Premier Inc (PINC): 38.97 +0.38 +0.98% Volume: 885,405 December 11, 2018

Premier, Inc. Reports Fiscal 2016 Second-Quarter Results

February 8, 2016

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Premier, Inc. (NASDAQ: PINC) today reported financial results for the fiscal 2016 second quarter ended December 31, 2015.

Second-Quarter Highlights:

  • Net revenue increased 17% to $291.7 million from the same period last year; Supply Chain Services segment revenue rose 13% and Performance Services segment revenue increased 27%.
  • Adjusted EBITDA* increased 17% to $116.1 million from the same period last year.
  • Adjusted fully distributed net income* increased 18% to $61.7 million, or $0.42 on a fully diluted per-share basis, from the same period a year ago. GAAP net income totaled $61.0 million, compared with $65.8 million in the prior year.

*Descriptions of adjusted EBITDA, adjusted fully distributed net income and other non-GAAP financial measures are provided in “Use and Definition of Non-GAAP Measures,” and reconciliations are provided in the tables at the end of this release.

“Our second-quarter financial performance demonstrates the growing power of Premier’s integrated business model as our multiple growth drivers unite to provide comprehensive solutions to the many cost, quality, safety and population health challenges facing our healthcare providers,” said Susan DeVore, president and chief executive officer. “The businesses within Supply Chain Services and Performance Services delivered significant year-over-year growth in the quarter, driving a 17% increase in both consolidated net revenue and adjusted EBITDA. Based on this performance and our current outlook and assumptions for the remainder of the fiscal year, we are raising fiscal 2016 full-year revenue and earnings guidance.”

“Longer term, we remain well positioned to continue to lead the transformation of healthcare delivery in this country through co-innovation with our member health systems across the continuum of care,” DeVore said. “We believe our comprehensive, cloud-based, provider-centric technology platform, coupled with industry leading advisory services across the areas of cost, quality, safety and population health, provide solutions unmatched in the marketplace.”

Results of Operations for the Second Quarter of Fiscal 2016

Consolidated Second-Quarter Financial Highlights              
Three Months Ended December 31,   Six Months Ended December 31,
(in thousands, except per share data)   2015     2014   % Change       2015     2014   % Change  
 
Net Revenue:
Supply Chain Services:
Net administrative fees $ 120,733 $ 112,675 7 % $ 238,682 $ 219,198 9 %
Other services and support   1,040     237   339 %     1,859     452   311 %
Services 121,773 112,912 8 % 240,541 219,650 10 %
Products   81,316     66,696   22 %     159,097     130,260   22 %
Total Supply Chain Services 203,089 179,608 13 % 399,638 349,910 14 %
Performance Services:
Services   88,580     69,837   27 %     162,866     128,843   26 %
Total $ 291,669   $ 249,445   17 %   $ 562,504   $ 478,753   17 %
 
Adjusted EBITDA (a):
Supply Chain Services $ 107,989 $ 97,342 11 % $ 210,938 $ 188,610 12 %
Performance Services   34,462     23,189   49 %     59,387     41,551   43 %
Total segment adjusted EBITDA 142,451 120,531 18 % 270,325 230,161 17 %
Corporate   (26,396 )   (21,723 ) 22 %     (49,273 )   (40,835 ) 21 %
Total $ 116,055   $ 98,808   17 %   $ 221,052   $ 189,326   17 %
 
Non-GAAP adjusted fully distributed net income (a) $ 61,747   $ 52,130   18 %   $ 117,770   $ 99,895   18 %
Non-GAAP earnings per share on adjusted fully distributed net income - diluted (a) $ 0.42   $ 0.36   17 %   $ 0.81   $ 0.69   17 %
Weighted average fully distributed shares outstanding - diluted   146,094     145,211         145,927     145,146    
(a) See attached supplemental financial information for reconciliation of reported GAAP results to Non-GAAP results.    

For the fiscal second quarter ended December 31, 2015, Premier generated net revenue of $291.7 million, an increase of 17% from net revenue of $249.4 million for the same period a year ago.

Adjusted EBITDA of $116.1 million increased 17% from $98.8 million for the same period last year. The increase was driven by revenue growth in both of the company’s business segments, contributions from recent acquisitions in the current year and effective management of operating expenses.

Adjusted fully distributed net income for the fiscal second quarter rose 18% to $61.7 million, or $0.42 per fully diluted share, from $52.1 million, or $0.36 per fully diluted share, 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 exchange their Class B common units and associated Class B common shares for Class A common shares, and reflects income taxes at an estimated effective rate of 40% on 100% of pretax income.

GAAP net income for the fiscal second quarter totaled $61.0 million, compared with $65.8 million for the same quarter a year ago. The decline is primarily attributable to higher income tax expense resulting from the recording of a valuation allowance against a portion of the company’s deferred tax assets. Fiscal 2016 and 2015 second-quarter net income attributable to stockholders required non-cash adjustments of $(65.6) million and $(42.3) million, respectively, to reflect the change in redemption value of the limited partners Class B common unit ownership at the end of each period. These non-cash adjustments result from changes in the company’s stock price between periods and do not reflect results of the company’s business operations. After these non-cash adjustments based on changes in stock price, the company reported a GAAP net loss attributable to stockholders of $1.31 per share, compared with a GAAP net loss attributable to stockholders of $0.93 per share a year ago. (See income statement in the tables section of this press release.)

Segment Results

Supply Chain Services

For the fiscal second quarter ended December 31, 2015, the Supply Chain Services segment generated net revenue of $203.1 million, an increase of 13% from $179.6 million a year ago. Revenue growth was driven by strong performance of both the company’s group purchasing organization (GPO) and products businesses. GPO net administrative fees revenue of $120.7 million increased 7% from a year ago, resulting from increased contract penetration of existing members, continued recruitment and conversion of members and positive utilization trends, although at a more normalized level. Product sales of $81.3 million increased 22% from a year ago due to the ongoing growth in member utilization of the company’s direct sourcing and specialty pharmacy businesses.

Supply Chain Services segment adjusted EBITDA of $108.0 million for the fiscal 2016 second quarter increased 11% from $97.3 million for the same period a year ago. The increase primarily reflects growth in net administrative fees revenue and the effective management of operating expenses.

Performance Services

For the fiscal second quarter ended December 31, 2015, the Performance Services segment generated net revenue of $88.6 million, an increase of 27% from $69.8 million for the same quarter last year. Revenue growth was driven by PremierConnect SaaS-based (software-as-a-service) subscriptions and renewals and the company’s advisory services as well as contributions from the recent acquisitions of CECity.Com, Inc., Healthcare Insights, LLC and InflowHealth LLC.

Performance Services segment adjusted EBITDA was $34.5 million for the fiscal 2016 second quarter, an increase of 49% from $23.2 million for the same quarter last year. The growth in adjusted EBITDA reflects increased revenue from PremierConnect SaaS-based subscriptions and licenses, advisory services, contributions from recent acquisitions and effective management of operating expenses.

Results of Operations for the Six Months Ended December 31, 2015

For the six months ended December 31, 2015, Premier generated net revenue of $562.5 million, an increase of 17%, from net revenue of $478.8 million for the same period a year ago. Adjusted EBITDA of $221.1 million increased 17% from $189.3 million for the same period last year. Adjusted fully distributed net income for the six months rose 18% to $117.8 million, or $0.81 per fully diluted share, from $99.9 million, or $0.69 per fully diluted share, for the same period a year ago.

GAAP Net income for the six-month period totaled $113.2 million, compared with $130.7 million for the same period a year ago. Fiscal 2016 and 2015 six-month net income attributable to stockholders required non-cash adjustments of $401.2 million and $(424.9) 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 result from changes in the company’s stock price between periods and do not reflect results of the company’s business operations. After these non-cash adjustments based on the changes in stock price, the company reported GAAP net income attributable to stockholders of $0.60 per fully diluted share, compared with a GAAP net loss attributable to stockholders of $11.96 per share a year ago. (See income statement in the tables section of this press release.)

Supply Chain Services segment net revenue for the first six months of fiscal 2016 increased 14% to $399.6 million from $349.9 million a year earlier. Supply Chain Services segment adjusted EBITDA increased 12%, to $210.9 million from $188.6 million for the prior year.

Performance Services segment net revenue for the first six months of fiscal 2016 increased 26% to $162.9 million from $128.8 million a year earlier, while segment adjusted EBITDA increased 43% to $59.4 million from $41.6 million.

Cash Flows and Liquidity

Cash provided by operating activities was $138.8 million for the six-month period ended December 31, 2015, compared with $153.7 million for the same period a year ago. At December 31, 2015, the company’s cash, cash equivalents and short- and long-term marketable securities totaled $251.6 million, compared with $469.5 million at December 31, 2014, and consisted of $157.4 million in cash and cash equivalents and $94.2 million in marketable securities with maturities ranging from three months to five years. The reduction in cash, cash equivalents and short- and long-term marketable securities, as compared to last year, was due to the company’s acquisitions of CECity.Com, Inc., Healthcare Insights, LLC and InflowHealth LLC during the first half of fiscal 2016. Through the first six months of fiscal 2016, the company had capital expenditures of $38.9 million.

Free cash flow for the quarter ended December 31, 2015 was $71.3 million, compared with $67.1 million for the same period last year. The company continues to expect that 40% to 50% of adjusted EBITDA will convert to free cash flow for the full fiscal year. The company does expect variability in free cash flow in certain quarters as a result of the timing of certain payments. The company defines free cash flow as cash provided by operating activities less distributions to limited partners, purchases of property and equipment, and payments to limited partners under tax receivable agreements (see free cash flow reconciliation to net cash provided by operating activities in the tables section of this press release).

At December 31, 2015, the company had an outstanding balance of $100.0 million on its five-year $750.0 million revolving credit facility. During the fiscal first quarter, the company borrowed $150.0 million to partially fund the acquisition of CECity.Com, Inc. which closed on August 20, 2015, and repaid $50.0 million in the fiscal second quarter.

Fiscal 2016 Outlook and Guidance

Based on fiscal second-quarter results and management’s current expectations and assumptions for the remainder of fiscal 2016, the company is raising full fiscal-year 2016 financial guidance as set forth below.

Fiscal 2016 Financial Guidance
Premier, Inc. raises full-year fiscal 2016 financial guidance, as follows:
  Updated     Previous
(in millions, except per share data)   FY 2016   % YoY Increase   FY 2016
Net Revenue:
Supply Chain Services segment $802 - $823 9% - 12% $792 - $813
Performance Services segment $352 - $362 31% - 35%   $352 - $362
Total Net Revenue $1,154 - $1,185 15% - 18% $1,144 - $1,175
 
Non-GAAP adjusted EBITDA $430 - $449 9% - 14% $425 - $444
 
Non-GAAP adjusted fully distributed EPS   $1.57 - $1.65   10% - 15%   $1.54 - $1.62
(1) Updated February 8, 2016. The Company does not reconcile guidance for non-GAAP adjusted EBITDA and non-GAAP adjusted fully distributed earnings per-share to net income (loss) or GAAP earnings per share because the Company does not provide guidance for reconciling items between net income (loss) and non-GAAP adjusted EBITDA and non-GAAP adjusted fully distributed earnings per share. The Company is unable to provide guidance for these reconciling items since certain items that impact net income (loss) are outside of the Company’s control and cannot be reasonably predicted. Accordingly, a reconciliation to net income (loss) or GAAP earnings per share is not available without unreasonable effort.

The company’s updated fiscal full-year 2016 outlook is based on stronger-than-anticipated Supply Chain Services revenue and stronger-than-expected adjusted EBITDA performance in both Supply Chain Services and Performance Services segments in the first half of the fiscal year. Key assumptions include: expectations of continued stable growth in the Supply Chain Services segment through the continued (but more normalized) growth of the company’s direct sourcing and specialty pharmacy businesses; the addition and contract conversion ramp-up of new GPO members; deeper penetration of existing members’ supply spend; increased product and services sales in the Performance Services segment, including sales and use of SaaS-based products; increased member participation in performance improvement collaboratives and increased demand for advisory services; the contribution from the Centers for Medicare & Medicaid Services one-year contract award related to the Partnership for Patients initiative that began in October 2015; and the continuation of historically high retention and renewal rates of Premier’s GPO and SaaS informatics products.

Guidance assumptions also include the integration and realization of anticipated financial and operational contributions from the CECity, Healthcare Insights and InflowHealth acquisitions previously announced but do not contemplate the impact of any potential future acquisitions. Premier expects fiscal 2016 capital expenditures of approximately $83 million and a consolidated EBITDA margin approximating 38%, as a result of our intentional business mix shift related to our growth strategy and the impact of the recent acquisitions.

The statements in this “Outlook and Guidance” discussion are “forward-looking statements.” For additional information regarding the use and limitations of such statements, see “Forward-Looking Statements” below and the “Risk Factors” section of the company’s Form 10-K for the fiscal year ended June 30, 2015.

Conference Call

Premier management will host a conference call and live audio webcast on Monday, February 8, 2016, at 5:00 p.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. To expedite access, participants should preregister at this website, at which time the participant will be sent a confirmation email including dial-in numbers and a unique PIN for those who wish to participate by phone. A replay of the conference call will be available on the investor relations page of Premier’s website.

About Premier, Inc.

Premier, Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of approximately 3,600 U.S. hospitals and 120,000 other providers to transform healthcare. With integrated data and analytics, collaboratives, supply chain solutions, and advisory and other services, Premier enables better care and outcomes at a lower cost. Premier, a Malcolm Baldrige National Quality Award recipient, 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, Foursquare 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 eliminates the variability of non-controlling interest as a result of member owner exchanges of Class B common stock and corresponding Class B units into shares of Class A common stock (which exchanges are a member owner’s cumulative right, but not obligation, which began on October 31, 2014, and occur each quarter thereafter, and are limited to one-seventh of the member owner’s initial allocation of Class B common units) 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 PHSI (i) excluding income tax expense, (ii) excluding the effect of non-recurring and non-cash items, (iii) 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 (iv) reflecting an adjustment for income tax expense on non-GAAP pro forma fully distributed net income before income taxes at the company’s estimated effective income tax rate.

EBITDA is defined as net income before 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. Non-recurring items include certain strategic and financial restructuring expenses. Non-operating items include gain or loss on disposal of assets. Segment adjusted EBITDA is defined as the segment's net revenue less 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. 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 cash provided by operating activities less distributions to limited partners and purchases of property and equipment and payments to limited partners under tax receivable agreements. 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 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, investments in related or complimentary businesses and debt reduction.

Forward-Looking Statements

Statements made in this release that are not statements of historical or current facts, such as those under the heading “Fiscal 2016 Outlook and Guidance” 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” sections of Premier’s Form 10-K for the fiscal year ended June 30, 2015 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, including as a result of new information or future events that occur after that date.

Condensed Consolidated Statements of Income  
(Unaudited)
(In thousands, except per share data)
 

Three Months Ended

December 31,

Six Months Ended

December 31,

  2015     2014    

2015

   

2014

 
Net revenue:
Net administrative fees $ 120,733 $ 112,675 $ 238,682 $ 219,198
Other services and support   89,620     70,074     164,725     129,295  
Services 210,353 182,749 403,407 348,493
Products   81,316     66,696     159,097     130,260  
Net revenue 291,669 249,445 562,504 478,753
Cost of revenue:
Services 40,492 35,276 78,616 68,040
Products   72,105     59,256     143,104     116,513  
Cost of revenue   112,597     94,532     221,720     184,553  
Gross profit 179,072 154,913 340,784 294,200
Operating expenses:
Selling, general and administrative 99,284 85,391 186,222 156,557
Research and development 424 716 880 1,789
Amortization of purchased intangible assets   9,271     3,141     15,318     4,044  
Operating expenses   108,979     89,248     202,420     162,390  
Operating income   70,093     65,665     138,364     131,810  
Equity in net income of unconsolidated affiliates 4,785 4,749 9,375 9,615
Interest and investment (expense) income, net (937 ) 122 (696 ) 313

 

Other expense, net   (272 )   (458 )   (2,081 )   (962 )
Other income, net   3,576     4,413     6,598     8,966  
Income before income taxes 73,669 70,078 144,962 140,776
Income tax expense   12,674     4,270     31,714     10,081  
Net income 60,995 65,808 113,248 130,695
Net income attributable to noncontrolling interest in S2S Global (786 ) (1,584 )
Net income attributable to noncontrolling interest in Premier LP   (49,817 )   (55,751 )   (97,717 )   (110,567 )
Net income attributable to noncontrolling interest   (49,817 )   (56,537 )   (97,717 )   (112,151 )
 
Adjustment of redeemable limited partners' capital to redemption amount   (65,561 )   (42,250 )   401,240     (424,907 )
Net income (loss) attributable to stockholders $ (54,383 ) $ (32,979 ) $ 416,771   $ (406,363 )
 
Weighted average shares outstanding:
Basic 41,575 35,589 39,655 33,965
Diluted 41,575 35,589 148,167 33,965
Earnings (loss) per share attributable to stockholders (a)
Basic $ (1.31 ) $ (0.93 ) $ 10.51 $ (11.96 )
Diluted $ (1.31 ) $ (0.93 ) $ 0.60 $ (11.96 )
 
(a) Earnings (loss) per share attributable to stockholders includes an adjustment to net income (loss) attributable to stockholders of redeemable limited partners' capital to redemption amount of ($65.6) million and ($42.2) million for the three months ended December 31, 2015 and 2014, respectively, and $401.2 million and ($424.9 million) for the six months ended December 31, 2015 and 2014, respectively.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
 

December 31,

2015

June 30,

2015

(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 157,410 $ 146,522
Marketable securities 42,205 240,667
Accounts receivable 125,052 99,120
Inventory 30,244 33,058
Prepaid expenses and other current assets 28,083 22,353
Due from related parties   3,764     3,444  
Total current assets 386,758 545,164
Marketable securities 51,963 174,745
Property and equipment, net 163,044 147,625
Intangible assets, net 175,952 38,669
Goodwill 537,905 215,645
Deferred income tax assets 408,512 353,723
Deferred compensation plan assets 38,428 37,483
Other assets   25,418     17,137  
Total assets $ 1,787,980   $ 1,530,191  
 
Liabilities, redeemable limited partners' capital and stockholders' deficit
Accounts payable $ 25,829 $ 37,634
Accrued expenses 48,163 41,261
Revenue share obligations 60,798 59,259
Limited partners' distribution payable 22,505 22,432
Accrued compensation and benefits 34,153 51,066
Deferred revenue 48,872 39,824
Current portion of tax receivable agreements 11,080 11,123
Current portion of long-term debt 4,046 2,256
Other liabilities   7,123     4,776  
Total current liabilities 262,569 269,631
Long-term debt, less current portion 113,104 15,679
Tax receivable agreements, less current portion 275,621 224,754
Deferred compensation plan obligations 38,428 37,483
Other liabilities   21,081     20,914  
Total liabilities   710,803     568,461  
 
Redeemable limited partners' capital 3,523,690 4,079,832
 
Stockholders' deficit:

Class A common stock, $0.01 par value, 500,000,000 shares authorized; 43,646,315 and

37,668,870 shares issued and outstanding at December 31, 2015 and June 30, 2015,

respectively

436 377

Class B common stock, $0.000001 par value, 600,000,000 shares authorized; 100,150,698 and

106,382,552 shares issued and outstanding at December 31, 2015 and June 30, 2015,

respectively

Accumulated deficit (2,446,788 ) (3,118,474 )
Accumulated other comprehensive loss   (161 )   (5 )
Total stockholders' deficit   (2,446,513 )   (3,118,102 )
Total liabilities, redeemable limited partners' capital and stockholders' deficit $ 1,787,980   $ 1,530,191  
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Six Months Ended December 31,
  2015     2014  
 
Operating activities
Net income $ 113,248 $ 130,695
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 39,382 25,614
Equity in net income of unconsolidated affiliates (9,375 ) (9,615 )
Deferred income taxes 21,331 917
Stock-based compensation 25,022 13,844
Employee stock purchase plan expense 232
Adjustment to tax receivable agreement liability (4,818 ) 1,073
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses and other current assets (26,245 ) (11,276 )
Other assets (10,853 ) (3,754 )
Inventory 2,814 (6,854 )
Accounts payable, accrued expenses, revenue share obligations and other current liabilities (12,376 ) 11,246
Long-term liabilities 166 674
Other operating activities   308     1,151  
Net cash provided by operating activities   138,836     153,715  
Investing activities
Purchase of marketable securities (19,211 ) (123,536 )
Proceeds from sale of marketable securities 339,674 190,734
Acquisition of CECity.com, Inc., net of cash acquired (398,261 )
Acquisition of Healthcare Insights, LLC, net of cash acquired (64,634 )
Acquisition of InFlow Health, LLC (10,197 )
Acquisition of Aperek, Inc., net of cash acquired (47,446 )
Acquisition of TheraDoc, Inc., net of cash acquired (108,561 )
Investment in unconsolidated affiliate (1,000 )
Distributions received on equity investment 11,743 10,050
Purchases of property and equipment (38,882 ) (32,411 )
Other investing activities   (5 )   353  
Net cash used in investing activities   (180,773 )   (110,817 )
Financing activities
Payments made on notes payable (1,336 ) (684 )
Proceeds from S2S Global revolving line of credit 800
Payments on S2S Global revolving line of credit (500 )
Proceeds from credit facility 150,000
Payments on senior secured line of credit (50,000 )
Proceeds from exercise of stock options under equity incentive plan 237 446
Proceeds from issuance of Class A common stock under stock purchase plan 1,302
Repurchase of restricted units (46 ) (31 )
Final remittance of net income attributable to S2S Global before February 1, 2015 (1,890 )
Distributions to limited partners of Premier LP (45,461 ) (45,099 )
Other financing activities   19      
Net cash provided by (used in) financing activities   52,825     (45,068 )
Net decrease in cash and cash equivalents 10,888 (2,170 )
Cash and cash equivalents at beginning of period   146,522     131,786  
Cash and cash equivalents at end of period $ 157,410   $ 129,616  
Supplemental Financial Information - Reporting of Adjusted EBITDA  
and Non-GAAP Adjusted Fully Distributed Net Income
Reconciliation of Selected Non-GAAP Measures to GAAP Measures
(Unaudited)
(In thousands)
   
Three Months Ended

December 31,

Six Months Ended

December 31,

2015 2014

2015

2014

 
Reconciliation of Net Income to Adjusted EBITDA and Reconciliation of Segment Adjusted EBITDA to Income Before Income Taxes:
 
Net income $ 60,995 $ 65,808 $ 113,248 $ 130,695

 

Interest and investment income, net 937 (122 ) 696 (313 )
Income tax expense 12,674 4,270 31,714 10,081
Depreciation and amortization 12,199 11,262 24,064 21,570
Amortization of purchased intangible assets     9,271     3,141     15,318     4,044  
EBITDA 96,076 84,359 185,040 166,077
Stock-based compensation 11,554 7,405 25,254 13,844

 

Acquisition related expenses 5,644 2,267 9,116 3,545
Strategic and financial restructuring expenses 208 1,183 235 1,279
ERP implementation expenses 1,518 2,078
Adjustment to tax receivable agreement liability (4,818 ) (1,073 )
Acquisition related adjustment - deferred revenue 1,047 3,596 4,139 5,661

 

Other income, net     8     (2 )   8     (7 )
Adjusted EBITDA   $ 116,055   $ 98,808   $ 221,052   $ 189,326  
 
Segment Adjusted EBITDA:

 

Supply Chain Services $ 107,989 $ 97,342 $ 210,938 $ 188,610
Performance Services 34,462 23,189 59,387 41,551
Corporate     (26,396 )   (21,723 )   (49,273 )   (40,835 )
Adjusted EBITDA $ 116,055 $ 98,808 $ 221,052 $ 189,326
Depreciation and amortization (12,199 ) (11,262 ) (24,064 ) (21,570 )
Amortization of purchased intangible assets (9,271 ) (3,141 ) (15,318 ) (4,044 )
Stock-based compensation (11,554 ) (7,405 ) (25,254 ) (13,844 )

 

Acquisition related expenses (5,644 ) (2,267 ) (9,116 ) (3,545 )
Strategic and financial restructuring expenses (208 ) (1,183 ) (235 ) (1,279 )
ERP implementation expenses (1,518 ) (2,078 )
Adjustment to tax receivable agreement liability 4,818 1,073
Acquisition related adjustment - deferred revenue (1,047 ) (3,596 ) (4,139 ) (5,661 )
Equity in net income of unconsolidated affiliates (4,785 ) (4,749 ) (9,375 ) (9,615 )
Deferred compensation plan expense   264     460     2,073     969  

 

Operating income   $ 70,093   $ 65,665   $ 138,364   $ 131,810  
Equity in net income of unconsolidated affiliates 4,785 4,749 9,375 9,615
Interest and investment income, net (937 ) 122 (696 ) 313
Other expense, net     (272 )   (458 )   (2,081 )   (962 )
Income before income taxes   $ 73,669   $ 70,078   $ 144,962   $ 140,776  
           
Reconciliation of Net Income (Loss) Attributable to Stockholders to Non-GAAP Adjusted Fully Distributed Net Income:
 
Net income (loss) attributable to stockholders $ (54,383 ) $ (32,979 ) $ 416,771 $ (406,363 )

 

Adjustment of redeemable partners' capital to redemption amount 65,561 42,250 (401,240 ) 424,907
Income tax expense 12,674 4,270 31,714 10,081
Stock-based compensation 11,554 7,405 25,254 13,844

 

Acquisition related expenses 5,644 2,267 9,116 3,545
Strategic and financial restructuring expenses 208 1,183 235 1,279
ERP implementation expenses 1,518 2,078
Adjustment to tax receivable agreement liability (4,818 ) (1,073 )
Acquisition related adjustment - deferred revenue 1,047 3,596 4,139 5,661
Amortization of purchased intangible assets 9,271 3,141 15,318 4,044
Net income attributable to noncontrolling interest in Premier LP     49,817     55,751     97,717     110,567  
Non-GAAP fully distributed income before income taxes 102,911 86,884 196,284 166,492
Income tax expense on fully distributed income before income taxes     41,164     34,754     78,514     66,597  
Non-GAAP Adjusted Fully Distributed Net Income   $ 61,747   $ 52,130   $ 117,770   $ 99,895  
Supplemental Financial Information - Reporting of Non-GAAP Free Cash Flow
Reconciliation of Selected Non-GAAP Measures to GAAP Measures
(Unaudited)
(In thousands)
     
Three Months Ended

December 31,

  Three Months Ended

September 30,

  Six Months Ended

December 31,

  2015     2014     2015     2014     2015     2014  
 
Reconciliation of Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow:
Net cash provided by operating activities $ 116,117 $ 107,842 $ 22,719 $ 45,873 $ 138,836 $ 153,715
Purchases of property and equipment (21,741 ) $ (18,051 ) (17,141 ) (14,360 ) (38,882 ) (32,411 )
Distributions to limited partners     (23,029 ) $ (22,691 )   (22,432 )   (22,408 )   (45,461 )   (45,099 )
Non-GAAP Free Cash Flow   $ 71,347   $ 67,100   $ (16,854 ) $ 9,105   $ 54,493   $ 76,205  
Supplemental Financial Information - Reporting of Net Income and Earnings Per Share
Reconciliation of Selected Non-GAAP Measures to GAAP Measures
(Unaudited)
(In thousands, except per share data)
 
Three Months Ended

September 30,

Six Months Ended

December 31,

  2015     2014     2015     2014  
 
Reconciliation of numerator for GAAP EPS to Non-GAAP EPS on Adjusted Fully Distributed Net Income
Net income (loss) attributable to stockholders $ (54,383 ) $ (32,979 ) $ 416,771 $ (406,363 )
Adjustment of redeemable limited partners' capital to redemption amount 65,561 42,250 (401,240 ) 424,907
Income tax expense 12,674 4,270 31,714 10,081
Stock-based compensation 11,554 7,405 25,254 13,844
Acquisition related expenses 5,644 2,267 9,116 3,545
Strategic and financial restructuring expenses 208 1,183 235 1,279
ERP implementation expenses 1,518 2,078
Adjustment to tax receivable agreement liability (4,818 ) (1,073 )
Acquisition related adjustment - deferred revenue 1,047 3,596 4,139 5,661
Amortization of purchased intangible assets 9,271 3,141

 

15,318 4,044
Net income attributable to noncontrolling interest in Premier LP   49,817     55,751     97,717     110,567  
Non-GAAP fully distributed income before income taxes 102,911 86,884 196,284 166,492
Income tax expense on fully distributed income before income taxes   41,164     34,754     78,514     66,597  
Non-GAAP adjusted fully distributed net income $ 61,747   $ 52,130   $ 117,770   $ 99,895  
 
Reconciliation of denominator for GAAP EPS to Non-GAAP Adjusted Fully Distributed Net Income
Weighted Average:
Common shares used for basic and diluted earnings (loss) per share 41,575 35,589 39,655 33,965
Potentially dilutive shares 2,341 948 2,129 785
Conversion of Class B common units   102,178     108,674     104,143     110,396  
Weighted average fully distributed shares outstanding - diluted   146,094     145,211     145,927     145,146  
 
Reconciliation of GAAP EPS to Non-GAAP Adjusted Fully Distributed EPS
GAAP earnings (loss) per share $ (1.31 ) $ (0.93 ) $ 10.51 $ (11.96 )
Impact of adjustment of redeemable limited partners' capital to redemption amount $ 1.58 $ 1.19 $ (10.12 ) $ 12.51
Impact of additions:
Income tax expense $ 0.30 $ 0.12 $ 0.80 $ 0.30
Stock-based compensation $ 0.28 $ 0.21 $ 0.64 $ 0.41
Acquisition related expenses $ 0.14 $ 0.06 $ 0.23 $ 0.10
Strategic and financial restructuring expenses $ - $ 0.03 $ 0.01 $ 0.04
ERP implementation expenses $ 0.04 $ - $ 0.05 $ -
Adjustment to tax receivable agreement liability $ - $ - $ (0.12 ) $ (0.03 )
Acquisition related adjustment - deferred revenue $ 0.02 $ 0.10 $ 0.10 $ 0.17
Amortization of purchased intangible assets $ 0.22 $ 0.09 $ 0.39 $ 0.12
Net income attributable to noncontrolling interest in Premier LP $ 1.20 $ 1.57 $ 2.46 $ 3.25
Impact of corporation taxes $ (0.99 ) $ (0.98 ) $ (1.98 ) $ (1.96 )
Impact of increased share count $ (1.06 ) $ (1.10 ) $ (2.16 ) $ (2.26 )
Non-GAAP earnings per share on adjusted fully distributed net income - diluted $ 0.42   $ 0.36   $ 0.81   $ 0.69  

Source: Premier, Inc. Premier, Inc.

Premier, Inc.

Investor contact:

Jim Storey, Vice President, Investor Relations

704-816-5958, jim_storey@premierinc.com

or

Media contact:

Amanda Forster, Vice President, Public Relations

202-897-8004, amanda_forster@premierinc.com

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