Q1 2025 Premier Inc Earnings Call
Good morning and welcome to premier's fiscal 2025 first quarter conference call.
Excuse me, from Ears, fiscal 2025, first quarter conference call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions.
Should you need assistance? Please signally conference specialists by pressing star than 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 than one on your telephone keypad. To withdraw your question, please press star than two.
Speaker Change: Please know that this event is being recorded. I would now like to turn the conference over to Ben Krasinski, Senior Director and Vester Relations. Please go ahead.
Ben Krasinski: Thank you, and welcome to premieres fiscal 2025 First Quarter Conference call.
Ben Krasinski: Our speakers this morning are Mike Alkire, premieres president and CEO.
Ben Krasinski: and Craig McKasson.
Ben Krasinski: and the supplemental presentation accompanying this call.
Ben Krasinski: are available in the investors section of our website at investors.premierinc.com.
Ben Krasinski: Please be advised that management's remarks today contain certain forward-looking statements, such as statements regarding our strategies, plans, prospects, expectations, and future performance.
Ben Krasinski: and actual results could differ materially from those discussed today. These forward-looking statements speak as of today and we undertake no obligation to update them.
Ben Krasinski: 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.
Ben Krasinski: We encourage you to review the detailed forward-looking statement and risk factor disclosures in these reports.
Ben Krasinski: Also, during this presentation, we will refer to adjusted and other non-GAAP financial measures, including free cash flow, to evaluate our business.
Ben Krasinski: Information on why we use these measures, in addition to GAAP financial measures, and reconciliations of these measures to our GAAP financial measures, are included in our earnings release and in the appendix of the supplemental presentation accompanying this call.
Ben Krasinski: Information on our non-GAAP financial measures will also be included in our Form 10-Q for the quarter and our Earnings Form 8-K, both of which we expect to file soon.
Speaker Change: I will now turn the call over to Mike Alkire.
Mike Alkire: Good morning, everyone, and thank you for joining us today.
Mike Alkire: I'm pleased to report that Fiscal 2025 First Quarter results slightly exceeded our expectations for total net revenue and profitability, giving us confidence in reaffirming our Fiscal 2025 guidance.
Mike Alkire: From a segment perspective, supply chain services revenue exceeded our expectations, while performance services revenue fell slightly short of what we anticipated for the quarter.
Craig will provide more detail later in the call.
Mike Alkire: In addition, we return capital to stockholders through our quarterly cash dividend and the repurchase of Class A common shares during the quarter under our previously announced $1 billion share repurchase authorization.
Speaker Change: Today marks election day in the United States. As a reminder, our strategies are designed to be less reliant on political and regulatory influences and more concentrated on addressing the core challenges faced by our members and other customers.
Speaker Change: Our strategies and member relationships are founded on the understanding that improving health care delivery for patients relies on reducing costs and improving outcomes through technologies.
Speaker Change: Regardless of the outcome, our commitment to improving the health of communities we serve remains unwavering.
Speaker Change: Turning to our business.
Speaker Change: Momentum continues to grow in the market for Premier's technology-driven supply chain strategy. By collaborating closely with our members and leveraging technology and services, we're identifying additional cost savings opportunities for our members while enhancing contract penetration in our group purchasing programs.
Speaker Change: Our strong member relationships have driven progress in contract renewals, which are also opening the door for us to have deeper and more strategic, data-driven discussions with members on opportunities for improvement.
Speaker Change: Our high renewal rate reflects our commitment to collaboration and the trust we've built with our members over the years.
Speaker Change: In addition, we continue to partner with our members, manufacturers, government agencies, and other stakeholders to help mitigate the impact that recent hurricanes have had on supply chains and hospital operations across the American communities.
With these challenges, the need for Premier to support our member hospitals and health systems remains at an all-time high.
Speaker Change: Premier's response to each disaster reinforces our commitment to enhancing the overall health care system's predictability, resilience, and response through technology enablement.
Speaker Change: These trying times have been particularly challenging for our health system members.
Speaker Change: Our job is to minimize the impact, to be a vital ally in building the future of healthcare.
Speaker Change: Turning to our performance services business, we continue to focus on opportunities to utilize our robust data and AI-enabled technology to deliver unparalleled insights and efficiencies for our members and other customers.
Speaker Change: For example, we were pleased to renew and extend our engagement with a government agency that leverages PREMIER's dataset and proprietary performance improvement methodologies to scale improvements in maternal and infant health outcomes in hospitals across the nation.
Speaker Change: We also extended our partnership with one of the top pharma companies in the world to include additional real-world evidence and observational research related to their innovations in Alzheimer's disease.
Speaker Change: This work underscores our unique differentiation in the marketplace that facilitates better, smarter, faster health care.
Speaker Change: We also continue to advance our sustainability efforts.
Speaker Change: A few weeks ago, we published our 2024 Sustainability Report and Climate Resilience Plan, highlighting our many practices and initiatives aimed at improving health care, operating responsibly, and positively impacting communities.
Speaker Change: Before I hand it over to Craig, I want to take a moment to express our gratitude for his 27 years of service.
Speaker Change: He has been an incredible leader for Premier and exemplifies integrity in all he does.
Speaker Change: We wish him the best in his retirement.
Speaker Change: We also look forward to introducing you to our new Chief Administrative and Financial Officer, Glenn Coleman, during our second quarter earnings call in February. Craig?
Craig: Thanks, Mike. I truly appreciate your kind words.
Craig: First, I would like to note that resulting from our divestiture of the S2S Global Direct Sourcing business, unless otherwise indicated, all results discussed during this call reflect our continuing operations.
Craig: In addition, as the divestiture process for the Contigo Health business remains ongoing, actual results will continue to include contributions from that business.
Craig: Although it will be excluded from guidance, given the expectation that it will be divested and moved to discontinued operations.
As such, we have included a table in our earnings release and supplemental presentation that reconciles the impact of the Contigo Health business on certain financial measures for the quarter.
Craig: Now turning to our fiscal 2025 first quarter results.
Speaker Change: Total net revenue of $248.1 million decreased 8% from the prior year period.
Speaker Change: To provide an update, the group of GPO members that were part of the August 2020 restructure represent approximately 70% of our total gross administrative fees.
Speaker Change: As of September 30th, we have addressed members representing approximately 55% of this group's associated gross administrative fees.
Speaker Change: We currently plan to address and finalize additional member renewals during the current fiscal year that would result in over three-fourths of this group's gross administrative fees being through the renewal process by the end of fiscal 2025.
Speaker Change: with the remainder occurring in fiscal 2026 and 2027.
Speaker Change: Additionally, we experience growth in our other supply chain services revenue driven by new agreements in our supply chain co-management business where members continue to express interest in leveraging Premier's expertise to help manage their end-to-end supply chain operations.
Speaker Change: In our performance services segment, the revenue decline was mainly driven by lower demand in the consulting business compared to the prior year period, continued pressure in the Contigo Health business.
Speaker Change: and Timing of Engagements in the Applied Sciences business.
Speaker Change: Turning to profitability, gap net income was $72.9 million for the quarter, which benefited from a $57 million non-operating gain from the derivative lawsuit settlement in the current year period.
Speaker Change: Total adjusted EBITDA of $62.4 million was better than expected in the quarter resulting from our GPO performance.
Speaker Change: However, compared to the prior year period, adjusted EBITDA declined due to the following factors.
Speaker Change: First.
Speaker Change: Supply chain services adjusted EBITDA declined mainly due to the decrease in net administrative fees revenue as a result of the expected increase in fee share, as well as additional investments in the supply chain co-management business to support ongoing growth.
Speaker Change: and second, performance services adjusted EBITDA decreased mainly due to the decline in revenue in the consulting and applied sciences businesses.
Speaker Change: Adjusted net income decreased primarily as a result of the same factors that impacted adjusted EBITDA, partially offset by a decrease in our effective income tax rate in the current year period.
Speaker Change: Adjusted earnings per share was affected by the same factors as well as completion of the 400 million dollar accelerated share repurchase transaction in July.
Speaker Change: Then, in August and September, we repurchased an additional $58 million of shares in the open market.
Speaker Change: As of September 30th, we have repurchased and retired nearly 23 million Class A common shares under the $1 billion share repurchase authorization.
Speaker Change: from a liquidity and balance sheet perspective.
Partially offset by higher performance-related compensation payments resulting from better fiscal 2024 performance against expectations than in the prior year period where performance was lower than expectations.
Speaker Change: Free cash flow for fiscal 2025 first quarter of $16.2 million increased from the prior year period primarily due to the same factors that impacted cash flow from operations as well as a decrease in purchases of property and equipment.
Speaker Change: These were partially offset by a full quarter of cash payments in the current year period to Omnia related to the sale of future revenue compared to a partial quarter in the prior year due to timing of the sale of the non-healthcare GP operations in fiscal 2024.
Speaker Change: Cash and cash equivalents totaled $87 million as of September 30, 2024, compared with $125.1 million as of June 30, 2024. The decrease was primarily driven by the use of cash for share repurchases.
Speaker Change: Our 5-year, $1 billion revolving credit facility continued to have no balance as of the end of the quarter.
Speaker Change: With respect to the sale of the non-healthcare GPO operations, we received the final payment of $42.3 million in the first quarter, resulting in cumulative proceeds of $723.8 million.
Speaker Change: With respect to capital deployment, we continue to remain disciplined and focused on taking a balanced approach while also remaining focused on return of capital to stockholders in the near term.
Speaker Change: As a reminder, in August we announced that our board approved execution of another share repurchase of $200 million under our $1 billion share repurchase authorization.
Speaker Change: We continue to repurchase shares under that program and following completion our board and management team will evaluate the remaining 400 million available under the current 1 billion dollar authorization
This augmented our quarterly cash dividend, which totaled $21.3 million in the first quarter of fiscal 2025.
Speaker Change: In addition, our board recently declared a dividend of $0.21 per share payable in December.
Speaker Change: We will continue to evaluate opportunities to invest in organic growth and potential acquisitions to differentiate our core offerings in the marketplace.
Speaker Change: Turning to our fiscal 2025 guidance.
Speaker Change: Based on performance for the first three months of the fiscal year and our outlook for the remainder of the year, we are reaffirming the guidance that we introduced on our earnings call in August.
Speaker Change: Please note that while we have begun to repurchase shares under the $200 million dollar share repurchase program, we are not planning to update adjusted earnings per share guidance until we have completed the program.
Speaker Change: From a cadence perspective, we currently expect the following.
Speaker Change: In our GPO business, we expect a sequential decline in net administrative fees revenue in the second quarter as we continue to work through the ongoing contract renewal process.
Speaker Change: In the back half of the year, we expect relatively comparable performance with the first half, as the impact of contract renewals is offset by the ongoing impact of residual purchasing from departed members.
Speaker Change: in our performance services business, and based on the current expectations for the timing of engagements, we still anticipate revenue will be more back half-weighted with the second quarter at or slightly above the first quarter.
Speaker Change: As a reminder, due to the timing and magnitude of enterprise license agreements and certain consulting arrangements, there may be periodic variability in the recognition of the revenue and profitability associated with these engagements between quarters.
Speaker Change: From a profitability perspective, we continue to expect adjusted EBITDA and adjusted earnings per share to be more back half-weighted, mainly due to the revenue cadence in the performance services business.
Speaker Change: Before I conclude, I would like to remind everyone that this will be my last earnings call with Premier, as I am retiring in December.
Speaker Change: I'd also like to thank the financial community for their collaboration over the years. It has indubitably been a pleasure to work with you, and I believe you will be in good hands going forward, as I have full confidence in Glenn and the rest of the team.
Speaker Change: We appreciate your time today, and we'll now open the call for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Eric Percher with Nefron Research. Please go ahead.
Eric Percher: Thank you and Craig I'll wish you luck and appreciate that you managed to fit the word indubitably into the last call here.
Eric Percher: I do want to ask about the admin fees. It's been very difficult to
Speaker Change: get views from health system customers on where they believe this
Speaker Change: All's out.
Speaker Change: but we hear about the renewal process.
Speaker Change: where it appears you're running for the year, that there's no...
Speaker Change: relative to the full year expectation of admin fees and any other nuances around that second half, first half.
Mike Alkire: Yeah, sure, Eric. Thanks, first of all.
Speaker Change: Relative to the GPO business, the renewal process is going right according to plan in terms of the renewals that we're doing being in sync with our expectations of where the renewed contracts would come out.
Speaker Change: What I'd say from the standpoint of the overall GPO is we actually had a stronger underlying performance in the actual purchasing from our health systems in the first quarter, which led to a stronger Q1 than we thought. We are actually monitoring sort of...
Speaker Change: elective procedures given the situation with Baxter and IV fluids and things like that, but overall, yes, on track, and expect to continue to have
Speaker Change: Fee share be in the low 60s throughout fiscal 2025 as we've guided to and would expect that we'll continue to seek good performance from our underlying purchasing through the supply chain services business.
Speaker Change: Okay and then Baxter was actually where I was going to go on the follow-up. Can you give us an update on what you've been doing to help offset the shortages and where we stand today as they're trying to get that up and running? Yeah so thank you Eric. A whole bunch of stuff. They actually have a website out where they keep the health care community up to speed.
Speaker Change: And I think I saw something in the last couple of weeks where they got that factory back up and running. Not necessarily back to 100%, but it's back up and running. So there's been a number of things that we've been focused on. First of all, we've been working, obviously, with the health systems.
Speaker Change: We've been working with the federal government as well to figure out ways to mitigate the overall issue. And those things include coordinating with, you know, the FDA and HHS and the White House and other agencies to look at ways to mitigate.
Speaker Change: fast-track the potential of bringing additional IV solution online.
Speaker Change: And it's really interesting. In some of these cases, we might have found some opportunities where, long-term, there might be some practices that we can leverage that can drive more effective efficiency.
Speaker Change: in the utilization of those IV solutions. So, conservation, obviously, is the second. And then the third is that we are working with other suppliers to look at
Speaker Change: where we can get IV solution that's either produced or get a potentially additional lines up and running to support the needs of the health system. So this is going to continue to play out over the end of this quarter and into the next quarter.
Speaker Change: But we're going to, you know, be focused on all three of those phases, working with, you know, obviously the federal government. Number two is looking at ways to conserve the supply that we have. And number three, we're going to look for additional capacity.
Speaker Change: Thank you.
Thank you, Eric.
Speaker Change: The next question comes from Michael
Michael: Good morning, and I'll echo Eric's comments. Craig, it's been a great run, very helpful since before the IPO, and best of luck in your retirement and whatever you're doing next.
Michael: Thank you, Michael.
Michael: Maybe just a touch on the underlying core. Great to see the pull through on better spending.
Michael: I don't think anyone would disagree. It's a higher utilization environment.
Michael: From a macro level, beyond the renegotiations, what else do you feel like your customers are preparing for in terms of...
Speaker Change: How are they thinking through the impact both of proposed in place and potentially in place?
Speaker Change: tariffs as they think through their purchasing decisions now and plan accordingly for whatever inventory levels they want to keep in a post-COVID world.
Speaker Change: Yeah, so there's a lot there. So let me see if I can unpack some of that from a, you know, just a utilization standpoint of the health system in general.
Speaker Change: We're seeing pretty stable to slight increases of utilization. Now, that is being tampered.
Speaker Change: by this IV solution issue. So, you know, we're keeping an eye on that to, you know, see how, you know, those, the IV issue is having an impact on elective procedures and such.
Speaker Change: As it relates to the utilization of our contracts...
Speaker Change: You know, one of the things, Michael, you know, we've been making significant investments in technologies to identify those areas where...
Speaker Change: Advanced Technologies to identify where those high areas of spend are and to put contracts around that. So we're going to obviously continue to do that and drive up.
Speaker Change: Obviously, the opportunity for us to continue to contract in areas that historically we've not done or we've not, you know, delivered contracts.
Speaker Change: So that's number one. Number two, health systems are really struggling right now with obviously the continual high cost of labor and so what I am seeing is we're out having conversations with
Speaker Change: And so, you know, where we're really doubling down on is what can we be creating and what can we be driving that are really labor extenders, so leveraging our technology to help them be more efficient in terms of their back office.
Speaker Change: leveraging our technologies to drive more throughput through the healthcare system.
Speaker Change: identifying where they've got gaps, or maybe areas that they've got high cost.
Speaker Change: we could help them sort of manage through. So all of those things are obviously, you know, building up into our strategy of how we're driving performance improvement today.
Speaker Change: But make no mistake, it's really all technology-driven. We're identifying these opportunities and then wrapping around services to help drive these performance improvement solutions.
Speaker Change: And Mike, you alluded to my thoughts on my second question and that's the idea of technology development. As you think through the adjustments you made on the portfolio, the changes on divestiture of S2S Global, how do you think about your development pipeline both for internal technology, making the core administrative
Speaker Change: Health systems settle into this new normal areas where you can be more helpful by further developing your performance services suite
Speaker Change: Yeah, that's a great question. So, as you think about the evolution of our organic capital investment, you know, we're continuing to think through, especially in the areas of
Speaker Change: HCC and prior authorization, how are we extending our current offering? So we're very, very good, for example, in...
Speaker Change: Radiology Benefit Management, and we're looking at other areas where we're now investing additional internal capital to grow where, you know, we have the opportunities to drive that technology into the health systems.
Speaker Change: So that's number one. Number two, when you think about inorganic, you know, as Craig said, we've always got that balanced approach to
Speaker Change: You know, capital utilization, number one, and supply chain.
Speaker Change: We want to continue to make investments to expand the portfolio. So where are those areas?
Speaker Change: that we're not covering today. You know, you've heard us talk about PPI and purchase services in the past.
Speaker Change: non-acute areas. Those are areas that we're going to continue to look for. Number two in the supply chain is that whole ordering platform.
Speaker Change: We do believe that to the degree that we can continue to evolve our offering there where we can tee up appropriate pricing
Speaker Change: and appropriate alternatives to products that there's a huge opportunity. So we're going to continue to make investments there.
Speaker Change: Performance services, we talked a little bit about, you know, as I open this up with HCC, prior authorization. So we want to continue to, you know, make the appropriate investments there. And then finally, as we think about what we're doing in life sciences,
Speaker Change: continue to deploy capital to build out.
Speaker Change: services around real-world evidence and those kinds of things for our life science companies. Craig. And Michael, this is Craig. One other point from an organic standpoint, as we've highlighted, we moved the historical Remitra platform into our supply chain services business this year and it really is about aligning our digital supply chain technology development to better align with the GPO and the technology enable the ability to get much tighter and fuller throughput of purchasing through the GPO as well as potentially getting to the point that we actually have an ability to
Speaker Change: Invoice suppliers for the administrative fees due to Premier versus historically relying on a supplier paid model
Speaker Change: Thanks so much. Thank you, Michael.
Speaker Change: The next question comes from Jessica Tesson with Piper Sandler. Please go ahead.
Jessica Tesson: Hi, thank you guys for taking the question.
Jessica Tesson: Is that $41.3 million kind of reflecting the level above which Premier would be able to retain the associated operating income in FY25? And then just, is that outperformance relative to the current portion of the liability included in your guidance, or would that be upside to guide?
Jessica Tesson: Omnia during the given year.
Speaker Change: during fiscal 2025 as a result of their purchasing, so it's not above and beyond the expected purchasing. I think what you're referring to, just so others understand, is there's a baseline of $50 to $55 million of purchasing that we would expect to come through Omnia. Anything above and beyond that that comes through the Omnia purchasing off our portfolio, we get to retain 30% of that upside. We would anticipate that for this fiscal year, depending on how performance goes, that's only going to be a few million dollars in this initial year, given that it's early in the life of the Omnia relationship. So that nominal amount of a few million dollars would have been factored into our expectations for fiscal 2025 guidance, but it's not the magnitude of the whole currency.
Speaker Change: liability.
Speaker Change: Okay, got it. And then just another quick clarification question and then a real one. Why would the liability grow quarter over quarter from 4Q to 1Q?
Speaker Change: Bye-bye.
Speaker Change: put a bow around the transaction in July. So that's why it went up. You would now expect to see it continue to come down quarter after quarter after quarter over the remaining life of the 10-year agreement.
Speaker Change: Got it. And then my question is, is the increased purchasing you saw in the first quarter kind of indicative of
Speaker Change: and Premier having reached a level of the share back rate that induces customer purchasing or was it really more a matter of expanding categories and diversification of purchasing? Thanks.
Speaker Change: Yeah, it's really... Oh, and congratulations.
Speaker Change: Thank you, Jessica. I appreciate it. The first quarter performance is really much more about driving contract penetration and just undergoing pull-through, leveraging our technology and our field resources to identify opportunities for savings as opposed to it being tied to any change in the fee share percentage.
Speaker Change: Thank you, Jessica. The next.
Speaker Change: The next question comes from Kevin Caliendo with UBS. Please go ahead.
Kevin Caliendo: Thank you. Thanks for taking my question and, Craig, congratulations. Best of luck and hopefully everything going forward will be relaxing, fun, and enjoyable.
Kevin Caliendo: Guys, my question really is on...
Kevin Caliendo: if there was any behavior ahead of tariffs or if you're expecting any behavior in terms of purchasing, people building inventories, you building inventories, if that affects how you think about cadence or anything else for the business. That was my first one. And we heard from...
Kevin Caliendo: a couple of supply chain companies that COVID impact came earlier this year because of timing, FDA, whatever, was wondering if that had an undue benefit for you in any way, shape, or form in the quarter.
Kevin Caliendo: If that impacts cadence, sorry. No, no, sorry about that, Kevin. This is Mike. Hey, let me hit the COVID first. Just as a reminder,
Kevin Caliendo: We didn't really see that kind of impact from COVID, and part of that, and this is why I was saying, just as a reminder, flu doesn't necessarily drive a significant amount of
Kevin Caliendo: So we didn't really see, you know, that impact from COVID this year. As it relates to the tariffs, that's a bit more of a...
Kevin Caliendo: So as you think about what our strategies have been over the last number of years, it's really as much as possible to try to reduce our dependence, obviously.
Kevin Caliendo: in Southeast Asia and look for ways to, you know, create resiliency across the supply chain. And we did that. So, you know, we've created capabilities to produce masks.
Kevin Caliendo: We've created, you know, domestically and nearshore. We've done the same with isolation gowns and other products.
Kevin Caliendo: You know, to some degree, we've been sort of building out the capability where terrorists wouldn't necessarily have a significant impact on a number of our categories.
Kevin Caliendo: Having said that, we've not seen a significant pull on suppliers thinking through that there might be these tariffs that come out and that obviously increase the price of products.
Kevin Caliendo: You know, focus on building out inventory, you know, as a concern as it relates to tariffs.
Speaker Change: Thank you.
Speaker Change: Got it. If I can ask one quick follow-up. You've talked a little bit about the IV bags and the weather, but how did it actually, as you think about your, you know, the December quarter,
Speaker Change: How did it actually affect your numbers, and did it in any way, shape, or form, your guidance, your expectations? Like, was there a drag because of this, like lower procedure volumes expected or anything like that?
Speaker Change: Yeah, Kevin, it really varies depending on the status of where each individual health system was and the amount of product they had in inventory to manage procedures.
Speaker Change: regionally and in various locations we are aware that they had to be a little more conservative in terms of some of their elective procedures, but we aren't currently expecting that it will have a material impact on our second quarter performance.
Speaker Change: Thank you so much. Thank you.
Speaker Change: The next question comes from Richard Close with Canaccord Genuity. Please go ahead.
Speaker Change: Hi, this is John Penneon for Richard Close. Thanks for the question.
John Penneon: Yes, first question. With the GPO contract renewals, can you discuss like how it's been potentially trying to cross-sell?
Speaker Change: and other services and as the renewals come up in this quarter, any movement there in that regard? Yeah, so thank you. You know, so while we're going through this, obviously it's an opportunity for us to spend time with the executive teams to ensure they understand the value that we can create.
Speaker Change: And, in fact, that's actually what's happening. So as you – as we're entering through these contract renewals,
Speaker Change: You know, we see significant opportunities for us to cross sell obviously our technology and our advisory services.
Speaker Change: A very, very high percent of these renewals are including that additional capability because at the end of the day, the healthcare systems are really looking for total value.
Speaker Change: And we've been talking about that for years. But they're looking for total value in terms of what we can do to help them bend the cost of supplies for them, and also look at ways to use our technologies to help them be a lot more efficient in how they're caring for patients.
Speaker Change: All right, great, thanks. And then just one follow-up, the supply chain segment adjusted EBITDA margin was, if I'm getting this number correct, like around 50%. I believe last quarter you were talking...
Speaker Change: Supply chain adjusted without being in a load of mid-40s? Is this like a sustainable level or is there any commentary thereof?
Speaker Change: Michael Alkire, Craig McKasson
Speaker Change: All right, great, thanks.
Speaker Change: Thank you.
Speaker Change: The next question comes from Stephanie Davis with Barclays. Please go ahead.
Stephanie Davis: Hey guys, thanks for taking my question. And Craig, you will be so missed. Oh, Stephanie Glenn is going to do a fantastic job here. Forget about me and her. I'm sure you're not going to miss these earnings calls, but we're going to miss you a lot. And I hope you are a stranger at happy hours.
Craig: Thank you very much.
Speaker Change: So, Mike, a lot of the prepared remarks, you're talking about AI, you called out license sales upside in supply chain of all segments, and then Craig called out having Remitra in SCS.
Speaker Change: So is it right to think that now that you're kind of done with the reshuffling and gotten to the right businesses for your forward You're going to lean into tech investments and the supply chain business
Speaker Change: And if so, can you walk us through the top items? What's in your your wish list? Yes Yes, yes, and I apologize if I there must be a bit of a delay Stephanie. I apologize if I jumped in there too early, but
Speaker Change: Technology, supply chain. Yeah, so we've been making that significant investment in e-invoicing and e-payables. What the e-invoicing capability allows for us to do, obviously, is to look at everything that a healthcare system buys.
Speaker Change: and put contracts around that. So that's really, really important. Number two.
Speaker Change: Well, that technology can layer on top of these ERPs and identify where there's opportunities, you know, from a price parity standpoint, off-contract spend, all those kinds of things.
Speaker Change: So, it is a critical differentiator, we believe, in the market, not only to help us continue to drive and evolve, you know, obviously our contract penetration models, and obviously therefore more revenue, but also differentiate us.
Speaker Change: for those entities that pull together health care systems as well as large IDNs that are still struggling.
Speaker Change: with managing their entire invoice process. So, very excited about that investment and looking forward for that to continue to penetrate the market.
Speaker Change: I guess a follow-up on the supply chain side and the less tech-heavy part of it.
Speaker Change: But you've seen a lot of distributors in the medical side lean into this prime vendor relationship and trying to have more of their own branded product sales
Speaker Change: So with that kind of going a little bit more head-to-head with your business, how are you thinking about those competitive dynamics, and how are you working with these players as they try to be more of a direct relationship?
Speaker Change: Yeah, so actually we work very closely with the distributors.
Speaker Change: You know, as their, you know, and this has been going on for a number of years, that they've been building out their private label programs and those kinds of things, obviously, many of those are on our current contract. So, you know, we, we, we.
Speaker Change: Obviously, they're a very, very important trading partner of ours. Number two, as we think about other areas, you know, we really do lean into the distributor partnerships that we have in the food program, for example. It truly does differentiate the value that we can create for our healthcare systems.
Speaker Change: And then similarly in the non-acute area, we have, you know, very strong partnerships there.
Speaker Change: with a distributor where we create differentiated value for those non-acute players in healthcare. So, you know, Stephanie, it's kind of interesting, depending on where they play within the healthcare ecosystem, you know, we have a, you know, basically a different playbook, but we do want to leverage their scale where it makes sense.
Speaker Change: Super helpful. Thank you guys. Craig, come to Miami. Yep. Thanks, Stephanie.
Speaker Change: This concludes our question and answer session and premieres fiscal 2025 first quarter conference call. Thank you for attending today's presentation. You may now disconnect.