PINC - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Premier Fiscal Year 2018 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. I would now like to introduce your host for today's conference, Mr. Jim Storey, Investor Relations. begin. may you Sir,

James R. Storey

and conference to call. Skyler, XXXX Inc's second quarter welcome you, Premier everyone fiscal Thank

and Financial Our the remainder and will update Mike Officer; and Chief today review year. Executive McKasson, speakers are provide outlook Officer; Alkire, Susan the quarter's discuss Chief an and our Susan, of Mike Officer. DeVore, performance, President Craig Craig Chief operations Operating the for

X-K, to Reconciliations presentation, expect this we accompanying remind obligation future included the SEC, in accompanying earnings today. of everyone and where and we to XXXX in encourage conference to that our could We forward-looking we the soon. contain we our XX-K to and as of Management's actual the Please Before measures want which and financial the which with get in release statements expect on to to Factor materially results our slides I in Safe measures note Factors filings XX-Q, remarks statements fiscal speak refer our no measures our section and business. non-GAAP and website Form available the are to slides today, Form update might supplemental that supplemental Relations our soon. of this are started, call those disclosures. also release earnings that Appendix results Report these today Investor them. at forward-looking differ will copies financial Risk to discussed are file Harbor affect non-GAAP review the you discussed certain Form XXXX our These of GAAP financial including undertake from invetors.premierinc.com. we to Quarterly earnings detailed of SEC release, appropriate, our furnish evaluate in fiscal

the turn Susan DeVore. me to call over let Now

Susan D. DeVore

operational positions time today talking healthcare want I'll Thanks, on overview achieve of safety conference are to areas who will some believe Jim, continuous aspects you we and evolving care. long-term infrastructure, in vision improvement cost, new appointment strategic the across met macro also pleased we leader I to the with and positioned about quarter in strategy, for by performance. more Azar systems CMS We're and health of the patient by for on needs these encouraged data complex the level, think going capitalize utilization exceeded we of organizations. of value-based reestablish in Secretary a vertical integrations payment models. trends, the horizontal with recent unique quarter. and implementation quality, the of financial as HHS toward We to the the technology, delivery partnering or about the industry. Alex objectives that At will the an also excited walk well the momentum our fiscal update on we're and of management's value-based and And provide Premier through which as everyone fiscal financial financial begin transformation. second to quarter, outlook second second welcome call. quarter to believe growth the a spend and and update year. will go-forward Premier I'm businesses our and continuing strategic continued remainder then deliver uniquely the an Mike our quarter our that of we the report to in our the fiscal very consistent Craig, followed and within implementation

grew legacy up according expectations. specific XX% XX%. revenue at quarter. growth of our the look administrative fees Performance increasing We X%, net Services to products year-over-year our Services revenue Supply during XX%, Chain some achievements, and fees administrative with net revenue up So in let's delivered revenue

our in growth healthcare business future we're of to address year, managing the diligently expect sequential back of the the to half revenue continue challenges We the systems. and

minimal and to the leverage, to We build and continue the sheet stockholders. while value our to returning acquire announced the returning marketplace, assets With giving strong ongoing current plan repurchase stock plan $XXX implement stockholders, continue the simultaneously October, flexibility we or in to value quarter. to in to us executed our maintain on million respect strategic a balance we in

We also stock to the reform, program, adjusted along non-GAAP with expect tax per fully share. positively distributed earnings repurchase impact

supply winning We expanding win clients, while touch developments financial in few GPO, and continue our are chain guidance measure from and in payments. to for will and introducing savings our Medicare this accordingly, more the business we outperforming shared existing industry Mike on to these for a accolades new other raising top marketplace to fiscal to And bundled financial full-year other guidance ACO metrics. minutes. earning reaffirming the from relationships, in ranges new capabilities in

regulatory looking scale. innovative our technologies, capitalize are to change mounting and Now, industry, and refine term, on uniquely capabilities opportunities. to Premier the longer how combinations. in by new and stands the I you the about lead continue our believe channel them growth marketplace as occurring Premier the anticipate differentiated at we our what change our aligned data future costs in expand assets, technologies, remains entrants I we ability to I driving across at deep and innovative thrive relationships characterized change and leveraging challenges, the forces and epicenter strong We and our at supplier we it, want are industry to today, Premier by talk believe business market of on to that leveraging our transformation rapid that's unique member

today's many forces of I've condensed purposes discussion, three trends. to down interrelated For

First the value-based care. is continuing movement to

different and improve long-term subject to will continue. and to is years delivery and ago. this payment transformation healthcare and will trend value-based journey to This care we regulatory of costs. patient migrating settings Premier embraced to means uncertainties, new reduce Although the believe our care be providers seek market recognized and periodic nation's as always quality

acquired ongoing build over to CECity we clinical alternate better and few to we business. Essensa, past as capabilities ambulatory continue Our end-to-end development, to and needs consumer and data site in and the and addressing have the internal emerge along positioned the solutions, our setting. and provider with as wherever continuum. we've with healthcare allocation integrated integrated others across enhance assets It's These we system Premier entire capture they reflects why GPO years that acquisitions delivery Innovatix well capital performance this. the It's serve why acquired and completed,

data assets payment deep play Our very role also a value-based transition to helping advisory health and wraparound systems services in models. important

of for occurring optimization point and learning predictive of Second growth digital the the fact rapid analytics, is records healthcare and health machine transparency. touch nearly growth of from is of to at the every transformation that connectivity consumer-focused demand electronic

critical result, are cost management analytic and deep prerequisites entire to capabilities system. the enabling improvement clinical a across As health

to this of by All powered access is detailed, assets. data incredible large,

built providers analytics pull unified platform; into we We form payer agnostic out member pushing and can a take our drive Looking the insights in it at several Premier, our intelligence, neutral. to its disconnected a data these dataset from we members and to across years healthcare data opportunities. vendor used business be disparate of ago, back that sources actionable improvement

digital manufacturers, consolidation industry chain across is and costs to these cost optimize sits and healthcare clinical entire to our and the for quality analytics ability improvement they're and in improvement. blockchain nexus directly datasets a years this infrastructure stakeholders technologies sustainable we We together capabilities trend performance our of assets, the four our the and has over technology see Across capabilities public force believe system. health going address and Precision further industry, our our key working reduction impacting stakeholders. our opportunities Premier capabilities. these to among providers, best integration ago, the And provide connect learning enable and growing Since payers, As assets, technology organizations. our to third built Medicine, assets, evolve, distributors, and infrastructure complex employers, workflow to emerging to our we enhance data supply and have machine advisory like transformation to to continues

accelerate Looking position and forward, opportunity to an end-to-end clinical our and see leadership performance I provider. Premier into expand supply transforming solutions chain by the

leveraging end-to-end Chain sourcing analytics mean? our So outcomes strategic owning capabilities, In and detailed cognitive Performance translates to capabilities. with connectivity electronic to and with collaboratives front-end distribution logistics Supply plan In and capabilities, total services our supply we and workflow. to combine Services, workflow back-end our that strategy and being advisory implementing partners our clinical procurement an enhance provider analytics, does to computing services, members, and what chain Services,

to build could which opportunities. in capabilities enterprise our to and and extend across clinical healthcare in and expect create sciences market on leverage provide We initiatives expansion enable which applied would It a comprehensive we Premier also initiatives, Precision Medicine turn transformation customer analytics this providers. to platform to

and partnering, this capital strategies. they evaluating to as as So improvement our allocations marketplace, healthcare leader a position as changing Premier's in performance to we relate our we are and acquisition, also look options enhance build

moving As our some our at capital fulfillment, sciences, logistics data Precision I forward of integration, in partnerships to in deepening predictive Medicine. applied electronic and enhancing terms in in last and JPMorgan planning ways analytics ambulatory stated deploy in procurement research for we're in month, and capabilities different

balance solutions more strategic continuing focused our strong And supported flow. higher Thanks much. their flexible cost-effective to by Our journey so remain succeed providers healthcare. our healthcare sheet, and is forward quality, enabling path our cash on to in

Now here's Mike Operating Alkire, Chief our Officer.

Michael J. Alkire

to highly – all that we to Susan, want our value differentiated healthcare growth to for joining consistent translates our continue we our as for you, you operational towards call. long-term providers stockholders. and delivering I performance of Thank thank believe review Today, goal our value

are model to spans to discussed, collaboratives. As Chain significant members our committed instance, advisory to Supply Services, national we rolling Susan able cost integrated performance decisions integrated down services, continue supply platform informatics chain to delivering through coordinate analytics, pharmacy, out for volume their and providers and and we standardization savings chosen who will buying every drive the evolve future a penetration maintain new pricing designed opportunities. be in Supply diversified this suppliers. We Chain best to highly believe facilities. growth, across in introducing are improvement that buying program, just enable and most our for we Services In committed category, retention products, additional enhance business while cloud-based committed program additional provide and achieve contract members, recruiting driving contracting will for that By delivered concentrated this our rates cost incremental the value leveraging maintain market revenue program, healthcare contracted are

launch in We expect program this April. to

health management system, expanded advisory academic with gain engagements regional We GPO total the system partner our our initiative additional launching since we with strategy are quarter. by Premier's We traction to relationship academic is supported initiated cost systems health spoke last two a long-term continuing have academic last services. a and health with also just that

in have Services Hospital, most their we high valued for drive with to using offerings. announced in of and the We the $X hospital research at KLAS University Premier academic more customized including Medicare pleased year, Premier in than population several recognized reports. successes, at measurement we have named addition, and by have interest health its partnering XXXX. XXXX our ACO during billion many Consolidation working since by we best academic its years, express Chain enterprise-wide are with peers Services by for that care Medicare as top systems, organization an Growth the joined by and In savings their members, to as organizations we the recent ACOs we second teaching just continuing bundle Software other programs estimate research academics active report. XX% Best the was collaborative XX a Louisville of past by with collaborative Premier's perform care now and surveys In straight recently Strategy, of Medicare performance If relationship the of are improvement been delivery or to consistently same doubled in periods. and Supply Premier recent that accountable that the is Separately, a all KLAS achieving joining. pipeline achieved KLAS, outperformed the our performer savings Among supported level health shared announced in And Consulting that firm's could expanded year. recent

growth appropriately includes align to forward, move to with we efficiencies, our synergies our objectives. growth resources integration maximize strategy As ongoing and

Craig adjustments reduction modest force month. a largely effort be As implemented the completed impact part we that will shortly. we this of to some process, the including financial personal discuss the this by have end will of in expect of

value-based encouraged Secretary, for new that Before want has we strong who reiterate the support to are by closing, voiced HHS payment programs. I

for Azar the Mr. more generic, advance expect FDA with and drugs, other as to as competitive the work lower other pharmaceuticals to to our entry We to closely well barriers create policies a market. biosimilar

and care bundled X% launch will clinicians recent payment for and outpatient of cost also X which XX-day episode. Medicare includes quality We of payment eligible a applaud programs, qualify for be next XX patients at to its generation will the voluntary over And an inpatient program, decision procedures. CMS to this also entire be risk the Under bonus.

with We for this hospitals are found many of to on providers Joint members, program. that than and in worked payments, has current of Premier organizations CMS's prospective expect bundled all Replacement them XX% Premier those apply better discussions Care savings. working hundreds shared with other we performed Comprehensive participating and and with achieving Model under in to

me future financial stability conclude for invest by saying and to that Let are the continuing strength. a of we position in

enable future. look providers the deliver to Thank solutions Premier healthcare to and for time and care success cost, in and you your Our value-based safety today. the that develop quality, their today

Craig to Chief Now, let Officer. McKasson, call our me over Financial turn the

Craig S. McKasson

Thanks, Mike.

of in consolidated same existing from a a quarter's revenue net the growth million administrative revenue Chain which of From XX% $XXX.X members. Innovatix second to net the more million Legacy was year contract million increased businesses revenue a increased ago. let's fee XX% detail. penetration contributions a $XX.X our settlement net a X%, in from quarter fees Supply driven through Now, Net revenue year recovery and Services revenue $XXX.X $XXX.X performance from million. or the included XX% by standpoint, ago, Essensa supplier. the and GAAP administrative increased year-over-year walk from to period

including timing recoveries, our which discussed, subject our is cash variability receipts, on a recognized a the revenue on administrative basis periodic historically cash and of routine revenue of are part is fees based As GPO. to effectively

second over lower the our legacy with from we discussed. quarter, consistent this rate months the business in have GPO patient quarter summer first the growth Excluding primarily recovery of in previously was that the results utilization and

pharmacy year Supply million within direct a achieving Services sourcing quarter business ago and Chain with XX% second to both double-digit grew growth. $XXX.X from products integrated Our businesses revenue the

Turning to Performance Services.

services over X% related As expected, period experienced in while management quarter, a also technology solutions, second and cost quarter the of first primarily informatics saw reflecting business growth ambulatory We year company's same growth sequentially quality our the solutions. ago. revenue we in increased growth and from to

remeasurement GAAP Tax EBITDA reflect adjusted to X% and year compared associated redemption fees offset primarily with loss million a one-time required of acquisition of income now common the $X.XX almost non-cash per for After to Due represents of profitability. GAAP increased limited Chain taxes share. partially adjustment December entirely Jobs XX% Consolidated and non-GAAP segment Growth quarter $XX.X Turning with from million reflects million a $XXX.X Supply in net a we the administrative non-GAAP the benefits in ago. of the increase increase adjusted From net totaled Innovatix by the the Services' the a partners' deferred Cuts resulting Act, of was growth revenue. million Essensa. salaries and from decrease XXXX EBITDA of perspective, ownership, ago. year in GAAP $XXX.X B to unit a a value Class reported $XXX.X

advisory services cost a impacted EBITDA an second in cost increase related quarter. segment revenue and performance-based the year cash adjustment support in purchase Corporate due equity X% well prior EBITDA increase prior included as Performance Innovatix not and million a In historically non-GAAP of acquisition. adjusted basis as accounted in included accounting decrease as increase non-cash X% expense date non-GAAP of was growth. to million revenue adjusted recognized the was primarily year adjusted in collections by through GAAP for net the to it a in an in on EBITDA up an as adjustment affiliate for Services, reflects unconsolidated non-GAAP as $X.X a of staffing income to recognition, sales, Additionally, $X.X the

net fully $XX totaled X% increase ago distributed a quarter share year adjusted non-GAAP in income fully a from the Second adjusted non-GAAP same of period increased million distributed $X.XX, year X% from of and an ago. per earnings

decreased $XX million compared capital net is of From largely last liquidity, million $XXX.X about income in sheet a working operations growth totaled at an XXXX, with million from perspective, at quarter revenue, net of million cash outflows million due administrative ongoing the free million XXXX, for increase related increase million cash primarily for Class fees end equivalents under we $XXX.X in well on driven adjusted to of as at period June non-GAAP flow repurchase X% five-year, Non-GAAP Looking balance purchased flow adjusted $XXX.X cash X.X the non-GAAP driving non-GAAP needs. XX, program. to the our was as six-month ago. outstanding an for is to and end. impact credit the approximately $XX.X We $XX.XX as compares approximately by at represents facility percentage free the our period balance $XXX by stock year. The EBITDA. tax million $XXX.X at our December of with positively stock fiscal year which and XX% million quarter, $XXX the we expect reform $XXX to growth primarily in The cash increase cash same approximately period fiscal of per with share XX, a cash or million, price flow six-month totaled an the for $XX.X million of XXXX EBITDA and related Through factors flow average operations. from a $XXX common revolving compared XXXX had shares million A currently

year, the distributed completion adjusted by full of per of we the an Assuming estimate share. non-GAAP to in program $X.XX fully fiscal increase end of the $X.XX earnings

$X.XX impact to guidance. of more per guidance the range $X.XX program, turn adjusted expected earnings to to fiscal non-GAAP repurchase for Today, on the $X.XX our approximately stock in financial tax our and based from fully per reform XXXX $X.XX $X.XX the distributed share let's detail share. to increasing Now we are

and adjusted result assumes C per a the because company guide used our reform, corporation. earnings I corporate distributed a fully adjusted year as process. second company's fully by non-GAAP shares distributed of Class X, of B the a income calculated to the in non-GAAP decrease basis. common will our we fiscal corporate the entire upon and included for in share our the current adjusted in XX% the half would structure segment are Chain Supply year, guidance a of half performance public revenue, measure of tax Based all fiscal XXXX, earnings tax to consolidated Further, count we first net first as to A of the for member-owner the on previous in Class taxes beyond. January beginning from of and XX% quarterly for our a result will rate that revenue, point As are and per year of share taxable of exchange though calculation and and the the remainder share assumptions ranges share and our non-GAAP is effective impact rate of XXXX of the rate full-year a non-GAAP half that, blended like EBITDA. determination. This held are This reminder, in out rate Performance Services on the outlook a fiscal revenue, XX% Services segment reaffirming

revenue, Chain expectation the perform Looking our components of revenue Services of will full-year is the guidance. that consolidated above at midpoint segment Supply net current

the full full-year to factors. are revenue based half revenue our year, growth fees to We fees in on net at performance fiscal for X% XX% the are for the currently reaffirming previously. raising of expect assumption first XX% growth outlook at overall from for assumptions XX% Additionally, second for and to fiscal administrative digit year fiscal products' for growth XX% business. on we the to administrative expectations the to the stabilize current mid-single revenue administrative half our base of three and the previous We stabilization following legacy year half for growth XX% the revenue fees our and net second

recent improving patient November, we commentary the commentary has rates from in This summer anecdotal our October months. slowdown. members in and after several were First, began hearing utilization intensified members from that

third, periods Second, our outpatient volumes second affecting with an our and we utilization. utilization flu in first nation shows continues and ongoing positively year, this affecting of which deal and review the trends healthcare between severe moderating to admissions discharge unusually the inpatient believe data season And quarters. is both

recognized record the to patient receipt As we our from a of a reminder, in a lag revenues inherent on approximately our basis, cash cash utilization revenue are generally suppliers. lag contracted and administrative to since reporting one-quarter trends fees on due

current services do fourth Services of of ambulatory, and We regulatory performance-based quarters, Performance year the segment, our to to be primarily in the engagements. regulatory heavily advisory guidance midpoint below expect full-year to we to of the the Turning weighted related revenue expect more revenue be third to timing continue and impact given reporting uncertainty.

full-year months Looking soft the during adjusted guidance patient currently we of impact EBITDA, end utilization given current the at expect non-GAAP uncertainty. and performance regulatory the lower the the towards range of year summer

We adjustments on reduction approximating $XX expect personnel that highlighted, force $XX million to basis. modest savings an produce annual to in Mike run-rate the the million including pre-tax cost

our which growth impacted expect these of March $X.X Approximately areas. the synergies personnel will current efforts and the of in ending quarter resources total We further pre-tax million, the and expensed Services realign to X% to the to are affected in future employees for positions majority Performance approximately XX or related positions XX. a and of incur be reduction by to segment charge relate in-force are adjustments integration

provide to on update like would process. brief our ongoing quarterly I Finally, exchange a

our January A health on systems. the Following by stock. of Class our company units approximately currently common one-for-one Class XX% and basis exchange X shares our XX, B recent exchanged member public most XX% a X, On is million for on by owned February approximately were

turn exchange quarterly back next XX. that, to call occurs on let Susan. over With Our April me the

Susan D. DeVore

Thanks, Mike and Craig.

continues chain, our stockholders. we strong and that future assets, opportunities the a all with remain strategy reiterate which, this the I powerful of our making that for about we're deliver and pleased for good questions? be I'm capabilities, channel and you and and company have And Operator, our leveraged environment, in Thank member the market you to good like far our to evolution. compelling combination data excited our sheet progress of when aligned I market technology very just for longer-term balance believe Premier's evolve. I'd questions, and supply the I'm to call the opening combined time unique Before as can confident call with grow to about open your today. value into please advisory could future; improvement clinical for and

Operator

Our with first question Wells from Jamie Fargo. comes Stockton

now is line Your open.

Jamie Stockton

good are Hey, the Thanks program. mentioned guess within rules maybe that one, questions. your going Mike, of guys off for fall that thumb give would evening. my taking one type you be system base? maybe kicking you bucket some to I Could maybe buying first that for you this of the us not into new versus health committed that would

Michael J. Alkire

Sure.

So, to centrally The Jamie, are which savings commitments, systems drive this chain types these standardize for let manage supply through that of participate, commitment me in can healthcare members of highest obviously to able organizations reiterate, that program our the and truly most intended can. of those will level our high drive purchases. their organizations aggregated is levels just that of sophisticated

capabilities also level. going expect have to hit to the on share and their their data us them to are right commitment We with the to ability actually performance

current ASCEND think care able our systems health going in them we are already percent given to participate high our participate actually a many that to program anyways. So of of be

Jamie Stockton

a through of the mean, your lower contracts for just and the supply goal it's buy health obviously I it. more to spending of mean, as them result I get is this, help systems

a whatever but see not you have want mean, achieve this into to or program, call should getting already contract people I and compliance them up it's we of levels? compliance them this? just high higher to moving taking that maybe it result Premier, For as go

Michael J. Alkire

Yeah.

levels everyone in expect we those higher contracts. on of to penetration drive So program this

So than they're much do. to going to recruit allow more a market, create Jamie, think differentiation our in more going to we able leveraging the significant contracts that be we're which is us obviously to going competitors. against to also effectively our be for they currently

Jamie Stockton

from the of just that you you Could the legacy timing one the on expect. a benefit that some just that give you us when of great. for maybe didn't quarter business maybe Craig, guys out this Okay, And revenue supplier with otherwise you historically? revenues then saw that's more. GPO recouping missed theoretically sense kind a

Craig S. McKasson

Sure, Jamie.

recoveries in in of recoveries our fees in or system be can X% to I have are years cross recoveries. of actually oftentimes part tend GPO of year timing fiscal coming revenue will underreported our to of any revenue something stated from prepared we issue any it given year the in my X.X% Those We identification whether terms So a as multiple routine generally that remarks. approximately get. and administrative was sales the

for And so, it's our just expect line of would we a what a recoveries. revenue in forecast still But function when those full-year timing arrive. within fiscal typically with year be

Jamie Stockton

Okay. Thank you.

Susan D. DeVore

Thanks, Jamie.

Operator

The from next question comes Lisa Gill JPMorgan. with

is line Your now open.

Lisa C. Gill

Thanks very much.

Susan D. DeVore

Hi, Lisa.

Lisa C. Gill

see Services you almost solutions just and with QX. in or we're anticipation a that had you Performance to quality ambulatory QX? come those coming you're talking going Can around in at halfway this QX, it to point Hi, Susan. have to your as – still about comment Susan, start I seen sales the start that want it through is just you in

Susan D. DeVore

of still seeing end for in the years of already we're And play if increase the reporting QX. out will, the to think have QX. happen you So sign-ups, that at seen some we in prior going that we will that's do the

Lisa C. Gill

great. Okay,

Craig S. McKasson

Lisa, this Craig. is

Just...

Lisa C. Gill

ahead. Go sorry. I'm

Craig S. McKasson

which that that quarter. end CMS, at remind reports way recognition is quality are we just once the is submitted of ambulatory reporting I'll to the revenue the ...quickly the the actually the recognize revenue works on

of we've those quarter. the registrations what the end the happen submissions, is but tracking recognition the at actual been and will point that So the occur the at

Lisa C. Gill

reductions, severance you million much rate about and that's you $XX how next as workforce think as run in about then, that think helpful. a benefit into will fiscal Okay, do the costs, we And to about $XX see million, year; but going secondly, we actually Craig, that the the of talked XXXX?

Craig S. McKasson

Yeah. question. great It's a

And So then XXXX. so in would an what the you offsets in think about that the the $XX effectively we impact current I run rate, million million $XX are would tell you to severance fiscal that fiscal is annualized is get year. the for savings of given if we our current year where

Lisa C. Gill

Okay, queue. great. I'll jump Thank back in the you.

Susan D. DeVore

Lisa. Thanks,

Operator

question Canaccord Genuity. Richard comes next Our Close from with

now line is Your open.

Richard Collamer Close

the of a for some Chain sharing you it off as question. your Susan, did those With Supply the goes the Thanks for across Great. term dive longer little bit deeper interest. Performance you into thanks in vision, Services? respect vision areas there. and rattle Can to

Susan D. DeVore

Yeah.

in acquired So have we view tuck-in improvement built little well, lot clinical that as a tremendous a out of acquisitions. a I our but at capabilities about analytics and Supply it bit of lot capabilities. JPMorgan Services. core GPO talked and We've Performance Chain is We've and

the Supply the connecting have more state of front-end what additional the deeply Chain fulfillment. logistics connecting future we're Richard, we it on distribution think back-end then now and and to on to side, some and interested I in technologies

electronic procurement down through spend you, supply healthcare we and our what, supply say, you you've with we got front-end own help and sourcing, we that know numbers middle partners, can of X, of we systems and chain can back-end with So go chain can you total to asking cost significantly. take and your with can total the they're distribution for with process this, those

to So side, vision that's on workflow. our needs to and ERP and Supply Chain it be the connected

a On the view, it's we a of similar have side, which of analytics. is point Services Performance lot

get workflow. computing end-to-end We collaboration, analytics have those connectivity and future additional capabilities advisory a state with lot technologies, machine to and an bring of like learning, to of cognitive we'd

more asking we data are Medicine And of the additional are there think – our also given Precision support. for members channels. for sets, Our customer size

lines to start lay to wanted that will we capital those deployment be some to two the relates as along our of out it segments. So

Richard Collamer Close

that these through terms terms of any internal of does come mostly to M&A? terms And driving revenue then capital or And just growth? deployment, initiatives follow-up of a accelerated the in timeline that in development in

Susan D. DeVore

Yeah.

continuous includes other as it's as technology So for on it and a process and us potentially and well acquisitions both development organic our partnering. development own

play as will continue is the side, itself forward, constantly Chain on we'll Services and refining side we so to Supply we do Performance strategy some are evolving And both and Richard, so our out. – and take a to the big, This strategy it going that. always, time bold

Richard Collamer Close

Okay. you. Thank

Susan D. DeVore

you. Thank

Operator

next from Our comes Percher Eric Nephron question with Research.

now is open. line Your

Susan D. DeVore

Hi, Eric.

Eric Percher

follow I'd up you ended. Thank like Susan, where to you. just

I XX the partnership weight last it. that notable, part Is type the more the capital see in you give us over sure Can for? make this a preparing want commentary well to a you may days that giving bit allocation? as internal you're what I'm as different seems expect to your on So and of little we right

Susan D. DeVore

on table. the are options all Eric,

us this capabilities add what to out it for figuring to to So and have we extend. need taking really we means the

clinical in the metric cost with with integration improvements health which and pretty health and got real big So, an to got fragmented the particularly metrics those challenges these health and own and system I've to mean, chain cost the tools. to bring are goal need solving I've multiple systems way supply I multiple partners. today. this their systems of is our are own environment I saying the integrated of activities, scale pressure.

we think space. in for we partnerships driving the healthcare inside in to It as be position set So us same end-to-end be end I about I will end. really be will solutions. They're And this this get to organic to will the our as we be the It acquisitions. are able disruptive competitors think development. really potential of said, to not think to be be will system this it

Eric Percher

be one for that taking across which a see within there that, your extend played is on payer me more the well, we're industry. well the you to payers as to to the from commentary an and seeing and community or view lot let So about that community? add consolidation you're Does do as a role payer integration impact then

Susan D. DeVore

manufacturers. see activities greater a great a will that in pretty on who sets data we solutions, we distributors see at we partnering And need think, again, the complex have for think market we're because integrated more the unfragmented have first, but lot of standardized, more And provider when we that. and suppliers unique bigger, it's and you set in even capitalize help Yeah, pharma this and consolidation providers and also and organizations among to look potentially payers payers the the position more interest improvement and and or a in question. would between of

would So too. additional customer potentially base, be yes, it

Eric Percher

Thank you.

Susan D. DeVore

you. Thank

Operator

Davis from comes Stephanie question next with Citi. Our

open. now is line Your

Susan D. DeVore

Hi, Stephanie.

Stephanie J. Davis

restructuring Is numbers? element second taking just the of my is Could given or the question. in driven, Thank the half puts EBITDA year-to-date? you Hey, takes and primarily guys. you that walk us just of for there an (XX:XX:XX) fees through conservatism solid

Craig S. McKasson

Not restructuring driven.

will So restructuring in out impact as net I indicated, itself effectively the fiscal XXXX.

So first half as growth fee first on year, lower model administrative year second the for EBITDA of get the fee of half. second drive help and EBITDA in of overall on and ranges the we to we the vis-à-vis little profitability year comes part of half. the in that'll at of And to contributions look a business consolidated in there's some a that of mentioned the I the our bit given half the adjusted that of of the as second expect the the the we and the that back half from year basis, to of improvement administrative half in that some stabilize the saw

Performance way we've this consistently the the will we business. Secondarily, in The regulatory margin is of about that improvement half year have business ambulatory higher is back talked operate as a about year. our sequential reporting Services the talked we'll that

And the quarter in recognize profitability point. in improvement revenue, in when help So that quarter, see we will at an that we're Performance to engagements the contribute to we some do drive fourth we then performance-based Services. able pull have which through of that anticipate some third

Stephanie J. Davis

one really traction in driving the given quick that? any sense. business, quarters increased informatics the makes just prior us on And that right, color performance could just with you few All side, the what's give follow-up

Michael J. Alkire

Alkire. Mike is this So,

the right that pretty line is in use couple a prevalent just analytics. now. So service of market are cases One

clinical of data their our data of with lines chain So of help profitability our systems clinical business. it's healthcare pulling to the and understand data associated our really really and our supply all outcomes labor together and the each

the driver. probably number that's one So

is area on across second focus really systems interest continuum. care, is care the in healthcare this entire standardizing high-value which our an The having whole

area in those the in launched and across that bear from last of bring the seeing managing to really standpoint data we're a quality them quality uptake in couple that's they're care really continuum. have ago, across assets continuum. driving to to acute; and so I improve enterprise we of we standardizing using is help that margins, terms for years that with probably that standardizing a looking Now systems to lot analytics, final the was the The offering program care our an which our it then of healthcare non-acute, talked we us also have about,

Stephanie J. Davis

the remember right, you I All liked analytics still questions. for take the my piece. demo. I thank always

Michael J. Alkire

Thank you.

Susan D. DeVore

Thank you.

Operator

And from question our comes Dodge Jefferies. next with Sean

Your is line now open.

Susan D. DeVore

Hi, Sean.

Sean Dodge

the Hi. questions. Thanks taking

And sense in us on revenue from maybe So performance-based coming much quarter staying engagements? in got the for of advanced know a guidance; Services you much is little pretty visibility you are maybe have how us riskier? help a bit understand those you they're I in into a Performance built you're expecting how the can moment, advisor or now those that see something or clearly Craig, give can fourth revenue? you've that

Craig S. McKasson

that's on lot anticipate would the expect of your and through into future are I back of this flight, period again, not the at given know type XX% And place and the then mean, you're there performance-based business, consulting on But in the would and is technology we that expect so of you ambulatory reparation. moving visibility effectively portion engagements, discussed. as going is disclose the savings. achieve systems stream of we an determinable the quarter to of see technology we're would business rest have visibility the expect out business be those services exact I underway, that point, and fixed are healthcare standpoint, if there From reporting year, work it the known at half a when we've the some to what while side. we plans an of the informatics as revenue from SaaS many third to the in a advisory advisory the high services nature magnitude as can't side always in with you to of working with look

come will on midpoint of segment the about sequential that see of I've business. the normalized acceleration in. And perform segment there's the in But, potential performance is as for are some of engagements the slippage where out think kind established guidance anticipate I particular that fourth the the expectation you'll quarter always originally As indicated, range talked how past, depending we we third, of below and overall or the going. then that will

Sean Dodge

initiatives the evenly of areas those on organization head to any are then Premier? particular the pretty there you. are quick, or Fair focused maybe, efficiency reductions Thank Okay. really enough. And going Susan, back spread are in those across count, the

Susan D. DeVore

last very the difficult management with This mostly has to of is as years. reduction hard. layers integration we've done the is workforce always do acquisitions X% It know, result of You of over a workforce. of and few the

it's the and it resources of to think in some in repositioning coming to So synergies Performance and primarily future. we the the acquisition growth areas, is Services relates where

Sean Dodge

Thanks right. the for All details.

Susan D. DeVore

you. Thank

Operator

with from Muken comes Ross question next Evercore. Our

Your open. now line is

Elizabeth Anderson

and marketplace to an announcement in this is week changes this Anderson how you're terms with opportunity Amazon's wondering or viewing I fit for last long-term Hi, Ross. as in earlier potentially the was forces of the not? that presentation, in Elizabeth you've in suggested

Susan D. DeVore

assume Berkshire you're talking JPMorgan, I So announcement. about Amazon, the

Elizabeth Anderson

Yeah. Yeah.

Susan D. DeVore

Yeah.

to many is are In but activity employers business. employers they it's contracting healthcare encourage aggregate Premier know, who work and members We aggregator, with nationally. You and an employers, the interesting. services and both we other of support with direct are regionally their ways, also

to think, net data care So I have it. we've And we segment, and encourage for would about delivery, positive, been actually cost we interest building, scaling much down. it's a care the with who on be we and we information say, an and testing provider think so all models going other and the new data think because technology think to to the and an delivery of system in try of And we information, kinds it's drive employers direct provider opportunity. have really may we there aggregation

Elizabeth Anderson

last Perfect, the update on that's that in talking you can you terms us quick are And of where helpful. about GPO really fall? give you were renewals through a just

Susan D. DeVore

Yeah.

about we talked member-owner or – contracts. those extended or of renewed So having auto renewed XX% renewed

of the our We about XXXX. contract a XX this work have because of a through members. They lot coming sort date of handful it urgency is to with that don't September we're have continuing

majority So that we to just we expect get vast them, all all have our renewed the with to time continue owners and member to still date. we of by of work of the

Elizabeth Anderson

you. Thank perfect. Okay,

Susan D. DeVore

you. Thank

Operator

question Naidu comes with Oppenheimer. from Mohan Our next

is Your now open. line

Mohan Naidu

this? health for along disruption lines, about are as Ascension do in trying all for the are think real you and Thanks drug and generic players to opportunities to Susan, how the What create systems this? here or taking JPMorgan such and my you what new do Intermountain from general Amazon the to trying questions. just company same this of reacting

Susan D. DeVore

ago. a direct blurring say What think is, I in Mohan, on sourcing many generally. just our program. would healthcare a There's going drug already of were anticipating years private acquired we own company. this system We lot I lines Yeah. of the We're labeling generic

find deal other the transparency. have ways and capability to with We shortages to pricing

example. already And own members are the lot within so of those buy company, Premier see and their generic leveraging need a don't build our or for capabilities drug to

continue market. I those the for is get if owning do And I I the talked analytics the drive to about think and will why The to the lot cost who facing. savings tremendous the parts of outcome have it's those. folks been aggregation, total a be to and decision doing need, to those of we've change, parts with of supply things making, really overall things chain and test out, they're of there think you any chain changing I one outcome, standardized So everybody's you the owning think the pieces where going allow which supply because different process reality of the will part the don't pressure in

Michael J. Alkire

like is I'd Mohan, this Hey, Mike just... to Alkire.

Mohan Naidu

Mike. Hey,

Michael J. Alkire

add to I'd just things. How of like you? couple are a

an actually opportunity. this we think So as of

want Amazon this path to – in got think together sort collaboratives you delivery. provider got of opportunity, the to help down we've got employers help to direct of actually if to pull the transparency, JPMorgan data, we've of during actually and – we've go the healthcare if fact this So they them the

So, we contract, given that we what's are systems drive sourcing the opportunity best can technology supply, with that manufacturing value organizations we we going those them. to out because and platform we're label our – direct aggregate asset think to do all of we've some then Obviously, on manufacture on think together the of generics. or think there the healthcare there's we reaching and investments the made coming depending actually private where the an to the have to to

Mohan Naidu

for improving That's great. you're the there lot now differentiate quick utilization help increase enough data utilization Maybe the utilization. Thanks you're a end or you one a general Craig, deductible one the color. is seeing overall? said versus in around right Is us that just utilization. seeing calendar whether towards this of just the can stuff that concentrated year from the plans coming

Craig S. McKasson

Yeah. I see that. to Mohan, to it's really still would preliminary tell be you, able

think And think I an we're seen think and directed we've don't people I the more year. pressured would in and talked well some in utilization. our you're I past move term, clearly going fiscal rest to the to there longer see for right where consumer uncertain seasonality moderation bodes think that overall, is as that improvement of plans. we believe environment have we now, in But that high

Susan D. DeVore

Yeah.

efficient the most chain supply in settings systems in the able to. And other support care. the capabilities, patients of settings said sense, setting to other quality sure going to moves, highest as around healthcare is in have that patients move really so outcomes, hospital we're utilization so Our the that Mohan, healthcare whatever it sites system will sicker, all and we with capabilities behind those at is be moves is in the be might it prepared making to as remarks, it we analytic

Mohan Naidu

a the That's color. for great. lot Thanks

Susan D. DeVore

Yeah. Thank you.

Operator

comes question Hooker Our Donald with KeyBanc. next from

now is line Your open.

Donald H. Hooker

there. do we guys far mean, seems to I had sort go? your getting following you on But in diminishing think how progress evening. this I'm supply do GPO, with great or contracts, great there, return buying you about low-cost compliant them have is It broadly, of of run? more to much much, there have your made Kind make guys interested Good national Great. program. I earlier how more up I Is gains an there with room a like contracts how members how we know with question, you guess think more

Craig S. McKasson

Susan Yeah. about as don't Craig. talked is penetration, we look up Mike any add it actually we've and I'll of service metric, or overall line. although penetration then routinely But at we Thanks, talk color. could Don, kind we by an discuss this tee about,

move of more think And kind categories, of are of or clinician that certain those or food a physician lot service when you into so as our But pharmacy there category stronger or XXs down lines stereotypical are more example penetrated there's in penetration. the into medical highly about type very preference program. to surgical runway, a into you preference potentially down categories are type still XX% categories for

savings committed still drive additional room attack you in that a is there's an there actually savings to as part lot Mike suppliers, this the term. of there. to buying incremental is we're can Premier for get drive So and described. the of categories for where to a program actually launching opportunity And penetration the really standardization that get to – And longer and arena, for for revenues commitment, or to savings big business supplier, member standardization

Susan D. DeVore

you intentional analytics end-to-end solve lowest can about the so pretty capabilities required sourcing through – or strategy, direct whichever have flexibility company with you direct this GPO it been capital costs. analytics, that get go an with to buying to chain tool chain assets analytics tool sourcing with to so we've supply to And the of with total and supply problem contracts, through that the e-procurement the Yeah.

Donald H. Hooker

then Got you. follow-up maybe the on quick a topic. same And

and versus going your do a what of Now we're going Essensa how growth businesses forward to is – sort inpatient are guess, rate think we Innovatix historical of going those to that, here, – kind services? I calendarize GPO about from

Craig S. McKasson

Craig. is This Yeah.

is and we've bit digit I non-acute growth the being regular little talked the about footprint. growth acute rate the a I'll historically in GPO in single kind in the lower say of of, think care that comprised has digit mid-single space been what higher historically footprint growth care

would overall I expect but fashion, continue in to longer that think mid-single form growth. digit term you'll kind of see I that

Donald H. Hooker

you. Thank

Susan D. DeVore

you. Thank

Operator

Wieland Jaffray. Piper from comes Sean question Our next with

open. now is line Your

Susan D. DeVore

Hi, Sean.

Sean W. Wieland

questions. Susan, taking Thanks, Hi. for the

payments member-owners So this agreement your agreement? affect to receivable tax future how the the of under does remeasurement that

Craig S. McKasson

Yeah.

So XX% the of pass is tax we rates, to the actually we take tax way deduction agreements our and members. through return receivable file enacted tax for benefit then such the at work savings tax a that time that that the tax at

short your the is is to the tax So the receivable liability answer for reduced. future health systems the tax of question that our the to amount agreement in because payment reduced is

cash incremental term. flow go that so And will down longer

Sean W. Wieland

of So how member-owners does to economic of overall business that then obligations Premier? the doing thinking and affect your revenue model the relative share with the

Susan D. DeVore

Yeah.

page we've as target. is them this shared our the chain Sean, talked the the tax of view the don't, includes chain total distributions, always on I have supply number them admin way equity, members but savings mean, is about, of which some fees, relationship, So biggest some supply

they're member talking us or about every the don't if it ROI I we showed know I with have Investor So that at think the quarter, you seen they're were last Day for where chart, getting.

number if and that's usually resources SaaS they a to distribution, is $XX overall that using have between fee is and lot fairly of tax X, savings how and So and paying ROI, tax million they're share what for X getting and and that of ROI they're XX target they to just technology and a fees, that fiscal bigger them. distribution numbers large thing think it about small with there's year the owners. There's of is are a XXXX, us. a parts This number relationship

Sean W. Wieland

Okay.

that the that how more XXX for? agreement, how in the (XX:XX:XX), tax years is So – many is receivable are left many years

Craig S. McKasson

Yeah.

that is way the Craig, Sean, agreement the way this work, life. it's amortization the So tax is receivable – IRS's XX-year over the

over in point so IPO for the at have for exchanged years XX at (XX:XX:XX) remeasurement. subsequent four of the to out accumulation and the the terms time those is So least that XXX actually actually equity then, at of it member-owners that first years this runs more

$XX So was to as tax million. attributable that member-owners million in all range agreement provided amount last example, the an the the the we to of year $XX receivable of to

Sean W. Wieland

what? new And at so rate, – that this would Okay. tax become then

Craig S. McKasson

down would It by about XX%. go

Sean W. Wieland

you much. very Thank Great.

Susan D. DeVore

you. Thank

Operator

And question from comes Coldwell Baird. our with next Eric

is line Your open. now

Eric W. Coldwell

Hey, have and can my I been don't of asked one follow and up that I questions think answered. all

Have So just quarter the up let work. update. say, congrats and a a great good night. me on Keep nice

Susan D. DeVore

you, Thank Eric.

Michael J. Alkire

Thank you.

Operator

Susan remarks. And further time, closing to the I'd showing no like for DeVore this over I'm to at back Ms. questions, turn call

Susan D. DeVore

conference talking early Thanks time today. again May. third quarter much to everybody so you in or us Okay. our We look with on with for spending forward call before

So, Operator, you close now call. can the

Operator

does thank gentlemen, in your today's for the This and participation conclude conference. Ladies program. you

now may disconnect. have You day. great Everyone, a

James R. Storey	Premier, Inc. (North Carolina)
Susan D. DeVore	Premier, Inc. (North Carolina)
Michael J. Alkire	Premier, Inc. (North Carolina)
Craig S. McKasson	Premier, Inc. (North Carolina)
Jamie Stockton	Wells Fargo Securities LLC
Lisa C. Gill	JPMorgan Securities LLC
Richard Collamer Close	Canaccord Genuity Group, Inc.
Eric Percher	Nephron Research LLC
Stephanie J. Davis	Citigroup Global Markets, Inc.
Sean Dodge	Jefferies LLC
Elizabeth Anderson	Evercore Group LLC
Mohan Naidu	Oppenheimer & Co., Inc.
Donald H. Hooker	KeyBanc Capital Markets, Inc.
Sean W. Wieland	Piper Jaffray & Co.
Eric W. Coldwell	Robert W. Baird & Co., Inc.

Premier (PINC) 6 Feb 182018 Q2 Earnings call transcript