Q2 2022 Premier Inc Earnings Call

Speaker 1: Good morning and welcome to the premier incorporated fiscal 2022 second quarter results in conference call. All participants will be in list and only mode. Should you need assistance please signal conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Angie McCabe. Please go ahead.

Good morning, and welcome to the Premier incorporated fiscal 2022 second quarter results and conference call.

All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to Angie Mccabe. Please go ahead.

Speaker 2: Thank you and welcome to premier fiscal 2022 second quarter call. Our speakers this morning are Mike Adelkire, our president and CEO , and Craig McCasin, our chief administrative and financial office.

Thank you and welcome to Premier's fiscal 2022 second quarter 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 would like to remind you that our earnings release and the supplemental slides accompanying this conference call.

Speaker 2: Before we get started, I would like to remind you that our earnings release and the supplemental slides accompanying this conference call are available in the Investor Relations section of our website at investors.premierank.com.

<unk> are available in the Investor Relations section of our website at investors Dot Premier Inc. Dotcom.

Speaker 2: Our remarks today contain certain forward-looking statements, and actual results could differ materially from those discussed today. These forward-looking statements speak only as of today, and we undertake no obligation to update them.

Our remarks today contain certain forward looking statements and actual results could differ materially from those discussed today. These forward looking statements speak only 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 most recent form.

Speaker 2: Factors that might affect future results are discussed in our filings with the SEC, including our most recent Form 10-K and our Form 10-Q for the quarter, which we expect to file soon. We encourage you to review these filings, including our detailed safe harbor and risk factor disclosures.

<unk> 10-K, and our Form 10-Q for the quarter, which we expect to file soon.

We encourage you to review these filings, including our detailed safe Harbor and risk factor disclosures.

Speaker 2: Also, where appropriate, we refer to adjusted or other non-GAAP financial measures.

Also where appropriate we refer to adjusted or other non-GAAP financial 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.

Speaker 2: such as pre-cash flow to evaluate our business. Reconciliation of non- GAAP financial measures to GAAP financial measures are included in our earnings release. In the appendix of the supplemental slides accompanying this presentation and in our earnings form 8k, which we expect to furnish to the SEC soon. I will now turn the call over to Mike Alkire. Mike.

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 Al-qaeda Mike.

Thanks, Nikki good morning, everyone and thank you for joining us today.

Speaker 3: Thanks, Angie. Good morning, everyone, and thank you for joining us today.

Speaker 3: We are pleased with our second quarter performance, which was in line with our expectation and reflects our focus on operational execution and growth in our core underlying businesses despite the impact associated with the COVID-19 pandemic on our quarter over quarter basis.

We are pleased with our second quarter performance, which was in line with our expectation.

And reflects our focus on operational execution and growth in our core underlying businesses.

Despite the impacts associated with the COVID-19 pandemic on our quarter over quarter basis.

This morning, I will discuss some of the key emerging trends in health care. They provide some highlights regarding the progress we are making towards achieving longer term.

Speaker 3: This morning, I will discuss some of the key emerging trends in healthcare and provide some highlights regarding the progress we are making toward achieving longer-term objectives.

Objectives.

Speaker 3: Craig will then review our operational and financial results, as well as the revised fiscal 2022 guidance in more detail later.

Greg will then review, our operational and financial results as well as a revised fiscal 2022 guidance in more detail later.

Speaker 3: We continue to help our members and other customers navigate the pandemic and prepare for the future of health.

We continue to help our members and other customers navigate the pandemic and prepare for the future of health care.

Speaker 3: We believe we are well positioned to address four key emerging healthcare trends.

We believe we are well positioned to address four key emerging health care trends.

First.

Speaker 3: The COVID-19 pandemic has created a renewed focus on building a more resilient health care supply.

The COVID-19 pandemic has created a renewed focus on building a more resilient health care supply chain.

This is in part due to many recent challenges.

Speaker 3: including product shortages, port closures, and other logistical issues associated with the pandemic and affecting the supply chain.

Including product shortages.

Foreclosures and other logistical issues associated with the pandemic.

Affecting the supply chain.

Speaker 3: For more than a decade, we have focused on designing a portfolio of offerings to address these potential disruptions, and we were quick to adapt that portfolio in the face of the challenges caused by the pandemic.

Well more than a decade, we have focused.

Finding a portfolio of offerings to address these potential disruptions and we were quick to adapt that portfolio in the face of the challenges caused by the pandemic.

Our data suggests members that took advantage of premier's capabilities fared better than those that did not during the pandemic.

We believe we are uniquely positioned to support healthcare supply chains by helping them focus on creating a greater diversity of supply sources, while at the same time.

Speaker 3: technology enabling operations and management of supply inventory.

Technology, enabling operations and management of supply inventories.

We anticipate continued member participation in our domestic manufacturing programs and expect to provide more real time upstream and downstream visibility across the industry to help the market predict and plan for adverse events.

Speaker 3: Second, the pandemic has taken a significant toll on staffing within many healthcare organizations.

The pandemic has taken a significant toll on staffing.

Any health care organizations.

Speaker 3: Our analysis of our pink AI data determined that clinical staff are working 50% more hours than they were prior to the pandemic.

Our analysis of our Pinky AI data determined that the clinical staff are working 50% more hours than they were prior to the pandemic.

Speaker 3: This has likely contributed to employee burnout and resignation.

This likely contributed to employee burnout and resignations.

Speaker 3: One third of all clinical employees have left their job since the pandemic began. Nearly double the

One third of all clinical employees.

After job since the pandemic began.

Nearly double the rate from two years ago.

Speaker 3: technology solutions enable our members and other customers to reduce inefficient fees and ensure business continuity.

Our technology solutions enable our members and other customers to reduce the inefficiency and ensure business continuity.

Third.

Speaker 3: There will be continued focus on technology enablement to automate and streamline manual processes and head.

There will be continued focus on technology enablement to automate and streamline manual processes and head count.

Key opportunities include.

Speaker 3: Key opportunities include, one, addressing manual disconnected processes with healthcare purchasing and procurement, which is why we are investing in and scaling our e-invoicing and e-payables with remittances.

One addressing manual disconnected processes with health care purchasing and procurement.

Which is why we are investing and scaling our E invoicing and E payables, but read metro.

Speaker 3: Our supply chain focused SaaS-based digital payments and financial solution plans.

Our supply chain focus SaaS based digital payments and financial solution platform.

Speaker 3: Second, automating administrative tasks necessary for assuring adequate reimbursement.

Second Automd.

Automating administrative tests necessary for assuring adequate reimbursement.

Speaker 3: which is why we've been seeing an increased interest in our artificial intelligence enabled coding and documentation decision support solution.

Which is why we put.

<unk> been seeing an increased interest in our artificial intelligence enabled coding and documentation decision support solution.

Speaker 3: And lastly, automating claims transactions and prior authorizations which save significant time and labor while also connecting patients with therapies in a timely manner.

And lastly.

Dominion claims transactions in prior authorizations, with which save significant time and labor, while also connecting patients with therapies in a timely manner.

With regard to the fourth trend, we believe AI will continue to be.

Speaker 3: With regard to the fourth trend, we believe AI will continue to be a significant, important capability in terms of transforming healthcare. This trend is primarily driven by

Significant.

Horton capability in terms of transforming health care.

This trend was primarily driven by market needs, including the following.

For many of our products currently available in the marketplace. There is a gap in the time it takes to generate evidence and use it to improve care delivery.

Speaker 3: For many of the products currently available in the marketplace, there is a gap in the time it takes to generate evidence and use it to improve care delivery.

Speaker 3: Premier, we are solving this challenge today through our applied sciences research capabilities and clinical physician support technology that is hardwired into the clinician workforce.

At Premier we are.

Solving this challenge today through our applied Sciences research capabilities and clinical decision support technology.

That is hard wired.

And so the clinician workflow.

Speaker 3: It was also a need to better understand and address the uneven health needs and outcomes of different populations.

It was also a need to better understand and address the uneven health needs and outcomes of different populations.

Speaker 3: We have been building natural language processing, or NLP, and other technologies within our pink AI platform to help solve this issue.

We have been building natural language processing or an L. P and other technologies within our pink AI platform to help solve this issue.

Speaker 3: We're helping healthcare providers address healthcare disparities by using NLP to make sense of key indicators found in free tests.

We're helping healthcare providers address healthcare disparities.

<unk> and <unk> to make sense of key indicators found in free test.

Participants in our performance improvement collaborative are leveraging detailed data to understand how comorbidities and other complications.

Speaker 3: Participants in our Performance Improvement Collaboratives are leveraging detailed data to understand how comorbidities and other complications influence health disparities.

Fluent health disparities.

Speaker 3: Healthcare continues to evolve and we believe we are well positioned based on our strategy and unique combination of capabilities to capitalize on these trends.

Health care continues to evolve and we believe we are well positioned based on our strategy and unique combination of capabilities to capitalize on these trends.

At our Investor Day last November we discussed our strategies to deliver sustainable long term growth. Our members are interested in an enterprise level analytics agreements.

Speaker 3: At our investor day last November , we discussed our strategies to deliver sustainable, long-term growth. Our members are interested in an enterprise-level analytics agreement.

Speaker 3: which were the primary drivers of growth in our performance services segment in the second quarter.

Which were the primary drivers of growth in our performance services segment in the second quarter.

Speaker 3: These multi-year, multi-faceted agreements bundle our core technology business capabilities with advisory services to deliver margin and clinical improvement together for our members.

These multiyear multifaceted agreements bundle, our core technology business capabilities with advisory services to deliver margin and clinical improvement together for our members.

Speaker 3: We believe moving from point solution sales to enterprise agreements affirms our position as a long-term strategic and transformational partner for our members and other customers.

We believe moving from point solution sales to enterprise agreements affirms our position as a long term strategic and transformational partner for our members and other customers.

Speaker 3: We also highlighted our plans to grow our early-stage, higher-growth adjacent markets business.

We also highlighted our plans to grow our early stage higher growth adjacent markets businesses.

Speaker 3: In the second quarter, we continue to make progress on this front.

It was in the second quarter, we continue to make progress on this front.

Our <unk> health business recently announced a new partnership with Ohio healthy.

Speaker 3: Our Contigo Health business recently announced a new partnership with OhioHealthy, a provider-owned health plan in Ohio.

Provider owned health plan in Ohio.

Speaker 3: OhioHealthy plans to leverage our business process operation services for health plan management, customer service, network administration, and support to help its members access higher quality, more affordable health.

Oh, how healthy plans to leverage our business process operations services for health plan management.

Customer service network administration and support to help its members access higher quality more affordable health care.

Speaker 3: In addition, we expect Contigo Healthcare Management Platform to be accessed by our own and OhioHealthy's clinical staff to monitor and manage utilization and help ensure effective collaboration between providers.

In addition, we expect continued good health care management platform to be accessed by our own and Ohio healthy clinical staff to monitor and manage utilization and help ensure effective collaboration between providers.

Speaker 3: We are very excited to partner with Ohio Healthy and believe this key development further validates Contigo Health's value proposition and our strategy to provide back office support and infrastructure at scale for self-insured employers.

We are very excited to partner with Ohio healthy I believe this key development further validates <unk> health's value proposition and our strategy to provide back office support and infrastructure at scale for self insured employers.

And our applied Sciences business, we are partnering with multiple life sciences organizations on prospective research focused on improving patient outcomes and many therapeutic areas, including oncology.

Speaker 3: In our Applied Sciences business, we are partnering with multiple life sciences organizations on prospective research focused on improving patient outcomes in many therapeutic areas, including oncology, cardiovascular disease, and maternal health.

Vascular disease and maternal health.

Speaker 3: Our work with women and infants follows our efforts to improve maternal health, namely our partnership with the Department of Health and Human Services to exclusively manage the Perinatal Improvement Collaborative.

Our work with women and infants follows our efforts to improve maternal health, namely our partnership with the department of health and human services to exclusively manage the perinatal improvement collaborative.

Speaker 3: We believe our unique approach and provider partnerships will help expedite the time to market for important therapies and demonstrate the traction we are gaining in this market. I'm also pleased to announce our

We believe our unique approach and.

And provider partnerships will help expedite the time to market for important therapies.

Demonstrates the traction we're gaining in this market.

I'm also pleased to announce our new partnership with Kubernetes.

Speaker 3: an AI-empowered software company that automates healthcare operations, enabling health systems to improve care coordination, increase surgical access and growth, and enhance profitability.

And AI empowered software company that automates health care operations, enabling health systems to improve care coordination.

<unk> surgical access.

And growth and enhanced profitability.

Speaker 3: Their solution which complement our existing enterprise analytics capabilities built upon hospital system investments and electronic health records and other technology solutions by utilizing AI and machine learning coupled with the latest.

Their solution, which complement our existing enterprise analytics capabilities build upon hospital system investments and electronic Health Records and other technology solutions like <unk>.

AI and machine learning, coupled with the latest and behavioral science and operations management to provide a real time closed loop automation platform.

Speaker 3: in behavioral science and operations management to provide a real-time closed-loop automation platform.

Speaker 3: We will be partnering with Qubentis to offer their solution to the market as well as to develop new AI-based solutions.

We will be partnering with <unk> to offer their solution to the market as well as to develop new AI based solutions.

Speaker 3: We are excited to collaborate with Kubernetes, leveraging the combination of our expertise and unique data assets with their exceptional talent in AI and machine learning.

We are excited to collaborate with kubernetes, leveraging the combination of our expertise and unique data assets with their exceptional talent and AI and machine learning.

We believe this represents another step in further differentiating our art pink AI capabilities and strengthening our overall value proposition in the market.

Speaker 3: We believe this represents another step and further differentiating our pink AI capabilities and strengthening our overall value proposition in the market.

In summary, we remain very excited about the road ahead of US we remain focused on executing our strategy. We believe we are well positioned to continue helping our members and other customers successfully adapt to and even get ahead of.

Speaker 3: In summary, we remain very excited about the road ahead of us. We remain focused on executing our strategy. We believe we are well-positioned to continue helping our members and other customers successfully adapt to, and even get ahead of, emerging and evolving market trends.

Emerging and evolving market trends.

Speaker 3: and we continue to advance our strategies to achieve our long-term growth objective.

And we continue to advance our strategies to achieve our long term growth objectives.

Speaker 3: I will now turn the call over to Craig McCasland for a discussion of our operational and financial performance.

I will now turn the call over to Craig Mckesson for a discussion of our operational and financial performance.

Thanks, Mike for.

For the second quarter of 2022, and as compared with the year ago second quarter total net revenue was $379 2 million a decrease of 10%.

Speaker 3: second quarter of 2022 and it's compared with the year ago's second quarter. Total net revenue was $379.2 million, a decrease of 10%.

Speaker 3: Supply chain services segment revenue was $271.5 million, a decrease of 18%. And performance services segment revenue was $107.7 million, an increase of 15%.

Supply chain services segment revenue was 271 5 million a decrease of 18% and performance services segment revenue was $177 million an increase of.

<unk> per cent.

Speaker 3: In our supply chain services segment, net administrative fees revenue increased 3% from the year-ago quarter due to further penetration of new and existing member spend during the quarter and a less significant impact from the COVID-19 pandemic compared with the second quarter of last year.

And our supply chain services segment net administrative fees revenue increased 3% from the year ago quarter.

Further penetration of new and existing members spend during the quarter and a less significant impact from the COVID-19 pandemic compared with the second quarter of last year.

Speaker 4: Certain categories within our GPO portfolio generated strong year-over-year growth, including our food program, which is returning to more normalized historic levels, and workforce staffing, where there is continued high demand due to the ongoing labor challenges in the market.

Certain categories within our GPO portfolio generated strong year over year growth, including our food program, which is returning to more normalized historic levels and workforce staffing where there is continued high demand due to the ongoing labor challenges in the market.

Speaker 4: Products revenue declined 38% from the prior year quarter. The decrease was primarily the result of the normalization of demand and pricing of PPE and other high-demand supplies associated with forward buys and certain non-healthcare provider customers as a result of the state of the COVID-19 pandemic relative to the prior year quarter. The decline, which was in line

Products revenue declined 38% from the prior year quarter. The decrease was primarily the result of the normalization of demand and pricing on PPE and other high demand supplies associated with forward buying and certain non health care provider customers as a result of the state of the.

COVID-19 pandemic relative to the prior year quarter.

The decline, which was in line with our expectation was partially offset by growth in our core direct sourcing business from ongoing demand for commodity products as we continue to expand our product portfolio and drive increased member adoption.

Speaker 4: partially offset by growth in our core direct sourcing business from ongoing demand for commodity products as we continue to expand our product portfolio and drive increased number adoption.

I would like to share a few comments regarding inflation and its potential impact on our business.

Speaker 4: I would like to share a few comments regarding inflation and its potential impact on our business.

Speaker 4: pricing inflation has historically had little impact on growth in our GPO business. Primarily due to firm pricing in most of our countries.

Pricing inflation has historically had little impact on growth in our GPO business, primarily due to carbon pricing in most of our contracts.

Speaker 4: Generally, in order for a price increase to incur an age contract, market research and supplier information is aggregated by Premier and shared with clinical sourcing committees. Comprised as Member Healthcare Provider.

Generally in order for a price increase to incur it needs contracts market research and supplier information and aggregated by Premier and shared with clinical sourcing committee comprised of member health care providers, who perform a comprehensive review of the requested price increase and determine if one.

Speaker 4: who perform a comprehensive review of the requested price increase and determine if one is more.

As warranted.

We have allowed short term price increases and limited circumstances.

Speaker 4: We have allowed short-term price increases in limited circumstances, but this has not had a material impact on our overall financial performance.

This has not had a material impact on our overall financial performance.

Some aspects of our portfolio such as food do allow for pricing fluctuation, but we strive to mitigate those fluctuations whenever possible.

Speaker 4: Some aspects of our portfolio, such as food, do allow for pricing fluctuations, but we strive to mitigate those fluctuations whenever.

Speaker 4: Since our GPO is a large portfolio of product offerings, we are often able to offset increases in some categories with price refreshes and reduced pricing in other categories.

Our G. P O is a large portfolio of product offerings.

We are often able to offset increases in some category with price refreshes and reduced pricing and other categories.

Speaker 4: In the second quarter, pricing inflation did not have a material impact on our direct sourcing business.

In the second quarter pricing inflation did not have a material impact on our direct sourcing business either.

In our performance services segment, we are pleased that revenue increased 15%.

Speaker 4: In our performance services segment, we are pleased that revenue increased 15% given demand for our enterprise analytics capability, which resulted in growth in the execution and associated revenue recognition of enterprise analytics license agreement in the current year compared to the prior year period.

Demand for our enterprise analytics capability, which resulted in growth in the execution and associated revenue recognition of enterprise analytics license agreement in the current year compared to the prior year period.

Speaker 4: This is consistent with our commentary last quarter and general expectation that we may experience periodic variability across quarters in our performance services segment, given that revenue recognition on these license agreements typically results in a significant percentage of the total contract value being recognized in the quarter in which the agreement is signed.

This is consistent with our commentary last quarter and general expectation that we may experience periodic variability across quarters in our performance services segment.

Revenue recognition on licensing agreements typically results in a significant percentage of the total contract value being recognized in the quarter in which the arena.

Speaker 4: The timing impact resulted in lower revenue than the originally expected in the first quarter of this fall 2022 and higher revenue during the second.

The timing impact resulted in lower revenue than we had originally expected in the first quarter of fiscal 2022 and higher revenue during the second quarter.

We also experienced strong growth in our adjacent market businesses, which remain on track to achieve or exceed our expectation of 25% year over year growth in fiscal 2022.

Speaker 4: We also experienced strong growth in our adjacent markets.

Speaker 4: which remain on track to achieve or exceed our expectation of 25% year-over-year growth in fiscal 2020.

With respect to profitability GAAP net income was $77 2 million for the quarter.

Speaker 4: With respect to profitability, gap net income was $77.2 million for the quarter.

Speaker 4: Adjusted EBITDA of $142 million in the second quarter increased 14% from the same quarter a year ago as a result of the following.

Adjusted EBITDA of $142 million in the second quarter increased 14% from the same quarter a year ago as a result of the following.

Speaker 4: Supply chain services adjusted EBITDA of $134.3 million, increased quarter over quarter, primarily due to increased net administrative fees revenue, as well as an increase in favorable product mix in our direct sourcing product mix.

Supply chain services, adjusted EBITDA of $134 3 million increase quarter over quarter, primarily due to increased net administrative fees revenue as.

As well as an increase in favorable product mix and our direct sourcing products business.

Speaker 4: and performance services segment adjusted EBIDOT of $39 million increased from the prior year quarter due to the increase in revenue, which was partially offset by higher selling, general, and administrative.

And performance services segment, adjusted EBITDA of $39 million increase from the prior year quarter due to the increase in revenue, which was partially offset by higher selling general and administrative expense primarily related to additional headcount to support growth in our <unk> health.

Speaker 4: primarily related to additional headcount to support growth in our contigo health and remit tributes.

And <unk> businesses.

Compared with the year ago quarter, adjusted net income increased 13% to $90 million and adjusted earnings per share increased 12% to seven.

Speaker 4: Compared with the year ago quarter, adjusted net income increased 13% to $90 million.

Speaker 4: and adjusted earnings per share increased 12% to 73%.

93%.

Speaker 4: From a liquidity and balance sheet perspective, cash flows from operations for the six months ended December 31, 2021, was $197.5 million, compared with $116.2 million for the prior year.

From a liquidity and balance sheet perspective cash flows from operations for the six months ended December 31, 2021 was $197 5 million compared with $116 2 million for the prior year.

Speaker 4: The increase was mainly due to a decrease in cash outlays in the current year due to the prior year build up in inventory to meet demand for PPE and other high demand supplies associated with the COVID-19 pandemic.

The increase was mainly due to a decrease in cash outlay in the current year due to the prior year a buildup in inventory to meet demand for PPE and other high demand supplies associated with the COVID-19 pandemic.

Speaker 4: This decrease was partially offset by an increase in cash outflow.

This decrease was partially offset by an increase in cash outflows associated with our operational investments to support growth in our adjacent market businesses.

Speaker 4: associated with our operational investments to support growth in our adjacent market businesses.

The impact of administrative fee share of payments in the current year compared with prior year.

Speaker 4: The impact of administrative feature payments in the courier compared with priorier.

Speaker 4: and timing of cash receipts on enterprise analytics. Life.

And timing of cash receipts on enterprise analytics license agreements.

Speaker 4: Free cash flow for the six months ended December 31, 2021 was $107.1 million compared with $37.1 million for the same period a year ago.

Free cash flow for the six months ended December 31, 2021 was $107 1 million compared with $37 1 million for the same period a year ago.

Speaker 4: The increase was primarily due to the same factors that affected cash flows from operations, as well as changes associated with historical tax distributions and TRA-related payments resulting from our August 2020 restructuring that we have discussed in previous quarters.

The increase was primarily due to the same factors that affected cash flows from operations as well as changes associated with historical tax distributions and TRA related payments, resulting from our August 2020 restructuring that we have discussed in previous quarters.

Cash and cash equivalents totaled $86 2 million at December 31, 2021, compared with $129 1 million at June 32021.

Speaker 4: Cash and Cash equivalent totaled 86.2 million as December 31, 2021, compared with 129.1 million at June 30, 2021.

Speaker 4: Our five-year, $1 billion revolving credit facility had an outstanding balance of $125 million as of December 31.

Our five year $1 billion revolving credit facility had an outstanding balance of $125 million as of December 31.

Speaker 4: With regard to capital deployment, we continue to focus on taking a balanced approach by investing in organic growth and targeting acquisitions to strengthen, enhance or complement our existing capabilities and differentiate our offerings in the marketplace. We are also returning to

With regard to capital deployment, we continue to focus on taking a balanced approach by investing in organic growth and targeting acquisitions to strengthen enhance or complement our existing capabilities and differentiate our offerings in the marketplace.

We are also returning capital to our stockholders during the six months ended December 31, 2021, we repurchased approximately four 5 million shares of our common stock for a total of $176 million and pay dividends to stockholders totaling $49 million.

Speaker 4: During the six month ended December 31, 2021, we re-purchased approximately 4.5 million shares of our common stock for a total of 176 million dollars.

Speaker 4: and paid dividends to stockholders totaling $49 million.

Speaker 4: In addition, our Board of Directors declared a dividend of 20 cents per share, payable on March 15, 2022 to stockholders of record as of March 1.

In addition, our board of directors declared a dividend of <unk> 20 per share payable on March 15, 2022 to stockholders of record.

As of March 1st.

Yeah.

Turning to our fiscal 2022 guidance.

Speaker 4: Based on our first half performance and outlook for the remainder of this year, we are increasing supply chain services segment net revenue guidance.

Based on our first half performance and outlook for the remainder of this year, we are increasing supply chain services segment net revenue guidance to be in the range of 1 billion to 1.12 billion as a result of net administrative fees revenue and we anticipate we'll be in a range of $580 million.

Speaker 4: to be in the range of 1 billion to 1.02 billion. As a result of net administrative fees revenue that we anticipate will be in a range of 580 million to 600 million and direct sourcing products revenue that we now expect to be in the range of 370 million to 390 million for these.

$600 million and direct sourcing products revenue that we now expect to be in the range of 370 million to $390 million for the year.

Speaker 4: This resulted in an increase to our total consolidated net revenue expectations, which are now in the range of 1.4 billion to 1.4 billion.

This resulted in an increase to our total consolidated net revenue expectations, which are now in the range of $1 4 billion to 1.44 billion.

We continue to expect our performance services segment net revenue to be in the range of 395 million to $420 million.

Speaker 4: We continue to expect our performance service and segment that revenue to be in the range of $395 million to $420.

Speaker 4: As a result, we expect consolidated adjusted EBITDA to be in the range of $483 million to $500 million.

As a result, we expect.

<unk> adjusted EBITDA to be in the range of 483 million to $500 million.

Speaker 4: We are lowering our previous guidance for adjusted earnings per share to a range of $2.45 to $2.55. Primarily due to our expectation that the annual effective tax rate will now be in the range of 24 to 26% up from the 21% rate that we previously estimate.

We are lowering our previous guidance for adjusted earnings per share to a range of $2 45.

To $2 and 55%.

Primarily due to our expectation that the annual effective tax rate will now be in the range of 24% to 26%.

From the 21% rate that we previously estimated.

Speaker 4: As we said last quarter, our estimate for our effective tax rate is influenced by a number of factors, including our ability to benefit from the utilization of historical net operating loss.

As we said last quarter, our estimate for our effective tax rate is influenced by a number of factors, including our ability to benefit from the utilization of historical net operating losses.

Speaker 4: due to our planned subsidiary reorganization and simplified reporting structure.

Due to our planned subsidiary reorganization and simplified reporting structure.

Yeah.

Speaker 4: Following implementation of this reorganization in the second quarter, we determined that our ability to utilize historical, separate company net operating losses during fiscal 2022 will be lower than originally estimated.

Following implementation of this reorganization in the second quarter, we determined that our ability to utilize historical separate company net operating losses during fiscal 2022 will be lower than originally estimated which resulted in the increase in our effective tax rate.

Speaker 4: which resulted in the increase in our effective tax rate.

Speaker 4: We continue to expect that the reorganization will allow for the full utilization of the historical net operating losses in future years.

We continue to expect that the reorganization will allow for the full utilization of the historical net operating losses in future years.

This change to our effective tax rate results in an estimated 14% impact to our fiscal 2022 adjusted earnings per share guidance. This changes on a noncash basis.

Speaker 4: This change to our effective tax rate results in an estimated 14th-cent impact to our fiscal 2022 adjusted earnings per share guide.

Speaker 4: This change is on a non-cash basis, and in fact, we expect the reorganization to have a greater than originally anticipated positive impact on our cash tax rate in fiscal 2022 and beyond.

And in fact, we expect the reorganization to have a greater than originally anticipated positive impact on our cash tax rate in fiscal 2022 and beyond.

Speaker 4: At the time we communicated our August 2020 restructure, we estimated and communicated that our cash tax rate moving forward would generally be in the range of 7 to 13 percent.

At the time, we communicated our August 2020, and restructure we estimated and communicated that our cash tax rate moving forward would generally be in the range of 7% to 13%.

As a result of our subsidiary reorganization completed in the second quarter. We now expect our cash tax rate to be in the range of 1% to 5% through fiscal 2024, after which we believe it could increase to the 8% to 11% range based on our current business structure.

Speaker 4: As a result of our subsidiary reorganization completed in second quarter, we now expect our cash tax rate to be in the range of one to five.

Speaker 4: through fiscal 2024, after which we believe it could increase to the eight to 11% range based on our current business structure and tax rates.

And tax rates.

Speaker 4: In summary, we continue to execute our strategy, achieve our planned operating performance.

In summary, we continue to execute our strategy achieve.

Achieve our planned operating performance.

Speaker 4: generate strong free cash flow and maintain a flexible balance.

We generate strong free cash flow and maintain a flexible balance sheet.

Speaker 4: As we look beyond fiscal 2022 and adjusted for the impact of the COVID-19 pandemic, we remain committed to achieving our targeted multi-year compound annual growth rate amidst a high single digit for total net revenue, adjusted EBITDA, and adjusted earnings per shift.

As we look beyond fiscal 2022, and adjusted for the impact of the COVID-19 pandemic, we remain committed to achieving our targeted multi year compound annual growth rate.

Mid to high single digits for total net revenue adjust.

Adjusted EBITDA and adjusted earnings per share.

Speaker 4: Thank you for your time today. We'll now open the call up for questions.

Thank you for your time today, we'll now open the call up for questions.

We will now begin the question and answer session.

Speaker 1: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone.

I ask a question you May press Star then one on your Touchtone phone.

Speaker 1: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your questions, please press star 1.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please.

Speaker 1: Please press star, then two. At this time, we'll pause momentarily to assemble our roster.

Please press Star then two at this time, we will pause momentarily to assemble our roster.

Our first question comes from Michael Cherny from Bank of America. Please go ahead.

Speaker 3: Good morning and congratulations on the good results. I want to dive in a little bit on the guidance and give it, again, understanding of how you think about the back half of the year. You've had very strong EBITDA performance, your date, you have a more robust outlook for both administrative fees and products, get your implied.

Good morning, and congratulations on the good results.

I wanted to dive in a little bit on the guidance and given again understanding of how you're thinking about the back half of the year, you've had very strong EBITDA performance year to date.

The more robust outlook for both net administrative fees and products that your implied.

Speaker 1: Quenched, the EBITDA step down is pretty significant, I think, versus any of even the pre-COVID times. So just curious, from an operational perspective, what's changing in the back half of the year? There are more potential inflationary pressure that you're expecting, investments in contiguous on these other areas. And the best to just be able to bridge the gap between the first half out performance and the second half in Plight Guide.

<unk> EBITA stepped down as pretty significant I think versus any of even the pre COVID-19 times. So just curious from an operational perspective, what's changing in the back half of the year is there more potential inflationary pressure, you're expecting investments and continuing on some of these other areas I would love to just be able to bridge the gap between the two.

First half outperformance in the second half implied guidance.

Sure. Thanks, Michael This is Craig I'll be happy to handle that.

Speaker 4: Sure, thanks Michael. This is Craig. I'll be happy to handle that. From a standpoint of the cadence throughout the years, we look at the back half of the year. I think there's a couple of things that are affecting the revenue and the associated adjusted a bit of guidance.

From a standpoint of the cadence throughout the year as we look at the back half of the year I think there's a couple of things that are affecting.

Affecting the revenue and then the associated adjusted EBITDA guidance.

Speaker 4: as we communicated from a GPO standpoint, very strong first half, but as we did communicate at the time.

As we communicated from a GPO standpoint, very strong first half, but as we didn't communicate at the time.

Speaker 4: We established guidance. We do still have some impact from members that didn't participate in the restructuring initially. And we indicated that that would like. We start to hit us a little bit more in the back half of the year. So there's a little bit of modulation in the GPO profitability and revenue in the back half of the year as a result of that.

We established guidance, we do still have some impact from members that didn't participate in the restructuring initially and we had indicated that that would likely start to hit us a little bit more in the back half of the year. So there's a little bit of.

Modulation in the GPO profitability and revenue in the back half of the year as a result of that from a direct sourcing standpoint, we do expect some normalization and reduction in margin gross margins in the back half of the year as a result of prices coming down and the normalization of demand continue.

Speaker 4: From a direct sourcing standpoint, we do expect some normalization and reduction in gross margins in the back half of the year as a result of prices coming down and the normalization of demand continuing to come down in the back half of the year. So very strong front half, but don't expect that to translate at the same level in the back half of the year as a result of that.

To come down in the back half of the year. So very strong first half, but don't expect that to translate at the same levels in the back half of the year.

As a result of that.

Speaker 4: I would say it's not, and as I said in my remarks, really inflation driven, we don't think that inflation itself will have a material impact on the business.

I'd say its not and as I said in my remarks really inflation driven.

We don't think that the inflation itself will have a material impact on the business.

Speaker 4: But clearly they do, you know.

But clearly they.

Speaker 4: continue to be some cost pressures given supply chain great expense things in those nature that we're getting to manage through uh... supply chain time

Continue to be some some cost pressures given supply chain great expense things of those nature that we're going to manage through.

On the supply chain side.

Speaker 5: Thanks, and I guess a question from Mike. I appreciate the color you've given on some of the...

Thanks, and I guess a question for Mike.

I appreciate the color you've given on some of the expanding strategies. You have competed PKI et cetera, how should we think about the next couple of years, especially against the backdrop of your.

Speaker 5: expanding strategies you have, you can see you'll pink AI, et cetera. How should we think about the next couple of years, especially against the backdrop of your...

Speaker 5: long-term guidance where some of the investments that will go in that area and that balance that you have about when these can be.

Long term guidance, where some of the investment spend will go in that area and that balance that you have about when these can be meaningful contributors to the business against the backdrop of what could potentially be incremental investment spend or is there is the investment spend you have right now basically how we should think about the go forward strategy.

Speaker 5: meaningful contributors to business against the backdrop of what could potentially be incremental investment standards. There is the investment spend you have right now, basically how we should think about the go-forward stretch.

Speaker 3: No, I appreciate the question and I also appreciate the congratulations on the strong quarter. So a couple thoughts and you heard us talk a little bit about the trends that are happening in healthcare for this year and beyond.

No I appreciate the question and I also appreciate the congratulations on the strong quarter. So a couple of thoughts.

And you heard us talk a little bit about the trends that are happening in <unk>.

Health care for this year and beyond.

Speaker 3: So, if you think about where we're going to continue to deploy capital, it's really around the technology enablement of supply chain. It's the technology enablement of clinical decision support. And in supply chain...

If you think about where we're going to continue to deploy capital it's really around the technology enablement of supply chain. It's the technology enablement of clinical decision support and then supply chain.

Speaker 3: It's really helping our health care systems identify all the spend. So, hence that investment, Michael, just be very specific.

It's really helping our health care systems identify all the spend.

So hence that investment Michael this be very specific.

Speaker 3: in IDS slash the rebranding to remitra.

And I D S slash the rebranding to re metro.

Speaker 3: You're gonna see a stubble down in that area because it's all about Ian voicing and he payables and we believe there's...

Youre going to see us double down on that area, because it's all about the invoicing and the payables and we believe there's a huge opportunity to identify spend that historically, we've not been able to get our arms around or health care systems.

Speaker 3: A huge opportunity to identify spend that historically we've not been able to get our arms around or health care systems.

Speaker 3: that have their ability to get their arms around. So we think that technology enablements really gonna help understand, you know, purchase services as well as the non-acute areas. So that's the focus in supply chain.

They have their ability to get their arms around so we think that technology enablement really going to help us understand you know purchase services spend as well as the non acute areas. So that's the focus in supply chain as it relates to you know clinical decision support and.

Speaker 3: As it relates to, you know, clinical decision support, and Craig and I have been talking about this since yesterday, we do have a few key areas that we think we're going to have continued outsized growth. The first, obviously, is just the basic clinical decision support capability, enabling that, looking at the unstructured data within the physician records.

Craig and I've been talking about this since Investor day, we do have a few key areas that we think we're gonna have continued outsized growth.

The first obviously is just the basic clinical decision support capability, enabling that looking at the unstructured data within the physician records.

Speaker 3: And really, sort of, hardwiring what's the best practice. That's number one, number two. We do believe there's opportunities and continuing to automate prior authorization. We think it's an incredibly manually intensive effort that lends itself well to automation and a couple of our pilots. We've actually not only reduced costs, but we've actually been more accurate than the manual intervention that's required to do that.

And really sort of you know hard wiring, what's the best practice.

Number one number two.

We do believe there's opportunities and continuing to automate prior authorization, we think it's an incredibly manually intensive effort.

That lends itself well to automation and a couple of our pilots, we've actually not only reduce costs, but we've actually been more accurate than than the manual intervention that's required to do that.

Speaker 3: I also mentioned a little bit about our HTC coding, and we believe that, again, that is another great application for us to technology-enable using machine learning and AI to ensure the appropriate coding is occurring.

I also mentioned a little bit about our our Hec coating and we believe that again that is another great application for us the technology enabled using machine learning and AI to ensure the appropriate coding is occurring.

Speaker 3: So, that, again, is another area of growth. And then, in Contigo...

So that again is another area of growth and then in contango.

Speaker 3: As we think about, you know, sort of the recent win with Ohio Healthy, which obviously lends itself well to continue to build that entire platform and create those services that our healthcare systems are going to need as they build out sort of their health plan needs. We also think this area of building out this network is really, really critical. Obviously along with our health systems, we have a

As we think about you know sort of the recent win with Ohio healthy.

Which obviously lends itself well to continue to build that entire platform and create those services that our health care systems are going to need as they build out sort of their their health plan needs.

We also think this area of building out. This network is really really critical obviously, along with our health systems, we have a very very strong footprint in the acute area.

Speaker 3: very, very strong footprint in the acute area. We will continue to look to deploy capital in the non-acute area to sort of continue to build that foundation out. So, Michael, that's a long answer. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

We will continue to look to deploy capital in the non acute area to sort of continue to build that foundation out so Michael that's a long answer.

Speaker 3: But that's those are the areas that we're going to continue to focus on and deploying capital around

But that's those are the areas that we're going to continue to focus on deploying capital around.

Great. Thanks, Mike.

I appreciate it.

Speaker 1: The next question comes from J. Landra Singh from Credit Suisse. Please go ahead.

The next question comes from <unk> Singh from Credit Suisse. Please go ahead.

Speaker 6: Thank you and good morning and congrats on the good quarter. I was wondering if in light of the resurgence in cases driven by Omicron variant globally, if you can provide more color around the status of critical PPS applies within your member partners, which types of PPR in short supply, which ones in ample supply. And how should we think about the consumption rate of these supplies compared to the stockpiling?

Thank you and good morning, and congrats on a good quarter.

I was wondering if in light of the resurgence in case, that's driven by old Mcglaun variant globally. If you can provide more color on the status of critical PPE supplies within you remember partners, which types of people you got in short supply, which ones and ample supply and how should we be thinking about the consumption rate it'll be supply as compared to the stockpiling.

Yeah, It's a great question Jo Lunder.

Speaker 3: Yeah, that's a great question, Jolanda. So a couple thoughts. I would tell you that.

So a couple thoughts.

You know.

I would tell you that.

Speaker 3: The year 2020 and early parts of 2021 were all about creating not only enough

The year 2020, and early parts of 2021, we're all about creating not only enough PPE to protect our caregivers, but also about building out.

Speaker 3: PPE to protect our caregivers, but also about building out the stock plan.

These stockpiles, so I think right now.

Speaker 3: So, I think right now, what the focus is really is just managing through Omicron and ensuring that we have enough supplies, and there's a lot of pressure right now on the global supply chain. And so, I think we're going to have to be very careful about that.

What you know the focus is really is just managing through them Oh micron.

And ensuring that we have enough supply. So there's a lot of pressure right now on the global supply chain hence.

Speaker 3: our focus on continuing to diversify that supply chain, you know, specifically out of Southeast Asian, China, and building that more domestic and near-shore capability.

Our focus on continually continuing to diversify that supply chain you know spin.

Specifically I'm out of Southeast Asia, and China and building it out more domestic than nearshore capabilities.

Speaker 3: As it relates to the current situation with the virus and what's happening, it's incredibly regional in terms of utilization of PPE as it relates to the virus. It's having, obviously, the virus is impacting different parts of the country more significantly than others.

As it relates to the current situation with the virus and what's happening it's incredibly regional in terms of you know utilization of PPE as it relates to the virus as it it's having it you know obviously the virus is impacting different parts of the country.

More significantly than others.

Speaker 3: I will tell you that the areas that we're going to continue to focus on, that we continue to hear issues around is from a supply standpoint include things like reagents from laboratory testing. So was on with an executive last week who started the teeth of pressure in the reagents area. We've been seeing pretty substantial issues associated with plastics.

I will tell you that the areas that we're going to continue to focus on that we continue to hear issues around us.

From a supply standpoint include.

Things like reagents for laboratory testing so was on with an executive last week, who is starting to see some pressure in the reagents area.

We've been seeing pretty substantial issues associated with plastics.

Speaker 3: So, the resins that, you know, are needed to make plastic that go into many, many health care supplies, we're, you know, continuing to see issues there. That relates very, very closely to things like suction canisters and those kinds of things. And so, we're seeing some pressure on the markets there. And then, as it relates to just general PPE.

So the resins that you know are needed to make a plastic take the window of many many.

Health care supplies, where.

You're going to see issues there.

That relates very very closely to things like suction cannot canisters and those kinds of things and so.

We're seeing some pressure on the markets there and then.

As it relates to just general P. P E.

Speaker 3: We see sort of sub-issues within the various products. So different sizes and those kinds of things. And hence the reason I talked so much about the technology and enablement on a spludging. We do fundamentally believe we've got to continue to make significant investment and building out of technology infrastructure that allows for us to see into what's happening from an inventory standpoint. So if in fact,

We see sort of.

Sub issues within the various products, so different sizes and those kinds of things and hence the reason I talked so much about the technology enablement of the supply chain. We do fundamentally believe we've got to continue to make significant investment in building out a technology infrastructure that allows for us to see into what's <unk>.

From an inventory standpoint, so if in fact.

Speaker 3: There are sizes that, you know, we're not having, you know, getting enough of for, like, specifically a mask. Let's just say small.

There are sizes that you know, we're not having it you know getting enough up for like specifically a mass, let's just a small.

Speaker 3: We can very, very quickly look at those signals and ensure that, you know, we can either produce more product quickly, partner with folks that are going to continue to produce more product quickly, or, in worst case, shift inventory from one, you know, part of the network to the other. So, right now, long answer, but the big areas are reagents.

We can very very quickly look at those signals and ensure that we can either.

Produce more product quickly partner with folks that are going to continue to produce more product quickly or in worst case shipped inventory from one.

You know part of the network to the other so right now long answer, but the big areas are reagents plastics.

Speaker 3: plastic Section canisters and then sizes of various sizes of PPE

Section canisters, and then size of the various sides of the PPE.

Speaker 6: Great, that's helpful. My follow-up is on your Contigo health business, like more on the direct-to-employer side. Over the last few quarters, we have seen some discussions around more employers entering into risk-based and value-based care contracts, several vendors that they work with. Just wondering what are you seeing from that perspective and what role do you expect to play if that trend accelerates?

Great. That's helpful and my follow up on is on your Contigo health business like more of a direct to employer side over the last few quarters. We have seen some discussions on onboard employers entering into risk based and value based care contracts with several windows did they work with just wondering what are you seeing from that perspective and walk through.

Or do you expect to play if that trend accelerate.

Speaker 3: Yeah, so you're right. We are working with hospitals and health systems.

Yeah, So you're right, we are working with hospitals and health systems.

Speaker 3: to help them, you know, really compete in a financially accountable marketplace. So we really believe that, you know, collaboration is going to be really, really important, you know, to ensure that, you know, best practices are being shared amongst the members in terms of how, you know, they're dealing with sort of the value-based care. Also, I will tell you that, you know, we're starting to see some announcements from CMS.

To help them.

You know really compete in a financially accountable marketplace.

So we really believe that collaboration is going to be really really important.

You know to ensure that best practices are being sure shared amongst the members in terms of how they're dealing with sort of the value based care.

Also I will tell you that you know where we're starting to see some announcements from CMS.

Speaker 3: that they are looking at other ways to contain a movement towards value-based care. So that movement is upon us. I will tell you what we're obviously focused on from Contigo standpoint to support that. One is we want to make sure that those organizations that have the infrastructure that are...

That you know they they are looking at other ways.

To you know container movement towards value based care so that.

That movement is upon us I will tell you what we're obviously focused on from contango standpoint to support that you.

You know one is we want to make sure that those organizations that have the infrastructure.

That are you know sort of not only providing care, but they've also got capabilities from a payment side or you know a health plan side, we want to make sure that we're providing them the data and the analytics to identify how to provide care of the most efficiently and most effectively.

Speaker 3: sort of not only providing care, but they've also got capabilities from a payment site or a health plan site. We want to make sure that we're providing them the data and analytics to identify how to provide care the most efficiently and most effectively.

Speaker 3: across the entire continual because that's where we know there's opportunities to drive, enhanced value back to those plans. So it's about the data there, it's about clinical decision support to ensure that as we see more complex cases coming into the health stream, we can identify up front the appropriate protocols and capabilities to manage those cases more effectively.

Across the entire continuum, because that's where we know there's opportunities to drive enhanced value back to those to those plans. So it's about the data there it's about the clinical decision support to ensure that you know.

As we see more complex cases coming into the health stream that we can identify upfront the appropriate protocols and capabilities to manage those cases more effectively.

Speaker 3: So we're going to continue to embed our AI machine learning and those kinds of things to help the health systems deal with this movement to value-based care.

So we're going to continue to a better you know, our AI and machine learning and those kinds of things to help the health systems.

Deal with this movement to value based care.

Speaker 7: Thanks a lot. So yeah, I appreciate the question.

Alright, Thanks, a lot so.

Yeah I appreciate the question.

Next question comes from Donald Hooker from Keybanc. Please go ahead.

Speaker 8: Next question comes from Donald Hooker from KeyBank. Please go ahead. Great. You guys haven't talked about as much about the purchase services opportunity in recent quarters. And forgive me if I'm wrong, but I don't think you brought it up this quarter either. I just wanted to catch up on that topic. I think you had a big deal with Yankee.

Great.

You guys haven't talked about as much about the purchase services opportunity.

In recent quarters, and I don't think I forgive me, if I'm wrong, but I don't think you brought it up this quarter either I just wanted to catch up on that topic. I think you had a big deal with Yankee.

Speaker 8: Alliance last, early last calendar, or actually, yeah, last year at this time, right? And I know you made some acquisitions in that area. Can you update us on that opportunity?

Alliance last early last calendar or exit last year at this time right.

And I know you've made some acquisitions in that area can you update us on that opportunity.

Speaker 3: Yeah, all I can say is that it's going, you know, obviously very well. I would suggest to you that we're in the middle of the implementation stage. So, we're implementing that technology that you just referred to in many, many of our health systems. And then, identifying where those opportunities to, you know, increase purchase services then are sourcing teams.

Yeah, all I can say is that it's going you know, obviously very well I would suggest to you that we're in the middle of the implementation stage. So.

So we're implementing that technology that you just referred to and many many of our health systems, and then identifying where those opportunities to increase purchase services spend our sourcing teams are.

Speaker 3: are working with the healthcare systems executives that make up those clinical committees and identifying the areas.

Our working with the health care systems executives that make up those clinical committees and identifying the areas.

Speaker 3: That we need to be focused on to put on national agreements or regional agreements or local agreements

We need to be focused on to put on national agreements or regional agreements for local agreements.

Speaker 3: And then obviously we're continuing to evolve the remitri platform, which we believe, given that it's got all the invoice data, we're gonna understand where the communities are for purchase services. But the net of all that out is, we're in the middle of that implementation as we speak.

And then obviously, we're continuing to a ball B room Metro platform, which we believe you know given that it's got all the invoice data.

Going to understand where the opportunities are for purchase services, but the net of all that out as we're in the middle of that implementation as we speak.

Speaker 4: Yeah, the only color I would have, the only color I would have, Mike, is that, and Dawn, I think you would probably expect this, but the pandemic has had some impact on healthcare providers, focus and ability to expand the attack new areas. And so a lot of their attention over the past year has been, obviously dealing with the pandemic and COVID patients, etc. And so we were making progress, but it is a little more measured than we might have anticipated before the pandemic started to change people's priorities.

Yes, the only color I would add the only color I would add Mike is that.

And I think you would probably expect this but the pandemic has had some impact on health care providers.

And our ability to expand to attack new areas and so a lot of their attention over the past year has been obviously dealing with the pandemic and COVID-19 patients et cetera, and so we're making progress but it is a little more measured than we might have anticipated before the pandemic started to.

To change People's priorities.

Great and then maybe as a follow up on a different topic in the direct sourcing business, maybe Craig for you.

Speaker 8: Great, and then maybe as a follow up on a different topic and the direct sourcing business may be Craig for you. I believe in the past, I think ever call, we were talking about sort of that business revenues and direct sourcing sort of settling the low 80 millions kind of range, kind of as a normalized basis, XCOVID. Not sure, can you update us on that? And maybe I'll elaborate a little bit on the favorable mix in that business as well, this quarter.

I believe in the past I think I recall, we were talking about sort of that business revenues and direct sourcing sort of settling in the low 880 millions kind of range kind of as a normalized basis ex COVID-19 not sure can you can you update us on that.

And maybe elaborate a little bit on the favorable mix in that in that business as well this quarter.

Yeah relative to the kind of excluding Covid again that was about a 202 hundred $20 million annualized business pre Covid and then obviously we've had the large spikes given the forward buys and some of the non health care related activity that has really expanded during the pandemic I think if you were to normalize.

Speaker 4: Yeah, relative to the kind of excluding COVID, again, that was about a $200, $220 million annualized business pre-COVID.

Speaker 4: And then obviously we've had the large spikes given the forward bias and some of the non-healthcare related activity that's really expanded during the pandemic. I think if you were to normalize that back down and assume double digit, you know, high single low double digit growth, which is what we've guided to.

That back down and assume double digit.

High single low double digit growth, which is what we've guided to.

Speaker 4: absent the COVID impact. I think $80 million a quarter might be a little bit high, but I think it would settle down more into sort of the probably $65 to $70 million a quarter type range if we didn't have some of this normalization. In terms of product mix, it's really just a function of

Absent the Covid impact I think $80 million, a quarter might be a little bit high but.

But I think it would settle down more into sort of the probably $65 million to $70 million a quarter type range. If we didnt have some of this a normalization in terms of product mix.

It's really just a function of as.

Speaker 3: Stockpiles and everything had been built. We obviously had some lower-margin products when we were just really working to try and meet people's needs, and in the second quarter in particular, the mix of what core product growth that was coming through direct sourcing helped us to have improved margin in the second quarter. Great. Thanks.

Stockpiles and everything had been built.

They had some lower margin products. When we were just really working to try and meet people's needs and as it did in the second quarter in particular in the mix of what our core product growth that was coming through direct sourcing helped us to have improved margins in the second quarter.

Great. Thanks, Congrats on the quarter.

Speaker 1: The next question comes from Jessica Tasson from Piper Sandler, please go ahead.

The next question comes from.

Next question comes from Jessica Tucson from Piper Sandler. Please go ahead.

Hi, Thank you so much for the question.

Speaker 9: Hi, thank you so much for the question. So Mike, it was helpful to hear you describe the process by which a manufacturer can request price increases at a conference last month. But can you just maybe comment on the volume of overall request for price and then what a successful campaign looks like from a P&L and a timing perspective for premier?

So Mike It was helpful to hear you describe that process by which a manufacturer can request price increases at a conference last month.

But can you just maybe comment on the volume of overall requests for price and then what a successful campaign it looks like a P&L and a timing perspective for premier.

Speaker 3: I think I understand your question, but you may have to clarify the last point. But in terms of what's happening from a pricing perspective or an inflation perspective, I think that was your first question. We are, as Craig said,

I think I understand your question, but you may have to clarify the last point, but in terms of what's happening from.

Our price expect perspective, or you know an inflation perspective, I think that was your first question.

We are it's Craig said.

Speaker 7: You know, just in terms of the impact on our business, it has a negligible impact on the overall business, primarily due to.

Just in terms of the impact on our business. It has a negligible impact on the overall business primarily due to you know.

Speaker 3: you know, us having firm pricing agreements and that we have a very, very tight process and I think this was your question in terms of getting approvals for.

Having firm pricing agreements.

And that we have a very very tight process and I think this was your question in terms of getting approvals for <unk>.

Speaker 3: you know price increases. So they obviously come through, you know, many of them come through for me or sometimes they get...

Price increases so they obviously come through you know many of them come through premier sometimes they get sort of filtered up from the health care systems executives as well and then they go to those go to a committee of our health care system executives that actually make the decision as to whether or not.

Speaker 3: sort of filtered up from the healthcare systems executives as well. Then those go to a committee of our healthcare system executives that actually make the decision as to whether or not. So, that's it.

Speaker 3: those prices should be agreed to. And they look at a number of things, and I think this may have been the heart of your question. They look at a number of things.

Those prices should be agreed to and they look at a number of things and I think this may have been the heart of your question. They look at a number of things.

Speaker 7: To determine whether or not a price should be agreed to, a price increase should be agreed to.

To determine whether or not a price should be agreed to a price increase should be agreed to.

Speaker 7: First, they're going to look at the profitability of that product. They're going to look at the profitability of the company. They want total transparency on what's happening there in that market.

First they're gonna look at you know the profitability of that product, they're going to look at the profitability of the company.

They want total transparency on what's happening there in that market.

Speaker 3: If it gets by those stages, then they want to look at the healthiness of the supply in that market, meaning are there multiple suppliers in that market?

If it gets probably those stages then they want to look at the healthiness of the supply in that market, meaning are there multiple suppliers in that market.

Speaker 3: as you know, they're not interested in creating a more constricted market. Obviously, especially in this time, they're looking to ensure that they've got healthy supply markets.

As you know they they are not interested in creating a more constricted market, obviously, there, especially in this time, they're looking to ensure that they've got healthy supply markets.

Speaker 3: So, you know, it's the worst case they'll agree to a price increase if in fact they believe that

So you know if the worst case they'll agree to a price increase if in fact, they believe that.

Speaker 3: you know, somebody may exit from a market or maybe exit from a product category because of their

Somebody might exit from a market or maybe exit from a product category because of their.

Speaker 3: lack of ability to drive a profit. So those are kind of the evaluation criteria that they kind of go down the path on. I think you asked also, what have we seen in terms of people requesting or suppliers requesting price increases?

Lack of ability to drive our profit. So those are kind of the evaluation criteria that they kind of go down the path on I think you asked also you know what have we seen in terms of people requesting or suppliers requesting price increases.

Speaker 7: Uh, that that obviously continues. Um.

That obviously continues.

You know, we you know as the pressures continue to come out on labor cost and those kinds of things I I foresee that.

Speaker 7: You know, we, you know, as the pressures continue to come out on labor costs and those kinds of things, I foresee that that pressure will not, you know, let up in the foreseeable future. But the pressure has been there for, I don't know, the last six, eight, nine months, and we expect it to continue in the next few months. I hope that answers your question.

That pressure will not let up in the foreseeable future, but the pressure has been therefore I don't know 689 months and we expect it to continue in the next few months I hope that answers your question.

Speaker 9: Yeah, that's helpful. Just the quick follow-up would be, what is the timing from when a request is initiated to when that manufacturer gets the verdict or Premier has visibility into whether or not the price increase is going to take effect?

Yeah that's helpful.

My follow up would be what is the timing from when a when a request than needed to win and that manufacturer cats, the verdict or premier has visibility into whether or not the python.

Speaker 3: Great question. Typically, it's a month. It's months of time.

Great question. So typically it's a it's a month it's months the uptime.

That that you know that that's the average that I see you know there there are some cases that there'll be.

Speaker 3: That's the average that I see. There are some cases that there'll be, especially if it's contractually allowable, you'll see an increase maybe within 30 or 60 days, but typically the cycle that I just talked about requires a couple of few months for the healthcare systems to do the appropriate due diligence to make a determination as whether or not they'll accept the price increase. Thank you.

Especially if it's contractually allowable you'll see an increase you know maybe within 30 or 60 days, but typically the cycle that I just talked about requires a couple a couple of few months for the health care system. So do the appropriate due diligence to make a determination as to whether or not there will accept the price increase.

Okay.

Got it thank you.

Thank you.

The next question comes from John Ransom from Raymond James. Please go ahead.

Speaker 1: The next question comes from John Ransom from Raymond James. Please go ahead.

Hey, good morning.

Speaker 3: Simple question. What is the year count estimate for the back half of the year considering you're buying?

This is the simple question.

What is the share count.

<unk> for the back half of the year considering here.

Yeah.

Speaker 3: Sure, this is Craig. So relative to the buyback, we've repurchased the 4.5 million shares that we described. So that's what would be included in terms of share count. Let me see. I'm trying to find that.

Sure. This is Craig so relative to the buyback we've repurchased four 5 million shares that we described so that's what would be included in terms of share count.

Well it's interesting.

Yeah.

Speaker 4: Paul, it's not seeing that. Tip them my fingers. I think it's in 122 million range or something like that, but let me confirm that, John , and I'll come back and state that. They fall back. You fall back more serious in the share count drop, and it's going to be so tough.

Apologize I'm not saying the tip of my fingers.

$122 million range or something like that but let me confirm that Jon and I'll I'll come back and say Oh yeah.

You bought back more shares and the share count dropped sequentially, because I assume there's some timing issues.

Speaker 10: So we were thinking share count might be a tad lower than where you ended up.

We were thinking of share count might be a tad lower.

And then where you ended up.

Speaker 10: And then secondly, I guess more of a strategic question around Contigo.

And then secondly, I guess more of a strategic question around can we go.

Speaker 10: I mean, I think we would all agree decision support is real time decision support for providers is a good, good product to have, but it seems to me like it's a little bit outside of your normal.

I mean.

I think we would all agree decision support is real.

Real time decision support for providers is that good.

Product habit and it seems to me like its a little bit Oh.

Outside of your normal.

Speaker 10: of channel and selling. Do you think Configo needs to be bundled?

Channel and selling do you think needs to be bundled.

Speaker 10: with another product offering, say, like a navigation-type product, or do you think it could just sort of sit out there as a standard?

With another product offerings say like a navigation.

Type product or do you think it could just sort of sit out there as a standalone.

Got it so it's a great question I'll take the first pass at this yeah, we absolutely think that you know navigation patient navigation I actually.

Speaker 3: It's a great question. I'll take the first pass at this. Yeah, we absolutely think that, you know, navigation, patient navigation, I actually kind of alluded to that in my remarks. We think patient navigation is really, really critical, especially across the continuum. So, we're gonna continue to, you know, look at, you know, partnerships and those kinds of things in that area, including, you know, potentially some capital deployment. But, yes, to answer your question.

Kind of alluded to that in my remarks, we think patient navigation is really really critical especially across the continuum. So we're going to continue to you know look at partnerships in those kinds of things in that area.

Including you know potentially some capital deployment, but yes to answer your question.

The handoffs across the consumer continuum, we're gonna be incredibly important as we are.

On more and more value based care.

And just one more question about that I mean, just thinking about the last mile.

Do you know so let's say you tell a doctor that you should really in this patient.

Specialist.

Or is this imaging center or whatever thing as you know in real time, if that suggestion.

And network, a suggestion and kind of with flow with their benefit design or is that technology that still needs to be built up.

Yeah. It's a great question. So it is stuff that we call front office and back office administration on prior authorization.

And it is part and parcel to our whole AI approach to prior off.

So the net of all of it is in in specific cases like high cost images and those kinds of things we have a good understanding you know and.

Continue to use that benefit.

The design and the.

The algorithms.

But I would tell you we're early stages in and you know, it's very very unique to a couple of specific use cases that we're piloting.

Great. Thanks, so much.

Hey, John This is Craig just to circle back quickly to finalize the answer so as I indicated about 122 million shares outstanding right now and to the extent that we do finalize and complete the share repurchase balance that is outstanding it will drop.

Below that in Q3, and Q4, but on a full year basis, I think we will still come in.

Diluted basis.

Shortly under the $122 billion level.

Thank you.

The next question comes from Eric Coldwell from Baird. Please go ahead.

Thanks, Good morning, I think I have two first on the enterprise analytic deals that contributed upside this quarter.

It looked to me like it was largely an offset of the timing slippage from Q1, but I am hoping you can give us a little more color on the number of deals that we're talking about are you now in a handful of million of upside is that two to three deals is it five to 10 and then.

I guess it was part of this what's the thinking on two H where any of these.

<unk> performance items pull forward from.

The back half of the year, what's the pipeline look like just wanting to make sure we understand the potential variability in results in the quarters on these.

These contracts that can be a bit lumpy. Thank you.

Thanks, Eric This is Craig I'll be happy to take it and Mike can add any color if necessary.

So first of all yes, a large part of the <unk> performance was the.

Timing of the one that didn't come through at the end of the first quarter. As we've described generally speaking in terms of volume and I think we may have referenced this in the past, but it's not that there are a significant number of enterprise license agreements in any particular quarter it tends to be.

Maybe one perhaps two but generally sort of one these are multimillion dollar engagements. So its not that there would be five to 10 of them in the back half of the year as you articulated.

Question about so.

That's the first half relative to the second half to the second part of your question there was not a pull forward.

Of any that we would anticipate in the back half of the year. We do still have a pipeline continue to work on these kind of all encompassing engagements, where we're wrapping our technologies together in a bundled solution with advisory services to deliver.

Clinical on margin improvement as I described they tend to be all encompassing so theyre not a kind of a quick sales process. So it would be unlikely typically that we would have pull forwards of these.

<unk>.

So some of it is that that did not contribute to the performance in the second quarter.

[laughter].

Thanks for that and then on the on the tax rate in prior periods you had signaled.

Actually a lower tax rate for this year, but then a jumping up to 27% in fiscal 'twenty three and beyond.

I thought I heard you say something on the call today that might imply that 'twenty three and beyond may not be as high as perhaps you were previously thinking but I was hoping you could give us some some guidance on that.

Yeah, I didn't actually discuss 'twenty three and beyond on an annual estimated effective tax rate I was talking about the cash tax rate on the call but to answer. Your question. We had previously anticipated and expected the 27% would be the rate beyond fiscal 2022, I think at this point, our current expectations, obviously subject to two.

You know.

Rate changes or other things, but it would be that will more likely be in the 26% range on a prospective basis. After this year.

Okay, that's great thanks very much.

The next question comes from Anne Samuel from J P. Morgan. Please go ahead.

Hi, guys. Thanks for taking the question.

You spoke about some areas and youre able to automate with Pinky I was hoping maybe you could just dig a little bit further into how labor shortages are impacting your customers and then within your performance services suite, what solutions are really resonating there to help with that issue.

Yeah. So.

Just just from a labor standpoint, I'll I'll jump into some statistics here to put a little bit of color around it and then I'll talk a little bit about what we're doing from a labor standpoint.

So you know we talked a little bit about this a few months ago that our hospitals are spending.

$24 billion.

More annually for clinical labor sets, a pretty substantial impact.

Impact on their bottom line.

I spoke a little bit about this in prepared remarks, better the overtime hours were up 50% six sick time is up 50%.

As well for the full time employee 60, and it's up 60% for part time employees.

There's also a big imbalance of what's happening from a oh.

Labour need standpoint for every clinician that's hired today there are 2.6 jobs that are open.

So you know I can tell you right now that.

You know that this is not going to this labor issue, it's not gonna go away quickly.

The last statistic that I'll tell you about is that the.

The attrition rate currently for clinical folks is about 17%.

Which is significantly higher than the averages up 8% to 12% pre COVID-19 . So it just continues just to tell you that you know, we're losing a lot of folks out of the labor force that we don't have a lot of folks to replace them.

Our focus really is to take the technology that you just talked about.

And automate procedures.

That you know we think.

Can allow for health systems to redeploy some of that clinical talent.

To the bedside, so think about things like prior authorization, where at times Youre using clinical staff to get in the middle of some of the authorization of things so.

Obviously, that's an area. We also think the focus on coding is an area that historically there has been a clinical staff. That's been utilized that we believe through leveraging AI and ml we can.

You know do as an effective job as manual intervention in those cases and again allow the redeployment of those those folks to.

You know more of the bedside and then finally just in general we are.

Have a fairly robust offering around the whole operations of a health system using clinical decision support and the focus there is really the appropriate utilization utilization of skills.

And ensuring that you know folks are practicing at the high end of their licenses and ensuring that you know we are.

Filling gaps with folks that are.

I'm very very confident but again.

That allow us to utilize you know folks you know maybe it's in the more clinically oriented care setting or what have you, but those are the areas that we're focused on to use AI and ml.

That's really helpful. Thank you.

Thank you.

The next question comes from Eric Percher from Nephron Research. Please go ahead.

Thank you.

Looking at the guidance halfway through the year versus when you first provided it.

Maybe at this point, what drives that drives us towards the upside or the lower end of that range and maybe put a finer point on it how much at this point because it really comes down to product margin and what flows through versus maybe the variability around them.

Supply chain.

<unk> said that we kind of knew was coming into the year or other factors.

Oh sure Eric Thanks for the question. This is Craig so relative to our guidance I think if you look at the supply chain side, obviously, one of the things that will influence where in the range on the GPO side of the business continues to be utilization trends and procedures and so.

Omicron has certainly had some impact as Mike talked about and has been regional.

And so we haven't seen huge impacts to overall sort of electric procedures, but in certain cases, there are parts of the country, where things had been deferred so the level of activity in the back half of the year could cause us to see more pull through on the GPO and result in higher performance relative to the range, but we'll have to.

So, let's see how that all plays out as we continue to navigate through this pandemic.

Unexpected implications at points in time.

From a direct sourcing standpoint, we continue to believe we have our finger pulse on sort of the cadence of how things are going to happen.

But demand is.

Not a precise science during this pandemic as well in terms of what happens there. So we believe we have sort of a normalization coming down properly anticipated, but to the extent that members continue to need.

More PPE and other commodities than we planned that could cause us to perform slightly higher.

And on a revenue basis, although we are seeing pricing.

Creases in normalization that that obviously.

Combination of both price and.

And volume and so those are the things on the supply chain side relative to performance services.

Expectations for the year there.

Obviously, not a change to our expected guidance range, we do have the periodic timing considerations that we've talked about so that's all a function of when things would come to pass and come through.

And the only other piece I would say on the performance services side is that with our <unk> program. As we continue to integrate continued to sign up suppliers and others onto that platform the pace with which that is happening. If we are more successful in getting that to accelerate a prior to the end of the year there is potential for a.

A little bit of upside in our expectations, depending on how that plays out.

And so not in there was any variability on the legacy contract runoff that we expected in the second half it sounds like that's not the swing factor is that fair.

I wouldn't say, it's a swing factor because we thought we'd already articulated we had that impact so as we as we've talked about previously we had some members that didn't agree to the restructuring at the time the contracts are now in place and effective and so that is affecting the second half, but it's not necessarily a swing factor in terms of there being some anticipated change.

Because those are all in place at this point in time.

It's now now okay. Thank you so much.

The next question is a follow up from John Ransom from Raymond James.

I just want to make sure I hear this correctly. So if we look at the second half run rate for.

Supply chain is that.

Now fully incorporating all the re contracting or is there further re contracting that needs to happen.

Yeah, Theres not further re contracting so the second half contemplates the completion of the full restructuring all the members they renewed their contracts back in August 2020 effective July one 2020, and then the subset of members than hadn't agreed at the time that have subsequently either renewed their.

Effective this year when they were original terms expired back in September .

Or as we talked about there were a couple of numbers that elected to go to other.

Supply chain partners and those R. R.

Have left at this point in or out of the equation. So no. There is not any more re contracting to take place in the back half of the year.

So I guess I'm curious I mean, your business seems pretty stable compared to say others are doing.

Just like drug distribution, where customers switch all the time is there really just not much in the way of switching.

That goes on in this industry are people kind of locked in because of the equity interest in <unk> and so forth and.

When you get a new customer other than just price.

Why what is the reason that you gain that customer to people look at this as sort of a commodity.

Pricing kind of the same across the board a month.

You and your big competitor, probably no competitor.

Yeah. This is Mike I'll jump on the just on the market stuff in general.

You know you you it's across the board John as you would expect you know if if you've got a great relationship and Youre working very closely with the health care system, they're going to look at a lot of different factors.

They think about you know partnerships.

And the value they can deliver.

So I would just tell you that that there's a lot of factors that go into play, especially if you have a.

A long standing relationship.

Sometimes though as you're entering into you know new with the new relationship.

There might be you know more economics on one part of the of the value equation and the other which could very well be admin fees.

So I will just tell you it's kind of all over the board.

It's a you know to answer your first question, it's an incredibly competitive environment.

And you know I.

I think.

Like any competitive environment, you know, we've got to make decisions along the way as to.

You know how to create continue to create the most amount of value for our.

Our current as well as prospective customers and then finally, we've also got to make decisions based upon you know if it's like Craig continues to talk about if if there's you know.

That actually want things that we're not interested or able to deliver then that's okay too.

To make sure we're maintaining the model appropriately.

And you know, creating contributing as much value to those prospective customers as possible.

Greg and Mike.

The only thing I would add to it is that changing supply chain partners is not a simple process. So that kind of answer. Your first question, there's not a tremendous number of switching that occurs in any typical year.

Which I think if you go back and look in history. There are a small number that actually make a decision and it typically relates to leadership changes or M&A type activity. In some cases, there can be you know if youre not servicing our customer appropriately either us or our competitor that they may may go look, but generally speaking there's not.

A tremendous amount of of health care providers that are looking to switch on a routine and regular basis given the complexity of it and then I think the other piece I would add is the second part of your question why do people choose us.

And somebody that's looking for a partner that is.

In our case, we believe we are differentiating capabilities to really help them not just with price of the product, but all of the clinical evaluation.

We had a lot of success through this pandemic with our.

Ability to source P. P. When they couldn't get it from other organizations and things of that nature and so it truly is the entire value proposition of services that we provide to help them with improving outcomes and reducing costs not just a commodity.

<unk> just a price at the pump on a GPO product.

Yeah, John I have to jump in here I do think that that is a critical differentiation, we have been making it better.

To diversify the supply chain, we do believe you know in the short term it provided access to products that many health systems that were not part of our alliance did not have.

We believe that our continued investment in domestic near shore and are more regional you know investments in partnerships for this PPE and other products, including generic drugs.

Will differentiate us long term so when you were talking about it being sort of a commodity we.

Significantly disagree just because of the focus that we've had on vertically integrating the supply chain much differently than what others are doing in the market as well as the technology investments to a technology enabled supply chain and help the health systems really understand where all the opportunities for cost reductions are.

Thanks, so much.

Ladies and gentlemen, this concludes our conference. Thank you for attending today's presentation you may now disconnect.

Okay.

Yeah.

[music].

Uh huh.