Quintiles IMS Holdings 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.
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.”
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.
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.
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.
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.