UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________________________________

FORM 10-Q

__________________________________________________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-36092

__________________________________________________________________________________________

Premier, Inc.

(Exact name of registrant as specified in its charter)

___________________________________________________________________________________________


Delaware		35-2477140
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

13034 Ballantyne Corporate Place
Charlotte,	North Carolina	28277
(Address of principal executive offices)		(Zip Code)

(704) 357-0022

(Registrant’s telephone number, including area code)

__________________________________________________________________________________________


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 Par Value	PINC	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October ~~28, 2021,~~27, 2022, there were ~~121,860,329~~118,762,118 shares of the registrant’s Class A common stock, par value $0.01 per share outstanding.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements made in this quarterly report for the three months ended September 30, ~~2021~~2022 for Premier, Inc. (this “Quarterly Report”) that are not statements of historical or current facts, such as those under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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 our actual results, performance or achievements to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in 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 our beliefs and expectations regarding future events and trends affecting our business and are necessarily subject to uncertainties, many of which are outside our control. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:

•the impact of the continuing financial and operational uncertainty due to the coronavirus pandemic and/or other ~~pandemics;~~pandemics, associated supply chain disruptions and inflation;

•global economic and political instability and conflicts, such as the ongoing conflict between Russia and Ukraine, could adversely affect our business, financial condition or results of operations, including issues such as rising inflation and global supply-chain disruption;

•competition which could limit our ability to maintain or expand market share within our industry;

•continued consolidation in the healthcare industry;

•potential delays in recognizing or increasing revenue if the sales cycle or implementation period takes longer than expected;

•the impact ~~on us~~to our business if members of our group purchasing organization (“GPO”) programs reduce activity levels or terminate or elect not to renew their contracts on substantially similar terms or at all;

•the rate at which the markets for our software as a service (“SaaS”) or licensed-based clinical analytics products and services develop;

•the dependency of our members on payments from third-party ~~payers;~~payors;

•our reliance on administrative fees that we receive from GPO suppliers;

•our ability to maintain third-party provider and strategic alliances and/or enter into new alliances;

•our ability to timely offer new and innovative products and services;

•the portion of our revenues that we receive from our largest members;

•risks and expenses related to future acquisition opportunities ~~and~~and/or integration of previous or future acquisitions;

•financial and operational risks associated with non-controlling investments in other businesses or other joint ventures that we do not control, particularly early-stage companies;

•pending and potential litigation;

•our reliance on Internet infrastructure, bandwidth providers, data center providers and other third parties and our own systems for providing services to our users;

•data loss or corruption due to failures or errors in our systems, ~~and~~ service disruptions at our data centers, and/or breaches or failures of our security measures;

•the financial, operational and reputational consequences of cyber-attacks or other data security breaches that disrupt our operations and/or result in the dissemination of proprietary or confidential information about us or our members or other third parties;

•our ability to use, disclose, de-identify or license data ~~and to~~and/or effectively integrate third-party technologies;

•our use of “open source” software;

•our dependency on contract manufacturing facilities located in various parts of the world;

•inventory risk we face in the event of a potential material decline in demand or price ~~decline~~ for the personal protective equipment or other products we may have purchased at elevated market prices or fixed prices;

•our ability to attract, hire, integrate and retain key personnel;

•adequate protection of our intellectual property and potential claims against our use of the intellectual property of third parties;

•potential sales and use tax liability in certain jurisdictions;

•changes in tax laws that materially impact our tax rate, income tax expense, anticipated tax benefits, deferred tax assets, cash flows and profitability;

•our indebtedness and our ability to obtain additional financing on favorable terms, including our ability to renew or replace our existing long-term credit facility at maturity;

•fluctuation of our quarterly cash flows, revenues and results of operations;

•changes and uncertainty in the political, economic or regulatory environment affecting healthcare organizations, including with respect to the status of the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act of ~~2010;~~2010 and pandemic-related public health and reimbursement measures;

•our compliance with complex international, federal and state laws, rules and regulations governing financial relationships among healthcare providers and the submission of false or fraudulent healthcare claims;

•interpretation and enforcement of current or future antitrust laws and regulations;

•compliance with complex federal, state and ~~state~~international privacy, security and breach notification laws;

•compliance with current or future laws, rules or regulations relating to information blocking provisions of the 21st Century Cures Act issued by the Office of the National Coordinator for Health Information Technology (the “ONC Rules”) that may cause our certified Health Information Technology products to be regulated by the ONC Rules;

•compliance with current or future laws, rules orand regulations adopted by the Food &and Drug Administration applicable to our software applications that may be considered medical devices;

•~~our holding company structure and dependence on distributions from Premier Healthcare Alliance, L.P. (“Premier LP”);~~

•the impact of payments required under notes payable to former limited partners related to the early termination of the Unit Exchange and Tax Receivable Acceleration Agreements (the “Unit Exchange Agreements”) issued in connection with our August 2020 Restructuring (as defined below) on our overall cash flow and our ability to fully realize the expected tax benefits to match such fixed payment obligations under ~~the Unit Exchange Agreements;~~those notes payable;

•provisions in our certificate of incorporation and bylaws and provisions of Delaware law and other applicable laws that discourage or prevent strategic transactions, including a takeover of us;

•failure to maintain an effective system of internal controls over financial reporting and/or an inability to remediate any weaknesses identified and the related costs of remediation;

•the impact on the price of our Class A common stock if we cease paying dividends or reduce dividend payments from current levels;

•the number of shares of Class A common stock repurchased by us pursuant to any ~~then existing~~then-existing Class A common stock repurchase program and the timing of any such repurchases;

•the number of shares of Class A common stock eligible for sale after the issuance of Class A common stock in our August 2020 Restructuring and the potential impact of such sales; and

•the risk factors discussed under the heading “Risk Factors” under Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021~~2022 (the ~~“2021~~“2022 Annual Report”), filed with the Securities and Exchange Commission (“SEC”). and this Quarterly Report on Form 10-Q.

More information on potential factors that could affect our 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” or similarly captioned sections of this Quarterly Report and our other periodic and current filings made from time to time with the SEC, which are available on our website at http://~~investors.premierinc.com/~~investors.premierinc.com (the

contents of which are not part of this Quarterly Report). You should not place undue reliance on any of our forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise. Furthermore, we cannot guarantee future results, events, levels of activity, performance or achievements.

Certain Definitions

For periods prior to August 11, 2020, references ~~in this Quarterly Report~~ to “member owners” are references to ~~the~~ participants in our GPO ~~program~~programs that were also limited partners of Premier LPHealthcare Alliance L.P. (“Premier LP”), sometimes referred to as “LPs” or “former limited partners,” that held Class B common units of Premier LP and shares of our Class B common stock.

For periods on or after August 11, 2020, references ~~in this Quarterly Report~~ to “members” are references to health systems and other customers that ~~participate in our GPO program, or~~ utilize any of our programs or services, some of which were formerly ~~referred to as~~ member owners.

~~“August~~References to the “August 2020 Restructuring” ~~means~~are references to our corporate restructuring on August 11, 2020 in which we (i) eliminated our dual-class ownership structure, through an exchange under which ~~member-owners~~member owners converted their Class B common units in Premier LP and corresponding Class B common shares of Premier, Inc. into our Class A common stock, on a one-for-one basis, and (ii) exercised our right to terminate the Tax Receivable Agreement (the “TRA”) by providing all former limited partners ~~of Premier LP~~ a notice of termination and the amount of the expected payment to be made to each limited partner pursuant to the early termination provisions of the TRA with a determination date of August 10, 2020. For additional information and details regarding the August 2020 Restructuring, see our 2021 Annual Report.

References to the “Subsidiary Reorganization” are references to an internal legal reorganization of our corporate subsidiaries in December 2021 for the purpose of simplifying our subsidiary reporting structure. For additional information and details regarding the Subsidiary Reorganization, see our Quarterly Report for the period ended December 31, 2021.

References to “Prior Premier GP” are references to our former wholly owned subsidiary Premier Services, LLC, which was merged with and into Premier, Inc., with Premier, Inc. being the surviving entity as part of the Subsidiary Reorganization.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PREMIER, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)


		September 30, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	184,421	$	129,141	Cash and cash equivalents	$	176,630	$	86,143
Accounts receivable (net of $1,283 and $1,174 allowance for credit losses, respectively)		139,111		142,557
Contract assets (net of $1,014 and $1,110 allowance for credit losses, respectively)		272,049		266,173
Accounts receivable (net of $1,127 and $2,043 allowance for credit losses, respectively)						Accounts receivable (net of $1,127 and $2,043 allowance for credit losses, respectively)	105,226		114,129
Contract assets (net of $838 and $755 allowance for credit losses, respectively)						Contract assets (net of $838 and $755 allowance for credit losses, respectively)	277,571		260,061
Inventory	Inventory	169,019		176,376		Inventory	123,881		119,652
Prepaid expenses and other current assets	Prepaid expenses and other current assets	68,125		68,049		Prepaid expenses and other current assets	55,655		65,581
Total current assets	Total current assets	832,725		782,296		Total current assets	738,963		645,566
Property and equipment (net of $538,399 and $518,332 accumulated depreciation, respectively)		226,349		224,271
Intangible assets (net of $300,801 and $289,912 accumulated amortization, respectively)		385,753		396,642
Property and equipment (net of $600,970 and $578,644 accumulated depreciation, respectively)						Property and equipment (net of $600,970 and $578,644 accumulated depreciation, respectively)	208,862		213,379
Intangible assets (net of $228,034 and $217,582 accumulated amortization, respectively)						Intangible assets (net of $228,034 and $217,582 accumulated amortization, respectively)	346,120		356,572
Goodwill	Goodwill	999,913		999,913		Goodwill	999,913		999,913
Deferred income tax assets	Deferred income tax assets	763,125		781,824		Deferred income tax assets	722,876		725,032
Deferred compensation plan assets	Deferred compensation plan assets	54,572		59,581		Deferred compensation plan assets	41,636		47,436
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	186,282		153,224		Investments in unconsolidated affiliates	215,436		215,545
Operating lease right-of-use assets	Operating lease right-of-use assets	46,432		48,199		Operating lease right-of-use assets	36,897		39,530
Other assets	Other assets	71,769		76,948		Other assets	109,038		114,154
Total assets	Total assets	$	3,566,920	$	3,522,898	Total assets	$	3,419,741	$	3,357,127

Liabilities and stockholders' equity	Liabilities and stockholders' equity					Liabilities and stockholders' equity
Accounts payable	Accounts payable	$	89,533	$	85,413	Accounts payable	$	59,803	$	44,631
Accrued expenses	Accrued expenses	42,540		48,144		Accrued expenses	39,342		40,968
Revenue share obligations	Revenue share obligations	223,748		226,883		Revenue share obligations	247,830		245,395
Accrued compensation and benefits	Accrued compensation and benefits	47,957		100,713		Accrued compensation and benefits	54,968		93,638
Deferred revenue	Deferred revenue	33,211		34,058		Deferred revenue	28,286		30,463
Current portion of notes payable to members		96,412		95,948
Current portion of notes payable to former limited partners						Current portion of notes payable to former limited partners	98,271		97,806
Line of credit and current portion of long-term debt	Line of credit and current portion of long-term debt	175,416		78,295		Line of credit and current portion of long-term debt	252,215		153,053
Other current liabilities	Other current liabilities	48,224		47,330		Other current liabilities	57,286		47,183
Total current liabilities	Total current liabilities	757,041		716,784		Total current liabilities	838,001		753,137
Long-term debt, less current portion	Long-term debt, less current portion	5,333		5,333		Long-term debt, less current portion	1,008		2,280
Notes payable to members, less current portion		274,717		298,995
Notes payable to former limited partners, less current portion						Notes payable to former limited partners, less current portion	176,446		201,188
Deferred compensation plan obligations	Deferred compensation plan obligations	54,572		59,581		Deferred compensation plan obligations	41,636		47,436

Deferred consideration, less current portion	Deferred consideration, less current portion	57,126		56,809		Deferred consideration, less current portion	28,864		28,702
Operating lease liabilities, less current portion	Operating lease liabilities, less current portion	40,979		43,102		Operating lease liabilities, less current portion	30,237		32,960
Other liabilities	Other liabilities	49,066		112,401		Other liabilities	42,130		42,574
Total liabilities	Total liabilities	1,238,834		1,293,005		Total liabilities	1,158,322		1,108,277
Commitments and contingencies (Note 14)		0		0
Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)


		September 30, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Class A common stock, $0.01 par value, 500,000,000 shares authorized; 123,772,055 shares issued and 122,680,693 shares outstanding at September 30, 2021 and 122,533,051 shares issued and outstanding at June 30, 2021		1,238		1,225
Treasury stock, at cost; 1,091,362 and 0 shares at September 30, 2021 and June 30, 2021, respectively		(42,628)		—
Class A common stock, $0.01 par value, 500,000,000 shares authorized; 125,175,648 shares issued and 118,746,273 shares outstanding at September 30, 2022 and 124,481,610 shares issued and 118,052,235 shares outstanding at June 30, 2022						Class A common stock, $0.01 par value, 500,000,000 shares authorized; 125,175,648 shares issued and 118,746,273 shares outstanding at September 30, 2022 and 124,481,610 shares issued and 118,052,235 shares outstanding at June 30, 2022	1,252		1,245
Treasury stock, at cost; 6,429,375 shares at both September 30, 2022 and June 30, 2022						Treasury stock, at cost; 6,429,375 shares at both September 30, 2022 and June 30, 2022	(250,129)		(250,129)
Additional paid-in capital	Additional paid-in capital	2,102,875		2,059,194		Additional paid-in capital	2,161,000		2,166,047
Retained earnings	Retained earnings	266,601		169,474		Retained earnings	349,309		331,690
Accumulated other comprehensive income						Accumulated other comprehensive income	(13)		(3)
Total stockholders' equity	Total stockholders' equity	2,328,086		2,229,893		Total stockholders' equity	2,261,419		2,248,850
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,566,920	$	3,522,898	Total liabilities and stockholders' equity	$	3,419,741	$	3,357,127

See accompanying notes to the unaudited condensed consolidated financial statements.

PREMIER, INC.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(In thousands, except per share data)

Three Months Ended
September 30,
2021 2020
Net revenue:
Net administrative fees $ 149,462 $ 132,645
Other services and support 97,255 98,827
Services 246,717 231,472
Products 118,430 115,415
Net revenue 365,147 346,887
Cost of revenue:
Services 43,809 38,750
Products 109,362 113,428
Cost of revenue 153,171 152,178
Gross profit 211,976 194,709
Operating expenses:
Selling, general and administrative 127,814 123,954
Research and development 994 576
Amortization of purchased intangible assets 10,889 13,204
Operating expenses 139,697 137,734
Operating income 72,279 56,975
Equity in net income of unconsolidated affiliates 7,058 5,927
Interest expense, net (2,788) (2,119)
Gain (loss) on FFF put and call rights 64,110 (1,919)
Other (expense) income, net (320) 3,683
Other income, net 68,060 5,572
Income before income taxes 140,339 62,547
Income tax expense (benefit) 19,033 (94,981)
Net income 121,306 157,528
Net loss (income) attributable to non-controlling interest 698 (11,845)
Adjustment of redeemable limited partners' capital to redemption amount — (26,685)
Net income attributable to stockholders $ 122,004 $ 118,998
Comprehensive income:
Net income 121,306 157,528
Comprehensive loss (income) attributable to non-controlling interest 698 (11,845)
Comprehensive income attributable to stockholders $ 122,004 $ 145,683
Weighted average shares outstanding:
Basic 122,945 99,575
Diluted 124,573 100,130
Earnings per share attributable to stockholders:
Basic earnings per share attributable to stockholders $ 0.99 $ 1.20
Diluted earnings per share attributable to stockholders $ 0.97 $ 1.19

~~See accompanying notes to the unaudited condensed consolidated financial statements.~~

~~PREMIER, INC.~~

~~Condensed Consolidated Statements of Stockholders' Equity~~

~~Three Months Ended September 30, 2021 and 2020~~

~~(Unaudited)~~

~~(In thousands)~~

Class A
Common Stock Class B
Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Total Stockholders' Equity
Shares Amount Shares Amount Shares Amount
Balance at June 30, 2021 122,533 $ 1,225 — $ — — $ — $ 2,059,194 $ 169,474 $ 2,229,893
Issuance of Class A common stock under equity incentive plan 1,239 13 — — — — 22,851 — 22,864
Treasury stock (1,091) — — — 1,091 (42,628) — — (42,628)
Stock-based compensation expense — — — — — — 7,554 — 7,554
Repurchase of vested restricted units for employee tax-withholding — — — — — — (9,171) — (9,171)
Net income — — — — — — — 121,306 121,306
Net loss attributable to non-controlling interest — — — — — — (698) 698 —
Dividends ($0.20 per share) — — — — — — — (24,877) (24,877)
Non-controlling interest related to acquisition — — — — — — 23,145 — 23,145
Balance at September 30, 2021 122,681 1,238 — — 1,091 (42,628) 2,102,875 266,601 2,328,086

Class A
Common Stock Class B
Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings / (Accumulated Deficit) Total Stockholders' Equity
Shares Amount Shares Amount Shares Amount
Balance at June 30, 2020 71,627 $ 716 50,213 $ — — $ — $ 138,547 $ — $ 139,263
Balance at July 1, 2020 71,627 716 50,213 — — — 138,547 — 139,263
Impact of change in accounting principle — — — — — — — (1,228) (1,228)
Adjusted balance at July 1, 2020 71,627 716 50,213 — — — 138,547 (1,228) 138,035
Exchange of Class B common units for Class A common stock by member owners 70 1 (70) — — — 2,436 — 2,437
Increase in additional paid-in capital related to quarterly exchange by member owners, including associated TRA revaluation — — — — — — 37,319 — 37,319
Increase in additional paid-in capital related to final exchange by member owners, including TRA termination — — — — — — 517,526 — 517,526
Issuance of Class A common stock under equity incentive plan 241 2 — — — — 642 — 644
Stock-based compensation expense — — — — — — 7,229 — 7,229
Repurchase of vested restricted units for employee tax-withholding — — — — — — (3,023) — (3,023)
Net income — — — — — — — 157,528 157,528
Net income attributable to non-controlling interest — — — — — — — (11,845) (11,845)
Adjustment of redeemable limited partners' capital to redemption amount — — — — — — — (26,685) (26,685)
Reclassification of redeemable limited partners' capital to permanent equity — — — — — — 1,750,840 3,767 1,754,607
Final exchange of Class B common units for Class A common stock by member owners 50,143 502 (50,143) — — — (502) — —
Early termination payments to members — — — — — — (438,967) — (438,967)
Dividends ($0.19 per share) — — — — — — — (23,381) (23,381)
Balance at September 30, 2020 122,081 1,221 — — — — 2,012,047 98,156 2,111,424


	Three Months Ended
	September 30,
	2022		2021
Net revenue:
Net administrative fees	$	150,006	$	149,462
Software licenses, other services and support	105,006		97,255
Services and software licenses	255,012		246,717
Products	58,861		118,430
Net revenue	313,873		365,147
Cost of revenue:
Services and software licenses	54,014		43,809
Products	57,874		109,362
Cost of revenue	111,888		153,171
Gross profit	201,985		211,976
Operating expenses:
Selling, general and administrative	132,050		127,814
Research and development	975		994
Amortization of purchased intangible assets	10,452		10,889
Operating expenses	143,477		139,697
Operating income	58,508		72,279
Equity in net income of unconsolidated affiliates	8,243		7,058
Interest expense, net	(2,859)		(2,788)
Gain on FFF Put and Call Rights	—		64,110
Other expense, net	(2,164)		(320)
Other income, net	3,220		68,060
Income before income taxes	61,728		140,339
Income tax expense	18,769		19,033
Net income	42,959		121,306
Net (income) loss attributable to non-controlling interest	(243)		698

Net income attributable to stockholders	$	42,716	$	122,004

Comprehensive income:
Net income	$	42,959	$	121,306
Comprehensive (income) loss attributable to non-controlling interest	(243)		698
Foreign currency translation loss	(10)		—
Comprehensive income attributable to stockholders	$	42,706	$	122,004

Weighted average shares outstanding:
Basic	118,351		122,945
Diluted	120,033		124,573

Earnings per share attributable to stockholders:
Basic	$	0.36	$	0.99
Diluted	$	0.36	$	0.97

See accompanying notes to the unaudited condensed consolidated financial statements.

PREMIER, INC.

Condensed Consolidated Statements of ~~Cash Flows~~Stockholders' Equity

Three Months Ended September 30, 2022 and 2021

(Unaudited)

(In thousands)
Three Months Ended September 30,
2021 2020
Operating activities
Net income $ 121,306 $ 157,528
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 31,485 30,678
Equity in net income of unconsolidated affiliates (7,058) (5,927)
Deferred income taxes 18,700 (106,386)
Stock-based compensation 7,554 7,229
(Gain) loss on FFF call/put rights (64,110) 1,919
Other 518 201
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable, inventories, prepaid expenses and other assets 22,682 (45,469)
Contract assets (5,876) (29,568)
Accounts payable, accrued expenses, deferred revenue, revenue share obligations and other current liabilities (70,014) 20,577
Net cash provided by operating activities 55,187 30,782
Investing activities
Purchases of property and equipment (21,050) (24,982)
Acquisition of businesses and equity method investments, net of cash acquired (26,000) —
Other — 29
Net cash used in investing activities (47,050) (24,953)
Financing activities
Payments made on notes payable (26,692) (188)
Proceeds from credit facility 175,000 100,000
Payments on credit facility (75,000) (25,000)
Distributions to limited partners of Premier LP — (9,949)
Payments to limited partners of Premier LP related to tax receivable agreements — (24,218)
Cash dividends paid (24,852) (23,195)
Repurchase of Class A common stock (held as treasury stock) (38,151) —
Other 36,838 (2,167)
Net cash provided by financing activities 47,143 15,283
Net increase in cash and cash equivalents 55,280 21,112
Cash and cash equivalents at beginning of period 129,141 99,304
Cash and cash equivalents at end of period $ 184,421 $ 120,416


	Class A Common Stock			Treasury Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity
	Shares	Amount			Shares			Amount
Balance at June 30, 2022	118,052	$	1,245		6,429	$	(250,129)		$	2,166,047	$	(3)	$	331,690	$	2,248,850
Issuance of Class A common stock under equity incentive plan	694	7			—	—			637		—		—		644

Stock-based compensation expense	—	—			—	—			7,136		—		—		7,136
Repurchase of vested restricted units for employee tax-withholding	—	—			—	—			(13,089)		—		—		(13,089)
Net income	—	—			—	—			—		—		42,959		42,959
Net income attributable to non-controlling interest	—	—			—	—			243		—		(243)		—
Change in ownership of consolidated entity	—	—			—	—			26		—		—		26
Dividends ($0.21 per share)	—	—			—	—			—		—		(25,097)		(25,097)

Foreign currency translation adjustment	—	—			—	—			—		(10)		—		(10)
Balance at September 30, 2022	118,746	$	1,252		6,429	$	(250,129)		$	2,161,000	$	(13)	$	349,309	$	2,261,419


	Class A Common Stock		Treasury Stock		Additional Paid-In Capital			Retained Earnings	Total Stockholders' Equity
	Shares	Amount		Shares		Amount
Balance at June 30, 2021	122,533	1,225		—	—		2,059,194		169,474	2,229,893
Issuance of Class A common stock under equity incentive plan	1,239	13		—	—		22,851		—	22,864

Treasury stock	(1,091)	—		1,091	(42,628)		—		—	(42,628)
Stock-based compensation expense	—	—		—	—		7,554		—	7,554
Repurchase of vested restricted units for employee tax-withholding	—	—		—	—		(9,171)		—	(9,171)
Net income	—	—		—	—		—		121,306	121,306
Net loss attributable to non-controlling interest	—	—		—	—		(698)		698	—

Dividends ($0.20 per share)	—	—		—	—		—		(24,877)	(24,877)



Non-controlling interest related to acquisition	—	—		—	—		23,145		—	23,145


Balance at September 30, 2021	122,681	1,238		1,091	(42,628)		2,102,875		266,601	2,328,086

See accompanying notes to the unaudited condensed consolidated financial statements.

PREMIER, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Three Months Ended September 30,
	2022		2021
Operating activities
Net income	$	42,959	$	121,306
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	33,891		31,485
Equity in net income of unconsolidated affiliates	(8,243)		(7,058)
Deferred income taxes	2,156		18,700
Stock-based compensation	7,136		7,554
Gain on FFF Put and Call Rights	—		(64,110)
Other	10,035		518
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable, inventories, prepaid expenses and other assets	22,495		22,682
Contract assets	(11,856)		(5,876)
Accounts payable, accrued expenses, deferred revenue, revenue share obligations and other liabilities	(23,822)		(70,014)
Net cash provided by operating activities	74,751		55,187
Investing activities
Purchases of property and equipment	(18,930)		(21,050)
Acquisition of businesses and equity method investments, net of cash acquired	—		(26,000)

Other	(1,300)		—
Net cash used in investing activities	(20,230)		(47,050)
Financing activities
Payments made on notes payable	(26,387)		(26,692)
Proceeds from credit facility	100,000		175,000
Payments on credit facility	—		(75,000)
Proceeds from exercise of stock options under equity incentive plan	644		22,864
Cash dividends paid	(25,218)		(24,852)
Repurchase of Class A common stock (held as treasury stock)	—		(38,151)
Other	(13,063)		13,974
Net cash provided by financing activities	35,976		47,143
Effect of exchange rate changes on cash flows	(10)		—
Net increase in cash and cash equivalents	90,487		55,280
Cash and cash equivalents at beginning of period	86,143		129,141
Cash and cash equivalents at end of period	$	176,630	$	184,421

See accompanying notes to the unaudited condensed consolidated financial statements.

PREMIER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) ORGANIZATION

Organization

Premier, Inc. (“Premier” or the “Company”) is a publicly held, for-profit Delaware corporation located in the United States. The Company is a holding company with no material business operations of its own. The Company’s primary asset is its equity interest in its wholly owned subsidiary Premier ~~Services, LLC,~~Healthcare Solutions, Inc., a Delaware ~~limited liability company~~corporation (“~~Premier GP”~~PHSI”). ~~Premier GP is the sole general partner of Premier Healthcare Alliance, L.P. (“Premier LP”), a California limited partnership.~~ The Company conducts substantially all of its business operations through ~~Premier LP~~PHSI and its other consolidated subsidiaries. The Company, together with its subsidiaries and affiliates, is a leading healthcare performance improvement company that unites hospitals, health systems, physicians, employers, product suppliers, service providers, and other healthcare providers and organizations to improve and innovate in the clinical, financial and operational areas of their businesses to meet the demands of a rapidly evolving healthcare ~~industry.~~industry and continues to expand its capabilities to more fully address and coordinate care improvement and standardization in the employer, payor and life sciences markets. The Company also provides services to other businesses, including food service, schools and universities.

The Company’s business model and solutions are designed to provide its members and other customers access to scale efficiencies, spread the cost of their development, provide actionable intelligence derived from anonymized data in the Company’s enterprise data warehouse, mitigate the risk of innovation and disseminate best practices to help the Company’s ~~member organizations~~members and other customers succeed in their transformation to higher quality and more cost-effective healthcare.

The Company, together with its subsidiaries and affiliates, delivers its integrated platform of solutions through 2two business segments: Supply Chain Services and Performance Services. See Note 1513 - Segments for further information related to the Company’s reportable business segments. The Supply Chain Services segment includes one of the largest healthcare group purchasing organization (“GPO”) programs in the United States, supply chain co-management, purchased services and direct sourcing activities. The Performance Services segment consists of 3three sub-brands: PINC AITM, the Company’s technology and services platform with offerings that help optimize performance in three main areas – clinical intelligence, margin improvement and value-based care – using advanced analytics to identify improvement opportunities, consulting and managed services for clinical and operational design, and workflow solutions to hardwire sustainable change in the provider, life sciences and payer markets; Contigo Health®, the Company’s ~~direct~~direct-to-employer business which provides third-party administrator services and management of health-benefit programs that allow employers to ~~employer business~~contract directly with healthcare providers as well as partner with healthcare providers to provide employers access to a specialized care network through Contigo Health’s centers of excellence program; and RemitraTM, the Company’s ~~electronic~~digital invoicing and payables ~~business.~~business which provides financial support services to healthcare providers and suppliers.

Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC and in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company exercised control and when applicable, entities for which the Company had a controlling financial interest or was the primary beneficiary. All intercompany transactions have been eliminated upon consolidation. Accordingly, certain information and disclosures normally included in annual financial statements have been condensed or omitted. The accompanying condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, consisting of normal recurring adjustments, unless otherwise disclosed. The Company believes that the disclosures are adequate to make the information presented not misleading and should be read in conjunction with the audited consolidated financial statements and related footnotes contained in the ~~2021~~2022 Annual Report.

~~Prior Periods’ Financial Statement Revision~~

As disclosed in the Company’s 2021 Annual Report, during the fourth quarter of fiscal year 2021, we identified and corrected an error to “Income tax (benefit) expense” resulting in additional income tax expense in the Condensed Consolidated Statements of Income and Comprehensive Income in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. As a result, the Company has revised the Condensed Consolidated Statements of Stockholders' Equity and the Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2020.

1112

Supplementary Cash Flows Information

The following table presents supplementary cash flows information for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

Three Months Ended September 30,
2021 2020
Supplementary non-cash investing and financing activities:
Increase in treasury stock related to a payable as a result of applying trade date accounting when recording the repurchase of Class A common stock $ 4,477 $ —
Non-cash additions to property and equipment 1,628 1,083
Accrued dividend equivalents 149 186
Increase in redeemable limited partners' capital for adjustment to fair value, with offsetting decrease in stockholders' equity — 26,685
Decrease in redeemable limited partners' capital, with offsetting increase in stockholders' equity related to quarterly exchanges by member owners — (2,437)
Net increase in deferred tax assets related to departures and quarterly exchanges by member owners and other adjustments — 331
Net increase in deferred tax assets related to final exchange by member owners — 284,852
Reclassification of redeemable limited partners' capital to additional paid in capital — 1,754,607
Decrease in additional paid-in capital related to notes payable to members, net of discounts — 438,967
Net increase in additional paid-in capital related to departures and quarterly exchanges by member owners and other adjustments — 37,319
Increase in additional paid-in capital related to final exchange by member owners — 517,526


	Three Months Ended September 30,
	2022		2021
Supplemental schedule of non-cash investing and financing activities:
Increase in treasury stock related to a payable as a result of applying trade date accounting when recording the repurchase of Class A common stock	$	—	$	4,477
Non-cash additions to property and equipment	—		1,628
Accrued dividend equivalents	156		149

Use of Estimates in the Preparation of Financial Statements

The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Significant estimates are evaluated on an ongoing basis, including, but not limited to, estimates for net administrative fees revenue, software licenses, other services and support revenue, contract assets, deferred revenue, contract costs, allowances for credit losses, reserves for net realizable value of inventory, obsolete inventory, useful lives of property and equipment, stock-based compensation, deferred tax balances including valuation allowances on deferred tax assets, uncertain tax positions, values of investments not publicly traded, projected future cash flows used in the evaluation of asset impairments, values of ~~put and~~ call rights, values of earn-out liabilities and the allocation of purchase prices. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

(2) SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to the Company’s significant accounting policies as described in the ~~2021~~2022 Annual Report.

Recently Issued Accounting Standards Not Yet Adopted

~~(3) BUSINESS ACQUISITIONS~~

~~Acquisition of Invoice Delivery Services, LP Assets~~

~~On March 1,~~In October 2021, the ~~Company, through Premier IDS, LLC~~Financial Accounting Standards Board (“~~Premier IDS”~~FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, (“ASU 2021-08”), ~~acquired substantially all the~~which requires that an acquirer recognize and measure contract assets and ~~assumed certain~~contract liabilities of Invoice Delivery Services, LP (“IDS”) for an adjusted purchase price of $80.7 million, subject to certain adjustments, of which $80.0 million was paid at closing with borrowings under the Company’s Credit Facility (as definedacquired in ~~Note 8 - Debt and Notes Payable).~~

~~The Company has accounted for the IDS acquisition as~~ a business combination ~~whereby~~in accordance with Topic 606, Revenue from Contracts with Customers. The Company will early adopt ASU 2021-08 during the ~~purchase price was allocated to tangible~~second quarter of fiscal 2023 and intangible assets acquired and liabilities assumed based on their fair values. The total fair value assigned to intangible assets acquired was $22.4 million, consisting primarily of developed technology.

~~The IDS acquisition resulted~~as such, this new standard will be effective for the Company for business combinations occurring in the ~~recognition of $57.7 million of goodwill based on~~current fiscal year. The Company is currently evaluating the ~~purchase price paid in the acquisition compared to the fair value~~impact of the ~~tangible assets acquired. The IDS acquisition was considered an asset acquisition for income~~

tax purposes. Accordingly, the Company expects tax goodwill to be deductible for tax purposes. The initial purchase price allocation for the IDS acquisition is preliminary and subject to changes in the valuationadoption of the ~~assets acquired and liabilities assumed. IDS was integrated within Premier under the brand name Remitra~~TM ~~and reported as part of the Performance Services segment.~~

~~Pro forma results of operations for the acquisition have not been presented because the effects~~new standard on ~~revenue and net income were not material to the Company’s historic~~its consolidated financial ~~statements.~~statements and related disclosures.

~~(4)~~(3) INVESTMENTS

Investments in Unconsolidated Affiliates

The Company’s investments in unconsolidated affiliates consisted of the following (in thousands):


		Carrying Value				Equity in Net Income						Equity in Net Income
						Three Months Ended September 30,				Carrying Value				Three Months Ended September 30,
		September 30, 2021		June 30, 2021		2021		2020				September 30, 2022		June 30, 2022		2022		2021
FFF	FFF	$	126,493	$	120,548	$	5,945	$	4,574		FFF	$	134,696	$	137,162	$	7,187	$	5,945
Exela	Exela	26,000		—		—		—			Exela	27,871		27,733		138		—
Qventus											Qventus	16,000		16,000		—		—
Prestige	Prestige	15,236		14,478		758		1,052			Prestige	15,777		15,597		180		758
Other investments	Other investments	18,553		18,198		355		301			Other investments	21,092		19,053		738		355
Total investments	Total investments	$	186,282	$	153,224	$	7,058	$	5,927		Total investments	$	215,436	$	215,545	$	8,243	$	7,058

The Company, through ~~PSCI,~~its indirect, wholly owned subsidiary Premier Supply Chain Improvement, Inc. (“PSCI”), held a 49% interest in FFF Enterprises, Inc. (“FFF”) through its ownership of stock of FFF at September 30, ~~2021~~2022 and June 30, 2021. On July 29, 2021, the FFF shareholders’ agreement was amended resulting in the termination of the FFF put right, which had previously provided the majority shareholder of FFF a right to require the Company to purchase such shareholder’s interest in FFF, on an all or nothing basis, on or after April 15, 2023 (“FFF Put Right”). The termination of the FFF Put Right resulted in the derecognition of the FFF Put Right liability and the recognition of a corresponding non-cash gain of $64.1 million in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income (see Note 5 - Fair Value Measurements for additional information). The Company accounts for its investment in FFF using the equity method of accounting and includes the investment as part of the Supply Chain Services segment.2022.

The Company, through its consolidated subsidiary, ExPre Holdings, LLC (“ExPre”), held an approximate 6% interest in Exela Holdings, Inc. (“Exela”), through its ownership of Exela Class A common stock at September 30, ~~2021. The~~2022. At September 30, 2022, the Company ~~owns~~owned approximately 15% of the membership interest of ExPre, with the remainder of the membership interests held by 11 member health systems or their affiliates. ~~The Company accounts for its investment in Exela using the equity method of accounting and includes the investment as part of the Supply Chain Services segment.~~

The Company, through its consolidated subsidiary, PRAM Holdings, LLC (“PRAM”), held an approximate 20% interest in Prestige Ameritech Ltd. (“Prestige”) through its ownership of Prestige limited partnership units at September 30, ~~2021. The~~2022. At September 30, 2022, the Company ~~owns~~owned approximately 26% of the membership interest of PRAM, with the remainder of the membership interests held by 16 member health systems or their affiliates.

The Company accounts for its ~~investment~~investments in FFF, Exela and Prestige using the equity method of accounting and includes ~~the~~each investment as part of the Supply Chain Services segment.

The Company, through PHSI, purchased an approximate 7% interest in Qventus, Inc. (“Qventus”) through its ownership of Qventus Series C preferred stock. The Company accounts for its investment in Qventus at initial cost less impairments, if any, plus or minus any observable changes in fair value. The Company includes Qventus as part of the Performance Services segment.

~~(5)~~(4) FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

The following table represents the Company’s financial assets and liabilities, which are measured at fair value on a recurring basis (in thousands):


		Fair Value of Financial Assets and Liabilities		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Fair Value of Financial Assets and Liabilities		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2021
September 30, 2022										September 30, 2022
Cash equivalents	Cash equivalents	$	75	$	75	$	—	$	—	Cash equivalents	$	75	$	75	$	—	$	—
Deferred compensation plan assets	Deferred compensation plan assets	60,559		60,559		—		—		Deferred compensation plan assets	46,291		46,291		—		—
Total assets	Total assets	60,634		60,634		—		—		Total assets	46,366		46,366		—		—

Earn-out liabilities	Earn-out liabilities	24,368		—		—		24,368		Earn-out liabilities	22,361		—		—		22,361

Total liabilities	Total liabilities	$	24,368	$	—	$	—	$	24,368	Total liabilities	$	22,361	$	—	$	—	$	22,361

June 30, 2021
June 30, 2022										June 30, 2022
Cash equivalents	Cash equivalents	$	75	$	75	$	—	$	—	Cash equivalents	$	75	$	75	$	—	$	—
Deferred compensation plan assets	Deferred compensation plan assets	65,051		65,051		—		—		Deferred compensation plan assets	52,718		52,718		—		—
Total assets	Total assets	65,126		65,126		—		—		Total assets	52,793		52,793		—		—

Earn-out liabilities	Earn-out liabilities	24,249		—		—		24,249		Earn-out liabilities	22,789		—		—		22,789
FFF put right		64,110		—		—		64,110

Total liabilities	Total liabilities	$	88,359	$	—	$	—	$	88,359	Total liabilities	$	22,789	$	—	$	—	$	22,789

Deferred compensation plan assets consisted of highly liquid mutual fund investments, which were classified as Level 1. The current portion of deferred compensation plan assets ($~~6.0~~4.7 million and ~~$5.5~~$5.3 million at September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, respectively) was included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets.

Financial Instruments Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

FFF ~~put~~Put and ~~call rights~~Call Rights

~~In connection with the Company’s equity investment in FFF,~~On July 29, 2021, the FFF shareholders’ agreement was amended ~~which resulted~~resulting in the termination of the FFF Put Right ~~on July 29, 2021.~~and the derecognition of the FFF Put Right liability.

In the event of a Key Man Event (generally defined in the FFF shareholders’ agreement as the resignation, termination for cause, death or disability of the majority shareholder), the Company has a call right that requires the majority shareholder to sell its remaining interest in FFF to the Company, and is exercisable at any time within ~~the later of~~ 180 calendar days after ~~(i)~~ the date of a Key

Man Event ~~or (ii) January 30, 2021~~ (the “Call Right”, together with the FFF Put Right, the “Put and Call Rights”). As of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, the Call Right had zero value. In the event that the Call Right is exercised, the purchase price for the additional interest in FFF will be at a ~~per share price equal to the~~ per share price equal to FFF’s earnings before interest, taxes, depreciation and amortization (“FFF EBITDA”) over the twelve calendar months prior to the purchase date multiplied by a market adjusted multiple, adjusted for any outstanding debt and cash and cash equivalents, divided by the number of shares of FFF common stock then outstanding (“Equity Value per Share”).

At September 30, 2021, the fair value of the Call Right was zero. At June 30, 2021, the fair values of the Put and Call Rights were determined using a Monte Carlo simulation in a risk-neutral framework based on the Equity Value per Share calculation using unobservable inputs, which included the estimated Put and Call Rights expiration dates, the forecast of FFF’s EBITDA and enterprise value over the option period, forecasted movements in the overall market and the likelihood of a Key Man Event. FFF’s enterprise value over the option period was valued utilizing expected annual FFF EBITDA and revenue growth rates, among other assumptions. The resulting FFF enterprise value was an assumption utilized in the valuation of the Put and Call Rights.

~~The Company utilized the following assumptions to estimate the fair value of the Put and Call Rights at June 30, 2021:~~


	~~June 30, 2021~~
~~Annual FFF EBITDA growth rate~~	~~2.5-10.8%~~
~~Annual revenue growth rate~~	~~2.5-6.3%~~
~~Correlation~~	~~80.0~~	%
~~Weighted average cost of capital~~	~~14.0~~	%
~~Asset volatility~~	~~30.0~~	%
~~Credit spread~~	~~0.8~~	%

~~The significant assumptions using the Monte Carlo simulation approach for valuation of the Put and Call Rights are:~~

~~(i)Annual EBITDA Growth Rate:~~ ~~The forecasted EBITDA growth range over six years;~~

~~(ii)Annual Revenue Growth Rate:~~ ~~The forecasted Revenue growth range over six years;~~

~~(iii)Correlation:~~ ~~The estimated correlation between future Business Enterprise Value and EBITDA of FFF;~~

~~(iv)Weighted Average Cost of Capital:~~ ~~The expected rate paid to security holders to finance debt and equity;~~

~~(v)Asset volatility:~~ ~~Based on the asset volatility of guideline public companies in the healthcare industry; and~~

~~(vi)Credit Spread:~~ ~~Based on term-matched BBB yield curve.~~

At September 30, 2021, the fair value of the Call Right was zero. At June 30, 2021, the Company recorded the Put and Call Rights within long-term other liabilities and long-term other assets, respectively, within the accompanying Condensed Consolidated Balance Sheets. Net changes in the fair values of the Put and Call Rights, including the gain recorded as a result of the termination of the FFF Put Right, were recorded within other (expense) income, net in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Earn-out liabilities

An earn-out liability was established in connection with the acquisition of substantially all of the assets and certain liabilities of Acurity, Inc. and Nexera, Inc. (the “Acurity and Nexera asset acquisition”) in February 2020. The earn-out liability ~~was~~is classified as Level 3 of the fair value hierarchy.

The earn-out liability arising from expected earn-out payments related to the Acurity and Nexera asset acquisition was measured on the acquisition date using a probability-weighted expected payment model and ~~are~~is remeasured periodically due to changes in management’s estimates of the number of transferred member renewals and market conditions. In determining the fair value of the contingent liabilities, management reviews the current results of the acquired business, along with projected results for the remaining earn-out period, to calculate the expected earn-out payment to be made based on the contractual terms set out in the acquisition agreement. The Acurity and Nexera earn-out liability utilized a credit spread of ~~0.8% and 0.9%~~1.8% at September 30, ~~2021~~2022 and 1.6% at June 30, ~~2021, respectively.~~2022. As of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, the undiscounted range of outcomes is between $0 and $30.0 million. A significant decrease in the probability could result in a significant decrease in the value of the earn-out liability. The fair value of the Acurity and Nexera earn-out liability at September 30, ~~2021~~2022 and June 30, ~~2021~~2022 was ~~$24.4~~$22.4 million and ~~$24.2~~$22.8 million, respectively.

Acurity and Nexera Earn-out (a)


Input assumptions	Input assumptions	As of September 30, 2021		As of June 30, 2021		Input assumptions	As of September 30, 2022		As of June 30, 2022
Probability of transferred member renewal percentage < 50%	Probability of transferred member renewal percentage < 50%	5.0	%	5.0	%	Probability of transferred member renewal percentage < 50%	5.0	%	5.0	%
Probability of transferred member renewal percentage between 50% and 65%	Probability of transferred member renewal percentage between 50% and 65%	10.0	%	10.0	%	Probability of transferred member renewal percentage between 50% and 65%	10.0	%	10.0	%
Probability of transferred member renewal percentage between 65% and 80%	Probability of transferred member renewal percentage between 65% and 80%	25.0	%	25.0	%	Probability of transferred member renewal percentage between 65% and 80%	25.0	%	25.0	%
Probability of transferred member renewal percentage > 80%	Probability of transferred member renewal percentage > 80%	60.0	%	60.0	%	Probability of transferred member renewal percentage > 80%	60.0	%	60.0	%
Credit spread	Credit spread	0.8	%	0.9	%	Credit spread	1.8	%	1.6	%

(a)The Acurity and Nexera earn-out liability was initially valued as of February 28, 2020.

A reconciliation of the Company’s Put Right and earn-out liabilities is as follows (in thousands):


		Beginning Balance		Purchases (Settlements) (a)		(Gain)/Loss (b)		Ending Balance			Beginning Balance		Settlements(a)		(Gain)/Loss (b)		Ending Balance
Three Months Ended September 30, 2021
Three Months Ended September 30, 2022										Three Months Ended September 30, 2022
Earn-out liabilities	Earn-out liabilities	$	24,249	—		119		24,368		Earn-out liabilities	$	22,789	$	—	$	(428)	$	22,361
FFF put right		64,110		(64,110)		—		—

Total Level 3 liabilities	Total Level 3 liabilities	$	88,359	$	(64,110)	$	119	$	24,368	Total Level 3 liabilities	$	22,789	$	—	$	(428)	$	22,361

Three Months Ended September 30, 2020
Three Months Ended September 30, 2021										Three Months Ended September 30, 2021
Earn-out liabilities	Earn-out liabilities	$	33,151	$	(9,073)	$	(1,061)	$	23,017	Earn-out liabilities	$	24,249	$	—	$	119	$	24,368
FFF put right	FFF put right	36,758		—		1,919		38,677		FFF put right	64,110		(64,110)		—		—
Total Level 3 liabilities	Total Level 3 liabilities	$	69,909	$	(9,073)	$	858	$	61,694	Total Level 3 liabilities	$	88,359	$	(64,110)	$	119	$	24,368

(a)~~Purchases (Settlements)~~Settlements for the three months ended September 30, 2021 includes non-cash gain recognized as a result the termination of the FFF Put Right and the derecognition of the FFF Put Right liability. Purchases (Settlements) for the three months ended September 30, 2020 includes the full earn-out from the acquisition of Stanson Health, Inc. in November 2018, which had been earned but not yet paid as of September 30, 2020.

(b)A gain on level 3 liability balances will decrease the liability ending balance whereas a loss on level 3 liability balance will increase the liability ending balance.

Non-Recurring Fair Value Measurements

~~During~~As a result of the August 2020 Restructuring, the Company recorded non-interest bearing notes payable to former limited partners during the three months ended September 30, ~~2021, the Company recorded notes payable to members as a result of the August 2020 Restructuring.~~2020. Although these notes are non-interest bearing, they include a Level 2 input associated with ~~the~~an implied fixed annual interest rate of 1.8% ~~and are calculated as of August 11, 2020.~~ (see Note 87 - Debt and Notes Payable). As of September

30, 2022 and June 30, 2022, the notes payable to former limited partners were recorded net of discounts of $7.7 million and $9.1 million, respectively.

During the three months ended September 30, ~~2021,~~2022, no non-recurring fair value measurements were required relating to the measurement of goodwill and intangible assets for impairment.

Financial Instruments For Which Fair Value Only is Disclosed

The fair values of non-interest bearing notes payable, classified as Level 2, were less than their carrying value by $0.1 million at both September 30, ~~2021~~2022 and June 30, ~~2021~~2022 based on assumed market interest rates of 1.6% for both periods.

Other Financial Instruments

The fair values of cash, accounts receivable, accounts payable, accrued liabilities, and the Credit Facility (as defined in Note 87 - Debt and Notes Payable) approximated carrying value due to the short-term nature of these financial instruments.

~~(6)~~(5) CONTRACT BALANCES

Deferred Revenue

Revenue recognized during the three months ended September 30, ~~2021~~2022 that was included in the opening balance of deferred revenue at June 30, ~~2021~~2022 was ~~$7.3~~$15.1 million, which is a result of satisfying certain performance obligations.

Performance Obligations

A performance obligation is a ~~promise~~contractual obligation to transfer a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Contracts may have a single performance obligation as the ~~promise~~agreement to transfer individual goods or services is not separately identifiable from other ~~promises~~contractual obligations and, therefore, not distinct, while other contracts may have multiple performance obligations, most commonly due to the contract covering multiple phases or deliverable arrangements (licensing fees, ~~implementation~~SaaS subscription fees, maintenance and support fees, and professional fees for consulting services)~~, including certain~~.

Refer to the Company’s significant accounting policies in the 2022 Annual Report for discussion of revenue recognition on contracts with customers.

Net revenue of $3.0 million was recognized during the three months ended September 30, 2022 from performance ~~guarantees.~~obligations that were satisfied or partially satisfied in prior periods. The net revenue recognized was driven by an increase of $4.7 million in net administrative fees revenue related to under-forecasted cash receipts received in the current period partially offset by a reduction of $1.7 million associated with revised forecasts from underlying contracts that include variable consideration components as well as additional fluctuations due to input method contracts which occur in the normal course of business.

Net revenue of $1.4 million was recognized during the three months ended September 30, 2021 from certain performance obligations that were satisfied or partially satisfied in prior periods. The net revenue recognized was driven by a $1.8 million increase in net administrative fees revenue related to under-forecasted cash receipts received in the current period, partially offset by a reduction of $0.4 million associated with revised forecasts from underlying contracts that include variable consideration components as well as additional fluctuations due to input method contracts which occur in the normal course of business.

A decrease to net revenue of $2.5 million was recognized during the three months ended September 30, 2020 from performance obligations that were satisfied or partially satisfied in prior periods. The decrease in net revenue recognized was driven by a $2.7 million decrease in net administrative fees revenue related to over-forecasted cash receipts received in the current period partially offset by $0.2 million associated with revised forecasts from underlying contracts that include variable consideration components as well as additional fluctuations due to input method contracts which occur in the normal course of business

Remaining performance obligations represent the portion of the transaction price that has not yet been satisfied or achieved. As of September 30, ~~2021,~~2022, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$588.8~~$707.5 million. The Company expects to recognize approximately ~~47%~~41% of the remaining performance obligations over the next 12 months and an additional ~~27%~~24% over the following 12 months, with the remainder recognized thereafter.

~~(7)~~(6) GOODWILL AND INTANGIBLE ASSETS

Goodwill

At September 30, ~~2021~~2022 and June 30, ~~2021, we~~2022, the Company had goodwill balances recorded at Supply Chain Services and Performance Services of $388.5 million and $611.4 million, respectively.

Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands):


		Useful Life	September 30, 2021		June 30, 2021			Useful Life	September 30, 2022		June 30, 2022
Member relationships	Member relationships	14.7 years	$	386,100	$	386,100	Member relationships	14.7 years	$	386,100	$	386,100
Technology	Technology	6.1 years	186,017		186,017		Technology	7.2 years	98,017		98,017
Customer relationships	Customer relationships	9.6 years	70,830		70,830		Customer relationships	10.4 years	47,830		47,830
Trade names	Trade names	7.4 years	24,610		24,610		Trade names	6.9 years	17,210		17,210
Non-compete agreements	Non-compete agreements	5.3 years	11,315		11,315		Non-compete agreements	5.2 years	17,315		17,315
Other (a)	Other (a)	10.2 years	7,682		7,682		Other (a)	10.2 years	7,682		7,682
Total intangible assets	Total intangible assets		686,554		686,554		Total intangible assets		574,154		574,154
Accumulated amortization	Accumulated amortization		(300,801)		(289,912)		Accumulated amortization		(228,034)		(217,582)
Total intangible assets, net	Total intangible assets, net		$	385,753	$	396,642	Total intangible assets, net		$	346,120	$	356,572

(a)Includes a $1.0 million indefinite-lived ~~asset that was acquired through the HDP acquisition.~~asset.

Intangible asset amortization was ~~$10.9~~$10.5 million and ~~$13.2~~$10.9 million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

~~(8)~~(7) DEBT AND NOTES PAYABLE

Long-term debt and notes payable consisted of the following (in thousands):


		September 30, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Credit Facility		$	175,000	$	75,000
Notes payable to members		371,129		394,943
Credit facility						Credit facility	$	250,000	$	150,000
Notes payable to members, net of discount						Notes payable to members, net of discount	274,717		298,994
Other notes payable	Other notes payable	5,749		8,628		Other notes payable	3,223		5,333
Total debt and notes payable	Total debt and notes payable	551,878		478,571		Total debt and notes payable	527,940		454,327
Less: current portion	Less: current portion	(271,828)		(174,243)		Less: current portion	(350,486)		(250,859)
Total long-term debt and notes payable	Total long-term debt and notes payable	$	280,050	$	304,328	Total long-term debt and notes payable	$	177,454	$	203,468

Credit Facility

~~Premier LP,~~PHSI, along with its consolidated subsidiaries, ~~PSCI~~Premier LP and ~~PHSI,~~PSCI, as Co-Borrowers, ~~Premier GP~~ and certain domestic subsidiaries of ~~Premier GP,~~the Co-Borrowers, as guarantors, entered into an unsecured Credit Facility, dated as of November 9, 2018, and amended as of December 1, 2021, (the “Credit Facility”). ~~Premier, Inc. is not a guarantor under the Credit Facility.~~

Outstanding borrowings under the Credit Facility bear interest on a variable rate structure with borrowings bearing interest at either London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging from 1.000% to 1.500% or the prime lending rate plus an applicable margin ranging from 0.000% to 0.500%. At September 30, ~~2021,~~2022, the weighted average interest rate on outstanding borrowings under the Credit Facility was ~~1.090%. At September 30, 2021~~3.729% and, the annual commitment fee, ~~which the Co-Borrowers are required to pay~~based on the actual daily unused amount of commitments under the Credit Facility, was 0.100%.

The Credit Facility contains customary representations and warranties as well as customary affirmative and negative covenants, including, among others, limitations on liens, indebtedness, fundamental changes, dispositions, restricted payments and investments. ~~Premier GP~~The Company was in compliance with all such covenants at September 30, ~~2021.~~2022. The Credit Facility also contains customary events of default, including a cross-default of any indebtedness or guarantees in excess of $75.0 million. If any event of default occurs and is continuing, the administrative agent under the Credit Facility may, with the consent, or shall, at the request of a majority of the lenders under the Credit Facility, terminate the commitments and declare all of the amounts owed under the Credit Facility to be immediately due and payable.

The Company had ~~$175.0~~$250.0 million in outstanding borrowings under the Credit Facility at September 30, ~~2021~~2022 with ~~$824.9~~$749.9 million of available borrowing capacity after reductions for outstanding borrowings and outstanding letters of credit. For the three months ended September 30, ~~2021,~~2022, the Company borrowed ~~$175.0~~$100.0 million ~~and repaid $75.0 million of~~under the Credit Facility. During the three months ended September 30, 2022, the Company did not make any payments on outstanding borrowings under the Credit Facility. In October ~~2021,~~2022, the Company ~~repaid $50.0~~borrowed $125.0 million ~~of outstanding borrowings~~ under the Credit ~~Facility.~~Facility to partially fund the asset acquisition

of TRPN Direct Pay, Inc. and Devon Health, Inc. (collectively, “TRPN”) (see Note 14 - Subsequent Events for further information).

Notes Payable

Notes Payable to ~~Members~~Former Limited Partners

At September 30, ~~2021,~~2022, the Company had ~~$371.1~~$274.7 million of notes payable to ~~members,~~former LPs, net of discounts on notes payable of ~~$13.9~~$7.7 million, of which ~~$96.4~~$98.3 million was recorded to current portion of notes payable to ~~members~~former limited partners in the accompanying Condensed Consolidated Balance Sheets. At June 30, ~~2021,~~2022, the Company had ~~$394.9~~$299.0 million of notes payable to ~~members,~~former LPs, net of discounts on notes payable of ~~$15.8~~$9.1 million, of which ~~$95.9~~$97.8 million was recorded to current portion of notes payable to ~~members~~former limited partners in the accompanying Condensed Consolidated Balance Sheets. The notes payable to ~~members~~former LPs were issued in connection with the early termination of the TRA as part of the August 2020 Restructuring. Although the notes payable to ~~members~~former LPs are non-interest bearing, pursuant to GAAP requirements, they were recorded net of imputed interest at a fixed annual rate of 1.8%.

Other

At September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, the Company had ~~$5.7~~$3.2 million and ~~$8.6~~$5.3 million in other notes payable, respectively, of which ~~$0.4~~$2.2 million and ~~$3.3~~$3.1 million, respectively, were included in current portion of long-term debt in the accompanying Condensed Consolidated Balance Sheets. Other notes payable do not bear interest and generally have stated maturities of three to five years from their date of issuance.

~~(9) REDEEMABLE LIMITED PARTNERS' CAPITAL~~

The fair value of redeemable limited partners’ capital was reclassified from temporary equity in the mezzanine section of the Condensed Consolidated Balance Sheets to additional paid in capital as a component of permanent equity at July 31, 2020. As a result, there were no adjustments to the fair value of redeemable limited partners’ capital for the three months ended September 30, 2021.

For the three months ended September 30, 2020, the Company recorded an adjustment of $(26.7) million to the fair value of redeemable limited partners’ capital as an adjustment of redeemable limited partners’ capital to redemption amount in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. Subsequent to July 31, 2020, there were no adjustments to the fair value of redeemable limited partners’ capital as an adjustment of redeemable limited partners’ capital to redemption amount were recorded in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

The tables below provide a summary of the changes in redeemable limited partners’ capital from June 30, 2020 to September 30, 2020 (in thousands). There were no changes in redeemable limited partner’s capital subsequent to July 31, 2020.

Receivables From Limited Partners Redeemable Limited Partners' Capital Total Redeemable Limited Partners' Capital
June 30, 2020 $ (995) $ 1,721,304 $ 1,720,309
Distributions applied to receivables from limited partners 141 — 141
Net income attributable to non-controlling interest in Premier LP — 11,845 11,845
Distributions to limited partners — (1,936) (1,936)
Exchange of Class B common units for Class A common stock by member owners — (2,437) (2,437)
Adjustment of redeemable limited partners' capital to redemption amount — 26,685 26,685
Reclassification to permanent equity 854 (1,755,461) (1,754,607)
September 30, 2020 $ — $ — $ —

~~(10)~~(8) STOCKHOLDERS' EQUITY

As of September 30, ~~2021,~~2022, there were ~~122,680,693~~118,746,273 shares of the ~~Company's~~Company’s Class A common stock, par value $0.01 per share, outstanding.

On August 5, 2021, the Company’s Board of Directors authorized the repurchase of up to $250.0 million of our outstanding Class A common stock during fiscal year 2022 through open market purchases or privately negotiated transactions. As of September 30, 2021, the Company had purchased approximately 1.1 million shares of Class A common stock at an average price of $39.04 per share for a total purchase price of $42.6 million. There can be no assurances regarding the timing or number of shares of Class A common stock purchased under this authorization. The repurchase authorization may be suspended, delayed or discontinued at any time at the discretion of the Company’s Board of Directors.

During the three months ended September 30, ~~2021,~~2022, the Company paid a cash dividend of ~~$0.20~~$0.21 per share on outstanding shares of Class A common stock to stockholders of record on September 1, ~~2021.~~2022. On October 21, ~~2021,~~2022, the Board of Directors declared a quarterly cash dividend of ~~$0.20~~$0.21 per share, payable on December 15, ~~2021~~2022 to stockholders of record on December 1, ~~2021.~~2022.

~~(11)~~(9) EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to stockholders by the weighted average number of shares of common stock outstanding for the period. Net income attributable to stockholders includes the adjustment recorded in the period to reflect redeemable limited partners’ capital at the redemption amount, which was due to the exchange benefit obtained by limited partners through the ownership of Class B common units, which were canceled in August 2020. Except when the effect would be anti-dilutive, the diluted earnings per share calculation, which is calculated using the treasury stock method, includes the impact of all potentially issuable dilutive shares of Class A common stock.

1918

The following table provides a reconciliation of the numerator and denominator used for basic and diluted earnings per share (in thousands, except per share amounts):


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Numerator for basic earnings per share:	Numerator for basic earnings per share:						Numerator for basic earnings per share:
Net income attributable to stockholders (a)	Net income attributable to stockholders (a)	$	122,004	$	118,998		Net income attributable to stockholders (a)	$	42,716	$	122,004

Numerator for diluted earnings per share:	Numerator for diluted earnings per share:						Numerator for diluted earnings per share:
Net income attributable to stockholders (a)	Net income attributable to stockholders (a)	$	122,004	$	118,998		Net income attributable to stockholders (a)	$	42,716	$	122,004

Net loss attributable to non-controlling interest	Net loss attributable to non-controlling interest	(698)		—			Net loss attributable to non-controlling interest	—		(698)
Net income (b)		121,306		118,998

Net income for diluted earnings per share							Net income for diluted earnings per share	$	42,716	$	121,306

Denominator for earnings per share:	Denominator for earnings per share:						Denominator for earnings per share:
Basic weighted average shares outstanding (c)		122,945		99,575
Effect of dilutive securities: (d)
Basic weighted average shares outstanding (b)							Basic weighted average shares outstanding (b)	118,351		122,945
Effect of dilutive securities: (c)							Effect of dilutive securities: (c)
Stock options	Stock options	310		253			Stock options	146		310
Restricted stock	Restricted stock	492		302			Restricted stock	563		492
Performance share awards	Performance share awards	826		—			Performance share awards	973		826

Diluted weighted average shares and assumed conversions	Diluted weighted average shares and assumed conversions	124,573		100,130			Diluted weighted average shares and assumed conversions	120,033		124,573

Earnings per share attributable to stockholders:	Earnings per share attributable to stockholders:						Earnings per share attributable to stockholders:
Basic earnings per share attributable to stockholders		$	0.99	$	1.20
Diluted earnings per share attributable to stockholders		$	0.97	$	1.19
Basic							Basic	$	0.36	$	0.99
Diluted							Diluted	$	0.36	$	0.97

(a)Net income attributable to stockholders was calculated as follows (in thousands):


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Net income	Net income	$	121,306	$	157,528		Net income	$	42,959	$	121,306
Net loss (income) attributable to non-controlling interest		698		(11,845)
Adjustment of redeemable limited partners’ capital to redemption amount		—		(26,685)
Net (income) loss attributable to non-controlling interest							Net (income) loss attributable to non-controlling interest	(243)		698
Net income attributable to stockholders	Net income attributable to stockholders	$	122,004	$	118,998		Net income attributable to stockholders	$	42,716	$	122,004

(b)For the three months ended September 30, 2021 and 2020, the tax expense related to the Company retaining the portion of net loss (income) attributable to income from non-controlling interest was calculated as a component of the income tax provision for the three months ended September 30, 2021 and 2020.

~~(c)~~Weighted average number of common shares used for basic earnings per share excludes the impact of all potentially issuable dilutive shares of Class A common stock for the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

~~(d)~~(c)For the three months ended September 30, 2022, the effect of 0.2 million stock options and restricted stock units was excluded from diluted weighted average shares outstanding as it had an anti-dilutive effect. Additionally, the effect of 0.1 million performance share awards was excluded from diluted weighted average shares outstanding as the awards had not satisfied the applicable performance criteria at the end of the period.

For the three months ended September 30, 2021, the effect of 0.3 million stock options and restricted stock units ~~were~~was excluded from diluted weighted average shares outstanding as ~~they~~it had an anti-dilutive effect. Additionally, the effect of 0.2 million performance share awards was excluded from diluted weighted average shares outstanding as the awards had not satisfied the applicable performance criteria at the end of the period.

For the three months ended September 30, 2020, the effect of 0.7 million stock options and restricted stock units and 22.4 million Class B common units were excluded from diluted weighted average shares outstanding as they had an anti-dilutive effect. Additionally, the effect of 0.6 million performance share awards was excluded from diluted weighted average shares outstanding as the awards had not satisfied the applicable performance criteria at the end of the period.

~~(12)~~(10) STOCK-BASED COMPENSATION

Stock-based compensation expense is recognized over the requisite service period, which generally equals the stated vesting period. The associated deferred tax benefit was calculated at a rate of 26% for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, which represents the expected effective income tax rate at the time of the compensation expense deduction and differs from the Company’s current effective income tax rate. See Note 1311 - Income Taxes for further information.

Stock-based compensation expense and the resulting deferred tax benefits were as follows (in thousands):


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Pre-tax stock-based compensation expense	Pre-tax stock-based compensation expense	$	7,554	$	7,229		Pre-tax stock-based compensation expense	$	7,136	$	7,554
Deferred tax benefit (a)		1,281		1,110
Less: deferred tax benefit (a)							Less: deferred tax benefit (a)	947		1,281
Total stock-based compensation expense, net of tax	Total stock-based compensation expense, net of tax	$	6,273	$	6,119		Total stock-based compensation expense, net of tax	$	6,189	$	6,273

(a)For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the deferred tax benefit was reduced by ~~$0.7~~$0.9 million and ~~$0.8~~$0.7 million, respectively, attributable to stock-based compensation expense that is nondeductible for tax purposes pursuant to Section 162(m) as amended by the Tax Cuts and Jobs Act of 2017.

Premier 2013 Equity Incentive Plan

The Premier 2013 Equity Incentive Plan, as amended and restated (and including any further amendments thereto, the “2013 Equity Incentive Plan”) provides for grants of up to 14.8 million shares of Class A common stock, all of which are eligible to be issued as non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units or performance share awards. As of September 30, ~~2021,~~2022, there were ~~4.6~~3.9 million shares available for grant under the 2013 Equity Incentive Plan.

The following table includes information related to restricted stock, performance share awards and stock options for the three months ended September 30, ~~2021:~~2022:


		Restricted Stock			Performance Share Awards			Stock Options				Restricted Stock			Performance Share Awards			Stock Options
		Number of Awards	Weighted Average Fair Value at Grant Date		Number of Awards	Weighted Average Fair Value at Grant Date		Number of Options	Weighted Average Exercise Price			Number of Awards	Weighted Average Fair Value at Grant Date		Number of Awards	Weighted Average Fair Value at Grant Date		Number of Options	Weighted Average Exercise Price
Outstanding at June 30, 2021		990,301	$	35.27	1,731,002	$	35.56	2,163,006	$	30.32
Outstanding at June 30, 2022											Outstanding at June 30, 2022	1,201,130	$	35.59	1,578,795	$	33.66	896,354	$	30.38
Granted	Granted	576,575	$	37.76	651,392	$	37.18	—	$	—	Granted	366,942	37.18		823,009	35.34		—	—
Vested/exercised	Vested/exercised	(156,158)	$	42.73	(588,142)	$	43.74	(745,407)	$	30.71	Vested/exercised	(198,261)	36.55		(826,743)	36.35		(20,680)	32.90
Forfeited	Forfeited	(103,034)	$	33.41	(147,825)	$	31.75	(12,025)	$	36.54	Forfeited	(37,530)	35.53		(34,372)	32.63		(1,614)	35.65
Outstanding at September 30, 2021		1,307,684	$	35.63	1,646,427	$	33.62	1,405,574	$	30.07
Outstanding at September 30, 2022											Outstanding at September 30, 2022	1,332,281	$	35.88	1,540,689	$	33.12	874,060	$	30.31

Stock options outstanding and exercisable at September 30, 2021								1,405,574	$	30.07
Stock options outstanding and exercisable at June 30, 2022											Stock options outstanding and exercisable at June 30, 2022							874,060	$	30.31

Restricted stock units and restricted stock awards issued and outstanding generally vest over a three-year period for employees and a one-year period for directors. Performance share awards issued and outstanding generally vest over a three-year period if performance targets are met. Stock options generally vest in equal annual installments over three years. Stock options have a term of ten years from the date of grant. Vested stock options will generally expire either twelve months after an employee’s termination with ~~Premier~~the Company or ~~immediately upon~~90 days after an employee’s termination with ~~Premier,~~the Company, depending on the termination circumstances. ~~Stock options generally vest in equal annual installments over three years.~~

Unrecognized stock-based compensation expense at September 30, ~~2021~~2022 was as follows (in thousands). At September 30, ~~2021,~~2022, there was no unrecognized stock-based compensation expense for outstanding stock options.


	Unrecognized Stock-Based Compensation Expense		Weighted Average Amortization Period
Restricted stock	$	~~31,788~~30,831	~~2.5~~2.3 years
Performance share awards	~~33,266~~34,649		2.1 years
Total unrecognized stock-based compensation expense	$	~~65,054~~65,480	~~2.3~~2.2 years

The aggregate intrinsic value of stock options at September 30, ~~2021~~2022 was as follows (in thousands):


	Intrinsic Value of Stock Options
Outstanding and exercisable	$	~~12,218~~3,416



Exercised during the year ended September 30, ~~2021~~2022	$		~~4,748~~71

~~(13)~~

(11) INCOME TAXES

Income tax expense for the three months ended September 30, 2022, and 2021 was $18.8 million and $19.0 million, respectively, which reflects an effective tax ~~rate~~rates of 30% and 14% ~~compared to an income tax benefit of $95.0 million for the three months ended September 30, 2020 which reflects an effective tax rate of (152)%.~~, respectively. The change in the effective tax rate for the three months ended September 30, ~~2021~~2022 is primarily driven by the prior year ~~deferred tax remeasurement due to the change in the state statutory rate and~~ valuation allowance release resulting from the ~~Company and its subsidiaries forming one consolidated filing group for tax purposes at the consummation of the August 2020 Restructuring.~~Subsidiary Reorganization. Excluding the ~~one-time deferred tax benefit,~~valuation allowance release, the effective tax rate would have been ~~24%~~28% for the three months ended September 30, ~~2020.~~

~~During~~2021 with the ~~first quarter of fiscal year 2022, the Company assessed the future realization of its deferred tax assets. As a result of Premier’s plan~~remaining difference primarily related to reorganize and simplify the Company’s subsidiary reporting structure by the end of the second quarter of fiscal year 2022, the Company expects to release $32.9 million deferred tax asset valuation allowance in fiscal year 2022. The release primarily relates to finite-lived net operating losses and research and development credit carryforwards. The Company has included $17.6 million of tax benefit in Premier’s annualized effective tax rate calculation based on the amount that is expected to offset ordinary income during fiscal year 2022, as a result of the reorganization. The remaining $15.3 million of valuation allowance being released relates to carryforwards expected to be utilized in future years and is being recognized as a discrete itemstate legislative changes in the ~~first quarter of fiscal 2022.~~current year.

~~(14)~~(12) COMMITMENTS AND CONTINGENCIES

Operating Leases

Operating lease expense for the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$2.6~~$2.5 million and ~~$3.4~~$2.6 million, respectively. As of September 30, ~~2021,~~2022, the weighted average remaining lease term was ~~4.6~~3.7 years and the weighted average discount rate was 4%.

Future minimum lease payments under ~~noncancelable~~noncancellable operating leases with initial lease terms in excess of one year were as follows (in thousands):


		September 30, 2021		June 30, 2021			September 30, 2022		June 30, 2022
2022 (a)		$	8,910	$	11,738
2023		12,131		12,012
2023 (a)						2023 (a)	$	9,112	$	12,131
2024	2024	12,267		12,145		2024	12,267		12,267
2025	2025	12,301		12,177		2025	12,301		12,301
2026	2026	9,005		8,878		2026	9,005		9,005
Thereafter		1,324		1,293
2027						2027	1,324		1,323
Total future minimum lease payments	Total future minimum lease payments	55,938		58,243		Total future minimum lease payments	44,009		47,027
Less: imputed interest	Less: imputed interest	4,840		5,289		Less: imputed interest	3,029		3,445
Total operating lease liabilities (b)	Total operating lease liabilities (b)	$	51,098	$	52,954	Total operating lease liabilities (b)	$	40,980	$	43,582

(a)As of September 30, ~~2021,~~2022, future minimum lease payments are for the period from October 1, ~~2021~~2022 to June 30, ~~2022.~~2023.

(b)As of September 30, ~~2021,~~2022, total operating lease liabilities included ~~$10.1~~$10.7 million within other current liabilities in the Condensed Consolidated Balance Sheets.

Other Matters

The Company is not currently involved in any litigation it believes to be material. The Company is periodically involved in litigation, arising in the ordinary course of business or otherwise, which from time to time may include stockholder derivative or other similar litigation, claims relating to commercial, product liability, tort and personal injury, employment, antitrust, intellectual property, or other regulatory matters.

~~Furthermore, as a public company, the Company may become subject to stockholder derivative or other similar litigation.~~ If current or future government regulations, including but not limited to those with respect to antitrust or healthcare laws, are interpreted or enforced in a manner adverse to the Company or its business, the Company may be subject to regulatory inquiries or investigations, enforcement actions, penalties and other material limitations which could have a material adverse effect on the Company’s business, financial condition and results of operations.

~~(15)~~(13) SEGMENTS

The Company delivers its solutions and manages its business through 2two reportable business segments, the Supply Chain Services segment and the Performance Services segment. The Supply Chain Services segment includes the Company’s GPO, supply chain co-management, purchased services and direct sourcing activities. The Performance Services segment consists of 3three sub-brands: PINC AITM, the Company’s technology and services ~~platform,~~platform; Contigo Health®, the Company’s direct-to-employer business; and Remitra, the Company’s ~~direct to employer business and~~ ~~Remitra~~TM~~, the Company’s electronic~~digital invoicing and payables business.

The following table presents disaggregated revenue by business segment and underlying source (in thousands):


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Net revenue:	Net revenue:						Net revenue:
Supply Chain Services	Supply Chain Services						Supply Chain Services
Net administrative fees	Net administrative fees	$	149,462	$	132,645		Net administrative fees	$	150,006	$	149,462
Other services and support		8,924		5,592
Services		158,386		138,237
Software licenses, other services and support							Software licenses, other services and support	10,826		8,924
Services and software licenses							Services and software licenses	160,832		158,386
Products	Products	118,430		115,415			Products	58,861		118,430
Total Supply Chain Services (a)	Total Supply Chain Services (a)	276,816		253,652			Total Supply Chain Services (a)	219,693		276,816
Performance Services ~~(a)~~	Performance Services ~~(a)~~	88,331		93,235			Performance Services ~~(a)~~
Software licenses, other services and support							Software licenses, other services and support
SaaS-based products subscriptions							SaaS-based products subscriptions	47,767		46,704
Consulting services							Consulting services	17,615		15,060
Software licenses							Software licenses	5,992		8,401
Other							Other	22,815		18,166
Total Performance Services (a)							Total Performance Services (a)	94,189		88,331
Total segment net revenue							Total segment net revenue	313,882		365,147
Eliminations (a)							Eliminations (a)	(9)		—
Net revenue	Net revenue	$	365,147	$	346,887		Net revenue	$	313,873	$	365,147

(a)Includes intersegment revenue that is eliminated in consolidation. Intersegment revenue is not separately identified in Segments as the amounts are not material.

Additional segment information related to depreciation and amortization expense, capital expenditures and total assets was as follows (in thousands):


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Depreciation and amortization expense (a):	Depreciation and amortization expense (a):						Depreciation and amortization expense (a):
Supply Chain Services	Supply Chain Services	$	13,144	$	8,802		Supply Chain Services	$	14,250	$	13,144
Performance Services	Performance Services	16,109		19,757			Performance Services	17,416		16,109
Corporate	Corporate	2,232		2,119			Corporate	2,225		2,232
Total depreciation and amortization expense	Total depreciation and amortization expense	$	31,485	$	30,678		Total depreciation and amortization expense	$	33,891	$	31,485

Capital expenditures:	Capital expenditures:						Capital expenditures:
Supply Chain Services	Supply Chain Services	$	8,157	$	2,876		Supply Chain Services	$	6,735	$	8,157
Performance Services	Performance Services	11,023		18,371			Performance Services	12,186		11,023
Corporate	Corporate	1,870		3,735			Corporate	9		1,870
Total capital expenditures	Total capital expenditures	$	21,050	$	24,982		Total capital expenditures	$	18,930	$	21,050


		September 30, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Total assets:	Total assets:					Total assets:
Supply Chain Services	Supply Chain Services	$	1,593,084	$	1,550,300	Supply Chain Services	$	1,401,646	$	1,406,108
Performance Services	Performance Services	1,014,850		1,043,608		Performance Services	1,063,999		1,054,687
Corporate	Corporate	958,990		928,939		Corporate	954,101		896,336
Total assets	Total assets	3,566,924		3,522,847		Total assets	3,419,746		3,357,131
Eliminations (b)	Eliminations (b)	(4)		51		Eliminations (b)	(5)		(4)
Total assets, net	Total assets, net	$	3,566,920	$	3,522,898	Total assets, net	$	3,419,741	$	3,357,127

(a)Includes amortization of purchased intangible assets.

(b)Includes eliminations of intersegment transactions which occur during the ordinary course of business.

The Company uses Segment Adjusted EBITDA (a financial measure not determined in accordance with generally accepted accounting principles (“Non-GAAP”)) as its primary measure of profit or loss to assess segment performance and to determine the allocation of resources. The Company also uses Segment Adjusted EBITDA to facilitate the comparison of the segment operating performance on a consistent basis from period to period. The Company defines Segment Adjusted EBITDA 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~~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. ~~Non-recurring items are 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.~~ 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.

For more information on Segment Adjusted EBITDA and the use of Non-GAAP financial measures, see “Our Use of Non-GAAP Financial Measures” within Item 2 - ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations.

A reconciliation of income before income taxes to unaudited Segment Adjusted EBITDA, a Non-GAAP financial measure, is as follows (in thousands):


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Income before income taxes	Income before income taxes	$	140,339	$	62,547		Income before income taxes	$	61,728	$	140,339
Equity in net income of unconsolidated affiliates (a)	Equity in net income of unconsolidated affiliates (a)	(7,058)		(5,927)			Equity in net income of unconsolidated affiliates (a)	(8,243)		(7,058)
Interest and investment loss, net		2,788		2,119
(Gain) loss on FFF put and call rights (b)		(64,110)		1,919
Other (income) expense		320		(3,683)
Interest expense, net							Interest expense, net	2,859		2,788
Gain on FFF Put and Call Rights (b)							Gain on FFF Put and Call Rights (b)	—		(64,110)
Other expense, net							Other expense, net	2,164		320
Operating income	Operating income	72,279		56,975			Operating income	58,508		72,279
Depreciation and amortization	Depreciation and amortization	20,596		17,474			Depreciation and amortization	23,439		20,596
Amortization of purchased intangible assets	Amortization of purchased intangible assets	10,889		13,204			Amortization of purchased intangible assets	10,452		10,889
Stock-based compensation (c)	Stock-based compensation (c)	7,751		7,375			Stock-based compensation (c)	7,349		7,751
Acquisition and disposition related expenses		3,421		2,845
Acquisition- and disposition-related expenses							Acquisition- and disposition-related expenses	2,160		3,421
Strategic initiative and financial restructuring-related expenses							Strategic initiative and financial restructuring-related expenses	1,520		25
Equity in net income of unconsolidated affiliates (a)	Equity in net income of unconsolidated affiliates (a)	7,058		5,927			Equity in net income of unconsolidated affiliates (a)	8,243		7,058
Deferred compensation plan income (expense) (d)		(318)		2,907
Other expense, net		27		4,036
Deferred compensation plan expense (d)							Deferred compensation plan expense (d)	(2,370)		(318)
Other reconciling items, net							Other reconciling items, net	79		2
Non-GAAP Adjusted EBITDA	Non-GAAP Adjusted EBITDA	$	121,703	$	110,743		Non-GAAP Adjusted EBITDA	$	109,380	$	121,703

Segment Non-GAAP Adjusted EBITDA:	Segment Non-GAAP Adjusted EBITDA:						Segment Non-GAAP Adjusted EBITDA:
Supply Chain Services (e)	Supply Chain Services (e)	$	129,269	$	102,649		Supply Chain Services (e)	$	121,194	$	129,269
Performance Services (e)	Performance Services (e)	23,715		37,116			Performance Services (e)	19,368		23,715
Corporate	Corporate	(31,281)		(29,022)			Corporate	(31,182)		(31,281)
Non-GAAP Adjusted EBITDA	Non-GAAP Adjusted EBITDA	$	121,703	$	110,743		Non-GAAP Adjusted EBITDA	$	109,380	$	121,703

(a)Refer to Note 43 - Investments for more information.

(b)Refer to Note 54 - Fair Value Measurements for more information.

(c)Includes non-cash employee stock-based compensation expense and stock purchase plan expense of $0.2 million ~~and $0.1 million~~ for both the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

(d)Represents realized and unrealized gains and losses and dividend income on deferred compensation plan assets.

(e)Includes intersegment revenue which is eliminated in consolidation.

(14) SUBSEQUENT EVENTS

On October 13, 2022, the Company, through its consolidated subsidiary Contigo Health, LLC (“Contigo Health”), acquired certain assets (the “Transferred Assets”) of TRPN, including contracts with more than 900,000 providers (collectively, the “Assumed Contracts”), and agreed to assume certain liabilities and obligations of TRPN with regard to the Assumed Contracts (referred to as the “Transaction”). The Transferred Assets relate to businesses of TRPN focused on improving access to quality healthcare and reducing the cost of medical claims through pre-negotiated discounts with network providers, including acute care hospitals, surgery centers, physicians, and other non-acute providers in the United States. Contigo Health also agreed to license proprietary cost containment technology of TRPN.

The purchase price paid by the Company completed the Transaction consisted of cash of $177.5 million (“Purchase Price”), funded with borrowings under the Credit Facility and cash on hand of which $17.8 million was placed in escrow to satisfy indemnification obligations of TRPN to Contigo Health and its affiliates and other parties related thereto under the purchase agreement governing the Transaction.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report. This discussion is designed to provide the reader with information that will assist in understanding our condensed consolidated financial statements, the changes in certain key items in those financial statements from quarter to quarter, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our condensed consolidated financial statements. In addition, the following discussion includes certain forward-looking statements. For a discussion of important factors, including the continuing development of our business and other factors which could cause actual results to differ materially from the results referred to in the forward-looking statements, see the discussions under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” herein and in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021~~2022 (the ~~“2021~~“2022 Annual Report”), filed with the Securities and Exchange Commission (“SEC”).

Business Overview

Our Business

Premier, Inc. (“Premier”, the “Company”, “we”, or “our”) is a leading healthcare improvement company, uniting an alliance of U.S. hospitals, health systems and other providers and organizations to transform healthcare. We partner with hospitals, health systems, physicians, employers, product suppliers, service providers, and other healthcare providers and organizations with the common goal of improving and innovating in the clinical, financial and operational areas of their businesses to meet the demands of a rapidly evolving healthcare industry. We deliver value through a comprehensive technology-enabled platform that offers critical supply chain services, clinical, financial, operational

and value-based care software-as-a-service (“SaaS”) ~~and licensed-based~~as well as clinical ~~analytics products,~~and enterprise analytics licenses, consulting services, ~~and~~ performance improvement collaborative ~~programs.~~programs, third-party administrator services, access to our centers of excellence program, and digital invoicing and payment processes for healthcare providers and suppliers. We also continue to expand our capabilities to more fully address and coordinate care improvement and standardization in the employer, payor and life sciences markets. We also provide services to other businesses including food service, schools and universities.

We generated net revenue, net income and Adjusted EBITDA (a financial measure not determined in accordance with generally accepted accounting principles (“Non-GAAP”)) for the periods presented as follows (in thousands):


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Net revenue	Net revenue	$	365,147	$	346,887		Net revenue	$	313,873	$	365,147
Net income	Net income	121,306		157,528			Net income	42,959		121,306
Non-GAAP Adjusted EBITDA	Non-GAAP Adjusted EBITDA	121,703		110,743			Non-GAAP Adjusted EBITDA	109,380		121,703

See “Our Use of Non-GAAP Financial Measures” and “Results of Operations” below for a discussion of our use of Non-GAAP Adjusted EBITDA and a reconciliation of net income to Non-GAAP Adjusted EBITDA.

Our Business Segments

Our business model and solutions are designed to provide our members and other customers access to scale efficiencies while focusing on optimization of information resources and cost containment, provide actionable intelligence derived from anonymized data in our data warehouse provided by our members, mitigate the risk of innovation, and disseminate best

practices that will help our member organizations and other customers succeed in their transformation to higher quality and more cost-effective healthcare. We deliver our integrated platform of solutions that address the areas of ~~total cost management, quality and safety~~clinical intelligence, margin improvement and ~~population health management~~value-based care through two business segments: Supply Chain Services and Performance Services.

Segment net revenue for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in thousands):


		Three Months Ended September 30,				Change				% of Net Revenue					Three Months Ended September 30,				Change				% of Net Revenue
Net revenue:	Net revenue:	2021		2020		2021		2020		2021		2020		Net revenue:	2022		2021		2022		2021		2022		2021
Supply Chain Services	Supply Chain Services	$	276,816	$	253,652	$	23,164	9	%	76	%	73	%	Supply Chain Services	$	219,693	$	276,816	$	(57,123)	(21)	%	70	%	76	%
Performance Services	Performance Services	88,331		93,235		(4,904)		(5)	%	24	%	27	%	Performance Services	94,189		88,331		5,858		7	%	30	%	24	%
Net revenue		$	365,147	$	346,887	$	18,260	5	%	100	%	100	%
Segment net revenue														Segment net revenue	$	313,882	$	365,147	$	(51,265)	(14)	%	100	%	100	%

Our Supply Chain Services segment includes one of the largest healthcare group purchasing organization ~~programs~~ (“GPO”) programs in the United States, serving acute, non-acute and non-healthcare sites and ~~alternate sites,~~providing supply chain co-management, purchased services and ~~our~~ direct sourcing activities. We generate revenue in our Supply Chain Services segment from administrative fees received from suppliers based on the total dollar volume of ~~supplies~~goods and services purchased by our members and other customers, service fees from supply chain co-management, subscription fees from purchased services and through product sales in connection with our direct sourcing activities.

Our Performance Services segment consists of three sub-brands: PINC AITM, ~~the Company’s~~our technology and services platform with offerings that help optimize performance in three main areas – clinical intelligence, margin improvement and value-based care – using advanced analytics to identify improvement opportunities, consulting and managed services for clinical and operational design, and workflow solutions to hardwire sustainable change in the provider, life sciences and payor markets; Contigo Health®, our ~~direct~~direct-to-employer business which provides third-party administrator services and management of health benefit programs that allow employers to ~~employer business~~contract directly with healthcare providers as well as partners with healthcare providers to provide employers access to a specialized care network through Contigo Health’s centers of excellence program; and RemitraTM, our ~~electronic~~digital invoicing and payables ~~business.~~business which provides financial support services to healthcare providers and suppliers. Each sub-brand serves different markets but are all united in our vision to optimize provider performance and accelerate industry innovation for better, smarter healthcare. ~~For additional information, please see “Performance Services Realignment for Fiscal 2022” under “Item 1. Business” in our 2021 Annual Report.~~

~~Acquisitions~~

~~Acquisition of Invoice Delivery Services, LP Assets~~

On March 1, 2021, we, through a newly formed consolidated subsidiary, Premier IDS, LLC, acquired substantially all the assets and assumed certain liabilities of Invoice Delivery Services, LP (“IDS”) for an adjusted purchase price of $80.7 million, subject to certain adjustments, of which $80.0 million was paid at closing with borrowings under our Credit Facility (as defined in Note 8 - Debt and Notes Payable to the accompanying condensed consolidated financial statements).

IDS offers digitization technologies that convert paper and portable document format (“PDF”) invoices to an electronic format to automate, streamline and simplify accounts payable processes in healthcare. IDS’ solutions include those for electronic invoicing and tracking, as well as digital payments. IDS is being integrated within Premier under the brand name RemitraTM ~~and reported as part of the Performance Services segment. See Note 3 - Business Acquisitions to the accompanying condensed consolidated financial statements for further information.~~

Market and Industry Trends and Outlook

We expect that certain trends and economic or industrywide factors will continue to affect our business, in both the short- and long-term. We have based our expectations described below on assumptions made by us and on information currently available to us. To the extent our underlying assumptions about, or interpretation of, available information prove to be incorrect, our actual results may vary materially from our expected results. See “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” herein and in the ~~2021~~2022 Annual Report.

Trends in the U.S. healthcare market affect our revenues and costs in the Supply Chain Services and Performance Services segments. The trends we see affecting our current healthcare business include the impact of the implementation of current or future healthcare legislation, particularly the potential for the Affordable Care Act (“ACA”) to be materially altered by Congress, through regulatory action by government agencies, or in the event of a change of party control in Congress. Actions related to the ACA could be disruptive for Premier and our customers, impacting revenue, reporting requirements, payment reforms, shift in care to the alternate site market and increased data availability and transparency. To meet the demands of this environment, there will be increased focus on scale and cost containment and healthcare providers will need to measure and report on and bear financial risk for outcomes. Over the long-term, we believe these trends will result in increased demand for our Supply Chain Services and Performance Services solutions in the areas of cost management, quality and safety, and value-based ~~care,~~care; however, there are uncertainties and risks that may affect the actual impact of these anticipated trends, expected demand for our services or related assumptions on our business. See “Cautionary Note Regarding Forward-Looking Statements” for more information.

COVID-19 Pandemic, Variants Thereof, Recurrences or Similar Pandemics

In addition to the trends in the U.S. healthcare market discussed above, we face known and unknown uncertainties arising from the outbreak of the novel coronavirus (“COVID-19”) and the resulting global pandemic and financial and operational uncertainty, including its impact on the overall economy, our sales, operations and supply chains, our members and other customers, workforce and suppliers, and countries. As a result of the COVID-19 pandemic, variants thereof, and potential future pandemic outbreaks, we face significant risks including, but not limited to:

•Overall economic and capital markets decline. The impact of the COVID-19 pandemic and variants thereof and associated supply chain disruptions could result in a prolonged recession or depression in the United States or globally that could harm the banking system, limit demand for many products and services and cause other foreseen and unforeseen events and circumstances, all of which could negatively impact us. The continued spread of COVID-19 and variants thereof has led to and could continue to lead to severe disruption and volatility in the United States and global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. In addition, trading prices on the public stock market, as well as that of our Class A common stock, have been highly volatile as a result of the COVID-19 pandemic.

•Changes in the demand for our products and ~~services~~services. . We experienced and may continue to experience demand uncertainty from both material increases and decreases in demand and pricing for our products and services as a result of the COVID-19 pandemic. There was a material increase in demand for personal protective equipment (“PPE”), drugs and other supplies directly related to treating and preventing the spread of COVID-19 and variants thereof during fiscal 2020 and 2021. ~~However, either voluntarily or due~~In the second half of fiscal 2022 through the current period of fiscal 2023, demand and pricing for PPE, drugs and other supplies decreased resulting in a decline in revenue relative to ~~government orders or advisories, patients,~~the previous two fiscal years. Patients, hospitals and other medical facilities ~~deferred~~continue to defer some elective procedures and routine medical visits ~~during the crisis. This created~~due to ongoing and continuing uncertainty from COVID-19 outbreaks or variants thereof, or as a ~~material decline in the~~result of restrictive government orders or advisories. While demand for many supplies and services not related to COVID-19 ~~during 2020 and 2021 and such lower demand~~ may continue ~~into~~to decline in fiscal ~~2022~~2023, rolling shortages of products and ~~beyond if COVID-19 vaccine programs are not~~drugs needed for routine procedures, such as ~~successful as anticipated, or if COVID-19 variants become widespread. In addition, as a result of our members’ focus~~contrast media and flush syringes, could have an impact on ~~managing the effects of COVID-19 on patients and their businesses, we have experienced a decrease in~~ demand for hospital services and the financial conditions of providers, particularly those forced to procure such products through resellers.

•Increased labor costs. Labor shortages and the resulting increases to the cost of labor are an ongoing challenge to the healthcare providers we serve. Limited availability of staff resources and rolling staff shortages may continue to impair the ability of existing staff to manage product and service procurement. While our ~~consulting~~non-acute and ~~other performance service engagements. Furthermore, during the COVID-19 pandemic, many of our members’ non-acute or~~ non-healthcare ~~facilities,~~businesses, such as education and hospitality ~~businesses, closed, operated on~~customers, experienced a ~~limited~~rebound in fiscal 2022, the recovery may be hampered by future COVID-19 outbreaks or ~~reduced basis and have delayed re-opening, and, as a result, we may see a material reduction in product sales to those facilities. The extent to~~variants, which ~~these impacts on demand may continue, and the effect they may have on our business and operating results, will depend upon future developments that~~ are highly uncertain and cannot be accurately predicted.

•Limited access to our members’ facilities that impacts our ability to fulfill our contractual requirements. ~~Our member hospitals and non-acute care sites~~While some of our hospital customers have ~~experienced reduced or limited~~allowed increased access ~~for~~to their facilities by non-patients, including our field teams, consultants and other professionals, ~~and~~there are many that still are not permitting onsite access outside of their staff. Hospital imposed travel restrictions ~~have impacted our employees’~~are also impacting some customers’ ability to ~~travel~~participate in face-to-face events with us, such as committee meetings and conferences, which limits our ability to ~~our members’ facilities and our performance under our existing contracts.~~build on customer relationships. The long-term continuation, or any future recurrence of these circumstances, may negatively impact the ability of our employees to effectively deliver existing or sell new products and services to our members and could negatively affect ~~our~~the performance of our existing contracts.

•Materials and personnel shortages and disruptions in supply chain, including manufacturing and shipping. The global supply chain has been materially disrupted due to personnel shortages associated with ongoing COVID-19 rates of infection, stay-at-home orders, ~~border closings and~~ rapidly escalating shipping ~~costs. Borders closings~~costs, raw material availability, material logistical delays due to port congestion and general labor constraints. Stay-at-home orders and other restrictions in response to the COVID-19 pandemic, particularly ~~regarding~~in China, ~~and India,~~ have impacted and continue to impact our access to products for our members. Staffing or personnel shortages due to ~~shelter-in-place~~stay-at-home orders and quarantines, or other public health measures, have impacted and, in the future, may impact us and our members, other customers or suppliers. In addition, due to unprecedented demand during the COVID-19 pandemic, there have been widespread shortages in certain product categories. During the COVID-19 pandemic, we lost revenue when member healthcare systems chose to source products directly themselves rather than through our GPO when incumbent suppliers could not deliver products in a timely manner or at all, and we were not able to locate reputable alternative suppliers. In the food service line, COVID-19 related illnesses impacted food processing suppliers and led to plant closures. If the supply chain for materials used in the products purchased by our members through our GPO or products contract manufactured through our direct sourcing business continue to be adversely impacted by ~~restrictions resulting from~~ the COVID-19 pandemic, our supply chain may continue to be disrupted. Failure of our suppliers, contract manufacturers, distributors, contractors and other business partners to meet their obligations to our members, other customers or to us, or material disruptions in their ability to do so due to their own financial or operational difficulties, may adversely impact our operations.

•Requests for contract modifications, payment deferrals or exercises of force majeure clauses. We have and may continue to receive requests for contract modifications, payment waivers and deferrals, payment reductions or amended payment terms from our contract counterparties. We have and may continue to receive requests to delay service or payment on performance service contracts. In addition, we have and may continue to receive requests from our suppliers for increases to their contracted prices, and such requests may be implemented in the future. Inflation in such contract prices may impact member utilization of items and services available through our GPO contracts, which could adversely impact our net administrative fees revenue and direct sourcing revenue. In addition, several pharmacy

suppliers have exercised force majeure clauses related to failure to supply clauses in their contracts with us because they are unable to obtain raw materials for manufacturing from India and China. The standard failure to supply language in our contracts contains financial penalties to suppliers if they are unable to supply products, which such suppliers may not be able to pay. In addition, we may not be able to source products from alternative suppliers on commercially reasonable terms, or at all.

•~~Overall economic and capital markets decline.~~ The impact of the COVID-19 pandemic could result in a prolonged recession or depression in the United States or globally that could harm the banking system, limit demand for all products and services and cause other foreseen and unforeseen events and circumstances, all of which could negatively impact us. The continued spread of COVID-19 has led to and could continue to lead to severe disruption and volatility in the United States and global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. In addition, trading prices on the public stock market, as well as that of our Class A common stock, have been highly volatile as a result of the COVID-19 pandemic.

•Managing the evolving regulatory ~~environment~~environment.. In response to the COVID-19 pandemic and variants thereof, federal, state and local governments are issuing new rules, regulations, orders and advisories and changing reimbursement eligibility rules ~~orders and advisories~~ on a regular basis. These government actions can impact us and our members, other customers and suppliers.

The ultimate impact of COVID-19, variants thereof, recurrences, or similar pandemics on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of any pandemic and the related length of its impact on the United States and global economies, which are uncertain and cannot be predicted at this time. The impact of the COVID-19 pandemic, variants thereof, recurrences, or future similar pandemics may also exacerbate many of the other risks described in Item 1A. “Risk Factors” section of the ~~2021~~2022 Annual Report. Despite our efforts to manage these impacts, their ultimate impact depends on factors beyond our knowledge or control, including the duration and severity of any outbreak and actions taken to contain its spread and mitigate its public health effects. The foregoing and other continued disruptions in our business as a result of the COVID-19 pandemic, variants thereof, recurrences or similar pandemics could result in a material adverse effect on our business, results of operations, financial condition, cash flows, prospects and the trading prices of our securities in the near-term and through fiscal ~~2022~~2023 and beyond.

Russia-Ukraine War

In February 2022, Russia invaded Ukraine which resulted in sanctions, export controls and other measures imposed against Russia, Belarus and specific areas within Ukraine. As the war endures, it continues to affect the global economy and financial markets, as well as exacerbating ongoing economic challenges, including issues such as rising inflation, energy costs and global supply-chain disruption. We continue to monitor the impacts of the Russia-Ukraine war on macroeconomic conditions and prepare for any implications that the war may have on member demand, our suppliers’ ability to deliver products, cybersecurity risks and our liquidity and access to capital. See Item 1A. “Risk Factors” in our 2022 Annual Report.

Critical Accounting Policies and Estimates

Refer to Note 1 - Organization and Note 2 - Significant Accounting Policies to the accompanying condensed consolidated financial statements for more information related to our use of estimates in the preparation of financial statements as well as information related to material changes in our significant accounting policies that were included in our ~~2021~~2022 Annual Report.

New Accounting Standards

New accounting standards that we have recently adopted as well as those that have been recently issued but not yet adopted by us are included in Note 2 - Significant Accounting Policies to the accompanying condensed consolidated financial statements, which is incorporated herein by reference.

Key Components of Our Results of Operations

Net Revenue

Net revenue consists of ~~service revenue, which includes~~ net administrative fees revenue, ~~and~~software licenses, other services and support revenue, and ~~product~~products revenue. Net administrative fees revenue consists of GPO administrative fees in our Supply Chain Services segment. Other services and support revenue consists primarily of fees generated by our Performance Services segment as discussed below. Product revenue consists of direct sourcing product sales, which are included in the Supply Chain Services segment.

Supply Chain Services

Supply Chain Services revenue ~~consists of GPO~~ is comprised of:

•net administrative fees ~~(gross~~revenue which consists of gross administrative fees received from suppliers, reduced by the amount of revenue share paid to ~~members),~~members;

•software licenses, other services and support revenue which consist of supply chain co-management and ~~direct sourcing revenue.~~purchased services revenue; and

•products revenue which consists of inventory sales.

The success of our Supply Chain Services revenue streams ~~are~~is influenced by our ability to negotiate favorable contracts with suppliers and members, the number of members that utilize our GPO supplier contracts and the volume of their purchases, ~~as well as~~ the impact of changes in the defined allowable reimbursement amounts determined by Medicare, Medicaid and other managed care plans and the number of members and other customers that purchase products through our direct sourcing activities and the impact of competitive pricing. Refer to “Impact of Inflation” within “Liquidity and Capital Resources” section of Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations for discussion of inflation and its impact on our Supply Chain Services’ businesses.

Performance Services

Performance Services revenue ~~consists of:~~is comprised of the following software licenses, other services and support revenue:

•~~SaaS~~healthcare information technology license and SaaS-based clinical, ~~analytics~~margin improvement and value-based care products subscriptions, license fees, professional fees for consulting services, performance improvement collaborative and other service subscriptions ~~professional fees for consulting services~~ and insurance services management fees and commissions from endorsed commercial insurance programs under our PINC AI technology and services platform;

•~~third party~~third-party administrator fees and fees from the centers of excellence program for ~~our~~ Contigo ~~Health direct to employer business;~~Health; and

•~~customer~~ fees from healthcare product suppliers and service providers for ~~our Remitra electronic invoicing and payables business.~~Remitra.

Our Performance Services growth will depend upon the expansion of our PINC AI technology and services platform to new and existing members and other customers, ~~expansion of our Contigo Health and Remitra businesses to new members,~~ renewal of existing subscriptions to our SaaS and licensed ~~informatics~~software products, ~~our ability to generate additional applied sciences engagements,~~ our ability to sell enterprise analytics licenses to new and existing customers at rates sufficient to offset the loss of recurring ~~SaaS based~~SaaS-based revenue due to the conversion to an enterprise analytics license, ~~and expand~~expansion into new ~~markets.~~markets and expansion of our Contigo Health and Remitra businesses to new and existing members.

Cost of Revenue

Cost of revenue consists of cost of ~~service~~services and software licenses revenue and cost of ~~product~~products revenue.

Cost of ~~service~~services and software licenses revenue includes expenses related to employees, ~~(including~~consisting of compensation and ~~benefits)~~benefits, and outside consultants who directly provide services related to revenue-generating activities, including consulting services to members and other customers, third-party administrator services and implementation services related to our SaaS ~~clinical analytics~~and licensed software products along with associated amortization of certain capitalized contract costs. Amortization of contract costs represent amounts that have been capitalized and reflect the incremental costs of obtaining and fulfilling a ~~contract. Amortization of~~ contract ~~costs included within cost of service revenue include~~including costs related to implementing SaaS informatics tools. Cost of ~~service~~services and software licenses revenue also includes expenses related to hosting services, related data center capacity costs, third-party product license expenses and amortization of the cost of internally developed software applications.

Cost of ~~product~~products revenue consists of purchase and shipment costs for direct sourced medical and commodity ~~products. Our cost of product revenue~~products and is influenced by the manufacturing and transportation costs associated with direct sourced medical and commodity products. Refer to “Impact of Inflation” within “Liquidity and Capital Resources” section of Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations for discussion of inflation and its impact on our Supply Chain Services’ businesses.

Operating Expenses

Operating expenses includes selling, general and administrative (“SG&A”) expenses, research and development expenses and amortization of purchased intangible assets.

~~Selling, general and administrative~~SG&A expenses are directly associated with selling and administrative functions and support of revenue-generating activities including expenses to support and maintain our software-related products and services. ~~Selling, general and administrative~~SG&A expenses primarily consist of ~~compensation~~compensation- and ~~benefits related costs,~~benefits-related costs; travel-related ~~expenses,~~expenses; business development expenses, including costs for business acquisition ~~opportunities,~~opportunities; non-recurring strategic initiative and financial restructuring-related expenses, indirect costs such as insurance, professional fees and other general overhead expenses, and amortization of certain contract costs. Amortization of contract costs represent amounts, including sales commissions, that have been capitalized and reflect the incremental costs of obtaining and fulfilling a contract.

Research and development expenses consist of employee-related compensation and benefit expenses and third-party consulting fees of technology professionals, net of capitalized labor, incurred to develop our software-related products and services prior to reaching technological feasibility.

Amortization of purchased intangible assets includes the amortization of all identified intangible assets.

Other ~~(Expense)~~ Income, Net

Other ~~(expense)~~ income, net, includes equity in net income of unconsolidated affiliates that is generated from our equity method investments. Our equity method investments primarily consist of our interests in FFF Enterprises, Inc. (“FFF”), Exela Holdings, Inc. (“Exela”), and Prestige Ameritech Ltd. (“Prestige”) (see Note 43 - Investments). Other ~~(expense)~~ income, net, also includes the ~~change in the fair value of the FFF call right and the~~fiscal year 2022 gain recognized ~~as a result of~~due to the termination of the FFF Put Right and derecognition of the associated liability (see Note 54 - Fair Value Measurements), interest income and expense, realized and unrealized gains or losses on deferred compensation plan assets, gains or losses on the disposal of assets, and any impairment on our assets or held-to-maturity investments.

Income Tax Expense ~~(Benefit)~~

~~Adjusted Net~~See Note 11 - Income ~~a Non-GAAP financial measure as defined below in “Our Use~~Taxes for discussion of ~~Non-GAAP Financial Measures”, is calculated net of taxes based on our estimated annual effective tax rate for federal and state~~ income tax adjusted for unusual or infrequent items, as we are a consolidated filing group for federal income tax purposes with all of our subsidiaries’ activities included. The tax rate used to compute Adjusted Net Income was 21% and 24% for the three months ended September 30, 2021 and 2020, respectively. The change in the tax rate used to compute Adjusted Net Income is due to our plan to reorganize and simplify our subsidiary reporting structure resulting in the release of $32.9 million of valuation allowance of our deferred tax asset in the fiscal year ending June 30, 2022. As a result of the planned restructure, one of our consolidated subsidiaries is expected to have sufficient income to enable it to utilize its net operating loss and research and development credit carryforwards. Of the $32.9 million release of the valuation allowance, $17.6 million is being included in the estimated annual effective tax rate calculation to the extent such carryforwards are projected to offset fiscal 2022 ordinary income and $15.3 million has been included as a discrete item in our first quarter of fiscal 2022 to the extent that the carryforwards are projected to offset income in future years beyond fiscal 2022.

Given the uncertainty of the plan to reorganize and simplify our subsidiary reporting structure as of June 30, 2021, we did not release any portion of the valuation allowance on June 30, 2021. We have made substantial progress on the plan to reorganize and simplify our subsidiary reporting structure in the first quarter of fiscal 2022 and expect to complete the plan prior to December 31, 2021. However, as there can be no assurance that all components of the plan will be completed in a timely manner or at all, and if not timely completed, we would be required to reverse the release of the $32.9 million deferred tax asset valuation allowance discussed above.expense.

Net ~~Loss (Income)~~Income Attributable to Non-Controlling Interest

We recognize net ~~loss (income)~~income attributable to non-controlling interest for non-Premier ownership in our consolidated subsidiaries which hold interest in our equity method investments. At September 30, ~~2021,~~2022, we ~~owned approximately 26%~~recognized net income attributable to non-controlling interest for the 74%, ~~21%~~79% and ~~15% of the membership~~85% interest ofheld in PRAM Holdings, LLC (“PRAM”), DePre Holdings, LLC (“DePre”) and ExPre Holdings, LLC (“ExPre”), ~~respectively. We recognized net loss (income) attributable to non-controlling interest for the 74%, 79% and 85% interest held in PRAM, DePre and ExPre,~~ respectively, by member health systems or their affiliates.

PRAM, DePre and ExPre are investments we made as part of our long-term supply chain resiliency program to promote domestic and geographically diverse manufacturing and to help ensure a robust and resilient supply chain for essential medical products.

As of September 30, ~~2021,~~2022, we ~~own 97%~~owned 93% of the equity interest in Contigo Health and recognized net ~~loss (income)~~income attributable to non-controlling interest for the 3%7% of equity ~~retained~~held by ~~an affiliate to a member health system.~~certain customers of Contigo Health.

Our Use of Non-GAAP Financial Measures

The other key business metrics we consider are EBITDA, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share and Free Cash Flow, which are all Non-GAAP financial measures.

We define EBITDA 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. We define Adjusted EBITDA as EBITDA before merger and ~~acquisition related~~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 initiative and financial ~~restructuring~~restructuring-related expenses. Non-operating items include gains or losses on the disposal of assets and interest and investment income or expense.

We define Segment Adjusted EBITDA 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~~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.

We define Adjusted Net Income 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~~restructuring-related expenses, (v) assuming, for periods prior to our August 2020 Restructuring, 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. We define Adjusted Earnings per Share as Adjusted Net Income divided by diluted weighted average shares (see Note 119 - Earnings Per Share).

We define Free Cash Flow as net cash provided by operating activities from continuing operations less ~~distributions and Tax Receivable Agreement (“TRA”) payments to limited partners,~~(i) early termination payments to certain former limited partners that elected to execute a Unit Exchange and Tax Receivable Acceleration Agreement (“Unit Exchange Agreement”) in connection with our August 2020 Restructuring and (ii) 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.

Adjusted EBITDA and Free Cash Flow are supplemental financial measures used by us and by external users of our financial statements and are considered to be indicators of the operational strength and performance of our business. Adjusted EBITDA and Free Cash Flow measures allow us to assess our performance without regard to financing methods and capital structure and without the impact of other matters that we do not consider indicative of the operating performance of our business. More specifically, Segment Adjusted EBITDA is the primary earnings measure we use to evaluate the performance of our business segments.

We use Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Share to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with GAAP, provides a more complete understanding of factors and trends affecting our business. We believe Adjusted EBITDA and Segment Adjusted EBITDA assist our Board of Directors, management and investors in comparing our operating performance on a consistent basis from period to period because they remove the impact of earnings elements attributable to our asset base (primarily depreciation and amortization), certain items outside the control of our management team, e.g. taxes, other non-cash items (such as impairment of intangible assets, purchase accounting adjustments and stock-based compensation), non-recurring items (such as strategic initiative and financial ~~restructuring~~restructuring-related expenses) and income and expense that has been classified as discontinued operations from our operating results. We believe Adjusted Net Income and Adjusted Earnings per Share 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 (such as impairment of intangible assets, purchase accounting adjustments and stock-based compensation) and non-recurring items (such as strategic initiative and financial ~~restructuring~~restructuring-related expenses), and eliminate the variability of non-controlling interest that ~~results~~primarily resulted from

member owner exchanges of Class B common units for shares of Class A common stock. We believe Free Cash Flow is an important measure because it represents the cash that we generate after ~~payment of tax distributions to limited partners,~~ payments to certain former limited partners that elected to execute a Unit Exchange Agreement in connection with our August 2020 Restructuring 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. Our Free Cash Flow allows us to enhance stockholder value through acquisitions, partnerships, joint ventures, investments in related businesses and debt reduction.

Despite the importance of these Non-GAAP financial measures in analyzing our business, determining compliance with certain financial covenants in our Credit Facility, measuring and determining incentive compensation and evaluating our operating performance relative to our competitors, EBITDA, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share and Free Cash Flow are not measurements of financial performance under GAAP, may have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, net income, net cash provided by operating activities, or any other measure of our performance derived in accordance with GAAP.

Some of the limitations of the EBITDA, Adjusted EBITDA and Segment Adjusted EBITDA measures include that they do not reflect: our capital expenditures or our future requirements for capital expenditures or contractual commitments; changes in, or cash requirements for, our working capital needs; the interest expense or the cash requirements to service interest or principal payments under our Credit Facility; income tax payments we are required to make; and any cash requirements for replacements of assets being depreciated or amortized. In addition, EBITDA, Adjusted EBITDA, Segment Adjusted EBITDA and Free Cash Flow are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flows from operating activities.

Some of the limitations of the Adjusted Net Income and Adjusted Earnings per Share measures are that they do not reflect income tax expense or income tax payments we are required to make. In addition, Adjusted Net Income and Adjusted Earnings per Share are not measures of profitability under GAAP.

We also urge you to review the reconciliation of these Non-GAAP financial measures included elsewhere in this Quarterly Report. To properly and prudently evaluate our business, we encourage you to review the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and to not rely on any single financial measure to evaluate our business. In addition, because the EBITDA, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share and Free Cash Flow measures are susceptible to varying calculations, such Non-GAAP financial measures may differ from, and may therefore not be comparable to, similarly titled measures used by other companies.

Non-recurring and non-cash items excluded in our calculation of Adjusted EBITDA, Segment Adjusted EBITDA and Adjusted Net Income consist of stock-based compensation, ~~acquisition~~acquisition- and ~~disposition related~~disposition-related expenses, ~~remeasurement of TRA liabilities,~~strategic initiative and financial restructuring-related expenses, gain on or loss on FFF ~~put~~Put and ~~call rights,~~Call Rights, income and expense that has been classified as discontinued operations and other ~~expense.~~reconciling items. More information about certain of the more significant items follows below.

Income tax expense on adjusted income

Adjusted Net Income, a Non-GAAP financial measure as defined below in “Our Use of Non-GAAP Financial Measures”, is calculated net of taxes based on our estimated annual effective tax rate for federal and state income tax, adjusted for unusual or infrequent items, as we are a consolidated group for tax purposes with all of our subsidiaries’ activities included. The tax rate used to compute the Adjusted Net Income was 26% and 21% for the three months ended September 30, 2022 and 2021, respectively. The 21% tax rate in fiscal year 2022 was primarily due to the benefit from the release of $32.9 million of valuation allowance of our deferred tax asset as a result of the Subsidiary Reorganization.

Of the $32.9 million valuation allowance released in fiscal year 2022, $17.6 million was included in the estimated annual effective tax rate calculation to the extent such carryforwards were projected to offset fiscal year 2022 ordinary income. The remaining $15.3 million of valuation allowance released was included as a discrete item in the three months ended September 30, 2021.

Stock-based compensation

In addition to non-cash employee stock-based compensation expense, this item includes non-cash stock purchase plan expense of $0.2 million ~~and $0.1 million~~ for both the three months ended September 30, ~~2021~~2022 and ~~2020, respectively~~2021 (see Note 1210 - Stock-Based Compensation to the accompanying condensed consolidated financial statements).

~~Acquisition~~Acquisition- and ~~disposition related~~disposition-related expenses

~~Acquisition related~~Acquisition-related expenses include legal, accounting and other expenses related to acquisition activities and gains and losses on the change in fair value of earn-out liabilities. ~~Disposition related~~Disposition-related expenses include severance and retention benefits and financial advisor fees and legal fees related to disposition activities.

Strategic initiative and financial restructuring-related expenses

Strategic initiative and financial restructuring-related expenses include legal, accounting and other expenses related to strategic initiative and financial restructuring-related activities.

Gain ~~or loss~~ on FFF ~~put~~Put and ~~call rights~~Call Rights

See Note 54 - Fair Value Measurements to the accompanying condensed consolidated financial statements.

Other reconciling items

Other reconciling items include, but are not limited to, gains and losses on disposal of long-lived assets and imputed interest on notes payable to former limited partners.

Results of Operations

~~Results of operations for all periods presented have been retrospectively adjusted to reflect continuing operations unless otherwise indicated.~~

The following table presents our results of operations for the periods presented (in thousands, except per share data):


		Three Months Ended September 30,						Three Months Ended September 30,
		2021			2020				2022		2021
		Amount		% of Net Revenue	Amount		% of Net Revenue				Amount		% of Net Revenue	Amount		% of Net Revenue
Net revenue:	Net revenue:									Net revenue:
Net administrative fees	Net administrative fees	$	149,462	41%	$	132,645	38%			Net administrative fees	$	150,006	48%	$	149,462	41%
Other services and support		97,255		27%	98,827		28%
Services		246,717		68%	231,472		67%
Software licenses, other services and support										Software licenses, other services and support	105,006		33%	97,255		27%
Services and software licenses										Services and software licenses	255,012		81%	246,717		68%
Products	Products	118,430		32%	115,415		33%			Products	58,861		19%	118,430		32%
Net revenue	Net revenue	365,147		100%	346,887		100%			Net revenue	313,873		100%	365,147		100%
Cost of revenue:	Cost of revenue:									Cost of revenue:
Services		43,809		12%	38,750		11%
Services and software licenses										Services and software licenses	54,014		17%	43,809		12%
Products	Products	109,362		30%	113,428		33%			Products	57,874		18%	109,362		30%
Cost of revenue	Cost of revenue	153,171		42%	152,178		44%			Cost of revenue	111,888		36%	153,171		42%
Gross profit	Gross profit	211,976		58%	194,709		56%			Gross profit	201,985		64%	211,976		58%
Operating expenses	Operating expenses	139,697		38%	137,734		40%			Operating expenses	143,477		46%	139,697		38%
Operating income	Operating income	72,279		20%	56,975		16%			Operating income	58,508		19%	72,279		20%
Other income, net	Other income, net	68,060		19%	5,572		2%			Other income, net	3,220		1%	68,060		19%
Income before income taxes	Income before income taxes	140,339		38%	62,547		18%			Income before income taxes	61,728		20%	140,339		38%
Income tax expense (benefit)		19,033		5%	(94,981)		(27)%
Income tax expense										Income tax expense	18,769		6%	19,033		5%
Net income	Net income	121,306		33%	157,528		45%			Net income	42,959		14%	121,306		33%
Net loss (income) attributable to non-controlling interest		698		—%	(11,845)		(3)%
Adjustment of redeemable limited partners’ capital to redemption amount		—		—%	(26,685)		(8)%
Net (income) loss attributable to non-controlling interest										Net (income) loss attributable to non-controlling interest	(243)		—%	698		—%
Net income attributable to stockholders	Net income attributable to stockholders	$	122,004	nm	$	118,998	nm			Net income attributable to stockholders	$	42,716	14%	$	122,004	33%

Earnings per share attributable to stockholders:	Earnings per share attributable to stockholders:									Earnings per share attributable to stockholders:
Basic earnings per share attributable to stockholders		$	0.99		$	1.20
Diluted earnings per share attributable to stockholders		$	0.97		$	1.19
Basic										Basic	$	0.36		$	0.99
Diluted										Diluted	$	0.36		$	0.97

~~nm = Not meaningful~~For the following Non-GAAP financial measures and reconciliations of our performance derived in accordance with GAAP to the Non-GAAP financial measures, refer to “Our Use of Non-GAAP Financial Measures” for further information regarding items excluded in our calculation of Adjusted EBITDA, Segment Adjusted EBITDA, Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Earnings Per Share.

The following table provides certain Non-GAAP financial measures for the periods presented (in thousands, except per share data). ~~Refer to “Our Use of Non-GAAP Financial Measures” for further information regarding items excluded in our calculation of Adjusted EBITDA and Segment Adjusted EBITDA.~~


		Three Months Ended September 30,						Three Months Ended September 30,
		2021			2020				2022		2021
Certain Non-GAAP Financial Data:	Certain Non-GAAP Financial Data:	Amount		% of Net Revenue	Amount		% of Net Revenue			Certain Non-GAAP Financial Data:	Amount		% of Net Revenue	Amount		% of Net Revenue
Adjusted EBITDA	Adjusted EBITDA	$	121,703	33%	$	110,743	32%			Adjusted EBITDA	$	109,380	35%	$	121,703	33%
Non-GAAP Adjusted Net Income	Non-GAAP Adjusted Net Income	79,141		22%	70,159		20%			Non-GAAP Adjusted Net Income	62,512		20%	79,141		22%
Non-GAAP Adjusted Earnings Per Share	Non-GAAP Adjusted Earnings Per Share	0.64		nm	0.57		nm			Non-GAAP Adjusted Earnings Per Share	0.52		nm	0.64		nm

nm = Not meaningful

3332

The following tables provide the reconciliation of net income ~~from continuing operations~~ to Adjusted EBITDA and the reconciliation of income before income taxes to Segment Adjusted EBITDA (in thousands). ~~Refer~~


	Three Months Ended September 30,
	2022		2021
Net income	$	42,959	$	121,306
Interest expense, net	2,859		2,788
Income tax expense	18,769		19,033
Depreciation and amortization	23,439		20,596
Amortization of purchased intangible assets	10,452		10,889
EBITDA	98,478		174,612
Stock-based compensation	7,349		7,751
Acquisition- and disposition-related expenses	2,160		3,421
Strategic initiative and financial restructuring-related expenses	1,520		25
Gain on FFF Put and Call Rights	—		(64,110)
Other reconciling items, net (a)	(127)		4
Adjusted EBITDA	$	109,380	$	121,703

Income before income taxes	$	61,728	$	140,339
Equity in net income of unconsolidated affiliates	(8,243)		(7,058)
Interest expense, net	2,859		2,788
Gain on FFF Put and Call Rights	—		(64,110)
Other expense, net	2,164		320
Operating income	58,508		72,279
Depreciation and amortization	23,439		20,596
Amortization of purchased intangible assets	10,452		10,889
Stock-based compensation	7,349		7,751
Acquisition- and disposition-related expenses	2,160		3,421
Strategic initiative and financial restructuring-related expenses	1,520		25
Equity in net income of unconsolidated affiliates	8,243		7,058
Deferred compensation plan expense	(2,370)		(318)
Other reconciling items, net (b)	79		2
Adjusted EBITDA	$	109,380	$	121,703


	Three Months Ended September 30,
	2022		2021
Segment Adjusted EBITDA:
Supply Chain Services	$	121,194	$	129,269
Performance Services	19,368		23,715
Corporate	(31,182)		(31,281)
Adjusted EBITDA	$	109,380	$	121,703

(a)Other reconciling items, net is primarily attributable to ~~“Our Use~~loss on disposal of ~~Non-GAAP Financial Measures” for further information regarding~~long-lived assets.

(b)Other reconciling items, ~~excluded in our calculation of Adjusted EBITDA and Segment Adjusted EBITDA.~~net is attributable to other miscellaneous expenses.

Three Months Ended September 30,
2021 2020
Net income $ 121,306 $ 157,528
Interest expense, net 2,788 2,119
Income tax expense (benefit) 19,033 (94,981)
Depreciation and amortization 20,596 17,474
Amortization of purchased intangible assets 10,889 13,204
EBITDA 174,612 95,344
Stock-based compensation 7,751 7,375
Acquisition and disposition related expenses 3,421 2,845
(Gain) loss on FFF put and call rights (64,110) 1,919
Other expense, net 29 3,260
Adjusted EBITDA $ 121,703 $ 110,743
Income before income taxes $ 140,339 $ 62,547
Equity in net income of unconsolidated affiliates (7,058) (5,927)
Interest expense, net 2,788 2,119
(Gain) loss on FFF put and call rights (64,110) 1,919
Other expense, net 320 (3,683)
Operating income 72,279 56,975
Depreciation and amortization 20,596 17,474
Amortization of purchased intangible assets 10,889 13,204
Stock-based compensation 7,751 7,375
Acquisition and disposition related expenses 3,421 2,845
Equity in net income of unconsolidated affiliates 7,058 5,927
Deferred compensation plan (expense) income (318) 2,907
Other expense, net 27 4,036
Adjusted EBITDA $ 121,703 $ 110,743

Three Months Ended September 30,
2021 2020
Segment Adjusted EBITDA:
Supply Chain Services $ 129,269 $ 102,649
Performance Services 23,715 37,116
Corporate (31,281) (29,022)
Adjusted EBITDA $ 121,703 $ 110,743

3433

The following table provides the reconciliation of net income attributable to stockholders to Non-GAAP Adjusted Net Income and the reconciliation of the numerator and denominator for earnings per share attributable to stockholders to Non-GAAP Adjusted Earnings per Share for the periods presented (in thousands). ~~Refer to “Our Use of Non-GAAP Financial Measures” for further information regarding items excluded in our calculation of Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Earnings per Share.~~


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020				2022		2021
Net income attributable to stockholders	Net income attributable to stockholders	$	122,004	$	118,998		Net income attributable to stockholders	$	42,716	$	122,004
Adjustment of redeemable limited partners’ capital to redemption amount		—		26,685
Net (loss) income attributable to non-controlling interest		(698)		11,845
Income tax expense (benefit)		19,033		(94,981)
Net income (loss) attributable to non-controlling interest							Net income (loss) attributable to non-controlling interest	243		(698)
Income tax expense							Income tax expense	18,769		19,033
Amortization of purchased intangible assets	Amortization of purchased intangible assets	10,889		13,204			Amortization of purchased intangible assets	10,452		10,889
Stock-based compensation	Stock-based compensation	7,751		7,375			Stock-based compensation	7,349		7,751
Acquisition and disposition related expenses		3,421		2,845
(Gain) loss on FFF put and call rights		(64,110)		1,919
Other expense, net		1,888		4,424
Acquisition- and disposition-related expenses							Acquisition- and disposition-related expenses	2,160		3,421
Strategic initiative and financial restructuring-related expenses							Strategic initiative and financial restructuring-related expenses	1,520		25
Gain on FFF Put and Call Rights							Gain on FFF Put and Call Rights	—		(64,110)
Other reconciling items, net (a)							Other reconciling items, net (a)	1,267		1,863
Non-GAAP adjusted income before income taxes	Non-GAAP adjusted income before income taxes	100,178		92,314			Non-GAAP adjusted income before income taxes	84,476		100,178
Income tax expense on adjusted income before income taxes ~~(a)~~(b)	Income tax expense on adjusted income before income taxes ~~(a)~~(b)	21,037		22,155			Income tax expense on adjusted income before income taxes ~~(a)~~(b)	21,964		21,037
Non-GAAP Adjusted Net Income	Non-GAAP Adjusted Net Income	$	79,141	$	70,159		Non-GAAP Adjusted Net Income	$	62,512	$	79,141

Reconciliation of denominator for earnings per share attributable to stockholders to Non-GAAP Adjusted Earnings per Share	Reconciliation of denominator for earnings per share attributable to stockholders to Non-GAAP Adjusted Earnings per Share						Reconciliation of denominator for earnings per share attributable to stockholders to Non-GAAP Adjusted Earnings per Share
Weighted Average:	Weighted Average:						Weighted Average:
Basic weighted average shares outstanding	Basic weighted average shares outstanding	122,945		99,575			Basic weighted average shares outstanding	118,351		122,945
Dilutive securities	Dilutive securities	1,628		555			Dilutive securities	1,682		1,628

Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	124,573		100,130			Weighted average shares outstanding - diluted	120,033		124,573

Class B shares outstanding (b)		—		22,369
Non-GAAP weighted average shares outstanding - diluted		124,573		122,499

(a)Other reconciling items, net is primarily attributable to loss on disposal of long-lived assets and imputed interest on notes payable to former limited partners.

(b)Reflects income tax expense at an estimated effective income tax rate of ~~21%~~26% and ~~24%~~21% of non-GAAP adjusted net income before income taxes for the three months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

~~(b)~~For the three months ended September 30, 2020, the effect of 22.4 million Class B common shares was excluded from the GAAP diluted weighted average shares outstanding as they had an anti-dilutive effect. On a non-GAAP basis, the effect of 22.4 million Class B common shares was included in the non-GAAP diluted weighted average shares outstanding.

The following table provides the reconciliation of earnings per share attributable to stockholders to Non-GAAP Adjusted Earnings per Share for the periods presented. ~~Refer to “Our Use of Non-GAAP Financial Measures” for further information regarding items excluded in our calculation of Non-GAAP Adjusted Earnings per Share.~~

Three Months Ended September 30,
2021 2020
Earnings per share attributable to stockholders $ 0.99 $ 1.20
Adjustment of redeemable limited partners’ capital to redemption amount — 0.27
Net (loss) income attributable to non-controlling interest (0.01) 0.12
Income tax expense (benefit) 0.15 (0.96)
Amortization of purchased intangible assets 0.09 0.13
Stock-based compensation 0.06 0.07
Acquisition and disposition related expenses 0.03 0.03
(Gain) loss on FFF put and call rights (0.52) 0.02
Other expense, net 0.02 0.04
Impact of corporation taxes (a)
(0.17) (0.22)
Impact of dilutive shares (b)
— (0.13)
Non-GAAP Adjusted Earnings Per Share $ 0.64 $ 0.57


	Three Months Ended September 30,
	2022		2021
Earnings per share attributable to stockholders	$	0.36	$	0.99
Net income (loss) attributable to non-controlling interest	—		(0.01)
Income tax expense	0.16		0.15
Amortization of purchased intangible assets	0.09		0.09
Stock-based compensation	0.06		0.06
Acquisition- and disposition-related expenses	0.02		0.03
Strategic initiative and financial restructuring-related expenses	0.01		—
Gain on FFF Put and Call Rights	—		(0.52)
Other reconciling items, net (a)	0.01		0.02
Impact of corporation taxes (b)	(0.19)		(0.17)

Non-GAAP Adjusted Earnings Per Share	$	0.52	$	0.64

(a)Other reconciling items, net is primarily attributable to loss on disposal of long-lived assets and imputed interest on notes payable to former limited partners.

~~(b)~~
Reflects impact of dilutive shares on a non-GAAP basis, primarily attributable to the assumed conversion of the weighted average outstanding Class B common units for the three months ended September 30, 2020 for Class A common stock.

Consolidated Results - Comparison of the Three Months Ended September 30, ~~2021~~2022 to ~~2020~~2021

The variances in the material factors contributing to the changes in the consolidated results are discussed further in “Segment Results” below.

Net Revenue

Net revenue ~~increased~~decreased by ~~$18.2~~$51.3 million during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020, primarily~~2021, due to ~~an increase~~decrease of ~~$16.9 million in net administrative fees revenue and an increase of $3.0~~$59.6 million in products revenue, partially offset by ~~a decrease~~an increase of ~~$1.5~~$7.8 million in software licenses, other services and support revenue.

Cost of Revenue

Cost of revenue ~~increased~~decreased by ~~$1.0~~$41.3 million during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020, primarily~~2021, due to a decrease of $51.5 million in cost of products revenue, partially offset by an increase of ~~$5.0~~$10.2 million in cost of services ~~revenue, partially offset by a decrease of $4.0 million in cost of products~~and software licenses revenue.

Operating Expenses

Operating expenses increased by ~~$2.0~~$3.8 million during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020,~~2021, primarily due to an increase of ~~$3.8~~$4.2 million in ~~selling, general and administrative expenses partially offset by a decrease of $2.3 million in amortization of purchased intangible assets.~~SG&A expenses.

Other Income, Net

Other income, net ~~increased~~decreased by ~~$62.5~~$64.8 million during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020,~~2021, primarily due to the prior year gain on the FFF ~~put right~~Put Right as a result of the termination and corresponding derecognition of the FFF Put Right liability ~~(see Note 5 - Fair Value Measurements to the accompanying condensed consolidated financial statements for further information).~~in fiscal year 2022 as well as an increase of $1.9 million in other expense, net. These changes were partially offset by an increase of $1.2 million in equity in net income of unconsolidated affiliates.

Income Tax Expense ~~(Benefit)~~

For the three months ended September 30, 2022 and 2021, we recorded tax expense of $18.8 million and $19.0 million, ~~compared to a~~respectively. The tax ~~benefit of $(95.0) million~~expense recorded during the three months ended September 30, ~~2020. The tax expense~~2022 and ~~benefit recorded during the three months ended September 30,~~ 2021 ~~and 2020~~ resulted in effective tax rates of ~~13.6%~~30% and ~~(151.9)%~~14%, respectively. The change in the effective tax rate is primarily attributable to the impact of the Subsidiary Reorganization on the prior year ~~one-time deferred~~effective tax ~~benefit associated with the remeasurement of the deferred tax asset and valuation allowance release as a result of the August 2020 Restructuring.~~rate. (See Note 1311 - Income Taxes to the accompanying condensed consolidated financial statements for more information.)

Net ~~Loss (Income)~~Income Attributable to Non-Controlling Interest

Net ~~loss (income)~~income attributable to non-controlling interest ~~decreased~~increased by ~~$12.5~~$0.9 million during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020,~~2021, primarily due to an decrease in the ~~August 2020 Restructuring, whereby~~portion of net ~~loss (income)~~income attributable to non-controlling ~~interest~~interests in ~~Premier LP was not recorded after August 11, 2020.~~PRAM, DePre, ExPre and Contigo Health.

Adjusted EBITDA

Adjusted EBITDA, a Non-GAAP financial measure as defined in “Our Use of Non-GAAP Financial Measures”, ~~increased~~decreased by ~~$11.0~~$12.3 million during the three months ended September 30, ~~2021,~~2022, compared to the three months ended September 30, ~~2020~~2021, primarily driven by ~~an increase~~decreases of ~~$26.7~~$8.1 million and $4.3 million in Supply Chain Services ~~Adjusted EBITDA partially offset by decreases of $13.4 million~~ and ~~$2.3 million in~~ Performance Services, ~~and Corporate Adjusted EBITDA,~~ respectively.

Segment Results

Supply Chain Services

The following table presents our results of operations and Adjusted EBITDA, a Non-GAAP financial measure, in the Supply Chain Services segment for the periods presented (in thousands):


		Three Months Ended September 30,							Three Months Ended September 30,
Supply Chain Services		2021		2020		Change
											2022		2021		Change
Net revenue:	Net revenue:									Net revenue:
Net administrative fees	Net administrative fees	$	149,462	$	132,645	$	16,817	13%		Net administrative fees	$	150,006	$	149,462	$	544	—%
Other services and support		8,924		5,592		3,332		60%
Services		158,386		138,237		20,149		15%
Software licenses, other services and support										Software licenses, other services and support	10,826		8,924		1,902		21%
Services and software licenses										Services and software licenses	160,832		158,386		2,446		2%
Products	Products	118,430		115,415		3,015		3%		Products	58,861		118,430		(59,569)		(50)%
Net revenue	Net revenue	276,816		253,652		23,164		9%		Net revenue	219,693		276,816		(57,123)		(21)%
Cost of revenue:	Cost of revenue:									Cost of revenue:
Services		3,370		734		2,636		359%
Services and software licenses										Services and software licenses	5,208		3,370		1,838		55%
Products	Products	109,362		113,428		(4,066)		(4)%		Products	57,874		109,362		(51,488)		(47)%
Cost of revenue	Cost of revenue	112,732		114,162		(1,430)		(1)%		Cost of revenue	63,082		112,732		(49,650)		(44)%
Gross profit	Gross profit	164,084		139,490		24,594		18%		Gross profit	156,611		164,084		(7,473)		(5)%
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	48,044		44,424		3,620		8%		Selling, general and administrative	50,023		48,044		1,979		4%
Research and development	Research and development	164		18		146		811%		Research and development	128		164		(36)		(22)%
Amortization of purchased intangible assets	Amortization of purchased intangible assets	8,137		8,000		137		2%		Amortization of purchased intangible assets	8,083		8,137		(54)		(1)%
Operating expenses	Operating expenses	56,345		52,442		3,903		7%		Operating expenses	58,234		56,345		1,889		3%
Operating income	Operating income	$	107,739	$	87,048	20,691		24%		Operating income	98,377		107,739		(9,362)		(9)%
Depreciation and amortization	Depreciation and amortization	5,007		802						Depreciation and amortization	6,167		5,007
Amortization of purchased intangible assets	Amortization of purchased intangible assets	8,137		8,000						Amortization of purchased intangible assets	8,083		8,137
Acquisition and disposition related expenses		1,553		884
Acquisition- and disposition-related expenses										Acquisition- and disposition-related expenses	509		1,553
Equity in net income of unconsolidated affiliates	Equity in net income of unconsolidated affiliates	6,830		5,891						Equity in net income of unconsolidated affiliates	8,007		6,830
Other expense		3		24
Other reconciling items, net										Other reconciling items, net	51		3
Segment Adjusted EBITDA	Segment Adjusted EBITDA	$	129,269	$	102,649	$	26,620	26%		Segment Adjusted EBITDA	$	121,194	$	129,269	$	(8,075)	(6)%

Comparison of the Three Months Ended September 30, ~~2021~~2022 to ~~2020~~2021

Net Revenue

Supply Chain Services segment net revenue ~~increased~~decreased by ~~$23.2~~$57.1 million, or 9%21%, during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020~~2021 driven by a decrease of $59.6 million in products revenue, partially offset by an increase of $1.9 million in software licenses, other services and support revenue.

Net Administrative Fees

Net administrative fees were flat compared to prior year.

Products Revenue

Products revenue decreased by $59.6 million, or 50%, during the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The decrease was primarily driven by lower demand for and pricing of personal protective equipment (“PPE”) and other high-demand supplies as a result of the state of the COVID-19 pandemic. As the COVID-19 pandemic continues to subside and becomes more manageable, we expect further stabilization of the market for some of these products and, accordingly, a decrease in period-over-period products revenue.

Software Licenses, Other Services and Support Revenue

Software licenses, other services and support revenue increased by $1.9 million, or 21%, during the three months ended September 30, 2022 compared to the three months ended September 30, 2021, primarily due to an increase in ~~net administrative~~supply chain co-management fees ~~of $16.8 million driven by an increase in the demand for supplies~~ and SaaS-based purchased services ~~and our existing members increased utilization of our contracts as well as by the addition of new categories and suppliers and the addition of new members to our contract portfolio.~~

Supply Chain Services segment net revenue also increased due to an increase in product revenue of $3.0 million and an increase in other services and support revenue of $3.3 million. Product revenue increased due to growth in commodity products under our PREMIERPRO® ~~brand partially offset by a decrease in demand as the industry slowly normalizes to pre-pandemic levels.~~revenue.

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~~Other services and support revenue increased due an increase in administrative support service revenue and supply chain co-management fees.~~

Cost of Revenue

Supply Chain Services segment cost of revenue decreased by ~~$1.4~~$49.7 million, or 44%, during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020~~2021. The decrease was primarily ~~driven by the aforementioned increase in other services and support revenue offset by~~attributable to the decrease in products revenue and the corresponding decrease in cost of products revenue of $51.5 million due to the prior year increase in demand partially offset by fluctuations in product costs and higher logistics costs in the current year. As the COVID-19 pandemic continues to subside and become more manageable, we expect further stabilization of the market for some of these products and, accordingly, a decrease in ~~demand as the industry slowly normalizes to pre-pandemic levels.~~period-over-period cost of products revenue.

Operating Expenses

Supply Chain Services segment operating expenses increased by ~~$3.9~~$1.9 million, or 3%, during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020. The increase was~~2021 primarily due to an increase of $2.0 million in ~~selling, general and administrative~~SG&A expenses ~~of $3.6 million~~ driven by ~~an increase~~increases in personnel costs and depreciation and amortization ~~expense.~~expense partially offset by a decrease in acquisition- and disposition-related expenses.

Segment Adjusted EBITDA

Supply Chain Services Segment Adjusted EBITDA ~~increased~~decreased by ~~$26.6~~$8.1 million ~~or 26%,~~ during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020,~~2021, primarily due to ~~the aforementioned increase~~unfavorable product sales mix driven by higher products costs on corresponding revenues as well as higher logistics costs in ~~net revenue.~~our direct sourcing business.

Performance Services

The following table presents our results of operations and Adjusted EBITDA in the Performance Services segment for the periods presented (in thousands):


		Three Months Ended September 30,							Three Months Ended September 30,
Performance Services		2021		2020		Change
											2022		2021		Change
Net revenue:	Net revenue:									Net revenue:
Other services and support		$	88,331	$	93,235	$	(4,904)	(5)%
Software licenses, other services and support										Software licenses, other services and support
SaaS-based products subscriptions										SaaS-based products subscriptions	$	47,767	$	46,704	$	1,063	2%
Consulting services										Consulting services	17,615		15,060		2,555		17%
Software licenses										Software licenses	5,992		8,401		(2,409)		(29)%
Other										Other	22,815		18,166		4,649		26%
Net revenue	Net revenue	88,331		93,235		(4,904)		(5)%		Net revenue	94,189		88,331		5,858		7%
Cost of revenue:	Cost of revenue:									Cost of revenue:
Services		40,439		38,016		2,423		6%
Services and software licenses										Services and software licenses	48,806		40,439		8,367		21%
Cost of revenue	Cost of revenue	40,439		38,016		2,423		6%		Cost of revenue	48,806		40,439		8,367		21%
Gross profit	Gross profit	47,892		55,219		(7,327)		(13)%		Gross profit	45,383		47,892		(2,509)		(5)%
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	38,800		34,159		4,641		14%		Selling, general and administrative	42,131		38,800		3,331		9%
Research and development	Research and development	830		558		272		49%		Research and development	846		830		16		2%
Amortization of purchased intangible assets	Amortization of purchased intangible assets	2,752		5,204		(2,452)		(47)%		Amortization of purchased intangible assets	2,369		2,752		(383)		(14)%
Operating expenses	Operating expenses	42,382		39,921		2,461		6%		Operating expenses	45,346		42,382		2,964		7%
Operating income	Operating income	5,510		15,298		(9,788)		nm		Operating income	37		5,510		(5,473)		(99)%
Depreciation and amortization	Depreciation and amortization	13,357		14,553						Depreciation and amortization	15,047		13,357
Amortization of purchased intangible assets	Amortization of purchased intangible assets	2,752		5,204						Amortization of purchased intangible assets	2,369		2,752
Acquisition related expenses		1,868		1,961
Acquisition- and disposition-related expenses										Acquisition- and disposition-related expenses	1,651		1,868
Equity in net income of unconsolidated affiliates	Equity in net income of unconsolidated affiliates	228		36						Equity in net income of unconsolidated affiliates	236		228
Other expense		—		64
Other reconciling items, net										Other reconciling items, net	28		—
Segment Adjusted EBITDA	Segment Adjusted EBITDA	$	23,715	$	37,116	$	(13,401)	(36)%		Segment Adjusted EBITDA	$	19,368	$	23,715	$	(4,347)	(18)%

Comparison of the Three Months Ended September 30, ~~2021~~2022 to ~~2020~~2021

Net Revenue

Net revenue in our Performance Services segment ~~decreased~~increased by ~~$4.9~~$5.9 million, or 5%7%, during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020.~~2021. The ~~decrease~~increase was primarily ~~driven by lower revenue associated with enterprise analytics license agreements executed during the current period as compared~~attributable to ~~the prior year period partially offset by~~ growth ~~in our Contigo Health business and incremental revenue associated with our Remitra business.~~of $4.6

3837

million in other revenue which includes the growth in Contigo Health and Remitra as well as growth of $2.6 million in consulting services under our PINC AI platform. These increases were partially offset by a decrease of $2.4 million in software licenses driven by timing of enterprise analytics license agreements.

Cost of Revenue

Performance Services segment cost of revenue increased by ~~$2.4~~$8.4 million, or 21%, during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020,~~2021, primarily due to an increase in consulting services expenses as well as higher personnel costs ~~related~~associated with increased headcount to ~~growth in our Contigo Health business.~~support revenue growth.

Operating Expenses

Performance Services segment operating expenses increased by ~~$2.5~~$3.0 million, or 7%, during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020 primarily due to~~2021. The increase was driven by an increase of ~~$4.6~~$3.3 million in ~~selling, general and administrative~~SG&A expenses ~~partially offset by $2.5 million of lower amortization of purchased intangible assets. The increase in selling, general and administrative expenses was primarily~~ due to ~~a decrease~~higher personnel costs associated with increased headcount primarily in ~~capitalized labor costs.~~our Remitra and Contigo Health businesses.

Segment Adjusted EBITDA

Performance Services Segment Adjusted EBITDA decreased by ~~$13.4~~$4.3 million, or ~~36%~~18%, during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020~~2021 primarily due to ~~the aforementioned decrease in revenue and increases in~~higher cost of revenue and operating ~~expenses.~~expenses driven by increases in consulting services expenses and personnel costs to support revenue growth partially offset by revenue growth.

Corporate

The following table presents corporate expenses and Adjusted EBITDA for the periods presented (in thousands):


		Three Months Ended September 30,							Three Months Ended September 30,
Corporate		2021		2020		Change
											2022		2021		Change
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	$	40,970	$	45,371	$	(4,401)	(10)%		Selling, general and administrative	$	39,906	$	40,970	$	(1,064)	(3)%

Operating expenses	Operating expenses	40,970		45,371		(4,401)		(10)%		Operating expenses	39,906		40,970		(1,064)		(3)%
Operating loss	Operating loss	(40,970)		(45,371)		4,401		(10)%		Operating loss	(39,906)		(40,970)		1,064		(3)%
Depreciation and amortization	Depreciation and amortization	2,232		2,119						Depreciation and amortization	2,225		2,232
Stock-based compensation	Stock-based compensation	7,751		7,375						Stock-based compensation	7,349		7,750
Deferred compensation plan (income) expense		(318)		2,907
Other expense, net		24		3,948
Strategic initiative and financial restructuring-related expenses										Strategic initiative and financial restructuring-related expenses	1,520		25
Deferred compensation plan expense										Deferred compensation plan expense	(2,370)		(318)
Other reconciling items, net										Other reconciling items, net	—		—
Adjusted EBITDA	Adjusted EBITDA	$	(31,281)	$	(29,022)	$	(2,259)	(8)%		Adjusted EBITDA	$	(31,182)	$	(31,281)	$	99	—%

Comparison of the Three Months Ended September 30, ~~2021~~2022 to ~~2020~~2021

Operating Expenses

Corporate operating expenses decreased by ~~$4.4~~$1.1 million, or 3%, during the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020,~~2021, primarily due to ~~costs incurred~~a decrease in ~~the prior year in connection with our August 2020 Restructuring.~~deferred compensation plan expense as a result of market changes.

Adjusted EBITDA

~~Adjusted~~Corporate adjusted EBITDA ~~decreased by $2.3 million, or 8%, during~~was flat for the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020, primarily due to an increase in professional fees and incremental costs related to increased headcount.~~2021.

Off-Balance Sheet Arrangements

As of September 30, ~~2021,~~2022, we did not have any off-balance sheet arrangements.

Liquidity and Capital Resources

Our principal source of cash has been primarily ~~been~~ cash provided by operating activities. From time to time we have used, and expect to use in the future, borrowings under our Credit Facility (as defined ~~below)~~in Note 7 - Debt and Notes Payable to the accompanying condensed consolidated financial statements) as a source of liquidity. Our primary cash requirements ~~involve~~include operating expenses, working capital fluctuations, revenue share obligations, tax payments, capital expenditures, dividend payments on our Class A common stock, if and when declared, repurchases of Class A common stock pursuant to stock repurchase programs in place from time to time, acquisitions and related business investments, and general

corporate activities. Our capital expenditures typically consist of internally developed software costs, software purchases and computer hardware purchases.

As of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, we had cash and cash equivalents of ~~$184.4~~$176.6 million and ~~$129.1~~$86.1 million, respectively. As of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, there ~~were $175.0~~was $250.0 million and ~~$75.0~~$150.0 million, respectively, of outstanding borrowings under our Credit Facility. During the three months ended September 30, ~~2021,~~2022, we borrowed ~~$175.0~~$100.0 million ~~and repaid $75.0 million of borrowings~~ under our Credit Facility, which was used for other general corporate purposes. ~~In October 2021,~~During the three months ended September 30, 2022, we ~~repaid $50.0 million of~~did not make any payments on outstanding borrowings under our Credit Facility. In October 2022, the Company borrowed $125.0 million under the Credit Facility to partially fund the asset acquisition of TRPN Direct Pay, Inc. and Devon Health, Inc. (collectively, “TRPN”) (see Note 14 - Subsequent Events for further information).

We expect cash generated from operations and borrowings under our Credit Facility to provide us with adequate liquidity to fund our anticipated working capital requirements, revenue share obligations, tax payments, capital expenditures, dividend payments on our Class A common stock, if and when declared, ~~and~~ repurchases of Class A common stock pursuant to stock repurchase programs in place from time to ~~time.~~time and to fund business acquisitions. Our capital requirements depend on numerous factors, including funding requirements for our product and service development and commercialization efforts, our information technology requirements, and the amount of cash generated by our operations. We believe that we have adequate capital resources at our disposal to fund currently anticipated capital expenditures, business growth and expansion, and current and projected debt service requirements. However, strategic growth initiatives will likely require the use of one or a combination of various forms of capital resources including available cash on hand, cash generated from operations, borrowings under our Credit Facility and other long-term debt and, potentially, proceeds from the issuance of additional equity or debt securities.

During the second half of fiscal 2020, the COVID-19 global pandemic continued to spread throughout the United States and much of the rest of the world. The full extent to which the COVID-19 pandemic may impact our business, operating results, financial condition and liquidity in the future will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and variants thereof, the continued actions to contain it and treat its impact, including the success of the COVID-19 vaccination program, or recurrences of COVID-19, variants thereof or similar pandemics. As discussed in Item 1A. “Risk Factors” in our 2021 Annual Report, as a result of the COVID-19 pandemic and potential future pandemic outbreaks, we face significant risks including but not limited to the following:

•We have experienced and may continue to experience demand uncertainty from both significant increases and decreases in demand for PPE, drugs and other supplies directly related to the treating and preventing the spread of COVID-19 and any variants thereof and decreases in demand for non-COVID-19-related products.

•Our member hospitals and non-acute care sites have experienced reduced or limited access for non-patients, including our field teams, consultants and other professionals, and travel restrictions have impacted our employees’ ability to travel to our members’ facilities.

•~~The global supply chain has been significantly disrupted due to stay at home orders, border closings and rapidly escalating shipping costs.~~

•We have and may continue to receive requests for contract modifications, payment waivers and deferrals, payment reductions or amended payment terms from our contract counterparties. In addition, several pharmacy suppliers have exercised force majeure clauses related to failure to supply clauses in their contracts with us.

•The impact of the COVID-19 pandemic and any variants thereof could result in a prolonged recession or depression in the United States or globally that could harm the banking system, limit demand for all products and services and cause other foreseen and unforeseen events and circumstances, all of which could negatively impact us.

•In response to COVID-19 and variants thereof, federal, state and local governments are issuing new rules, regulations, changing reimbursement eligibility rules, orders and advisories on a regular basis. These government actions can impact us, our members, other customers and suppliers.

Discussion of Cash Flows for the Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

A summary of net cash flows is as follows (in thousands):

Three Months Ended September 30,
2021 2020
Net cash provided by (used in):
Operating activities $ 55,187 $ 30,782
Investing activities (47,050) (24,953)
Financing activities 47,143 15,283
Net increase in cash and cash equivalents $ 55,280 $ 21,112


	Three Months Ended September 30,
	2022		2021
Net cash provided by (used in):
Operating activities	$	74,751	$	55,187
Investing activities	(20,230)		(47,050)
Financing activities	35,976		47,143
Effect of exchange rate changes on cash flows	(10)		—
Net increase in cash and cash equivalents	$	90,487	$	55,280

Net cash provided by operating activities increased by $24.4 million primarily due to an increase of $14.3 million in cash received from net revenues and a decrease of $71.0 million in cash paid for cost of revenue. These increases were partially offset by an increase of $44.4 million in payments of operating expenses and a decrease of $14.6 million in net income tax refunds.

~~Net cash used in investing activities increased by $22.1~~$19.6 million for the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020.~~2021. The increase in net cash provided by operating activities was primarily due to a decrease of $57.3 million in cash paid for cost of revenue and operating expenses and an increase of $8.5 million in miscellaneous cash receipts primarily due to dividends received on our investments in unconsolidated affiliates. These increases in cash were partially offset by a decrease of $46.2 million in cash received from net revenues.

Net cash used in investing activities decreased by $26.8 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The decrease in net cash used in investing activities was primarily due to ~~an increase of $26.0 million in~~the cash ~~paid by ExPre~~outlay for ~~interest~~the investment in Exela Holdings, Inc. ~~This was partially offset by~~in the three months ended September 30, 2021 and a ~~$3.9 million reduction~~decrease in ~~purchases~~purchase of property and equipment.

Net cash provided by financing activities ~~increased~~decreased by ~~$31.9~~$11.2 million for the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020.~~2021. The ~~increase~~decrease in net cash provided by financing activities was primarily driven by a ~~$25.0~~decrease of $27.0 million increase in net borrowings under our Credit Facility, a $34.2 million reduction in distributions to limited partners of Premier LP and payments to limited partners of Premier LP related to tax receivable agreements as both distributions and payments were eliminated in connection with the August 2020 Restructuring and a $39.0 million increase in other financing activities ~~including net~~as well as $22.2 million less proceeds from the issuance of Class A

common stock in connection with the exercise of outstanding stock options ~~and proceeds from~~in the ~~membership interests in ExPre held by 11 member health systems.~~current year period as compared to the prior year period. These ~~increases~~decreases were partially offset by the prior year cash outflow of $38.2 million for ~~repurchases~~the repurchase of Class A common stock under ~~the~~our fiscal ~~year~~ 2022 stock repurchase ~~program and an increase of $26.5 million~~program. The change in ~~payments~~other financing activities was primarily ~~on the outstanding notes payable to members (see Note 8 - Debt and Notes Payable).~~driven by fiscal 2022 proceeds from member health systems that acquired membership interests in ExPre in fiscal 2022.

Discussion of Non-GAAP Free Cash Flow for theThree Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

We define Non-GAAP Free Cash Flow as net cash provided by operating activities from continuing operations less ~~distributions and TRA 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. Non-GAAP Free Cash Flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayments under our Credit Facility.

A summary of Non-GAAP Free Cash Flow and reconciliation to net cash provided by operating activities for the periods presented is as follows (in thousands):


		Three Months Ended September 30,					Three Months Ended September 30,
		2021		2020			2022		2021
Net cash provided by operating activities	Net cash provided by operating activities	$	55,187	$	30,782	Net cash provided by operating activities	$	74,751	$	55,187
Purchases of property and equipment	Purchases of property and equipment	(21,050)		(24,982)		Purchases of property and equipment	(18,930)		(21,050)
Distributions to limited partners of Premier LP		—		(9,949)
Payments to limited partners of Premier LP related to tax receivable agreements		—		(24,218)
Early termination payments to certain former limited partners that elected to execute a Unit Exchange Agreement (a)	Early termination payments to certain former limited partners that elected to execute a Unit Exchange Agreement (a)	(23,813)		—		Early termination payments to certain former limited partners that elected to execute a Unit Exchange Agreement (a)	(24,277)		(23,813)
Non-GAAP Free Cash Flow	Non-GAAP Free Cash Flow	$	10,324	$	(28,367)	Non-GAAP Free Cash Flow	$	31,544	$	10,324

(a)Early termination payments to certain former limited partners that elected to execute a Unit Exchange Agreement in connection with our August 2020 Restructuring are presented in our Condensed Consolidated Statements of Cash Flows under “Payments made on notes payable.” WeDuring the three months ended September 30, 2022, we paid $25.7 million to members including imputed interest of $1.4 million which is included in net cash provided by operating activities. During the three months ended September 30, 2021, we paid $25.7 million to members including imputed interest of $1.9 million which is included in net cash provided by operating activities. See Note 87 - Debt and Notes Payable to the accompanying condensed consolidated financial statements for further information.

Non-GAAP Free Cash Flow increased by ~~$38.7~~$21.2 million for the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020.~~2021. The increase in Non-GAAP Free Cash Flow was ~~driven by~~primarily due to the aforementioned ~~$24.4~~$19.6 million increase in net cash provided by operating activities and a decrease of $2.1 million in purchases of property and equipment of $3.9 million and no distributions to limited partners of Premier LP or payments to limited partners of Premier LP related to tax receivable agreements in the three months ended September 30, 2021 as both were eliminated in connection with the August 2020 Restructuring. These increases were partially offset by $23.8 million of early termination payments to certain former limited partners in connection with the August 2020 Restructuring.equipment.

See “Our Use of Non-GAAP Financial Measures” above for additional information regarding our use of Non-GAAP Free Cash Flow.

Contractual Obligations

Notes Payable to ~~Members~~Former Limited Partners

At September 30, ~~2021, $385.1~~2022, $282.4 million remains to be paid without interest in 1511 equal quarterly installments to former limited partners that elected to execute Unit Exchange Agreements ending with the quarter ended June 30, 2025. See Note 87 - Debt and Notes Payable to the accompanying condensed consolidated financial statements for more information.

Other Notes Payable

At September 30, ~~2021,~~2022, we had commitments of ~~$5.7~~$3.2 million for other obligations under notes payable. Other notes payable have stated maturities between three to five years from the date of issuance and are non-interest bearing. See Note 87 - Debt and Notes Payable to the accompanying condensed consolidated financial statements for more information.

Credit Facility

We maintain an unsecured credit facility which provides for borrowings of up to $1.0 billion with a $50.0 million sub-facility for standby letters of credit and a $100.0 million sub-facility for swingline loans as well as the ability to incur incremental term loans from time to time and request an increase in the revolving commitments up to an aggregate of $350.0 million, subject to certain conditions (the “Credit Facility”). The Credit Facility matures on November 9, 2023, subject to up to two one-year extensions which require the approval of a majority of the lenders under the Credit Facility.

Outstanding borrowings under the Credit Facility (as defined in Note 7 - Debt and Notes Payable to the accompanying condensed consolidated financial statements for more information) bear interest on a variable rate structure with borrowings bearing interest at either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging from 1.000% to 1.500% or the prime lending rate plus an applicable margin ranging from 0.000% to 0.500%. We pay a commitment fee ranging from 0.100% to 0.200% for unused capacity under the Credit Facility. At September 30, ~~2021,~~2022, the interest rate on outstanding borrowings under the Credit Facility was ~~1.090%~~3.729% and the commitment fee was 0.100%.

The Credit Facility contains customary representations and warranties as well as customary affirmative and negative covenants. We were in compliance with all such covenants at September 30, ~~2021.~~2022. The Credit Facility also contains customary events of default, including a cross-default of any indebtedness or guarantees in excess of $75.0 million. If any event of default occurs and is continuing, the administrative agent under the Credit Facility may, with the consent, or shall, at the request of a majority of the lenders under the Credit Facility, terminate the commitments and declare all of the amounts owed under the Credit Facility to be immediately due and payable.

Proceeds from borrowings under the Credit Facility may generally be used to finance ongoing working capital requirements, including permitted acquisitions, repurchases of Class A common stock pursuant to stock repurchase programs, in place from time to time, dividend payments, if and when declared, and other general corporate activities. At September 30, ~~2021,~~2022, we had outstanding borrowings of ~~$175.0~~$250.0 million under the Credit Facility with ~~$824.9~~$749.9 million of available borrowing capacity after reductions for outstanding borrowings and outstanding letters of credit. In October ~~2021, we repaid $50.0~~2022, the Company borrowed $125.0 million ~~of outstanding borrowings~~ under the Credit ~~Facility.~~Facility to partially fund the asset acquisition of TRPN (see Note 14 - Subsequent Events for further information).

The above summary does not purport to be complete, and is subject to, and qualified in its entirety by reference to, the complete text of the Credit Facility, as amended, which is filed as Exhibit ~~10.21 to~~10.1 in our quarterly report for the ~~2020 Annual Report.~~period ended December 31, 2021. See also Note 87 - Debt and Notes Payable to the accompanying condensed consolidated financial statements.

Cash Dividends

OnIn September ~~15, 2021,~~2022, we paid a cash dividend of ~~$0.20~~$0.21 per share on outstanding shares of Class A common ~~stock to stockholders of record on September 1, 2021.~~stock. On October 21, ~~2021,~~2022, our Board of Directors declared a quarterly cash dividend of ~~$0.20~~$0.21 per share, payable on December 15, ~~2021~~2022 to stockholders of record on December 1, ~~2021.~~2022.

We currently expect quarterly dividends to continue to be paid on or about December 15, March 15, June 15, and September 15. However, the actual declaration of any future cash dividends, and the setting of record and payment dates as well as the per share amounts, will be at the discretion of our Board of Directors each quarter after consideration of various factors, including our results of operations, financial condition and capital requirements, earnings, general business conditions, restrictions imposed by our current credit facility and any future financing arrangements, legal restrictions on the payment of dividends and other factors our Board of Directors deems relevant.

~~Stock Repurchase Program~~

~~On August 5, 2021,~~Fiscal 2023 Developments

COVID-19 Pandemic, Variants Thereof, Recurrences or Similar Pandemics

The COVID-19 global pandemic and its variants continue to create challenges throughout the United States and the rest of the world. The full extent to which the COVID-19 pandemic may impact our ~~Board~~business, operating results, financial condition and liquidity in the future will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and variants thereof, the continued actions to contain it and treat its impact, including the success of ~~Directors authorized~~COVID-19 vaccination programs, or recurrences of COVID-19, variants thereof or similar pandemics. Refer to Item 1A. “Risk Factors” in our 2022 Annual Report as well as “Market and Industry Trends and Outlook” within Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report for further discussion of the ~~repurchase~~material risks we face.

Russia-Ukraine War

In February 2022, Russia invaded Ukraine which resulted in sanctions, export controls and other measures imposed against Russia, Belarus and specific areas within Ukraine. As the war endures, it continues to affect the global economy and financial markets, as well as exacerbating ongoing economic challenges, including issues such as rising inflation, energy costs and global supply-chain disruption. Refer to Item 1A. “Risk Factors” in our 2022 Annual Report as well as “Market and Industry Trends and Outlook” within Item 2 - Management's Discussion and Analysis of upFinancial Condition and Results of Operations of this Quarterly Report for further discussion.

Impact of Inflation

The U.S. economy is experiencing the highest rates of inflation since the 1980s. Historically, we have not experienced significant inflation risk in our business arising from fluctuations in market prices across our diverse product portfolio. Our GPO business has largely been unaffected by pricing inflation as we use our members’ aggregated purchasing power to ~~$250.0 million~~negotiate firm prices in many of our ~~outstanding Class A common stock during fiscal year 2022~~contracts. In our Direct Sourcing business, we have been able to partially offset increases in cost through ~~open market purchases or privately negotiated transactions. At September 30,~~temporary adjustments to selling prices and through various cost reduction initiatives while ensuring our

4241

2021, we had purchased approximately 1.1 million shares of Class A common stock at an average price of $39.04 per share for a total purchase price of $42.6 million. The purchase authorization may be suspended, delayed, or discontinued at any time at the discretion ofproducts remain competitively priced. However, our ~~Board of Directors. Repurchases are subject~~ability to ~~compliance with applicable federal securities laws and~~raise our ~~management may, at its discretion, suspend, delay, or discontinue repurchases at any time, based~~selling prices depends on market conditions ~~alternate uses of capital, or other factors.~~and there may be periods during which we are unable to fully recover increases in our costs.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market risk relates primarily to the increase or decrease in the amount of any interest expense we must pay with respect to outstanding variable-rate debt instruments. At September 30, ~~2021,~~2022, we had ~~$175.0~~$250.0 million outstanding borrowings under our Credit Facility. AtBased on the weighted average interest rate charged on outstanding borrowings under our Credit Facility at September 30, ~~2021,~~2022, a one-percent change in the weighted average interest rate charged on outstanding borrowings ~~under our Credit Facility~~ would increase or decrease interest expense over the next twelve months by ~~$1.8~~$2.5 million.

We invest our excess cash in a portfolio of individual cash equivalents. We do not hold any material derivative financial instruments. We do not expect changes in interest rates to have a material impact on our results of operations or financial position. We plan to mitigate default, market, and investment risks of our invested funds by investing in low-risk securities.

Foreign Currency Risk

Substantially all of our financial transactions are conducted in U.S. dollars. We do not have significant foreign operations and, accordingly, do not believe we have market risk associated with foreign currencies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange ~~Act)~~Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As of the end of the period covered by this Quarterly Report, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon our evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2021.~~2022.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We operate businesses that are subject to substantial litigation from time to time. We are periodically involved in litigation, arising in the ordinary course of business or otherwise, which from time to time may include claims relating to contractual disputes, product liability, tort or personal injury, employment, antitrust, intellectual property or other commercial or regulatory matters. If current or future government regulations are interpreted or enforced in a manner adverse to us or our business, including without limitation those with respect to antitrust or healthcare laws, we may be subject to enforcement actions, penalties, damages and material limitations on our business. ~~Furthermore, as a public company, we may become subject to stockholder inspection demands under Delaware law and derivative or other similar litigation.~~

From time to time, we have been named as a defendant in class action or other antitrust lawsuits brought by suppliers or purchasers of medical products. Typically, these lawsuits have alleged the existence of a conspiracy among manufacturers of competing products, distributors and/or operators of GPOs, including us, to deny the plaintiff access to a market for certain products, to raise the prices for products and/or limit the plaintiff’s choice of products to buy. We believe that we have at all times conducted our business affairs in an ethical and legally compliant manner and have successfully resolved all such actions. No assurance can be given that we will not be subjected to similar actions in the future or that any such existing or future matters will be resolved in a manner satisfactory to us or which will not harm our business, financial condition or results of operations.

On March 4, 2022, a shareholder derivative complaint captioned City of Warren General Employees’ Retirement System v. Michael Alkire, et al., Case No. 2022-0207-JTL, purportedly brought on behalf of Premier, was filed in the Delaware Court of Chancery against our current and former Chief Executive Officers and certain current and former directors. We are named as a nominal defendant in the complaint. The lawsuit alleges that the named officers and directors breached their fiduciary duties and committed corporate waste by approving agreements between Premier and certain of the former LPs that provided for accelerated payments as consideration for the early termination of the TRA with such LPs. The complaint asserts that the aggregate early termination payment amounts of $473.5 million exceeded the alleged value of the tax assets underlying the TRA by approximately $225.0 million.

The complaint seeks unspecified damages, costs and expenses, including attorney fees, and declaratory and other equitable relief. Since the lawsuit is purportedly brought on behalf of Premier, and we are only a nominal defendant, the alleged damages were allegedly suffered by us. We and the individual defendants deny the allegations in the complaint and intend to vigorously defend the litigation. In light of the fact that the lawsuit is in an early stage and the claims do not specify an amount of damages, we cannot predict the ultimate outcome of the suit.

Additional information relating to certain legal proceedings in which we are involved is included in Note 1412 - Commitments and Contingencies to the accompanying condensed consolidated financial statements, which information is incorporated herein by reference.

Item 1A. Risk Factors

During the quarter ended September 30, ~~2021,~~2022, there were no material changes to the risk factors disclosed in Item 1A. “Risk Factors” in the ~~2021~~2022 Annual ~~Report.~~

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~

~~Purchases of Equity Securities~~

On August 5, 2021, our Board of Directors authorized the repurchase of up to $250.0 million of our outstanding Class A common stock during fiscal year 2022 through open market purchases or privately negotiated transactions. All repurchases of our Class A common stock were recorded as treasury shares. The following table summarizes information relating to repurchases of our Class A common stock for the quarter ended September 30, 2021.

Period Total Number of Share Purchased
Average Price Paid per Share ($)(a)
Total Number of Shares Purchased as Part of Publicly Announced Program
Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions)(b)
July 1 through July 31, 2021 — $ — — $ 250
August 1 through August 31, 2021 — — — 250
September 1 through September 30, 2021 1,091,362 39.04 1,091,362 207
Total 1,091,362 1,091,362 $ 207

~~(a)Average price per share excludes fees and commissions.~~

~~(b)~~From the stock repurchase program's inception through September 30, 2021, we purchased approximately 1.1 million shares of Class A common stock at an average price of $39.04 per share for a total of $42.6 million.Report

4443

Item 6. Exhibits


Exhibit No.						Description
~~3.2~~2.1						~~Amended and Restated Bylaws of Premier, Inc., effective~~Asset Purchase Agreement, dated as of ~~October 21, 2021 (Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on October 21, 2021~~)
~~10.1~~						~~Form of Special Restricted Stock Unit Agreement under the Amended~~September 6, 2022, among Contigo Health, LLC, TRPN Direct Pay, Inc. and ~~Restated Premier, Inc. 2013 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 5, 2021)+~~
~~10.2~~						~~Consulting Agreement, effective September 1, 2021, between Stephen R. D’Arcy and Premier,~~Devon Health Inc. (Incorporated by reference to Exhibit ~~10.1~~2.1 to our Current Report on Form 8-K filed on September 7, ~~2021)~~2022)
~~10.3~~						~~Consulting Agreement, effective September 1, 2021, between David H. Langstaff and Premier, Inc.(Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on September 7, 2021)~~
~~10.4~~						~~Consulting Agreement, effective September 1, 2021, between William E. Mayer and Premier, Inc.(Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on September 7, 2021)~~
~~10.5~~						~~Form of Restricted Stock Unit Agreement for Consultants(Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on September 7, 2021)~~.+
31.1						Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2						Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1						Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.‡
32.2						Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.‡
101						Sections of the Premier, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2021,~~2022, formatted in iXBRL (Inline eXtensible Business Reporting Language), submitted in the following files:
101.SCH						Inline XBRL Taxonomy Extension Schema Document.*
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
104						The cover page from the Premier, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2021,~~2022, formatted in Inline XBRL (included in Exhibit 101).*

* Filed herewith.

+ Indicates a management contract or compensatory plan or arrangement

‡ Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.

PREMIER, INC.

Date:

November ~~2, 2021~~1, 2022

By:

/s/ Craig S. McKasson

Name:

Craig S. McKasson

Title:

Chief Administrative and Financial Officer and Senior Vice President

~~Signing on~~On behalf of the registrant and as principal financial ~~officer~~ and ~~principal~~ accounting officer

4645


		Page
PART I. FINANCIAL INFORMATION		67
Item 1.	Financial Statements	67
	Condensed Consolidated Balance Sheets (Unaudited)	67
	Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)	89
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	910
	Condensed Consolidated Statements of Cash Flows (Unaudited)	1011
	Notes to Condensed Consolidated Financial Statements (Unaudited)	1112
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2524
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4342
Item 4.	Controls and Procedures	4342
PART II. OTHER INFORMATION		4443
Item 1.	Legal Proceedings	4443
Item 1A.	Risk Factors	44
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	4443
Item 6.	Exhibits	4544
	Signatures	4645


	Class A Common Stock			Class B Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at June 30, 2021	122,533	$	1,225	—	$	—	—	$	—	$	2,059,194	$	169,474	$	2,229,893
Issuance of Class A common stock under equity incentive plan	1,239	13		—	—		—	—		22,851		—		22,864
Treasury stock	(1,091)	—		—	—		1,091	(42,628)		—		—		(42,628)
Stock-based compensation expense	—	—		—	—		—	—		7,554		—		7,554
Repurchase of vested restricted units for employee tax-withholding	—	—		—	—		—	—		(9,171)		—		(9,171)
Net income	—	—		—	—		—	—		—		121,306		121,306
Net loss attributable to non-controlling interest	—	—		—	—		—	—		(698)		698		—
Dividends ($0.20 per share)	—	—		—	—		—	—		—		(24,877)		(24,877)
Non-controlling interest related to acquisition	—	—		—	—		—	—		23,145		—		23,145
Balance at September 30, 2021	122,681	1,238		—	—		1,091	(42,628)		2,102,875		266,601		2,328,086


	Receivables From Limited Partners		Redeemable Limited Partners' Capital		Total Redeemable Limited Partners' Capital
June 30, 2020	$	(995)	$	1,721,304	$	1,720,309
Distributions applied to receivables from limited partners	141		—		141
Net income attributable to non-controlling interest in Premier LP	—		11,845		11,845
Distributions to limited partners	—		(1,936)		(1,936)
Exchange of Class B common units for Class A common stock by member owners	—		(2,437)		(2,437)
Adjustment of redeemable limited partners' capital to redemption amount	—		26,685		26,685
Reclassification to permanent equity	854		(1,755,461)		(1,754,607)
September 30, 2020	$	—	$	—	$	—


Period	Total Number of Share Purchased	Average Price Paid per Share ($)(a)		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions)(b)
July 1 through July 31, 2021	—	$	—	—	$	250
August 1 through August 31, 2021	—	—		—	250
September 1 through September 30, 2021	1,091,362	39.04		1,091,362	207
Total	1,091,362			1,091,362	$	207