U.S. Markets closed

Premier Inc. Reports Fiscal 2020 Third-Quarter Results

  • Oops!
    Something went wrong.
    Please try again later.
·30 min read
  • Oops!
    Something went wrong.
    Please try again later.

Premier Inc. (NASDAQ: PINC) today reported financial results for the fiscal 2020 third quarter ended March 31, 2020.

All results presented in this press release reflect continuing operations following completion of the sale and exit of the Specialty Pharmacy business on June 7, 2019.

Q3 2020 Highlights:

  • GAAP net revenue increased 11% to $334.8 million from $301.2 million a year ago; Supply Chain Services segment revenue increased 14% to $238.6 million from $208.6 million a year ago; and Performance Services segment revenue increased 4% to $96.2 million from $92.6 million a year ago.

  • GAAP net income was $73.2 million, compared with $75.3 million a year ago; diluted earnings per share was $0.54 compared with income of $0.49 per share a year ago.

  • Non-GAAP adjusted EBITDA* increased 12% to $155.9 million from $138.7 million a year ago.

  • Non-GAAP adjusted fully distributed net income* increased 4% to $88.9 million from $85.7 million a year ago and non-GAAP adjusted fully distributed earnings per share increased 10% to $0.73 from $0.66.

  • To expand Premier’s long-term Contigo Health direct-to-employer, high-value care initiative, on May 4, 2020, the company acquired Health Design Plus (HDP), a third-party administrator and care management company specializing in the development and administration of innovative health benefits solutions for employer clients and health system partners, for a total consideration of approximately $25.0 million, including a 3% equity stake in the combined Contigo Health-HDP company.

* Descriptions of non-GAAP financial measures are provided below under "Use and Definition of Non-GAAP Financial Measures," and reconciliations are provided in the tables at the end of this release.

"Premier delivered a solid financial performance in the fiscal third quarter, reflecting continued momentum in our Supply Chain Services segment and revenue growth in our Performance Services segment that exceeded our expectations," said Susan DeVore, chief executive officer. "I am proud that Premier is successfully managing through the COVID-19 pandemic, mobilizing our full resources for our member health systems and the patients they serve. Our teams responded quickly to implement our business continuity and disaster preparedness protocols, rapidly addressing our members’ critical supply chain, clinical and technology needs.

"We believe Premier will continue adding significant value to our members through the duration of the COVID-19 pandemic and beyond, given our unique position as the nexus between healthcare providers, distributors, manufacturers and government agencies, as well as our differentiated ability to facilitate supply, aggregate demand and provide critical flow of timely and accurate information for the industry," DeVore continued. "We have also been leveraging our unique combination of analytics and technology capabilities to help clinicians deliver informed, coordinated patient care during the COVID-19 pandemic, to predict disease progression and resurgence as the nation begins its recovery, and ultimately to improve the quality of medical interventions and the spread of this and other diseases in the future.

"Looking ahead, we will continue to operate from a position of financial strength and stability and expect to deliver results generally within our full-year guidance range, subject to the ultimate impact of COVID-19, which we expect to pressure profitability in the fourth quarter even as we experience positive net revenue trends," DeVore said. "Our solid balance sheet, ample liquidity and strong free cash flow give us the financial flexibility to continue creating value for our members and stockholders."

Consolidated Fiscal 2020 Third-Quarter Financial Highlights

Consolidated Third-Quarter Financial Highlights

Three Months Ended March 31,

Nine Months Ended March 31,

(in thousands, except per share data)

2020

2019

% Change

2020

2019

% Change

Net Revenue (a):

Supply Chain Services:

Net administrative fees

$

174,049

$

164,534

6

%

$

518,566

$

492,229

5

%

Other services and support

3,396

2,484

37

%

8,439

6,520

29

%

Services

177,445

167,018

6

%

527,005

498,749

6

%

Products

61,183

41,568

47

%

167,344

129,441

29

%

Total Supply Chain Services (a)

238,628

208,586

14

%

694,349

628,190

11

%

Performance Services (a)

96,195

92,627

4

%

262,490

273,214

(4

)%

Total (a)

$

334,823

$

301,213

11

%

$

956,839

$

901,404

6

%

Net income from continuing operations

$

73,212

$

75,265

(3

)%

$

235,726

$

264,448

(11

)%

Net income from continuing operations attributable to stockholders

$

340,726

$

266,524

28

%

$

620,262

$

280,128

121

%

Adjusted net income from continuing operations (b)

$

66,145

$

63,503

4

%

$

205,719

$

225,945

(9

)%

Weighted average shares outstanding:

Basic

69,451

62,020

12

%

65,582

58,346

12

%

Diluted

122,470

129,072

(5

)%

124,030

132,249

(6

)%

Earnings per share attributable to stockholders from continuing operations:

Basic

$

4.91

$

4.30

14

%

$

9.46

$

4.80

97

%

Diluted (b)

$

0.54

$

0.49

10

%

$

1.66

$

1.71

(3

)%

NON-GAAP FINANCIAL MEASURES:

Adjusted EBITDA (a) (c):

Supply Chain Services

$

149,212

$

134,805

11

%

$

447,081

$

406,139

10

%

Performance Services

34,634

33,235

4

%

84,977

100,910

(16

)%

Total segment adjusted EBITDA

183,846

168,040

9

%

532,058

507,049

5

%

Corporate

(27,957

)

(29,323

)

(5

)%

(87,508

)

(85,862

)

2

%

Total (a)

$

155,889

$

138,717

12

%

$

444,550

$

421,187

6

%

Adjusted fully distributed net income (c)

$

88,908

$

85,722

4

%

$

265,668

$

262,722

1

%

Earnings per share on adjusted fully distributed net income - diluted (a) (c)

$

0.73

$

0.66

10

%

$

2.14

$

1.99

8

%

(a) Bolded measures correspond to company guidance.

(b) Earnings per share attributable to stockholders excludes the adjustment of redeemable limited partners' capital to redemption amount and the net income attributable to non-controlling interest in Premier LP if Class B common stock is determined to be dilutive. Likewise, earnings per share attributable to stockholders includes the adjustment of redeemable limited partners' capital to redemption amount and the net income attributable to non-controlling interest in Premier LP if Class B common stock is determined to be antidilutive.

(c) See attached supplemental financial information for reconciliation of reported GAAP results to Non-GAAP results.

Results of Operations for the Three Months Ended March 31, 2020

For the fiscal third quarter ended March 31, 2020, Premier generated GAAP net revenue of $334.8 million, an increase of 11% from $301.2 million for the same period a year ago.

GAAP net income for the fiscal third quarter was $73.2 million, compared with $75.3 million a year ago. In accordance with GAAP, fiscal 2020 and 2019 third-quarter net income attributable to stockholders includes non-cash adjustments of $302.6 million and $235.4 million, respectively, to reflect the change in the redemption value of limited partners’ Class B common unit ownership at the end of each period. These non-cash adjustments resulted primarily from changes in the number of Class B common units outstanding and the company’s stock price between periods and do not reflect results of the company’s business operations. After these non-cash adjustments, the company reported net income attributable to stockholders of $340.7 million, or $0.54 per diluted share, compared with net income of $266.5 million, or $0.49 per diluted share, a year ago. See "Calculation of GAAP Earnings per Share" in the income statement section of this press release.

Fiscal third-quarter non-GAAP adjusted EBITDA of $155.9 million increased 12% from $138.7 million for the same period the prior year.

Non-GAAP adjusted fully distributed net income for the fiscal third quarter of $88.9 million increased 4% from $85.7 million for the same period a year ago. Non-GAAP adjusted fully distributed earnings per share increased 10% to $0.73 from $0.66 for the same period a year ago. Adjusted fully distributed earnings per share is a non-GAAP financial measure that represents net income, adjusted for non-recurring and non-cash items, attributable to all stockholders as if all Class B stockholders exchanged their Class B common units and associated Class B common shares for Class A common shares.

Segment Results

Supply Chain Services
For the fiscal third quarter ended March 31, 2020, Supply Chain Services segment net revenue of $238.6 million increased 14% from $208.6 million a year ago. Net administrative fees revenue of $174.0 million increased 6% from $164.5 million a year ago, primarily due to continuing contract penetration driven largely by the company’s high-compliance portfolio programs and revenue from new contract categories and suppliers.

Products revenue of $61.2 million increased 47% from $41.6 million a year ago, primarily driven by strong growth in PremierPro brand commodity products related to healthcare and food service providers and timing of revenue from ongoing aggregated purchasing of certain products relative to the prior year.

Supply Chain Services segment non-GAAP adjusted EBITDA for the fiscal 2020 third quarter of $149.2 million increased 11% from $134.8 million for the same period a year ago, primarily driven by growth in net administrative fees revenue.

Performance Services
For the fiscal third quarter ended March 31, 2020, Performance Services segment net revenue of $96.2 million increased 4% from $92.6 million for the same quarter a year ago. The increase was primarily driven by growth in licensed technology engagements and clinical decision support technology, partially offset by the timing of certain consulting and technology engagements, as well as lower revenue associated with the CMS government contract at reduced rates, which ended on March 31, 2020.

Performance Services segment non-GAAP adjusted EBITDA for the fiscal 2020 third quarter of $34.6 million increased 4% from $33.2 million for the same period a year ago. The increase was primarily due to increased revenue, partially offset by ongoing strategic investments in the company’s Contigo Health direct-to-employer, high-value care network and clinical decision support technology.

Results of Operations for the Nine Months Ended March 31, 2020

For the nine months ended March 31, 2020, GAAP net revenue of $956.8 million increased 6% from $901.4 million for the same period a year ago.

For the nine-month period, GAAP net income totaled $235.7 million, compared with $264.4 million for the same period a year ago. Fiscal 2020 and 2019 nine-month GAAP net income attributable to stockholders required non-cash adjustments of $516.7 million and $178.9 million, respectively, to reflect changes in redemption value of the limited partners Class B common unit ownership at the end of each period. These non-cash adjustments resulted primarily from changes in the number of Class B common units outstanding and the company’s stock price between periods and do not reflect results of the company’s business operations. After these non-cash adjustments, the company reported net income attributable to stockholders of $620.3 million compared with $280.1 million a year ago. On a diluted per-share basis, net income totaled $1.66 compared with $1.71 for the same period a year ago. See "Calculation of GAAP Earnings per Share" in the income statement section of this press release.

For the nine months ended March 31, 2020, non-GAAP adjusted EBITDA of $444.6 million increased 6% from $421.2 million for the same period last year. Non-GAAP adjusted fully distributed net income of $265.7 million increased 1% from $262.7 million, while non-GAAP adjusted fully distributed earnings per share of $2.14 increased 8% from $1.99.

Supply Chain Services segment net revenue for the first nine months of fiscal 2020 of $694.3 million increased 11% from $628.2 million a year earlier. Supply Chain Services segment adjusted EBITDA of $447.1 million increased 10% from $406.1 million for the prior year.

Performance Services segment net revenue for the nine months of fiscal 2020 of $262.5 million decreased 4% from $273.2 million a year earlier. Segment adjusted EBITDA of $85.0 million decreased 16% from $100.9 million for the prior year.

Cash Flows and Liquidity

Net cash provided by operating activities was $248.1 million for the nine months ended March 31, 2020, compared with $356.6 million for the same period last year. The decrease was primarily due to the addition of the prepaid contract administrative fee share of $92.1 million for one-time rebates to certain Acurity members, as agreed to by Acurity prior to entering into a purchase agreement with Premier, which was excluded from the purchase price of the Acurity and Nexera asset acquisition. In addition, the company funded prepayments during March 2020 to procure personal protective equipment for members related to COVID-19. The decreases were partially offset by a decline in operating expenses primarily due to the remeasurement of the TRA, partially offset by increased acquisition and disposition related expenses associated with certain strategic initiatives. At March 31, 2020, the company’s cash and cash equivalents totaled $241.7 million, compared with $141.1 million at June 30, 2019. At March 31, 2020, the company had an outstanding balance of $250.0 million on its five-year, $1.0 billion revolving credit facility, of which $150.0 million was subsequently repaid in late April 2020.

Non-GAAP free cash flow for the nine months ended March 31, 2020 was $213.9 million, or 48% of non-GAAP adjusted EBITDA, compared with $224.0 million, or 53% of non-GAAP adjusted EBITDA, for the same period a year ago. The decrease primarily resulted from the same factors that impacted net cash provided by operating activities, partially offset by reduced distributions to limited partners due to change in ownership. The company defines free cash flow as cash provided by operating activities less quarterly tax distributions and annual TRA payments to limited partners and purchases of property and equipment (see free cash flow reconciliation to net cash provided by operating activities in the tables section of this press release).

Fiscal 2020 Outlook and Guidance

Based on results for the nine months ended March 31, 2020, management’s expectations for the remainder of fiscal 2020, the realization in all material respects of the company’s underlying guidance assumptions and the estimated financial impact of COVID-19 on the company, Premier currently expects to complete fiscal 2020 within its previously announced guidance ranges. However, due to uncertainty regarding the extent and duration of the unprecedented COVID-19 pandemic, it is possible that Supply Chain Services revenue might slightly exceed the top end of its current range, while non-GAAP adjusted EBITDA and fully distributed earnings per share could finish below their respective ranges. Current expectations are as follows:

  • Supply Chain Services segment revenue is currently expected to perform at or above the top end of the current range of $895.0 million to $930.0 million for the fiscal year. This outlook assumes that strong gains in direct sourcing revenue from ongoing COVID-19-related efforts to secure certain personal protective equipment and other high-demand supplies, will more than offset anticipated softness in net administrative fees revenue due to the pandemic-induced interruption of elective procedures, lower overall occupancy and utilization and the slowdown of alternate site spending in non-healthcare related areas.

  • Performance Services segment revenue is expected to be at the low end of the current range of $340.0 million to $354.0 million, due to pressure on new and existing consulting and technology engagements, which are being delayed and extended as healthcare providers focus on the pandemic.

  • Consolidated revenue is projected to be in the upper end of the current range of $1.235 billion to $1.284 billion.

  • Non-GAAP adjusted EBITDA is currently anticipated to be near or potentially a few million dollars below the low end of the current range of $566.0 million to $589.0 million, due to the pandemic-related expectation that fourth-quarter Supply Chain Services revenue growth will be largely driven by a mix shift to the low-margin direct sourcing products business, while Performance Services revenues will be further pressured by delays in consulting and technology projects as healthcare providers focus on the pandemic.

  • As a result, non-GAAP adjusted fully distributed earnings per share is currently expected to be near or potentially a few cents below the low end of the current range of $2.76 to $2.89.

Fiscal 2020 Financial Guidance *

Premier, Inc. maintains full-year fiscal 2020 financial guidance, as follows:

Current*

(in millions, except per share data)

FY 2020

% YoY Increase

Net Revenue:

Supply Chain Services segment

$895.0 - $930.0

5% - 9%

Performance Services segment

$340.0 - $354.0

(6)% - (2)%

Total Net Revenue

$1,235.0 - $1,284.0

1% - 5%

Non-GAAP adjusted EBITDA

$566.0 - $589.0

1% - 5%

Non-GAAP adjusted fully distributed EPS

$2.76 - $2.89

4% - 9%

* The company does not meaningfully reconcile guidance for non-GAAP adjusted EBITDA and non-GAAP adjusted fully distributed earnings per share to net income attributable to stockholders or earnings per share attributable to stockholders because the company cannot provide guidance for more significant reconciling items between net income attributable to stockholders and adjusted EBITDA and between earnings per share attributable to stockholders and non-GAAP adjusted fully distributed earnings per share without unreasonable effort. This is due to two primary reasons:
• Reasonable guidance cannot be provided for reconciling the adjustment of redeemable limited partners’ capital to redemption amount – historically the largest adjustment in the reconciliation from non-GAAP to GAAP amounts – due to the fact that the increase or decrease in this item is based on the change in the number of shares of Class B stock outstanding and change in stock price between quarters, which the company cannot predict, control or reasonably estimate.
• Reasonable guidance cannot be provided for earnings per share attributable to stockholders because the ongoing quarterly member-owner exchange of Class B common stock and corresponding Class B units into shares of Class A common stock impacts the number of shares of Class A common stock outstanding each quarter, which the company cannot predict, control or reasonably estimate. Member owners have the right, but not the obligation, to exchange shares on a quarterly basis, and the company has the discretion to settle any exchanged shares for Class A common stock, cash, or a combination thereof, neither of which can be predicted, controlled or reasonably estimated at this time.

Consistent with prior years, Premier plans to address fiscal 2021 guidance in mid-August, when the company reports fiscal 2020 results. Management will continue to assess the course of the pandemic and evaluate additional trends and data to inform its approach for establishing fiscal 2021 guidance.

Health Design Plus Acquisition

On May 4, 2020, Premier acquired Health Design Plus (HDP), a third-party administrator (TPA) and care management company specializing in the development and administration of customized health benefits solutions for employer clients and health system partners. The company offers both TPA services and nationally recognized Centers of Excellence health benefit programs for many innovative employers, including well-known Fortune 25 brands. HDP is expected to be an integral part of Premier’s long-term Contigo Health direct-to-employer, high-value care strategy. It will continue to provide specialized TPA services as well as support Contigo Health as it expands its product pilot programs in various markets with multiple employers. HDP is also expected to further enhance and expand employer-focused products by expanding the Center of Excellence program, bundling pricing of care episodes for employers, and providing capability enhancements for employers’ health benefit plans. Premier acquired HDP from University Hospitals Health System for a total consideration of approximately $25.0 million, including a 3% equity stake in the combined Contigo Health-HDP company.

Conference Call

Premier management will host a conference call and live audio webcast on Tues., May 5, 2020, at 8:00 a.m. ET, to discuss the company’s financial results. The conference call can be accessed through a link provided on the investor relations page on Premier’s website at investors.premierinc.com. Those wanting to participate by phone may do so by dialing 844.296.7719 and providing the operator with conference ID number: 7033659. International callers should dial 574.990.1041 and provide the same passcode. The company encourages callers to dial in at least five minutes before the start of the call to register. The archived webcast will be accessible on Premier’s investor relations page.

About Premier Inc.

Premier Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of more than 4,000 U.S. hospitals and health systems and approximately 175,000 other providers and organizations to transform healthcare. With integrated data and analytics, collaboratives, supply chain solutions, and consulting and other services, Premier enables better care and outcomes at a lower cost. Premier plays a critical role in the rapidly evolving healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide. Headquartered in Charlotte, N.C., Premier is passionate about transforming American healthcare. Please visit Premier’s news and investor sites on www.premierinc.com; as well as Twitter, Facebook, LinkedIn, YouTube, Instagram and Premier’s blog for more information about the company.

Use and Definition of Non-GAAP Measures

Premier uses EBITDA, adjusted EBITDA, segment adjusted EBITDA, adjusted fully distributed net income, adjusted fully distributed earnings per share, and free cash flow to facilitate a comparison of the company’s operating performance on a consistent basis from period to period and to provide measures that, when viewed in combination with its results prepared in accordance with GAAP, allow for a more complete understanding of factors and trends affecting the company’s business than GAAP measures alone. The company believes adjusted EBITDA and segment adjusted EBITDA assist its board of directors, management and investors in comparing the company’s operating performance on a consistent basis from period to period by removing the impact of the company’s asset base (primarily depreciation and amortization) and items outside the control of management (taxes), as well as other non-cash (impairment of intangible assets and purchase accounting adjustments) and non-recurring items, from operating results.

In addition, adjusted fully distributed net income and adjusted fully distributed earnings per share eliminate the variability of non-controlling interest as a result of member owner exchanges of Class B common units and corresponding Class B common stock into shares of Class A common stock and other potentially dilutive equity transactions which are outside of management’s control. Adjusted fully distributed net income is defined as net income attributable to Premier (i) excluding income tax expense, (ii) excluding the impact of adjustment of redeemable limited partners’ capital to redemption amount, (iii) excluding the effect of non-recurring and non-cash items, (iv) assuming the exchange of all the Class B common units for shares of Class A common stock, which results in the elimination of non-controlling interest in Premier LP, and (v) reflecting an adjustment for income tax expense on non-GAAP fully distributed net income before income taxes at the company’s estimated effective income tax rate. We define adjusted fully distributed earnings per share as adjusted fully distributed net income divided by diluted weighted average shares. These measures assist our board of directors, management and investors in comparing our net income and earnings per share on a consistent basis from period to period because these measures remove non-cash and non-recurring items, and eliminate the variability of non-controlling interest that results from member owner exchanges of Class B common units into shares of Class A common stock.

EBITDA is defined as net income before loss from discontinued operations, net of tax, interest and investment income, net, income tax expense, depreciation and amortization and amortization of purchased intangible assets. Adjusted EBITDA is defined as EBITDA before merger and acquisition related expenses and non-recurring, non-cash or non-operating items, and including equity in net income of unconsolidated affiliates. For all Non-GAAP financial measures, we consider non-recurring items to be income or expenses and other items that have not been earned or incurred within the prior two years and are not expected to recur within the next two years. Such items include certain strategic and financial restructuring expenses. Non-operating items include gains or losses on the disposal of assets and interest and investment income or expense.

Segment adjusted EBITDA is defined as the segment's net revenue less cost of revenue and operating expenses directly attributable to the segment, excluding depreciation and amortization, amortization of purchased intangible assets, merger and acquisition related expenses and non-recurring or non-cash items, and including equity in net income of unconsolidated affiliates. Operating expenses directly attributable to the segment include expenses associated with sales and marketing, general and administrative, and product development activities specific to the operation of each segment. General and administrative corporate expenses that are not specific to a particular segment are not included in the calculation of segment adjusted EBITDA. Segment Adjusted EBITDA also excludes any income and expense that has been classified as discontinued operations.

Adjusted EBITDA is a supplemental financial measure used by the company and by external users of the company’s financial statements.

Management considers adjusted EBITDA an indicator of the operational strength and performance of the company’s business. Adjusted EBITDA allows management to assess performance without regard to financing methods and capital structure and without the impact of other matters that management does not consider indicative of the operating performance of the business. Segment adjusted EBITDA is the primary earnings measure used by management to evaluate the performance of the company’s business segments.

Free cash flow is defined as net cash provided by operating activities from continuing operations less distributions and tax receivable agreement payments to limited partners and purchases of property and equipment. Free cash flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayments. Management believes free cash flow is an important measure because it represents the cash that the company generates after payment of tax distributions to limited partners and capital investment to maintain existing products and services and ongoing business operations, as well as development of new and upgraded products and services to support future growth. Free cash flow is important because it allows the company to enhance stockholder value through acquisitions, partnerships, joint ventures, investments in related or complimentary businesses and/or debt reduction.

To properly and prudently evaluate our business, readers are urged to review the reconciliation of these non-GAAP financial measures, as well as the other financial tables, included at the end of this release. Readers should not rely on any single financial measure to evaluate the company’s business. In addition, the non-GAAP financial measures used in this release are susceptible to varying calculations and may differ from, and may therefore not be comparable to, similarly titled measures used by other companies.

Further information on Premier’s use of non-GAAP financial measures is available in the "Our Use of Non-GAAP Financial Measures" section of Premier’s Form 10-K for the year ended June 30, 2019.

Forward-Looking Statements

Statements made in this release that are not statements of historical or current facts, such as those related to the expected financial and operational impacts of the COVID-19 pandemic on our business segments, our ability to manage expenses during the COVID-19 pandemic, current market environment and uncertainties, expected financial performance, non-GAAP free cash flow generation, the statements related to fiscal 2020 outlook and guidance and the assumptions underlying such guidance, and the anticipated financial and operational impact of the acquisition of HDP are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Premier to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. Accordingly, readers should not place undue reliance on any forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in the conditional or future tenses or that include terms such as "believes," "belief," "expects," "estimates," "intends," "anticipates" or "plans" to be uncertain and forward-looking. Forward-looking statements may include comments as to Premier’s beliefs and expectations as to future events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside Premier’s control. More information on potential factors that could affect Premier’s financial results is included from time to time in the "Cautionary Note Regarding Forward-Looking Statements," "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" sections of Premier’s periodic and current filings with the SEC, including those discussed under the "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" section of Premier’s Form 10-K for the year ended June 30, 2019 as well as the Form 10-Q for the quarter ended March 31, 2020, expected to be filed with the SEC shortly after the date of this release, and also made available on Premier’s website at investors.premierinc.com. Forward-looking statements speak only as of the date they are made, and Premier undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events that occur after that date, or otherwise.

(Tables Follow)

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

Three Months Ended March 31,

Nine Months Ended March 31,

2020

2019

2020

2019

Net revenue:

Net administrative fees

$

174,049

$

164,534

$

518,566

$

492,229

Other services and support

99,591

95,111

270,929

279,734

Services

273,640

259,645

789,495

771,963

Products

61,183

41,568

167,344

129,441

Net revenue

334,823

301,213

956,839

901,404

Cost of revenue:

Services

49,007

46,545

143,965

133,107

Products

54,121

39,496

150,415

124,024

Cost of revenue

103,128

86,041

294,380

257,131

Gross profit

231,695

215,172

662,459

644,273

Operating expenses:

Selling, general and administrative

115,289

113,336

315,311

320,198

Research and development

628

296

1,808

928

Amortization of purchased intangible assets

13,966

13,572

38,948

39,787

Operating expenses

129,883

127,204

356,067

360,913

Operating income

101,812

87,968

306,392

283,360

Equity in net income of unconsolidated affiliates

4,442

553

11,038

4,687

Interest and investment loss, net

(9,966

)

(1,081

)

(9,849

)

(2,628

)

(Loss) gain on FFF put and call rights

(13,906

)

(4,109

)

8,477

3,458

Other (expense) income

(5,005

)

3,671

(1,996

)

1,362

Other (expense) income, net

(24,435

)

(966

)

7,670

6,879

Income before income taxes

77,377

87,002

314,062

290,239

Income tax expense

4,165

11,737

78,336

25,791

Net income from continuing operations

73,212

75,265

235,726

264,448

Income (loss) from discontinued operations, net of tax

5

(1,463

)

1,009

(3,862

)

Net income

73,217

73,802

236,735

260,586

Net income from continuing operations attributable to noncontrolling interest

(35,055

)

(44,135

)

(132,189

)

(163,230

)

Net (income) loss from discontinued operations attributable to noncontrolling interest

(3

)

747

(480

)

2,098

Net income attributable to non-controlling interest in Premier LP

(35,058

)

(43,388

)

(132,669

)

(161,132

)

Adjustment of redeemable limited partners' capital to redemption amount

302,569

235,394

516,725

178,910

Net income attributable to stockholders

$

340,728

$

265,808

$

620,791

$

278,364

Calculation of GAAP Earnings per Share

Numerator for basic earnings per share:

Net income from continuing operations attributable to stockholders

$

340,726

$

266,524

$

620,262

$

280,128

Net income (loss) from discontinued operations attributable to stockholders

2

(716

)

529

(1,764

)

Net income attributable to stockholders

$

340,728

$

265,808

$

620,791

$

278,364

Numerator for diluted earnings per share:

Net income from continuing operations attributable to stockholders

$

340,726

$

266,524

$

620,262

$

280,128

Adjustment of redeemable limited partners' capital to redemption amount

(302,569

)

(235,394

)

(516,725

)

(178,910

)

Net income from continuing operations attributable to non-controlling interest in Premier LP

35,055

44,135

132,189

163,230

Net income from continuing operations

$

73,212

$

75,265

$

235,726

$

264,448

Tax effect on Premier, Inc. net income

(7,067

)

(11,762

)

(30,007

)

(38,503

)

Adjusted net income from continuing operations

$

66,145

$

63,503

$

205,719

$

225,945

Net income (loss) from discontinued operations attributable to stockholders

$

2

$

(716

)

$

529

$

(1,764

)

Net income (loss) from discontinued operations attributable to non-controlling interest in Premier LP

3

(747

)

480

(2,098

)

Adjusted net income (loss) from discontinued operations

$

5

$

(1,463

)

$

1,009

$

(3,862

)

Adjusted net income

$

66,150

$

62,040

$

206,728

$

222,083

Denominator for basic earnings per share:

Weighted average shares

69,451

62,020

65,582

58,346

Denominator for diluted earnings per share:

Weighted average shares

69,451

62,020

65,582

58,346

Effect of dilutive securities:

Stock options

232

474

357

630

Restricted stock

216

256

239

304

Performance share awards

197

-

66

-

Class B shares outstanding

52,374

66,322

57,786

72,969

Weighted average shares and assumed conversions

122,470

129,072

124,030

132,249

Basic earnings per share:

Basic earnings per share from continuing operations

$

4.91

$

4.30

$

9.46

$

4.80

Basic earnings (loss) per share from discontinued operations

-

(0.01

)

0.01

(0.03

)

Basic earnings per share attributable to stockholders

$

4.91

$

4.29

$

9.47

$

4.77

Diluted earnings per share:

Diluted earnings per share from continuing operations

$

0.54

$

0.49

$

1.66

$

1.71

Diluted earnings (loss) per share from discontinued operations

-

(0.01

)

-

(0.03

)

Diluted earnings per share attributable to stockholders

$

0.54

$

0.48

$

1.66

$

1.68

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

June 18, 2020

June 18, 2020

Assets

Cash and cash equivalents

$

241,734

$

141,055

Accounts receivable (net of $1,125 and $739 allowance for doubtful accounts, respectively)

139,902

168,115

Contract assets

234,467

205,509

Inventory

48,522

51,032

Prepaid expenses and other current assets

87,746

23,765

Current assets of discontinued operations

-

24,568

Total current assets

752,371

614,044

Property and equipment (net of $431,633 and $359,235 accumulated depreciation, respectively)

203,512

205,108

Intangible assets (net of $233,888 and $197,858 accumulated amortization, respectively)

420,104

270,722

Goodwill

929,615

880,709

Deferred income tax assets

436,047

422,014

Deferred compensation plan assets

42,780

45,466

Investments in unconsolidated affiliates

120,642

99,636

Operating lease right-of-use assets

59,901

-

Other assets

98,097

31,868

Total assets

$

3,063,069

$

2,569,567

Liabilities, redeemable limited partners' capital and stockholders' equity (deficit)

Accounts payable

$

62,304

$

54,540

Accrued expenses

67,289

82,476

Revenue share obligations

149,976

137,359

Limited partners' distribution payable

9,314

13,202

Accrued compensation and benefits

56,208

70,799

Deferred revenue

38,042

35,623

Current portion of tax receivable agreements

18,118

17,505

Line of credit and current portion of long-term debt

254,745

27,608

Other liabilities

30,187

7,113

Current liabilities of discontinued operations

-

11,797

Total current liabilities

686,183

458,022

Long-term debt, less current portion

4,828

6,003

Tax receivable agreements, less current portion

276,739

326,607

Deferred compensation plan obligations

42,780

45,466

Deferred tax liabilities

13,140

4,766

Deferred consideration

112,917

-

Operating lease liabilities, less current portion

55,336

-

Other liabilities

71,265

67,683

Total liabilities

1,263,188

908,547

Redeemable limited partners' capital

1,658,419

2,523,270

Stockholders' equity (deficit):

Class A common stock, $0.01 par value, 500,000,000 shares authorized; 71,070,617 shares issued and outstanding at March 31, 2020 and 64,357,305 shares issued and 61,938,157 shares outstanding at June 30, 2019

711

644

Class B common stock, $0.000001 par value, 600,000,000 shares authorized; 50,715,564 and 64,548,044 shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively

-

-

Treasury stock, at cost; 0 and 2,419,148 shares at March 31, 2020 and June 30, 2019, respectively

-

(87,220

)

Additional paid-in-capital

140,751

-

Accumulated deficit

-

(775,674

)

Total stockholders' equity (deficit)

141,462

(862,250

)

Total liabilities, redeemable limited partners' capital and stockholders' equity (deficit)

$

3,063,069

$

2,569,567

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Nine Months Ended March 31,

2020

2019

Operating activities

Net income

$

236,735

$

260,586

Adjustments to reconcile net income to net cash provided by operating activities:

(Income) loss from discontinued operations, net of tax

(1,009

)

3,862

Depreciation and amortization

114,638

103,316

Equity in net income of unconsolidated affiliates

(11,038

)

(4,687

)

Deferred income taxes

60,394

9,849

Stock-based compensation

19,048

20,354

Remeasurement of tax receivable agreement liabilities

(24,584

)

-

Impairment of held to maturity investments

8,500

-

Gain on FFF put and call rights

(8,477

)

(3,458

)

Changes in operating assets and liabilities:

Accounts receivable, inventories, prepaid expenses and other assets

(95,953

)

(30,268

)

Contract assets

(28,909

)

(28,056

)

Accounts payable, accrued expenses, deferred revenue, revenue share obligations and other liabilities

(23,341

)

24,118

Other operating activities

2,078

1,018

Net cash provided by operating activities from continuing operations

248,082

356,634

Net cash provided by operating activities from discontinued operations

9,338

11,502

Net cash provided by operating activities

$

257,420

$

368,136

Investing activities

Purchases of property and equipment

$

(69,326

)

$

(69,906

)

Acquisition of businesses, net of cash acquired

(96,346

)

(50,854

)

Investments in unconsolidated affiliates

(10,165

)

-

Proceeds from sale of assets

3,632

-

Other investing activities

251

(11,414

)

Net cash used in investing activities from continuing operations

(171,954

)

(132,174

)

Net cash used in investing activities from discontinued operations

-

(211

)

Net cash used in investing activities

$

(171,954

)

$

(132,385

)

Financing activities

Payments made on notes payable

$

(2,046

)

$

-

Proceeds from credit facility

375,000

50,000

Payments on credit facility

(150,000

)

-

Distributions to limited partners of Premier LP

(39,590

)

(44,746

)

Payments to limited partners of Premier LP related to tax receivable agreements

(17,425

)

(17,975

)

Repurchase of Class A common stock (held as treasury stock)

(150,093

)

(248,840

)

Other financing activities

(633

)

10,936

Net cash provided by (used in) financing activities

$

15,213

$

(250,625

)

Net increase (decrease) in cash and cash equivalents

100,679

(14,874

)

Cash and cash equivalents at beginning of year

141,055

152,386

Cash and cash equivalents at end of period

$

241,734

$

137,512

Supplemental Financial Information

Reconciliation of Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow

(Unaudited)

(In thousands)

Nine Months Ended March 31,

2020

2019

Net cash provided by operating activities from continuing operations (a)

$

340,228

$

356,634

Purchases of property and equipment

(69,326

)

(69,906

)

Distributions to limited partners of Premier LP

(39,590

)

(44,746

)

Payments to limited partners of Premier LP related to tax receivable agreements

(17,425

)

(17,975

)

Non-GAAP Free Cash Flow

$

213,887

$

224,007

(a) Net cash provided by operating activities from continuing operations excludes the impact of the prepaid contract administrative fee share for one-time rebates to certain Acurity, Inc. members, as agreed to by Acurity, Inc. prior to entering into the Purchase Agreement, which was excluded from the purchase price of the Acurity and Nexera asset acquisition.

Supplemental Financial Information

Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA

Reconciliation of Operating Income to Segment Adjusted EBITDA

Reconciliation of Net Income Attributable to Stockholders to Non-GAAP Adjusted Fully Distributed Net Income

(Unaudited)

(In thousands)

Three Months Ended March 31,

Nine Months Ended March 31,

2020

2019

2020

2019

Net income from continuing operations

$

73,212

$

75,265

$

235,726

$

264,448

Interest and investment loss, net

9,966

1,081

9,849

2,628

Income tax expense

4,165

11,737

78,336

25,791

Depreciation and amortization

25,777

21,797

75,690

63,529

Amortization of purchased intangible assets

13,966

13,572

38,948

39,787

EBITDA

127,086

123,452

438,549

396,183

Stock-based compensation

7,668

6,737

19,358

20,650

Acquisition and disposition related expenses

7,287

3,856

16,263

6,789

Remeasurement of tax receivable agreement liabilities

(902

)

-

(24,584

)

-

Gain on FFF put and call rights

13,906

4,109

(8,477

)

(3,458

)

Other expense

844

563

3,441

1,023

Adjusted EBITDA

$

155,889

$

138,717

$

444,550

$

421,187

Income before income taxes

$

77,377

$

87,002

$

314,062

$

290,239

Equity in net income of unconsolidated affiliates

(4,442

)

(553

)

(11,038

)

(4,687

)

Interest and investment loss, net

9,966

1,081

9,849

2,628

Gain on FFF put and call rights

13,906

4,109

(8,477

)

(3,458

)

Other expense (income)

5,005

(3,671

)

1,996

(1,362

)

Operating income

101,812

87,968

306,392

283,360

Depreciation and amortization

25,777

21,797

75,690

63,529

Amortization of purchased intangible assets

13,966

13,572

38,948

39,787

Stock-based compensation

7,668

6,737

19,358

20,650

Acquisition and disposition related expenses

7,287

3,856

16,263

6,789

Remeasurement of tax receivable agreement liabilities

(902

)

-

(24,584

)

-

Equity in net income of unconsolidated affiliates

4,442

553

11,038

4,687

Deferred compensation plan (expense) income

(5,476

)

3,975

(2,484

)

1,076

Other expense, net

1,315

259

3,929

1,309

Adjusted EBITDA

$

155,889

$

138,717

$

444,550

$

421,187

SEGMENT ADJUSTED EBITDA

Supply Chain Services

$

149,212

$

134,805

$

447,081

$

406,139

Performance Services

34,634

33,235

84,977

100,910

Corporate

(27,957

)

(29,323

)

(87,508

)

(85,862

)

Adjusted EBITDA

$

155,889

$

138,717

$

444,550

$

421,187

Net income attributable to stockholders

$

340,728

$

265,808

$

620,791

$

278,364

Adjustment of redeemable limited partners' capital to redemption amount

(302,569

)

(235,394

)

(516,725

)

(178,910

)

Net income attributable to non-controlling interest in Premier LP

35,058

43,388

132,669

161,132

(Income) loss from discontinued operations, net of tax

(5

)

1,463

(1,009

)

3,862

Income tax expense

4,165

11,737

78,336

25,791

Amortization of purchased intangible assets

13,966

13,572

38,948

39,787

Stock-based compensation

7,668

6,737

19,358

20,650

Acquisition and disposition related expenses

7,287

3,856

16,263

6,789

Remeasurement of tax receivable agreement liabilities

(902

)

-

(24,584

)

-

Loss (gain) on FFF put and call rights

13,906

4,109

(8,477

)

(3,458

)

Other expense

844

563

3,441

1,023

Non-GAAP adjusted fully distributed income before income taxes

120,146

115,839

359,011

355,030

Income tax expense on fully distributed income before income taxes

31,238

30,117

93,343

92,308

Non-GAAP Adjusted Fully Distributed Net Income

$

88,908

$

85,722

$

265,668

$

262,722

Supplemental Financial Information

Reconciliation of GAAP EPS to Non-GAAP EPS on Adjusted Fully Distributed Net Income

(Unaudited)

(In thousands, except per share data)

Three Months Ended March 31,

Nine Months Ended March 31,

2020

2019

2020

2019

Net income attributable to stockholders

$

340,728

$

265,808

$

620,791

$

278,364

Adjustment of redeemable limited partners' capital to redemption amount

(302,569

)

(235,394

)

(516,725

)

(178,910

)

Net income attributable to non-controlling interest in Premier LP

35,058

43,388

132,669

161,132

(Income) loss from discontinued operations, net of tax

(5

)

1,463

(1,009

)

3,862

Income tax expense

4,165

11,737

78,336

25,791

Amortization of purchased intangible assets

13,966

13,572

38,948

39,787

Stock-based compensation

7,668

6,737

19,358

20,650

Acquisition and disposition related expenses

7,287

3,856

16,263

6,789

Remeasurement of tax receivable agreement liabilities

(902

)

-

(24,584

)

-

Loss (gain) on FFF put and call rights

13,906

4,109

(8,477

)

(3,458

)

Other expense

844

563

3,441

1,023

Non-GAAP adjusted fully distributed income before income taxes

120,146

115,839

359,011

355,030

Income tax expense on fully distributed income before income taxes

31,238

30,117

93,343

92,308

Non-GAAP Adjusted Fully Distributed Net Income

$

88,908

$

85,722

$

265,668

$

262,722

Weighted average:

Common shares used for basic and diluted earnings per share

69,451

62,020

65,582

58,346

Potentially dilutive shares

645

730

662

934

Conversion of Class B common units

52,374

66,322

57,786

72,969

Weighted average fully distributed shares outstanding - diluted

122,470

129,072

124,030

132,249

GAAP earnings per share

$

4.91

$

4.29

$

9.47

$

4.77

Adjustment of redeemable limited partners' capital to redemption amount

(4.36

)

(3.80

)

(7.88

)

(3.07

)

Net income attributable to non-controlling interest in Premier LP

0.50

0.70

2.02

2.76

(Income) loss from discontinued operations, net of tax

-

0.02

(0.02

)

0.07

Income tax expense

0.06

0.19

1.19

0.44

Amortization of purchased intangible assets

0.20

0.22

0.59

0.68

Stock-based compensation

0.11

0.11

0.30

0.35

Acquisition and disposition related expenses

0.10

0.06

0.25

0.12

Remeasurement of tax receivable agreement liabilities

(0.01

)

-

(0.37

)

-

Loss (gain) on FFF put and call rights

0.20

0.07

(0.13

)

(0.06

)

Other expense

0.01

0.01

0.05

0.02

Impact of corporation taxes

(0.45

)

(0.50

)

(1.42

)

(1.58

)

Impact of dilutive shares

(0.54

)

(0.71

)

(1.91

)

(2.51

)

Non-GAAP EPS on Adjusted Fully Distributed Net Income

$

0.73

$

0.66

$

2.14

$

1.99

View source version on businesswire.com: https://www.businesswire.com/news/home/20200505005184/en/

Contacts

Investor contact:
Jim Storey
Vice President, Investor Relations
704.816.5958
jim_storey@premierinc.com

Media contact:
Amanda Forster
Vice President, Public Relations
202.879.8004
amanda_forster@premierinc.com