- Revenue up 25.2 percent at constant
currency
- Adjusted EBITDA up 9.4 percent at
constant currency
- Adjusted Net Income up 6.4 percent
at constant currency
- Adjusted Diluted Earnings per Share
was $0.42 reported, up 9.5 percent at constant currency
- Constant currency guidance
reaffirmed, reported guidance raised
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 March 31, 2016.
First-Quarter 2016 Operating Results
Revenue for the first quarter of $774 million was up 25.2
percent on a constant currency basis and 22.5 percent on a reported
basis compared with the first quarter of 2015. Excluding the impact
of Cegedim’s CRM and Strategic Data businesses, which were acquired
in the second quarter of 2015, and AlphaImpactRx, which was
acquired in the first quarter of 2016 (the “Cegedim and AIRx
Acquisitions”), revenue was up 7.2 percent on a constant currency
basis compared with the first quarter of 2015.
Technology services revenue grew 45.8 percent in the first
quarter on a constant currency basis and 43.6 percent reported
versus the same period last year. Information offerings revenue was
up 9.0 percent on a constant currency basis and 6.0 percent
reported. Emerging markets revenue increased 28.1 percent in the
first quarter at constant currency and 18.3 percent reported.
Developed markets revenue grew 24.7 percent at constant currency
and 23.3 percent reported.
Excluding the Cegedim and AIRx acquisitions, technology services
revenue increased 15.8 percent and Information revenue increased
0.4 percent, both on a constant currency basis.
Adjusted EBITDA improved to $236 million, up 9.4 percent on a
constant currency basis and 9.3 percent reported compared with the
first quarter of 2015.
“We are pleased to report another quarter of consistent strong
operating performance, with technology services revenue again
growing double digits in our core IMS business,” said Ari Bousbib,
chairman and CEO, IMS Health. “Continued investment and new
contract wins during the quarter position us well to continue this
momentum.”
First-quarter 2016 net income was $43 million, compared with
$298 million in last year’s first quarter. Since the first quarter
of last year, IMS Health has asserted that its non-U.S. earnings
would be indefinitely reinvested outside of the U.S. with the
company no longer accruing taxes on those foreign earnings at the
higher U.S. tax rate. This resulted in a $256 million non-cash
income tax benefit in last year’s first quarter from a one-time
reduction in the deferred tax liability. Adjusted Net Income, which
excludes this one-time, non-cash tax benefit, increased to $140
million, up 6.4 percent on a constant currency basis and 3.3
percent on a reported basis.
Diluted earnings per share was $0.13 in the first quarter,
compared with $0.86 per share in the first quarter of 2015, which
included the one-time non-cash income tax benefit mentioned
previously. Adjusted Diluted Earnings per Share increased 9.5
percent at constant currency and 6.3 percent reported to $0.42 in
the first quarter.
Financial Position
As of March 31, 2016, cash and cash equivalents were $378
million and the principal amount of debt was $4,606 million,
resulting in net debt of $4,228 million.
Cash Flow
Net cash used in operating activities was $15 million in the
first quarter, compared with cash provided of $30 million in the
first quarter of 2015. This decline was primarily due to a large
upfront investment in specialty data, higher severance payments,
and timing of cash payments in businesses that manage loyalty card
programs for our customers, which were acquired in the second and
third quarters of 2015. Capital expenditures and additions to
deferred software of $39 million increased by $7 million versus the
first quarter of 2015. Unlevered Free Cash Flow for the first
quarter was $37 million.
2016 Full-Year and Second Quarter Guidance
IMS Health reaffirms full-year constant currency guidance and
raises full-year 2016 reported guidance. The reaffirmed full-year
constant currency guidance is revenue growth of 10 to 12 percent,
Adjusted EBITDA of 7.5 to 9.5 percent, Adjusted Net Income of 6.5
to 8.5 percent and Adjusted Diluted Earnings per Share of 8.5 to
10.5 percent. Assuming foreign exchange rates hold at current
levels through the end of 2016, IMS Health expects full-year
reported revenue growth of 9 to 11 percent, Adjusted EBITDA growth
of 7.5 to 9.5 percent, Adjusted Net Income growth of 2 to 4 percent
and Adjusted Diluted Earnings per Share growth of 4 to 6
percent.
IMS Health is providing second-quarter constant currency
guidance as follows: Revenue growth of 7.5 to 8.5 percent, Adjusted
EBITDA growth of 5 to 6 percent, Adjusted Net Income growth of 4.5
to 5.5 percent and Adjusted Diluted Earnings per Share growth of
5.5 to 6.5 percent.
Assuming foreign exchange rates hold at current levels through
the end of the second quarter of 2016, IMS Health expects
second-quarter reported revenue growth of 7.5 to 8.5 percent,
Adjusted EBITDA growth of 6.5 to 7.5 percent, Adjusted Net Income
growth of 1 to 2 percent and Adjusted Diluted Earnings per Share
growth of 2 to 3 percent.
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 reported 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 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 and second quarter
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 first-quarter 2016 results at
10:00 a.m. Eastern Time on Tuesday, May 3, 2016. 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 +1-800-679-0308 in
the U.S. and Canada, or +1-303-223-4382 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 for the year ended March 31, 2016 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
“2016 Full-Year and Second-Quarter 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; our ability to
successfully integrate, and achieve expected benefits from, our
acquired businesses; and the other factors set forth in the “Risk
Factors” section included in Part I, Item 1A of our most recent
annual report on Form 10-K on file with the SEC and any subsequent
SEC filings. We undertake no obligation to publicly update any
forward-looking statements whether as a result of new information,
future developments or otherwise.
About IMS Health
IMS Health is a leading global information and technology
services company providing clients in the healthcare industry with
end-to-end solutions to measure and improve their performance. Our
7,000 services experts connect configurable SaaS applications to
15+ petabytes of complex healthcare data in the IMS One™ cloud
platform, delivering unique insights into diseases, treatments,
costs and outcomes. The company’s 15,000 employees blend global
consistency and local market knowledge across 100 countries to help
clients run their operations more efficiently. 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 March 31, (in millions,
except per share data) 2016 2015
Revenue $ 774 $ 632 Information
376 354 Technology services 398 278
Operating costs of information, exclusive
of depreciation and
amortization 160 157 Direct and incremental costs of technology
services, exclusive of depreciation and amortization 222 138
Selling and administrative expenses, exclusive of depreciation and
amortization 177 137 Depreciation and amortization 87 96 Severance,
impairment and other charges 15 13
Operating Income
113 91 Interest income 1 — Interest
expense (46 ) (37 ) Other income (loss), net (5 ) 4
Non-Operating Loss, Net (50 )
(33 ) Income before income taxes 63 58 (Provision
for) benefit from income taxes (20 ) 240
Net
Income $ 43 $ 298
Earnings per Share Attributable to Common
Stockholders: Basic
$ 0.13
$ 0.89 Diluted
$ 0.13
$ 0.86
Weighted-Average Common Shares
Outstanding: Basic 328.6 335.5 Diluted 335.6 345.3
Table 2 IMS Health Holdings,
Inc. Condensed Balance Sheet (Preliminary and
Unaudited) March 31, December 31,
(in millions) 2016 2015 Assets: Cash
and cash equivalents
$ 378
$ 396 Accounts receivable,
net 585 508 Property, plant and equipment, net 168 167 Computer
software, net 323 309 Goodwill & other identifiable intangibles
6,126 5,782 Other current & long-term assets 315
297
Total Assets $ 7,895 $ 7,459
Liabilities and Stockholders’ Equity:
Liabilities: Accounts payable, accrued & other current
liabilities, and deferred revenues
$ 939
$ 974
Postretirement and postemployment benefits 109 109 Long-term
deferred tax and other liabilities 632 609 Debt 4,537
4,195
Total Liabilities 6,217
5,887 Stockholders’ Equity:
Total Stockholders’ Equity 1,678
1,572 Total
Liabilities and Stockholders’ Equity $ 7,895
$ 7,459 Table 3 IMS
Health Holdings, Inc. Condensed Statement of Cash Flows
(Preliminary and Unaudited) Three Months
Ended March 31, (in millions) 2016
2015 Cash Flows from Operating Activities: Net Income
$ 43
$ 298
Adjustments to Reconcile Net Income to
Net Cash from Operating Activities: Depreciation and
amortization 87 96 Deferred income taxes (4 ) (262 ) Non-cash
stock-based compensation charges 7 6 Other (7 ) (2 ) Change in
assets and liabilities, excluding effects from acquisitions and
dispositions: Current assets and liabilities (125 ) (102 ) Long
term-assets and liabilities (16 ) (4 )
Net Cash
(Used in) Provided by Operating Activities (15
) 30 Cash Flows from Investing
Activities: Capital expenditures (13 ) (9 ) Additions to
computer software (26 ) (23 ) Payments for acquisitions of
businesses, net of cash acquired (252 ) (26 ) Other investing
activities, net 1 (1 )
Net Cash Used in
Investing Activities (290 )
(59 ) Cash Flows from Financing
Activities: Net Cash
Provided by Financing Activities 280
287 Effect of
Exchange Rate Changes on Cash and Cash
Equivalents
7 (9
)
(Decrease) Increase in Cash and Cash Equivalents (18
) 249 Cash and Cash Equivalents, Beginning of
Period 396 390 Cash and
Cash Equivalents, End of Period $ 378
$ 639 Table 4 IMS
Health Holdings, Inc. Net Income to Adjusted EBITDA
Reconciliation (Preliminary and Unaudited)
Three Months Ended March 31, (in millions)
2016 2015 Net Income $ 43
$ 298 Provision for (benefit from) income taxes 20
(240 ) Other (income) loss, net 5 (4 ) Interest expense 46 37
Interest income (1 ) — Depreciation and amortization 87 96 Deferred
revenue purchase accounting adjustments 1 1 Stock-based
compensation related charges (1) 7 6 Restructuring and related
charges (2) 16 14 Acquisition-related charges (3) 12
8
Adjusted EBITDA $ 236
$ 216 Depreciation and amortization (34 ) (34
) Interest expense, net (45 ) (37 ) Royalty hedge gains 2 7 Cash
tax payments, net of refunds (19 ) (16 )
Adjusted
Net Income $ 140 $ 136
(1) Stock-based compensation related charges are included in
Operating costs of information, Direct and incremental costs of
technology services and Selling and administrative expenses as
follows:
Three Months Ended March 31, (in
millions) 2016 2015 Operating costs of
information $ 1 $ 1 Direct and incremental costs of technology
services 1 — Selling and administrative expenses 5 5
(2) Restructuring and related charges includes severance and
impairment charges and the cost of employee and third-party charges
related to dual running costs for knowledge transfer activities.
Dual running costs for knowledge transfer activities of less than
$1 million for both the three months ended March 31, 2016 and 2015,
respectively, are included primarily in Operating costs of
information and Selling and administrative expenses.
(3) Acquisition-related charges are included primarily in
Selling and administrative expenses.
Table 5 IMS Health Holdings, Inc.
Net Income to Adjusted Net Income Reconciliation
(Preliminary and Unaudited) Three Months
Ended March 31, (in millions, except per share
data) 2016 2015 Net Income $
43 $ 298 Provision for (benefit from) income
taxes 20 (240 ) Amortization associated with purchase accounting 53
62 Deferred revenue purchasing accounting adjustments 1 1
Stock-based compensation related charges (1) 7 6 Restructuring and
related charges (2) 16 14 Acquisition-related charges (3) 12 8
Other (income) loss, net 5 (4 )
Adjusted
Pre Tax Income $ 157 $ 145 Royalty
hedge gains 2 7 Cash tax payments, net of refunds (19 )
(16 )
Adjusted Net Income $ 140
$ 136 Adjusted Earnings per Share
Attributable to Common Stockholders: Basic $ 0.43 $ 0.40
Diluted $ 0.42 $ 0.39
Weighted-Average Common Shares
Outstanding: Basic 328.6 335.5 Diluted 335.6 345.3
(1) Stock-based compensation related charges are included in
Operating costs of information, Direct and incremental costs of
technology services and Selling and administrative expenses as
follows:
Three Months Ended March 31, (in
millions) 2016 2015 Operating costs of
information $ 1 $ 1 Direct and incremental costs of technology
services 1 — Selling and administrative expenses 5 5
(2) Restructuring and related charges includes severance and
impairment charges and the cost of employee and third-party charges
related to dual running costs for knowledge transfer activities.
Dual running costs for knowledge transfer activities of less than
$1 million for both the three months ended March 31, 2016 and 2015,
respectively, are included primarily in Operating costs of
information and Selling and administrative expenses.
(3) Acquisition-related charges are included primarily in
Selling and administrative expenses.
Table 6 IMS Health Holdings, Inc.
Net Cash Provided by Operating Activities to Unlevered
Free Cash Flow (Preliminary and Unaudited)
Three Months Ended March 31, (in millions)
2016 2015 Net Cash (Used in) Provided by
Operating Activities $ (15 )
$ 30 Capital expenditures (13 ) (9 ) Additions to
computer software (26 ) (23 )
Free Cash Flow
$ (54 ) $ (2 ) Cash
interest payments 33 30 Cash tax payments, net of refunds 19 16
Acquisition related charges (1) 12 8 Severance, transaction &
other payments 29 7 FX hedge (receipts) payments (2 )
(2 )
Unlevered Free Cash Flow $ 37
$ 57
(1) Acquisition-related charges are included primarily in
Selling and administrative expenses.
Table 7 IMS Health Holdings, Inc.
Calculation of Gross Leverage Ratio as of March 31,
2016 (Preliminary and Unaudited) (in
millions) Gross Debt as of March 31, 2016
$ 4,606 Adjusted EBITDA for the year ended
December 31, 2015
886 Less: Adjusted EBITDA for the three
months ended March 31, 2015 (216 ) Add: Adjusted EBITDA for the
three months ended March 31, 2016 236
Adjusted
EBITDA for the twelve months ended March 31, 2016 $
906 Gross Leverage Ratio (Gross Debt/LTM Adjusted
EBITDA) 5.1x Table
8 IMS Health Holdings, Inc. Non-GAAP Adjustments
By Income Statement Line Items (Preliminary and
Unaudited) Three Months Ended March
31, (in millions) 2016 2015
Non-GAAP adjustments included in:
Operating costs of information, exclusive
of depreciation and
amortization 1 1 Direct and incremental costs of technology
services, exclusive of depreciation and amortization 1 1 Selling
and administrative expenses, exclusive of depreciation and
amortization 17 14
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IMS Health Holdings, Inc.Tom KinsleyInvestor Relations,
+1 203-448-4691tkinsley@imshealth.comorTor Constantino, +1
484-567-6732Media Relationstconstantino@us.imshealth.com
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