Q3 2023 Premier Inc. Earnings Call

Speaker 1: Thank.

Speaker 2: Good morning and welcome to Premier's Fiscal 2023.

Speaker 2: Third quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one.

Speaker 2: your telephone keypad. To withdraw your question please press star then 2. Please note this event is being recorded.

Speaker 2: I would now like to turn the conference over to Angie McCabe, Vice President, Investor Relations

Speaker 2: Please go ahead.

Speaker 3: Thank you. Welcome to Premier's Fiscal 2023 Third Quarter Conference Call. Our speakers this morning are Mike Alkire, Premier's President and CEO , and Craig McCassen, our Chief Administrative and Financial Officer. Before we get started, I want to remind everyone that our earnings release and the supplemental slides accompanying this conference call.

Speaker 3: of today and we undertake no obligation to update them. Doctors that might affect future results are discussed in our filings with the FCC, including our most recent form 10K and our form 10Q for the quarter, which we expect to file soon. We encourage you to review these detailed safe harbor and risk factor disclosures. We encourage you to review these detailed safe harbor and risk factor disclosures.

Speaker 3: Also, where appropriate, we will 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 in the appendix of the supplemental slides accompanying this presentation.

Speaker 2: and in our Erion Form 8K, which we expect to furnish to the SEC soon. I will now turn the call over to Mike Alkair. Mike? Thank you Angie. Good morning everyone and thank you for joining us today. Early this morning we reported Fiscal 2023 Third Court of Results and provided an update to our Fiscal 2023 guidance.

Speaker 4: market dynamics.

Speaker 2: and then Craig will provide details on our financial and operational results and revised fiscal 2023 guidance. As the purpose driven healthcare company, we remain steadfast in supporting our member healthcare providers and other customers as they continue to navigate.

Speaker 4: current environment, largely characterized by labor challenges, applied change disruptions, inflation and rising interest rates.

Speaker 4: We also continue to focus on advancing our longer-term strategy and reinforcing our competitive position in the market. Our businesses built on a solid foundation and we believe we are uniquely positioned in the market through.

Speaker 4: 1. Our ability to identify and predict innovation catalysts using our vast data set.

Speaker 4: Two are ability to deliver solutions to those catalysts and the market with AI-enabled technology services and programs.

Speaker 4: and three, our ability to scale by leveraging the power of the premier alliance.

Speaker 4: In the third quarter, our performance services segment produced 9% quarter over quarter revenue growth.

Speaker 4: Within this segment, our AI-enabled technology and services platform is driving efficiency and scale for our healthcare provider members and other customers. Top-line growth in this segment reflects our progress and further diversifying our revenue mix and expanding into new customer basings by leveraging our unique combination of member relationships.

Speaker 4: Integrated Analytics and other wrap-around services to further penetrate markets that are adjacent to our core healthcare provider business Through our adjacent markets businesses, we are also partnering with life sciences, payers

Speaker 4: It's self-insured employer customers and other healthcare products and service suppliers to deliver high quality more effective healthcare.

Speaker 4: Collectively, our adjacent markets' businesses produce strong quarter-over-colder growth and remain on track to grow 30 to 40% this fiscal year.

Speaker 4: Contigo Health, our Director of Provider and Director of Employer Health Plan benefits platform, which includes our Provider Network, Centers of Excellence, and 30-party Administrator, and Provider Sponsored Health Plan Solutions, is making solid progress integrating our recently acquired Provider Network assets.

Speaker 4: We recently formally launched ConfigureNet, our Out of Network Graph offering built from these acquired contracts with more than 900,000 providers across 4.1 million locations.

Speaker 4: While it's still early, Configurant is beginning to gain traction in the market. I'm pleased to report that we have signed several new Configurant customers over the past several months.

Speaker 4: health plans, and Fortune 50 and other large self-insured employers.

Speaker 4: We believe this business is well positioned to expand into self-funded employer health plans across the US by offering a differentiated solution that better manages health care costs for employers and their health plan members. Turning now to our supply chain services business.

Speaker 4: In the third quarter, our group purchasing organization, business, performed in line with their expectations.

Speaker 4: with or not a queue or continuum of care, GPO producing mid-single digit growth.

Speaker 4: Our direct sourcing business continues to be impacted by excess market supply and high member inventory levels, which contribute to lower demand and pricing. We along with our healthcare provider and supplier partners continue to focus on building a more resilient supply chain.

Speaker 4: This part of our ongoing effort to geographically diversify sources of production across a broader set of products.

Speaker 4: We recently announced the joint venture and the subsequent grand opening of a new domestic manufacturing facility to manufacturing and accountants products in Virginia.

Speaker 4: We expect this and other partnerships to contribute more sustainable and secure production of vital domestically produced health care products.

Speaker 4: We believe this will help drive less dependence on unpredictable markets and strength and premier's overall value proposition by further supporting our members including the more than 4,400 U.S. hospitals and health systems and over 250,000 providers and other organizations.

Speaker 4: Before I turn the call over to Craig and as we wrap up fiscal 2023, I want to acknowledge the continued dedication and efforts of our employees in advancing premier strategy and focusing on our mission to improve the health of our communities.

Speaker 4: In summary, we remain focused on executing our longer-term strategy by partnering with our members and other customers to deliver innovative, scalable solutions that we believe help solve some of healthcare's biggest challenges and create value for our stakeholders.

Speaker 4: We will continue to help providers and other customers navigate current macro, economic and up-and-up headwinds and other markets.

Speaker 4: Dynamics through novel, technology enabled solution designed to lower costs and improve healthcare and the quality of life for patients.

Speaker 4: I will now turn the call over to Craig for more detailed discussion of our third-coded results and revised fiscal 2023 financial guidance.

Speaker 2: Thanks, Mike. For the third quarter of 2023 and is compared with the same period a year ago, our results were total net revenue of 322.2 million, a decrease of 7%.

Speaker 2: Supply Chain Services Segment Revenue of 216.7 million, a decrease of 14%, and performance services segment revenue of 105.6 million, an increase of 9%.

Speaker 2: In our supply chain services segment, net administrative fees revenue was flat compared with the year ago quarter driven by mid-single digit growth in our non-acute or continuum of care group purchasing business, where we continue to focus on technology enablement to create greater efficiencies for our members.

Speaker 4: while also channeling incremental member spend to our GPO portfolio.

Speaker 2: The growth in our continuum of care GPO business was offset primarily by the following factors within our acute GPO business.

Speaker 4: First, the continued normalization of demand and pricing across certain categories, including pharmacy, diagnostics, staffing, and personal protective equipment for PPE.

Speaker 4: Second, continued regional variation in patient utilization trends affecting member purchasing.

Speaker 4: And third, a slight increase in aggregate blended member fee share due to current market dynamics, including the impact from consolidation of certain member health systems.

Speaker 4: Within both our acute and continuum of care GPO portfolios, the food category produced another consecutive quarter of strong growth.

Speaker 2: primarily driven by increases in volume and the impact of inflation.

Speaker 4: which was partially offset by the continued normalization of demand and pricing across the other categories previously mentioned.

Speaker 4: Direct sourcing products revenue declined from the third quarter of fiscal 2022, which included the effect of higher prices and incremental purchases of PPE and other high demand supplies as a result of the COVID-19 pandemic. This business continues to be impacted by excess market supply and member inventory levels of certain products, which resulted in lower demand and pricing.

Speaker 4: We continue to see ongoing demand for other products such as topical skin adhesives and IV safety catheters and are expanding our product portfolio and driving increased member adoption to mitigate current market conditions.

Speaker 4: In our performance services segment, revenue increased 9% compared with last year's third quarter, primarily due to growth in our consulting services and certain of our adjacent markets businesses.

Speaker 4: including contributions from Contigo Health acquisition of TRPN assets in October 2022.

Speaker 4: As Mike stated earlier, we continue to expect revenue from our adjacent markets businesses to grow 30 to 40 percent on a combined basis in fiscal 2023 compared with fiscal 2022.

Speaker 4: Turning to profitability, GapNet income was 48.6 million for the quarter. Adjusted EBIDA increased 5% from the prior year period and primarily reflects two factors.

Speaker 4: First, an increase in supply chain services adjusted EBITDA, which was mainly due to lower performance-related compensation expense.

Speaker 4: lower logistics costs in our direct sourcing business.

Speaker 4: higher equity earnings related to certain of our minority investments in domestic manufacturing.

Speaker 4: These items were partially offset by restructuring expenses from our previously announced COF savings plan that was implemented in the quarter.

Speaker 4: The increase in supply chain services adjusted EBITDA was partially offset by a quarter over quarter decline in performance services adjusted EBITDA, which was mainly due to higher headcount related expenses in some of our growing adjacent markets businesses compared with the prior year period, as well as restructuring expenses associated with the cost savings plan. Subscribe For ???

Speaker 4: These items were partially offset by profitability associated with revenue growth in our pink AI and contigo health businesses as well as lower performance-related compensation expense. Compared with the year-ago quarter, adjusted net income, and adjusted earnings per share each increased 2%.

Speaker 4: Primarily as a result of the same items that impacted adjusted EBITDA, partially offset by an increase in the effective tax rate in fiscal 2023, compared with fiscal 2022. From a liquidity and balance sheet perspective, cash flow from operations for the nine months ended March 31, 2023 of 331.2 million decreased compared with the prior year period.

Speaker 4: primarily due to one, a decrease in cash receipts from members and other customers compared with the prior year period in which there was higher direct sourcing products revenue as a result of the impact from the COVID-19 pandemic and two, an increase in revenue share paid to members.

Speaker 4: in the current year period. These items were partially offset by a decrease in inventory purchases compared with the year ago period, as well as lower operating expenses driven by the company's cost savings plan implemented in the third quarter of fiscal 2023.

Speaker 4: In addition, net operating cash flows increased due to higher cash receipts, primarily due to dividends from one of our minority investments. Pre-cash flow for the nine months year to date in fiscal 2023 was 199.5 million, compared with 201.9 million for the same period a year ago. The decrease was primarily due to the same factors that impacted cash flow from operations.

Speaker 4: partially offset by lower purchases of property and equipment, namely, our internally developed software and purchased hardware. Compared with the prior year period, due to the timing of projects and purchases. For fiscal 2023, we continue to expect free cash flow of approximately 45 to 55% of adjusted EBITDA.

Speaker 4: Cash and Cash Equivalents totaled $91.5 million as of March 31, 2023, compared with $86.1 million as of June 30, 2022. We ended the quarter with an outstanding balance of $235 million on our $5-year $1 billion revolving credit facility.

Speaker 4: of which 60 million was repaid in April .

Speaker 4: During the first nine months of fiscal 2023, we paid quarterly cash dividends to stockholders, totaling 75.2 million. Recently, our Board of Directors declared a dividend of 21 cents per share, payable on June 15, 2023, to stockholders of record as of June 1.

Speaker 4: Now turning to our revised fiscal 2023 outlook and guidance.

Speaker 4: Based on our performance in the first nine months of this fiscal year, our current visibility into the macro environment and market dynamics, and our expectations for the remainder of the fiscal year, we are making the following updates to our fiscal 2023 guidance ranges.

Speaker 4: We are lowering supply chain services net revenue to a range of 895 to 925 million. This decrease is due to our revised outlook for our direct sourcing products business of 250 to 265 million, reflecting the ongoing impact of excess market supply and member inventory levels.

Speaker 4: and lower revenues than we previously anticipated due to delays in new domestic manufacturing capabilities for isolation gowns and exam gloves.

Speaker 4: Consistent with the guidance we provided last quarter, we continue to expect GPO net administrative fees revenue of 600 to 620 million.

Speaker 4: We are lowering performance services net revenue to a range of 440 to 460 million.

Speaker 4: While the overall business continues to have a strong pipeline of opportunities, we are seeing to some degree some softening in demand and delayed decision making for some of our more comprehensive enterprise license and consulting services engagements.

Speaker 4: largely due to the current macro environment. While we believe there is a continued need for these innovative solutions in the longer term, we think it is prudent to take a more cautious view in the nearer term.

Speaker 4: As a result of the changes to segment level revenue guidance, we now expect total net revenue to be in a range of 1.34 to 1.39 billion in fiscal 2023.

Speaker 4: We are revising our adjusted EBITDA guidance to a range of 490 to 510 million.

Speaker 4: and adjusted earnings per share to a range of $2.43 to $2.55. This is primarily due to the changes to our revenue guidance, as well as the results of premier entering into an amended agreement with FFF Enterprises.

Speaker 4: where we received a preference on any future liquidation of that business. As a result of this new liquidation preference, our 49% ownership interest is now considered preferred equity rather than common stock interest.

resulting in a change in the accounting methodology where we will no longer recognize our proportionate share of quarterly equity earnings, which we had historically included in adjusted EBITDA and adjusted earnings per share.

This change is expected to result in an approximate 2-4 cent per share impact on our fiscal 2023 earnings per share.

Importantly, it will not have an impact on cashflow.

While we're disappointed that we're bringing down our fiscal 2023 guidance,

especially since we implemented the cost savings plan in the third quarter to help mitigate some of the macro related headwinds impacting our business.

We remain focused on executing our long-term strategy to create value for our stakeholders. Our business is stable and resilient, built on a solid foundation with significant cash flow generation and a strong flexible balance sheet, and importantly, supported by highly engaged employees dedicated to our mission to improve the health of communities.

We appreciate your time today and we'll now open the call to questions. We will now begin the question and answer session. Do ask a question you may press star than one on your telephone keypad.

If you're using a speaker phone, please pick up your handset before pressing the keys.

If any time your question has been addressed and you'd like to withdraw your question, please press star then two.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Kevin Kalliendo with UBS.

comes from Kevin Kalliendo with UBS. Please go ahead.

Thanks, thanks for taking my call so soon. I think believe you previously had said that the destocking trend would normalize.

in a couple quarters, I think it was the actual language he used. Is the expectation still the same? Is anything really changed much? Is this just like a magnitude issue that causes?

I think in general what we're still seeing

just access inventory levels.

within the health systems and they're continuing to be bleed through this. So, you know, I still think...

You know obviously we've got a this has got to normalize at some point in time

You know, we're still guessing that, you know, this is probably a lot of a couple of quarters. But, you know, we're just watching how, you know, these inventories are, you know, being utilized in the short term. Yeah, and this is crazy. The only thing I'd add is that it is specific to some of the core commodity products, pretty fast-paced.

that were stocked up very heavily during the pandemic and which the direct sourcing business has its primary business in. So it does vary, but certainly there, we believe it will continue to take a couple of quarters to kind of help all the way out.

I have to follow up. Within SINP, maybe can you speak to the demand across categories? Is there access supply within specific areas of PPE or supplies versus others?

In general, I would just say that you're still see excess supply in the gloves and the gowns. But you could generalize Kevin and say that it's crossed all the categories. OK, thanks so much.

The next question comes from Michael Cherny with Bank of America. Please go ahead. Good morning. Thanks for taking the question. Maybe if I can just ask one on the GPO side, it seems like this quarter has been all about improvisation we've seen it from.

health systems you service, we've seen it from very different medical device, product manufacturers that you work with. How do you think about that trajectory of what you're seeing, what your customer base is seeing on the utilization side, both inpatient and continuum of care, especially as it sets you up?

for remainder of this calendar year and what may be or may not be included in some initial fiscal 24 jumping off points. Yeah, so this is my go start. So just consistent with what we saw last quarter, utilization varies by geography. And some have not seen, you know, the full return to pre-tandemic love.

areas where the economy is not growing quite as fast that you see a still growth.

You know, I, again, I think it's lumpy. I also think, you know, when you have larger population areas versus more rural population areas, you're seeing a, you know, difference between how, you know, those parts of the country are coming back from a utilization standpoint. I was literally out with...

It's a very, very large health system that span geographies. And even they are saying, look, across our entire business, we're seeing exactly what you're seeing. We're seeing that in our higher growth markets that...

from a population standpoint, we're seeing, you know, the recovery happening and then those other areas were not. And if I can just ask one, just follow up and just a technical question. Do you remind us, continue with care side of the administrative fees? What does that has a percent of the total?

The continuing of care represents approximately 40% of our total GPO today, Michael.

Thanks, Craig. The next question comes from Tiffany Yuan representing Steve Valokette with Barclays. Please go ahead. Hi, thanks for taking the question. I think on PS last quarter, like in response to the South O'Dame and dynamic viewers in for Remitra announced a handful of new marketing efforts.

I was wondering if you could give us an update on those efforts and maybe just any changes overall to the sales or marketing approach across all of the PS in order to firm up sales type and respond to what you're seeing in the market. Yeah, so let me hit remetra first and then I'll talk in general about performance services.

So in remetra, obviously we're continuing to build out our business to business infrastructure.

which as we've described in the past really allows for both AR and NAP payment automation. We think it is a very underserved part of the market. We think it's an opportunity to automate some functions within.

our healthcare systems that need to be automated and drive significant efficiency. So since our last call we've been out having conversations with both suppliers as well as our members talking about the value of the offering, getting their feedback and those kinds of things in terms of

as they're struggling in many cases with the headwinds associated with labor and other things. As it relates to performance services,

A couple of different parts of performance services, if you look at our enterprise licenses, still see a very, very strong pipeline of enterprise licenses as our healthcare systems are continuing to need capabilities to help them manage through a very difficult environment. So the technology and the wraparound services in those cases are the ones that we need as consumers. Over the past eight months, the fact that having these kind of Day Understanding andyeighthouse services for these companies

this as well. Yeah, and the only color, this is correct that I would add to that is I think part of your question was around sort of how are we approaching sales and marketing and I think consistent with what we've said previously. Given the extreme financial duress that a lot of these healthcare providers are under, we are continuing to try and articulate short-term value proposition to...

Thanks.

The next question comes from Eric Coldwell with Bear. Please go ahead.

Okay, thank you on the member fee share that was mentioned. I guess I can understand the impact of. Client consolidation on on average fees, but. I'm not as clear on why the macro. Environment was also cited as a reason for higher revenue share. What what was the concept there?

Yeah, I think the is described thanks for the question Eric. You know we we're operating in a challenging environment As you know with labor challenges, supply chain disruptions inflation rising interest rates etc And that's putting on unprecedented cost pressure on these health systems So as we think about recruiting new ones as we think about retention of

ones that do have contracts coming up in the ordinary course. We are in some cases seeing more pressure for Fischer because they are looking to actually improve their financial performance in any possible way that they can in the short term. And so that is having a bearing on Fischer in the current period.

And then on adjacent markets, is there any chance you could parse out the varying growth in the quarter between your legacy healthcare provider revenue and your adjacent markets? I'm trying to get a sense on what adjacent markets actually grew this quarter. I think last quarter was in the lower 20s and you're citing 30 to 40 for the year. So assumption is that that business had to do a little better on a growth rate this quarter, but I'd like to get your thoughts there. on how to play oce this quarter in the middle of the quarter, four

Yeah, so your assumptions correct. So for the third quarter, the business, we had really strong growth in Contigo health and the applied sciences business in particular, but overall we are as we said validating to hit the 30 to 40% on a Full-year basis and did hit in I'd say the mid-20s in the adjacent markets with

sort of mid single digit growth in the provider market. Okay, and then last one on the JVs Honeywell and De Royal. I know last quarter both of those were cited as running behind launch schedule. Sounds like that's

still happening. What's the update on those facilities? Why are they delayed and when do you expect them to, I guess, become, I don't know if the right word is productive, but, you know, functioning at the level you've anticipated. Yeah, so I think issues can expect when you're setting up new lines of production, particularly new facilities and for new complex manuscripts.

initially to get the actual assembly line in place and operational and then given the new automation there were quality control checks to ensure that the products were actually meeting all the expectations as they were coming off the line. So there were delays by a number of months versus where we did originally anticipated as a result of that. They are now coming off the lines.

And so that part is moving forward relative to Honeywell. Similarly, there have been delays in certain of the facilities that they were looking to manufacture. They have pivoted to other facilities to get production, but it's not at the capacity and level that was originally anticipated and expected.

according to the timelines and the plans that we had. And so they are operating now, Eric, but not at the magnitude and level that was originally expected and then those delays. And we are also working a little bit through some of the excess inventory in those product categories that we've talked about as well.

impacting the level of growth in those businesses. Got it. Thank you very much. The next question comes from Richard Close with Ken Accord Genuity. Please go ahead. Yes, thanks for the questions. Craig, could you maybe just go into the softening demand on the consulting and license, just a little bit more details there. What changed from the second quarter? Did this...

standpoint? Sure I'll start and then Mike can add any color is as he deems appropriate. Relative to changes in performance services I think the financial pressures that the health care systems are facing are only continuing to to increase longer term they have the labor challenges at disruptions that are continuing to put pressure on them so

licenses. And so those engagements are taking longer to get through the funnel. As Mike indicated, we do still have a good pipeline, but it's just that they're not closing on the, at the same pace as we'd anticipated last quarter when we were providing our results. From a standpoint of what I was talking about with the short term, it's really about how can you...

you know, 18, 24 months from now, it's how do we position to really drive optimization from either a labor or workforce standpoint or a service line standpoint, etc. so that they get those benefits more quickly. Mike, I don't know if there's things you would add to that. So you got it. And then as a follow-up on the GPO side, I think you mentioned staff.

I thought you had mentioned the category of staffing. Oh, sorry. Richard, this is a kind of apologize. We have continued to see, and I think you are aware of this, during the pandemic, with the labor shortages, there was a tremendous increase in temporary staffing.

So, we have a temporary staffing GPO relationship. We sought substantial growth a year ago in that temporary staffing contract. Over time, health systems had begun to focus on how to reduce their dependency on those temporary staffing. And we've seen more normalization of that staffing category in our GPO.

and we like bottomed out there. I think it's pretty hard to say. I would say that we're probably pretty close to the bottom. But there's still a ways to go. There's still excess costs associated with traveling.

temporary labor in some of our markets and I will tell you I think a lot of those health systems are looking at strategies to continue to get more full-time resources and to support their patients. Yeah and I think it's important to note temporary staffing is still an important part of how healthcare provider manages their labor. It just got to a point that the cost was extremely high. They couldn't...

challenges and the rate hikes that they were able to get over a period of time.

Thank you. The next question comes from Jessica Tessin with Piper Sandler.

The next question comes from Jessica Tesson with Piper Sandler. Please go ahead.

Hi, thank you so much for taking the question. Can you just talk a little bit about the product mix within the products revenue business? So the vast majority still PPE and then just what is kind of the long-term target mix of differentiated products versus PPE and then the current versus long-term margin targets for that business?

Sure, Jessica, this is Craig Altstart and then Mike can clarify our any color. The vast majority of the products in our direct sourcing portfolio today are commodity products. That is where we started in the key areas of gloves, gowns, masks, things of that nature.

We have continued to expand the product portfolio over time, and in some cases have gone further up. I'll say the clinical chain a bit when you think about things like surgeon's gloves and IV catheters and different types of product categories that you've heard us talk about. But the vast majority does continue to be commodity products. I think longer time we will continue.

longer term, excuse me, if we will continue to think about the right product mix and we'll look to where appropriate source more clinical products that are more clinical in nature, to the extent that there is a market that makes sense and we can reduce cost of bring transparency to what's happening from a product perspective in those areas. Longer term, I think that market lends itself and we'll continue to lend itself to...

players that there's not a lot of competitive friction, you will see us go into those markets. I think, definitionally, those are also higher-margined areas just because of the way that market plays out. That's really helpful. And then just my quick follow-up would be assuming it closes, what might be the impact of Kaiser's purchase of Guisinger? Is there a kind of a general rule for this and other consolidation activity? You recently re-negotiated GPO contract, remain intact?

until they expire or are all kind of GPO contracts, you know, severed one deal. Thanks. I can let me hit the macro question first, and then I think Craig has a comment. So at a higher level, from a macro standpoint, yeah, I think we're going to continue to see consolidation across the industry. We've talked about it in the past.

Health systems are looking for additional scale to obviously absorb some of the costs associated with providing the services to their communities. I also think that you're seeing a significant movement to other revenue generating areas, for example, health plans and getting more on the payments.

possible for the fixed costs that they have. Yeah, and I think just a little more specificity. Relative to Kaiser and Geisinger specifically, they don't participate with us in our supply chain business. So that merger itself does not have an implication on our supply chain business today. Relative, you're questioning around the contracts, the way that our GPO contracts.

have the ability to go through a change of control process with 12 months notice if there are two systems coming together, one of which is premier and one of which is not. In the event that two premier systems are merging together, it actually does not trigger that change of clause of control provision so their contract would remain intact.

We've been very, very successful in retaining or winning that additional business. So we do think our overall value proposition is differentiated in the market. Thank you so much. The next question comes from Jack Wallace with Google Securities. Please go ahead. Thanks for taking the questions. I've got a more philosophical question for you, particularly in the core performance services business. You have the consulting business, you have the...

in retaining or winning that additional business. So we do think our overall value proposition is differentiated in the market. Thank you so much. The next question comes from Jack Wallace with Google Securities. Please go ahead. Thanks for taking the questions. I've got a term of more philosophical question for you, particularly in the core performance service business. You have the consulting business, you have the technology business.

But you're calling out your pressures with your member customers, strictly in labor. We've seen a couple of other business models that sell technology solutions across different areas of the hospital system that also incorporate an outsourced labor component. As an outsourced labor component, something you'd consider for that business doesn't make sense. And with that help, re-accelerate your growth or provide a more visible and stable deal pipeline. It's a great question. So we are in fact exploring those opportunities.

we are continuing to see opportunities in that market. We also have capabilities and have launched capabilities to basically co-manage tech various parts of the technology that our healthcare systems utilize.

to run their health systems. And so we've got a couple of those deals that are either sold to be delivered or in process. Just as a reminder, we did create a company called Long80 where we actually can do...

help an important capability to help our healthcare systems control costs.

Great, thank you. That's helpful. And then, yeah, on the GPO comments around the the fee share pressure, yeah, I guess outside of consolidation, are you seeing these conversations pop up more with the customers that are not also performance services customers or is this pretty much across the board? Thank you.

I would say it's pretty much across the board. I'm trying to think, but yeah, I think just in general, it's pretty much across the board.

I would say it's pretty much across the board. I'm trying to think, but yeah, I think just in general, it's pretty much across the board. Appreciate it. Thank you. Thank you.

The next question comes from AJ Rice with Credit Suisse. Please go ahead. Hi, everybody. Just to maybe go back to the GPO question, I think you called out mid-single digit increase in your non-acute GPO business, but you left your overall. You guys left your overall on Ma'. It.

GPO guidance on change. I know on the acute side, I guess that's where you're reflecting the changes in normalization demand and pricing for PPE products that you've highlighted. But you also talked about utilization being strong in part of Texas but being less strong in the upper Midwest. If you isolate the...

What's going on with the PPE? What is happening when you can look at the overall of the acute side of GPIO? Is it flatish? Is it up? Yeah, for the quarter itself, the acute was flat to slightly declining in terms of the third quarter performance.

normalizing for the for the PPE. It in incorporating the implications of PPE, which are affecting pricing and demand, not just in direct sourcing, but we have GPO contracts for those products as well. So I talked about the fact that food was a tailwind to our GPO performance, very strong growth, it cost both acute and non-easiness.

not seeing the testing, you're not seeing the use of the supplies and you're not seeing the staffing. So that is putting pressure more proportionally on the acute care part of the GPO because that's where a lot of those were actually taking place. Okay. And then on the capital deployment, just I don't know if there's much to update there, but obviously you can take a call on targeted acquisitions and investments to support strategic new j?. Ariel.

We're just continuing and noted in the commentary overall that some of that is the timing of when we do purchases and development But overall, you know We're going to continue to be focused on being good stewards of that and manage our capital expenditures as efficiently as we can But nothing specific to note on that side relative to capital deployment overall

I would say no change to our philosophy in terms of balancing where appropriate M&A. We have done the acquisition this year, the TRPN acquisition that we continue to integrate. And then our focus has been de-levering the

credit facility that we did take up in order to facilitate that transaction. We have our ongoing quarterly dividend. From a pipeline standpoint, there are assets we do continue to look at. We continue to be focused in the supply chain on how to technology enable and look for solutions to help capture additional and more.

spend for providers, particularly in the continuum of care as we move forward. And so we'll continue to look for opportunities to do that. On the performance service side of the business, it is primarily focused on those growth businesses. So in life sciences, to the extent that there are things that are going to help us with.

data analytics and capabilities to help providers and life science companies with their analytics around the efficacy of products and the ability to source and identify patients for clinical trials. We're continuing to advance strategically around the payer market with our clinical decision support capabilities and so things that can help enhance that.

automation of prior authorization that we think is going to continue to be a significant development in the future. And then Contigo Health, which we've talked about, we think there are continue to be opportunities around enhancing the network that we've acquired and the capabilities to credential and things of that nature are areas of focus that we'll continue to take a look at.

We will continue to look for opportunities to deploy capital to further differentiate our capabilities. We will balance that with the dividend that we have in place and continue to have discussions with the Board of Directors about when it may be appropriate to implement an additional share repurchase authorization, which we do not have in place right now, but we'll continue to evaluate that with the Board on a go-forward basis. Okay, great. Thanks a lot.

The next question comes from Dolph Warburton on behalf of Eric Pertsher with Nefron. Please go ahead. Hi, thank you for taking our question. Just a quick question on the restructuring charges that are included within the adjusted EBITDA results for each segment. Can you, is there a way to size the...

the impact and the duration that these restructuring charges are going to have going forward. Are we past them now? Just want to get some color on what to expect on EBITDA on the next few quarters. Thank you. Thanks, Dolph. This is Craig. So first of all, yes, all of the restructuring charges.

took place and were implemented in the third quarter when we affected that transaction. So it was approximately $8 million of one-time cost across the two segments. I don't have the specific breakout amongst the various parts of the business at the tip of my fingers, but in total it was a one-time charge that we had to bear the burden of in Q3. And I think as you're aware, we did not adjust that out of our performance. So we are absorbing that in our financial performance that we kind of wait until I'm part of the participation in thisrib static.

our guidance for adjusting the data that we've established. Okay, thank you for reminding me of that. Appreciate it. The last question will come from Stephanie Davis with SVB Learn. Please go ahead. Hey guys, thanks for sneaking me in. You know, a lot of folks have asked about the macro, but might Craig use both that premier for at least fun economic cycle.

Could you share if you saw anything like ordering and fee share pressure in the last recession? And thinking about the lessons learned from 2009 and beyond.

How long did it take to rewrite the ship and see some of these pressure beams? Yeah, you know, this is Mike. First of all, I think recoveries are different, you know, based on some, to your point, some of the microtrends as well. How long did the ship take to rewrite the ship and see some of these pressure beams?

I will tell you what's very unique about what's facing the health systems today is just the labor issues that they're dealing with. First of all, some of the costs associated with it, but then also just access to the labor. I will tell you, we have seen and we continue to hear.

health care systems and in some parts of the country struggling to provide the level of services that they want to provide as a result of that. So I just think we've got just from an industry standpoint, there's a...

There's a headwind here. We've got a aging population that I think should be a tailwind. So, it depends how that all plays out. Do we have enough resources actually to provide that care? When does that really provide the impetus for growth again? Yeah, and the only color I would add to that is that I do think this cycle we're in now.

is unique and different from previous, I'll say, recessionary periods. I know in the number of healthcare executives I've talked to for the reasons Mike just articulated, but it said that in 20, 30 years of leading healthcare systems, this is the worst dynamic that they have operated under in their entire careers. I think you have the whole supply chain disruption of the pandemic, and then the recessionary implications that are affecting labor and all those other dynamics. And so it is a perfect storm.

in terms of the pressure that it is putting on these health care systems to survive. Coupling that with riding interest rates, which is creating cost capital issues form and things of that nature. And so just those dynamics, Stephanie, are different than being able to just rely on kind of historical episodic recessions. Because typically, I would say in the past health systems were a bit more...

I don't want to say recession proved, but people need to care. They went and got it and they sort of managed through it. It might have affected their margin profile as they were going through it. But I think there are just more significant levers that are affecting their ability to perform through this cycle given all of the things that are hitting them.

Well, maybe let's try putting this a little bit of a different way because we have seen some of the labor challenges, while they're still there, have to ease a little bit. Is the read through for Premier that your business model will see improvement with the lag or is there anything else to think about in how your contracts are structured that could expose you more to inflation?

extend resources and extend people's capability by automating e-payables and e-invoicing. We believe that our natural language processing machine learning capability and doing things around prior authorization from a technological standpoint reduces the amount of labor required.

To do the reviews, the chart reviews, and those kinds of things from a prior authorization standpoint, same with documentation and coding. So that is the reason we are so passionate about the technology, Stephanie, as we want to be the driver behind this change, regardless as whether or not these labor issues get resolved or not.

Thank you. This concludes our question and answer session and Premier's Fiscal 2023 Third Quarter Earnings Conference call. Thank you for attending today's presentation. You may now disconnect. Please return to your seats.

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