Premier(PINC) - 2025 Q1 - Quarterly Report

FORM 10-Q Filing Information Details Premier, Inc.'s quarterly report filing status, including its filer type and outstanding Class A common stock - Premier, Inc. filed its Quarterly Report on Form 10-Q for the period ended September 30, 2024, as a large accelerated filer and not a shell company[1][2] - As of October 31, 2024, there were 96,108,595 shares of the registrant's Class A common stock outstanding[3] Cautionary Note Regarding Forward-Looking Statements Highlights inherent uncertainties and risks associated with forward-looking statements, outlining key factors that could impact actual results - The report contains forward-looking statements subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from projections[5] - Key risk factors encompass competition, reliance on GPO administrative fees, healthcare industry consolidation, sales cycle delays, member activity reductions, market development for SaaS products, dependency on third-party payers, ability to maintain alliances, timely offering of new products (including AI integration risks), reliance on large members, acquisition risks, litigation, cybersecurity, data usage, supply chain issues, personnel retention, economic conditions (inflation, recession, geopolitical), regulatory changes (healthcare laws, privacy, antitrust), intellectual property protection, tax liabilities, and debt obligations[5][6] Certain Definitions Clarifies specific terminology used throughout the report, such as 'August 2020 Restructuring' and 'Operating income from revenues sold to OMNIA' - The 'August 2020 Restructuring' refers to the corporate restructuring on August 11, 2020, which eliminated the dual-class ownership structure and terminated the Tax Receivable Agreement (TRA)[9] - 'Operating income from revenues sold to OMNIA' refers to operating income from revenues sold to OMNIA Partners, LLC in July 2024, related to non-healthcare GPO member contracts, less retained royalty fees[10] PART I. FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and related disclosures for the reporting period Item 1. Financial Statements Presents Premier, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flows, with detailed explanatory notes Condensed Consolidated Balance Sheets (Unaudited) Provides a snapshot of Premier, Inc.'s financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Assets/Liabilities (in thousands) | Sep 30, 2024 | Jun 30, 2024 | |:----------------------------------|:-------------|:-------------| | Total current assets | $707,636 | $752,057 | | Total assets | $3,313,598 | $3,401,449 | | Total current liabilities | $648,548 | $746,563 | | Total liabilities | $1,359,415 | $1,439,218 | | Total stockholders' equity | $1,954,183 | $1,962,231 | - Total assets decreased by $87.85 million from June 30, 2024, to September 30, 2024, primarily driven by a decrease in cash and cash equivalents and current assets of discontinued operations[13] - Total liabilities decreased by $79.80 million, largely due to reductions in accrued compensation and benefits, current portion of notes payable to former limited partners, and current liabilities of discontinued operations[13] Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) Presents Premier, Inc.'s unaudited consolidated income and comprehensive income, detailing revenues, expenses, and net income for the period Condensed Consolidated Statements of Income and Comprehensive Income (in thousands) | Income Statement Item (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:-------------------------------------|:--------------------------------|:--------------------------------| | Net revenue | $248,142 | $269,026 | | Gross profit | $180,418 | $204,894 | | Operating income | $35,315 | $58,340 | | Income before income taxes | $95,651 | $55,500 | | Net income from continuing operations| $72,940 | $41,769 | | Net income attributable to stockholders| $70,784 | $44,761 | | Basic EPS from continuing operations | $0.72 | $0.37 | | Diluted EPS from continuing operations| $0.72 | $0.37 | - Net revenue decreased by $20.88 million (8%) year-over-year, while net income attributable to stockholders increased by $26.02 million (58%) due to a significant increase in other income, net[16] - Basic and diluted earnings per share from continuing operations both increased to $0.72 in Q3 2024 from $0.37 in Q3 2023[16] Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Details changes in Premier, Inc.'s stockholders' equity, including common stock, treasury stock, and retained earnings Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Stockholders' Equity Item (in thousands) | Balance at Jun 30, 2024 | Balance at Sep 30, 2024 | |:-----------------------------------------|:------------------------|:------------------------| | Class A Common Stock (Amount) | $1,115 | $978 | | Treasury Stock (Amount) | $(250,129) | $0 | | Additional Paid-In Capital | $2,105,684 | $2,188,208 | | (Accumulated Deficit) Retained Earnings | $105,590 | $(234,995) | | Total Stockholders' Equity | $1,962,231 | $1,954,183 | - Total stockholders' equity slightly decreased from $1,962.23 million to $1,954.18 million, primarily due to the retirement of Class A common stock and dividends paid, partially offset by net income and stock-based compensation[18] - The company retired 14,152 thousand shares of Class A common stock, resulting in a significant reduction in treasury stock and a corresponding decrease in retained earnings[18] Condensed Consolidated Statements of Cash Flows (Unaudited) Summarizes Premier, Inc.'s cash inflows and outflows from operating, investing, and financing activities for the reporting period Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:----------------------------------|:--------------------------------|:--------------------------------| | Net cash provided by operating activities | $67,647 | $81,876 | | Net cash used in investing activities | $(17,718) | $(21,270) | | Net cash (used in) provided by financing activities | $(88,140) | $302,865 | | Net (decrease) increase in cash and cash equivalents | $(38,190) | $363,468 | - Net cash provided by operating activities decreased by $14.23 million year-over-year, primarily due to a decrease in cash from discontinued operations[21] - Net cash used in financing activities significantly shifted from a $302.87 million inflow in Q3 2023 to an $88.14 million outflow in Q3 2024, largely due to lower proceeds from the sale of future revenues and increased share repurchases[21] Notes to Condensed Consolidated Financial Statements (Unaudited) Provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements (1) Organization and Basis of Presentation Premier, Inc. operates as a technology-driven healthcare improvement company through its wholly-owned subsidiary PHSI and other consolidated subsidiaries, delivering solutions via two segments: Supply Chain Services and Performance Services. The company recently divested its direct sourcing business (S2S Global) and retrospectively adjusted financial statements to reflect continuing operations - Premier operates through two business segments: Supply Chain Services (including GPO, supply chain co-management, purchased services, and Remitra) and Performance Services (PINC AI and Contigo Health)[25] - On September 30, 2024, Premier exchanged its direct sourcing subsidiary, S2S Global, for a 20% minority interest in Prestige Ameritech, Ltd., classifying S2S Global as a discontinued operation[26][27] (2) Significant Accounting Policies There have been no material changes to the Company's significant accounting policies as described in the 2024 Annual Report - No material changes to significant accounting policies were reported for the three months ended September 30, 2024[32] (3) Discontinued Operations and Exit Activities Premier classified its direct sourcing business (S2S Global) as a discontinued operation as of September 30, 2024, following its exchange for a 20% minority interest in Prestige. The company will continue to provide transitional services and generate administrative fees from GPO members' purchases on S2S Global's supplier contracts - S2S Global was classified as a discontinued operation as of September 30, 2024, after being exchanged for a 20% minority interest in Prestige, increasing Premier's total interest in Prestige to approximately 24%[33][34] Discontinued Operations (in thousands) | Discontinued Operations (in thousands) | Sep 30, 2024 | Jun 30, 2024 | |:---------------------------------------|:-------------|:-------------| | Current assets of discontinued operations | $104,893 | $116,462 | | Current liabilities of discontinued operations | $20,163 | $45,724 | Net (Loss) Income from Discontinued Operations (in thousands) | Net (Loss) Income from Discontinued Operations (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:--------------------------------------------------------------|:--------------------------------|:--------------------------------| | Net revenue | $50,485 | $49,726 | | Net (loss) income from discontinued operations, net of tax | $(1,604) | $641 | (4) Investments Premier holds investments in unconsolidated affiliates, including FFF, Exela, Qventus, and Prestige. The accounting method for these investments varies, with Exela and Prestige accounted for using the equity method, and FFF and Qventus at cost less impairments Investment (in thousands) | Investment (in thousands) | Carrying Value Sep 30, 2024 | Equity in Net Income (Loss) Q3 2024 | Equity in Net Income (Loss) Q3 2023 | |:--------------------------|:----------------------------|:------------------------------------|:------------------------------------| | FFF | $136,080 | $0 | $0 | | Exela | $33,458 | $1,198 | $(1,419) | | Qventus | $16,000 | $0 | $0 | | Prestige | $15,157 | $308 | $119 | | Other investments | $29,700 | $327 | $(426) | | Total investments | $230,395 | $1,833 | $(1,726) | - Premier's equity in net income of unconsolidated affiliates significantly improved from a loss of $1.73 million in Q3 2023 to an income of $1.83 million in Q3 2024[40] - Following the S2S Global sale, Premier's direct and indirect ownership in Prestige increased to approximately 24%, which is accounted for using the equity method[44] (5) Fair Value Measurements The company measures certain financial assets and liabilities at fair value on a recurring basis, primarily deferred compensation plan assets (Level 1) and earn-out liabilities (Level 3). Earn-out liabilities, mainly from the Acurity and Nexera acquisition, are based on member renewals and are expected to be paid in Q3 fiscal year 2025 Fair Value Item (in thousands) | Fair Value Item (in thousands) | Sep 30, 2024 | Jun 30, 2024 | |:-------------------------------|:-------------|:-------------| | Deferred compensation plan assets | $58,222 | $61,198 | | Earn-out liabilities | $30,000 | $28,549 | - Earn-out liabilities increased from $28.55 million to $30.00 million, with the maximum number of transferred member renewals achieved for the Acurity and Nexera earn-out, expected to be paid in the third quarter of fiscal year 2025[51][53] - Non-interest bearing notes payable to former limited partners are recorded net of discounts, with an implied fixed annual interest rate of 1.8%[54] (6) Contract Balances Premier recognized $10.0 million in revenue from its opening deferred revenue balance in Q3 2024. Additionally, $4.7 million in net revenue was recognized from performance obligations satisfied in prior periods, primarily due to under-forecasted cash receipts and revised forecasts. The aggregate remaining performance obligations totaled $724.8 million as of September 30, 2024, with a significant portion expected to be recognized over the next three years - Revenue recognized from the opening deferred revenue balance at June 30, 2024, was $10.0 million for the three months ended September 30, 2024[57] - Net revenue of $4.7 million was recognized in Q3 2024 from performance obligations satisfied in prior periods, mainly from under-forecasted cash receipts in net administrative fees and revised forecasts for variable consideration[60] - As of September 30, 2024, remaining performance obligations totaled $724.8 million, with approximately 39% expected to be recognized in the next 12 months, 22% in the following 12 months, and 28% over the subsequent 36 months[62] (7) Goodwill and Intangible Assets Premier recorded goodwill and intangible asset impairment charges totaling $16.5 million and $113.5 million, respectively, related to the Contigo Health reporting unit in fiscal year 2024, resulting in full impairment. Goodwill balances are maintained across Supply Chain Services and Performance Services, with estimated amortization expense for intangible assets projected for the coming years - In fiscal year 2024, Premier recorded pre-tax goodwill and intangible asset impairment charges of $16.5 million and $113.5 million, respectively, related to the Contigo Health reporting unit, which is now fully impaired[64] Goodwill (in thousands) | Goodwill (in thousands) | Sep 30, 2024 | Jun 30, 2024 | |:------------------------|:-------------|:-------------| | Supply Chain Services | $408,300 | $408,300 | | Performance Services | $587,500 | $587,500 | | Accumulated impairment losses (Performance Services) | $70,900 | $70,900 | Intangible Assets, Net (in thousands) | Intangible Assets, Net (in thousands) | Sep 30, 2024 | Jun 30, 2024 | |:--------------------------------------|:-------------|:-------------| | Total intangible assets, net | $259,622 | $269,259 | | Estimated amortization expense for 2025 | $28,552 | | (8) Debt and Notes Payable Premier's debt primarily consists of notes payable to former limited partners, which are non-interest bearing but recorded net of imputed interest. The company has a $1.0 billion Credit Facility with no outstanding borrowings as of September 30, 2024, and was in compliance with all covenants Debt and Notes Payable (in thousands) | Debt and Notes Payable (in thousands) | Sep 30, 2024 | Jun 30, 2024 | |:--------------------------------------|:-------------|:-------------| | Notes payable to former limited partners, net of discount | $76,317 | $101,523 | | Other notes payable | $0 | $1,008 | | Total debt and notes payable | $76,317 | $102,531 | - The company had no outstanding borrowings under its $1.0 billion Credit Facility at September 30, 2024, with $995.0 million of available borrowing capacity[71] - Notes payable to former limited partners, issued from the August 2020 Restructuring, are non-interest bearing but recorded with an imputed annual interest rate of 1.8%[73] (9) Liability Related to the Sale of Future Revenues Premier sold its non-healthcare GPO member contracts to OMNIA for $723.8 million in July 2023, creating a liability related to the sale of future revenues. This liability is being repaid over a 10-year term based on administrative fees, with an effective annual interest rate of 2.5% - On July 25, 2023, Premier sold its non-healthcare GPO member contracts to OMNIA for $723.8 million, all of which has been received as of September 30, 2024[75] - The liability related to the sale of future revenues is being repaid over a 10-year term with an effective annual interest rate of 2.5%[77] Liability Related to Sale of Future Revenues (in thousands) | Liability Related to Sale of Future Revenues (in thousands) | Amount | |:------------------------------------------------------------|:---------| | Beginning balance as of June 30, 2024 | $651,221 | | Proceeds from the sale of future revenues | $42,325 | | Imputed interest expense | $4,351 | | Payments against the liability | $(25,300)| | Ending balance as of September 30, 2024 | $672,597 | (10) Stockholders' Equity As of September 30, 2024, Premier had 97.8 million shares of Class A common stock outstanding. The company executed a $400.0 million accelerated share repurchase (ASR) agreement, repurchasing 19.9 million shares, and approved an additional $200.0 million repurchase authorization, under which $58.0 million has been used. Quarterly cash dividends of $0.21 per share were paid and declared - As of September 30, 2024, 97,794,635 shares of Class A common stock were outstanding[81] - Premier completed a $400.0 million accelerated share repurchase (ASR) agreement, repurchasing 19.9 million shares at an average price of $20.12 per share[82] - An additional $200.0 million share repurchase authorization was approved, with $58.0 million used to repurchase 2.9 million shares at an average price of $20.18 per share as of September 30, 2024[83] - A quarterly cash dividend of $0.21 per share was paid in September 2024, and another $0.21 per share dividend was declared payable in December 2024[84][85] (11) Earnings Per Share This section provides the reconciliation of the numerator and denominator used for basic and diluted earnings per share calculations. Basic EPS from continuing operations increased to $0.72 in Q3 2024 from $0.37 in Q3 2023, while diluted EPS from continuing operations also increased to $0.72 from $0.37 EPS Metric (in thousands, except per share) | EPS Metric (in thousands, except per share) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:--------------------------------------------|:--------------------------------|:--------------------------------| | Net income attributable to stockholders | $70,784 | $44,761 | | Basic weighted average shares outstanding | 100,380 | 119,344 | | Diluted weighted average shares | 100,991 | 120,133 | | Basic EPS from continuing operations | $0.72 | $0.37 | | Diluted EPS from continuing operations | $0.72 | $0.37 | - The increase in EPS from continuing operations is primarily due to higher net income from continuing operations and a lower weighted average number of shares outstanding[87] (12) Stock-Based Compensation Premier recognized $6.93 million in pre-tax stock-based compensation expense for Q3 2024. The 2013 Equity Incentive Plan expired in September 2023, and the new 2023 Equity Incentive Plan provides for grants of up to 6.0 million shares, with approximately 4.1 million shares available for grant as of September 30, 2024. Unrecognized stock-based compensation expense totaled $63.66 million Stock-Based Compensation (in thousands) | Stock-Based Compensation (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:----------------------------------------|:--------------------------------|:--------------------------------| | Pre-tax stock-based compensation expense| $6,931 | $6,692 | | Total stock-based compensation expense, net of tax | $5,676 | $5,148 | - The 2013 Equity Incentive Plan expired on September 24, 2023, with no new grants to be issued under it[91] - The 2023 Equity Incentive Plan, effective December 1, 2023, allows for grants of up to 6.0 million shares, with approximately 4.1 million shares available as of September 30, 2024[92] - Unrecognized stock-based compensation expense totaled $63.66 million at September 30, 2024, with a weighted average amortization period of 2.3 years[96] (13) Income Taxes Income tax expense from continuing operations for Q3 2024 was $22.7 million, reflecting an effective tax rate of 24%, a slight decrease from 25% in Q3 2023. This change is primarily due to shifts in stock-based compensation expense, state law repricing, and statute of limitation release on uncertain tax positions Income Tax Expense (in thousands) | Income Tax Expense (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:----------------------------------|:--------------------------------|:--------------------------------| | Income tax expense | $22,711 | $13,731 | | Effective tax rate | 24% | 25% | - The change in the effective tax rate is mainly attributed to changes in stock-based compensation expense, state law repricing, and the release of the statute of limitations on uncertain tax positions[97] (14) Commitments and Contingencies Operating lease expense for Q3 2024 was $2.0 million, with a weighted average remaining lease term of 1.9 years. The company is not currently involved in any material litigation but is periodically subject to various legal proceedings in the ordinary course of business Operating Lease Payments (in thousands) | Operating Lease Payments (in thousands) | Sep 30, 2024 | |:----------------------------------------|:-------------| | Total future minimum lease payments | $21,125 | | Total operating lease liabilities | $19,982 | - Operating lease expense for the three months ended September 30, 2024, was $2.0 million, with a weighted average remaining lease term of 1.9 years and a discount rate of 6%[98] - The company is not currently involved in any material litigation but is subject to periodic litigation, including potential claims related to antitrust, healthcare laws, and other commercial matters[99] (15) Segments Premier operates through two segments: Supply Chain Services and Performance Services. Remitra is now reported under Supply Chain Services for fiscal year 2025. Net revenue decreased across both segments in Q3 2024 compared to Q3 2023. Segment Adjusted EBITDA also saw declines, with Supply Chain Services decreasing by 24% and Performance Services by 35% - Remitra, the digital invoicing and payables automation business, is now reported as a component of the Supply Chain Services segment for fiscal year 2025[101][102] Net Revenue by Segment (in thousands) | Net Revenue by Segment (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:--------------------------------------|:--------------------------------|:--------------------------------| | Supply Chain Services | $151,388 | $163,276 | | Performance Services | $96,754 | $105,750 | | Total Net Revenue | $248,142 | $269,026 | Segment Adjusted EBITDA (in thousands) | Segment Adjusted EBITDA (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:---------------------------------------|:--------------------------------|:--------------------------------| | Supply Chain Services | $77,511 | $101,387 | | Performance Services | $14,949 | $22,930 | | Segment Adjusted EBITDA | $92,460 | $124,317 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes Premier's financial condition and results, covering business overview, strategic initiatives, segment performance, market trends, and liquidity Business Overview Provides an overview of Premier, Inc.'s business model as a technology-driven healthcare improvement company and key financial metrics - Premier is a technology-driven healthcare improvement company that partners with healthcare providers and organizations to transform healthcare through supply chain services, SaaS, analytics, consulting, and digital payment automation[112] Financial Metric (in thousands) | Financial Metric (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:--------------------------------|:--------------------------------|:--------------------------------| | Net revenue | $248,142 | $269,026 | | Net income from continuing operations | $72,940 | $41,769 | | Non-GAAP Adjusted EBITDA | $62,428 | $93,308 | Strategic Review Summarizes the outcomes of Premier's strategic review, including divestitures and significant share repurchase authorizations - The Board of Directors concluded its strategic review, authorizing the company to seek partners for Contigo Health and S2S Global[114] - Premier divested its direct sourcing subsidiary, S2S Global, for a 20% minority interest in Prestige Ameritech, Ltd., increasing its total ownership in Prestige to approximately 24%[114] - The Board authorized a $1.0 billion share repurchase program, under which a $400.0 million accelerated share repurchase (ASR) was completed, and an additional $200.0 million repurchase was approved[115][116] Our Business Segments Describes Premier's integrated platform and provides a breakdown of net revenue by its Supply Chain Services and Performance Services segments - Premier's integrated platform addresses clinical intelligence, margin improvement, and value-based care through two segments: Supply Chain Services and Performance Services[117] Segment Net Revenue (in thousands) | Segment Net Revenue (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change ($) | Change (%) | |:-----------------------------------|:--------------------------------|:--------------------------------|:-----------|:-----------| | Supply Chain Services | $151,388 | $163,276 | $(11,888) | (7)% | | Performance Services | $96,754 | $105,750 | $(8,996) | (9)% | | Segment net revenue | $248,142 | $269,026 | $(20,884) | (8)% | - Supply Chain Services includes GPO programs, co-management, purchased services, and Remitra; Performance Services comprises PINC AI (clinical intelligence, margin improvement, value-based care) and Contigo Health (direct-to-employer health benefits)[118] Sales and Divestitures Details Premier's recent sales of non-healthcare GPO contracts to OMNIA and the divestiture of its direct sourcing business, S2S Global - On July 25, 2023, Premier sold its non-healthcare GPO member contracts to OMNIA Partners, LLC for $723.8 million, with members retaining access to purchasing contracts for at least 10 years[119] - On September 30, 2024, Premier divested its direct sourcing business, S2S Global, for a 20% minority interest in Prestige Ameritech, Ltd., increasing its total ownership in Prestige to approximately 24%[120] - The direct sourcing business was classified as a discontinued operation, and financial information has been retrospectively adjusted[121] Market and Industry Trends and Outlook Discusses the impact of ongoing market and industry trends, such as inflation and geopolitical tensions, on Premier's business - Premier expects ongoing trends like inflation, rising healthcare input costs (especially labor), and healthcare legislation to impact its business, increasing demand for cost management, quality, safety, and value-based care solutions[123] - While inflation has declined, elevated rates continue to pressure supplier pricing and company margins, though contract term price protection mitigates some impact[124][125] - Geopolitical tensions continue to affect the global economy, exacerbating challenges like inflation, energy costs, logistics, tariffs, and supply-chain disruptions, which Premier actively monitors[127][128] Critical Accounting Policies and Estimates Highlights Premier's critical accounting policies, including goodwill impairment testing and the adoption of new accounting standards - Premier performs annual goodwill impairment testing and quarterly qualitative assessments, with the Informatics and Technology Services (ITS) reporting unit having a heightened risk of future impairments[130][131] - No new accounting standards were adopted during the three months ended September 30, 2024[132] Key Components of Our Results of Operations Explains the primary components of Premier's net revenue, cost of revenue, and other income (expense), net - Net revenue comprises net administrative fees, software licenses, other services and support, and products revenue, with Supply Chain Services revenue influenced by GPO contracts and member utilization, and Performance Services revenue by expansion of services and SaaS/licensed product subscriptions[132][133] - Cost of revenue includes employee compensation, outside consultants, hosting services, data center costs, third-party licenses, and amortization of capitalized contract costs and internally developed software[135][136] - Other income (expense), net, includes interest income/expense, equity in unconsolidated affiliates (Exela, Prestige), and non-operating gains, such as the $57.0 million settlement from a shareholder derivative complaint[141][142] Our Use of Non-GAAP Financial Measures Describes Premier's use of Non-GAAP financial measures like Adjusted EBITDA and Adjusted Net Income for performance assessment and comparability - Premier uses Non-GAAP financial measures such as EBITDA, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per Share, and Free Cash Flow to assess performance and facilitate period-to-period comparisons[146][154] - Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow definitions were revised to exclude operating income from revenues sold to OMNIA and related imputed interest/tax expense, and cash payments to OMNIA for the sale of future revenues[151][152] - Non-GAAP measures exclude non-recurring, non-cash, or non-operating items like stock-based compensation, acquisition/disposition expenses, strategic initiative expenses, discontinued operations, and gains/losses on asset disposal[147][159][160] Results of Operations Presents a summary of Premier's consolidated financial results, including net revenue, net income, and Non-GAAP Adjusted EBITDA Financial Metric (in thousands, except per share) | Financial Metric (in thousands, except per share) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:--------------------------------------------------|:--------------------------------|:--------------------------------| | Net revenue | $248,142 | $269,026 | | Gross profit | $180,418 | $204,894 | | Operating income | $35,315 | $58,340 | | Income before income taxes | $95,651 | $55,500 | | Net income attributable to stockholders | $70,784 | $44,761 | | Basic EPS attributable to stockholders | $0.71 | $0.38 | | Diluted EPS attributable to stockholders | $0.70 | $0.37 | | Adjusted EBITDA | $62,428 | $93,308 | | Non-GAAP Adjusted Net Income | $34,739 | $56,165 | | Non-GAAP Adjusted Earnings Per Share | $0.34 | $0.47 | - Net revenue decreased by 8% year-over-year, while net income attributable to stockholders increased by 58% due to a significant non-operating gain[168] - Adjusted EBITDA decreased by 33% and Non-GAAP Adjusted Net Income decreased by 38% year-over-year[169] Consolidated Results - Comparison of the Three Months Ended September 30, 2024 to 2023 Compares Premier's consolidated financial performance for the three months ended September 30, 2024, versus 2023, highlighting key changes - Net revenue decreased by $20.9 million, primarily due to an $11.9 million decrease in Supply Chain Services (higher fee share) and a $9.0 million decrease in Performance Services (non-recurring revenue in prior year)[176] - Cost of revenue increased by $3.6 million, mainly due to a $3.5 million increase in Supply Chain Services personnel costs for new co-management engagements[177] - Other income (expense), net, increased by $63.2 million, driven by a $57.0 million non-operating gain from a shareholder derivative complaint settlement and increases in deferred compensation plan income and equity in unconsolidated affiliates[179] - Adjusted EBITDA decreased by $30.9 million, primarily due to declines in both Supply Chain Services ($23.9 million) and Performance Services ($8.0 million) Adjusted EBITDA[183] Segment Results Provides a detailed breakdown of financial results for Premier's Supply Chain Services and Performance Services segments Supply Chain Services Supply Chain Services net revenue decreased by 7% due to a $17.3 million decline in net administrative fees (higher fee share) partially offset by a $5.4 million increase in software licenses and other support. Cost of revenue increased by 28% due to higher personnel costs, leading to a 24% decrease in Segment Adjusted EBITDA Supply Chain Services (in thousands) | Supply Chain Services (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change ($) | Change (%) | |:-------------------------------------|:--------------------------------|:--------------------------------|:-----------|:-----------| | Net administrative fees | $132,625 | $149,886 | $(17,261) | (12)% | | Software licenses, other services and support | $18,763 | $13,390 | $5,373 | 40% | | Net revenue | $151,388 | $163,276 | $(11,888) | (7)% | | Cost of revenue | $15,932 | $12,408 | $3,524 | 28% | | Segment Adjusted EBITDA | $77,511 | $101,387 | $(23,876) | (24)% | - The decrease in net administrative fees was primarily due to an increase in the aggregate blended fee share paid to members as a result of GPO contract renewals at higher fee shares[186] - Software licenses, other services and support revenue increased due to new agreements in supply chain co-management fees[187] Performance Services Performance Services net revenue decreased by 9%, driven by declines in SaaS-based product subscriptions, other revenue (Contigo Health, PINC AI), and consulting services, partially offset by an increase in software licenses (enterprise analytics). Operating expenses decreased by 16% due to lower acquisition/disposition-related expenses and amortization, resulting in a 35% decrease in Segment Adjusted EBITDA Performance Services (in thousands) | Performance Services (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change ($) | Change (%) | |:------------------------------------|:--------------------------------|:--------------------------------|:-----------|:-----------| | SaaS-based products subscriptions | $38,911 | $45,340 | $(6,429) | (14)% | | Consulting services | $19,689 | $23,768 | $(4,079) | (17)% | | Software licenses | $20,947 | $14,738 | $6,209 | 42% | | Other | $17,207 | $21,904 | $(4,697) | (21)% | | Net revenue | $96,754 | $105,750 | $(8,996) | (9)% | | Segment Adjusted EBITDA | $14,949 | $22,930 | $(7,981) | (35)% | - SaaS-based product subscriptions decreased due to conversion to licensed-based products and contract expirations[192] - Software licenses revenue increased due to higher enterprise analytics license revenue[193] Corporate Corporate operating expenses increased by 4% due to a $3.8 million rise in deferred compensation plan expense, partially offset by decreases in professional and legal fees. Corporate Adjusted EBITDA increased by 3% due to these reduced professional fees Corporate Expenses (in thousands) | Corporate Expenses (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change ($) | Change (%) | |:----------------------------------|:--------------------------------|:--------------------------------|:-----------|:-----------| | Selling, general and administrative | $42,176 | $40,624 | $1,552 | 4% | | Adjusted EBITDA | $(30,032) | $(31,009) | $977 | 3% | - The increase in corporate operating expenses was primarily due to a $3.8 million increase in deferred compensation plan expense resulting from market changes[198] - Corporate Adjusted EBITDA increased by $1.0 million, or 3%, primarily due to a decrease in professional fees[199] Off-Balance Sheet Arrangements Confirms that Premier, Inc. did not have any off-balance sheet arrangements as of September 30, 2024 - As of September 30, 2024, Premier did not have any off-balance sheet arrangements[200] Liquidity and Capital Resources Discusses Premier's primary cash sources and uses, including operating activities, investing, financing, and Non-GAAP Free Cash Flow - Premier's primary cash sources are operating activities and borrowings under its Credit Facility, used for operating expenses, working capital, revenue share, taxes, capital expenditures, dividends, share repurchases, and acquisitions[201] Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:---------------------------------|:--------------------------------|:--------------------------------| | Net cash provided by operating activities from continuing operations | $80,043 | $62,650 | | Net cash used in investing activities | $(17,718) | $(21,270) | | Net cash (used in) provided by financing activities | $(88,140) | $302,865 | | Net (decrease) increase in cash and cash equivalents | $(38,190) | $363,468 | - Net cash provided by operating activities from continuing operations increased by $17.4 million, primarily due to a $57.0 million shareholder complaint settlement and higher collections, partially offset by increased operating expense payments[208] Non-GAAP Free Cash Flow (in thousands) | Non-GAAP Free Cash Flow (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | |:---------------------------------------|:--------------------------------|:--------------------------------| | Net cash provided by operating activities from continuing operations | $80,043 | $62,650 | | Early termination payments to former limited partners | $(25,206) | $(24,742) | | Purchases of property and equipment | $(17,718) | $(21,270) | | Cash payments to OMNIA for sale of future revenues | $(20,949) | $(4,322) | | Non-GAAP Free Cash Flow | $16,170 | $12,316 | Contractual Obligations Outlines Premier's significant contractual obligations, including debt, sale of future revenues, dividends, and share repurchase authorizations - Premier had no outstanding borrowings under its Credit Facility as of September 30, 2024, with $995.0 million available capacity[216] - $77.0 million in notes payable to former limited partners remains, to be paid in three equal quarterly installments ending June 30, 2025[218] - A non-recourse commitment of $672.6 million for the sale of future revenues to OMNIA will be paid monthly from net administrative fees over at least 10 years[219] - The Board declared a quarterly cash dividend of $0.21 per share payable in December 2024; the company also has a $1.0 billion share repurchase authorization, with $542.0 million remaining as of September 30, 2024[220][223][240] Item 3. Quantitative and Qualitative Disclosures About Market Risk Assesses Premier's exposure to market risks, primarily interest rate fluctuations, and its approach to managing investment and foreign currency risks - Premier's market risk primarily relates to interest rate changes on variable-rate debt, but there were no outstanding borrowings under the Credit Facility as of September 30, 2024[225] - The company invests excess cash in low-risk cash equivalents and does not hold material derivative financial instruments[226] - Premier does not have significant foreign operations and therefore believes it has no material market risk associated with foreign currencies[227] Item 4. Controls and Procedures Premier's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of September 30, 2024, concluding they were effective. There were no material changes in internal control over financial reporting during the quarter - Premier's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2024[229] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2024[230] PART II. OTHER INFORMATION Presents additional information not included in the financial statements, covering legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Details Premier's involvement in various legal proceedings, including the settlement of a shareholder derivative complaint - Premier is subject to substantial litigation, including contractual disputes, product liability, employment, antitrust, and intellectual property matters[232] - A shareholder derivative complaint alleging breach of fiduciary duties related to accelerated payments to former limited partners was settled in July 2024[234][235] - As a result of the settlement, Premier received $57.0 million in net cash from its directors' and officers' insurance carriers[235] Item 1A. Risk Factors Confirms no material changes to the risk factors previously disclosed in Premier's 2024 Annual Report on Form 10-K - No material changes to the risk factors were reported since the filing of the 2024 Annual Report on Form 10-K[237] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports on Premier's share repurchases during the quarter, including accelerated share repurchases and market repurchases - Premier repurchased 7,722,215 shares of Common Stock during Q3 2024 at an average price of $20.14 per share[240] - The repurchases included 4,848,900 shares from the final settlement of the $400.0 million ASR agreement and 2,873,315 shares from market repurchases under a $200.0 million authorization[240] - As of September 30, 2024, $542.0 million remained under the $1.0 billion Share Repurchase Authorization[240] Item 5. Other Information Details SEC Rule 10b5-1 trading plans adopted by certain directors and executive officers during the quarter ended September 30, 2024 - One SEC Rule 10b5-1 trading plan was adopted by an administrative and financial officer on September 9, 2024, for the sale of up to 165,000 shares, with a scheduled expiration date of June 30, 2025[241][242] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including various equity incentive plan agreements, credit agreement amendments, employment agreements, certifications (Sarbanes-Oxley Act), and iXBRL financial data files - Exhibits include forms of Performance Share Award and Restricted Stock Unit Agreements under the 2023 Equity Incentive Plan, the Premier, Inc. Annual Incentive Compensation Plan, and the First Amendment to the Amended and Restated Credit Agreement[244] - Also filed are employment agreements for key executives, certifications by the principal executive and financial officers (Sarbanes-Oxley Act), and iXBRL formatted financial data[244] Signatures Identifies the individuals who signed the Quarterly Report on Form 10-Q on behalf of Premier, Inc. - The Quarterly Report was signed on November 5, 2024, by Craig S. McKasson, Chief Administrative and Financial Officer, and Crystal B. Climer, Chief Accounting Officer[246][247]