• Net Revenue: $240 million for the second quarter, decreased from the prior year period.
• GAAP Net Loss: $46 million due to a $127 million impairment charge to goodwill.
• Adjusted EBITDA: $50 million, with a margin of 20.8%.
• Adjusted Earnings Per Share (EPS): $0.25, excluding Contigo Health impact was $0.27.
• Free Cash Flow: $74 million for the first half of fiscal year 2025, increased by $33 million from the prior year period.
• Cash and Cash Equivalents: $86 million as of December 31, 2024.
• Share Repurchases: Over 29 million shares repurchased for $600 million.
• Dividend: $0.21 per share declared, payable in March.
• Supply Chain Services Revenue Guidance: Increased by $25 million due to higher net administrative fees.
• Performance Services Revenue Guidance: Lowered by $25 million due to short-term headwinds.

• Warning! GuruFocus has detected 6 Warning Signs with PINC.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Premier Inc (NASDAQ:PINC) reaffirmed its total net revenue guidance and increased its adjusted earnings per share guidance due to better-than-expected results in the Supply Chain Services segment.
• The company successfully transitioned its digital supply chain strategy beyond the pilot phase, signing its first agreement with a major partner.
• Premier Inc (NASDAQ:PINC) is leveraging AI to enhance manual back-office processes, delivering significant time improvements and cost savings.
• The company is experiencing growth in other supply chain services revenue, driven by new agreements in its supply chain co-management business.
• Premier Inc (NASDAQ:PINC) completed a $200 million share repurchase in early January 2025, reflecting a disciplined approach to capital deployment and returning capital to stockholders.

Negative Points

• Second quarter revenue and adjusted EBITDA were below expectations, driven by a decline in net administrative fees revenue in Supply Chain Services.
• The Performance Services segment experienced a 19% revenue decline due to lower demand in consulting services and an unfavorable product mix in Applied Sciences.
• GAAP net loss from continuing operations was $46 million, primarily due to an impairment charge to goodwill of $127 million related to the data and technology business in the Performance Services segment.
• The company is facing short-term headwinds in the Performance Services segment, with a shift in member interest favoring SaaS subscription engagements versus license agreements.
• Premier Inc (NASDAQ:PINC) is working towards divesting the remaining assets of Contigo Health, indicating ongoing restructuring challenges.

Q & A Highlights

Q: How is Premier Inc preparing for potential tariffs and ensuring customer savings? A: Michael Alkire, President and CEO, explained that Premier is focusing on building supply chain resiliency and diversification to mitigate tariff impacts. Most contracts have firm pricing terms that protect against taxes and tariffs, ensuring minimal short-term impact on healthcare providers. Premier is also working to reduce reliance on specific countries by diversifying production locations.

Q: What factors contributed to the better-than-expected performance in Supply Chain Services? A: Glenn Coleman, CFO, noted that gross administrative fees grew by nearly 4%, driven by increased contract penetration and new member additions. The renegotiation of fee shares is progressing well, with 69% completed, and new member wins, such as AllSpire, are expected to contribute positively in the second half of the year.

Q: Can you elaborate on the expected performance of the Performance Services segment in the second half of the fiscal year? A: Glenn Coleman highlighted that the segment is expected to be more back-end weighted, with a strong funnel in Applied Sciences and enterprise license agreements shifting to later quarters. New leadership under David Zito is focusing on building a significant pipeline of opportunities and enhancing collaborative capabilities.

Q: How does Premier's firm for term pricing work in the context of tariffs? A: Michael Alkire clarified that firm for term pricing is embedded in supplier contracts, meaning suppliers absorb tariff costs, not Premier or its healthcare system members. This ensures that healthcare providers are shielded from pricing pressures due to tariffs.

Q: What is the status of the Contigo Health divestiture? A: Glenn Coleman reported that Premier completed the sale of Contigo Health's network assets for $15 million in January 2025. The company is still in the process of divesting the third-party administrative and center of excellence aspects of the business.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.