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Premier Inc (PINC): 21.18 +0.39 +1.88% Volume: 1,112,804 April 19, 2024

Premier, Inc. Reports Fiscal-Year 2023 Third-Quarter Results

May 2, 2023

Updates Fiscal-Year 2023 Guidance

Premier, Inc. (NASDAQ: PINC), a leading technology-driven healthcare improvement company, today reported financial results for the fiscal year 2023 third quarter ended March 31, 2023 and provided updates to its fiscal 2023 guidance.

"We continue to make progress in advancing our longer-term strategy while supporting our members and other customers in a challenging and uncertain environment. During the fiscal 2023 third quarter, our group purchasing organization business performed in line with our expectations, with our non-acute, or Continuum of Care, GPO business producing mid-single digit growth in the quarter. Our direct sourcing business continues to be impacted by excess market supply and member inventory levels which contribute to lower demand and pricing," said Michael J. Alkire, Premier's President and CEO. "Our Performance Services segment grew nine percent quarter over quarter, driven by continued growth in our adjacent markets businesses collectively and our consulting services business."

"Importantly, our business is built on a stable foundation anchored by a strong, flexible balance sheet and significant cash flows. As we look ahead, we remain focused on executing our multi-year growth strategy by partnering with our members and other customers and leveraging our assets to create innovative healthcare solutions and deliver long-term value for our stakeholders."

Consolidated Financial Highlights

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Nine Months Ended March 31,

(in thousands, except per share data)

2023

2022

% Change

 

2023

2022

% Change

Net Revenue:

 

 

 

 

 

 

 

Supply Chain Services:

 

 

 

 

 

 

 

Net administrative fees

$

148,441

 

$

148,396

 

%

 

$

452,870

 

$

448,261

 

1

%

Software licenses, other services and support

 

11,032

 

 

8,914

 

24

%

 

 

35,963

 

 

27,165

 

32

%

Services and software licenses

 

159,473

 

 

157,310

 

1

%

 

 

488,833

 

 

475,426

 

3

%

Products

 

57,212

 

 

93,629

 

(39

%)

 

 

183,066

 

 

323,825

 

(43

%)

Total Supply Chain Services

 

216,685

 

 

250,939

 

(14

%)

 

 

671,899

 

 

799,251

 

(16

%)

Performance Services

 

105,556

 

 

96,903

 

9

%

 

 

323,860

 

 

292,962

 

11

%

Total segment net revenue

 

322,241

 

 

347,842

 

(7

%)

 

 

995,759

 

 

1,092,213

 

(9

%)

Eliminations

 

(9

)

 

(9

)

%

 

 

(28

)

 

(18

)

56

%

Net revenue

$

322,232

 

$

347,833

 

(7

%)

 

$

995,731

 

$

1,092,195

 

(9

%)

 

 

 

 

 

 

 

 

Net income

$

48,649

 

$

39,069

 

24

%

 

$

155,982

 

$

237,607

 

(34

%)

Net income attributable to stockholders

$

46,801

 

$

38,415

 

22

%

 

$

153,563

 

$

235,964

 

(35

%)

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to stockholders

$

0.39

 

$

0.32

 

22

%

 

$

1.28

 

$

1.94

 

(34

%)

Consolidated Financial Highlights

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Nine Months Ended March 31,

(in thousands, except per share data)

2023

2022

% Change

 

2023

2022

% Change

 

 

 

 

 

 

 

 

NON-GAAP FINANCIAL MEASURES*:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

Supply Chain Services

$

122,040

 

$

118,034

 

3

%

 

$

371,228

 

$

381,586

 

(3

%)

Performance Services

 

25,018

 

 

26,552

 

(6

%)

 

 

87,587

 

 

89,277

 

(2

%)

Total segment adjusted EBITDA

 

147,058

 

 

144,586

 

2

%

 

 

458,815

 

 

470,863

 

(3

%)

Corporate

 

(29,772

)

 

(32,398

)

8

%

 

 

(91,613

)

 

(94,956

)

4

%

Total

$

117,286

 

$

112,188

 

5

%

 

$

367,202

 

$

375,907

 

(2

%)

Adjusted net income

$

69,488

 

$

68,098

 

2

%

 

$

217,650

 

$

235,444

 

(8

%)

Adjusted earnings per share (EPS)

$

0.58

 

$

0.57

 

2

%

 

$

1.82

 

$

1.93

 

(6

%)

 

 

 

 

 

 

 

 

* Refer to the supplemental financial information at the end of this release for reconciliation of reported GAAP results to non-GAAP results.

Fiscal 2023 Guidance

Certain statements in this release, including without limitation, those in this section, are forward-looking statements. For additional information regarding the use and limitations of such statements, refer to "Forward-Looking Statements" below and the "Risk Factors" section of the company's most recent Form 10-K for the fiscal year ended June 30, 2022.

Based on its financial results for the nine months ended March 31, 2023, current visibility into the macro environment, and expectations for the remainder of this fiscal year, Premier is making the following changes to its fiscal 2023 guidance ranges:

  • Lowering Supply Chain Services segment net revenue to a range of $895 million to $925 million, reflecting lower direct sourcing revenue as a result of an ongoing impact from excess market supply and member inventory levels and lower revenues than the company previously anticipated due to delays in new domestic manufacturing capabilities. The company noted that its guidance for net administrative fees revenue of $600 million to $620 million remains unchanged.
  • Lowering Performance Services segment net revenue to a range of $440 million to $460 million, primarily reflecting some softening in demand and delayed decision-making by members for some of the company's more comprehensive enterprise license agreement and consulting services engagements mainly due to the current macro-economic environment.
  • As a result of the aforementioned revisions to its segment-level revenue guidance, the company currently expects total net revenue to be in the range of $1.34 billion to $1.39 billion.
  • Lowering adjusted EBITDA to a range of $490 million to $510 million and adjusted EPS to a range of $2.43 to $2.55, primarily as a result of the aforementioned changes to revenue guidance as well as the result of the company entering into an amended agreement with FFF Enterprises, Inc. ("FFF") in which Premier received a preference on any future liquidation of FFF. As a result, the company's historical 49% ownership interest in FFF is now considered preferred equity rather than common stock interest, resulting in a change in accounting methodology where Premier will no longer recognize its proportionate share of equity earnings, which had historically been included in adjusted EBITDA and adjusted earnings per share. The company expects this accounting methodology change to result in an approximate $0.02 to $0.04 per share impact on its fiscal 2023 adjusted earnings per share. Premier noted that this change will not have an impact on cash flow.

Guidance Metric

Fiscal 2023 Guidance Range*
(as of May 2, 2023)

Previous Fiscal 2023

Guidance Range*

(as of February 7, 2023)

Segment Net Revenue:

 

 

Supply Chain Services

$895 million to $925 million

$930 million to $980 million

Performance Services

$440 million to $460 million

$450 million to $470 million

Total Net Revenue

$1.34 billion to $1.39 billion

$1.38 billion to $1.45 billion

Adjusted EBITDA

$490 million to $510 million

$510 million to $530 million

Adjusted EPS

$2.43 to $2.55

$2.53 to $2.65

Fiscal 2023 guidance is based on the realization of the following key assumptions:

  • Net administrative fees revenue of $600 million to $620 million (unchanged from previous guidance)
  • Direct sourcing products revenue of $250 million to $265 million (previously: $285 million to $315 million)
  • Capital expenditures of $85 million to $90 million (previously: $90 million to $95 million)
  • Effective income tax rate in the range of 26% to 27% (unchanged from previous guidance)
  • Free cash flow of 45% to 55% of adjusted EBITDA (unchanged from previous guidance)
  • Does not include the effect of any potential future significant acquisitions or share repurchases
* Premier, Inc. does not provide forward-looking guidance on a GAAP basis as certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated. Refer to "Premier's Use of Forward-Looking Non-GAAP Measures" below for additional explanation.

Results of Operations for the Three Months Ended March 31, 2023
(As compared with the three months ended March 31, 2022)

GAAP net revenue of $322.2 million decreased 7% from $347.8 million in the year-ago period. The decrease was due to a decline in direct sourcing products revenue as a result of the impact of excess market supply and member inventory levels and the continued normalization of COVID-19 pandemic-driven demand and pricing for personal protective equipment (PPE) and other related supplies.

GAAP net income of $48.6 million increased 24% from $39.1 million in the prior-year period mainly due to lower performance-related compensation expense in the current period compared with the fiscal 2022 third quarter offset by the impact of increased headcount primarily in the company's growing adjacent markets businesses, restructuring costs associated with the cost-savings plan that Premier implemented in the third quarter of fiscal 2023, and an increase in interest expense resulting from higher interest rates associated with the utilization of the company's revolving credit facility.

GAAP diluted EPS of $0.39 increased 22% from $0.32 in the same period a year ago due to the aforementioned drivers affecting GAAP net income quarter-over-quarter growth.

Adjusted EBITDA of $117.3 million increased 5% from $112.2 million for the same period a year ago primarily due to an increase in Supply Chain Services adjusted EBITDA partially offset by a decrease in Performance Services adjusted EBITDA. Refer to Supply Chain Services and Performance Services sections below for further discussion on the factors that impacted each segment during the quarter.

Adjusted net income of $69.5 million increased 2% from $68.1 million for the same period a year ago. Adjusted EPS of $0.58 increased 2% from $0.57 for the same period a year ago primarily as a result of the same factors that impacted adjusted EBITDA offset by an increase in the effective tax rate in the current year period.

Segment Results
(For the fiscal third quarter of 2023 as compared with the fiscal third quarter of 2022)

Supply Chain Services

Supply Chain Services segment net revenue of $216.7 million decreased 14% from $250.9 million for the same quarter a year ago, primarily reflecting lower products revenue in the third quarter of fiscal 2023, as described below.

Net administrative fees revenue of $148.4 million was flat compared with the year ago quarter driven by growth in Premier's non-acute, or "Continuum of Care," group purchasing business, offset by the following factors affecting the company's acute GPO business: the continued normalization of demand and pricing across certain categories; continued regional variation in patient utilization trends affecting member purchasing; and an increase in aggregate blended member fee share due to market dynamics, including the impact from consolidation of certain member health systems.

Products revenue of $57.2 million decreased 39% from $93.6 million in the year-ago period which included higher prices and incremental purchases of PPE and other high-demand supplies related to the pandemic. The quarter-over-quarter decline, which the company expected, was primarily the result of the state of the pandemic compared with the prior-year period and continued excess market supply and member inventory levels which contributed to lower demand and pricing.

Segment adjusted EBITDA of $122.0 million increased 3% from $118.0 million the same period a year ago primarily due to lower performance-related compensation expense, lower logistics costs in the company's direct sourcing business, and higher equity earnings related to certain of Premier's minority investments in domestic manufacturing in the current-year period compared with the prior-year period. These items were partially offset by restructuring expenses paid during the quarter associated with the company's previously announced cost-savings plan.

Performance Services

Performance Services segment net revenue of $105.6 million increased 9% from $96.9 million for the same quarter a year ago, primarily due to growth in the company's consulting services and certain of its adjacent markets businesses, including revenue contributions from the company's acquisition of TPRN Direct Pay, Inc. and Devon Health, Inc. (collectively, "TRPN") in October 2022.

Segment adjusted EBITDA of $25.0 million decreased 6% from $26.6 million for the same period a year ago mainly due to higher headcount in the current-year period compared with the year-ago period in certain of the company's adjacent markets businesses as well as restructuring expenses paid during the quarter associated with the company's previously announced cost-savings plan. These items were partially offset by profitability associated with revenue growth in the PINC AI™ and Contigo Health businesses and lower performance-related compensation expense.

Results of Operations for the Nine Months Ended March 31, 2023
(As compared with the nine months ended March 31, 2022)

GAAP net revenue of $995.7 million decreased 9% from $1,092.2 million for the same period a year ago. The decrease was due to a decline in direct sourcing products revenue, which the company expected, as a result of the impact of excess market supply and member inventory levels and the continued normalization of pandemic-driven demand and pricing for PPE and other related supplies in the first nine months of fiscal 2023 as compared with the prior-year period.

GAAP net income of $156.0 million decreased 34% from $237.6 million in the same period a year ago primarily due to the following factors:

  1. a one-time gain of $64.1 million on the FFF put right in the prior-year period as a result of the termination and corresponding derecognition of the FFF Put Right liability in fiscal year 2022; and
  2. a $19.7 million increase in income tax expense primarily attributable to the prior year valuation allowance release resulting from the company's subsidiary reorganization on the fiscal-year 2022 GAAP effective tax rate.

GAAP diluted EPS of $1.28 decreased 34% from $1.94 in the same period a year ago mainly due to the aforementioned decrease in net income.

Adjusted EBITDA of $367.2 million decreased 2% from $375.9 million in the same period a year ago.

Adjusted net income of $217.7 million decreased 8% from $235.4 million for the same period a year ago. Adjusted EPS decreased 6% to $1.82 from $1.93 for the same period a year ago. The company noted that adjusted net income and adjusted EPS reflect income tax expense at an effective rate of 26% and 24% for fiscal 2023 and 2022, respectively.

Supply Chain Services segment net revenue of $671.9 million decreased 16% from $799.3 million for the same period a year ago. Segment adjusted EBITDA of $371.2 million decreased 3% from $381.6 million for the same period a year ago.

Performance Services segment net revenue of $323.9 million increased 11% from $293.0 million for the same period a year ago. Segment adjusted EBITDA of $87.6 million decreased 2% from $89.3 million for the same period a year ago.

Cash Flows and Liquidity

Net cash provided by operating activities ("operating cash flow") for the nine months ended March 31, 2023 of $331.2 million decreased by $3.6 million compared with the year-ago period primarily due to a decrease in cash receipts from members and other customers compared with the prior-year period in which there was higher direct sourcing products revenue to support members' needs during the COVID-19 pandemic as well as an increase in revenue share paid to members in the current-year period. These items were partially offset by a decrease in inventory purchases compared with the year-ago period; lower operating expenses driven by the company's cost-savings initiative implemented in the third quarter of fiscal 2023; and higher cash receipts primarily due to dividends from one of the company's minority investments.

Net cash used in investing activities and net cash used in financing activities for the nine months ended March 31, 2023, were $249.8 million and $76.0 million, respectively. As of March 31, 2023, cash and cash equivalents were $91.5 million compared with $86.1 million as of June 30, 2022, and the company's five-year, $1.0 billion revolving credit facility had an outstanding balance of $235.0 million, of which $60.0 million was repaid in April 2023.

Free cash flow for the nine months ended March 31, 2023 was $199.5 million compared with $201.9 million for the same period a year ago. The decrease was primarily due to the same factors that impacted operating cash flow, partially offset by a decrease in purchases of property and equipment compared to the prior-year period.

For the nine months ended March 31, 2023, the company paid aggregate dividends of $75.2 million to holders of its Class A common stock.

Conference Call and Webcast

Premier will host a conference call to provide additional detail around the company's performance and outlook today at 8:00 a.m. ET. The call will be webcast live from the company's website and, along with the accompanying presentation, will be available at the following link: Premier Events. The webcast should be accessed 10 minutes prior to the conference call start time. A replay of the webcast will be available for one year following the conclusion of the live broadcast and will be accessible on the company's website at https://investors.premierinc.com.

For those parties who do not have internet access, the conference call may be accessed by calling one of the below telephone numbers and asking to join the Premier, Inc. call:

Domestic participant dial-in number (toll-free):

(833) 953-2438

International participant dial-in number:

(412) 317-5767

About Premier, Inc.

Premier, Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of more than 4,400 U.S. hospitals and health systems and approximately 250,000 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.

Premier’s Use and Definition of Non-GAAP Measures

Premier uses EBITDA, adjusted EBITDA, segment adjusted EBITDA, adjusted net income, adjusted 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. Management believes EBITDA, adjusted EBITDA and segment adjusted EBITDA assist the company’s 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. Adjusted EBITDA and segment adjusted EBITDA are supplemental financial measures 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.

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, payments to certain former limited partners that elected to execute a Unit Exchange and Tax Receivable Agreement (“Unit Exchange Agreement) in connection with our August 2020 restructuring and purchases of property and equipment 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.

Non-recurring items are 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 stock-based compensation, acquisition- and disposition-related expenses, strategic initiative- and financial restructuring-related expenses, remeasurement of TRA liabilities, loss on disposal of long-live assets, gain or loss on FFF put and call rights, income and expense that has been classified as discontinued operations and other expense.

Non-operating items include gains or losses on the disposal of assets and interest and investment income or expense.

EBITDA is defined as net income before income or loss from discontinued operations, net of tax, interest and investment income or expense, 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.

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 net income is defined as net income attributable to Premier (i) excluding income or loss from discontinued operations, net, (ii) excluding income tax expense, (iii) excluding the impact of adjustment of redeemable limited partners’ capital to redemption amount, (iv) excluding the effect of non-recurring or non-cash items, including certain strategic initiative- and financial restructuring-related expenses, (v) 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 (vi) reflecting an adjustment for income tax expense on Non-GAAP net income before income taxes at our estimated annual effective income tax rate, adjusted for unusual or infrequent items.

Adjusted earnings per share is Adjusted Net Income divided by diluted weighted average shares.

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, early termination payments to certain former limited partners that elected to execute a Unit Exchange Agreement in connection with our August 2020 restructuring 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.

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, 2023, filed with the Securities and Exchange Commission (SEC), as may be updated in subsequent filings with the SEC.

Premier's Use of Forward-Looking Non-GAAP Measures

The company does not meaningfully reconcile guidance for non-GAAP adjusted EBITDA and non-GAAP adjusted earnings per share to net income attributable to stockholders or earnings per share attributable to stockholders because the company cannot provide guidance for the 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 earnings per share without unreasonable effort. This is due to the fact that future period non-GAAP guidance includes adjustments for items not indicative of our core operations, which may include, without limitation, items included in the supplemental financial information for reconciliation of reported GAAP results to non-GAAP results. Such items include strategic and acquisition related expenses for professional fees; mark to market adjustments for put options and contingent liabilities; gains and losses on stock-based performance shares; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the company believes to be non-indicative of its ongoing operations. Such adjustments may be affected by changes in ongoing assumptions, judgements, as well as nonrecurring, unusual or unanticipated charges, expenses or gains/losses or other items that may not directly correlate to the underlying performance of our business operations. The exact amount of these adjustments is not currently determinable but may be significant.

Cautionary Note Regarding Forward-Looking Statements

Statements made in this release that are not statements of historical or current facts, such as those related to our ability to advance our long-term strategies, the payment of dividends at current levels, or at all, our expected effective income tax rate, and the statements under the heading “Fiscal 2023 Guidance” and the key assumptions underlying fiscal 2023 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, 2022 as well as the Form 10-Q for the quarter ended March 31, 2023, 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.

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

March 31,

 

March 31,

 

2023

2022

 

2023

2022

Net revenue:

 

 

 

 

 

Net administrative fees

$

148,441

 

$

148,396

 

 

$

452,870

 

$

448,261

 

Software licenses, other services and support

 

116,579

 

 

105,808

 

 

 

359,795

 

 

320,109

 

Services and software licenses

 

265,020

 

 

254,204

 

 

 

812,665

 

 

768,370

 

Products

 

57,212

 

 

93,629

 

 

 

183,066

 

 

323,825

 

Net revenue

 

322,232

 

 

347,833

 

 

 

995,731

 

 

1,092,195

 

Cost of revenue:

 

 

 

 

 

Services and software licenses

 

54,149

 

 

46,735

 

 

 

163,428

 

 

136,326

 

Products

 

49,013

 

 

88,621

 

 

 

168,507

 

 

294,916

 

Cost of revenue

 

103,162

 

 

135,356

 

 

 

331,935

 

 

431,242

 

Gross profit

 

219,070

 

 

212,477

 

 

 

663,796

 

 

660,953

 

Operating expenses:

 

 

 

 

 

Selling, general and administrative

 

143,587

 

 

143,676

 

 

 

416,165

 

 

418,330

 

Research and development

 

1,001

 

 

826

 

 

 

2,976

 

 

2,666

 

Amortization of purchased intangible assets

 

11,916

 

 

11,151

 

 

 

35,415

 

 

32,890

 

Operating expenses

 

156,504

 

 

155,653

 

 

 

454,556

 

 

453,886

 

Operating income

 

62,566

 

 

56,824

 

 

 

209,240

 

 

207,067

 

Equity in net income of unconsolidated affiliates

 

4,630

 

 

3,991

 

 

 

14,547

 

 

17,165

 

Interest expense, net

 

(4,269

)

 

(2,804

)

 

 

(11,759

)

 

(8,465

)

Gain on FFF Put and Call Rights

 

 

 

 

 

 

 

 

64,110

 

Other income (expense), net

 

2,954

 

 

(4,248

)

 

 

3,720

 

 

(2,176

)

Other (expense) income, net

 

3,315

 

 

(3,061

)

 

 

6,508

 

 

70,634

 

Income before income taxes

 

65,881

 

 

53,763

 

 

 

215,748

 

 

277,701

 

Income tax expense

 

17,232

 

 

14,694

 

 

 

59,766

 

 

40,094

 

Net income

 

48,649

 

 

39,069

 

 

 

155,982

 

 

237,607

 

Net income attributable to non-controlling interest

 

(1,848

)

 

(654

)

 

 

(2,419

)

 

(1,643

)

Net income attributable to stockholders

$

46,801

 

$

38,415

 

 

$

153,563

 

$

235,964

 

 

 

 

 

 

 

Calculation of GAAP Earnings per Share

 

 

 

 

 

 

 

 

 

 

 

Numerator for earnings per share:

 

 

 

 

 

Net income attributable to stockholders

$

46,801

 

$

38,415

 

 

$

153,563

 

$

235,964

 

 

 

 

 

 

 

Denominator for earnings per share:

 

 

 

 

 

Basic weighted average shares outstanding

 

118,872

 

 

118,697

 

 

 

118,668

 

 

120,957

 

Effect of dilutive securities:

 

 

 

 

 

Stock options

 

76

 

 

98

 

 

 

103

 

 

225

 

Restricted stock

 

528

 

 

465

 

 

 

519

 

 

499

 

Performance share awards

 

340

 

 

553

 

 

 

542

 

 

621

 

Diluted weighted average shares and assumed conversions

 

119,816

 

 

119,813

 

 

 

119,832

 

 

122,302

 

 

 

 

 

 

 

Earnings per share attributable to stockholders:

 

 

 

 

 

Basic

$

0.39

 

$

0.32

 

 

$

1.29

 

$

1.95

 

Diluted

$

0.39

 

$

0.32

 

 

$

1.28

 

$

1.94

 

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

 

 

 

 

March 31, 2023

June 30, 2022

Assets

 

 

Cash and cash equivalents

$

91,493

 

$

86,143

 

Accounts receivable (net of $2,747 and $2,043 allowance for credit losses, respectively)

 

115,289

 

 

114,129

 

Contract assets (net of $808 and $755 allowance for credit losses, respectively)

 

290,824

 

 

260,061

 

Inventory

 

94,431

 

 

119,652

 

Prepaid expenses and other current assets

 

59,091

 

 

65,581

 

Total current assets

 

651,128

 

 

645,566

 

Property and equipment (net of $642,684 and $578,644 accumulated depreciation, respectively)

 

206,687

 

 

213,379

 

Intangible assets (net of $252,997 and $217,582 accumulated amortization, respectively)

 

442,718

 

 

356,572

 

Goodwill

 

1,069,073

 

 

999,913

 

Deferred income tax assets

 

722,949

 

 

725,032

 

Deferred compensation plan assets

 

47,699

 

 

47,436

 

Investments in unconsolidated affiliates

 

230,300

 

 

215,545

 

Operating lease right-of-use assets

 

31,658

 

 

39,530

 

Other assets

 

110,305

 

 

114,154

 

Total assets

$

3,512,517

 

$

3,357,127

 

 

 

 

Liabilities and stockholders' equity

 

Accounts payable

$

53,486

 

$

44,631

 

Accrued expenses

 

63,372

 

 

40,968

 

Revenue share obligations

 

258,112

 

 

245,395

 

Accrued compensation and benefits

 

59,088

 

 

93,638

 

Deferred revenue

 

27,880

 

 

30,463

 

Current portion of notes payable to former limited partners

 

99,200

 

 

97,806

 

Line of credit and current portion of long-term debt

 

236,272

 

 

153,053

 

Other current liabilities

 

102,922

 

 

47,183

 

Total current liabilities

 

900,332

 

 

753,137

 

Long-term debt, less current portion

 

1,008

 

 

2,280

 

Notes payable to former limited partners, less current portion

 

126,614

 

 

201,188

 

Deferred compensation plan obligations

 

47,699

 

 

47,436

 

Deferred consideration, less current portion

 

29,189

 

 

28,702

 

Operating lease liabilities, less current portion

 

25,468

 

 

32,960

 

Other liabilities

 

46,416

 

 

42,574

 

Total liabilities

 

1,176,726

 

 

1,108,277

 

 

 

 

Commitments and contingencies

 

 

Stockholders' equity:

 

 

Class A common stock, $0.01 par value, 500,000,000 shares authorized; 125,309,682 shares issued and 118,880,307 shares outstanding at March 31, 2023 and 124,481,610 shares issued and 118,052,235 shares outstanding at June 30, 2022

 

1,253

 

 

1,245

 

Treasury stock, at cost; 6,429,375 shares at both March 31, 2023 and June 30, 2022

 

(250,129

)

 

(250,129

)

Additional paid-in capital

 

2,175,048

 

 

2,166,047

 

Retained earnings

 

409,630

 

 

331,690

 

Accumulated other comprehensive loss

 

(11

)

 

(3

)

Total stockholders' equity

 

2,335,791

 

 

2,248,850

 

Total liabilities and stockholders' equity

$

3,512,517

 

$

3,357,127

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

 

Nine Months Ended March 31,

 

2023

2022

Operating activities

 

 

Net income

$

155,982

 

$

237,607

 

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

 

 

Depreciation and amortization

 

100,568

 

 

95,764

 

Equity in net income of unconsolidated affiliates

 

(14,547

)

 

(17,165

)

Deferred income taxes

 

2,083

 

 

36,926

 

Stock-based compensation

 

16,375

 

 

37,792

 

Gain on FFF Put and Call Rights

 

 

 

(64,110

)

Other

 

3,066

 

 

4,578

 

Changes in operating assets and liabilities, net of the effects of acquisitions:

 

 

Accounts receivable, inventories, prepaid expenses and other assets

 

47,389

 

 

91,418

 

Contract assets

 

(31,975

)

 

(39,139

)

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

 

52,237

 

 

(48,882

)

Net cash provided by operating activities

$

331,178

 

$

334,789

 

Investing activities

 

 

Purchases of property and equipment

$

(58,464

)

$

(61,061

)

Acquisition of businesses and equity method investments, net of cash acquired

 

(187,750

)

 

(26,000

)

Investment in unconsolidated affiliates

 

(2,060

)

 

(16,000

)

Other

 

(1,510

)

 

(10,000

)

Net cash used in investing activities

$

(249,784

)

$

(113,061

)

Financing activities

 

 

Payments made on notes payable

$

(76,024

)

$

(75,082

)

Proceeds from credit facility

 

350,000

 

 

300,000

 

Payments on credit facility

 

(265,000

)

 

(125,000

)

Proceeds from exercise of stock options under equity incentive plan

 

704

 

 

37,385

 

Cash dividends paid

 

(75,227

)

 

(72,861

)

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

 

 

 

(250,129

)

Other

 

(10,489

)

 

14,318

 

Net cash used in financing activities

$

(76,036

)

$

(171,369

)

Effect of exchange rate changes on cash flows

 

(8

)

 

3

 

Net increase in cash and cash equivalents

 

5,350

 

 

50,362

 

Cash and cash equivalents at beginning of year

 

86,143

 

 

129,141

 

Cash and cash equivalents at end of period

$

91,493

 

$

179,503

 

Supplemental Financial Information

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

(Unaudited)

(In thousands)

 

 

 

 

Nine Months Ended March 31,

 

2023

2022

Net cash provided by operating activities

$

331,178

 

$

334,789

 

Purchases of property and equipment

 

(58,464

)

 

(61,061

)

Early termination payments to certain former limited partners that elected to execute a Unit Exchange Agreement (a)

 

(73,180

)

 

(71,786

)

Free Cash Flow

$

199,534

 

$

201,942

 

(a)

Early termination payments to certain former limited partners that elected to execute a Unit Exchange Agreement in connection with Premier's August 2020 restructuring are presented in Condensed Consolidated Statements of Cash Flows under “Payments made on notes payable." During the nine months ended March 31, 2023, the company paid $77.0 million to members including imputed interest of $3.8 million which is included in net cash provided by operating activities. During the nine months ended March 31, 2022, the company paid $77.0 million to members, including imputed interest of $5.2 million which is included in net cash provided by operating activities.

Supplemental Financial Information

Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA

Reconciliation of Operating Income to Segment Adjusted EBITDA

Reconciliation of Net Income Attributable to Stockholders to Adjusted Net Income

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

March 31,

 

March 31,

 

2023

2022

 

2023

2022

Net income

$

48,649

 

$

39,069

 

 

$

155,982

 

$

237,607

 

Interest expense, net

 

4,269

 

 

2,804

 

 

 

11,759

 

 

8,465

 

Income tax expense

 

17,232

 

 

14,694

 

 

 

59,766

 

 

40,094

 

Depreciation and amortization

 

20,275

 

 

21,408

 

 

 

65,153

 

 

62,874

 

Amortization of purchased intangible assets

 

11,916

 

 

11,151

 

 

 

35,415

 

 

32,890

 

EBITDA

 

102,341

 

 

89,126

 

 

 

328,075

 

 

381,930

 

Stock-based compensation

 

6,709

 

 

14,149

 

 

 

16,859

 

 

38,229

 

Acquisition- and disposition-related expenses

 

6,294

 

 

3,115

 

 

 

11,592

 

 

10,282

 

Strategic initiative and financial restructuring-related expenses

 

1,942

 

 

5,540

 

 

 

10,988

 

 

9,314

 

Gain on FFF Put and Call Rights

 

 

 

 

 

 

 

 

(64,110

)

Other reconciling items, net

 

 

 

258

 

 

 

(312

)

 

262

 

Adjusted EBITDA

$

117,286

 

$

112,188

 

 

$

367,202

 

$

375,907

 

 

 

 

 

 

 

Income before income taxes

$

65,881

 

$

53,763

 

 

$

215,748

 

$

277,701

 

Equity in net income of unconsolidated affiliates

 

(4,630

)

 

(3,991

)

 

 

(14,547

)

 

(17,165

)

Interest expense, net

 

4,269

 

 

2,804

 

 

 

11,759

 

 

8,465

 

Gain on FFF Put and Call Rights

 

 

 

 

 

 

 

 

(64,110

)

Other (income) expense, net

 

(2,954

)

 

4,248

 

 

 

(3,720

)

 

2,176

 

Operating income

 

62,566

 

 

56,824

 

 

 

209,240

 

 

207,067

 

Depreciation and amortization

 

20,275

 

 

21,408

 

 

 

65,153

 

 

62,874

 

Amortization of purchased intangible assets

 

11,916

 

 

11,151

 

 

 

35,415

 

 

32,890

 

Stock-based compensation

 

6,709

 

 

14,149

 

 

 

16,859

 

 

38,229

 

Acquisition- and disposition-related expenses

 

6,294

 

 

3,115

 

 

 

11,592

 

 

10,282

 

Strategic initiative and financial restructuring-related expenses

 

1,942

 

 

5,540

 

 

 

10,988

 

 

9,314

 

Equity in net income of unconsolidated affiliates

 

4,630

 

 

3,991

 

 

 

14,547

 

 

17,165

 

Deferred compensation plan expense (income)

 

2,859

 

 

(3,994

)

 

 

3,148

 

 

(1,923

)

Other reconciling items, net

 

95

 

 

4

 

 

 

260

 

 

9

 

Adjusted EBITDA

$

117,286

 

$

112,188

 

 

$

367,202

 

$

375,907

 

 

 

 

 

 

 

SEGMENT ADJUSTED EBITDA

 

 

 

 

 

Supply Chain Services

$

122,040

 

$

118,034

 

 

$

371,228

 

$

381,586

 

Performance Services

 

25,018

 

 

26,552

 

 

 

87,587

 

 

89,277

 

Corporate

 

(29,772

)

 

(32,398

)

 

 

(91,613

)

 

(94,956

)

Adjusted EBITDA

$

117,286

 

$

112,188

 

 

$

367,202

 

$

375,907

 

 

 

 

 

 

 

Net income attributable to stockholders

$

46,801

 

$

38,415

 

 

$

153,563

 

$

235,964

 

Net income attributable to non-controlling interest

 

1,848

 

 

654

 

 

 

2,419

 

 

1,643

 

Income tax expense

 

17,232

 

 

14,694

 

 

 

59,766

 

 

40,094

 

Amortization of purchased intangible assets

 

11,916

 

 

11,151

 

 

 

35,415

 

 

32,890

 

Stock-based compensation

 

6,709

 

 

14,149

 

 

 

16,859

 

 

38,229

 

Acquisition- and disposition-related expenses

 

6,294

 

 

3,115

 

 

 

11,592

 

 

10,282

 

Strategic initiative and financial restructuring-related expenses

 

1,942

 

 

5,540

 

 

 

10,988

 

 

9,314

 

Gain on FFF Put and Call Rights

 

 

 

 

 

 

 

 

(64,110

)

Other reconciling items, net

 

1,161

 

 

1,885

 

 

 

3,520

 

 

5,489

 

Adjusted income before income taxes

 

93,903

 

 

89,603

 

 

 

294,122

 

 

309,795

 

Income tax expense on adjusted income before income taxes

 

24,415

 

 

21,505

 

 

 

76,472

 

 

74,351

 

Adjusted Net Income

$

69,488

 

$

68,098

 

 

$

217,650

 

$

235,444

 

Supplemental Financial Information

Reconciliation of GAAP EPS to Adjusted EPS

(Unaudited)

(In thousands, except per share data)

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

March 31,

 

March 31,

 

2023

2022

 

2023

2022

 

 

 

 

 

 

Net income attributable to stockholders

$

46,801

 

$

38,415

 

 

$

153,563

 

$

235,964

 

Net income attributable to non-controlling interest

 

1,848

 

 

654

 

 

 

2,419

 

 

1,643

 

Income tax expense

 

17,232

 

 

14,694

 

 

 

59,766

 

 

40,094

 

Amortization of purchased intangible assets

 

11,916

 

 

11,151

 

 

 

35,415

 

 

32,890

 

Stock-based compensation

 

6,709

 

 

14,149

 

 

 

16,859

 

 

38,229

 

Acquisition- and disposition-related expenses

 

6,294

 

 

3,115

 

 

 

11,592

 

 

10,282

 

Strategic initiative and financial restructuring-related expenses

 

1,942

 

 

5,540

 

 

 

10,988

 

 

9,314

 

Gain on FFF Put and Call Rights

 

 

 

 

 

 

 

 

(64,110

)

Other reconciling items, net

 

1,161

 

 

1,885

 

 

 

3,520

 

 

5,489

 

Adjusted income before income taxes

 

93,903

 

 

89,603

 

 

 

294,122

 

 

309,795

 

Income tax expense on adjusted income before income taxes

 

24,415

 

 

21,505

 

 

 

76,472

 

 

74,351

 

Adjusted Net Income

$

69,488

 

$

68,098

 

 

$

217,650

 

$

235,444

 

 

 

 

 

 

 

Weighted average:

 

 

 

 

 

Common shares used for basic and diluted earnings per share

 

118,872

 

 

118,697

 

 

 

118,668

 

 

120,957

 

Potentially dilutive shares

 

944

 

 

1,116

 

 

 

1,164

 

 

1,345

 

Weighted average shares outstanding - diluted

 

119,816

 

 

119,813

 

 

 

119,832

 

 

122,302

 

 

 

 

 

 

 

Basic earnings per share attributable to stockholders

$

0.39

 

$

0.32

 

 

$

1.29

 

$

1.95

 

Net income attributable to non-controlling interest

 

0.02

 

 

0.01

 

 

 

0.02

 

 

0.01

 

Income tax expense

 

0.14

 

 

0.12

 

 

 

0.50

 

 

0.33

 

Amortization of purchased intangible assets

 

0.10

 

 

0.09

 

 

 

0.30

 

 

0.27

 

Stock-based compensation

 

0.06

 

 

0.12

 

 

 

0.14

 

 

0.32

 

Acquisition- and disposition-related expenses

 

0.05

 

 

0.03

 

 

 

0.10

 

 

0.09

 

Strategic initiative and financial restructuring-related expenses

 

0.02

 

 

0.05

 

 

 

0.09

 

 

0.08

 

Gain on FFF Put and Call Rights

 

 

 

 

 

 

 

 

(0.53

)

Other reconciling items, net

 

0.01

 

 

0.02

 

 

 

0.04

 

 

0.04

 

Impact of corporation taxes

 

(0.21

)

 

(0.18

)

 

 

(0.64

)

 

(0.61

)

Impact of dilutive shares

 

 

 

(0.01

)

 

 

(0.02

)

 

(0.02

)

Adjusted EPS

$

0.58

 

$

0.57

 

 

$

1.82

 

$

1.93

 

 

Investor contact:
Angie McCabe
Vice President, Investor Relations
704.816.3888
angie_mccabe@premierinc.com

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

Source: Premier, Inc.