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Premier Inc (PINC): 37.89 -0.85 -2.19% Volume: 432,185 December 13, 2019

Premier Inc. Reports Fiscal 2019 Fourth-Quarter and Full-Year Results

August 20, 2019

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Premier Inc. (NASDAQ: PINC) today reported financial results for the fiscal 2019 fourth quarter and full year ended June 30, 2019.

The company adopted new revenue recognition standard ASC 606 on July 1, 2018, in conjunction with the beginning of fiscal 2019, using the modified retrospective approach and did not restate prior periods. Therefore, fiscal 2019 results of operations under the new revenue standard ASC 606 are compared with fiscal 2018 results under the previous revenue standard ASC 605 in the body of this press release, and the comparisons are not necessarily meaningful. However, solely for informational purposes, current period results under the previous standard are included in the tables at the back of this press release.

On May 6, 2019, the company announced that it committed to a plan to sell certain assets of its specialty pharmacy business and to discontinue operations of, and wind down and exit from the specialty pharmacy business. On June 7, 2019, the company closed the transaction. As such, and unless stated otherwise, all results presented in the following release reflect those of continuing operations. A table showing the quarterly impact of discontinued operations is included in this press release.

Full-Year 2019 Highlights of Continuing Operations:

  • GAAP net revenue was $1.22 billion, compared with $1.18 billion a year ago; Supply Chain Services segment revenue was $855.2 million, compared with $824.0 million a year ago; and Performance Services segment revenue was $362.5 million, compared with $360.7 million a year ago.
  • GAAP net income was $334.7 million, compared with $258.0 million a year ago; diluted net income was $0.27 per share, compared with $1.37 per share a year ago.
  • Non-GAAP adjusted EBITDA* was $561.0 million, compared with $539.5 million a year ago.
  • Non-GAAP adjusted fully distributed net income* was $349.1 million, or $2.66 per diluted share, compared with $315.4 million, or $2.30 per diluted share a year ago.
  • For the fiscal year ended June 30, 2019, the company generated cash flow from operations of $511.9 million. Non-GAAP free cash flow* for the fiscal year of $342.8 million and represented 61% of full-year non-GAAP adjusted EBITDA.
  • Premier completed the acquisition of Stanson Health, Inc. as well as the exit of the specialty pharmacy business during fiscal 2019.
  • Premier completed its previous $250.0 million stock repurchase plan implemented during fiscal 2019 and received Board authorization for a $300.0 million stock repurchase plan for fiscal 2020.

Q4 2019 Highlights of Continuing Operations:

  • GAAP net revenue was $316.2 million, compared with $312.6 million a year ago; Supply Chain Services segment revenue was $227.0 million, compared with $217.8 million a year ago; and Performance Services segment revenue was $89.2 million, compared with $94.8 million a year ago.
  • GAAP net income was $70.2 million, compared with $101.0 million a year ago; diluted net loss was $4.28 per share, compared with a loss of $6.17 per share a year ago.
  • Non-GAAP adjusted EBITDA* was $139.9 million, compared with $147.7 million a year ago.
  • Non-GAAP adjusted fully distributed net income* was $86.3 million, or $0.68 per diluted share, compared with $94.7 million, or $0.70 per diluted share a year ago.

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

“Premier’s financial performance met management’s expectations for the fourth quarter and full year as we continued our close collaboration with more than 4,000 member hospitals and health systems and approximately 175,000 other providers and organizations, working together to reduce costs, improve quality and safety and prepare for America’s ongoing transition to value-based healthcare,” said Susan DeVore, chief executive officer. “Operationally, we remain focused on providing our member health systems with best-in-class solutions and compelling value, underscored by our 97% retention rate and more than $61 billion in contract volume in our group purchasing (GPO) business for the year. We also achieved a 96% SaaS institutional renewal rate within our Performance Services segment, demonstrating the continued strength of our unique and value-added offerings.

“Looking ahead, we expect the challenging environment and market uncertainties to persist through fiscal 2020 as the nation enters a presidential election year,” DeVore continued. “We have factored these continuing uncertainties into our fiscal 2020 guidance, which projects modest year-over-year consolidated growth, and we are focused on appropriately managing our businesses and expenses as we continue to invest in the future. Importantly, we believe Premier, as a trusted partner to the nation’s largest health systems, and with strong, diverse and innovative capabilities, is well positioned for continued success. We are operating from a position of financial strength, characterized by our flexible balance sheet and strong free cash flow. We are committed to growing and expanding our relationships with member health systems, further refining our supply chain and performance services offerings to deliver additional value for our customers, while creating long-term value for our stockholders.”

Results of Continuing Operations for the Fourth Quarter and Full Year of Fiscal 2019

Consolidated Fourth-Quarter and Full Year Financial Highlights

Three Months Ended June 30,

Year Ended June 30,

(in thousands, except per share data)

2019

2018

 

2019

2018

 

New revenue
standard

Previous revenue
standard

% Change

New revenue
standard

Previous revenue
standard

% Change

Net Revenue (a):
Supply Chain Services:
Net administrative fees

$

170,234

 

$

171,893

 

(1

)%

$

662,462

 

$

643,839

 

3

%

Other services and support

 

2,042

 

 

2,086

 

(2

)%

 

8,561

 

 

7,812

 

10

%

Services

 

172,276

 

 

173,979

 

(1

)%

 

671,023

 

 

651,651

 

3

%

Products

 

54,715

 

 

43,833

 

25

%

 

184,157

 

 

172,327

 

7

%

Total Supply Chain Services (a)

 

226,991

 

 

217,812

 

4

%

 

855,180

 

 

823,978

 

4

%

Performance Services (a)

 

89,243

 

 

94,792

 

(6

)%

 

362,458

 

 

360,679

 

%

Total (a)

$

316,234

 

$

312,604

 

1

%

$

1,217,638

 

$

1,184,657

 

3

%

 
Net income from continuing operations

$

70,229

 

$

101,000

 

(30

)%

$

334,677

 

$

258,007

 

30

%

Net income from continuing operations attributable to stockholders

$

(264,421

)

$

(323,068

)

18

%

$

15,706

 

$

191,040

 

(92

)%

Adjusted net (loss) income from continuing operations (b)

$

(264,421

)

$

(323,068

)

18

%

$

15,706

 

$

187,750

 

(92

)%

Weighted average shares outstanding:
Basic

 

61,725

 

 

52,412

 

18

%

 

59,188

 

 

53,518

 

11

%

Diluted

 

61,725

 

 

52,412

 

18

%

 

60,269

 

 

137,340

 

(57

)%

(Loss) earnings from continuing operations per share attributable to stockholders:
Basic

$

(4.28

)

$

(6.17

)

31

%

$

0.27

 

$

3.57

 

(92

)%

Diluted (b)

$

(4.28

)

$

(6.17

)

31

%

$

0.27

 

$

1.37

 

(80

)%

 
NON-GAAP FINANCIAL MEASURES:
 
Adjusted EBITDA (a) (c):
Supply Chain Services

$

141,892

 

$

142,053

 

%

$

548,029

 

$

531,851

 

3

%

Performance Services

 

28,236

 

 

37,564

 

(25

)%

 

129,147

 

 

123,429

 

5

%

Total segment adjusted EBITDA

 

170,128

 

 

179,617

 

(5

)%

 

677,176

 

 

655,280

 

3

%

Corporate

 

(30,272

)

 

(31,917

)

5

%

 

(116,134

)

 

(115,760

)

%

Total (a)

$

139,856

 

$

147,700

 

(5

)%

$

561,042

 

$

539,520

 

4

%

Adjusted fully distributed net income (c)

$

86,330

 

$

94,700

 

(9

)%

$

349,052

 

$

315,411

 

11

%

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

$

0.68

 

$

0.70

 

(3

)%

$

2.66

 

$

2.30

 

16

%

 
(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.

For the fiscal fourth quarter ended June 30, 2019, Premier generated GAAP net revenue of $316.2 million, compared to net revenue of $312.6 million for the same period a year ago.

GAAP net income for the fiscal fourth quarter was $70.2 million, compared with $101.0 million a year ago. In accordance with GAAP, fiscal 2019 and 2018 fourth-quarter net income attributable to stockholders includes non-cash adjustments of $(297.0) million and $(353.7) 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 result 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 a net loss attributable to stockholders of $264.4 million, or $4.28 per diluted share, compared with $323.1 million, or $6.17 per diluted share, a year ago. See “Calculation of GAAP Earnings per Share” in the income statement section of this press release.

Fiscal fourth-quarter non-GAAP adjusted EBITDA of $139.9 million compared to $147.7 million for the same period the prior year.

Non-GAAP adjusted fully distributed net income for the fiscal fourth quarter of $86.3 million compared to $94.7 million for the same period a year ago. Non-GAAP adjusted fully distributed earnings per share totaled $0.68, compared with $0.70 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 fourth quarter ended June 30, 2019, Supply Chain Services segment net revenue was $227.0 million, compared with $217.8 million a year ago. Net administrative fees revenue of $170.2 million increased from the preceding quarter while decreasing 1% from the year-ago period, which benefited from higher-than-anticipated recoveries of past-due net administrative fees and the timing of cash collections ahead of the July 1, 2018 adoption of the new ASC 606 revenue recognition standard. Net administrative fees revenue in the fiscal 2019 fourth quarter under the previous revenue recognition standard totaled $172.3 million, basically unchanged from a year ago.

Products revenue was $54.7 million, compared with $43.8 million a year ago, primarily driven by growth in certain commodity product categories of the direct sourcing business as well as sales associated with aggregated purchasing of products.

Supply Chain Services segment non-GAAP adjusted EBITDA for the fiscal 2019 fourth quarter was $141.9 million, compared with $142.1 million for the same period a year ago. Direct sourcing gross profit growth resulting primarily from increased sales of higher-margin products was primarily offset by increased investments in the company’s recently launched E-Commerce initiative to develop a more efficient integrated delivery system ordering platform.

Performance Services
For the fiscal fourth quarter ended June 30, 2019, Performance Services segment net revenue was $89.2 million, compared with $94.8 million for the same quarter last year. The decrease was due to lower consulting revenue related to cost management and quality and safety engagements. This was partially offset by growth in the clinical surveillance, cost management and clinical decision support areas of the technology business.

Performance Services segment non-GAAP adjusted EBITDA was $28.2 million for the fiscal 2019 fourth quarter, compared with $37.6 million for the same quarter last year. The decrease was primarily the result of lower revenue and ongoing investments in the company’s clinical decision support technology and in the development of the company’s high-value care network, a strategy intended to link employers and payers with providers to enable better clinical outcomes at reduced cost.

Results of Continuing Operations for the Twelve Months Ended June 30, 2019

For the fiscal year ended June 30, 2019, GAAP net revenue was $1.22 billion, compared with $1.18 billion in the prior year. GAAP net income totaled $334.7 million, compared with $258.0 million a year ago. Fiscal 2019 and 2018 full-year GAAP net income attributable to stockholders required non-cash adjustments of $(118.1) million and $157.6 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 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 $15.7 million, or $0.27 per diluted share, compared with net income of $191.0 million, or $1.37 per diluted share, in the prior year. See “Calculation of GAAP Earnings per Share” in the income statement section of this press release.

For fiscal year ended June 30, 2019, non-GAAP adjusted EBITDA was $561.0 million, compared with $539.5 million in the prior year. Non-GAAP adjusted fully distributed net income was $349.1 million, compared with $315.4 million a year ago, while non-GAAP adjusted fully distributed earnings per share was $2.66, compared with $2.30.

Supply Chain Services segment net revenue was $855.2 million for fiscal 2019, compared with $824.0 million a year ago. Segment adjusted EBITDA was $548.0 million, compared with $531.9 million for the prior year.

Performance Services segment net revenue was $362.5 million for fiscal 2019, compared with $360.7 million a year ago. Segment adjusted EBITDA was $129.1 million, compared with $123.4 million.

Cash Flows and Liquidity

Net cash provided by operating activities was $511.9 million for the fiscal year ended June 30, 2019, compared with $505.3 million for the same period last year. The increase was primarily driven by increases in net administrative fees and services revenue and an increase in cash collections on accounts receivable, partially offset by increased cash paid for taxes primarily related to a refund received in the prior year, and increased selling, general and administrative expenses. At June 30, 2019, the company’s cash and cash equivalents totaled $141.1 million, compared with $152.4 million at June 30, 2018. At June 30, 2019, the company had an outstanding balance of $25.0 million on its five-year, $1.0 billion revolving credit facility. On July 15, 2019, the company repaid the outstanding balance.

Non-GAAP free cash flow for the fiscal year ended June 30, 2019 was $342.8 million, compared with $333.6 million for the same period a year ago and was primarily impacted by a decrease in distributions to limited partners as well as by the same factors that contributed to an increase in net cash provided by operating activities partially offset by the $18.0 million Tax Receivable Agreement (TRA) payment made to member owners in the current year. Timing of the TRA payment shifted to July in the current year from June in previous years due to a change in the company’s federal tax filing deadline. Free cash flow equaled 61% of non-GAAP adjusted EBITDA for fiscal 2019. 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).

As previously announced, the company completed its $250.0 million Class A stock repurchase program in March 2019. Under the program, the company repurchased approximately 6.7 million shares of Class A common stock, which had the impact of adding approximately $0.06 to diluted per-share results for fiscal year ended June 30, 2019.

Fiscal 2020 Outlook and Guidance

The statements in this “Fiscal 2020 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 most recent Form 10-K filed with the Securities and Exchange Commission (SEC), as updated from time to time in the company’s other filings with the SEC.

Premier believes it remains well positioned financially and operationally for fiscal 2020, and is introducing financial guidance for the fiscal year based on the following key assumptions:

  • Net administrative fees revenue growth of 1% to 5%.
  • Revenue growth of the company’s products business of 5% to 9%.
  • Extension of the Hospital Improvement Innovation Network contract with CMS at rates approximating 45% of the $14.4 million generated in fiscal 2019.
  • Performance consistent with the company’s current visibility into its annual revenue stream. Assuming the continuation of historical GPO retention and SaaS institutional renewal rates that are consistent with fiscal 2019 results, approximately 88% to 93% of Premier’s fiscal 2020 consolidated net revenue guidance range is available under contract.
  • A consolidated non-GAAP adjusted EBITDA margin of 43% to 47%.
  • Capital expenditures of approximately $95 million to $100 million.
  • An effective tax rate of approximately 26%.
  • Stock-based compensation of $28 million to $32 million.
  • Amortization of purchased intangible assets of approximately $50 million.
  • Non-GAAP free cash flow approximating 55% to 65% of non-GAAP adjusted EBITDA
  • Per-share guidance does not include the impact of share repurchases under the previously authorized $300 million stock repurchase plan. The timing and amount of any share repurchases will be determined by management based on market conditions, share price and other factors.
  • Guidance does not contemplate the impact of any future significant acquisitions.

Based on the company’s current outlook, and the realization of the assumptions discussed above in all material respects, Premier has established the following financial guidance for the fiscal year ending June 30, 2020:

Fiscal 2020 Financial Guidance *
 
Premier, Inc. introduces full-year fiscal 2020 financial guidance, as follows:
 
(in millions, except per share data)

FY 2020

% YoY Increase
Net Revenue:
Supply Chain Services segment $872.0 - $907.0 2% - 6%
Performance Services segment $359.0 - $373.0 (1)% - 3%
Total Net Revenue $1,231.0 - $1,280.0 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.

Impact of Discontinued Operations on Fiscal 2019 Financial Results

On May 6, 2019, the company announced that it committed to a plan to sell certain assets of its specialty pharmacy business and to discontinue operations of, and wind down and exit from the specialty pharmacy business. On June 7, 2019, the company closed the transaction. The table below shows the impact of discontinued operations by quarter and full fiscal year:

Supplemental Financial Information
Selected Financial Information for Discontinued Operations
(Unaudited)
(In thousands, except per share data)
 
First Second Third Fourth
Fiscal Year 2019 Discontinued Operations Results: Quarter Quarter Quarter Quarter Full Year
Net revenue

$

108,944

 

$

114,268

 

$

121,662

 

$

83,619

 

$

428,493

 

Gross profit

$

3,090

 

$

3,496

 

$

3,720

 

$

663

 

$

10,969

 

Loss from discontinued operations, net of tax

$

(1,399

)

$

(1,000

)

$

(1,463

)

$

(46,736

)

$

(50,598

)

 
NON-GAAP FINANCIAL MEASURES:
 
Adjusted EBITDA

$

(904

)

$

(946

)

$

(1,137

)

$

(5,063

)

$

(8,050

)

Adjusted fully distributed net loss

$

(858

)

$

(852

)

$

(985

)

$

(3,864

)

$

(6,559

)

Loss per share on adjusted fully distributed net income - diluted

$

(0.01

)

$

-

 

$

(0.01

)

$

(0.03

)

$

(0.05

)

Conference Call

Premier management will host a conference call and live audio webcast on Tuesday, Aug. 20, 2019, 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: 2739956. 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, 2018.

Forward-Looking Statements

Statements made in this release that are not statements of historical or current facts, such as those related to the current market environment and uncertainties, expected financial performance, non-GAAP free cash flow generation, the impact of the new revenue recognition standards, share repurchases, if any, under our current and future stock repurchase program, the success of our incremental investments in growth opportunities, the financial and strategic impact of our decision to exit the specialty pharmacy business and the statements related to fiscal 2020 outlook and guidance and the assumptions underlying such 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” section of Premier’s Form 10-K for the year ended June 30, 2019, 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)

 

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Year Ended June 30,

 

2019

2019

2019

2018

 

2019

2019

2019

2018

 

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

 

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

Net revenue:
Net administrative fees

$

170,234

 

$

(2,080

)

$

172,314

 

$

171,893

 

$

662,462

 

$

8,150

 

$

654,312

 

$

643,839

 

Other services and support

 

91,285

 

 

(3,353

)

 

94,638

 

 

96,878

 

 

371,019

 

 

12,552

 

 

358,467

 

 

368,491

 

Services

 

261,519

 

 

(5,433

)

 

266,952

 

 

268,771

 

 

1,033,481

 

 

20,702

 

 

1,012,779

 

 

1,012,330

 

Products

 

54,715

 

 

6,246

 

 

48,469

 

 

43,833

 

 

184,157

 

 

3,924

 

 

180,233

 

 

172,327

 

Net revenue

 

316,234

 

 

813

 

 

315,421

 

 

312,604

 

 

1,217,638

 

 

24,626

 

 

1,193,012

 

 

1,184,657

 

Cost of revenue:
Services

 

49,269

 

 

(927

)

 

50,196

 

 

46,171

 

 

182,375

 

 

(6,769

)

 

189,144

 

 

187,363

 

Products

 

49,230

 

 

-

 

 

49,230

 

 

39,976

 

 

173,255

 

 

-

 

 

173,255

 

 

154,634

 

Cost of revenue

 

98,499

 

 

(927

)

 

99,426

 

 

86,147

 

 

355,630

 

 

(6,769

)

 

362,399

 

 

341,997

 

Gross profit

 

217,735

 

 

1,740

 

 

215,995

 

 

226,457

 

 

862,008

 

 

31,395

 

 

830,613

 

 

842,660

 

Other operating income:
Remeasurement of tax receivable agreement liabilities

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

177,174

 

Other operating income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

177,174

 

Operating expenses:
Selling, general and administrative

 

118,787

 

 

(2,544

)

 

121,331

 

 

107,056

 

 

438,985

 

 

(5,959

)

 

444,944

 

 

425,251

 

Research and development

 

296

 

 

-

 

 

296

 

 

318

 

 

1,224

 

 

-

 

 

1,224

 

 

1,423

 

Amortization of purchased intangible assets

 

13,498

 

 

-

 

 

13,498

 

 

13,172

 

 

53,285

 

 

-

 

 

53,285

 

 

52,801

 

Operating expenses

 

132,581

 

 

(2,544

)

 

135,125

 

 

120,546

 

 

493,494

 

 

(5,959

)

 

499,453

 

 

479,475

 

Operating income

 

85,154

 

 

4,284

 

 

80,870

 

 

105,911

 

 

368,514

 

 

37,354

 

 

331,160

 

 

540,359

 

Equity in net income of unconsolidated affiliates

 

971

 

 

-

 

 

971

 

 

604

 

 

5,658

 

 

-

 

 

5,658

 

 

1,174

 

Interest and investment income (loss), net

 

157

 

 

-

 

 

157

 

 

(1,061

)

 

(2,471

)

 

-

 

 

(2,471

)

 

(5,300

)

Loss on disposal of long-lived assets

 

(6,378

)

 

-

 

 

(6,378

)

 

(651

)

 

(6,681

)

 

-

 

 

(6,681

)

 

(2,376

)

Other (expense) income

 

(2,004

)

 

-

 

 

(2,004

)

 

(1,838

)

 

3,119

 

 

-

 

 

3,119

 

 

(16,324

)

Other (expense) income, net

 

(7,254

)

 

-

 

 

(7,254

)

 

(2,946

)

 

(375

)

 

-

 

 

(375

)

 

(22,826

)

Income before income taxes

 

77,900

 

 

4,284

 

 

73,616

 

 

102,965

 

 

368,139

 

 

37,354

 

 

330,785

 

 

517,533

 

Income tax expense

 

7,671

 

 

(2,135

)

 

9,806

 

 

1,965

 

 

33,462

 

 

1,872

 

 

31,590

 

 

259,526

 

Net income from continuing operations

 

70,229

 

 

6,419

 

 

63,810

 

 

101,000

 

 

334,677

 

 

35,482

 

 

299,195

 

 

258,007

 

Loss from discontinued operations, net of tax

 

(46,736

)

 

(1,329

)

 

(45,407

)

 

(364

)

 

(50,598

)

 

-

 

 

(50,598

)

 

(437

)

Net income

 

23,493

 

 

5,090

 

 

18,403

 

 

100,636

 

 

284,079

 

 

35,482

 

 

248,597

 

 

257,570

 

Net income from continuing operations attributable to noncontrolling interest

 

(37,676

)

 

(3,800

)

 

(33,876

)

 

(70,348

)

 

(200,907

)

 

(22,427

)

 

(178,480

)

 

(224,548

)

Net loss from discontinued operations attributable to noncontrolling interest

 

23,849

 

 

677

 

 

23,172

 

 

221

 

 

25,948

 

 

(10

)

 

25,958

 

 

279

 

Net income attributable to non-controlling interest in Premier LP

 

(13,827

)

 

(3,123

)

 

(10,704

)

 

(70,127

)

 

(174,959

)

 

(22,437

)

 

(152,522

)

 

(224,269

)

Adjustment of redeemable limited partners' capital to redemption amount

 

(296,974

)

 

1,744

 

 

(298,718

)

 

(353,720

)

 

(118,064

)

 

16,045

 

 

(134,109

)

 

157,581

 

Net income (loss) attributable to stockholders

$

(287,308

)

$

3,711

 

$

(291,019

)

$

(323,211

)

$

(8,944

)

$

29,090

 

$

(38,034

)

$

190,882

 

 
Calculation of GAAP Earnings (Loss) per Share
 
Numerator for basic earnings (loss) per share:
Net (loss) income from continuing operations attributable to stockholders

$

(264,421

)

$

4,363

 

$

(268,784

)

$

(323,068

)

$

15,706

 

$

29,100

 

$

(13,394

)

$

191,040

 

Net loss from discontinued operations attributable to stockholders

 

(22,887

)

 

(652

)

 

(22,235

)

 

(143

)

 

(24,650

)

 

(10

)

 

(24,640

)

 

(158

)

Net (loss) income attributable to stockholders

$

(287,308

)

$

3,711

 

$

(291,019

)

$

(323,211

)

$

(8,944

)

$

29,090

 

$

(38,034

)

$

190,882

 

 
Numerator for diluted earnings (loss) per share:
Net (loss) income from continuing operations attributable to stockholders

$

(264,421

)

$

4,363

 

$

(268,784

)

$

(323,068

)

$

15,706

 

$

29,100

 

$

(13,394

)

$

191,040

 

Adjustment of redeemable limited partners' capital to redemption amount

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(157,581

)

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

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

224,548

 

Net (loss) income from continuing operations

 

(264,421

)

 

4,363

 

 

(268,784

)

 

(323,068

)

 

15,706

 

 

29,100

 

 

(13,394

)

 

258,007

 

Tax effect on Premier, Inc. net income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(70,257

)

Adjusted net (loss) income from continuing operations

$

(264,421

)

$

4,363

 

$

(268,784

)

$

(323,068

)

$

15,706

 

$

29,100

 

$

(13,394

)

$

187,750

 

 
Net loss from discontinued operations attributable to stockholders

$

(22,887

)

$

(652

)

$

(22,235

)

$

(143

)

$

(24,650

)

$

(10

)

$

(24,640

)

$

(158

)

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

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(279

)

Adjusted net loss from discontinued operations

$

(22,887

)

$

(652

)

$

(22,235

)

$

(143

)

$

(24,650

)

$

(10

)

$

(24,640

)

$

(437

)

 
Adjusted net (loss) income

$

(287,308

)

$

3,711

 

$

(291,019

)

$

(323,211

)

$

(8,944

)

$

29,090

 

$

(38,034

)

$

187,313

 

 
Denominator for basic earnings (loss) per share:
Weighted average shares

 

61,725

 

 

61,725

 

 

61,725

 

 

52,412

 

 

59,188

 

 

59,188

 

 

59,188

 

 

53,518

 

 
Denominator for diluted earnings (loss) per share:
Weighted average shares

 

61,725

 

 

61,725

 

 

61,725

 

 

52,412

 

 

59,188

 

 

59,188

 

 

59,188

 

 

53,518

 

Effect of dilutive stock based awards

 

-

 

 

-

 

 

-

 

 

-

 

 

1,081

 

 

1,081

 

 

-

 

 

822

 

Class B shares outstanding

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

83,000

 

Weighted average shares and assumed conversions

 

61,725

 

 

61,725

 

 

61,725

 

 

52,412

 

 

60,269

 

 

60,269

 

 

59,188

 

 

137,340

 

 
Basic earnings (loss) per share:
Basic (loss) earnings per share from continuing operations

$

(4.28

)

$

0.07

 

$

(4.35

)

$

(6.17

)

$

0.27

 

$

0.49

 

$

(0.22

)

$

3.57

 

Basic loss per share from discontinued operations

 

(0.37

)

 

(0.01

)

 

(0.36

)

 

-

 

 

(0.42

)

 

-

 

 

(0.42

)

 

-

 

Basic (loss) earnings per share attributable to stockholders

$

(4.65

)

$

0.06

 

$

(4.71

)

$

(6.17

)

$

(0.15

)

$

0.49

 

$

(0.64

)

$

3.57

 

 
Diluted earnings (loss) per share:
Diluted (loss) earnings per share from continuing operations

$

(4.28

)

$

0.07

 

$

(4.35

)

$

(6.17

)

$

0.27

 

$

0.48

 

$

(0.22

)

$

1.37

 

Diluted loss per share from discontinued operations

 

(0.37

)

 

(0.01

)

 

(0.36

)

 

-

 

 

(0.42

)

 

-

 

 

(0.42

)

 

(0.01

)

Diluted (loss) earnings per share attributable to stockholders

$

(4.65

)

$

0.06

 

$

(4.71

)

$

(6.17

)

$

(0.15

)

$

0.48

 

$

(0.64

)

$

1.36

 

 

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

 

 

 

 

 

 

June 30, 2019

June 30, 2019

June 30, 2019

June 30, 2018

 

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

Assets
Cash and cash equivalents

$

141,055

 

$

-

 

$

141,055

 

$

152,386

 

Accounts receivable (net of $4,327 and $1,841 allowance for doubtful accounts, respectively)

 

189,298

 

 

(11,664

)

 

200,962

 

 

186,768

 

Contract assets

 

205,509

 

 

205,509

 

 

-

 

 

-

 

Inventory

 

51,032

 

 

-

 

 

51,032

 

 

52,635

 

Prepaid expenses and other current assets

 

23,765

 

 

(5,110

)

 

28,875

 

 

22,437

 

Current assets held for sale

 

3,385

 

 

-

 

 

3,385

 

 

14,392

 

Total current assets

 

614,044

 

 

188,735

 

 

425,309

 

 

428,618

 

Property and equipment (net of $359,235 and $293,5641 accumulated depreciation, respectively)

 

205,108

 

 

-

 

 

205,108

 

 

205,349

 

Intangible assets (net of $197,858 and $144,574 accumulated amortization, respectively)

 

270,722

 

 

-

 

 

270,722

 

 

300,386

 

Goodwill

 

880,709

 

 

(98

)

 

880,807

 

 

843,170

 

Deferred income tax assets

 

422,014

 

 

(10,348

)

 

432,362

 

 

305,624

 

Deferred compensation plan assets

 

45,466

 

 

-

 

 

45,466

 

 

44,577

 

Investments in unconsolidated affiliates

 

99,636

 

 

-

 

 

99,636

 

 

94,053

 

Other assets

 

31,868

 

 

16,754

 

 

15,114

 

 

3,892

 

Long-term assets held for sale

 

-

 

 

-

 

 

-

 

 

86,547

 

Total assets

$

2,569,567

 

$

195,043

 

$

2,374,524

 

$

2,312,216

 

 
Liabilities, redeemable limited partners' capital and stockholders' deficit
Accounts payable

$

54,540

 

$

-

 

$

54,540

 

$

47,954

 

Accrued expenses

 

82,476

 

 

-

 

 

82,476

 

 

60,137

 

Revenue share obligations

 

137,359

 

 

51,087

 

 

86,272

 

 

78,999

 

Limited partners' distribution payable

 

13,202

 

 

6,391

 

 

6,811

 

 

15,465

 

Accrued compensation and benefits

 

70,799

 

 

-

 

 

70,799

 

 

63,326

 

Deferred revenue

 

35,623

 

 

(10,489

)

 

46,112

 

 

39,785

 

Current portion of tax receivable agreements

 

17,505

 

 

-

 

 

17,505

 

 

17,925

 

Current portion of long-term debt

 

27,608

 

 

-

 

 

27,608

 

 

100,250

 

Other liabilities

 

7,113

 

 

-

 

 

7,113

 

 

7,732

 

Current liabilities held for sale

 

11,797

 

 

-

 

 

11,797

 

 

17,309

 

Total current liabilities

 

458,022

 

 

46,989

 

 

411,033

 

 

448,882

 

Long-term debt, less current portion

 

6,003

 

 

-

 

 

6,003

 

 

6,962

 

Tax receivable agreements, less current portion

 

326,607

 

 

-

 

 

326,607

 

 

237,176

 

Deferred compensation plan obligations

 

45,466

 

 

-

 

 

45,466

 

 

44,577

 

Deferred tax liabilities

 

4,766

 

 

(2,981

)

 

7,747

 

 

17,569

 

Other liabilities

 

67,683

 

 

-

 

 

67,683

 

 

63,384

 

Long-term liabilities held for sale

 

-

 

 

-

 

 

-

 

 

320

 

Total liabilities

 

908,547

 

 

44,008

 

 

864,539

 

 

818,870

 

 
Redeemable limited partners' capital

 

2,523,270

 

 

-

 

 

2,523,270

 

 

2,920,410

 

Stockholders' deficit:
Class A common stock, $0.01 par value, 500,000,000 shares authorized; 64,357,305 shares issued and 61,938,157 shares outstanding at June 30, 2019 and 57,530,733 shares issued and 52,761,177 shares outstanding at June 30, 2018

 

644

 

 

-

 

 

644

 

 

575

 

Class B common stock, $0.000001 par value, 600,000,000 shares authorized; 64,548,044 and 80,335,701 shares issued and outstanding at June 30, 2019 and June 30, 2018, respectively

 

-

 

 

-

 

 

-

 

 

-

 

Treasury stock, at cost; 2,419,148 and 4,769,556 shares at June 30, 2019 and June 30, 2018, respectively

 

(87,220

)

 

-

 

 

(87,220

)

 

(150,058

)

Additional paid-in-capital

 

-

 

 

-

 

 

-

 

 

-

 

Accumulated deficit

 

(775,674

)

 

151,035

 

 

(926,709

)

 

(1,277,581

)

Total stockholders' deficit

 

(862,250

)

 

151,035

 

 

(1,013,285

)

 

(1,427,064

)

Total liabilities, redeemable limited partners' capital and stockholders' deficit

$

2,569,567

 

$

195,043

 

$

2,374,524

 

$

2,312,216

 

 

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

 

 

 

Year Ended June 30,

 

2019

2019

2019

2018

 

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

Operating activities
Net income

$

284,079

 

$

35,482

 

$

248,597

 

$

257,570

 

Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations, net of tax

 

50,598

 

 

-

 

 

50,598

 

 

437

 

Depreciation and amortization

 

140,164

 

 

-

 

 

140,164

 

 

123,065

 

Equity in net income of unconsolidated affiliates

 

(5,658

)

 

-

 

 

(5,658

)

 

(1,174

)

Deferred income taxes

 

11,878

 

 

(3,238

)

 

15,116

 

 

233,282

 

Stock-based compensation

 

29,001

 

 

-

 

 

29,001

 

 

28,844

 

Remeasurement of tax receivable agreement liabilities

 

-

 

 

-

 

 

-

 

 

(177,174

)

Loss on disposal of long-lived assets

 

6,681

 

 

-

 

 

6,681

 

 

2,376

 

Loss on FFF put and call rights

 

17

 

 

-

 

 

17

 

 

22,036

 

Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses and other current assets

 

(6,699

)

 

11,353

 

 

(18,052

)

 

(13,590

)

Contract assets

 

(36,549

)

 

(36,549

)

 

-

 

-
Inventories

 

1,603

 

 

-

 

 

1,603

 

 

(12,849

)

Other assets

 

(6,004

)

 

(1,363

)

 

(4,641

)

 

(725

)

Accounts payable, deferred revenue and other current liabilities

 

17,920

 

 

(5,685

)

 

23,605

 

 

20,138

 

Accrued expenses

 

22,202

 

 

-

 

 

22,202

 

 

10,028

 

Long-term liabilities

 

(57

)

 

-

 

 

(57

)

 

6,787

 

Other operating activities

 

2,762

 

 

-

 

 

2,762

 

 

6,207

 

Net cash provided by operating activities from continuing operations

 

511,938

 

 

-

 

 

511,938

 

 

505,258

 

Net cash (used in) provided by operating activities from discontinued operations

 

(6,599

)

 

-

 

 

(6,599

)

 

2,448

 

Net cash provided by operating activities

$

505,339

 

$

-

 

$

505,339

 

$

507,706

 

Investing activities
Purchases of property and equipment

$

(93,385

)

$

-

 

$

(93,385

)

$

(92,425

)

Acquisition of Stanson Health, Inc., net of cash acquired

 

(50,854

)

 

-

 

 

(50,854

)

 

-

 

Proceeds from sale of assets

 

22,731

 

 

-

 

 

22,731

 

 

-

 

Investments in convertible notes

 

(11,500

)

 

-

 

 

(11,500

)

 

-

 

Convertible note redemption

 

3,624

 

 

-

 

 

3,624

 

 

-

 

Other investing activities

 

110

 

 

-

 

 

110

 

 

-

 

Net cash used in investing activities from continuing operations

 

(129,274

)

 

-

 

 

(129,274

)

 

(92,425

)

Net cash used in investing activities from discontinued operations

 

(196

)

 

-

 

 

(196

)

 

(255

)

Net cash used in investing activities

$

(129,470

)

$

-

 

$

(129,470

)

$

(92,680

)

Financing activities
Proceeds from credit facility

$

50,000

 

$

-

 

$

50,000

 

$

30,000

 

Payments on credit facility

 

(125,000

)

 

-

 

 

(125,000

)

 

(150,000

)

Payments made on notes payable

 

(676

)

 

-

 

 

(676

)

 

(8,002

)

Redemption of limited partner of Premier LP

 

256

 

 

-

 

 

256

 

 

-

 

Proceeds from exercise of stock options under equity incentive plan

 

19,429

 

 

-

 

 

19,429

 

 

8,019

 

Proceeds from issuance of Class A common stock under stock purchase plan

 

2,858

 

 

-

 

 

2,858

 

 

2,619

 

Repurchase of vested restricted units for employee tax-withholding

 

(8,134

)

 

-

 

 

(8,134

)

 

(5,965

)

Distributions to limited partners of Premier LP

 

(57,825

)

 

-

 

 

(57,825

)

 

(79,255

)

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

 

(17,975

)

 

-

 

 

(17,975

)

 

-

 

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

 

(250,133

)

 

-

 

 

(250,133

)

 

(200,129

)

Earn-out liability payment to GNYHA Holdings

 

-

 

 

-

 

 

-

 

 

(16,662

)

Net cash used in financing activities

 

(387,200

)

 

-

 

 

(387,200

)

 

(419,375

)

Net decrease in cash and cash equivalents

 

(11,331

)

 

-

 

 

(11,331

)

 

(4,349

)

Cash and cash equivalents at beginning of year

 

152,386

 

 

-

 

 

152,386

 

 

156,735

 

Cash and cash equivalents at end of period

$

141,055

 

$

-

 

$

141,055

 

$

152,386

 

 

Supplemental Financial Information

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

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Year Ended June 30,

 

2019

2018

 

2019

2018

 
Net cash provided by operating activities from continuing operations

$

161,268

 

$

137,666

 

$

511,938

 

$

505,258

 

Purchases of property and equipment

 

(23,479

)

 

(27,420

)

 

(93,385

)

 

(92,425

)

Distributions to limited partners of Premier LP

 

(13,079

)

 

(13,157

)

 

(57,825

)

 

(79,255

)

Payments to limited partners under tax receivable agreements (1)

 

(17,975

)

Non-GAAP Free Cash Flow

$

124,710

 

$

97,089

 

$

342,753

 

$

333,578

 

 
(1) The timing of the annual tax receivable agreement payments has shifted to July from June due to the change in the company's federal tax filing deadline. As a result, Premier did not make a tax receivable agreement payment in fiscal 2018, but made the payment in July of fiscal 2019 and will make future annual payments in July.

Supplemental Financial Information

Reconciliation of Net Income 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 June 30,

Year Ended June 30,

 

2019

2019

2019

2018

2019

2019

2019

2018

 

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

 
Net income from continuing operations

$

70,229

 

$

6,419

 

$

63,810

 

$

101,000

 

$

334,677

 

$

35,482

 

$

299,195

 

$

258,007

 

Interest and investment (income) loss, net

 

(157

)

 

-

 

 

(157

)

 

1,061

 

 

2,471

 

 

-

 

 

2,471

 

 

5,300

 

Income tax expense

 

7,671

 

 

(2,135

)

 

9,806

 

 

1,965

 

 

33,462

 

 

1,872

 

 

31,590

 

 

259,526

 

Depreciation and amortization

 

23,351

 

 

-

 

 

23,351

 

 

18,666

 

 

86,879

 

 

-

 

 

86,879

 

 

70,264

 

Amortization of purchased intangible assets

 

13,498

 

 

-

 

 

13,498

 

 

13,172

 

 

53,285

 

 

-

 

 

53,285

 

 

52,801

 

EBITDA

 

114,592

 

 

4,284

 

 

110,308

 

 

135,864

 

 

510,774

 

 

37,354

 

 

473,420

 

 

645,898

 

Stock-based compensation

 

8,747

 

 

-

 

 

8,747

 

 

4,431

 

 

29,396

 

 

-

 

 

29,396

 

 

29,235

 

Acquisition and disposition related expenses

 

6,364

 

 

-

 

 

6,364

 

 

2,022

 

 

13,154

 

 

-

 

 

13,154

 

 

8,335

 

Strategic and financial restructuring expenses

 

7

 

 

-

 

 

7

 

 

859

 

 

7

 

 

-

 

 

7

 

 

2,512

 

Remeasurement of tax receivable agreement liabilities

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(177,174

)

ERP implementation expenses

 

259

 

 

-

 

 

259

 

 

468

 

 

872

 

 

-

 

 

872

 

 

1,000

 

Acquisition related adjustment - deferred revenue

 

34

 

 

-

 

 

34

 

 

43

 

 

141

 

 

-

 

 

141

 

 

300

 

Loss on disposal of long-lived assets

 

6,378

 

 

-

 

 

6,378

 

 

651

 

 

6,681

 

 

-

 

 

6,681

 

 

2,376

 

Loss on FFF put and call rights

 

3,475

 

 

-

 

 

3,475

 

 

3,362

 

 

17

 

 

-

 

 

17

 

 

22,036

 

Impairment on investments

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

5,002

 

Adjusted EBITDA

$

139,856

 

$

4,284

 

$

135,572

 

$

147,700

 

$

561,042

 

$

37,354

 

$

523,688

 

$

539,520

 

 
Income before income taxes

$

77,900

 

$

4,284

 

$

73,616

 

$

102,965

 

$

368,139

 

$

37,354

 

$

330,785

 

$

517,533

 

Equity in net income of unconsolidated affiliates

 

(971

)

 

-

 

 

(971

)

 

(604

)

 

(5,658

)

 

-

 

 

(5,658

)

 

(1,174

)

Interest and investment (income) loss, net

 

(157

)

 

-

 

 

(157

)

 

1,061

 

 

2,471

 

 

-

 

 

2,471

 

 

5,300

 

Loss on disposal of long-lived assets

 

6,378

 

 

-

 

 

6,378

 

 

651

 

 

6,681

 

 

-

 

 

6,681

 

 

2,376

 

Other expense (income)

 

2,004

 

 

-

 

 

2,004

 

 

1,838

 

 

(3,119

)

 

-

 

 

(3,119

)

 

16,324

 

Operating income

 

85,154

 

 

4,284

 

 

80,870

 

 

105,911

 

 

368,514

 

 

37,354

 

 

331,160

 

 

540,359

 

Depreciation and amortization

 

23,351

 

 

-

 

 

23,351

 

 

18,666

 

 

86,879

 

 

-

 

 

86,879

 

 

70,264

 

Amortization of purchased intangible assets

 

13,498

 

 

-

 

 

13,498

 

 

13,172

 

 

53,285

 

 

-

 

 

53,285

 

 

52,801

 

Stock-based compensation

 

8,747

 

 

-

 

 

8,747

 

 

4,431

 

 

29,396

 

 

-

 

 

29,396

 

 

29,235

 

Acquisition and disposition related expenses

 

6,364

 

 

-

 

 

6,364

 

 

2,022

 

 

13,154

 

 

-

 

 

13,154

 

 

8,335

 

Strategic and financial restructuring expenses

 

7

 

 

-

 

 

7

 

 

859

 

 

7

 

 

-

 

 

7

 

 

2,512

 

Remeasurement of tax receivable agreement liabilities

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(177,174

)

ERP implementation expenses

 

259

 

 

-

 

 

259

 

 

468

 

 

872

 

 

-

 

 

872

 

 

1,000

 

Acquisition related adjustment - deferred revenue

 

34

 

 

-

 

 

34

 

 

43

 

 

141

 

 

-

 

 

141

 

 

300

 

Equity in net income of unconsolidated affiliates

 

971

 

 

-

 

 

971

 

 

604

 

 

5,658

 

 

-

 

 

5,658

 

 

1,174

 

Impairment on investments

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

5,002

 

Deferred compensation plan income

 

1,470

 

 

-

 

 

1,470

 

 

957

 

 

2,546

 

 

-

 

 

2,546

 

 

3,960

 

Other income

 

-

 

 

-

 

 

-

 

 

567

 

 

590

 

 

-

 

 

590

 

 

1,752

 

Adjusted EBITDA

$

139,856

 

$

4,284

 

$

135,572

 

$

147,700

 

$

561,042

 

$

37,354

 

$

523,688

 

$

539,520

 

 
Segment Adjusted EBITDA:
Supply Chain Services

$

141,892

 

$

(2,025

)

$

143,917

 

$

142,053

 

$

548,029

 

$

9,492

 

$

538,537

 

$

531,851

 

Performance Services

 

28,236

 

 

6,309

 

 

21,927

 

 

37,564

 

 

129,147

 

 

27,862

 

 

101,285

 

 

123,429

 

Corporate

 

(30,272

)

 

-

 

 

(30,272

)

 

(31,917

)

 

(116,134

)

 

-

 

 

(116,134

)

 

(115,760

)

Adjusted EBITDA

$

139,856

 

$

4,284

 

$

135,572

 

$

147,700

 

$

561,042

 

$

37,354

 

$

523,688

 

$

539,520

 

 
 
Net (loss) income attributable to stockholders

$

(287,308

)

$

3,711

 

$

(291,019

)

$

(323,211

)

$

(8,944

)

$

29,090

 

$

(38,034

)

$

190,882

 

Adjustment of redeemable limited partners' capital to redemption amount

 

296,974

 

 

(1,744

)

 

298,718

 

 

353,720

 

 

118,064

 

 

(16,045

)

 

134,109

 

 

(157,581

)

Net income attributable to non-controlling interest in Premier LP

 

13,827

 

 

3,123

 

 

10,704

 

 

70,127

 

 

174,959

 

 

22,437

 

 

152,522

 

 

224,269

 

Loss from discontinued operations, net of tax

 

46,736

 

 

1,329

 

 

45,407

 

 

364

 

 

50,598

 

 

-

 

 

50,598

 

 

437

 

Income tax expense

 

7,671

 

 

(2,135

)

 

9,806

 

 

1,965

 

 

33,462

 

 

1,872

 

 

31,590

 

 

259,526

 

Amortization of purchased intangible assets

 

13,498

 

 

-

 

 

13,498

 

 

13,172

 

 

53,285

 

 

-

 

 

53,285

 

 

52,801

 

Stock-based compensation

 

8,747

 

 

-

 

 

8,747

 

 

4,431

 

 

29,396

 

 

-

 

 

29,396

 

 

29,235

 

Acquisition and disposition related expenses

 

6,364

 

 

-

 

 

6,364

 

 

2,022

 

 

13,154

 

 

-

 

 

13,154

 

 

8,335

 

Strategic and financial restructuring expenses

 

7

 

 

-

 

 

7

 

 

859

 

 

7

 

 

-

 

 

7

 

 

2,512

 

Remeasurement of tax receivable agreement liabilities

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(177,174

)

ERP implementation expenses

 

259

 

 

-

 

 

259

 

 

468

 

 

872

 

 

-

 

 

872

 

 

1,000

 

Acquisition related adjustment - deferred revenue

 

34

 

 

-

 

 

34

 

 

43

 

 

141

 

 

-

 

 

141

 

 

300

 

Loss on disposal of long-lived assets

 

6,378

 

 

-

 

 

6,378

 

 

651

 

 

6,681

 

 

-

 

 

6,681

 

 

2,376

 

Loss on FFF put and call rights

 

3,475

 

 

-

 

 

3,475

 

 

3,362

 

 

17

 

 

-

 

 

17

 

 

22,036

 

Impairment on investments

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

5,002

 

Non-GAAP adjusted fully distributed income before income taxes

 

116,662

 

 

4,284

 

 

112,378

 

 

127,973

 

 

471,692

 

 

37,354

 

 

434,338

 

 

463,956

 

Income tax expense on fully distributed income before income taxes

 

30,332

 

 

1,114

 

 

29,218

 

 

33,273

 

 

122,640

 

 

9,712

 

 

112,928

 

 

148,545

 

Non-GAAP Adjusted Fully Distributed Net Income

$

86,330

 

$

3,170

 

$

83,160

 

$

94,700

 

$

349,052

 

$

27,642

 

$

321,410

 

$

315,411

 

 

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 June 30,

Year Ended June 30,

 

2019

2019

2019

2018

2019

2019

2019

2018

 

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

 
Net (loss) income attributable to stockholders

$

(287,308

)

$

3,711

 

$

(291,019

)

$

(323,211

)

$

(8,944

)

$

29,090

 

$

(38,034

)

$

190,882

 

Adjustment of redeemable limited partners' capital to redemption amount

 

296,974

 

 

(1,744

)

 

298,718

 

 

353,720

 

 

118,064

 

 

(16,045

)

 

134,109

 

 

(157,581

)

Net income attributable to non-controlling interest in Premier LP

 

13,827

 

 

3,123

 

 

10,704

 

 

70,127

 

 

174,959

 

 

22,437

 

 

152,522

 

 

224,269

 

Loss from discontinued operations, net of tax

 

46,736

 

 

1,329

 

 

45,407

 

 

364

 

 

50,598

 

 

-

 

 

50,598

 

 

437

 

Income tax expense

 

7,671

 

 

(2,135

)

 

9,806

 

 

1,965

 

 

33,462

 

 

1,872

 

 

31,590

 

 

259,526

 

Amortization of purchased intangible assets

 

13,498

 

 

-

 

 

13,498

 

 

13,172

 

 

53,285

 

 

-

 

 

53,285

 

 

52,801

 

Stock-based compensation

 

8,747

 

 

-

 

 

8,747

 

 

4,431

 

 

29,396

 

 

-

 

 

29,396

 

 

29,235

 

Acquisition and disposition related expenses

 

6,364

 

 

-

 

 

6,364

 

 

2,022

 

 

13,154

 

 

-

 

 

13,154

 

 

8,335

 

Strategic and financial restructuring expenses

 

7

 

 

-

 

 

7

 

 

859

 

 

7

 

 

-

 

 

7

 

 

2,512

 

Remeasurement of tax receivable agreement liabilities

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(177,174

)

ERP implementation expenses

 

259

 

 

-

 

 

259

 

 

468

 

 

872

 

 

-

 

 

872

 

 

1,000

 

Acquisition related adjustment - deferred revenue

 

34

 

 

-

 

 

34

 

 

43

 

 

141

 

 

-

 

 

141

 

 

300

 

Loss on disposal of long-lived assets

 

6,378

 

 

-

 

 

6,378

 

 

651

 

 

6,681

 

 

-

 

 

6,681

 

 

2,376

 

Loss on FFF put and call rights

 

3,475

 

 

-

 

 

3,475

 

 

3,362

 

 

17

 

 

-

 

 

17

 

 

22,036

 

Impairment on investments

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

5,002

 

Non-GAAP adjusted fully distributed income before income taxes

 

116,662

 

 

4,284

 

 

112,378

 

 

127,973

 

 

471,692

 

 

37,354

 

 

434,338

 

 

463,956

 

Income tax expense on fully distributed income before income taxes

 

30,332

 

 

1,114

 

 

29,218

 

 

33,273

 

 

122,640

 

 

9,712

 

 

112,928

 

 

148,545

 

Non-GAAP Adjusted Fully Distributed Net Income

$

86,330

 

$

3,170

 

$

83,160

 

$

94,700

 

$

349,052

 

$

27,642

 

$

321,410

 

$

315,411

 

 
Weighted Average:
Common shares used for basic and diluted earnings (loss) per share

 

61,725

 

 

61,725

 

 

61,725

 

 

52,412

 

 

59,188

 

 

59,188

 

 

59,188

 

 

53,518

 

Potentially dilutive shares

 

1,522

 

 

1,522

 

 

1,522

 

 

1,636

 

 

1,081

 

 

1,081

 

 

1,081

 

 

822

 

Conversion of Class B common units

 

64,405

 

 

64,405

 

 

64,405

 

 

80,548

 

 

70,827

 

 

70,827

 

 

70,827

 

 

83,000

 

Weighted average fully distributed shares outstanding - diluted

 

127,652

 

 

127,652

 

 

127,652

 

 

134,596

 

 

131,096

 

 

131,096

 

 

131,096

 

 

137,340

 

 
GAAP (loss) earnings per share

$

(4.65

)

$

0.06

 

$

(4.71

)

$

(6.17

)

$

(0.15

)

$

0.49

 

$

(0.64

)

$

3.57

 

Adjustment of redeemable limited partners' capital to redemption amount

 

4.81

 

 

(0.03

)

 

4.84

 

 

6.75

 

 

1.99

 

 

(0.28

)

 

2.27

 

 

(2.94

)

Net income attributable to non-controlling interest in Premier LP

 

0.22

 

 

0.05

 

 

0.17

 

 

1.34

 

 

2.96

 

 

0.38

 

 

2.58

 

 

4.19

 

Loss from discontinued operations, net of tax

 

0.76

 

 

0.02

 

 

0.74

 

 

0.01

 

 

0.85

 

 

-

 

 

0.85

 

 

0.01

 

Income tax expense

 

0.12

 

 

(0.04

)

 

0.16

 

 

0.04

 

 

0.57

 

 

0.04

 

 

0.53

 

 

4.85

 

Amortization of purchased intangible assets

 

0.22

 

 

-

 

 

0.22

 

 

0.25

 

 

0.90

 

 

-

 

 

0.90

 

 

0.99

 

Stock-based compensation

 

0.14

 

 

-

 

 

0.14

 

 

0.08

 

 

0.50

 

 

-

 

 

0.50

 

 

0.55

 

Acquisition and disposition related expenses

 

0.10

 

 

-

 

 

0.10

 

 

0.04

 

 

0.22

 

 

-

 

 

0.22

 

 

0.16

 

Strategic and financial restructuring expenses

 

-

 

 

-

 

 

-

 

 

0.02

 

 

-

 

 

-

 

 

-

 

 

0.05

 

Remeasurement of tax receivable agreement liabilities

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(3.31

)

ERP implementation expenses

 

-

 

 

-

 

 

-

 

 

0.01

 

 

0.01

 

 

-

 

 

0.01

 

 

0.02

 

Acquisition related adjustment - deferred revenue

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

0.01

 

Loss on disposal of long-lived assets

 

0.10

 

 

-

 

 

0.10

 

 

0.01

 

 

0.11

 

 

-

 

 

0.11

 

 

0.04

 

Loss on FFF put and call rights

 

0.06

 

 

-

 

 

0.06

 

 

0.06

 

 

-

 

 

-

 

 

-

 

 

0.41

 

Impairment on investments

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

0.09

 

Impact of corporation taxes

 

(0.49

)

 

(0.02

)

 

(0.47

)

 

(0.63

)

 

(2.07

)

 

(0.17

)

 

(1.90

)

 

(2.78

)

Impact of dilutive shares

 

(0.71

)

 

(0.01

)

 

(0.70

)

 

(1.11

)

 

(3.23

)

 

(0.25

)

 

(2.98

)

 

(3.61

)

Non-GAAP EPS on Adjusted Fully Distributed Net Income

$

0.68

 

$

0.03

 

$

0.65

 

$

0.70

 

$

2.66

 

$

0.21

 

$

2.45

 

$

2.30

 

 

Consolidated Fourth-Quarter and Full Year Financial Highlights

 

Three Months Ended June 30,

Year Ended June 30,

(in thousands, except per share data)

2019

2019

2019

2018

2019

2019

2019

2018

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

New revenue
standard

Impact of new
revenue standard

Previous revenue
standard

Previous revenue
standard

Net Revenue (a):
Supply Chain Services:
Net administrative fees

$

170,234

 

$

(2,080

)

$

172,314

 

$

171,893

 

$

662,462

 

$

8,150

 

$

654,312

 

$

643,839

 

Other services and support

 

2,042

 

 

(8,571

)

 

10,613

 

 

2,086

 

 

8,561

 

 

(11,442

)

 

20,003

 

 

7,812

 

Services

 

172,276

 

 

(10,651

)

 

182,927

 

 

173,979

 

 

671,023

 

 

(3,292

)

 

674,315

 

 

651,651

 

Products

 

54,715

 

 

6,246

 

 

48,469

 

 

43,833

 

 

184,157

 

 

3,924

 

 

180,233

 

 

172,327

 

Total Supply Chain Services (a)

 

226,991

 

 

(4,405

)

 

231,396

 

 

217,812

 

 

855,180

 

 

632

 

 

854,548

 

 

823,978

 

Performance Services (a)

 

89,243

 

 

5,218

 

 

84,025

 

 

94,792

 

 

362,458

 

 

23,994

 

 

338,464

 

 

360,679

 

Total (a)

$

316,234

 

$

813

 

$

315,421

 

$

312,604

 

$

1,217,638

 

$

24,626

 

$

1,193,012

 

$

1,184,657

 

 
Net income from continuing operations

$

70,229

 

$

6,419

 

$

63,810

 

$

101,000

 

$

334,677

 

$

35,482

 

$

299,195

 

$

258,007

 

Net income from continuing operations attributable to stockholders

$

(264,421

)

$

4,363

 

$

(268,784

)

$

(323,068

)

$

15,706

 

$

29,100

 

$

(13,394

)

$

191,040

 

Adjusted net (loss) income from continuing operations (b)

$

(264,421

)

$

4,363

 

$

(268,784

)

$

(323,068

)

$

15,706

 

$

29,100

 

$

(13,394

)

$

187,750

 

Weighted average shares outstanding:
Basic

 

61,725

 

 

61,725

 

 

61,725

 

 

52,412

 

 

59,188

 

 

59,188

 

 

59,188

 

 

53,518

 

Diluted

 

61,725

 

 

61,725

 

 

61,725

 

 

52,412

 

 

60,269

 

 

60,269

 

 

59,188

 

 

137,340

 

Earnings (loss) from continuing operations per share attributable to stockholders:
Basic

$

(4.28

)

$

0.07

 

$

(4.35

)

$

(6.17

)

$

0.27

 

$

0.50

 

$

(0.23

)

$

3.57

 

Diluted (b)

$

(4.28

)

$

0.07

 

$

(4.35

)

$

(6.17

)

$

0.27

 

$

0.50

 

$

(0.23

)

$

1.37

 

 
NON-GAAP FINANCIAL MEASURES:
 
Adjusted EBITDA (a) (c):
Supply Chain Services

$

141,892

 

$

(2,025

)

$

143,917

 

$

142,053

 

$

548,029

 

$

9,492

 

$

538,537

 

$

531,851

 

Performance Services

 

28,236

 

 

6,309

 

 

21,927

 

 

37,564

 

 

129,147

 

 

27,862

 

 

101,285

 

 

123,429

 

Total segment adjusted EBITDA

 

170,128

 

 

4,284

 

 

165,844

 

 

179,617

 

 

677,176

 

 

37,354

 

 

639,822

 

 

655,280

 

Corporate

 

(30,272

)

 

(30,272

)

 

(31,917

)

 

(116,134

)

 

(116,134

)

 

(115,760

)

Total (a)

$

139,856

 

$

4,284

 

$

135,572

 

$

147,700

 

$

561,042

 

$

37,354

 

$

523,688

 

$

539,520

 

Adjusted fully distributed net income (c)

$

86,330

 

$

3,170

 

$

83,160

 

$

94,700

 

$

349,052

 

$

27,642

 

$

321,410

 

$

315,411

 

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

$

0.68

 

$

0.03

 

$

0.65

 

$

0.70

 

$

2.66

 

$

0.21

 

$

2.45

 

$

2.30

 

 
(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.

 

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

Source: Premier Inc.

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