IQVIA Holdings Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. IQVIA provides analytics, technology, and clinical research services to the life sciences industry through Technology & Analytics Solutions (TAS), Research & Development Solutions (R&D), and Contract Sales & Medical Solutions (CSMS).
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $3.541 billion | $3.438 billion | $7.109 billion | $6.847 billion |
| Operating income | $453 million | $286 million | $948 million | $628 million |
| Net income attributable to IQVIA | $256 million | $175 million | $581 million | $387 million |
| Diluted EPS | $1.34 | $0.90 | $3.02 | $1.99 |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $837 million | $1.406 billion |
- Reported revenue increased 3.0% in Q2 and 3.8% in the first half. Constant-currency growth was approximately 7.1% and 6.9%, respectively.
- Operating margin was approximately 12.8% in Q2 versus 8.3% a year earlier, and 13.3% for the first half versus 9.2%. Lower depreciation and amortization, including merger-related intangibles that became fully amortized in 2021, contributed to the increase.
- Cash from operations fell $569 million year over year in the first half, mainly reflecting lower cash collections related to unearned income, accounts receivable and unbilled services, and other operating balances. Capital spending on property, equipment and software was $338 million.
- Cash and equivalents were $1.428 billion at June 30. Current assets were $4.911 billion and current liabilities $5.104 billion.
- Total debt principal was $12.824 billion, compared with $12.185 billion at December 31, 2021; cash reduced reported net debt to approximately $11.4 billion. The company reported $1.5 billion of available revolving-credit capacity and compliance with material financial covenants.
Changes and segment results
- Q2 revenue growth was led by TAS and R&D. Reported revenue was $1.408 billion for TAS (up 4.1%), $1.950 billion for R&D (up 3.1%), and $183 million for CSMS (down 5.7%).
- Q2 segment profit rose to $384 million for TAS from $352 million and to $398 million for R&D from $343 million; CSMS segment profit declined to $13 million from $20 million.
- R&D growth reflected clinical services and lab testing, with lower COVID-19-related work in the Americas partly offset by growth in Europe and Africa and Asia-Pacific. CSMS had constant-currency revenue growth despite a reported decline, reflecting foreign-exchange effects.
- Other expense was $33 million in Q2 versus $29 million of other income in Q2 2021, mainly due to foreign-currency and mutual-fund investment losses. First-half operating cash flow was also lower, while investing outflows increased primarily because of acquisitions.
- The company repurchased 4.5 million shares for $993 million in the first half and had approximately $1.5 billion of authorization remaining at June 30.
Outlook, risks, and unusual items
- No specific full-year revenue or earnings guidance is provided in the supplied filing text. Management said cash, operating cash generation, and available credit were expected to fund operating needs, capital expenditures, contractual obligations, and debt service for at least the next 12 months.
- Remaining performance obligations were approximately $28.7 billion; IQVIA expected to recognize about 30% over the next 12 months. R&D contracted backlog increased to $25.6 billion from $24.8 billion at year-end, with approximately $7.0 billion expected to convert to revenue over the next 12 months. Backlog and remaining performance obligations are not identical measures.
- Restructuring actions to consolidate functions, eliminate redundant roles, and align resources were expected to continue into 2023. The June 30 restructuring accrual was $23 million; most was expected to be paid in 2022 and 2023.
- Risks identified include contract termination or delay, COVID-19 and other disruptions, privacy and data-security requirements, foreign-exchange movements, inflation and general economic conditions, backlog conversion, and acquisition integration. Approximately 35% of first-half revenue was denominated in currencies other than the U.S. dollar.
- Management did not expect pending legal and tax matters, individually or collectively, to have a material adverse effect, but noted outcomes could differ. Disclosed matters include Veeva counterclaims seeking damages exceeding $200 million and a MedImpact suit seeking approximately $100 million plus potential treble damages. Appeals and other proceedings remain ongoing.
- Q2 comprehensive loss attributable to IQVIA was $22 million despite net income of $256 million, largely reflecting foreign-currency translation losses. The company also reported a $1.250 billion additional Term A borrowing in June, used partly to repay revolving-credit borrowings and partly for general corporate purposes.
Investor verification points
- Check whether constant-currency growth, segment profitability, and R&D backlog conversion persist as COVID-19-related work and foreign-exchange effects change.
- Monitor operating cash flow, receivables and unbilled services, capital spending, and cash conversion relative to net income.
- Assess debt levels, floating-rate exposure, refinancing needs, available credit, and continued covenant compliance.
- Track share repurchases against liquidity and leverage, and confirm the remaining authorization and actual repurchase pace.
- Review developments in the Veeva, MedImpact, and Korean matters, including potential outcomes and any change to management’s assessment.