CHARLOTTE, N.C.–(BUSINESS WIRE)–Premier Inc. (NASDAQ: PINC) today reported financial results for the fiscal 2019 fourth quarter and full year ended June 30, 2019.
The company adopted new revenue recognition standard ASC 606 on July 1, 2018, in conjunction with the beginning of fiscal 2019, using the modified retrospective approach and did not restate prior periods. Therefore, fiscal 2019 results of operations under the new revenue standard ASC 606 are compared with fiscal 2018 results under the previous revenue standard ASC 605 in the body of this press release, and the comparisons are not necessarily meaningful. However, solely for informational purposes, current period results under the previous standard are included in the tables at the back of this press release.
On May 6, 2019, the company announced that it committed to a plan to sell certain assets of its specialty pharmacy business and to discontinue operations of, and wind down and exit from the specialty pharmacy business. On June 7, 2019, the company closed the transaction. As such, and unless stated otherwise, all results presented in the following release reflect those of continuing operations. A table showing the quarterly impact of discontinued operations is included in this press release.
Full-Year 2019 Highlights of Continuing Operations:
- GAAP net revenue was $1.22 billion, compared with $1.18 billion a year ago; Supply Chain Services segment revenue was $855.2 million, compared with $824.0 million a year ago; and Performance Services segment revenue was $362.5 million, compared with $360.7 million a year ago.
- GAAP net income was $334.7 million, compared with $258.0 million a year ago; diluted net income was $0.27 per share, compared with $1.37 per share a year ago.
- Non-GAAP adjusted EBITDA* was $561.0 million, compared with $539.5 million a year ago.
- Non-GAAP adjusted fully distributed net income* was $349.1 million, or $2.66 per diluted share, compared with $315.4 million, or $2.30 per diluted share a year ago.
- For the fiscal year ended June 30, 2019, the company generated cash flow from operations of $511.9 million. Non-GAAP free cash flow* for the fiscal year of $342.8 million and represented 61% of full-year non-GAAP adjusted EBITDA.
- Premier completed the acquisition of Stanson Health, Inc. as well as the exit of the specialty pharmacy business during fiscal 2019.
- Premier completed its previous $250.0 million stock repurchase plan implemented during fiscal 2019 and received Board authorization for a $300.0 million stock repurchase plan for fiscal 2020.
Q4 2019 Highlights of Continuing Operations:
- GAAP net revenue was $316.2 million, compared with $312.6 million a year ago; Supply Chain Services segment revenue was $227.0 million, compared with $217.8 million a year ago; and Performance Services segment revenue was $89.2 million, compared with $94.8 million a year ago.
- GAAP net income was $70.2 million, compared with $101.0 million a year ago; diluted net loss was $4.28 per share, compared with a loss of $6.17 per share a year ago.
- Non-GAAP adjusted EBITDA* was $139.9 million, compared with $147.7 million a year ago.
- Non-GAAP adjusted fully distributed net income* was $86.3 million, or $0.68 per diluted share, compared with $94.7 million, or $0.70 per diluted share a year ago.
* Descriptions of non-GAAP financial measures are provided in “Use and Definition of Non-GAAP Financial Measures,” and reconciliations are provided in the tables at the end of this release.
“Premier’s financial performance met management’s expectations for the fourth quarter and full year as we continued our close collaboration with more than 4,000 member hospitals and health systems and approximately 175,000 other providers and organizations, working together to reduce costs, improve quality and safety and prepare for America’s ongoing transition to value-based healthcare,” said Susan DeVore, chief executive officer. “Operationally, we remain focused on providing our member health systems with best-in-class solutions and compelling value, underscored by our 97% retention rate and more than $61 billion in contract volume in our group purchasing (GPO) business for the year. We also achieved a 96% SaaS institutional renewal rate within our Performance Services segment, demonstrating the continued strength of our unique and value-added offerings.
“Looking ahead, we expect the challenging environment and market uncertainties to persist through fiscal 2020 as the nation enters a presidential election year,” DeVore continued. “We have factored these continuing uncertainties into our fiscal 2020 guidance, which projects modest year-over-year consolidated growth, and we are focused on appropriately managing our businesses and expenses as we continue to invest in the future. Importantly, we believe Premier, as a trusted partner to the nation’s largest health systems, and with strong, diverse and innovative capabilities, is well positioned for continued success. We are operating from a position of financial strength, characterized by our flexible balance sheet and strong free cash flow. We are committed to growing and expanding our relationships with member health systems, further refining our supply chain and performance services offerings to deliver additional value for our customers, while creating long-term value for our stockholders.”
|
Results of Continuing Operations for the Fourth Quarter and Full Year of Fiscal 2019 |
||||||||||||||||
| Consolidated Fourth-Quarter and Full Year Financial Highlights | ||||||||||||||||
|
Three Months Ended June 30, |
Year Ended June 30, |
|||||||||||||||
| (in thousands, except per share data) |
2019 |
2018 |
|
2019 |
2018 |
|
||||||||||
|
New revenue |
Previous revenue |
% Change |
New revenue |
Previous revenue |
% Change |
|||||||||||
| Net Revenue (a): | ||||||||||||||||
| Supply Chain Services: | ||||||||||||||||
| Net administrative fees |
$ |
170,234 |
|
$ |
171,893 |
|
(1 |
)% |
$ |
662,462 |
|
$ |
643,839 |
|
3 |
% |
| Other services and support |
|
2,042 |
|
|
2,086 |
|
(2 |
)% |
|
8,561 |
|
|
7,812 |
|
10 |
% |
| Services |
|
172,276 |
|
|
173,979 |
|
(1 |
)% |
|
671,023 |
|
|
651,651 |
|
3 |
% |
| Products |
|
54,715 |
|
|
43,833 |
|
25 |
% |
|
184,157 |
|
|
172,327 |
|
7 |
% |
| Total Supply Chain Services (a) |
|
226,991 |
|
|
217,812 |
|
4 |
% |
|
855,180 |
|
|
823,978 |
|
4 |
% |
| Performance Services (a) |
|
89,243 |
|
|
94,792 |
|
(6 |
)% |
|
362,458 |
|
|
360,679 |
|
— |
% |
| Total (a) |
$ |
316,234 |
|
$ |
312,604 |
|
1 |
% |
$ |
1,217,638 |
|
$ |
1,184,657 |
|
3 |
% |
| Net income from continuing operations |
$ |
70,229 |
|
$ |
101,000 |
|
(30 |
)% |
$ |
334,677 |
|
$ |
258,007 |
|
30 |
% |
| Net income from continuing operations attributable to stockholders |
$ |
(264,421 |
) |
$ |
(323,068 |
) |
18 |
% |
$ |
15,706 |
|
$ |
191,040 |
|
(92 |
)% |
| Adjusted net (loss) income from continuing operations (b) |
$ |
(264,421 |
) |
$ |
(323,068 |
) |
18 |
% |
$ |
15,706 |
|
$ |
187,750 |
|
(92 |
)% |
| Weighted average shares outstanding: | ||||||||||||||||
| Basic |
|
61,725 |
|
|
52,412 |
|
18 |
% |
|
59,188 |
|
|
53,518 |
|
11 |
% |
| Diluted |
|
61,725 |
|
|
52,412 |
|
18 |
% |
|
60,269 |
|
|
137,340 |
|
(57 |
)% |
| (Loss) earnings from continuing operations per share attributable to stockholders: | ||||||||||||||||
| Basic |
$ |
(4.28 |
) |
$ |
(6.17 |
) |
31 |
% |
$ |
0.27 |
|
$ |
3.57 |
|
(92 |
)% |
| Diluted (b) |
$ |
(4.28 |
) |
$ |
(6.17 |
) |
31 |
% |
$ |
0.27 |
|
$ |
1.37 |
|
(80 |
)% |
| NON-GAAP FINANCIAL MEASURES: | ||||||||||||||||
| Adjusted EBITDA (a) (c): | ||||||||||||||||
| Supply Chain Services |
$ |
141,892 |
|
$ |
142,053 |
|
— |
% |
$ |
548,029 |
|
$ |
531,851 |
|
3 |
% |
| Performance Services |
|
28,236 |
|
|
37,564 |
|
(25 |
)% |
|
129,147 |
|
|
123,429 |
|
5 |
% |
| Total segment adjusted EBITDA |
|
170,128 |
|
|
179,617 |
|
(5 |
)% |
|
677,176 |
|
|
655,280 |
|
3 |
% |
| Corporate |
|
(30,272 |
) |
|
(31,917 |
) |
5 |
% |
|
(116,134 |
) |
|
(115,760 |
) |
— |
% |
| Total (a) |
$ |
139,856 |
|
$ |
147,700 |
|
(5 |
)% |
$ |
561,042 |
|
$ |
539,520 |
|
4 |
% |
| Adjusted fully distributed net income (c) |
$ |
86,330 |
|
$ |
94,700 |
|
(9 |
)% |
$ |
349,052 |
|
$ |
315,411 |
|
11 |
% |
| Earnings per share on adjusted fully distributed net income – diluted (a) (c) |
$ |
0.68 |
|
$ |
0.70 |
|
(3 |
)% |
$ |
2.66 |
|
$ |
2.30 |
|
16 |
% |
| (a) Bolded measures correspond to company guidance. | ||||||||||||||||
| (b) Earnings per share attributable to stockholders excludes the adjustment of redeemable limited partners’ capital to redemption amount and the net income attributable to non-controlling interest in Premier LP if Class B common stock is determined to be dilutive. Likewise, earnings per share attributable to stockholders includes the adjustment of redeemable limited partners’ capital to redemption amount and the net income attributable to non-controlling interest in Premier LP if Class B common stock is determined to be antidilutive. | ||||||||||||||||
| (c) See attached supplemental financial information for reconciliation of reported GAAP results to Non-GAAP results. | ||||||||||||||||
For the fiscal fourth quarter ended June 30, 2019, Premier generated GAAP net revenue of $316.2 million, compared to net revenue of $312.6 million for the same period a year ago.
GAAP net income for the fiscal fourth quarter was $70.2 million, compared with $101.0 million a year ago. In accordance with GAAP, fiscal 2019 and 2018 fourth-quarter net income attributable to stockholders includes non-cash adjustments of $(297.0) million and $(353.7) 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 result 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. After these non-cash adjustments, the company reported a net loss attributable to stockholders of $264.4 million, or $4.28 per diluted share, compared with $323.1 million, or $6.17 per diluted share, a year ago. See “Calculation of GAAP Earnings per Share” in the income statement section of this press release.
Fiscal fourth-quarter non-GAAP adjusted EBITDA of $139.9 million compared to $147.7 million for the same period the prior year.
Non-GAAP adjusted fully distributed net income for the fiscal fourth quarter of $86.3 million compared to $94.7 million for the same period a year ago. Non-GAAP adjusted fully distributed earnings per share totaled $0.68, compared with $0.70 for the same period a year ago. Adjusted fully distributed earnings per share is a non-GAAP financial measure that represents net income, adjusted for non-recurring and non-cash items, attributable to all stockholders as if all Class B stockholders exchanged their Class B common units and associated Class B common shares for Class A common shares.
Segment Results
Supply Chain Services
For the fiscal fourth quarter ended June 30, 2019, Supply Chain Services segment net revenue was $227.0 million, compared with $217.8 million a year ago. Net administrative fees revenue of $170.2 million increased from the preceding quarter while decreasing 1% from the year-ago period, which benefited from higher-than-anticipated recoveries of past-due net administrative fees and the timing of cash collections ahead of the July 1, 2018 adoption of the new ASC 606 revenue recognition standard. Net administrative fees revenue in the fiscal 2019 fourth quarter under the previous revenue recognition standard totaled $172.3 million, basically unchanged from a year ago.
Products revenue was $54.7 million, compared with $43.8 million a year ago, primarily driven by growth in certain commodity product categories of the direct sourcing business as well as sales associated with aggregated purchasing of products.
Supply Chain Services segment non-GAAP adjusted EBITDA for the fiscal 2019 fourth quarter was $141.9 million, compared with $142.1 million for the same period a year ago. Direct sourcing gross profit growth resulting primarily from increased sales of higher-margin products was primarily offset by increased investments in the company’s recently launched E-Commerce initiative to develop a more efficient integrated delivery system ordering platform.
Performance Services
For the fiscal fourth quarter ended June 30, 2019, Performance Services segment net revenue was $89.2 million, compared with $94.8 million for the same quarter last year. The decrease was due to lower consulting revenue related to cost management and quality and safety engagements. This was partially offset by growth in the clinical surveillance, cost management and clinical decision support areas of the technology business.
Performance Services segment non-GAAP adjusted EBITDA was $28.2 million for the fiscal 2019 fourth quarter, compared with $37.6 million for the same quarter last year. The decrease was primarily the result of lower revenue and ongoing investments in the company’s clinical decision support technology and in the development of the company’s high-value care network, a strategy intended to link employers and payers with providers to enable better clinical outcomes at reduced cost.
Results of Continuing Operations for the Twelve Months Ended June 30, 2019
For the fiscal year ended June 30, 2019, GAAP net revenue was $1.22 billion, compared with $1.18 billion in the prior year. GAAP net income totaled $334.7 million, compared with $258.0 million a year ago. Fiscal 2019 and 2018 full-year GAAP net income attributable to stockholders required non-cash adjustments of $(118.1) million and $157.6 million, respectively, to reflect changes in redemption value of the limited partners Class B common unit ownership at the end of each period. These non-cash adjustments result 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. After these non-cash adjustments, the company reported net income attributable to stockholders of $15.7 million, or $0.27 per diluted share, compared with net income of $191.0 million, or $1.37 per diluted share, in the prior year. See “Calculation of GAAP Earnings per Share” in the income statement section of this press release.
For fiscal year ended June 30, 2019, non-GAAP adjusted EBITDA was $561.0 million, compared with $539.5 million in the prior year. Non-GAAP adjusted fully distributed net income was $349.1 million, compared with $315.4 million a year ago, while non-GAAP adjusted fully distributed earnings per share was $2.66, compared with $2.30.
Supply Chain Services segment net revenue was $855.2 million for fiscal 2019, compared with $824.0 million a year ago. Segment adjusted EBITDA was $548.0 million, compared with $531.9 million for the prior year.
Performance Services segment net revenue was $362.5 million for fiscal 2019, compared with $360.7 million a year ago. Segment adjusted EBITDA was $129.1 million, compared with $123.4 million.
Cash Flows and Liquidity
Net cash provided by operating activities was $511.9 million for the fiscal year ended June 30, 2019, compared with $505.3 million for the same period last year. The increase was primarily driven by increases in net administrative fees and services revenue and an increase in cash collections on accounts receivable, partially offset by increased cash paid for taxes primarily related to a refund received in the prior year, and increased selling, general and administrative expenses. At June 30, 2019, the company’s cash and cash equivalents totaled $141.1 million, compared with $152.4 million at June 30, 2018. At June 30, 2019, the company had an outstanding balance of $25.0 million on its five-year, $1.0 billion revolving credit facility. On July 15, 2019, the company repaid the outstanding balance.
Non-GAAP free cash flow for the fiscal year ended June 30, 2019 was $342.8 million, compared with $333.6 million for the same period a year ago and was primarily impacted by a decrease in distributions to limited partners as well as by the same factors that contributed to an increase in net cash provided by operating activities partially offset by the $18.0 million Tax Receivable Agreement (TRA) payment made to member owners in the current year. Timing of the TRA payment shifted to July in the current year from June in previous years due to a change in the company’s federal tax filing deadline. Free cash flow equaled 61% of non-GAAP adjusted EBITDA for fiscal 2019. The company defines free cash flow as cash provided by operating activities less quarterly tax distributions and annual TRA payments to limited partners and purchases of property and equipment (see free cash flow reconciliation to net cash provided by operating activities in the tables section of this press release).
As previously announced, the company completed its $250.0 million Class A stock repurchase program in March 2019. Under the program, the company repurchased approximately 6.7 million shares of Class A common stock, which had the impact of adding approximately $0.06 to diluted per-share results for fiscal year ended June 30, 2019.
Fiscal 2020 Outlook and Guidance
The statements in this “Fiscal 2020 Outlook and Guidance” discussion are “forward-looking statements.” For additional information regarding the use and limitations of such statements, see “Forward-Looking Statements” below and the “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 believes it remains well positioned financially and operationally for fiscal 2020, and is introducing financial guidance for the fiscal year based on the following key assumptions:
- Net administrative fees revenue growth of 1% to 5%.
- Revenue growth of the company’s products business of 5% to 9%.
- Extension of the Hospital Improvement Innovation Network contract with CMS at rates approximating 45% of the $14.4 million generated in fiscal 2019.
- Performance consistent with the company’s current visibility into its annual revenue stream. Assuming the continuation of historical GPO retention and SaaS institutional renewal rates that are consistent with fiscal 2019 results, approximately 88% to 93% of Premier’s fiscal 2020 consolidated net revenue guidance range is available under contract.
- A consolidated non-GAAP adjusted EBITDA margin of 43% to 47%.
- Capital expenditures of approximately $95 million to $100 million.
- An effective tax rate of approximately 26%.
- Stock-based compensation of $28 million to $32 million.
- Amortization of purchased intangible assets of approximately $50 million.
- Non-GAAP free cash flow approximating 55% to 65% of non-GAAP adjusted EBITDA
- Per-share guidance does not include the impact of share repurchases under the previously authorized $300 million stock repurchase plan. The timing and amount of any share repurchases will be determined by management based on market conditions, share price and other factors.
- Guidance does not contemplate the impact of any future significant acquisitions.
Based on the company’s current outlook, and the realization of the assumptions discussed above in all material respects, Premier has established the following financial guidance for the fiscal year ending June 30, 2020:
| Fiscal 2020 Financial Guidance * | ||||
| Premier, Inc. introduces full-year fiscal 2020 financial guidance, as follows: | ||||
| (in millions, except per share data) |
FY 2020 |
% YoY Increase | ||
| Net Revenue: | ||||
| Supply Chain Services segment | $872.0 – $907.0 | 2% – 6% | ||
| Performance Services segment | $359.0 – $373.0 | (1)% – 3% | ||
| Total Net Revenue | $1,231.0 – $1,280.0 | 1% – 5% | ||
| Non-GAAP adjusted EBITDA | $566.0 – $589.0 | 1% – 5% | ||
| Non-GAAP adjusted fully distributed EPS | $2.76 – $2.89 | 4% – 9% | ||
|
* The company does not meaningfully reconcile guidance for non-GAAP adjusted EBITDA and non-GAAP adjusted fully distributed earnings per share to net income attributable to stockholders or earnings per share attributable to stockholders because the company cannot provide guidance for 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 fully distributed earnings per share without unreasonable effort. This is due to two primary reasons: |
||||
|
•Reasonable guidance cannot be provided for reconciling the adjustment of redeemable limited partners’ capital to redemption amount – historically the largest adjustment in the reconciliation from non-GAAP to GAAP amounts – due to the fact that the increase or decrease in this item is based on the change in the number of shares of Class B stock outstanding and change in stock price between quarters, which the company cannot predict, control or reasonably estimate. |
||||
|
• Reasonable guidance cannot be provided for earnings per share attributable to stockholders because the ongoing quarterly member-owner exchange of Class B common stock and corresponding Class B units into shares of Class A common stock impacts the number of shares of Class A common stock outstanding each quarter, which the company cannot predict, control or reasonably estimate. Member owners have the right, but not the obligation, to exchange shares on a quarterly basis, and the company has the discretion to settle any exchanged shares for Class A common stock, cash, or a combination thereof, neither of which can be predicted, controlled or reasonably estimated at this time. |
||||
Impact of Discontinued Operations on Fiscal 2019 Financial Results
On May 6, 2019, the company announced that it committed to a plan to sell certain assets of its specialty pharmacy business and to discontinue operations of, and wind down and exit from the specialty pharmacy business. On June 7, 2019, the company closed the transaction. The table below shows the impact of discontinued operations by quarter and full fiscal year:
| Supplemental Financial Information | |||||||||||||||||||
| Selected Financial Information for Discontinued Operations | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Fiscal Year 2019 Discontinued Operations Results: | Quarter | Quarter | Quarter | Quarter | Full Year | ||||||||||||||
| Net revenue |
$ |
108,944 |
|
$ |
114,268 |
|
$ |
121,662 |
|
$ |
83,619 |
|
$ |
428,493 |
|
||||
| Gross profit |
$ |
3,090 |
|
$ |
3,496 |
|
$ |
3,720 |
|
$ |
663 |
|
$ |
10,969 |
|
||||
| Loss from discontinued operations, net of tax |
$ |
(1,399 |
) |
$ |
(1,000 |
) |
$ |
(1,463 |
) |
$ |
(46,736 |
) |
$ |
(50,598 |
) |
||||
| NON-GAAP FINANCIAL MEASURES: | |||||||||||||||||||
| Adjusted EBITDA |
$ |
(904 |
) |
$ |
(946 |
) |
$ |
(1,137 |
) |
$ |
(5,063 |
) |
$ |
(8,050 |
) |
||||
| Adjusted fully distributed net loss |
$ |
(858 |
) |
$ |
(852 |
) |
$ |
(985 |
) |
$ |
(3,864 |
) |
$ |
(6,559 |
) |
||||
| Loss per share on adjusted fully distributed net income – diluted |
$ |
(0.01 |
) |
$ |
– |
|
$ |
(0.01 |
) |
$ |
(0.03 |
) |
$ |
(0.05 |
) |
||||
Conference Call
Premier management will host a conference call and live audio webcast on Tuesday, Aug. 20, 2019, at 8:00 a.m. ET, to discuss the company’s financial results. The conference call can be accessed through a link provided on the investor relations page on Premier’s website at investors.premierinc.com. Those wanting to participate by phone may do so by dialing 844.296.7719 and providing the operator with conference ID number: 2739956. International callers should dial 574.990.1041 and provide the same passcode. The company encourages callers to dial in at least five minutes before the start of the call to register. The archived webcast will be accessible on Premier’s investor relations page.
About Premier Inc.
Premier Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of more than 4,000 U.S. hospitals and health systems and approximately 175,000 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, Instagram and Premier’s b
Contacts
Investor contact:
Jim Storey
Vice President, Investor Relations
704.816.5958
[email protected]
Media contact:
Amanda Forster
Vice President, Public Relations
202.879.8004
[email protected]
