Yahoo Finance Premier Inc (PINC) (Q3 2024) Earnings Call Transcript Highlights: Navigating Challenges and ...
Total Net Revenue: Increased from the prior year period, driven by growth in Supply Chain Services and Performance Services segments.
GAAP Net Loss: $49.2 million for the quarter, primarily due to a $140 million impairment charge related to Contigo Health.
Adjusted EBITDA: Impacted by revenue growth and increased expenses in Performance Services; decline in Supply Chain Services due to higher logistics costs and increased expenses.
Adjusted Net Income: Decreased primarily due to factors impacting adjusted EBITDA, offset by lower interest expense.
Adjusted EPS: Increased due to reduction in weighted average share count from accelerated share repurchase.
Free Cash Flow: $48.1 million, declined from prior year, impacted by tax payments and increased in capitalized software development.
Cash and Cash Equivalents: $61.9 million as of March 31, 2024, down from $89.8 million as of June 30, 2023.
Capital Deployment: Executed a $400 million accelerated share repurchase; declared a dividend of $0.21 per share payable on June 15, 2024.
Fiscal 2024 Guidance: Reaffirmed, based on performance for the first 9 months and outlook for the remainder of the year.
Fiscal 2025 Revenue Outlook: Expected decline in Supply Chain Services revenue, growth in Performance Services revenue in the mid-single-digit range.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Premier Inc (NASDAQ:PINC) reported an increase in total net revenue for the third quarter, driven by growth in both the Supply Chain Services and Performance Services segments.
The company successfully implemented a $400 million accelerated share repurchase transaction, demonstrating a strong return of capital to shareholders.
Premier Inc (NASDAQ:PINC) has made significant progress in technology-enabled supply chain strategies, including the adoption of digital supply chain capabilities which are expected to enhance labor cost management and cash flow for providers.
The company has renewed and expanded several partnership agreements, delivering substantial value in the market, such as the $75 million savings realized by Kaleida Health over five years.
Premier Inc (NASDAQ:PINC) continues to expand its AI-driven provider performance improvement strategies, including the successful launch of the 100 Top Hospitals program in partnership with Fortune Magazine.
Negative Points
Premier Inc (NASDAQ:PINC) reported a GAAP net loss of $49.2 million for the quarter, primarily due to a $140 million impairment charge related to its Contigo Health business.
The adoption of the network capabilities into the self-insured healthcare provider market has been slower than anticipated, impacting the financial expectations for the Contigo Health business.
There is an expected increase in the aggregate blended member fee share to the mid-50% level, which could potentially impact future profitability.
The direct sourcing business revenue was relatively flat, with growth offset by lower pricing for certain products compared to the prior year period.
Free cash flow and cash flow from operations both declined from the prior year period, influenced by tax payments associated with the sale of non-healthcare GPO operations and increased investments in capitalized software development.
Q & A Highlights
Q: Could you help us understand the extent of the early termination benefit in the quarter? Was that an item that was expected in guidance? A: (Craig Steven McKasson, Premier, Inc. - Chief Administrative & Financial Officer & SVP) The early termination payment was around $5 million for the quarter. This was anticipated and factored into our guidance when established.
Q: As we look at the guidance for next year in the low 60% range, how much of the book will have repriced at that level? A: (Craig Steven McKasson) About 1/3 of our book has already been renewed with revised pricing and fee share levels. By the end of fiscal 2025, we expect about 3/4 of the book to be renewed at these levels.
Q: Is there any way to think about what the ceiling is long term for admin fee share and where this can go? A: (Craig Steven McKasson) It's challenging to predict accurately until we complete all renewals. Our current perspective is that we will likely remain in the 60% range, although it could ratchet up from the low 60s longer term.
Q: Can you discuss the receptivity within your customer base for some of the AI-enabled capabilities you discussed, like documentation? A: (Michael J. Alkire, Premier, Inc. - President, CEO & Director) About 10% to 20% of our health systems are innovators using AI, with the next 60% to 70% being followers. Our focus is on predictive AI, helping with drug trials, documentation for reimbursement, and streamlining prior authorization processes.
Q: What type of outside partner are you looking to engage for Contigo and S2S Global, and how do you envision the structure of any future partnership? A: (Craig Steven McKasson) For Contigo, we're looking for partners with TPA, COE capabilities, or strategic partners powered by financial backers. For S2S Global, we seek partners with a shared vision on supply chain resiliency, more product breadth, and capacity for scale.
Q: How much of the mid-single-digit growth outlook for Performance Services is in your control, and what are the assumptions around the macro that get you there? A: (Michael J. Alkire) The growth is driven by our services helping health systems manage increased labor costs and inflation. We focus on enabling them to do more with less while maintaining high-quality care.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
