Q3 2021 Premier Inc Earnings Call
Good morning. My name is next to Ryan I'll be your conference operator today at this time I would like to welcome everyone to the Premier Inc. Fiscal year 2021 third quarter results and conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session.
Mind you This conference is being recorded.
Okay.
Awesome.
Thank you Dexter welcoming to premier its fiscal 2021 third quarter conference call. Our speakers. This morning are Mike Alkire, our president and CEO and Craig Mckesson, our chief administrative and financial officer before we get started I want to remind everyone that our earnings release and the supplemental slides accompanying.
This conference call are available in the Investor Relations section of our website at investors Dot Premier Inc. Dot com.
Management's remarks today contain certain forward looking statements and actual results could differ materially from those discussed today. These forward looking statements speak as of today and we undertake no obligation to update them.
Factors that might affect future results are discussed in our filings with the SEC, including our form 10-Q for the fiscal third quarter, which we expect to file soon we encourage you to review these detailed safe Harbor and risk factor disclosures Altherr also where appropriate we will refer to adjusted or other non-GAAP.
<unk> measures such as free cash flow to evaluate our business reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and the appendix of the supplemental slides accompanying this presentation and in our earnings form 8-K, which we expect to furnish to the SEC soon.
I will now turn the call over to Mike Alkire.
Thanks, Angie good morning, everyone and thank you for joining us today for a discussion.
Our fiscal 2021 third quarter results.
Look for the remainder of this fiscal year and preliminary thoughts on fiscal 2022.
Before we get started let me say that I'm honored and humbled to have been chosen by our board to lead Premier as we continue on our strategic journey to transform health care together with our members.
I want to thank Susan for her leadership and her role in shaping premier into the company. It is today, an industry, leading health care solutions company with an extensive provider network and artificial intelligence enabled technology platform that helps our members and other customers to deliver and provide access to higher quality more cost.
Effective healthcare, Susan and I continue to work closely to ensure a smooth transition.
Look forward to her continued insights and perspectives for premier.
Takes on her advisory role.
Turning to some highlights for the third quarter, we are pleased with our results, which exceeded our expectations and reflects another quarter of strong fundamental performance compared with the third quarter of fiscal 2020.
Consolidated net revenue grew 40%.
Supply chain services segment net revenue increased 56%.
And performance services segment net revenue grew 3%.
As we expected adjusted EBITDA and adjusted earnings per share declined year over year, primarily due to the amended and extended GPO agreements that were executed in August 2020.
We also announced this morning that we are increasing our fiscal 2021 guidance ranges. We currently expect consolidated net revenue to be in the range of 1671 to 171 1 billion.
Adjusted EBITDA to be in the range of $460 million to $475 million and adjusted EPS to be in the range of $2 42.
To $2 51.
Craig will discuss our financial results and updated guidance in his remarks.
This morning, as I take on the role of Premier's, New CEO I wanted to share with you might view of our business and our path forward.
With my background in technology, a long history in process improvement and a commitment to premier's vision mission and values.
We're focused on leading premiers continued evolution into a technology based health care solutions provider.
Use our differentiated network vast data and machine learning to help our members and other customers deliver higher quality lower cost healthcare and reduce waste and other inefficiencies.
This is something that I'm very passionate about and as part of my plan I'm focused on three key priorities as we advance our strategies to achieve our goals and deliver and to deliver long term growth and value to our stockholders members and other stakeholders.
First we are reinforcing our focus on our mission vision and values and enhancing our culture with a mindset of innovation growth discipline and accountability.
This includes executing on delivering consistent operational and financial performance.
Second we are continuing to nurture our core business, while expanding into adjacent markets and diversifying our business.
We believe our strong relationships with our members also position us to serve the needs of employers payers and life sciences companies through our data and technology.
Third we will be more creative in our approach to increasing the value of our portfolio of unique assets. This includes building acquiring enhancing and refining the wright complement of assets and capabilities. Our recent acquisition of invoice delivery services <unk>.
Leading provider of electronic invoicing and payment solutions for health care as an example of this approach.
Adding the <unk> capabilities to digitize and automate invoicing and payments to our technology portfolio of assets is a key component in advancing our strategy to tech enable all aspects of the supply chain.
We believe these capabilities will further diversify and grow our revenue streams by accelerating our expansion of technology enabled financial solutions for health care.
We also expect these capabilities will give us greater visibility to total members spend and the GPO, which will enable us to continue to identify GPO contract expansion opportunities and drive further contract compliance.
In addition, <unk> provides an opportunity for us to use advanced technology to help our members reduce the total cost of care by enhancing enhancing invoice and payment workflow and enabling automated communications between contracted parties.
Over the past several years, we have strengthened our foundation, one that positions us well for the opportunities that are ahead of us.
We have long standing strategic relationships with our members with access to what we believe is one of the industry's largest repositories of healthcare data, including clinical financial and operational data.
We've enhanced our integrated technology platform by expanding our natural language processing capabilities, which provide real time and actionable insights at the point of the physician decision, making to reduce variations in care and safely reduce costs.
We have further expanded our use of artificial intelligence to begin solving for new use cases in adjacent markets, including the identification of patients for clinical trials and the monetization of manual and costly processes such as prior authorization.
We have a strong leadership team with the significant industry experience in their respective areas of expertise.
And we continue to operate from a position of financial strength as reflected by our financial balance sheet.
Free cash and our free cash flow generation.
Under my leadership, we will look forward to further accelerate technology enablement to advance our strategies.
Our members and our customers and other.
Other adjacent markets are now being confronted with new expectations and requirements in an environment that will require technology enablement to help drive higher quality health care through improved health outcomes with efficiency and lower cost.
Premier is a critical partner in helping to navigate this new environment and address these necessary evolution into the future.
I'll now discuss our view regarding some of the anticipated changes in Washington D C.
Although by the administration and Congress remained focus on ending the pandemic attention is transitioning to economic recovery. This.
This includes healthcare reforms to expand coverage and improve healthcare quality and cost effectiveness.
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We anticipate an improved reimbursement environment for our hospitals and health system members, which May result, in a greater ability and willingness for them to take or to make incremental investments in technology and services to improve quality and reduce costs.
Second there is an increased focus on value based care and pricing transparency, including incentives to move to risk space alternative payment models. We believe we are well positioned to support our members through analytics capabilities that support evidence based care and performance improvement.
Third there was a strong bipartisan support for automating the healthcare system's antiquated prior authorization system.
We believe we are well positioned to support our members and other customers through our current prior authorization solution.
And then finally, we expect action to create a technology enabled resilient U S healthcare supply chain.
Premier has already taken steps many in partnerships with our members to meet these needs and we look forward to further partnering opportunities to improve healthcare supply chain resiliency.
In summary, we are very pleased with our third quarter results. The role we continue to plan supporting our members through the pandemic and our progress towards achieving our multi year strategic goals.
As we look forward, we are focused on operational and financial execution advancing.
Our strategy and delivering meaningful solutions to our members and our other customers to create long term value for all of our stakeholders.
I will now turn the call over to Craig Mckesson for a discussion of our financial performance and expectations.
Thanks, Mike I'll begin with a brief discussion of our fiscal 2021 third quarter results and provide details regarding our updated financial guidance for the remainder of fiscal 2021.
We are pleased with our strong performance in the quarter and we're excited about the opportunities ahead of us while we are still developing our fiscal 2022 plan I will also provide you with our preliminary thoughts for next fiscal year.
For the third quarter of 2021 consolidated net revenue of $469 9 million increased 40% from the year ago quarter.
Supply chain services segment revenue of $371 2 million increased 56% compared with the prior year quarter and performance services segment revenue of $98 $7 million increased 3% compared with the prior year quarter.
In supply chain services net administrative fees revenue decreased compared with the prior year quarter, primarily due to one as we expected our amended and extended GPO agreements, which were effective July one 2020 and reduced net administrative fees revenue by approximately <unk> <unk>.
$2 million in the third quarter compared with the prior year quarter.
Two the impact of the $5 million and GAAP required noncash amortization of prepaid contract administrative fees as a result of our prior year asset acquisition of security and Nextera in February 2020.
And three the ongoing impact on net administrative fees revenue from the COVID-19 pandemic.
Demonstrating the resiliency of our core business. These items were partially offset by growth in net administrative fees revenue as a result of the ramp up from the addition of new members, including Virginia, Mason Health system, and community health care system and ongoing contract penetration driven in part by our high.
Clients Port portfolio programs, and the addition of new contract categories and suppliers across both our acute and alternate site businesses.
Products revenue increased 253% from the prior year quarter, primarily driven by $155 million in incremental revenue related to growth and commodity products and aggregated purchase of certain other products as well as our ongoing success in securing P.
P E and other critically needed high demand supplies for our members as a result of the COVID-19 pandemic.
The growth in product revenues, while low margin given our commitment to deliver high quality and low cost products to members in need has delivered incremental profitability to mitigate the negative impact on our GPO, resulting from declines in utilization and spend during the pandemic.
In our performance services segment revenue growth in the third quarter was primarily driven by a $5 million in incremental revenue and our contango health business related to our acquisition of health design plus in May 2020, as well as growth in our applied sciences cost management and perform.
<unk> improvement consulting businesses. These increases were partially offset by lower revenue associated with enterprise analytics license agreements during the current period compared with the prior year period, which included significant revenue from enterprise analytics license agreements entered into during the prior year.
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With respect to profitability.
GAAP net income was $51 $4 million for the quarter.
As we expected consolidated adjusted EBITDA of $121 2 million in the third quarter decreased 22% from the prior year quarter, primarily due to supply chain services, adjusted EBITDA of $117 9 million, which decreased 21% quarter over quarter.
Mainly as a result of the amended and extended GPO agreements and the noncash amortization of the security prepaid administrative fees.
This decline was partially offset by performance services segment, adjusted EBITDA of $36 million, which increased 4% from the prior year quarter.
Adjusted net income of $78 5 million decreased 12% from a year ago and adjusted earnings per share decreased 12% to <unk> 64.
Our effective tax rate of 22%, which we now expect for the remainder of fiscal 2021 was slightly lower than we previously anticipated and primarily results from the release of evaluation allowance on deferred tax assets associated with current year utilization of historical net op.
Operating losses. This change in the effective tax rate resulted in a <unk> <unk> benefit to our diluted earnings per share in the third quarter and five <unk> for the nine months ended March 31 2021.
From a liquidity and balance sheet perspective cash flow from operations for the nine months ended March 31, 2021 was $192 4 million compared with $248 1 million for the prior year.
The decrease was primarily due to expected lower net administrative fees revenue as a result of the amended GPO agreements and the impact of the COVID-19 pandemic.
In addition changes in working capital, including higher levels of inventory, primarily driven by the impact of aggregated purchasing of PPE as a result of the pandemic also impacted net cash from operating activities.
Free cash flow for the nine month period ended March 31, 2021 was $91 6 million compared with $213 9 million for the same period a year ago. The.
The decrease as we expected was primarily due to the same factors that impacted net cash provided by operating activities as well as payments made to former limited partners a premier LP in connection with the early termination of the tax receivable agreement as a part of the company's restructure in August 2020.
These factors were partially offset by the elimination of tax distributions to limited partners also resulting from the restructure.
On April 23, 2021, Premier's Board of directors declared a quarterly cash dividend of <unk> 19 per share payable on June 15th 2021 to stockholders of record as of June <unk>.
Cash and cash equivalents totaled $132 6 million at March 31, 2021, compared with $99 3 million at June 32020.
Our five year $1 billion revolving credit facility had an outstanding balance of $200 million as of March 31, and subsequent to quarter end, we repaid $75 million of that balance.
In addition, we're excited about our March 2021 acquisition of Ibs. These capabilities are operational although still in their early stages, and we expect to make incremental investments over the next year or so to further build out the technology.
Our goal is to have enhanced functionality fully operational to our members and suppliers over the next 12 to 24 months. We currently believe this capability will deliver $50 million to $100 million in revenue over the next three to five years with meaningful profitability and will deliver a double dip.
Return on invested capital.
As Mike highlighted earlier with our increased visibility on the remainder of this fiscal year. We are updating our fiscal 2021 full year guidance, which is based on our year to date performance through March 31, 2021, and our current expectations for the remainder of this fiscal year.
Our guidance incorporates certain key assumptions related to our business and the health care market and consistent with prior years. It does not incorporate the effect of any future significant acquisitions that we may undertake.
We are making the following updates to our guidance.
We are increasing supply chain services segment segment net revenue to one $3 billion to $133 billion, primarily comprised of GPO net administrative fees revenue of $565 million to $580 million and direct sourcing products revenue.
Of $700 million to $720 million.
We are narrowing the range for performance services segment net revenue by increasing the low end of the range for a new range of $371 million to $381 million, representing 7% to 10% growth over prior year.
Together. These produced an increase in expected consolidated net revenue to a range of $1 67, one to 171 1 billion.
We are increasing adjusted EBITDA to be in the range of $460 million to $475 million as well as adjusted earnings per share to be in the range of $2 42.
To $2 51.
Our fiscal 2021 guidance is based on the following assumptions.
We continue to expect the GPO net administrative fees revenue may continue to be pressured by lower overall health care utilization.
The potential deferral of certain elective procedures and the ongoing lower level of purchasing in non health care related areas. As a result of the COVID-19 pandemic.
We currently expect direct sourcing products revenue to decrease sequentially by approximately 10% to $20 million in the fourth quarter from the third quarter of fiscal 2021 with a further step down anticipated in fiscal first quarter 2022 as demand for certain PPE products.
Subsides as a result of lower overall use as well as a result of many of our members completing the buildup of their stockpiles of PPE and other critically needed items.
As we have communicated previously due to the timing and magnitude of enterprise analytics license agreements in our performance services segment, there will be periodic variability and the recognition of the revenue and profitability associated with these engagements during any given fiscal year.
We expect capital expenditures to be slightly lower than we originally anticipated and to now be in the range of $100 million to $105 million for the fiscal year.
Lastly, we now expect that adjusted net income for full fiscal year 2021 will reflect an effective tax rate of 22% as we look ahead to fiscal 2022, we expect the effective tax rate to revert back to a more normalized level ranging between 23% to 27%.
As always we will continue to evaluate the appropriate tax planning strategies and to the extent, we are able or not able to leverage any opportunities. It could bring us to the lower end or higher end of the range respectively.
Finally, as Mike commented earlier as we look forward to fiscal 2022, we remain focused on executing on the key priorities. He laid out to further strengthen and position our business for long term success and achieve our multi year compounded annual growth rate targets of mid to high.
High single digits, excluding the impact of the COVID-19 pandemic for consolidated net revenue adjusted EBITDA and adjusted earnings per share.
We are still in the process of finalizing our fiscal 2022 plan.
<unk> during the past year, we have been focused on taking actions that will drive our performance in fiscal 2022 and beyond.
Our initial view for fiscal 2022 is to target mid to high single digit growth in consolidated net revenue and to be near the low end of our multi year compound annual growth rate targets of mid to high single digits for adjusted EBITDA.
This will be driven in large part by two factors.
First the incremental impact on net administrative fees revenue from the restructuring in August 2020, as a result of the remaining members that did not agreed to amended GPO agreements, which will result in a fee share at the higher end of the high <unk> to low 50% range that we previously guided to.
And second some incremental investments to drive future growth. We currently expect profitability growth to perform at a higher level than our targeted range in subsequent years as our solutions gain further traction across our members and other customers we expect.
To provide full year fiscal 2022 financial guidance on our fourth quarter earnings call. We remain very excited about near and longer term opportunities across our businesses.
Thank you for your time today Dexter will now open the call up for questions.
Thank you Mr. Greg as a reminder to ask a question you will need to press Star One Kelly phone, let me draw. Your question press the pound again Thats star one to ask a question. Please standby, while we compile the Q&A roster.
Your first question comes from the line.
<unk> from Jpmorgan Your line is open.
Thanks, so much for all the color and congrats on the great quarter.
I was hoping maybe you could provide a little bit more our omni Inc. Please focus on value based care, what's the appetite like with Jeff.
Store base to align with that and.
What incrementally are you seeing out there in the marketplace.
Yes. This is Mike so.
It's interesting so what the new by the administration, it's a little too early to tell.
But obviously, we're really encouraged by the commentary and the actions that are coming out of DC.
And as you know we've positioned the business to be a bit more agnostic, where we're not so reliant on value based care, but the net of everything is it's a little early to tell but I think the signs are positively pointing towards more value based care.
Very helpful. Thank you.
Thank you.
Your next question comes from the line of David Anderson from Credit Suisse. Your line is open.
Yeah. Thank you John good morning, and congrats on good quarter.
Wanted to get some color around.
Community Health care system partners contract win you announced.
A few days back a few weeks back my understanding is it was it had been from <unk> GPU.
Just wondering if it was the fallout from the <unk> acquisition up in day, and if Youre seeing you're already expecting some additional opportunities from emerging from that combination.
Yes, I think John Youre, referring to community health.
So just as a quick reminder, that was a it was a broad based win for Premier where.
Our obviously, our GPO and our pricing played a significant role in us winning that opportunity as well as are the future and what we've actually been implementing from a technology standpoint to really get after all of the cost.
In the supply chain to include purchase services in some of the areas that we.
That <unk> historically focused on but I think it was.
When that really highlighted the differentiation that premier has.
Okay, and then last comment Craig you just made about this.
When do you see in fiscal 'twenty two about.
Some contracts, which are not negotiated Florida appreciating previously can you quantify the impact.
How much is that.
That will you be done with all the contracts coming in.
Hi, 40 low 40.
Appreciating arrangement, just give us some more color there.
Sure. This is Craig I'll start and then Mike can add any color.
As we talked about when we did the restructuring in August of 2020, the vast majority of our members agreed to the amended and extended GPO agreements, but we did have a subset that we're continuing our already in sort of an evaluation process. They continued under the existing contracts that we had in place prior to the restructuring for this fiscal year.
And so we've been working with them. The majority of them will have new agreements in place moving forward. There have been a very small subset have through the process made a determination to partner with a different organization due to leadership change or merger acquisition.
But we're not at a point to actually specifically quantified the magnitude, but it will have an impact on our growth next year and cause that fee share to move within the original range, but from the high <unk> to the low Fifty's, yes, Craig the only thing I'll add is that we are very disciplined about the economics that we.
Provide too.
Customers.
And there are times when from a business standpoint, it does not make sense to continue the partnership. So we will walk away. If in fact, we're not getting the economics that makes sense for our business.
Okay. Thanks, guys.
Your next question comes from the line of Ryan Daniels from William Blair. Your line is open.
Hey, Good morning. This is Jared haase in for Ryan.
Mike I wanted to circle back to one of the points that you've talked about in the prepared remarks, just around some of the market adjacencies.
That youre looking to expand into and I know, we've talked a good deal about the employer and the life Sciences I think those have been deemed in the last couple of quarters. So was hoping maybe we could spend a little bit more time around the payer segment that you mentioned just curious if you could talk a little bit further about kind of where you see <unk>.
Amir sitting from a value proposition perspective for that channel I know you talked a little bit about prior authorization. So maybe theres some value add on that front, but just curious if you could talk about any areas, where you see premier adding value in any specific investments or product areas that you think premier can add to further penetrate that adjacent market.
Sure. Thanks for the question.
So from a payer perspective, I think there's two areas that you mentioned one of them.
Our technology, and our data and our network lend themselves well to providing valuable services to so first.
We believe that.
The prior authorization space issue as you suggested using our natural language technology literally and bad things.
Things into the workflow or insights into the workflow.
It's something that payers are going to be very supportive of and I think youre aware that one of the initiatives that we're currently working on is for Medicare.
Is all about Panama, which is the focus on looking at ways to reduce high cost imaging. So just think of the potential extension of high cost imaging and other diagnostics into the payer market. So.
Think that's number one number two we.
A number of our health care systems that actually Jeff health plans. So from that standpoint, many of them are very very interested and linking into our <unk> health initiative.
Is there a think about how do they create a more meaningful capable.
Health plan to their communities and create.
Or or leverage wrappers.
For when their health plan participants need services outside of their current geographic.
Arena, So I think.
Two ways one prior often then obviously leveraging our <unk> health offering.
Got it that makes sense and thanks for that and then maybe just a quick follow up and I think this is maybe more for Craig.
Can you just talk a little bit to what extent sales and implementations and business development activities kind of remain split between sort of virtual or remote or in person I'm just trying to get a sense of what kind of normalized opex might look like and to what extent that might also be impacting the commentary that you shared regarding fiscal 'twenty two.
Stability.
Sure I'll start and then again, Mike can add color as well.
From a from a standpoint of virtual versus onsite, we certainly have some of our advisory services and our field force that have begun to go back on site to our facilities, but continue to do a fair amount and a virtual.
Capacity as well and I think the go forward business will not will be a mix of that.
Prospected basis, I would expect I would say that as we look to next year, we do expect to see some incremental opex as continued travel starts to pick back up as we do begin to reconvene with our members in person, which we have an aggregate, which we have done virtually this year.
So certainly that has an impact on our fiscal 2022 performance as we return to normal.
But overall continue to begin to be more on site with our members, but we will also leverage the opportunity for virtual enhancement that I think has been learned across the industry through the pandemic.
Okay, great that makes sense and thanks and congrats on the quarter.
Thank you. Thank you.
We have a question from Richard close from Canaccord Genuity. Your line is open.
Great. Thanks, congratulations on the quarter, Mike I was curious if you could expand a little on your comment.
That you need to be creative in your approach to increasing value of the portfolio assets is there anything specific that you can add to that or just like where you're coming from in terms of that statement.
Yes first of all.
We've been doing a lot of it.
Over the last couple of years, where we're looking for partners.
And others to really help extend our capabilities. So as you think about our future going forward and as we are continuing to evolve into new markets.
We are going to be looking for.
Partners to literally help us expand in those markets either.
Quicker or with more scale.
So think maybe.
Maybe organizations within life Sciences that have.
Strong.
Ability.
From a channel standpoint or think of.
Organizationally that can marry data that they have maybe from a claims standpoint with some of our clinical as well as our operational data.
So think of also maybe in the.
Prior off areas that we're looking also for partners that.
Have clinical protocols that we can embed into some of our machine learning and natural language technology. So those are those would just be a couple of examples.
Okay, and then as we think about acquisitions.
And new product development.
Any sort of guidepost you can provide us in terms of.
How much is like focused in on the core business versus.
The new adjacent markets.
Sure. Richard This is Craig I don't know that we'd say, we have a specific earmark broadly I think we will always look for capabilities to enhance our core technology capabilities on the supply chain side things that we can do to further cement the technology evolution of our supply chain services and <unk>.
Drive additional contract penetration and access to product suites et cetera on the performance services side, I think relative to the core provider component of the business. We will continue to look for ways to improve and enhance.
The data across the entire continuum of care.
But we will also focus on opportunities to extend and as Mike just talked about look for those partnerships or potential M&A targets to further.
Enhance our growth opportunities in the life sciences payer and employer markets, although those do tie very directly to our kind of core capabilities and improving provider performance.
Okay. Thank you.
Your next question comes from the line of Jessica <unk> from Piper Sandler Your line is open.
Hi, Thanks for taking the question is Jack on for Sean.
I think just interested if you could remind us what the net admin fee impact of the yen Caribbean Eric transaction was that we are lapping in February 2021, and then just any other P&L impact.
So the transactions that we should be aware.
But as we lap them.
Sure so from a standpoint of the acuity and Nextera acquisition, we've disclosed the fact that prior to our acquisition of that business. They had entered into some agreements.
With our prepaid administrative fee that we were required to report from a GAAP standpoint in that in that way, that's about $20 million a year.
So we've been we've been having the impact of that amortization of about $5 million per quarter and non cash amortization that now that we're a year past should.
Should be lapped in terms of that impact.
As we move forward and then again they had entered into a five year agreements with the vast majority of our members prior to the acquisition. So we are in place with them moving forward and then for the rest of our business. The majority of our members entered into five six and seven year contracts.
At the increased fee share that we've previously disclosed we had talked about $100 million to $110 million or so impact to our fiscal 2021 results that as we move into fiscal 'twenty. Two we will be beyond although we do have the small minority of numbers that I talked about in my prepared.
Remarks, where either some of them will have incremental fee share as they have been operating under the historical 30% that all of our members had prior to the restructuring and then we have had a couple.
Again that potentially will not or have made a decision to no longer remain with premier as a result of either executive changes within that health care system.
Or due to merger and acquisition, we had a couple that were acquired as happens in a consolidation environment, but again.
Largest percentage of our members, 96% agreed to the amended and extended GPO agreements moving forward.
Got it and can I follow up and ask let Jonathan.
Jonathan performance services in the quarter.
Thank you Leigh multi month contracts theyre kind of shorter term in nature any color would be helpful.
Yes in general.
Our our helped design plus acquisition is obviously going well.
We're continuing to see a lot of strong interest in our advisory services and our clinical decision support and our life Sciences business had a really solid quarter this quarter.
And I think this is Craig just a little bit of color so with risk with respect to the applied sciences growth. That's a combination of what we would call sort of short term data projects, where we actually deliver data and they delivered strong growth and then kind of ongoing consulting projects. So it's really a mix.
Short term and kind of more extended agreements I will say, we continue to have a very.
Positive pipeline of new engagements and continue to see really strong growth in the applied sciences part of our business as Mike mentioned in the in the performance improvement consulting arena those are primarily.
Engagements that theyre not onetime episodic they tend to be consulting engagements to deliver perform margin improvement services over a period of time.
And again seeing really strong growth and performance in that part of the consulting practice.
And so it's a blend of sort of as as is typical kind of more short term engagements to deliver revenue in the quarter and then with extension beyond into the next quarter and beyond.
Okay.
Your next question comes from the line Irish long from Wehrenberg. Your line is open.
Hi, good morning, Thanks for taking my question.
So along the same Leigh on life Sciences I'm, just wondering if you can kind of speak about the opportunities.
So like you mentioned in the remarks.
You guys have clinical trial recruitment and maybe can you talk about that business a lot of that and then.
Also can you kind of help us to understand what kind of competition like for your lifestyle.
Sure. So this is Mike I'll start so just as a reminder.
Our life Sciences business, obviously is focused for the most part.
Towards the pharmaceutical industry, but we do do some things with the medical device area as well.
I think our sweet spot really is all around real world evidence so as.
New discoveries are being made I think pharma and med device partners really like.
A warm testbed, if you will post.
Drug approval.
To see how therapies are actually reacting in the real world because we have a very very strong network because we have very very.
Strong data that provides them inset insights into.
How to effectively.
How to effectively leverage those therapies into the patient markets. So thats number one number two.
And this is this is a sort of a recent trend where.
We're also beginning to work because work with life Sciences company, because we have the ability at the point of care.
To look at the unstructured data to identify whether or not patients.
Would be good for specific drug trials, and so theres a lot of interest on behalf of of pharma to understand the utilization of that technology and identify whether or not a patient has a good prospect.
Of being a good candidate for a trial. So we think that there is pretty significant.
<unk> an upside from.
Drug trial patient identification standpoint.
As it relates to competitors I think they're very unique aspect or the very strong the strength of premier is.
Likely the $3 three items that Craig and I have been talking about really it's our strong both clinical and operational data to its our technology, our ability to use natural language technology natural language processing.
And embed infer.
Information or glean information from the electronic medical record and it's also our strong network.
That we have.
With our health systems.
With its ability truly too.
At a broad base standpoint be able to.
Look at real World studies, and those kinds of things.
Okay, Great and then my follow up question is on performance.
So it sounds like the lower enterprise analytics licensing revenue is entirely due to timing is that right and then maybe can you kind of talk about your bookings and pipeline for the enterprise analytics solution.
Sure. This is Craig so so yes, whenever we enter into an enterprise analytics license agreement, which we continue to really like because it furthers the sort of strategic alignment with the member and the long term stickiness of that relationship but the way. The revenue recognition does work is that the majority a large portion of the <unk>.
On track that revenue gets recognized at the time of that engagement and so there is a timing implication that's going to happen. We did have enterprise analytics license agreements in the current quarter. It's just not at the level that we had had in the prior year quarter. So it did present, a little bit of a headwind in Q3, but in prior quarters earlier in the year.
We had strong growth from those from a pipeline standpoint, there continues to be a pipeline for those engagements and relationships moving forward. It's just hard to predict iris exactly what quarter something may hit in terms of.
How that pipeline develops overtime.
Okay. Thanks.
Next question Bill Sutherland with benchmark company.
Thanks, and good morning, everybody.
Mortgage services with the <unk>.
Additionally, with the.
Growth and additions you've made in that portfolio of businesses I'm wondering if you could give us a feel about for the mix.
Revenue between.
Perpetual and SaaS and also ticket enabled services.
Sure. This is Craig so we continue to have about 70% of the business today being technology based which is a combination of both the SaaS and the license based revenue that we've discussed tied to enterprise analytics license agreements and about 30% of our business is in the advisory services either.
I'll say one to one.
Margin improvement services that we provide or the collaborative is that we have which think of as one day, many consulting where we're working on our collective issue such as bundled payment or or some other aspect of value based care that we continue to have in that portfolio as well.
And then Craig.
Within the 70%.
Roughly what would be the split with perpetual and.
More SaaS like.
The significant majority today continues to be SaaS based revenue, but we have had a ramp up in enterprise analytics license agreements over the past.
Year or so so it has become more of a piece, but the vast majority is still a SaaS base okay.
That's exactly what I was wondering and then finally.
Stamps.
Mike did you say that.
The use case, there with Panama.
Is that a needle mover in this next fiscal year should.
Should we think of it that way.
I think it's all embedded in our forecast and our guidance.
For fiscal 'twenty two.
Yes, Ryan when we haven't issued guidance for fiscal 'twenty, two yet but included in the mid to high single digit revenue growth that we've contemplated and said we intend to target for next year that factors in some incremental contributions from that part of that expansion of our business.
Okay.
Thanks, everybody.
Thank you.
Next is Stephanie Davis Stephens, Inc. Your line is open.
Thank you for taking my questions. Congrats on the quarter I wanted to follow up on the Railroad Avenue <unk> question, just given we're seeing a lot of different players of datasets that David.
Could you walk us through the compensation down normal is this something where.
A life Sciences company, we'd have to Colby one David that weighed the kind of co op petition by multiple datasets can coexist in peace, so theres not as much maybe differentiate.
Yes.
A couple of things first of all I said earlier in our remarks that we've got some incredible datasets right. So.
If you think about our clinical datasets, we have more than 1000 hospitals that subscribe to our clinical datasets.
About 1000 hospitals in our safety as you think about you just heard the clinical decision support and stance in health.
We're in hundreds of hospitals, where we're getting sort of real time feeds back and forth.
With epic and Cerner and Athena.
You think about our operational labor data sets again, we have close to 1000 hospitals that participate there. So we just think we've got a very very strong.
<unk>.
Capable data set thats very very unique in the industry.
Now most recently with.
Some of the work that we've been doing with a couple of our members. We are now beginning to pull and claims data as well. So I think our history of integrating these datasets and creating meaningful insights out of these datasets are truly things that differentiate us and then our ability truly to take those data and write them.
And of the workflow in terms of the insights or to pull information out of that.
The workflow from the electronic medical record.
Pretty significant differentiation for our capability.
Our life Sciences.
And then thinking about the U S.
Cases for having this robust David.
In a post COVID-19 world.
It more toward analytics is it more towards improving efficiencies staffing modeling what are you seeing the demand.
Yes. So post thank you. It's a great question. So post COVID-19 for our health systems, It's all about getting back to normalcy. So obviously.
Is there as COVID-19 is.
In many cases on the downward swing.
They're trying to get as many electric procedures back.
Back up and running as quickly as possible many of our health care systems are coming to us and asking us to help them.
To create a more flexible corporate cost structures using our data.
Be a bit more dynamic with those those cost structures and Ses to provide services and those kinds of things to augment and when they need help or to help them when they need to reduce costs. So I think number one from a health care system standpoint, it's really all about helping them get back to some.
Some form of normalcy, lifesciences as Craig and I, both but talking about I think that.
Real World evidence is continuing to be a significant opportunity for us patient identification for.
Drug trials and those kinds of things also seem to be.
Obviously a much.
The life Sciences companies are very interested in that as well.
And then finally from a contango standpoint, these many of our large employer customers that.
Have experienced some financial turmoil as a result of COVID-19 and Theyre looking for ways to maximize the investment in health care for their employee ease.
And so they're looking for our <unk> offering to sort of help them.
Great through some of those scenarios to ensure that.
They can work more closely with our health systems and get the lowest cost highest quality care possible.
It sounds like a good setup.
Thank you.
Next question from Michael Chenier.
Bank of America.
This is allen in for Mike. Thanks for taking the questions. Craig I think you mentioned the direct sourcing business. Some of the PPE you expect to see a step down over the next couple of quarters can you talk about what youre hearing from clients and what you see the demand curve looking like like out a couple of quarters.
Sure. So I think as I mentioned in my prepared remarks demand certainly as COVID-19 has become a bit more stabilized is coming down although I will say it depends on kind of <unk>.
<unk> and geography, I mean, we are continuing to see sort of pretty significant wave in the upper Midwest. So in that part of the country. We are continuing to see demand, but in many other parts as youre well aware from from everything you're seeing in the news COVID-19 cases are down dramatically and I think that people have become far more effective at sort of managing.
And in an appropriate fashion. The other point that I highlighted that I think is important is that a lot of health systems have spent the past year, ensuring they have appropriate stockpiles of critically needed PPE and other equipment. So that theyre not put into a similar predicament is happened a year ago when they were.
We're down to the hour in terms of some of that supply and so we think that that's been built up and we will get back to more of a normalized trend. So as I articulated we see a slight step down in Q4 $10 million to $20 million step down off of what we had in the third quarter and then do expect a pretty significant.
Stepped down moving into fiscal 2022.
From the levels that we're at at this point.
Still sort of working through the exact sequential impacted out over multiple quarters and I think we'll have more color to that when we actually establish an issue guidance in August.
Great. Thank you.
There are no further question at this time I would like to turn the conference back to Mr. Mike Hoffman.
Thank you Dexter and thank you all again for joining our call. This morning, I look forward to engaging with you in the weeks or months ahead and sharing with you the progress we're making on achieving our goals.
This concludes today's conference call. Thank you for joining you may now disconnect.
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