective of the company's ongoing operations.
Non-GAAP measures are frequently used by securities analysts,
investors and other interested parties in their evaluation of
companies comparable to the company, many of which present non-GAAP
measures when reporting their results. Non-GAAP measures have
limitations as an analytical tool. They are not presentations made
in accordance with GAAP, are not measures of financial condition or
liquidity and should not be considered as an alternative to profit
or loss for the period determined in accordance with GAAP or
operating cash flows determined in accordance with GAAP. Non-GAAP
measures are not necessarily comparable to similarly titled
measures used by other companies. As a result, you should not
consider such performance measures in isolation from, or as a
substitute analysis for, the company’s results of operations as
determined in accordance with GAAP.
Click here to subscribe to Mobile Alerts for QuintilesIMS.
QUINTILESIMSFIN
Table 1 QUINTILES IMS HOLDINGS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(in millions, except per share data) (preliminary and unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2017
2016 2017 2016 Revenues $ 1,969 $ 1,167 $
3,880 $ 2,275 Reimbursed expenses 406 386
817 768 Total revenues 2,375
1,553 4,697 3,043 Costs of revenue, exclusive of depreciation and
amortization 1,154 735 2,266 1,429 Costs of revenue, reimbursed
expenses 406 386 817 768 Selling, general and administrative
expenses 370 216 750 416 Depreciation and amortization 245 32 477
64 Impairment charges 40 — 40 — Restructuring costs 9 25 28 28
Merger related costs — 9 —
9 Income from operations 151 150 319 329
Interest income (1 ) — (3 ) (1 ) Interest expense 81 22 156 48 Loss
on extinguishment of debt — — 3 — Other expense (income), net
3 (3 ) 6 2
Income before income taxes and equity in
earnings (losses) of unconsolidated affiliates
68 131 157 280 Income tax (benefit) expense (7 ) 36
5 79
Income before equity in earnings (losses)
of unconsolidated affiliates
75 95 152 201 Equity in earnings (losses) of unconsolidated
affiliates 4 (4 ) 3 (1 )
Net income 79 91 155 200 Net income attributable to non-controlling
interests (4 ) (5 ) (6 ) (7 ) Net
income attributable to Quintiles IMS Holdings, Inc. $ 75 $
86 $ 149 $ 193 Earnings per share attributable
to common stockholders: Basic $ 0.35 $ 0.73 $ 0.67 $ 1.62 Diluted $
0.34 $ 0.71 $ 0.65 $ 1.59 Weighted average common shares
outstanding: Basic 217.6 119.5 223.8 119.5 Diluted 222.3 121.5
228.6 121.5 Note: Numbers may not add to total due to
rounding.
Table 2 QUINTILES IMS
HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions, except per share data) (preliminary and unaudited)
June 30, December 31,
2017 2016 ASSETS Current assets:
Cash and cash equivalents $ 902 $ 1,198 Trade accounts receivable
and unbilled services, net 1,845 1,707 Prepaid expenses 153 123
Income taxes receivable 41 34 Investments in debt, equity and other
securities 43 40 Other current assets and receivables 275
235 Total current assets 3,259
3,337 Property and equipment, net 430 406 Investments
in debt, equity and other securities 8 13 Investments in
unconsolidated affiliates 62 69 Goodwill 11,258 10,727 Other
identifiable intangibles, net 6,493 6,390 Deferred income taxes 94
89 Deposits and other assets 178 177
Total assets $ 21,782 $ 21,208
LIABILITIES
AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable
and accrued expenses $ 1,678 $ 1,743 Unearned income 801 774 Income
taxes payable 73 76 Current portion of long-term debt 94 92 Other
current liabilities 14 20 Total current
liabilities 2,660 2,705 Long-term debt 8,858 7,108 Deferred income
taxes 2,069 2,133 Other liabilities 421 402
Total liabilities 14,008 12,348
Commitments and contingencies Stockholders’ equity:
Common stock and additional paid-in
capital, 400.0 shares authorized at June 30, 2017 and December 31,
2016, $0.01 par value, 250.7 and 248.3 shares issued at June 30,
2017 and December 31, 2016, respectively
10,721 10,602 Accumulated deficit (255 ) (399 )
Treasury stock, at cost, 34.3 and 12.9
shares at June 30, 2017 and December 31, 2016, respectively
(2,694 ) (1,000 ) Accumulated other comprehensive loss (233
) (570 ) Equity attributable to Quintiles IMS Holdings,
Inc.’s stockholders 7,539 8,633 Non-controlling interests
235 227 Total stockholders’ equity
7,774 8,860 Total liabilities and
stockholders’ equity $ 21,782 $ 21,208
Note: Numbers may not add to total due to rounding.
Table 3 QUINTILES IMS HOLDINGS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in millions) (preliminary and unaudited)
Six Months Ended June 30, 2017
2016 Operating activities: Net income $ 155 $ 200
Adjustments to reconcile net income to cash provided by operating
activities: Depreciation and amortization 477 64 Amortization of
debt issuance costs and discount 4 3
Amortization of accumulated other
comprehensive loss on terminated interest rate swaps
3 3 Stock-based compensation 53 19 Impairment of goodwill and
identifiable intangible assets 40 — Loss from unconsolidated
affiliates 7 6 Benefit from deferred income taxes (203 ) (3 )
Excess income tax benefits from stock-based award activities — (5 )
Changes in operating assets and liabilities: Change in accounts
receivable, unbilled services and unearned income (55 ) (81 )
Change in other operating assets and liabilities (180 )
(53 ) Net cash provided by operating activities 301 153
Investing activities: Acquisition of property, equipment and
software (178 ) (57 ) Acquisition of businesses, net of cash
acquired (268 ) — Purchase of trading securities — (39 ) Proceeds
from corporate owned life insurance policies — 21 Proceeds from
sale of cost method investments — 26 Investments in unconsolidated
affiliates, net of payments received 6 (10 ) Other —
(1 )
Net cash used in investing activities
(440 ) (60 )
Financing activities: Proceeds from issuance of
debt 3,998 — Payment of debt issuance costs (23 ) — Repayment of
debt and principal payments on capital lease obligations (2,515 )
(25 ) Proceeds from revolving credit facility 853 — Repayment of
revolving credit facility (890 ) — Stock issued under employee
stock purchase and option plans 69 15 Repurchase of common stock
(1,694 ) (98 ) Distributions to non-controlling interest (5 ) —
Excess income tax benefits from stock-based award activities — 5
Contingent consideration and deferred purchase price payments
(3 ) —
Net cash used in financing activities
(210 ) (103 ) Effect of foreign currency exchange rate changes on
cash 53 (12 ) Decrease in cash and cash
equivalents (296 ) (22 ) Cash and cash equivalents at beginning of
period 1,198 977 Cash and cash
equivalents at end of period $ 902 $ 955
Note: Numbers may not add to total due to rounding.
Table 4 QUINTILES IMS HOLDINGS, INC. AND
SUBSIDIARIES NET INCOME TO ADJUSTED EBITDA
RECONCILIATION COMBINED COMPANY AS IF THE MERGER CLOSED
1/1/2016 (in millions) (preliminary and unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2017
2016 2017 2016 Net Income $
75 $ 111 $ 149 $
261 Provision for (benefit from) income taxes (7 ) 44 5 107
Depreciation and amortization 245 120 477 239 Interest expense, net
80 68 153 139 (Income) loss in unconsolidated affiliates (4 ) 4 (3
) 2
Income from non-controlling interests
4 4 6 6 Deferred revenue purchasing accounting adjustments 2 2 8 3
Stock-based compensation 27 18 53 34
Other expense (income), net
4 (1 ) 10 7 Loss on extinguishment of debt — — 3 — Impairment
charges 40 — 40 — Restructuring and related charges 9 76 28 95
Acquisition related charges 7 10 18 23 Merger related charges
3 10 5 10
Adjusted EBITDA $ 486 $
466 $ 953 $ 926
Note: Numbers may not add to total due to rounding.
Table 5 QUINTILES IMS HOLDINGS, INC.
AND SUBSIDIARIES NET INCOME TO ADJUSTED NET INCOME
RECONCILIATION (in millions, except per share data)
(preliminary and unaudited)
Three
Months Six Months Ended Ended
June 30, 2017 June 30, 2017 Net Income
$ 75 $ 149 Provision for (benefit from)
income taxes (7 ) 5 Purchase accounting amortization 183 360
(Income) loss in unconsolidated affiliates (4 ) (3 )
Income from non-controlling interests
4 6 Deferred revenue purchasing accounting adjustments 2 8
Stock-based compensation 27 53
Other expense (income), net
4 10 Loss on extinguishment of debt — 3 Impairment Charges 40 40
Royalty hedge gain/(loss) 3 7 Restructuring and related charges 9
28 Acquisition related charges 7 18 Merger related charges 3
5
Adjusted Pre Tax Income $
347 $ 689 Adjusted tax expense (100 ) (199 )
Income from non-controlling interests
(4 ) (6 ) Minority interest effect in non-GAAP adjustments (1)
(2 ) (5 )
Adjusted Net Income $
242 $ 480 Adjusted
earnings per share attributable to common shareholders: Basic $
1.11 $ 2.14 Diluted $ 1.09 $ 2.10
Weighted-average common shares
outstanding: Basic 217.6 223.8 Diluted 222.3 228.6 (1)
Reflects the portion of Q2 Solutions' after-tax non-GAAP
adjustments attributable to the minority interest partner. Note:
Numbers may not add to total due to rounding.
Table 6 QUINTILES IMS HOLDINGS, INC. AND SUBSIDIARIES
CALCULATION OF GROSS AND NET LEVERAGE RATIOS AS OF JUNE
30, 2017 (in millions) (preliminary and unaudited)
Gross Debt
as of June 30, 2017
$ 8,986 Net
Debt as of June 30, 2017
$
8,084 Adjusted EBITDA (1) for the twelve months ended
June 30, 2017
$
1,983 Gross Leverage Ratio (Gross Debt/LTM Adjusted EBITDA)
4.5x Net Leverage Ratio (Net Debt/LTM Adjusted EBITDA)
4.1x (1) LTM Adjusted EBITDA is for the
combined company (assumes merger closed 1/1/2016) and recast to
conform with current methodology
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QuintilesIMSInvestor Relations:Andrew Markwick,
+1-973-257-7144andrew.markwick@quintilesims.comorMedia
Relations:Tor Constantino,
+1-484-567-6732tor.constantino@quintilesims.com
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