FORM 10-Q" This is a quarterly report filed by Premier, Inc. with the Securities and Exchange Commission (SEC) for the period ended December 31, 2024.

Premier Inc. Reports Strong Financial Performance Despite Challenges

Premier Inc., a leading healthcare performance improvement company, has released its financial results for the second quarter of fiscal year 2025. Despite facing headwinds from inflation, supply chain disruptions, and other macroeconomic factors, the company has demonstrated resilience and delivered solid financial performance.

Overview of Financial Performance

For the three months ended December 31, 2024, Premier reported net revenue of $240.3 million, a decrease of 14% compared to the same period in the prior year. This decline was driven by decreases in both the Supply Chain Services and Performance Services segments.

On the bottom line, Premier reported a net loss of $85.2 million, compared to net income of $52.9 million in the prior year period. This loss was primarily due to a $126.8 million goodwill impairment charge related to the company’s Informatics and Technology Services (ITS) reporting unit.

Despite the net loss, Premier generated $50.1 million in Adjusted EBITDA, a non-GAAP metric that excludes certain one-time and non-cash items. This represented a 21% Adjusted EBITDA margin. The company also reported $23.8 million in Non-GAAP Adjusted Net Income, or $0.25 per diluted share.

For the six-month period ended December 31, 2024, Premier reported net revenue of $488.4 million, a decrease of 11% compared to the prior year. Adjusted EBITDA for the six-month period was $112.5 million, representing a 23% margin.

Segment Performance

Premier operates two main business segments: Supply Chain Services and Performance Services.

The Supply Chain Services segment, which includes the company’s group purchasing organization (GPO) program, saw net revenue decline 11% in the quarter and 9% in the six-month period. This was primarily due to an increase in the revenue share paid to members as the company renewed certain GPO contracts at higher fee rates. Cost of revenue in this segment increased, putting pressure on margins.

The Performance Services segment, which provides technology-enabled performance improvement solutions, experienced a 19% decline in quarterly net revenue and a 14% decline in six-month net revenue. This was driven by decreases in SaaS-based product subscriptions, consulting services, and other revenue streams. The segment also incurred a $126.8 million goodwill impairment charge, leading to a significant operating loss.

Strengths and Weaknesses

One of Premier’s key strengths is its diversified business model, with revenue streams from both supply chain services and performance improvement solutions. This helps to mitigate risk and provide stability during challenging times.

However, the company is facing headwinds in both of its segments. In Supply Chain Services, the increasing competition for GPO contracts is putting pressure on margins as Premier has had to offer higher revenue shares to members. In Performance Services, the decline in demand for certain products and services is concerning and may require the company to reevaluate its product portfolio and go-to-market strategy.

The goodwill impairment charge in the Performance Services segment is also a weakness, as it indicates challenges in that part of the business. Premier will need to carefully assess the ITS reporting unit and determine how to address the underlying issues.

On the positive side, Premier’s strong cash flow generation and healthy balance sheet, with $85.9 million in cash and cash equivalents, provide the company with financial flexibility to navigate the current environment. The company’s recent $1 billion share repurchase authorization also demonstrates confidence in the long-term prospects of the business.

Outlook and Future Prospects

Looking ahead, Premier expects that certain trends and economic or industry-wide factors will continue to affect its business, both in the short and long term. These include the impact of inflation on the broader economy, the significant increase in input costs in healthcare, and the potential disruption from the implementation of healthcare legislation.

To address these challenges, Premier will need to focus on scale and cost containment, as well as helping its healthcare provider customers measure, report on, and bear financial risk for outcomes. The company believes these trends will result in increased demand for its Supply Chain Services and Performance Services solutions in the areas of cost management, quality and safety, and value-based care.

However, there are uncertainties and risks that may affect the actual impact of these anticipated trends, the expected demand for Premier’s services, and related assumptions on the business. The company will need to closely monitor the macroeconomic environment and be prepared to adapt its strategies accordingly.

Overall, Premier’s financial performance in the second quarter and first half of fiscal year 2025 reflects the challenges facing the healthcare industry, but the company’s diversified business model, strong cash flow, and financial flexibility provide a solid foundation for navigating the current environment. As Premier continues to execute on its strategic initiatives, investors will be closely watching the company’s ability to adapt and capitalize on the evolving healthcare landscape.