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PINC Premier

Filed: 4 Feb 21, 4:55pm

Exhibit 99.1

 

LOGO

Premier, Inc. Reports Fiscal-Year 2021 Second-Quarter Results

Company Initiates Fiscal 2021 Guidance

CHARLOTTE, N.C., Feb. 2, 2021 - Premier, Inc. (NASDAQ: PINC) today reported financial results for the fiscal year (FY) 2021 second quarter ended December 31, 2020 and announced its fiscal 2021 financial guidance.

All results presented in this press release reflect continuing operations following completion of the sale and exit of the Specialty Pharmacy business on June 7, 2019.

“Our fiscal 2021 second quarter results demonstrate solid execution across our businesses and continued demand for our unique combination of capabilities that deliver solutions to drive better health outcomes and lower costs for our members and other customers,” said Susan DeVore, Premier’s chief executive officer. “As we enter the second half of fiscal 2021, despite the uncertainty caused by the ongoing COVID-19 pandemic, we believe we have more visibility into our anticipated performance for the remainder of this year and therefore are issuing fiscal 2021 financial guidance.”

Fiscal Second-Quarter 2021 Results and Recent Highlights:

(Financial comparisons are for fiscal second quarter of 2021 vs. fiscal second quarter of 2020)

 

  

GAAP net revenue increased 32% to $422.8 million from $319.6 million a year ago.

 

 

Supply Chain Services segment revenue increased 41% to $329.1 million from $232.6 million a year ago.

 

 

Performance Services segment revenue increased 8% to $93.7 million from $87.0 million a year ago.

 

  

GAAP net income of $44.9 million decreased from $91.6 million a year ago primarily due to a decrease in net administrative fees revenue; a loss on certain put and call rights in the current period compared to the gain in the second quarter of fiscal 2020; and a prior period remeasurement of the Tax Receivable Agreement liability as a result of the change in North Carolina state income tax law.

 

  

GAAP diluted earnings per share (EPS) of $0.36 compared with loss of $6.88 per share a year ago.

 

  

Adjusted EBITDA* of $124.8 million decreased 16% from $148.4 million a year ago primarily as a result of the impact of the recently amended GPO agreements, the impact of the COVID-19 pandemic, and the Acurity/Nexera asset acquisition.

 

  

Adjusted net income* of $79.4 million decreased 13% from $90.8 million a year ago and adjusted EPS* decreased 12% to $0.65 from $0.74 a year ago.

 

  

On January 21, 2021, Premier’s Board of Directors declared a quarterly cash dividend of $0.19 per share, payable on March 15, 2021 to stockholders of record as of March 1, 2021.

 

*

Descriptions of consolidated and segment adjusted (non-GAAP) financial measures and non-GAAP free cash flow are provided below under “Use and Definition of Non-GAAP Financial Measures,” and reconciliations are provided in the tables at the end of this release.

 

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Consolidated Fiscal 2021 Second Quarter Financial Highlights

Consolidated Second-Quarter Financial Highlights

 

   Three Months Ended December 31,  Six Months Ended December 31, 
(in thousands, except per share data)  2020  2019  % Change  2020  2019  % Change 

Net Revenue:

       

Supply Chain Services:

       

Net administrative fees

  $145,339 $172,114  (16)%  $277,984 $344,517  (19)% 

Other services and support

   4,086  2,482  65  9,677  5,043  92
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Services

   149,425  174,596  (14)%   287,661  349,560  (18)% 

Products

   179,670  58,040  210  295,085  106,161  178
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Supply Chain Services

   329,095  232,636  41  582,746  455,721  28

Performance Services

   93,732  86,970  8  186,968  166,295  12
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $422,827 $319,606  32 $769,714 $622,016  24
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income from continuing operations

  $44,904 $91,575  (51)%  $225,589 $162,514  39

Net income from continuing operations attributable to stockholders

  $43,969 $(444,002  nm  $186,124 $279,536  nm 

Adjusted net income from continuing operations

  $43,969 $(444,002  nm  $186,124 $139,573  nm 

NON-GAAP FINANCIAL MEASURES*:

     

Adjusted EBITDA:

     

Supply Chain Services

  $118,939 $147,959  (20)%  $221,590 $297,870  (26)% 

Performance Services

   36,609  29,967  22  73,724  50,343  46
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total segment adjusted EBITDA

   155,548  177,926  (13)%   295,314  348,213  (15)% 

Corporate

   (30,730  (29,521  4  (59,753  (59,552  —  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $124,818 $148,405  (16)%  $235,561 $288,661  (18)% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted net income

  $79,394 $90,774  (13)%  $149,553 $176,760  (15)% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings per share on adjusted net income - diluted

  $0.65 $0.74  (12)%  $1.22 $1.42  (14)% 

 

*

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

Fiscal 2021 Outlook and Guidance

The statements in this section are forward-looking statements. For additional information regarding the use and limitations of such statements, refer to “Forward-Looking Statements” below and “Risk Factors” section of the company’s most recent Form 10-K filed with the Securities and Exchange Commission (“SEC”), as updated from time to time in the company’s other filings with the SEC.

Premier announced financial guidance for full fiscal year 2021. The company expects total net revenue to be in the range of $1.608 billion to $1.653 billion, adjusted EBITDA to be in the range of $445 million to $465 million, and adjusted EPS to be in the range of $2.26 to $2.39. The company also reiterated that, adjusted for the impact of the COVID-19 pandemic, beginning in fiscal year 2022, it expects to target a multi-year, compound annual growth rate in the mid-to-high single digits for consolidated net revenue, adjusted EBITDA and adjusted EPS.

Refer to the table below for specific fiscal 2021 guidance metrics and related footnotes. In addition, refer to the “Premier’s Use and Definition of Non-GAAP Numbers” and “Premier’s Use of Forward-Looking Non-GAAP Measures” at the end of this release for descriptions of consolidated and adjusted (non-GAAP) financial measures.

 

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Guidance Metric  Fiscal 2021 Guidance Range*
Segment Net Revenue:   

    Supply Chain Services

    Performance Services

  

$1.242 billion to $1.272 billion

$366 million to $381 million

  
Total Net Revenue  $1.608 billion to $1.653 billion
  
Adjusted EBITDA  $445 million to $465 million
  
Adjusted EPS  $2.26 to $2.39
 

Fiscal 2021 guidance assumes the realization of the following key assumptions:

 

•  Net administrative fees revenue of $560 million to $580 million

 

•  Direct sourcing products revenue of $650 million to $690 million

 

•  Capital expenditures of $105 million to $110 million

 

•  Effective tax rate of 24%

 

•  Does not include the effect of any potential future significant acquisitions

 

*

The company does not provide forward-looking guidance on a GAAP basis as certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated. Refer to “Use of Forward-Looking Non-GAAP Measures” below for additional explanation.

Results of Operations for the Three Months Ended December 31, 2020

(As compared with the three months ended December 31, 2019)

GAAP net revenue of $422.8 million increased 32% from $319.6 million for the same period a year ago.

GAAP net income of $44.9 million decreased from $91.6 million a year ago. In accordance with GAAP, fiscal 2020 second-quarter net income attributable to stockholders includes a non-cash adjustment of $(480.2) million to reflect the change in the redemption value of limited partners’ Class B common unit ownership at the end of that period. This non-cash adjustment resulted primarily from changes in the number of Class B common units outstanding and the company’s stock price between periods and do not reflect results of the company’s business operations. Since the Board of Directors is comprised of a majority of independent directors as of July 31, 2020, Premier is not required to make this adjustment for the three months ended December 31, 2020 or any subsequent periods.

Adjusted EBITDA of $124.8 million decreased 16% from $148.4 million for the same period a year ago primarily as a result of the impact of the previously mentioned amended GPO agreements, the impact of the COVID-19 pandemic, and the Acurity/Nexera asset acquisition.

Adjusted net income of $79.4 million decreased 13% from $90.8 million for the same period a year ago. Adjusted earnings per share decreased 12% to $0.65 from $0.74 for the same period a year ago.

 

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Segment Results

(For the fiscal second quarter of 2021 as compared with the fiscal second quarter of 2020)

Supply Chain Services

Supply Chain Services segment net revenue of $329.1 million increased 41% from $232.6 million a year ago.

Net administrative fees revenue of $145.3 million decreased $26.8 million, or 16%, from $172.1 million a year ago, primarily due to a higher average fee share that resulted from the previously mentioned amended GPO agreements that were effective on July 1, 2020; a decline in member purchasing volume in certain categories as a result of the COVID-19 pandemic which continued to impact overall healthcare utilization, including elective procedures and a slowdown of spending in non-healthcare related areas; and the non-cash amortization of prepaid contract administrative fees from the Acurity/Nexera asset acquisition. These decreases were partially offset by further penetration of new and existing members.

Products revenue of $179.7 million increased $121.6 million, or 210%, from $58.0 million a year ago, primarily driven by the company’s ongoing efforts to provide certain personal protective equipment (PPE) and other high-demand supplies for its members as a result of the COVID-19 pandemic.

Segment adjusted EBITDA of $118.9 million decreased 20% from $148.0 million for the same period a year ago, primarily as a result of the previously mentioned decline in net administrative fees revenue related to the amended GPO agreements, the impact of the COVID-19 pandemic, and the Acurity/Nexera asset acquisition.

Performance Services

Performance Services segment net revenue of $93.7 million increased 8% from $87.0 million for the same quarter a year ago, primarily driven by growth across the technology and consulting businesses, including new enterprise license agreements, and incremental revenue associated with the fiscal year 2020 acquisition of Health Design Plus. These increases were partially offset by lower revenue as a result of the Centers for Medicare and Medicaid Services (CMS) planned discontinuation of the company’s former CMS government contract as part of the overall Hospital Improvement Innovation Network program that ended on March 31, 2020.

Segment adjusted EBITDA of $36.6 million increased 22% from $30.0 million for the same period a year ago. The increase was primarily due to the aforementioned increase in revenue and a decrease in selling, general and administrative expenses primarily related to a decrease in travel and meeting expenses as a result of the COVID-19 pandemic as well as savings in third-party cost of sales.

Results of Operations for the Six Months Ended December 31, 2020

(As compared with the six months ended December 31, 2019)

GAAP net revenue of $769.7 million increased 24% from $622.0 million for the same period a year ago.

GAAP net income was $225.6 million compared with $162.5 million a year ago. In accordance with GAAP, fiscal 2021 and 2020 second-quarter net income attributable to stockholders includes non-cash adjustments of $(26.7) million and $214.2 million, respectively, to reflect the change in the redemption value of limited partners’ Class B common unit ownership at the end of each period. These non-cash adjustments resulted primarily from changes in the number of Class B common units outstanding and the company’s stock price between periods and do not reflect results of the company’s business operations. The adjustment for six months ended December 31, 2020 reflects the change in the redemption value of limited partners’ Class B common unit ownership for the period from July 1, 2020 through July 31, 2020, due to the Board of Directors being comprised of a majority of independent directors on July 31, 2020. As a result, Premier will no longer make this adjustment in subsequent periods.

 

4


After the previously mentioned non-cash adjustments, the company reported net income attributable to stockholders of $186.1 million compared with net income $279.5 million a year ago. On a diluted per share basis, net income was $1.67 compared with $1.12 for the same period a year ago. See “Calculation of GAAP Earnings per Share” in the income statement section of this press release.

Adjusted EBITDA of $235.6 million decreased 18% from $288.7 million for the same period the prior year. Adjusted net income of $149.6 million decreased 15% from $176.8 million for the same period a year ago. Adjusted earnings per share decreased 14% to $1.22 from $1.42 for the same period a year ago.

Supply Chain Services segment net revenue of $582.7 million increased 28% from $455.7 million a year ago. Supply Chain Services segment adjusted EBITDA of $221.6 million decreased 26% from $297.9 million for the same period a year ago.

Performance Services segment net revenue of $187.0 million increased 12% from $166.3 million for the same quarter a year ago. Performance Services segment adjusted EBITDA of $73.7 million increased 46% from $50.3 million for the same period a year ago.

Cash Flows and Liquidity

Net cash provided by operating activities for the six months ended December 31, 2020 was $116.2 million compared with $217.0 million for the same period last year. The decrease was primarily driven by lower net administrative fees revenue as a result of the amended GPO agreements, the impact of the COVID-19 pandemic as well as the timing of cash collections related to approximately $169 million in purchases during the period associated with the demand for PPE to address increased needs as a result of the pandemic.

Net cash used in investing activities and net cash provided by financing activities for the six months ended December 31, 2020 were $46.9 million and $59.6 million, respectively. At December 31, 2020, cash and cash equivalents was $109.0 million compared with $99.3 million at June 30, 2020, and the company’s five-year, $1.0 billion revolving credit facility had an outstanding balance of $100.0 million.

Free cash flow for the six months ended December 31, 2020 was $37.1 million compared with $127.9 million for the same period a year ago. The decrease was primarily due to the same factors that impacted net cash provided by operating activities as well as an increase in Tax Receivable Agreement payments made to the former limited partners of Premier LP as a result of the acceleration of payments as part of the company’s restructure.

Conference Call

The conference call will be webcast live from the company’s website and will be available at the following link: Premier Webcast Link. The webcast should be accessed 10 minutes prior to the conference call start time. A replay of the webcast will be available for one year following the conclusion of the live broadcast and will be accessible on the company’s website at https://investors.premierinc.com.

For those parties who do not have internet access, the conference call may be accessed by calling one of the below telephone numbers and providing conference ID number 1094328:

 

Domestic participant dial-in number (toll-free):  (844) 296-7719
International participant dial-in number:  (574) 990-1041

Premier’s presentation that will accompany the conference call and webcast can be accessed via the following link: Premier Events.

 

5


About Premier, Inc.

Premier, Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of more than 4,100 U.S. hospitals and health systems and approximately 200,000 other providers and organizations to transform healthcare. With integrated data and analytics, collaboratives, supply chain solutions, and consulting and other services, Premier enables better care and outcomes at a lower cost. Premier plays a critical role in the rapidly evolving healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide. Headquartered in Charlotte, N.C., Premier is passionate about transforming American healthcare. Please visit Premier’s news and investor sites on www.premierinc.com, as well as Twitter, Facebook, LinkedIn, YouTube and Instagram for more information about the company.

Premier’s Use and Definition of Non-GAAP Measures

Premier uses EBITDA, adjusted EBITDA, segment adjusted EBITDA, adjusted net income (historically referred to as “adjusted fully distributed net income”), adjusted earnings per share (historically referred to as “adjusted fully distributed earnings per share”), and free cash flow to facilitate a comparison of the company’s operating performance on a consistent basis from period to period and to provide measures that, when viewed in combination with its results prepared in accordance with GAAP, allow for a more complete understanding of factors and trends affecting the company’s business than GAAP measures alone. Management believes EBITDA, adjusted EBITDA and segment adjusted EBITDA assist the company’s board of directors, management and investors in comparing the company’s operating performance on a consistent basis from period to period by removing the impact of the company’s asset base (primarily depreciation and amortization) and items outside the control of management (taxes), as well as other non-cash (impairment of intangible assets and purchase accounting adjustments) and non-recurring items, from operating results. Adjusted EBITDA and segment adjusted EBITDA are supplemental financial measures used by the company and by external users of the company’s financial statements.

Management considers adjusted EBITDA an indicator of the operational strength and performance of the company’s business. Adjusted EBITDA allows management to assess performance without regard to financing methods and capital structure and without the impact of other matters that management does not consider indicative of the operating performance of the business. Segment adjusted EBITDA is the primary earnings measure used by management to evaluate the performance of the company’s business segments.

Management believes free cash flow is an important measure because it represents the cash that the company generates after payment of tax distributions to limited partners and capital investment to maintain existing products and services and ongoing business operations, as well as development of new and upgraded products and services to support future growth. Free cash flow is important because it allows the company to enhance stockholder value through acquisitions, partnerships, joint ventures, investments in related or complimentary businesses and/or debt reduction.

In addition, adjusted fully distributed net income and adjusted fully distributed earnings per share eliminate the variability of non-controlling interest as a result of member owner exchanges of Class B common units and corresponding Class B common stock into shares of Class A common stock and other potentially dilutive equity transactions which are outside of management’s control. These measures assist our board of directors, management and investors in comparing our net income and earnings per share on a consistent basis from period to period because these measures remove non-cash and non-recurring items and eliminate the variability of non-controlling interest that results from member owner exchanges of Class B common units into shares of Class A common stock.

Non-Recurring Items are items to be income or expenses and other items that have not been earned or incurred within the prior two years and are not expected to recur within the next two years. Such items include stock-based compensation, acquisition and disposition related expenses, remeasurement of TRA liabilities, loss on disposal of long-live assets, gain or loss on FFF put and call rights, income and expense that has been classified as discontinued operations and other expense.

 

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

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

Adjusted EBITDA is defined as EBITDA before merger and acquisition related expenses and non-recurring, non-cash or non-operating items and including equity in net income of unconsolidated affiliates.

Segment adjusted EBITDA is defined as the segment’s net revenue less cost of revenue and operating expenses directly attributable to the segment excluding depreciation and amortization, amortization of purchased intangible assets, merger and acquisition related expenses and non-recurring or non-cash items and including equity in net income of unconsolidated affiliates. Operating expenses directly attributable to the segment include expenses associated with sales and marketing, general and administrative, and product development activities specific to the operation of each segment. General and administrative corporate expenses that are not specific to a particular segment are not included in the calculation of Segment Adjusted EBITDA. Segment Adjusted EBITDA also excludes any income and expense that has been classified as discontinued operations.

Adjusted Net Income is defined as net income attributable to Premier (i) excluding income or loss from discontinued operations, net, (ii) excluding income tax expense, (iii) excluding the impact of adjustment of redeemable limited partners’ capital to redemption amount, (iv) excluding the effect of non-recurring or non-cash items, including certain strategic and financial restructuring expenses, (v) assuming the exchange of all the Class B common units for shares of Class A common stock, which results in the elimination of non-controlling interest in Premier LP and (vi) reflecting an adjustment for income tax expense on Non-GAAP net income before income taxes at our estimated annual effective income tax rate, adjusted for unusual or infrequent items.

Adjusted Earnings per Share is Adjusted Net Income divided by diluted weighted average shares.

Free cash flow is defined as net cash provided by operating activities from continuing operations less distributions and TRA payments to limited partners and purchases of property and equipment. Free Cash Flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayments.

To properly and prudently evaluate our business, readers are urged to review the reconciliation of these non-GAAP financial measures, as well as the other financial tables, included at the end of this release. Readers should not rely on any single financial measure to evaluate the company’s business. In addition, the non-GAAP financial measures used in this release are susceptible to varying calculations and may differ from, and may therefore not be comparable to, similarly titled measures used by other companies.

Further information on Premier’s use of non-GAAP financial measures is available in the “Our Use of Non-GAAP Financial Measures” section of Premier’s Form 10-K for the year ended June 30, 2020 filed with the Securities and Exchange Commission (“SEC”), as may be updated in subsequent filings with the SEC.

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

The company does not meaningfully reconcile guidance for non-GAAP adjusted EBITDA and non-GAAP adjusted earnings per share to net income attributable to stockholders or earnings per share attributable to stockholders because the company cannot provide guidance for the more significant reconciling items between net income attributable to stockholders and adjusted EBITDA and between earnings per share attributable to stockholders and non-GAAP adjusted earnings per share without unreasonable effort. This is due to the fact that future period non-GAAP guidance includes adjustments for items not indicative of our core operations, which may include, without limitation, items included in the supplemental financial information for reconciliation of reported GAAP results to non-GAAP results. Such items include strategic and acquisition

 

7


related expenses for professional fees; mark to market adjustments for put options and contingent liabilities; gains and losses on stock based performance shares; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the company believes to be non-indicative of its ongoing operations. Such adjustments may be affected by changes in ongoing assumptions, judgements, as well as nonrecurring, unusual or unanticipated charges, expenses or gains/losses or other items that may not directly correlate to the underlying performance of our business operations. The exact amount of these adjustments are not currently determinable but may be significant.

Forward-Looking Statements

Statements made in this release that are not statements of historical or current facts, such as those related to the timing and continuing impact of COVID-19, the statements related to fiscal 2021 outlook and guidance and the key assumptions underlying such guidance, and expected target multi-year, compound annual growth rate in the mid-to-high single digits for consolidated net revenue, adjusted EBITDA and adjusted EPS beginning in fiscal year 2022 are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Premier to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. Accordingly, readers should not place undue reliance on any forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in the conditional or future tenses or that include terms such as “believes,” “belief,” “expects,” “estimates,” “intends,” “anticipates” or “plans” to be uncertain and forward-looking. Forward-looking statements may include comments as to Premier’s beliefs and expectations as to future events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside Premier’s control. More information on potential factors that could affect Premier’s financial results is included from time to time in the “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Premier’s periodic and current filings with the SEC, including those discussed under the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” section of Premier’s Form 10-K for the year ended June 30, 2020 as well as the Form 10-Q for the quarter ended December 31, 2020, expected to be filed with the SEC shortly after the date of this release, and also made available on Premier’s website at investors.premierinc.com. Forward-looking statements speak only as of the date they are made, and Premier undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events that occur after that date, or otherwise.

 

Investor contact:  Media contact:  
Angie McCabe  Amanda Forster  
Vice President, Investor Relations  Vice President, Public Relations  
704.816.3888  202.879.8004  
angie_mccabe@premierinc.com  amanda_forster@premierinc.com  

 

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Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 

   Three Months Ended December 31,  Six Months Ended December 31, 
   2020  2019  2020  2019 

Net revenue:

     

Net administrative fees

  $145,339 $172,114 $277,984 $344,517

Other services and support

   97,818  89,452  196,645  171,338
  

 

 

  

 

 

  

 

 

  

 

 

 

Services

   243,157  261,566  474,629  515,855

Products

   179,670  58,040  295,085  106,161
  

 

 

  

 

 

  

 

 

  

 

 

 

Net revenue

   422,827  319,606  769,714  622,016

Cost of revenue:

     

Services

   40,122  47,422  78,872  94,958

Products

   171,722  52,819  285,150  96,294
  

 

 

  

 

 

  

 

 

  

 

 

 

Cost of revenue

   211,844  100,241  364,022  191,252
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

   210,983  219,365  405,692  430,764
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

     

Selling, general and administrative

   129,997  86,093  253,951  200,022

Research and development

   722  801  1,298  1,180

Amortization of purchased intangible assets

   10,260  11,938  23,464  24,982
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses

   140,979  98,832  278,713  226,184
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   70,004  120,533  126,979  204,580
  

 

 

  

 

 

  

 

 

  

 

 

 

Equity in net income of unconsolidated affiliates

   4,572  2,989  10,499  6,596

Interest and investment (loss) income, net

   (3,398  (359  (5,517  117

(Loss) gain on FFF put and call rights

   (14,507  30,222  (16,426  22,383

Other income

   4,890  2,747  8,573  3,009
  

 

 

  

 

 

  

 

 

  

 

 

 

Other (expense) income, net

   (8,443  35,599  (2,871  32,105
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

   61,561  156,132  124,108  236,685

Income tax expense (benefit)

   16,657  64,557  (101,481  74,171
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income from continuing operations

   44,904  91,575  225,589  162,514

Income from discontinued operations, net of tax

   —     614  —     1,004
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

   44,904  92,189  225,589  163,518

Net income from continuing operations attributable to non-controlling interest

   (935  (55,424  (12,780  (97,134

Net income from discontinued operations attributable to non-controlling interest

   —     (280  —     (477
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income attributable to non-controlling interest

   (935  (55,704  (12,780  (97,611

Adjustment of redeemable limited partners’ capital to redemption amount

   —     (480,153  (26,685  214,156
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income attributable to stockholders

  $43,969 $(443,668 $186,124 $280,063
  

 

 

  

 

 

  

 

 

  

 

 

 

Calculation of GAAP Earnings per Share

     

Numerator for basic earnings per share:

     

Net income (loss) from continuing operations attributable to stockholders

  $43,969 $(444,002 $186,124 $279,536

Net income from discontinued operations attributable to stockholders

   —     334  —     527
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to stockholders

  $43,969 $(443,668 $186,124 $280,063
  

 

 

  

 

 

  

 

 

  

 

 

 

Numerator for diluted earnings per share:

     

Net income (loss) from continuing operations attributable to stockholders

  $43,969 $(444,002 $186,124 $279,536

Adjustment of redeemable limited partners’ capital to redemption amount

   —     —     —     (214,156

Net income from continuing operations attributable to non-controlling interest

   —     —     —     97,134
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) from continuing operations

  $43,969 $(444,002 $186,124 $162,514

Tax effect on Premier, Inc. net income

   —     —     —     (22,941
  

 

 

  

 

 

  

 

 

  

 

 

 

 

9


Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 

   Three Months Ended December 31,  Six Months Ended December 31, 
   2020   2019  2020   2019 

Adjusted net income (loss) from continuing operations

  $43,969  $(444,002 $186,124  $139,573
  

 

 

   

 

 

  

 

 

   

 

 

 
       

Net income from discontinued operations attributable to stockholders

  $—    $334 $—    $527

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

   —      —     —      477
  

 

 

   

 

 

  

 

 

   

 

 

 

Adjusted net income from discontinued operations

  $—    $334 $—    $1,004
  

 

 

   

 

 

  

 

 

   

 

 

 

Adjusted net income (loss)

  $43,969  $(443,668 $186,124  $140,577
  

 

 

   

 

 

  

 

 

   

 

 

 

Denominator for basic earnings per share:

       

Weighted average shares

   122,127   64,552  110,851   63,668
  

 

 

   

 

 

  

 

 

   

 

 

 

Denominator for diluted earnings per share:

       

Weighted average shares

   122,127   64,552  110,851   63,668

Effect of dilutive securities:

       

Stock options

   321   —     287   420

Restricted stock

   333   —     318   250

Performance share awards

   138   —     117   —   

Class B shares outstanding

   —      —     —      60,493
  

 

 

   

 

 

  

 

 

   

 

 

 

Weighted average shares and assumed conversions

   122,919   64,552  111,573   124,831
  

 

 

   

 

 

  

 

 

   

 

 

 

Earnings per share attributable to stockholders:

       

Basic earnings per share attributable to stockholders

  $0.36  $(6.88 $1.68  $4.39

Diluted earnings per share attributable to stockholders

  $0.36  $(6.88 $1.67  $1.12
  

 

 

   

 

 

  

 

 

   

 

 

 

 

10


Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

 

   December 31, 2020   June 30, 2020 

Assets

    

Cash and cash equivalents

  $109,013  $99,304

Accounts receivable (net of $1,843 and $731 allowance for doubtful accounts, respectively)

   166,438   135,063

Contract assets

   239,139   215,660

Inventory

   178,346   70,997

Prepaid expenses and other current assets

   93,402   97,338
  

 

 

   

 

 

 

Total current assets

   786,338   618,362

Property and equipment (net of $486,689 and $452,609 accumulated depreciation, respectively)

   220,569   206,728

Intangible assets (net of $268,623 and $245,160 accumulated amortization, respectively)

   395,581   417,422

Goodwill

   942,263   941,965

Deferred income tax assets

   825,668   430,025

Deferred compensation plan assets

   55,035   49,175

Investments in unconsolidated affiliates

   148,245   133,335

Operating lease right-of-use assets

   52,890   57,823

Other assets

   84,210   93,680
  

 

 

   

 

 

 

Total assets

  $3,510,799  $2,948,515
  

 

 

   

 

 

 

Liabilities, redeemable limited partners’ capital and stockholders’ equity

 

Accounts payable

  $94,523  $54,841

Accrued expenses

   53,176   53,500

Revenue share obligations

   203,763   145,777

Limited partners’ distribution payable

   —      8,012

Accrued compensation and benefits

   59,120   73,262

Deferred revenue

   32,491   35,446

Current portion of tax receivable agreements

   —      13,689

Current portion of notes payable to members

   95,069   —   

Line of credit and current portion of long-term debt

   105,798   79,560

Other liabilities

   60,932   31,987
  

 

 

   

 

 

 

Total current liabilities

   704,872   496,074

Long-term debt, less current portion

   5,749   4,640

Tax receivable agreements, less current portion

   —      279,981

Notes payable to members, less current portion

   347,201   —   

Deferred compensation plan obligations

   55,035   49,175

Deferred tax liabilities

   —      17,508

Deferred consideration, less current portion

   83,700   112,917

Operating lease liabilities, less current portion

   48,151   52,990

Other liabilities

   93,675   75,658
  

 

 

   

 

 

 

Total liabilities

   1,338,383   1,088,943
  

 

 

   

 

 

 

Commitments and contingencies

    

Redeemable limited partners’ capital

   —      1,720,309

Stockholders’ equity:

    

Class A common stock, $0.01 par value, 500,000,000 shares authorized; 122,228,635 shares issued and outstanding at December 31, 2020 and 71,627,462 shares issued and outstanding at June 30, 2020

   1,222   716

Class B common stock, $0.000001 par value, 600,000,000 shares authorized; 0 and 50,213,098 shares issued and outstanding at December 31, 2020 and June 30, 2020, respectively

   —      —   

Additional paid-in-capital

   2,029,604   138,547

Retained earnings

   141,590   —   
  

 

 

   

 

 

 

Total stockholders’ equity

   2,172,416   139,263
  

 

 

   

 

 

 

Total liabilities, redeemable limited partners’ capital and stockholders’ equity

  $3,510,799  $2,948,515
  

 

 

   

 

 

 

 

11


Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

   Six Months Ended December 31, 
   2020  2019 

Operating activities

   

Net income

  $225,589 $163,518

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

   

Income from discontinued operations, net of tax

   —     (1,004

Depreciation and amortization

   60,031  74,895

Equity in net income of unconsolidated affiliates

   (10,499  (6,596

Deferred income taxes

   (127,535  53,368

Stock-based compensation

   14,545  11,479

Remeasurement of tax receivable agreement liabilities

   —     (23,682

Loss (gain) on FFF put and call rights

   16,426  (22,383

Other

   323  2,971

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

   

Accounts receivable, inventories, prepaid expenses and other assets

   (127,764  (5,752

Contract assets

   (23,541  (9,346

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

   88,602  (20,447
  

 

 

  

 

 

 

Net cash provided by operating activities from continuing operations

   116,177  217,021

Net cash provided by operating activities from discontinued operations

   —     10,028
  

 

 

  

 

 

 

Net cash provided by operating activities

  $116,177 $227,049
  

 

 

  

 

 

 

Investing activities

   

Purchases of property and equipment

  $(44,864 $(44,768

Acquisition of businesses, net of cash acquired

   (791  (34,727

Proceeds from sale of assets

   —     3,632

Investments in unconsolidated affiliates

   —     (10,165

Other

   (1,228  251
  

 

 

  

 

 

 

Net cash used in investing activities

  $(46,883 $(85,777
  

 

 

  

 

 

 

Financing activities

   

Payments made on notes payable

  $(3,684 $(2,045

Proceeds from credit facility

   125,000  125,000

Payments on credit facility

   (100,000  (100,000

Distributions to limited partners of Premier LP

   (9,949  (26,901

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

   (24,218  (17,425

Cash dividends paid

   (46,396  —   

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

   —     (148,566

Other

   (338  (820
  

 

 

  

 

 

 

Net cash used in financing activities

  $(59,585 $(170,757
  

 

 

  

 

 

 

Net increase (decrease) in cash and cash equivalents

   9,709  (29,485

Cash and cash equivalents at beginning of year

   99,304  141,055
  

 

 

  

 

 

 

Cash and cash equivalents at end of period

  $109,013 $111,570
  

 

 

  

 

 

 

 

12


Supplemental Financial Information

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

(Unaudited)

(In thousands)

 

   Six Months Ended December 31, 
   2020  2019 

Net cash provided by operating activities from continuing operations

  $116,177 $217,021

Purchases of property and equipment

   (44,864  (44,768

Distributions to limited partners of Premier LP

   (9,949  (26,901

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

   (24,218  (17,425
  

 

 

  

 

 

 

Free Cash Flow

  $37,146 $127,927
  

 

 

  

 

 

 

 

13


Supplemental Financial Information

Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA

Reconciliation of Operating Income to Segment Adjusted EBITDA

Reconciliation of Net Income Attributable to Stockholders to Adjusted Net Income

(Unaudited)

(In thousands)

 

   Three Months Ended
December 31,
  Six Months Ended
December 31,
 
   2020  2019  2020  2019 

Net income from continuing operations

  $44,904 $91,575 $225,589 $162,514

Interest and investment loss (income), net

   3,398  359  5,517  (117

Income tax expense (benefit)

   16,657  64,557  (101,481  74,171

Depreciation and amortization

   19,093  25,378  36,567  49,913

Amortization of purchased intangible assets

   10,260  11,938  23,464  24,982
  

 

 

  

 

 

  

 

 

  

 

 

 

EBITDA

   94,312  193,807  189,656  311,463

Stock-based compensation

   7,415  7,838  14,790  11,690

Acquisition and disposition related expenses

   7,918  2,835  10,763  8,976

Remeasurement of tax receivable agreement liabilities

   —     (28,356  —     (23,682

Loss (gain) on FFF put and call rights

   14,507  (30,222  16,426  (22,383

Other expense

   666  2,503  (746  47
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted EBITDA

  $124,818 $148,405 $235,561 $288,661
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

  $61,561 $156,132 $124,108 $236,685

Equity in net income of unconsolidated affiliates

   (4,572  (2,989  (10,499  (6,596

Interest and investment loss (income), net

   3,398  359  5,517  (117

Loss (gain) on FFF put and call rights

   14,507  (30,222  16,426  (22,383

Other income

   (4,890  (2,747  (8,573  (3,009
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   70,004  120,533  126,979  204,580

Depreciation and amortization

   19,093  25,378  36,567  49,913

Amortization of purchased intangible assets

   10,260  11,938  23,464  24,982

Stock-based compensation

   7,415  7,838  14,790  11,690

Acquisition and disposition related expenses

   7,918  2,835  10,763  8,976

Remeasurement of tax receivable agreement liabilities

      (28,356     (23,682

Equity in net income of unconsolidated affiliates

   4,572  2,989  10,499  6,596

Deferred compensation plan income

   4,803  2,751  7,710  2,992

Other expense

   753  2,499  195  64
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted EBITDA

  $124,818 $148,405 $235,561 $288,661
  

 

 

  

 

 

  

 

 

  

 

 

 

SEGMENT ADJUSTED EBITDA

     

Supply Chain Services

  $118,939 $147,959 $221,590 $297,870

Performance Services

   36,609  29,967  73,724  50,343

Corporate

   (30,730  (29,521  (59,753  (59,552
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted EBITDA

  $124,818 $148,405 $235,561 $288,661
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income attributable to stockholders

  $43,969 $(443,668 $186,124 $280,063

Adjustment of redeemable limited partners’ capital to redemption amount

      480,153  26,685  (214,156

Net income attributable to non-controlling interest

   935  55,704  12,780  97,611

Income from discontinued operations, net of tax

      (614     (1,004

Income tax expense (benefit)

   16,657  64,557  (101,481  74,171

Amortization of purchased intangible assets

   10,260  11,938  23,464  24,982

Stock-based compensation

   7,415  7,838  14,790  11,690

Acquisition and disposition related expenses

   7,918  2,835  10,763  8,976

Remeasurement of tax receivable agreement liabilities

      (28,356     (23,682

Loss (gain) on FFF put and call rights

   14,507  (30,222  16,426  (22,383

Other expense

   2,805  2,503  7,229  47
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted income before income taxes

   104,466  122,668  196,780  238,865

Income tax expense on adjusted income before income taxes

   25,072  31,894  47,227  62,105
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted Net Income

  $79,394 $90,774 $149,553 $176,760
  

 

 

  

 

 

  

 

 

  

 

 

 

 

14


Supplemental Financial Information

Reconciliation of GAAP EPS to Adjusted EPS

(Unaudited)

(In thousands, except per share data)

 

   Three Months Ended
December 31,
  Six Months Ended
December 31,
 
   2020  2019  2020  2019 

Net income attributable to stockholders

  $43,969 $(443,668 $186,124 $280,063

Adjustment of redeemable limited partners’ capital to redemption amount

   —     480,153  26,685  (214,156

Net income attributable to non-controlling interest

   935  55,704  12,780  97,611

Income from discontinued operations, net of tax

   —     (614  —     (1,004

Income tax expense (benefit)

   16,657  64,557  (101,481  74,171

Amortization of purchased intangible assets

   10,260  11,938  23,464  24,982

Stock-based compensation

   7,415  7,838  14,790  11,690

Acquisition and disposition related expenses

   7,918  2,835  10,763  8,976

Remeasurement of tax receivable agreement liabilities

   —     (28,356  —     (23,682

Loss (gain) on FFF put and call rights

   14,507  (30,222  16,426  (22,383

Other expense

   2,805  2,503  7,229  47
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted income before income taxes

   104,466  122,668  196,780  238,865

Income tax expense on adjusted income before income taxes

   25,072  31,894  47,227  62,105
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted Net Income

  $79,394 $90,774 $149,553 $176,760
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average:

     

Common shares used for basic and diluted earnings per share

   122,127  64,552  110,851  63,668

Potentially dilutive shares

   792  —     722  670

Conversion of Class B common units

   —     —     —     60,493
  

 

 

  

 

 

  

 

 

  

 

 

 

GAAP weighted average shares outstanding - diluted

   122,919  64,552  111,573  124,831

Conversion of potentially dilutive shares

   —     579  —     —   

Conversion of Class B common units

   —     57,898  11,185  —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average shares outstanding - diluted

   122,919  123,029  122,758  124,831
  

 

 

  

 

 

  

 

 

  

 

 

 

GAAP earnings per share

  $0.36 $(6.87 $1.68 $4.40

Adjustment of redeemable limited partners’ capital to redemption amount

   —     7.44  0.24  (3.36

Net income attributable to non-controlling interest

   0.01  0.86  0.12  1.53

Income from discontinued operations, net of tax

   —     (0.01  —     (0.02

Income tax expense (benefit)

   0.14  1.00  (0.92  1.16

Amortization of purchased intangible assets

   0.08  0.18  0.21  0.39

Stock-based compensation

   0.06  0.12  0.13  0.18

Acquisition and disposition related expenses

   0.06  0.04  0.10  0.14

Remeasurement of tax receivable agreement liabilities

   —     (0.44  —     (0.37

Loss (gain) on FFF put and call rights

   0.12  (0.47  0.15  (0.35

Other expense

   0.02  0.04  0.07  0.04

Impact of corporation taxes

   (0.20  (0.49  (0.43  (0.98

Impact of dilutive shares

   —     (0.66  (0.13  (1.34
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted EPS

  $0.65 $0.74 $1.22 $1.42
  

 

 

  

 

 

  

 

 

  

 

 

 

 

15