Third-Quarter 2015 Operating Results
Revenue for the third quarter of $735 million was up 23.0 percent on a constant currency basis and 12.0 percent on a reported basis compared with the third quarter of 2014. Excluding the impact of Cegedim's CRM and Strategic Data businesses ("the Cegedim Acquisition"), revenue was up 4.1 percent on a constant currency basis and down 4.4 percent on a reported basis, with the difference entirely due to the year-over-year strengthening of the U.S. dollar versus key currencies in which the company transacts business.
The company's revenue growth in the third quarter included a 42.4 percent increase in technology services revenue on a constant currency basis, up 31.9 percent on a reported basis, versus the same period last year. Information offerings revenue was up 8.9 percent on a constant currency basis and down 2.3 percent reported. Emerging markets revenue increased 30.5 percent in the third quarter on a constant currency basis and 11.2 percent on a reported basis. Developed markets revenue grew 21.5 percent on a constant currency basis and 12.2 percent reported.
Excluding the Cegedim Acquisition, technology services revenue increased 10.1 percent at constant currency and 3.6 percent reported. Information offerings revenue was flat on a constant currency basis and declined 10.1 percent on a reported basis.
Adjusted EBITDA of $218 million improved 8.6 percent at constant currency and decreased 1.5 percent reported compared with the third quarter of 2014.
"We had another quarter of strong financial and operating performance; this marks our 19th consecutive quarter of revenue and Adjusted EBITDA growth at constant currency," said Ari Bousbib, chairman and CEO, IMS Health. "We are making excellent progress integrating the Cegedim acquisition and are especially pleased with the traction that the NexxusTM Suite of applications and the newly integrated Mobile Intelligence CRM platform are gaining in the marketplace, as well as the continued strong growth in our Real-World Evidence offerings."
Third-quarter 2015 net income was $43 million compared with $47 million in last year's third quarter. Adjusted Net Income for the third quarter was $129 million, up 10.6 percent on a constant currency basis and 3.0 percent on a reported basis.
Diluted earnings per share was $0.13 in the third quarter, compared with $0.14 per share in the third quarter of 2014.
Adjusted Diluted Earnings per Share increased 12.6 percent at constant currency and 4.9 percent on a reported basis to $0.38 in the third quarter.
Year-to-date 2015 Operating Results
Revenue for the nine months ended September 30, 2015 of $2,109 million increased 18.3 percent on a constant currency basis and 7.4 percent reported, compared with the first nine months of 2014. Excluding the impact of the Cegedim Acquisition, revenue for the nine months ended September 30, 2015 was up 5.4 percent on a constant currency basis and down 3.7 percent on a reported basis. Adjusted EBITDA of $654 million increased 9.3 percent at constant currency and declined 1.5 percent reported, compared with the first nine months of 2014. Net income for the nine months ended September 30, 2015 was $388 million, compared with a net loss of $197 million in the prior-year period, which included one-time IPO-related charges. Adjusted Net Income was $390 million, up 29.5 percent at constant currency and 18.6 percent reported, from the prior-year period. Diluted Earnings per Share was $1.14 in the first nine months of 2015, compared with a loss of $0.63 per share in the prior-year period. Adjusted Diluted Earnings per Share increased 22.9 percent on a constant currency basis and 12.6 percent on a reported basis to $1.15 in the first nine months, compared with $1.02 in the prior-year period.
As of September 30, 2015, cash and cash equivalents were $394 million and the principal amount of debt was $4,296 million, resulting in net debt of $3,902 million. At the end of the third quarter of 2015, IMS Health's Gross Leverage Ratio was 5.0 times trailing 12 month Adjusted EBITDA, compared with 4.3 times at December 31, 2014.
Net cash provided by operating activities was $111 million in the third quarter and capital expenditures and additions to deferred software were $38 million. Unlevered Free Cash Flow for the third quarter was $141 million, or 65 percent of Adjusted EBITDA.
2015 Full-Year Guidance
IMS Health expects constant currency results for 2015 as follows: Revenue growth of 19 to 20 percent, Adjusted EBITDA growth of approximately 11 percent, Adjusted Net Income growth of 22 to 23 percent and Adjusted Diluted Earnings per Share growth of 17 to 18 percent.
Assuming current foreign exchange rates hold constant through the end of the year, IMS Health expects reported revenue growth of approximately 10 percent, Adjusted EBITDA growth of approximately 1 percent, Adjusted Net Income growth of 10 to 11 percent and Adjusted Diluted Earnings per Share growth of 5 to 6 percent.
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.
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.
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