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PINC Premier

Participants
Jim Storey Investor Relations
Susan DeVore Chief Executive Officer
Mike Alkire President
Craig McKasson Chief Administrative Officer & Chief Financial Officer
Steve Valiquette Barclays
Ryan Daniels William Blair
Lisa Gill JP Morgan
Michael Cherny Bank of America Merrill Lynch
Jamie Stockton Wells Fargo
Mohan Naidu Oppenheimer
Sandy Draper SunTrust
Dolph Warburton Nephron Research
Joy Zhang Citigroup
Richard Close Canaccord Genuity
Kevin Caliendo UBC
John Ransom Raymond James
Charles Rhyee Cowen
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the Premier Incorporated Fourth Quarter and Full Year 2019 Results and Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, this conference maybe recorded.

to Relations. conference like Storey to now Investor of would turn over the Jim I

begin. may You

Jim Storey

Thank you, welcome, quarter Soniya, and conference XXXX Inc’s call. fourth fiscal everyone, to Premier

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

earnings release we in that could our certain Before results of differ actual started, copies this investors.premierinc.com. accompanying contain to I the at statements remarks Management's today. section available the everyone remind and materially conference get want Relations our are from slides website and discussed forward-looking today supplemental of call Investor those

of no We file our in XXXX our detailed factor speak Safe we that Form and Harbor we Factors them. and XX-K, risk statements including obligation to to update with affect forward-looking future soon. are disclosures. undertake might which fiscal encourage these the you SEC, These as review results to filings discussed today expect

soon. where our we the of Please to we that, and presentation non-GAAP release the X-K, financial to slides earnings measures Form financial included business. Reconciliations appropriate, evaluate which in expect note will of financial non-GAAP refer to GAAP are accompanying this measures measures earnings also SEC release, to in to our supplemental the appendix in our furnish

call over turn Susan Now, the let me to DeVore.

Susan DeVore

XXXX sufficient Q&A. discuss our and Thanks, strategic and on XXXX for updates call. we'll fiscal performance, our and Today recap our Jim, everyone fiscal in fourth time quarter to welcome conference leaving our objectives for detail, outlook provide

opportunities and providers fiscal to large and safety. see quick our costs were health performance continue systems that of Results and and consistent national improve our quarter our to for and both collaborate today other overview with from as year with a expectations, we footprint highlight So operations member I'll continuing we with previous start reduce quality the ahead. of the our

year-over-year A growth increase adjusted EBITDA X% generated few fiscal and XX% of flow XXXX per $XXX.X in growth million, in X% non-GAAP cash of XX% a quick revenue, free earnings distributed non-GAAP net adjusted consolidated We delivered share. fully in highlights. non-GAAP significant in EBITDA. Financially which adjusted equals non-GAAP we achieved

We successfully completed balance exit strong specialty stockholders. the we sheet ongoing returning a our to the the flexibility also which provides transaction our support business pharmacy to to strategy, maintained while capital growth and

a and stock for year our announced authorization Board During for $XXX we announced repurchase the completed new repurchase previously million plan, fiscal million plan $XXX stock XXXX. fiscal

our financial ahead, which approaching in some outlook market which presidential already in a Looking on uncertainties stage. continue areas intensify anticipates XXXX weigh regulatory with environment. member challenging decision to for is election taking Political healthcare likely and center the making continued will fiscal

segment this project have elimination in related segment, Performance Hospital with participated CMS where are Improvement environment, or has the we growth. profitability Services to In our years. factors, with consolidated same continued line modest Chain fiscal projects for these time, uncertainty of reduction Services Consistent market our revenue three guidance our face the significant steady the that we past deliver experiencing the to for some and XXXX Supply year-over-year in we At also growth. financial challenges

strong we while current the And successfully our a and year, environment, of very position free As from flow. cash are flexible we confident Premier that the positioned to continue operate sheet fiscal strength, for navigate begin the future. positioning the company balance new to continue by financial remains we to characterized

the capabilities. of analytics growth we and business Importantly, on supply our improvement enterprise continue performance expanding chain to improving focus our and

these Our businesses longer consistent. term for remains vision

enabling implementation our market and strong sciences all is by aspects to data our In a expand wrap-around among to improve and costs. In the technology; business chain are other of chain supply with and our technology vision chain reach total co-manage Supply sciences and expanding to to supply we costs, our things, reduce Performance clinical capabilities Chain portfolio spend. Services, healthcare leveraging Services, payers, outcomes to services, companies employers, working life as connect providers supply

believe delivering value. right customers, capabilities has long-term and will value help We us for and which Premier unique offerings the compelling stockholder deliver and continue to the our growth

initiatives President that me will let over the some of our Now, through Mike Alkire, you who we're call to turn pursuing. walk the

Mike Alkire

Susan, for joining everyone and our thanks call. Thank you,

Let achievements year for the ended. me start operational few a with just

number our across with We GPO we continued to volume providers the and than XXX,XXX. through contracts purchasing and billion. increased to running the organizations serve more expanded hospitals with We more and systems to approximately other U.S. $XX health which business of than X,XXX the do

XX And to We member renewal again annual satisfaction members continue organization. institutional as SaaS maintained for years. survey this viewed year, our approximately we a showed member owner partner rate end by retention a business At as strategic very with rate. and retention XX% rates purchasing our extension be average at group of their fiscal of our our XXXX, a tenure or XX% stood an high the

same and we forward, growth to rightsizing continued within diligently on time, businesses we our to align with opportunities. continuing capitalize additional on are manage hiring recruiting to identified to demands and At market remain focused are Looking other costs. are shifting professionals currently sales and portfolio the committed

I capabilities actions the while discussed. same the environment, Now, vision some and to want in market supporting to growth we of time stability are Susan and augment term the drive at just current core review our specific longer taking that the

reduced assets, unique our and developing payers First, high-value enable employers continue capabilities at linking data network directly to of other providers clinical costs. better with outcomes we leveraging care a are analytics to combination and

over major are employers have We in been this term engage and year fiscal strategic the initiative investing longer targeting to during current the year. past

these we Magellan and develop deploy electronic project this unique the point-of-care within of of and health record at the providers in this one the Hawaii. Health workflow major two piloting an with healthcare Health, are Hawaii Pacific to largest part innovative plans solution, prior collaborating authorization up have one of authorization prior solution with physician together the we’re As teamed with health automated initiative, to

acquisition of its developing and represents We in Stanson support and also Stanson way. sales this opportunities. November strategy attractive and new key technology its The it's own last decision and has business excitement acquired clinical of part an Health generated it a

We continue modestly XXXX. integrate with functionality Premier fiscal assets other be it to in to capabilities and build to and expect earnings Stanson’s and accretive data

provider growth, Second, are broader more continues in opportunities experience within to on certain to market. capitalize businesses while we the portfolio leveraging our adjacent existing market modest

leverages is matter channel subject healthcare Applied generate these of our business expertise our real-world provider data, and our One Sciences best-in-class that to supports evidence which research transformation.

rate see While to with the continuing revenue, small in segment contributor Services potential and still year. coming a are pleased rapid Performance growth this relatively we

with this examples, is improvement. collaborating Additionally, we device healthcare major with are we for with and patients to A working leaders collaboration diagnostic, companies partnering populations complex large evaluate and pharmaceutical with of impact to business in to healthcare are test industry few innovations, and conditions. accelerate companies pharmaceutical interventions imaging real-world develop, scale major with and and oncology systems

have of our always Susan earlier, part been capital as considered disciplined strategy. deployment As strategic carefully noted acquisitions

of exploring of opportunities example are recent our Stanson business. other add that we potential to acted While the targeted to M&A augment an capabilities we acquisition on, areas represents or opportunity in

ways technology. member chain instance On for chain position centralized we're to using at to processes the partner continue this an believe further improve our supply Premier supply embedded looking supply with operations. our We as members’ and side will chain

capabilities support further and that to the better services offering. exploring strategic that will opportunities emerging Performance accelerate prior strategy, side we're of us delivery allow the evolution On well network our our automated as of high-value as the authorization enable

conclude me opportunistic. reiterating by disciplined and Let we remain that

pursuing opportunities costs in safety markets continues new delivery of ways our better in We are partner new and creating improve innovative as for well quality Premier our to our current as members the to long-term focused care and manage to markets. creating while on with value stakeholders. and explore value

we our sheet stockholders capital At program. maintaining balance while to capital part strong allocation remain a of course same the balanced of returning committed to as time,

your today. time for Thank you

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

Craig McKasson

Thanks, Mike.

to exit discussed we wind Susan to quarter. indicated, and in activities fourth otherwise the highlighted, certain the of pharmacy continuing call reflect As and business during unless the assets this all results related that specialty and initiated completed from operations. Accordingly, down business, sale our

restate do standard results, walk prior to modified did means everyone under which approach, beginning fiscal I in through we XXXX, XXX, ASC we want not recognition the results we standard. the year remind the revenue Before that the new retrospective using new adopted

some fourth As results comparing under the of a comparisons recognition prior are standard our be and meaningful. not standard which previous revenue the year quarter we may fiscal means year to using result, XXXX new these results full

non-GAAP with want billion, excluding $X.XX, that I operations year EBITDA per discontinued of net consolidated quarter, X%; $X.XX million, of up non-GAAP adjusted revenue to our met the Before reviewing $XXX X% fully earnings fiscal of XX%. adjusted full share expectations, distributed our year-over-year; and performance reiterate up up

in revenue driven revenue revenue and revenue and products X% administrative a increase Supply rise net Chain Services Services X% X% rose in Performance fees year-over-year, nominal. a by growth our was

walk through more in let's the quarter's Now, performance detail. fourth

year, revenue comparisons the comparisons prior the in previous year second quarter the throughout setting standard, stronger half fourth the fourth revenue half would standard, fiscal particularly in of timing more relative the that under resulted the anticipated year results while XXXX, in year-over-year the we in which challenged, in due earlier up the new difficult quarter. first of to the discussed year I be the As under of to recognition largely

from have cash $XXX.X net administrative discussed a year and the anticipated quarter. million revenue it under ago. $XXX.X consistent from fourth quarter preceding the than million assumptions same while to recoveries quarter, past-due the Services cadence previous the From of ago. to standpoint, period administrative fourth year a and same revenue standard was million a consolidated the is the year collections, revenue a of from Supply we of higher decreased million which fees compared $XXX.X ago, timing prior period of the given with fees by increased compared $XXX.X This year revenue GAAP Chain net X% million in benefited $XXX segment previously

Products products. to with well our a ago, categories as $XX.X primarily sales as of direct year business, associated revenue growth commodity was product $XX.X sourcing of purchasing million million compared aggregated by in certain driven

million and was $XX.X of same business. cost fourth the and Turning by cost was compared segment, growth a technology safety clinical clinical was decrease to and revenue consulting quarter areas support revenue to management Performance engagements, decision the The management which to period lower for surveillance, offset million the year quality the partially due $XX.X ago. from Services in

market the performance-based demand a and specifically, consulting value-based cost appear many approach healthcare as year, More care uncertainty, last movement to adoption wait election management experiencing to more upcoming lower are and models. and to for see relative we given of providers taking large engagements be slower

Performance in Services revenue safety fiscal did XXXX large benefit half of engagements. from the licensed two second

of SaaS-based, at contract whereas standard, majority safety was prevention standard the our revenue is our license the of over sell new the is also majority of the for recognized we do licenses more technology. While revenue engagements term the with revenue and Under ratably previous associated contract. revenue technology infection signing, under the spread

quarter share. Looking the to a required for limited the $XXX reported our at million per negative adjustment during based profitability, in ownership on GAAP ago. GAAP a After price year Class partners’ unit million the GAAP the value we net of reflect common non-cash stock of redemption income to increase $XXX a was net of million period, in $XX.X $X.XX loss compared the increase B

adjusted for the same ago. million quarter EBITDA compared year to was the million $XXX.X $XXX.X a for non-GAAP Consolidated period

initiative. incremental During the the in million build-out our ProvideGx our of invested our $X expenses integration year, high we clinical including operating future the program, initiatives, launched of support recently E-Commerce technology, for our value and growth network, of decision the development approximately

adjusted From products increased $XXX.X non-GAAP by EBITDA of $XXX.X year was E-Commerce ago. in to compared our the a business offset investments higher from direct a sourcing segment perspective, million, Supply was primarily margin Chain growth million in Gross profit initiative. Services’ sales increased

same investments was network to result compared ongoing $XX.X decrease clinical the primarily non-GAAP The period Performance for support prior as was period, revenue compared ago. to technology the the the the the adjusted strategy. Services, decision value high million lower EBITDA million, a our in In of and well year $XX.X as

share fully distributed was income same million adjusted $XX.X ago, compared year compared with non-GAAP $XX.X ago. distributed of for the year a quarter non-GAAP fully a adjusted representing per period earnings $X.XX, to million, Fourth net $X.XX

for From a balance with perspective, cash and $XXX.X from last year. liquidity million, was sheet $XXX.X flow million fiscal operations compared XXXX

EBITDA adjusted quarter fourth was for of totaled approximately and XX% EBITDA XX% the for representing full non-GAAP flow year. $XXX.X the cash free million, fiscal of $XXX.X Non-GAAP non-GAAP or million, adjusted

compared June XXXX. which year $XXX.X on $XXX.X We $XX facility, cash Our of credit June year million ended at our outstanding at with equivalents million million down billion totaled with paid balance the cash XX, an and we XXth. XXXX, on subsequently five revolving $X July XX,

our we non-GAAP results which And completed fiscal XXXX full total during to X.X share for reported, million adjusted the $XXX million as of repurchase distributed per previously year. repurchasing share approximately $X.XX added approximately fully shares, a program

to turn let's guidance XXXX. Now, our fiscal for financial

future acquisitions years We are expectations guidance undertake. not and to key does full significant guidance prior and year fiscal it the incorporates an we This incorporate based for regulatory historical uncertain year. environment. certain performance political introducing impact any may assumptions current the that our XXXX fiscal our on with related and Consistent of business

we billion XXXX. guidance approximately factored available prior contract and of with renewal guidance for that SaaS This revenue our XX% estimated revenue GPO and is historical expected the range retention approximately in XX% the realization represents consistent continuation our institutional in consolidated of rates. years net fiscal $X.X of developing under to In assumes

are mind assumptions guidance in specific XXXX year ranges So fiscal follows: our as with these key full

X% X%. X% $XXX of revenue net Chain to of of year. growth Together these $XXX X% to revenue Performance of representing million consolidated $X.XX representing revenue of $XXX negative segment million billion growth growth produce prior X%. to to $XXX the billion representing Supply million Services of Services positive $X.XXX to to million over segment X%

to $X.XX, range increase non-GAAP fully of a per is estimated a million, be X% reflecting to adjusted the X% million for of to EBITDA non increase results. representing in earnings to year $XXX X% GAAP $XXX adjusted expect to year. We an over X% And at share prior $X.XX distributed

timing reflect management based stock authorized amount of share share million on of our repurchase market and XXXX share by conditions, be $XXX Our guidance and previously The does the per not repurchases impact other factors. will any price fiscal plan. determined

any Given million completed $XXX XXXX, activities, we and provide we our in fiscal on updates repurchase basis. March our share the shares quarterly if repurchase regarding a repurchase not had any, in program share fourth quarter will did

on also guidance XXXX fiscal expectations additional based Our and is assumptions follows: as

to growth. be Mid-range flow fees the cash revenue generally fiscal to net environment. consistent of of administrative free non-GAAP EBITDA full expect ramp-up growth In from the Services Growth and our we is by guidance will existing adjusted assumes patient Chain new anticipates achieved addition XX% continuation to approximate further trends. Overall, non-GAAP member new year. penetration for X% XX% X% of Supply with member utilization revenue growth expected of flat spend, conversions historical contracts and revenue

X% of significantly programs. Our revenue the for pricing also steady growth our Mid-range and aggregated business. tariffs products Supply in purchasing products stable year-over-year periodic portfolio, anticipates Services product X% use continuation by assumes member potential to Chain guidance our continued not is of revenue our that product impacted

of in continuation renewal areas. and historically continuing the some rates challenge demand mid-range incorporate does of segment, assumes high In Services guidance hesitant the our institutional Performance SaaS

also Lastly, Hospital $XX.X factors the Performance Network extension Improvement in XXXX our with fiscal uncertainty which guidance Services associated with in contract million revenue. revenue generated Innovation CMS, of

Our expired month-to-month June funding at continued in three level. contract on and year July a has reduced and XXth, August

continuation further at this uncertain this the time. However, is of program

this potential XXXX, experienced XXXX program XXXX we XX% fiscal fiscal XXXX, guidance our over the fiscal contribution approximating revenue of contribution range by Performance through X%. growth year of from partial Services the anticipates impacting continuation a revenue Accordingly, March in

Services generate XX% revenue currently half expect to the Services expect XX% From in year the half approximately the to at Supply the and XX% consolidated of cadence segment Chain flow segment year. the for their revenue of of Performance to approximately perspective, generate first of year, we first a approximately Looking of we in generate revenue respectively. the

approximately XX% is EBITDA of first profitability, fiscal be in non-GAAP year. at Looking expected the generated adjusted consolidated half of the to

investments clinical second across half growth Services weighted sales first year, high additional in the half is of as While the heavily relatively the and professionals. consulting Supply consistent the is more from and of decision sales from incremental EBITDA technology revenue Services and value the the fiscal year, the in of Chain network, occurs EBITDA support, planned adjusted second recruitment Performance

As EBITDA second growth negative the to and Performance reflect the adjusted to we previously a consolidated growth showing revenue year-over-year negative in result, segment due in quarters, anticipate first non-GAAP quarter, Services with the factors year-over-year first discussed.

revenue. other contemplates XX% adjusted adjusted million also the purchase non-GAAP million capital rate approximately net $XX reflect capital fully to guidance consolidated will Our of $XXX software revenue. of XX% to income an and in our internally range the calculation net primarily capitalized net consolidated tax EBITDA projected of developed X% representing And non-GAAP year, X% for distributed effective anticipates It expenditures, margin of to XX%. consolidated of

a ongoing On approximately would X.X of one-for-one on exchanged brief process. I like basis common Finally, a update million to A Class units stock. our on for shares provide quarterly exchange Class July were B XXst,

Class A no the a which common defined election as company by As of directors, of exemption power holders of hold means NASDAQ. qualifies than our the longer stock now XX% result, more for the Premier for voting controlled

compensation related this Our on company anticipating and our a October, majority a having committees directors within majority with and a to Board of in independent expect nominating on our has comply timely of been NASDAQ end independent of all year. including manner, guidelines we by and governance directors change, one the and

always Compliance and independent. Audit Committee been Our has fully

occurs XXst. exchange October on next Our quarterly

you your time today. Thank for

Susan. turn me the let Now, call to over back

Susan DeVore

our debt free markets balance a that our revenue to remain flow. with flexible, prepared operating for success. generating generating by and drivers reiterating no strong cash we multiple long-term sheet remarks growth believe a across in to continues Thanks, positioned be well Premier Craig. I want We leader conclude

to will our expenses. confident financial drive And manage pursue and strategies, continue rigorously growth in we to we growth further improve value our ability and we creation. remain performance As

for open please could Operator, you the questions? call

Operator

Instructions]. [Operator you. Thank

of Steve Our from comes first Barclays. Valiquette question

now line Your is open.

Steve Valiquette

So, the customers on comprised demand engagements. just new that, segment just is I also, just the for overall ballpark, is related just there's in in contracts? your these the deeper Thanks. if challenges Performance or any on contracts? any types guess color of curious mentioned getting trigger bit a rough a larger drill percent are pull contracts, the it to I'm to lower Services, consulting And I'm And what of seeing cancellation some of of to you more those PS on curious, you little of

Susan DeVore

So answer can I'll Craig From start question. contracts. our and those seeing you then perspective, what discontinuation we the not is of second the of consulting any half are

had large associated GPO with that a of had two. engagements We the number have last or consulting of very we've over the several pursuits year

We more around a are GPO environment normal in now recruiting.

we second growth Craig, have just large consulting so maybe in some the you half. can And slower those of answer engagements. scale

Craig McKasson

At to the broad Performance that our I the total revenue. Sure. of XX% is of typically X% level, Services a indicate our range arm consulting approximately cost of Performance segment probably would management Services in

Operator

our William of Thank Daniels Blair. Ryan you. next And from comes question

line open. Your now is

Ryan Daniels

on regardless particular of seems we're costs, in And the like would up future areas moving hear those and It be of to proof value-based and prescient. seems be improve the that. who's and safety in or quality need follow was management uncertainty. office. the cut margins if a It care, Maybe Performance of somewhat focus to cost kind Services, surprising to that would in

weakness? driving be that So curious what might

Susan DeVore

intensely. a they're easier long-term the made going I getting know, decision momentum a at little the what though in regulatory the back lot and and would to our Craig same and sort out X% have providers of going lot the to lengthening assume is know of do around of it. the And because basket to rate making in I forth all the staying Ryan, a fee-for-service increase this Yes, a payment need even has It's as fee-for-service programs, just and say market they're time member short-term, costs manage Mike of with urgency programs -- risk, and customers. the slowing time even spend you bit more provider too more in to and that

invest continue we So the to strategically long-term. for

thing assets some We pivot right and the momentum continue to but provider of it's additional segment and decision our an markets, to just in making urgency now.

Ryan Daniels

that I come if the helpful and GPO that's the Prescription don't Section of what potential this on if Reduction I'm could fide highly know service thoughts ever a to the And impact Okay, fruition, color. curious in Pricing XXX anything? fees and will Drug are defined Act have impact then your bona but on what

Susan DeVore

so Yes, of programs, get We've a back, index rolled lot questions. kind and pricing proposals seen that form. international a different out regulatory out, including rolled pulled of in different again two

on that the pressure pricing, is to think one we is healthcare have that think pharma to the pricing, -- do particular for forward very we politically. accomplish politically. so because proposal hard supported We which to systems. lower is pharmaceuticals move of pharma really And we be cost But get on always challenging our goal pressure think to going

Washington. On active PBMs group other We're the differentiating in from GPO to the question, on. in have active bona are work that advocacy things they think and fide trying fee very a we I very

that difference we so And impact make very working sure the the the us, anticipating everybody on others. the Premier. not bona fee hard And effect of are fide between and PBMs understands service for and GPO to we're

Operator

Thank Gill JPMorgan. from Lisa you. of comes next And our question

open. Your line is now

Lisa Gill

both the Performance seeing to side think were you First, opportunities. around structurally comment incremental you in start secondly, I the and business, business Mike's business? talking hiring changing talking anything on Or sales additional as of Were Services the them? sales want the today? just that's And you some competitively GPO GPO either people with then about or of we are or around

Mike Alkire

just very Mike, is quickly. So Lisa, this

commercial we're entire general, the across hiring business. in assets So more

to areas well we I in sciences, majority high in think hiring perspective, as of recruit new as network. want a life members. new are make folks we GPO value from to investments additional the a But these actually the going So of sales are after

we're seeing, growth. obviously, That's making we're where that's the the where big investments. bigger So

to commercial for organization. investments space of to the make going we're parts those two the continue in the So

question your of part second The was…?

Susan DeVore

perspective, GPO don't a From the operating. structural are GPOs the see changes we in way

great had that health in our launch recruitment systems, started have compliance of over more a high year GPO market normalized significant pursuits. double-digit generates academic now the over did is healthcare ago. which success We We the savings like portfolio systems. for feel last years We to market two

We will several launching continue that year. in portfolio contracts new this that

And so, I our continue health with it end-to-end for is the supply really we systems management. pilot just guess that as are health looking for and chain I our It would our deeper to end-to-end of that we're sort customer supply continues taking be supply chain value base. a support. It’s describe to total market. a chain competitive the market. But competitive proposition

Lisa Gill

would is that's But the the I structure that really marketplace. your you your competitive of would you're from you the say today market? some Susan players outside mean clearly that's in advantages really of like where differentiates ownership that, And other differentiated. something you say in

Susan DeVore

Chain Performance relationship member I Mike attachment renewal long-term the advantages. that, in One are and surrounding about that end-to-end think big that two talked Services. Supply is there retention competitive capabilities

think one. that's I

advantages. I on think the cost that distinct the improvement the value-based ready those to connect those back and to back second Performance When got and data in assets data get one patients supply it really use all that are XX% of to of chain, you connect you've total can care, Services. for is

we that think long-term a the we bring to that project having with uncertain the members all can or overall being CMS innovation of this revenue relationship stream think capabilities with will in reduced But are and that's differentiator. I is We continue be to deal total. even

Mike Alkire

could Susan things if of just technology. couple I add on a the

question, of lot the sort point technology I in to differentiates Lisa, is think what answer So of we've investment to making control your a order. really of us been

unique also to investments very all very, is that been We've Premier. management. So under making get spend the to

purchase really of big today. on terms that's think the very, we work traditionally of that all to We're So services very in spend capabilities. our making and us unique investments don't

want of differentiate continue to to along we the So technology. lines

well, And back unique contract the capability I as the healthcare to best across would products is very manufacturing secondly, bring or us sourcing globe, our contract in our also our actually direct U.S. where the we're to value systems really to then manufacturing say,

Operator

Michael next Lynch. our comes America Cherny from of question And Bank you. Merrill Thank of

is now open. Your line

Michael Cherny

Performance rate Thinking year any run of out and for be have programs growth Services talked in is Performance there way become Services some versus outlook for that Is to could about parse the the should what out. our again, over that the next what revenue about time? impact government underlying you

Craig McKasson

Michael and I I in revenue million through the been fiscal XXXX. as specifically, July think my Yes, articulated was comments, revenue government There's in August. contract $XX.X nominal

have that program that and have or the March, of continue $XX.X assumption million $X.X of will that through in which in We will XX% approximately factored an that about continuation million XXXX. we so is fiscal

the X% a rate is in that So Services. Performance growth headwind to

services about program government the Overall, overall of stream. X% was our Performance Services revenue

Michael Cherny

Thanks finish for the reiteration of that. And to then the year. strong just flow, very turning back to cash

helping plus assumptions, don't have whether make more anything part there sizable make to into scale your know forward for organization, think some know you Services? at any go accelerate get $XX feedback you scale talked the is to more of there or you would drive the I to proposition built what about you -- As you that need? M&A, spend enough was value sense as GPOs I that billion than point big sake any this of would Are sense of you Performance is it

Susan DeVore

growth opportunities. always think No, for I looking we're

We're a such activity. disciplined strategically. to we that balance have that for make we are and that going sense about we anywhere to long-term be because wonderful look sheet, revenue can synergies find growth So continuing

Services. look that sales, potential continue and Chain current think to to at and acquisitions sales with people continue focused the we Performance in be we and on Services, technology I additional both Supply GPO Performance sales,

Operator

Jamie you. Thank question And Wells of then next from Stockton Fargo. comes

now open. Your line is

Jamie Stockton

of well. sounds consulting it contract that’s as about headwind the headwind business. you there’s guess like CMS on And a bit creating I little talked some the

that clients far your are you are As are one just big that or overhangs the that really are that If on seems guess as those that are them on? how clients than about through, talk focused you two focused there regulatory maybe guess people you're them great? focused that, could or through work now issues things on helping election -- work right other I of issues? I are And be big it like helping would issues kind

Susan DeVore

Yes, to so this interesting value-based is lot of and What's are doing. eventually on the care. they are Medicaid private Medicare focused a long-term I think, that payers follow Jamie what movement

in overall Medicare when long-term. expect slower programs. some of of perspective on fully payers private So accelerate cost the an and those the also programs, slower if are Medicare that Medicaid pressure movement that, those to in is implementing some from implementing continues We

so are our the They're actually physicians are before collaborative. collaborative. we're bundle have the being to And in models past. health new aggressive for our and participate We've ACO they about participate to less been spoken payment MIPS continuing than systems our and continuing in payment growing

space, we or year And are that some so seeing softness two we last actually. seen in the which have for

So us quality, and have I to belief it's what us they're costs, take infrastructure look going urgency support is I momentum, and really reduce not that, have that is risk, to to for for. improve think which of said a will to not -- question look which the what before, all a long-term they

Jamie Stockton

about mentioned, you're focus maybe investments we that's you investments number versus XXXX? just on employer that an as Okay, -- that And in of stuff we XXXX authorization or still of think prior the But missed the the should you investment a Mike and I think kind there number from incremental some guys sales gave spending about great. it. front is doing that as on are then force what standpoint a and the

Craig McKasson

Sure, Jamie, Craig. this is

employer network, will my million $XX incur those primarily and we the high We remarks, our initiative XXXX. So integration provided. support the operating the the that's expense and about for decision we value activities. as continued $X of anticipate ranges guidance clinical I in we And of in indicated that factored million into initiatives, about invested

Operator

of And you. from comes Mohan next Thank our question Naidu Oppenheimer.

now is line open. Your

Mohan Naidu

the of Applied on can research, you in which we near-term high-value compare you network, couple care A guess the you should couple elaborate next performance again. Science of of segments high-value with on network if segment questions to And long-term? what versus years? in traction anticipate expect this CDS the care one the more on I and see the

MikeAlkire

Mike. is this so Yes,

much in near-term, into that market that life And Obviously, years. we're of So of sciences. for expect number we've in a it's traction market. what the in we really the see to offering more been evolution

offering in past, and the of those things. kinds been retrospective of slices we've data kind So

going sciences And capabilities, and more predictive support about launching it's then they're much the to future new life ability the is thinking real-world organizations, the as really therapies. much evidence. to be about It's -- more about

unique got what's with acquisition through take that the embed is of versus real-world, our to them us. is offer we we and I think today Stanson which very can the protocols the ability which what for past really very, different Health, is in into actually sort

focus that we also do so think pretty whole will support And that's a the on differentiation. It drug substantial trials.

leveraging that that for value think see we So might that some very technology differential sciences in. that is that, again life us,

high a value whole new market. we're From network obviously, to this standpoint, relatively

healthcare analytics our getting and going really advisory opportunities are be an services think I to from data initial a systems standpoint. prepared the

So standpoint think large PMPM from initial see longer we're of to opportunities management supporting see that's term some really growth. where a revenue Maybe we our the some going employers. we benefit

So both short focus long-term. that's and the

Mohan Naidu

follow-up, One that more quick Thanks for a color, Mike. lot Craig.

changes composition the this? changes other or make predominantly changes expansion, to I or the operational of any at company the you On need guess are the control expected level, because in Board do

Craig McKasson

Yes. Thanks Craig. is Board Mohan, governance. this is It

for order just in the will and Board the been couple we get independent of independent to over time So within -- of a recruitment timeframe. to year additional a directors have planning one majority

Operator

our SunTrust. And next Draper comes of from you. question Sandy Thank

now is line open. Your

Sandy Draper

lot Performance broadly, I about I’ll Thanks more the just Services. stick -- questions answered. when A of and very think much. on maybe But asked been have my

or you look on somewhat the to in there? you from a point somewhere factor the just factor not willing and most like understand of Services? of get want thing product, out question big in this you -- business, guys sales segment Supply the decided to portfolio like Thanks. for I Are the that people sounds trying have you You evaluation other are weak underperforming Then is here on competitive, to Chain, did where one any are at same that? consulting a -- but may Performance really the is I of there exiting. not like I'm of because or areas see it there. EHR Are any say everything how to us, road what’s times is, growth? really that get some and is the Have you're competition good you there just it the down that but is that you just fit done choppy market the just guys guess at cycle a reach wonder, vendors doesn't that we see a much may is

Susan DeVore

there. questions Two

about are specialty changes business. the performing. the the others, of as question, business a we And On harder open because and the some we are we'll diversified how did evaluating performance pharmacy. the always to they're as and all our we flex first some things make at rightsizing we we're years of -- than spoke exit look businesses. And And decision to market always

see think we disciplined make. acquire need I openness you'll how we So we that and forward be continue to going with to business the decisions what about about to an any manage us disciplined

really and EHR have what of primarily need On need. interesting, you do make but from think country, health workflow from of not providers data have embedding you're in analytics systems we the across when can that into data all only have EHR just all the is. then I been workflow. this improvement we've decisions, is systems of intelligence a is that learning Stanson embed EHR, and and the and to been the with health And for differentiation agnostic, on that gives stuff and help able the and our companies the acquisition they question market, you you the I top it's for workflow on competitive health our those EHR system perspective, the second the workflow the around and And the that's them think doing they opportunities business think where

see making analytics HC the our EHRs. to competitive for vendors EHR we differentiated of and on top and But So services. market it is sit in investments think breadth of and depth those for we we're a do all IT

Mike Alkire

to one can of And add working implement thing, got we've with I think a history our those I changes. actually Susan if healthcare system long

offer on that top of unique are us those So EHRs. very from capabilities to the the wrap-around us analytics very, we and do differentiate

Operator

And from Warburton Research. our Thank Nephron next of you. comes question Dolph

line now Your open. is

Dolph Warburton

You regulatory mentioned some near uncertainty. term

in with the are hearing in any your you Thank up. as whether they early ACOs, to engagements However, arrangements follow I one sharing with from so, And changes that not continue customers two-sided CMS, And to the customers? if these over or the risk how impact long-term, a the signs have your risk you. will would arrangement?

Susan DeVore

Yes, thanks, Dolph.

risk So it's infrastructure more obviously, our and two-sided taking providers requires harder.

maintenance We that includes have collaborative, which who path. moving ACO our and growth folks in seen down are

continue both infrastructure, long-term that is there's so risk for say we continue political the in some. lots at customers of because two future. would payers as if uncertainty And I that have double-sided because It's a we model the more in because or operating to And we're we're there, it to that's and private public being strategic environment. ultimate growing and -- care it's the the we make I rate the ago see what of see years future. three it that think the risk, and not level investments we growing we But believe growing retaining bigger value-based was

Dolph Warburton

you is the And a throughout expecting segment investment over fiscal the kind cadence of for quantitatively that we should there just range the EBITDA way go great. margins And of Okay, any housekeeping. to quick year? Did 'XX? be

Craig McKasson

Yes, this is Craig.

have consistent the $XX incremental that investments our million operating relative factored So year. guidance, into that's the to we in relatively throughout

that down a to back the of ramp highlighted of in the although I heavily weighted offset more there. there's year, we'll year, front of the tremendous a some half ongoing wouldn't say get half I probably year, that bit some revenue which So throughout little the the because ramp investment up of begin will the of contributions or in the

EBITDA the to -- the Relative EBITDA about talk proportion throughout did of EBITDA, year. the segment I

in perspective, If you're EBITDA downward expect Services the slightly fairly goes to fiscal an margins our Supply higher growth to a going on as trajectory that. a direct of bit little EBITDA We're margins in always consistent growth time in -- rate have asking business. about we’d sourcing from relative our 'XX, although with Chain

mid the Chain, X for you as margin overall if tip to low So, Supply progresses. in XXs, it'll mid probably in year the think EBITDA point down XXs the

lower I be the mid XXs, EBITDA lower year, in fiscal would we've of improvement in standpoint, revenue would the expectation likely that in to a margins bit Services half Performance half the think we little operating front given see then the about, continue been have a year. of where some talked of and back the of some that we the you'll From the

Operator

Citi. And comes you. question Stephanie next Thank our of from Demko

is line Your open. now

Joy Zhang

traction seeing for guys, there out? taking provide color for And trends Hi, Health? Stephanie. early Zhang is pipeline this Stanson Joy are you in call any to for on Could the Thanks the on you're if my question. some

Mike Alkire

traction workflow. in about is, analytics embedding all mentioning, really the really early Susan picking Yes, I the them think those as both been it's and I have and

been -- that service line our it’s systems working then analytics So and and we've the workflow. analytics part service, working information with for and and really analytics but driving taking with been of leveraging that then line, healthcare a insights that have service actually are most them number by the enterprise the writing those into our our

of the And so driving the recipe sort of that's terms in in market. we're really that how

Craig McKasson

And had Craig, We post were acquisition. couple business. was making an revenue -- is 'XX of only a million this of that I fiscal we in I investment that it the would financially thing in is dollars think add --

as revenues in indicated, modestly accretive in are XXXX. do in expecting And to fiscal fiscal be growth it expect significant We 'XX. financially

Mike Alkire

Yes, around and is focused other whole the one regulation PAMA. area that and we're that on,

for workflow, into the requirements those of all us. focus putting So is another that area

Joy Zhang

That's helpful. color on in opening remarks, more just provide the Magellan it. you mentioned collaboration? And Got Health your can you

Mike Alkire

we're working building So prior authorization. Health, capabilities with on around our Magellan them

management. and within of utilization lot interest it's And the at they data we've the So capability. been taking have a towards the primarily focused it that and obviously using their insights auth prior and building capabilities all out

help provide to setting. about procedures a utilization work thinking them to sort patient. efficient of obviously our they are ability most what's clinical appropriate the they to So care the way really the actually love within through of And

Susan DeVore

connecting employers this and payers payers Stephanie, And to employers. our into and providers is and way

talk So when that. that definitely going of the one to assets we to about Stanson new is we're ways pivoting our market, do

Operator

Thank you.

Our Close next Canaccord from Genuity. question of Richard comes

is line Your now open.

Richard Close

Great, thanks for the question.

you Magellan, of that So What addressable the some just terms Susan, that? maybe opportunities, is any and per networks member be said you Mike, value think you in per there. in follow opportunities around some on you then up a the a side? and the revenue from month. of -- market are in of of that? will Magellan. earlier on On high just And getting And terms the will I newer thinking thoughts this be on or Just maybe total opportunity pilot that

Mike Alkire

just quickly. The really your to just Magellan, is So pilot. answer question, a

early, trying early help just stages. So we're of sort protocols -- to utilization with we're them

a from utilization So the of sort we're working through issues standpoint.

phase. well pilot payer prior But all with We in another large very are doing authorization just working stuff. similar are the in as again, these very, some

Susan DeVore

they into network, outcomes. are sure Mike new in we're of -- is entrant market. piece, can trying cost centers carve clinical the the said right help and our which value to And Yes. they to right really We're profile a earlier, it that the excellence. the relates can we have to make what And be that's and as included high providers how

addressable And it $X is for a for $X we garner we in. the billion so, this can of flow or piece some us revenue we think market think billion that

starting with providers We're centers how will concepts. then some to with from directly short-term we're with take we there. our excellence the of of employers grow starting the form It We're with work also starting of pilots mobilize and in And employers. so authorization. footprint it'll likely do do with prior

Operator

of question comes our Caliendo next UBS. from And Kevin Thank you.

is open. Your now line

Kevin Caliendo

the a the of the downside? appreciate is, kind like to and about midpoint an where were there's down delta you one for which the of and get always of which where you in I one of of how your think detail on to has break amount dig of understanding sort amount the ask you to bit if but -- around you I'd highest talk the that that little and least to in business segments variability that you has the any provide lines it? guidance, most four which What might delta outlook think but do and upside, drive you guidance, do

Craig McKasson

Thanks I kind of Kevin, the is magnitude answer What delta, Sure, is this question. Craig. for would say -- second. in I’ll a the just

lower and clearly the talked I of upper upper about patient guidance, think end impact the midpoint, you what If ends, the would I is, utilization about say GPO. trends our

extent kind of improved over inpatient the So were see flat decline, outpatient the declining end, that utilization push and to seeing utilization we that end. consistently slightly would that us to on non-acute the the if in to don't to we've significantly us we were that be the been anticipate and could seeing, we've upper that lower been to improvement help or which

our direct have. of part of we the it's kind sourcing business, really steady the In demand

the from could and we if us can I that higher uptake timing purchasing is those that increased And some So variable for sourcing. demand to push aggregated of commodity only some say our direct end. members see of would the the do, influence products of the programs we

does that that the one to biggest not probably On that would thing up. a range need volatility the we the the to provided guidance -- Because Performance side, that that X% extension. is make of Services HIIN within headwind is extent gets

will employer So in the bring sciences to fiscal the push lower us dictate the expansion the and ongoing demand life could market other of employers opportunities in ability our and the 'XX. and network then on obviously, uncertain end. that to a couple And

the in our that terms Services think it all you think the that versus on Supply answer of is surprise Chain business. with business and side the would So the of of I side background, I don't I would risk Services higher Performance delta of

Kevin Caliendo

competition commodity their label higher products? get the to you all from to That's products? of very seem helpful. label wholesalers there and or to white little be a increased percentage who be seeing private pushing bit you volume of sort Can distributors Are talk more or

Mike Alkire

It's interesting question. an

had -- been we've of from the distributors pressure the since we've program. So obviously inception

right is to scale figuring to our the drive are who vertically integrate continue continue costs. program, to and continuing the with partners out down Our focus to

them in products. So makes in continue will some when strategy And it contract we partner our and we'll where cases, for with to some cases, sense. manufacture

Operator

question Thank Ransom from James. you. of And our next comes John Raymond

open. Your now line is

John Ransom

it's Deep -- well, clever. But in hard to queue the me me be way. for any hard really it’s let

of mixed Let trying to kind me messages channel. reconcile I'm hear the just just through step we back.

ones have increasingly, to, you talk profit. So this talk they when for overwhelmingly soured least and providers, at on we to is the

of taking. So one a I are slice world. a soured Number you reasons there's forever. think on they've risk programs -- government different have the take few But these

industry expectations it's when dialysis a with One the programs sustain experience said, the with on every data forever is government ACOs. and is thing profit takes Fresenius And the at hard look I And sales bad pioneer up had ratcheted ESCO the that, to marquee. to data. get get year. Let's the a like growing stream the

and the commercial And the then the So then side, the a trap. pause you think. government about risk not I've with talked programs haven't sharing and what I with heard worked to And is mention some this of orthopedic out, not. what expression, really capitation don't

lot said, it's to year, I eventually, I to year next I sustain this next heck $X.XX. $X.XX, save a to Okay, save like I And saved of a year easier some $X got up X simple type payers of more regulators. and X. revenue in And to squeeze savings up out fee-for-service of to it ever growth a demands try ratcheting to on model is a volume got

-- like five just sharing wrong providers setup really Or we move three wasn't gosh, would? to that we risk the we it good on is it from it world are there? years that and is didn't made the missing So saying, possible now the you're thought for bet a something

Susan DeVore

I about think is U.S. with XX,XXX global a mean think when Medicaid budget the horizons, be continue you about to people new to global overall it right. the problem going day, the of about joining that global, challenges and and treatments, every if think XX,XXX, think cost Medicare I of you for And and new I of the time Medicaid. it's roles Medicare expanded, all care drugs,

be to either how And deliver I the people be to to is going happen, get one or truly and models cuts better to so, to going outcome. there are think there to fee-for-service of that risk-based where going shifts death more figure out are to efficiently two things care

infrastructure of environment it some positioning is a model efficient to fee-for-service in and kind cost doesn't the and the short-term, for more we're What payment is the with company quality care. problem deal delivery with the to pressured And the actually -- efficient that of in long-term more of deliver care. leads

not eggs agreement. we're to focused, saying going all form and so be of that models we're And there. some to focused, payment are to outcomes a is, various cost of What in try efficiency get it's saying risk-based basket focused,

company strategically we that it's do anything But none is what as And going prepare over inability when that they to ball not think we increasingly the reason and how that take employers think try continue the for frustrated to costs. enjoy to we going time. that exactly have the is a control with Part economy crystal are think of ways to future long of on it's to But to fee-for-service that us time. to and up, a costs. employers we're are is. the And good, control easier seeking we focused payments are new or the

John Ransom

the or Do $XXX is going carve serve out capitation that just this you horizon, and procedures, And are think and it think systems bundle foreseeable insurance global you do a you you model for for $XX,XXX goes think I -- hospital what or vertically care $X.XX, and more be by you total vertical? that joint many as and getting do take -- and it's to time where member horizontally? a specific evolves Let's let's month mean type agreements, companies way.

Susan DeVore

see I going broad-based both. models overlay these specific bundled dialysis models, those going health specific models. you're models, models. DRG payment to And I end oncology think you're think or to risked population you're or within to seeing models, going actually specific that see up

all multiple world so, a and the payment in problem. challenge of And of we we're solve I is ways to mean going that the messy to multiple trying have models live

care expected the variation day, delivery, I total be at ultimate we the overall are to saying end think keep care for outcomes cost access clinical the to that solved problem and is in is population. much of as not the is its too whole

so when particularly it's political so, different to take moving going And many out. and forms, have administrations in you

just have industry is that so you've stay trying to problem large. on for at -- healthcare we And got to the what we're solve the focused core

Operator

Thank our question you. comes Charles from of Cowen. And Rhyee next

Your line is now open.

Charles Rhyee

Susan, maybe to that. a follow up

changes on, earlier -- is the here. to season mentioned around is administration pause in the the move health You and of? is be to like want like of forward. move talk you the don't to efforts noise at House. within look that some it the what regardless more sort diabetes button some of uncertainty bit they regardless from to around get election care, system clients substandard And uncertainty, or it to that when there little will that some But just it view White could a trend sounds they expectation expectations your plan you forward hit the rhetoric tended want that clients, continue programs front that's government's it When really health -- in of

Susan DeVore

timing. it's Well, think I

know overall and coming. they with of the wait form to infrastructure implement these the programs to in for. management, till are how this almost is I then whatever terms the to specific, do in to concept outcomes, with administrations, let's build infrastructure are opposed figure program trying know programs different this is risk, actual the and quality what they a very out will models infrastructure and cost think, as say, work they're working take, I think assuming what the They But them to even we're that for want different. to when way, different,

-- all think versus come, healthcare payment question think is them they all and model because to global if with costs need momentum of the do they has a time get think I I to predictable employers. of the to to But going the and form and it Medicaid I for -- urgency they all just line timing that, have for of it's think budget for it, item which more that Medicare, to we to a some talk and

question just of It's momentum. really a urgency and

Charles Rhyee

about helpful? which are Is where your workflow. kind you're decision we're with which Any -- efforts case, costing talked of are Okay, they’re be being that's you Is that When it like in health trying And line systems the real to move to doctors helpful. groups clinical of practices, Thanks. that's are moving drill forwards about the this system into the sort Or we workflow or health it support EHR? their embed orthopedic would -- sort information? service to it primary direction decision clients are Stanson into targeting doing if is Because the And you to then first? down going care? line. of kind -- rules is sense back right sorry, now talking of quick. of just just the traditional of embedded

Susan DeVore

Yes.

So it, to first make say and think about right for think and care the clinical meaning that content, being about would clinical they're is it your protocols what way, delivered. in being decision guidelines I this how the physicians all

is sort PAMA So clinical go thing, regulatory protocol, clinical regulatory And imaging, the which imaging. clinical you protocols. use of decision like guidelines new a XXX from Stanson clinical there, that requirement programs think this over advanced for has support through cases. about Then

which and prior or Then with to what have going embedding get for guidelines Mike is authorization talked we're approve, So not the that get what what workflow. to are Magellan, meaning in that. payers think the that approve about let's they're about,

now can separate in not is apps a about that formulary. see is or all so he’s in formulary today to sit that product supply ready our of and doctor X.X average term, and getting workflow those in using the of can a analytics benchmarking, when process he's the take embed he all see use on those of that's think that all right $X.XX ability that our Longer our with cost So and Premier. think chain to about

So Stanson. we have big is where described plans already But for want today. take to stuff we the you there

Charles Rhyee

revenues the was in Performance benefit half, the the from we're from How this made be first follow you some going may just say Craig Services meaningful When year. you back you more what the about to more contribution about And -- talk it much XX% up. half, one talked year in of investments Thanks. half of like back it investments sounds of bearing this of that is from you fruit would ramp versus Stanson? more overall

Craig McKasson

it's the three Yes, I really talked a really balance about. across components

the value see from contributions to So believe network. will begin do we we high

We will growth. see incremental some

recruitment growth see as half with we've back year do in But will we'll half they that year. from then of the in revenue the We And to incremental the professionals the sales from the deliver doing and of convert see as to the fiscal continue been well. Stanson in sales, growth half we back Stanson. will front will those

Operator

And our to remarks. does turn I like DeVore would over to conclude this you. closing question-and-answer session. call back gentlemen, ladies and Susan for now the Thank

Susan DeVore

months Thanks, sure I'm ahead. the your and today. talk with everyone, we'll many of time we'll you and weeks in for meet

for so scheduled Thanks Our great update a is next quarterly and have much November Xth. day. currently

Operator

This participating program. Ladies today's for thank conference. in today's concludes and you gentlemen,

all may You disconnect.