Q3 2025 Premier Inc Earnings Call
Speaker Change: Good morning and welcome to Premier's Fiscal 2025 third quarter conference call. All participants will be in a listen only mode. Should you need assistance please signal on conference specialists by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star than one on a touchtone phone. To withdraw your question, please press star than two.
Please note this event is being recorded.
Speaker Change: I would now like to turn the call over to Ben Krasinski, senior director and investor relations. Please go ahead.
Speaker Change: Thank you, and welcome to Premier's fiscal year 2025 third quarter conference call. Our speakers this morning are Mike Alkire, Premier's president and CEO and Glenn Coleman, our chief administrative and financial officer.
Speaker Change: Before we get started, I want to remind everyone that our earnings release and the supplemental presentation accompanying this call are available in the investors section of our website at investors.premierinc.com
Speaker Change: Please be advised that management's remarks today contain certain forward-looking statements.
Speaker Change: such as statements regarding our strategies, plans, prospects, expectations and future performance.
Speaker Change: 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.
Speaker Change: Factors that might affect future results are discussed in our filings with the SEC, including our most recent form 10K and form 10Q for the quarter, which we expect to file soon. We encourage you to review the detailed forward-looking statement and risk factor disclosures in these reports.
Speaker Change: Also, during this presentation, we will refer to adjusted and other non-GAAP financial measures including free cash flow to evaluate our business.
Speaker Change: Information on why we use these measures in addition to GAAP financial measures and reconciliation 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.
Speaker Change: Information on our non-GAAP financial measures will also be included in our Form 10Q for the quarter and our earnings form 8K, both of which we expect to file soon.
I will now turn the call over to Mike Alkire.
Mike Alkire: Thank you, Ben. Good morning, everyone, and thank you for joining us for Premier 5th School Year 2025 3rd Quarter Ernie's call.
Mike Alkire: This quarter's results reflect the growing impact our strategy is having and delivering meaningful value to our members, other customers and stockholders.
Mike Alkire: Our overall revenue and profitability for the third quarter experienced meaningful sequential growth and exceeded our expectations.
Most notably in our supply chain services segment.
Mike Alkire: As a result, we are increasing our full-year guidance for adjusted EBITDA and adjusted EPS in reaffirming the midpoint of our consolidated revenue guidance.
Mike Alkire: In addition, we continue to return value to stockholders through our quarterly cash dividend and we initiated a $200 million accelerated share repurchase program during the quarter
Mike Alkire: In a challenging environment marked by rising costs, workforce shortages, and reimbursement challenges, health care providers are under intense pressure to deliver high quality, affordable care.
Increasingly,
Mike Alkire: Existing and prospective members are turning to Premier as a strategic partner, leveraging our expertise to co-develop integrated solutions that address their most critical operational and clinical needs
Mike Alkire: Our platform is uniquely positioned to support providers as they navigate the evolving landscape.
Mike Alkire: from data and insights to AI-enabled decision support in the workflow.
Premier's technology closes the loop on comprehensive performance improvement.
Mike Alkire: In supply chain services, tariffs remain top of mind for our members and suppliers due to the potential impact on care delivery.
Mike Alkire: Premier is leading the charge, actively monitoring developments, advocating in Washington and leveraging our proactive member-driven contracting strategies.
Mike Alkire: Due to our member-led process and our supply chain resiliency efforts, today we've seen no material disruption across our GPO portfolio, but would note that it is a fluid situation that will require continued monograms.
Mike Alkire: In addition, we remain the only healthcare company offering a fully integrated digital supply chain solution from sourcing to purchasing to payments.
Mike Alkire: Our tech-first model is delivering real value to members by enabling faster, smarter, data-driven decisions that improve margins and support quality care delivery.
Mike Alkire: We've recruited some of the industry's most seasoned operators, leaders with track records of delivering enterprise-wide transformation with a focus on supply chain, labor reduction, and quality improvement at some of the largest and most complex health systems in the nation.
Mike Alkire: With investments in people and technology, we are evolving our solutions to take on a broader set of challenges faced by health care providers.
You'll see us roll out more comprehensive solutions.
Mike Alkire: that leverage AI, machine learning, and automation to drive impact across supply chain optimization, workforce planning and productivity, clinical transformation.
Strategy and Growth
Mike Alkire: One example of this momentum is our recently announced strategic partnership with Epic.
Mike Alkire: Premier's documentation and coding solution is expected to go live in late 2025, making it available to Netflix, Vast, customer base.
Mike Alkire: and applied sciences. We continue to see strong and growing interest in premieres real-world data and real-world evidence, particularly from life science and MedTech manufacturers aiming to bring clinically effective and financially sustainable products to market.
Mike Alkire: Building on this momentum, we're expanding our advisory capabilities to help partners more effectively harness these insights and drive greater impact.
Mike Alkire: Finally, to further enhance our sales function, we've invested in and retooled our account management team.
Mike Alkire: Following a similar path toward advisory business to include recruiting new talent and leadership.
Mike Alkire: Looking ahead, we are committed to continued investment in our people and core capabilities.
Mike Alkire: including our advisory services, technology and supply chain solutions with the discipline roadmap that includes both organic development and potential tuck-and-acquisitions.
Mike Alkire: AI will remain central to our approach, ensuring the right insights reach the right health care decision maker on the right platform at the right time.
Mike Alkire: Before I turn this call over to Glenn, I want to recognize the outstanding hospitals named toward 2025, Premier 100 top hospitals list.
Mike Alkire: This fully-transparent data-driven program is not just a recognition tool. It's a roadmap for how hospitals can lead across a balanced scorecard of quality, cost, and outcomes.
Mike Alkire: With that, I'll now turn the call over to Glenn for a deeper dive into our financial results.
Thanks, Mike, and good morning, everyone.
Glenn Coleman: As a reminder, all results discussed during this call reflect continuing operations operations.
Mike Alkire: and do not reflect S2S Global, which is the vested on October 1, 2024.
Mike Alkire: In addition, we're working to transition to partners or wind down the remaining contigo health assets by the end of this calendar year.
Mike Alkire: As such, action results for the quarter include contributions from the Contigo Health Business.
Mike Alkire: However, we are continuing to exclude the results of contigo health in our guidance.
Now, turning to third quarter financial results [inaudible]
Mike Alkire: Revenue, adjusted EBITDA, and adjusted EPS, saw significant sequential growth from Q2 to Q3 in both of our business segments.
and it exceeded our expectations for the third quarter.
Mike Alkire: Net revenue of $261 million for the third quarter grew $21 million on a sequential basis, but declined by $25 million from the prior year period, largely driven by higher fee share from contract renewals, which is now mostly complete.
Mike Alkire: Gap net income from continuing operations of $28 million, increased $76 million compared to the prior year period, mainly due to asset impairment charges related to Tego Health in the third quarter of fiscal year 2024.
Adjusted EBITDA, excluding Contigo Health of 73 million dollars [inaudible]
Mike Alkire: Representative is sequential improvement of $21 million in the second quarter, and translated to our highest quarterly margin of this fiscal year at 28.4%
Mike Alkire: Adjusted EPS, excluding Contigo Health, the 46 cents, was well ahead of our expectations through the better than expected revenue and a lower share count.
Mike Alkire: As of March 2025, we've repurchased over 38 million shares of Class A common stock under a $1 billion dollar authorization.
Mike Alkire: Turning to segment results, our supply chain services segment continued to perform above expectations.
Mike Alkire: Despite lower net administrative fees revenue, driven by the expected increase in the aggregate reblanded fee share in the quarter.
Mike Alkire: Rose Administrative fees continued to grow, driven by higher contract penetration with existing members and onboarding of new members.
Mike Alkire: For the first nine months of fiscal year 2025, gross administrative fees grew 3.5% over the prior year period, with broad growth across key categories such as med surge, diagnostics, food and pharmacy.
Mike Alkire: As of March 31st, we made very good progress in contract negotiations with the GPO members that were part of the August 2020 restructure.
Mike Alkire: and we expect to end the fiscal year with less than 20% remaining, the majority of which are expected to be addressed in fiscal year 2026 and we expect to end the fiscal year 2026.
Mike Alkire: Based on our contract renewal today, we continue to expect our aggregate funded fee share to be in a low 60% range for the full fiscal year 2025.
Mike Alkire: and that it will lightly stabilize in the high 60s once we've completed all of the renewals.
Mike Alkire: Lastly, we experience growth in other supply chain services revenue driven by continued growth from new engagements in our supply chain coal management business and further expansion of our digital supply chain solutions to providers and suppliers.
Moving to the performance services segment, [inaudible]
Mike Alkire: We saw notable sequential revenue and adjusted EBITDA improvement from Q2 However we experienced lower consulting revenue compared to the prior year period which was partially offset by better performance in the applied sciences business.
Mike Alkire: As Mike mentioned earlier, we recruited meaningful new talent which has accelerated our efforts to rebuild our sales pipeline in this business, launching new go-to-market solutions, and we're already seeing early positive signs in our sales funnel.
Mike Alkire: shifting to the balance sheet in the first nine months of fiscal year 2025
Mike Alkire: Free cashflow of $130 billion decreased $13 million from the prior year period, mainly due to the timing of payments to Omnia under our channel partnership arrangement related to non-health care customers.
Mike Alkire: Cash and Cash equivalent totaled $71 million as of March 31st, and we ended the quarter with an outstanding balance of $255 million on our credit facility, of which $70 million was repaid in April .
The increase in borrowings is primarily to fund Sherry purchases.
Mike Alkire: With respect to capital deployment, we continue to remain disciplined and focused on taking a balanced approach.
and returning capital to stockholders in the near term. [inaudible]
Mike Alkire: Notably, we completed $200 million as a market sharey purchases in January 2025.
Mike Alkire: We also initiated a new 200 million dollar Accelerated Sherry Purchase Program in February 2025.
Mike Alkire: which resulted in the initial receipt of 9 million shares, and we continue to expect the final settlement to occur by the end of the first quarter of fiscal year 2026.
Mike Alkire: We also continued to return capital through our quarterly dividend, which totaled $60 million in the first nine months of fiscal year 2025, and represented a 4% yield over the 12 month period and at March 31st.
Mike Alkire: In addition, our board recently declared a dividend of 21 cents per share of payable in June .
Mike Alkire: In the future, our priority on capital deployment will be driving revenue growth through organic investments.
Mike Alkire: as well as potential tuck-and-acquisitions to further enhance our Coldwell offerings in the marketplace.
Mike Alkire: Lastly, as a reminder, we will make the final payment associated with determination, the tax receivable agreement and connection with our August 2020 restructure by the end of this fiscal year.
Mike Alkire: These payments have been around $100 million per year and will no longer negatively impact our free cash flow starting on July 1, 2025.
Mike Alkire: Turning to guidance based on our actual performance for the first nine months of fiscal year 2025 which was ahead of our overall expectations
and I look for the remainder of the year.
Mike Alkire: We're increasing our adjusted EBITDA range by $6 million and our adjusted EPS range by $0.10 due to better performance and supply chain services.
and the impact of the February Accelerated Share Repurchase Program.
Mike Alkire: We're also reaffirming the midpoint of our consolidated revenue guidance range of $955 million to $995 million.
Mike Alkire: and expect supply chain services revenue to be above the midpoint of its range and performance services to be below the midpoint of its range.
Mike Alkire: In summary, revenue and profitability, so significant sequential improvement and exceed our expectations for the third quarter, as well as for the first nine months of fiscal year
Mike Alkire: Supply Chain Services performed better than expected, and we're now on the back end of contract we know those for GPL members.
We continue to execute our plan to reinvigorate performance services
Mike Alkire: We believe we have the right strategy and differentiation in the market.
Mike Alkire: and we have a flexible balance sheet and meaningful cash flow that provides us the ability to continue to draw our business and return value to stockholders.
Mike Alkire: We appreciate your time today. We'll now open the call for questions.
We will now begin the question and answer session.
Mike Alkire: To ask a question, you may press star than one on your touchtone phone.
Mike Alkire: If you are using a speaker phone, please pick up your handset before pressing the keys [inaudible]
Mike Alkire: If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
Mike Alkire: At this time, we will pause momentarily to assemble a roster.
Mike Alkire: The first question today comes from Kevin Caliendo with UBS. Please go ahead.
Kevin Calendo: Thanks. Thanks for taking my question, guys. Congrats. Congrats on a really nice quarter.
Speaker Change: So I guess I want to understand you say you're beating expectations in both segments and I'm wondering if this is
Related in any way to you guys taking share with me.
Speaker Change: Acting in anticipation of terrorists. Can you just maybe talk a little bit about what's happening in the macro? That's sort of driving.
Speaker Change: Driving the outperformance that you saw. I think Kevin, first of all, good morning, and this is Mike. I think first of all, it's a little bit of everything.
Speaker Change: So obviously there's a lot of pressure on the healthcare systems today just based on some of the impending changes from a reimbursement standpoint.
Speaker Change: We already know there's a lot of pressure on the health systems from some of the labor shortages that are still left over from COVID.
Speaker Change: and then obviously some of these tariffs are putting pressure on the health system. So I think all of that sort of leads to us
Speaker Change: you know providing a different level of service in terms of helping them you know continue to look at ways to bend their cost curves and you know with the addition of Dave Zito and his team.
Speaker Change: as these healthcare systems continue to face some of these mounting pressures. But I think to answer your question from a macro standpoint,
Speaker Change: I think it's labor, I think it's tariffs and then thread of more tariffs, and then I also think it's...
Speaker Change: We're continuing to do a good job on negotiating the fee share arrangements and we're continuing to see a really nice uptick on contract penetration.
Speaker Change: We've been pretty conservative in some of our modeling on, you know, the gross administrative fee growth we're expecting in the back after the year we've been out performing that and I mentioned it's pretty broad based when I look at diagnostics, food, pharmacy, med service, all growing very nicely in the 4% to higher range.
Speaker Change: and so supply chain services continues to do well here and is becoming more and more stable as we get through these negotiations. I would also say that we saw a bit of a rebound in performance services, a nice sequential improvement there as well and
Speaker Change: That was largely driven by higher enterprise license agreements that we signed in the quarter along with software licenses you probably remember Kevin last quarter We had a bit of a dip in this area we said some it was timing and we actually had signed a couple deals in January So that was obviously stronger here in Q3 and the other thing I'd highlight
Speaker Change: is we have made an investment in our advisory services business. We've brought in a number of new talented people.
Speaker Change: We're actually now seeing a very healthy sales funnel. We're seeing an uptick in new bookings and we actually had sequential revenue growth. We had modeled it to be flat and we're actually now seeing that uptick and consulting services and I'm expecting another uptick here in the fourth quarter of sequentially. So.
Speaker Change: Those investments were expecting we're going to have a nice pay back for us as we move forward.
Speaker Change: But really those are the areas of outperformance and as you know when we have higher revenues we have a pretty much a fixed cost infrastructure
Speaker Change: When you talk about supply chain services and enterprise license deals and software which has very high margin so all of that flow through to the bottom line and result that in the significant beat in the corner on profitability.
Speaker Change: That's super helpful. Can I ask you a quick follow-up? I don't know how quick it is, but we've heard from a lot of that health systems that they have a lot of fixed contracts and they cost
Speaker Change: at least from the large public companies are not something that is going to be overly onerous to them, but you may comment that there's already increasing costs and you're seeing it and it could get worse.
Speaker Change: How is this actually going to play out for your customers, and what are you being asked to do to offset? Where is this cost, the higher care of cost of products coming in? Who's going to end up paying for that, and how do you guys?
Speaker Change: You know benefit or how do you guys work with your customers to reduce those costs? Yeah, so first of all let me just say that you know the healthcare system at large cannot absorb any meaningful tariffs without having obviously dramatic impact on their already pretty tight margins. [inaudible]
Speaker Change: The full impact, though, of any of these tariffs or any additional tariffs are going to obviously depend on the countries that the tariffs are levied on, tariff rates, and obviously any final
Speaker Change: and then as far as Premier goes most of the contracts that we have written for tariffs are sort of that firm for the term pricing
Speaker Change: So, meaning that at least during the time of the contract, that should lessen the issue of the tariff.
Speaker Change: and then obviously, we've been working pretty diligently at creating a modeling tool that uses algorithms that allow users to understand what the issues are with tariffs by category.
Speaker Change: and that's important so that you know we can begin to look at
Speaker Change: You know, other products within a category and look at, you know, where those products might not have the significant issues that some that are, you know, going to be, you know, burdened with tariffs are going to have from a pricing standpoint. [inaudible]
and then, finally, I think you're aware of this but…
Speaker Change: As you think about Premier, you ask the question, all of the decisions that are made from a contracting process are remembered led.
Speaker Change: Obviously informed by all of our data and the contracts that we write, but it's really a member-led process that actually drives the strategy associated with how we continue to manage these tariffs.
Thank you guys so much, super helpful. Thank you, pace.
Thank you.
Speaker Change: The next question comes from Eric Percher with Neffron Research. Please go ahead.
Speaker Change: Thank you. I want to start by maybe a little bit more of a double click on Kevin's question and my question for you would be what are you seeing customers do so far today given firm for the term and
Speaker Change: What you have in place in the contracting are you seeing active stock up, any changes in inventory and are you seeing and expecting that there is more impact in low value consumables.
Speaker Change: that may be balanced toward countries with particularly high tariffs versus higher value products. If you can help us with what they're doing today and then where the impact may be most impactful. I think it's a great question and this again is Mike.
Speaker Change: So, this issue associated with tariffs, obviously the strategy to manage tariffs that's...
Speaker Change: You know, been in place since COVID, right? And where we started to work down the path of creating more resiliency in the supply chain
Speaker Change: You know, the impact, you know, from the COVID days. And so what have these health systems been doing? They've been sitting down with us working through strategies [inaudible]
Speaker Change: around, you know, if a terrif gets levied here, what are our strategies in these specific categories?
Speaker Change: Right, and so there might be categories where there's just a few players who have to be really thoughtful around how do we, you know, work in those markets? How can we get additional suppliers and those markets and those kinds of things?
Speaker Change: On the other hand, there might be organizations that are going to be less exposed to tariffs instead.
Speaker Change: You know, we might have to leverage more of to actually ensure that, you know, that the terrorist are negligible on the price of the products.
Finally, I'll tell you, you know, [inaudible]
Speaker Change: We've been working with them and we created this concept called dynamic pricing model which allows for the health systems to understand.
Speaker Change: Begin to model out and build out models to help these health systems ensure that they're truly finding
Speaker Change: Products at the lowest price that will have, you know, the least amount of impact on tarant. So...
Speaker Change: That's for the most part what they're up to and what they're focused on.
Speaker Change: In terms of, you know, the other things that you talk about, we've not seen any big shifts and
Speaker Change: Purchasing, you know, and anticipation of some of those things because as you know during COVID
Speaker Change: What that does is drive up the price of products unnecessarily.
Speaker Change: and so people are really leveraging data and analytics this time around to understand these impacts and truly understand, you know, supply signals so that they can make the best informed decisions.
Speaker Change: Mike, I would just add, well most of our contracts have this firm for the term pricing as we call it.
Speaker Change: Our members have now a member-led contracting process that allows and reviews all supplier requests for price increases due to these tariffs.
So, suppliers are required now to provide transparency regarding...
Speaker Change: The need for any price increases and if they're going to accept those, it goes through this special committee that we've established and it's really decided upon by our members and obviously we want to make sure we've got critical healthcare supplies remaining in the market and that's the reason why we've set up this special committee as well.
Thank You Glenn
Speaker Change: That's helpful. And can you just remind us how significant pharmaceuticals are across your book and any particular concerns particularly sterile injectables?
Speaker Change: We're going to have to get back to you on specifically what we're doing there.
Speaker Change: So yeah, we'll have to get back to you specifically on the impact on the pharmaceuticals, but I would tell you it falls under the same guide as what we've been talking about for med surgery stuff, but we'll get to the exact numbers as a percent of the overall revenue.
Okay, thank you. Thank you. Thanks, Eric.
Speaker Change: The next question comes from Michael Cherny with Flea Ring Partners. Please go ahead.
Michael Czerny: Good morning, guys. Congrats on a nice quarter. Thank you. Maybe if we can just talk a little bit more about the fee share dynamic, no surprise. Obviously you've been very vocal and transparent about the transition going on over the course of the year.
Michael Czerny: In terms of what developed in the quarter, anything off of your expectations and clearly the performance on the net admin fees was incredibly strong, but are you seeing any differences in discussions versus what you would have anticipated as you go through the re-contracted cycle this year?
Michael Czerny: Yeah, the only thing I would say that's different from the previous discussions and this is favorable to us is we've gotten further along in the actual renegotiations process so as we figure today we're above 75% complete now
Michael Czerny: and we expect to be above 80% by the end of the fiscal year. If you go back to what we said previously, we thought it'd be around 75%. So I think the good news is we're further along into the renegotiations and getting these things finalized.
Michael Czerny: As it relates to the actual B-share percentages, things are very much in line with what we thought [inaudible]
Michael Czerny: and then maybe just another, you use the term partnership and expanding partnerships. It's not something that's new to premiere but as you sit here today and obviously the theme of this call is...
Speaker Change: Tariff Mitigation. How much of the expansion of the partnership is being driven, called defensively, that dynamic of looking for other offsets, given the uncertainty of tariffs? And is there anything along that side that you're looking to partner on, that's...
Speaker Change: Call it difference than what you've done previously for your, your members, your customers? Yeah, so I'll take this one. So a couple things.
Speaker Change: You know, first of all, yes, they are not only looking at us to, you know, put strategies in place to support them on the tariffs but
This calls into sort of broader cost reduction opportunities.
Speaker Change: So, just think, stay in supply chain for a second, you know, people very much interested in
How they potentially are utilizing products at the right levels on the right levels.
Speaker Change: You know, clinically comparative products, you know, they're beginning to sort of look at those opportunities because the tariffs obviously...
Speaker Change: are bringing those questions into play. And so some of the harder things that you have to do from a supply chain standpoint to bring down costs, those are definitely engagements and conversations that are being delivered as we speak.
Speaker Change: So that's number one. And then outside of supply chain, obviously, you know, as
Speaker Change: These health systems feel this pressure on trying to maintain the margins, the limited margins that they have, obviously the labor and productivity and those kinds of
Speaker Change: Um, opportunities are sort of coming into play and then, you know, with Dave being here [inaudible]
Speaker Change: You know, his focus also on how do we make sure that we're bringing in the appropriate amount of revenue from a health system standpoint and looking at the
Speaker Change: You know, the different models to ensure, you know, maximization from that standpoint. So anyway, they're looking at a holistic sort of performance improvement now given this pressure.
Thank you. Appreciate it. Thank you very much, Michael.
Speaker Change: The next question comes from Jessica Tassan with Piper Sandler. Please go ahead.
Jessica Tassin: Yeah, I wanted to ask, is there a difference between hospital's ability to absorb tariffs on consumables versus operating expenses, or sorry, on consumables and operating expenses versus on capital purchases?
and then maybe of the volume that comprises operating expense.
Jessica Tassin: How much of that volume are you able to source domestically? Anne, are you able to give us a rough sense of kind of the purchasing volume that you'd consider
are very, very important, but I will tell you.
Both OPEX and Capital
Jessica Tassin: You know, obviously from an Op-Ix standpoint, that's for the most part, that's all the tariff conversation we've been having, having in the call is really focused on that Op-X.
Jessica Tassin: You know, the only difference on capital is that we get a little bit more time to actually create strategies, you know, to think through, you know, what's the right, you know.
Jessica Tassin: Couple of employment strategy and those kinds of things. So I will just say tariffs affect both. You know, they're going to affect your your op-ex, they're going to affect your capital depending on where, you know, a lot of these products are being manufactured. You know, I'm not sure.
Jessica Tassin: and it's just a matter of truly you know putting a strategy in place to manage both sides of that equation.
Speaker Change: Got it, and are you able to just give us a sense of your purchasing volume in a year? What is the mix of OPEX versus capital expense, and then maybe within OPEX the mix of labor?
Obviously.
and Ben Krasinski.
Speaker Change: We'll have to get back just with some of the specifics on how that sort of plays out because it's very dynamic. There are some years...
Speaker Change: Man, I can remember post COVID where you had, you know, outsized capital growth. There are some years and it just depends on the, you know, economics of what's happening within healthcare because that constantly shifts. I will tell you when there's a lot of pressure.
Speaker Change: You know, on healthcare systems financial obviously it's going to be years where capital expenditures are going to be less right because they're less comfortable and affordable.
Speaker Change: with the predictability of what their profitability looks like. So, those are very, very dynamic questions and as soon as I answer it one way it'll surely be different within the next couple of quarters.
Okay, that makes sense, and then, I'm just...
Speaker Change: That interested maybe if first up was there anything one time in the net admin fee revenue? And then secondly, can you just give us some context for kind of why you were able to complete these renewals? You know ahead of schedule was that a customer initiated acceleration or was it just execution? Any just context there would be helpful. Thanks again. Thanks again.
Speaker Change: Yeah, there was no one-time items in our administrative fees this quarter and it's just about execution and getting the negotiations complete sooner than we had previously modeled and you know we've tried to be conservative on all of our assumptions around this so you know we are moving forward at a good pace and
Speaker Change: Hopefully we will continue to get these things done almost entirely, I would say, or at least the majority in 2026.
Speaker Change: Scottie, thank you. Thank you, Jessica. I appreciate the questions. Hey, real quick, I did want to get an answer on the record. So Eric could ask, Eric Percher would ask, what percent of our gross admin fees?
Speaker Change: comes from Pharma Spend, and it's about 18.5%. So that's Q1 through Q3.
Speaker Change: about 18.5% comes from pharmaceuticals. And then he asked, you know, is there anything specific on, you know what's happening?
Speaker Change: from a macro standpoint on sterile injectables. And there was an EO that I believe came out earlier this week that was focused on expanding our expediting domestic drug manufacturing.
Speaker Change: and so obviously I think hopefully as that EO gets put in place, that will inform a number of manufacturers to highly consider doing more production domestically.
Speaker Change: So with that operator, we can open it up to the next question.
Allen Lutz: The next question comes from Allen Lutz with Bank of America. Please go ahead.
Allen Lutz: Good morning and thanks for taking the questions. One for either Mike or Glenn. Given the strength in 3Q, would you expect your health system customers to think the same way in 4Q, trying to get a sense of what your expectations are on their behaviors we go from what was really nice 3Q into fiscal 4Q? Thanks. Yeah, thank you, Allen. So just very quickly, I think the health systems.
Allen Lutz: are, you know, at least the ones I've been having conversations with over the last few weeks. I think there's just a lot of pressure on them with some of these potentially impending changes. [inaudible]
So I don't know if...
have significantly positive outlooks just because...
Allen Lutz: I think they're obviously worried on the ...
Allen Lutz: How this terrifying is going to play out? They're worried about what's happening with these labor markets and again, they're worried about
Allen Lutz: some of the potential federal funding changes. So I will tell you, I just think it's that place into an executive psyche in terms of how they're thinking about their business from a long-term perspective.
That's really helpful. And then, really around that is…
Allen Lutz: It might be a little bit more difficult, this quarter, to have a sense of what utilization.
Speaker Change: has been within your customer base. But curious what you have observed from, I guess, fiscal 2Q or calendar 4Q into that fiscal 3Q calendar 1Q. And if you can kind of tease out something that you've noticed there, thank you guys. Yeah, thank you very much, Ellen. Obviously, we've got some fantastic data that kind of,
who shows us what's happening from the utilization standpoint. So, through.
Speaker Change: The end of December , or our data is typically about a quarter behind…
Speaker Change: But through the end of December , we're showing low single digits We're showing low single digits.
Speaker Change: sort of increased from acute and then as is usual the non-acute is growing faster than the acute side of the business.
Speaker Change: All right operator, I think we're ready for the last one.
Jay Lewis: The next question comes from Jay Lewis with Baird. Please go ahead.
Jay Lewis: Hi, thanks for taking my question. I had two quick ones. One, you said there were no one-timers in the quarter. That was to say there were no cancellation payments in the quarter either. You're welcome.
Speaker Change: Yes, correct. And are you still expecting the 10 million payment in the fourth quarter? We didn't quantify that payment, so we do expect it in the fourth quarter, but we have not quantified how much that payment is.
Alright, thanks. And then on the performance services outlook
You had a lot of positive comments, it sounds.
Speaker Change: really good, but in a macro environment like this where things are really difficult and hospitals are watching their cost.
Speaker Change: We would historically see a lower demand and a little bit of delayed investment. Could you talk more about why you think that that might not be the case or what you're seeing with your customers? Yeah, typically when there's financial pressures on health systems.
Speaker Change: There's typically more of a demand for services and technology to automate processes.
Speaker Change: Obviously, to see if there's ways they can then labor cost curves and those kinds of things So, when there's financial pressures on the health systems, I think that's when they're more engaging in terms of understanding where those opportunities for performance improvement are [inaudible]
All right. Thank you.
Michael J. Smith, Ed Sheerl, Ed Sheerl, Ed Sheerl,
Speaker Change: This concludes our question and answer session and premieres the school 2025 third quarter conference call Thank you for attending today's presentation. You may now disconnect and connect.