Premier - Earnings Call - Q4 2025

Executive Summary

• Q4 FY25 delivered a clean beat versus Wall Street on revenue and adjusted EPS, driven by Supply Chain Services outperformance: Revenue $262.9M vs $247.7M consensus*, Adjusted EPS $0.43 vs $0.34 consensus*; Adjusted EBITDA ex-Contigo $71.1M vs $64.0M consensus*.
• Sequential progress continued: Revenue +1% vs Q3, Adjusted EBITDA margin 27.6% (vs 28.4% in Q3) with beats flowing through from higher GPO penetration despite fee-share resets.
• FY26 guidance initiated (ex-Contigo): Total net revenue $940M–$1.0B, Adjusted EBITDA $230M–$245M, Adjusted EPS $1.33–$1.43; Q1 FY26 guide implies a first-half margin dip from advisory hiring before back-half ramp.
• Strategic catalysts: advisory momentum (four large wins), IllumiCare acquisition (10:1 ROI; ~$100 savings per discharge), and fee-share stabilization expected by FY26 with growth resuming in FY27.

Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well

• Supply Chain Services beat internal midpoint and drove the quarter: segment revenue $170.0M, with net administrative fees $150.1M (growth in gross admin fees and new member onboarding).
• Advisory pipeline inflecting: recently signed four very large deals; FY26 advisory growth expected ≥25% on multi‑year engagements.
• Capital returns and cash generation: FY25 operating cash flow $417.8M; free cash flow $180.5M; completed $200M ASR and repurchased $800M under the 2024/2025 programs; dividend $0.21 declared.

“Strong finish to the year despite the contract renewal headwinds… overall revenue and profitability exceeded expectations largely due to better-than-anticipated results in our Supply Chain Services segment.” — Michael J. Alkire, CEO.

What Went Wrong

• Performance Services softer YoY: revenue $92.9M (-20% YoY) on consulting and timing of license revenue; segment adjusted EBITDA $17.2M (-48% YoY).
• Fee-share reset still compressing margins: adjusted EBITDA margin at 27.6% vs 28.4% in Q3; Supply Chain EBITDA margin expected down in FY26 before stabilizing later.
• FY25 adjusted EPS and EBITDA declined YoY on lower net revenue and increased operating costs (stock comp; asset impairments); adjusted EPS $0.43 vs $0.61 prior year.

Transcript

Speaker 7

Good morning and welcome to Premier, Inc.'s fiscal 2025 fourth quarter and full year conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ben Krasinski, Senior Director, Investor Relations. Please go ahead.

Speaker 1

Thank you and welcome to Premier's fiscal 2025 fourth quarter and full year conference call. Our speakers this morning are Mike Alkire, Premier's President and CEO, and Glenn Coleman, our Chief Administrative and Financial Officer. 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. 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, and actual results could differ materially from those discussed today. These forward-looking statements speak as of today and we undertake no obligation to update them. Factors that might affect future results are discussed in our filings with the SEC, including our fiscal 2025 Form 10-K, which we expect to file soon.

We encourage you to review the detailed forward-looking statement and risk factor disclosures in these reports. Also, during this presentation we will refer to adjusted and other non-GAAP financial measures, including free cash flow, to evaluate our business. 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. Information on our non-GAAP financial measures will also be included in our fiscal 2025 Form 10-K and our earnings Form 8-K, both of which we expect to file soon. I will now turn the call over to Mike Alkire.

Speaker 0

Thanks Ben. Good morning everyone and thank you for joining us for Premier's fiscal year 2025 fourth quarter and full year earnings call. Glenn will share a more detailed review of our results later in the call, but overall I'm pleased with our strong finish to the year. Our overall revenue and profitability exceeded expectations, largely due to better than anticipated performance in the supply chain services segment where we continue to see better contract penetration and ramp up of new member spend. In addition, we also continue to return meaningful capital to stockholders through our quarterly cash dividend and the completion of our $200 million accelerated share repurchase program. From a macro perspective, we continue to see mounting financial pressures for many of our member hospitals and health systems both in the current environment and looking ahead.

These broader market dynamics are accelerating demand for the kind of value-based strategic support that we uniquely provide. Significant headwinds such as reimbursement cuts are forcing health systems to rethink their cost structures and long-term sustainability. Many of our members are proactively moving beyond short-term cost containment towards structural changes that strengthen operational resilience and unlock long-term value. We are well positioned to help them on that journey. The breadth of our GPO portfolio, the depth of our advisory expertise, and the promise of our technology are differentiating us in the market, enabling us to deliver measurable impact that scale and deepen our strategic partnerships across the health system landscape. This is evident in the fact that we recently signed four very large advisory deals and have a robust pipeline heading into fiscal 2026.

As a result of our efforts to reinvigorate our performance services segment and the new talent that we have brought into the company, we are seeing meaningful momentum in our advisory business, a strong validation of the differentiated expertise and capabilities we bring to our members. These health systems are turning to Premier for enterprise-wide transformation. In June we were excited to announce the acquisition of Illumicare, a strategic move that significantly strengthens our ability to deliver real-time insights at the point of care leveraging our AI capabilities. This solution not only complements our existing clinical decision support offering, but also expands our addressable market, especially as providers face mounting pressure to improve clinical and financial performance simultaneously. Importantly, our pipeline continues to build, and we're encouraged by the level of strategic engagement we're seeing. These are not one-off projects.

Our members are increasingly recognizing the need for fundamental changes in our supply chain services segment. Our core GPO business remains strong. We're seeing increased demand for members looking for margin improvement solutions amid ongoing cost pressures, reimbursement uncertainty, and potential tariff impacts. We continue to focus on delivering stability and long-term value creation. Our pharmacy and food portfolios continue to serve as key differentiators within our GPO. Both are delivering steady, meaningful growth not only among our current members, but also by attracting non-Premier organizations seeking distinctive, high-impact savings with built-in supply assurance. These categories are proving to be powerful entry points, and based on historical performance, we believe they are strong leading indicators of broader engagement across our portfolio. This momentum reinforces the critical value we deliver in helping members and future partners navigate today's operational and financial challenges.

Taken together, the strength of our business, the commitment of our team, and the growing strategic needs of our members give us confidence in our ability to drive growth. Moving forward with that, I'll now turn the call over to Glenn for a deeper dive into our financial results and outlook for the year ahead.

Speaker 3

Thanks, Mike. As a reminder, all results discussed during.

This call reflects continuing operations and do.

Not reflect S2S Global, which was divested in October 2024. In addition, we continue to transition and wind down the remaining Contigo Health assets.

By the end of this calendar year.

As such, actual results for the quarter include contributions from the Contigo Health business. However, we're continuing to exclude the results of Contigo Health in our guidance and our discussion of revenue and adjusted profitability for the fourth quarter and full year on today's call. Now turning to our financial results, total full year revenue, adjusted EBITDA and adjusted EPS exceeded our expectations. We closed out fiscal year 2025 on a positive note with net revenue of $986 million, being $11 million above the midpoint of the guidance range, while adjusted EPS of $1.54 was $0.11 above the.

High end of our guidance range.

Moving to our fourth quarter results, net revenue of $258 million increased 1% on a sequential basis but declined from the prior year period, largely driven by higher fee share from contract renewals which are now mostly completed. GAAP net income and EPS from continuing operations of $18 million or $0.22 per share decreased from the prior year period mainly due to lower revenue. In the current year quarter, adjusted EBITDA of $71 million was flat on a sequential basis and translated to a margin of 27.6%. This was better than expected as the revenue outperformance in Supply Chain Services had high margin flow through to profitability. Adjusted EPS of $0.46 was well ahead of our expectations due to better than expected revenue in our Supply Chain Services segment.

A lower share count in mid August, we completed our $200 million accelerated share repurchase program, bringing the total amount of common stock repurchased to $800 million under our $1 billion authorization, which expired on June 30. Turning to segment results, Supply Chain Services continued to perform above expectations despite the increase in the aggregate blended fee share in the quarter. This increase is partially offset by continued growth in gross administrative fees which grew over 3% in fiscal year 2025 driven by higher contract penetration with existing members and onboarding of new members. In addition, we continue to see broad growth across key categories such as Med, Surg, Pharmacy, food and purchase services. We've also made meaningful progress in contract negotiations with GPO members that were part of the August 2020 restructure.

As of June 30, contracts representing less than 20% of group fees remain with the majority expected to be addressed in fiscal year 2026. As such, we anticipate fee share will increase to the mid 60% range of fiscal year 2026 and will stabilize in the high 60s on an annualized basis once we've addressed all renewals. Lastly, given we are on the back end of renewals, this will be our final report on the process. Also in this segment, other Supply Chain Services revenue was driven by 17% growth in our supply chain co-management business resulting from new engagements with members. In addition, our digital supply chain business grew 15% due to further expansion of our solutions to providers and suppliers. Both of these areas represent growth opportunities for us in fiscal year 2026 and beyond.

Moving to the performance services segment, we delivered another quarter of sequential improvement in our advisory business. However, it was lower compared to the prior year period as we're still working to rebuild our sales funnel but are very encouraged by the large engagements that we've recently won. We also have a robust pipeline of additional opportunities that we're working to close and expect our advisory business to return to double-digit growth in fiscal year 2026. In the fourth quarter, we also had lower enterprise license revenue due to a tough comp to the prior year quarter. Shifting to the balance sheet in fiscal year 2025, free cash flow was above our expectations, amounting to $181 million, which translated to a free cash flow conversion of 69% year over year. Free cash flow decreased $48 million mainly due to higher performance-related compensation payments and the timing of payments to Omnia.

These are partially offset by cash received from the derivative lawsuit settlement and a dividend distribution from one of our minority investments in the current year. In fiscal year 2026, we expect free cash flow conversion in the range of 70% to 80%, and we continue to anticipate that our cash tax rate will be less than 5% over the next five years. Cash and cash equivalents totaled $84 million as of June 30, and we ended the quarter with an outstanding balance of $280 million on our credit facility. With respect to capital deployment, we continue to remain disciplined and focused on taking a balanced approach. As I mentioned earlier, we recently completed the $200 million accelerated share repurchase program. In fiscal year 2025, our quarterly dividends totaled $77 million and represented a nearly 4% dividend yield.

Going forward, our priority in capital deployment will be driving revenue growth through organic investments as well as potential tuck-in acquisitions to further enhance our core offerings in the marketplace. As Mike mentioned earlier, we recently acquired Illumicare to further expand our clinical decision support capabilities. Lastly, we made the final payment associated with the termination of the tax receivable agreement in connection with our August 2020 restructure. These payments have been approximately $100 million per year, and beginning July 1, 2025, they no longer negatively impact our free cash flow, providing us more capacity to support our long-term growth plans. Let me now turn to our outlook at a high level. I would generally characterize fiscal year 2026 as a year of expected stabilization and transition as we finalize the GPO contract renewal process.

As such, we expect to return to positive growth for total net revenue, adjusted EBITDA, and adjusted EPS in fiscal year 2027. With that said, our fiscal year 2026 guidance ranges are as follows. Total net revenue of $940 million to $1 billion. Our segment guidance assumed in this range is supply chain services revenue of $590 million to $620 million and performance services revenue of $350 million to $380 million. We also expect adjusted EBITDA to be in a range of $230 million to $245 million and adjusted EPS of $1.33 to $1.43. In terms of operating expense, we took meaningful steps to reduce our expenses by $40 million on an annual run rate basis in the fourth quarter, which is expected to result in a slight year-over-year reduction in fiscal year 2026 operating expenses.

Despite reinvesting some of these savings back into faster growing areas of our business, in terms of our quarterly cadence, we expect lower revenue and profitability in the first half of the year, mainly due to the ramp up of headcount to support the recent success of our advisory business. Importantly, we anticipate this impact will be transitory and that margins will improve as we begin to recognize the associated revenue later in the year. Although we don't typically provide quarterly guidance, given this dynamic, we're providing the following guidance for Q1: total net revenue of between $230 million and $245 million, adjusted EBITDA of $45 million to $50 million, and adjusted EPS of $0.27 to $0.32. In summary, we finished the year on a positive note as overall revenue and profitability exceeded our expectations for the year. This provides us momentum heading into fiscal year 2026.

Second, supply chain services continue to perform better than expected and we're on the back end of the contract renewals for GPO members. We also continue to execute our plan to reinvigorate performance services with significant contract wins in advisory services and are building a robust pipeline of future opportunities. Third, we expect an inflection back to growth in key consolidated financial metrics in fiscal year 2027. In closing, we have a flexible balance sheet and meaningful cash flow that provide us with the ability to continue to grow our business and return value to stockholders. We appreciate your time today and will now open the call for questions.

Speaker 7

We will now begin the question and answer session. To ask a question, you may press Star then one on your touchtone phone. 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 two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Michael Cherny with Leerink Partners. Please go ahead.

Great, thanks.

Speaker 3

Good morning.

Speaker 1

This is Dan Clark on for Mike. First question, just wanted to ask about customer buying behavior you saw in the supply chain services segment in the quarter. Was there any changes or any pull forward ahead of potential tariffs that you observed, and what are you kind of seeing here generally?

Speaker 0

Hey, this is Mike Alkire.

Hey.

We did not see a significant pull forward of any buying behavior. In certain areas, you might have seen some increases, but that was primarily due to some regional issues and things like that. Nothing significant due to the tariffs.

Speaker 3

Great.

Speaker 1

Just a second question on the momentum in the advisory business. Can you talk a little more about what's driving that? Is it how much of it is execution on your end, the collection of the services that you offer, and how much of it is just market driven?

Speaker 3

Thanks. Yeah.

Speaker 0

I'm going to introduce Dave Zito here in just a second. Dave's on the call. Dave is obviously the leader of Performance Services. Let me just start by saying I think the number one thing that's driving it is we've hired Dave and Dave's got a long history of a lot of success in advisory. With all that success and with what's happening with the market, the dynamics happening with the cost pressures, the labor issues, some of these issues associated with potential cuts in Medicaid and those kinds of things, it's a market that needs some very, very strong solutions to help these health systems transform. The market's there, we've got a strong team led by Dave and these guys have recently signed four very large deals. With that, Dave, I'll turn it over to you for some color.

Speaker 4

Thank you. I would just echo Mike's comments. I think it's one is market for sure. I think people are concerned about the impacts of the one big beautiful bill from a Medicaid perspective on both top and bottom line. They're trying to prepare for that. Secondly, I think it's we have the right capabilities, breadth and depth of resources. The technology enablement that Premier's invested in over time is a differentiator. Probably most importantly is that Premier is a trusted brand in the market in terms of delivering results for customers. They look to us, they trust that we'll help them address their concerns. I think it's a combination of all those things that's allowing us to be successful.

Speaker 0

Thank you.

Speaker 7

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

Speaker 4

Thank you. It's good to hear the progress on the admin fee renewal now being below 23% for that August 20th group. Given that you said it's a final report you'd like to give here, can you provide us with a bit of color on the cadence over the year as you get to the stabilization level in the high 60%, is it fair to expect that we may see more of that in the first half of the year versus second half? Also, can you tell us what the underlying admin fee share growth assumption is for fiscal year 2026?

Speaker 0

Yeah.

Speaker 3

Eric, this is Glenn.

Thanks for the questions. Before I get into that, I just first want to highlight the outstanding quarter we had in Supply Chain Services. We actually beat our guidance midpoint by about $21 million on the top line, and it drove a significant beat on both our EBITDA and EPS. We were very pleased overall with how we ended up the year with Supply Chain Services, which was pretty consistent throughout the year. If I look at the components of our fee share, our gross administrative fees grew about 3% on a full year basis. We saw growth year over year in.

All four quarters, with the largest being in the fourth quarter.

We also saw growth in both acute and non-acute.

The growth we're seeing across our.

Portfolio, Food, Pharmacy, Med, Surg, acute, non-acute, very broad-based growth, and we're expecting that to continue heading into fiscal year 2026. I would say on the GPO side, with the increase we're seeing in contract penetration, more uptake on our Surpass contracts, we're expecting that 3% number to go up in 2026. Think of that as a 4% type number on the fee share. We ended the year in 2025 in the low 60% range. That was consistent with our guidance. Based upon our 2026 guidance numbers, we're anticipating the fee share amount to go in the mid-60% range, and that will ramp up throughout 2026. Expect to see the slight increase throughout the year, and then by the end of 2026 we should be essentially complete with all of the 2020 restructured contracts.

There may be a couple still out.

We're now on the back end of this. We're going to be done for the majority of these contracts by the end of 2026. That's why we're no longer going to give specific numbers on our fee share percentages moving forward. If anything changes in a significant way.

Obviously, we would call that out.

Hopefully that gives you enough power too.

Give you a sense about where we're at.

Speaker 4

Yeah, that's helpful. I think where I'm trying to get is the segment EBITDA levels. Based on what you stated, it appears that PS will be down. I think you just gave us why. We should assume the pull through on the admin fee and supply chain looks similar to what we saw this quarter as we're modeling next year.

Speaker 3

Is that fair?

We're not going to give specific segment guidance for EBITDA. I would just directionally tell you I'm expecting to see a nice EBITDA margin expansion in our performance services business. That's largely driven by the fact that advisory services is expected to ramp. You know, we talked about the meaningful contracts that we've won recently. There's four of them. We've got a robust pipeline of additional opportunities. Even with some of our software business declining in 2026, we're expecting EBITDA margin expansion because of better productivity, largely coming from our advisory business. I'm really excited about that turnaround. On the supply chain services side, we would expect to see a decline in our EBITDA margins because we're not through the fee share reset yet. Even with the GAAP growth I talked about, overall, I'm expecting our EBITDA margins to go down in supply chain services.

Obviously, as we get to 2027, we would expect the overall business to show an improvement. I think for the first time now we've got good line of sight to say we feel good. We're going to be growing across all of our key financial metrics in 2027.

Thanks for that.

Speaker 0

Thank you, Eric.

Speaker 7

The next question comes from Eric Percher with Baird. Please go ahead.

Thanks very much and good morning. I was hoping you could help us with sizing on Illumicare in terms of both revenue and EBITDA profile. Secondarily, I know you're guiding fiscal 2026 without Contigo Health, but could you let us know what your thinking results might look like if we continue to model that from what's left on revenue and EBITDA?

Speaker 3

Sure.

Speaker 0

Let me start real quick on Illumicare, because I want to make sure everybody understands the asset that we've acquired. First of all, Illumicare solves a very, very critical member pain point. It addresses the concerns that we've been speaking about, which is margin compression. All these things that both Dave Zito and I have talked about with labor shortages, reimbursement cuts, rising costs, and those kinds of things. Illumicare is going to be a proven lever to actually drive value there. It drives demonstrable difference in terms of delivering about $100 savings per inpatient discharge. I think it has a huge opportunity to have significant penetration in our health systems and, importantly, can really help our healthcare systems perform in a very, very difficult time. It also has some wonderful real-time clinical decision support capability that actually works across all EMRs or a significant chunk of EMRs.

We're very excited about that. Obviously, we think it's going to be a really nice addition to our stance and health capability, and it's going to be a very robust solution using AI, machine learning, and clinical decision support. With that, Glenn, I'll flip it over to you to get into the details on the numbers.

Speaker 3

Yeah, I would just add to your point.

Comments on the $100 per discharge savings. It's a 10 to 1 return on investment for our customers, which is a meaningful full return that they get almost immediate. We're really excited about that acquisition.

In terms of the size of the numbers.

Illumicare you can think of as an $8 to $10 million revenue business for us in fiscal year 2026 and break even on the bottom line. No impact to our adjusted EPS or adjusted EBITDA. Obviously we're expecting this to be one of the growth engines for us going forward as it integrates with our Stanson business. Between the clinical decision support and financial decision support, now we have a really nice synergistic business that we're expecting to generate double-digit growth moving forward. As it relates to Contigo Health, I would just say we're winding that business down right now. We've modeled about $9 million of revenue in 2026 and a $6 million EBITDA loss.

Speaker 4

Thank you very much. It's great.

Speaker 0

Thank you.

Speaker 3

Appreciate it.

Speaker 7

The next question comes from Jessica Tassan with Piper Sandler. Please go ahead. Hi guys.

Speaker 8

Thank you so much for the question, and congrats on the really strong fourth quarter and fiscal 2025.

Speaker 3

Thank you.

Speaker 8

You guys have an interesting perspective because I think the group, and you mentioned this in your prepared remarks, the group purchasing portfolio includes food and perishable items, I guess. Are you observing any divergence in kind of typical food purchasing patterns versus med surg purchasing patterns that would indicate increased intensity per unit of care delivered in FY2025, either because of kind of deliberate hospital actions or because patients are preparing to lose coverage in 2026? Just any color on trends in an intensity per unit of care that you might be able to glean based on just med surg versus food purchasing?

Speaker 0

That's a great question. It's very tough to glean it out of those two portfolios we look at. We have all the data on other measures from a clinical standpoint, lab values and those kinds of things that we can understand and glean that a little bit more effectively. I would tell you there's nothing that we see that's significantly changing. From a dynamic that you're speaking about from a food standpoint, as just a quick reminder, our food program is truly differentiated in the industry. We use it as sort of a pointing into the sphere in terms of getting access into accounts that might not be Premier accounts. You heard me talk a little bit about that in those opening remarks.

We want to continue to do that just because that program continues to grow and evolve and drive a significant amount of value to these health systems, especially when there's a lot of fiscal pressures they're facing.

Speaker 8

Got it. That's helpful. Just my second question is how big is the advisory business within, and apologies if I missed this, how big is advisory within performance services? I think you mentioned that business is expected to grow double digits in FY2026. Do those four big contracts get you there, or just how much visibility do you have into that double digit growth?

Speaker 7

Thanks again.

Speaker 3

Thank you for the question.

We don't break out advisory in performance services, but I'll just give you a rough sizing. It's about $50 to $100 million. You know I talked about double digit growth. I would say we're expecting the growth to be above 25% in fiscal year 2026. A lot of these contracts, keep in mind, are multi-year contracts. We will recognize that revenue over, in many cases, 18 to 24 months. I'm expecting at least 25% growth coming from advisory, largely coming from these four deals. If we get more deals closed, it could even be greater upside to our numbers. Right now we feel very confident given what we've closed, and obviously we got to execute on these deals to get that revenue. Really nice turnaround in our advisory business. It's not going to be a one-time blip.

We're really creating a sustainable long-term business that we expect to grow meaningfully over the next five years.

Speaker 0

Thank you, Jess.

Speaker 7

The next question comes from Kevin Caliendo with UBS. Please go ahead.

Speaker 3

Thanks for taking my question, Glenn, on the free cash flow guidance. Appreciate the color on that.

It's always helpful.

I'm just wondering how the tax receivable agreement payments play into that.

Speaker 0

Like, is that included in the free?

Speaker 3

Cash flow conversion, or should we think about the TRA as incremental for fiscal 2026 free cash flow?

You know, it's included in our free cash flow guidance.

You know, overall, our free cash flows.

If you look at the numbers year.

To year are pretty flat.

There are a couple dynamics in place here. Number one, we've got the positive $100 million TRA benefit, but there was a couple of items in fiscal year 2025 that helped us as well. That's one time in nature. The derivative lawsuit that I mentioned, along with this minority investment dividend.

Received pretty much offset that year over year.

That is why you don't see the big pop in free cash flow. Going forward, you know, we expect now not to have this $100 million headwind, which is a big positive for us.

Got it.

Speaker 0

I know you guys said there wasn't any forward buying around tariffs.

Speaker 3

Was there any activity, services activity, other activity that you found?

Speaker 0

Because of the fear of tariffs.

Speaker 3

The changes that were taking place that were a benefit or continuing to be a benefit, how should we think about that? Because it obviously occupied a ton of our mental well-being. I'm just wondering how customers behave and if that's continued or carried momentum, or if it was a benefit in fiscal 2025 that wouldn't be a benefit in fiscal 2026.

Speaker 0

Yeah, it's a little bit.

I would characterize it as more a focus on the psyche of what's happening. Obviously, tariffs are incredibly dynamic, as you are well aware and everybody on the call is aware. As we've said in the past, our contracts are firm for the term. That means that for the most part there's not necessarily going to be significant impacts from tariffs. We have this member led contracting process as we have spoken about in the past. When we talk about this, that doesn't mean that suppliers aren't coming and saying, hey, we've got issues with tariffs, we might want some price increase, those kinds of things. The member led contracting process is really what dictates whether or not we decide to have a tariff or not.

I think that comes down to, obviously, if we have a healthy market, if there's multiple suppliers in the market and many of them are not asking for tariff relief or any of that stuff, then the tariffs are going to have a de minimis impact on the business. I will just say that so far, things are pretty stable as it relates to tariffs. That does not mean there's not a lot of work that's actually happening in concert with our suppliers, in concert with our members to minimize the impacts of these tariffs. There is a lot of work happening under the water level, if you will. So far the teams are working through these without having a significant impact on the healthcare systems. Fantastic.

Speaker 3

Thanks so much, guys.

Speaker 0

Thank you.

Speaker 7

The next question comes from Ben Krasinski with Bank of America. Please go ahead.

Speaker 3

Good morning and thanks for taking the questions. Glenn, you mentioned that you expect a return to revenue and EBITDA growth in fiscal 2027. You talked about the increasing contract penetration and maybe a stabilization of revenue sharebacks. What is embedded or what needs to happen in fiscal 2027 for revenue and EBITDA to increase? Can you just provide some high level framing of what utilization has to do? Revenue, sharebacks. Just any high level thoughts would be helpful.

Speaker 4

Thanks.

Speaker 3

Yeah, sure. I'll give you a couple of points.

On why we're confident in the recovery to growth in 2027. I think first and foremost when we look at our enterprise license agreements and our software deals, we have a bit of a trough here in 2026. We have fewer renewals coming due just based upon timing. That's going to pick up in 2027, and we're expecting an increase in our software business starting in 2027. Advisory, as we talked about, is going to continue to ramp into fiscal year 2027. I think we're expecting to see some good double digit growth coming from the synergies of our clinical decision support business and Illumicare. Those are areas I would say of growth that will continue to help us moving forward. On the supply chain services side, this.

Gas growth should continue.

We're seeing great momentum in our food and pharmacy portfolios. You know, 3% this year. We're expecting faster growth in 2026 that should continue into 2027. There's good momentum on our gross administrative fees. Both our digital supply chain and co-management businesses are growing double digits.

That should continue as we go into 2027.

Most importantly, we're going to.

Have lower fee share headwinds.

Right.

We'll be through the 2026 negotiations and those headwinds, and it'll still probably be.

A slight headwind in 2027 will be much less than what we've seen in 2025 and 2026.

Those are the key items. As we look at our plans.

For 2027, now we're saying, you know, we expect to see a rebound back to growth across all of our key financial metrics. Thanks for the question, that's helpful.

Thank you for that. You mentioned last quarter you were expecting a client termination payment in 4Q. Did that take place, and is there any way to size that? Thank you. Yeah, it did take place.

We received the cash as well, and the sizing was previously given several quarters ago as part of our guidance increase for supply chain services. At that point in time, I believe we raised our guidance by $15 million, and it was one of the components of the $15 million raise. That just gives you a general idea about what that could be. There are other areas as well. It was consistent with our expectations, and that was all booked and cash received in Q4.

Great. Thanks, Glenn.

Thank you.

Speaker 0

Thank you, Ben.

Speaker 7

The next question comes from Richard Close with Canaccord Genuity. Please go ahead.

Speaker 6

Yeah, thanks for the questions. A lot of the questions I had on advisory were asked, but I'm curious just the magnitude of the headcount additions. Can you give any color there, and just curious how long those people take to ramp up to being productive.

Yeah, I'll start here. Dave Zito, I think you're still on if you can maybe add some color. I think first and foremost, the reason why we're winning is the deep subject matter expertise we're building in our advisory business along with our tech enablement. We've ramped resources. We pretty much added roughly 10 senior leaders across our business. We've got more people we're going to be adding here based upon the support needed for these advisory wins and what we're seeing in the funnel. I would expect probably another 20 people or so will be added in the not too distant future. These engagements, I would say, range everywhere from cost reduction, margin improvement to revenue opportunity. It's everything from revenue optimization to clinical delivery, workforce optimization, supply chain optimization, and those are areas that we're going after. Dave, did you want to add any more color?

Speaker 4

Yeah, I would. Just a couple things. We've been making the investment since the beginning of the calendar year, and the additions of those 10 people that were referenced really helped drive again partnering with the Premier team that was here to build that pipeline and close those deals. The people we're hiring now are really going to be deployed immediately to work. We're really stopping as people come on board, we are deploying them right to project work. Ramp up will not be an issue as we move forward. Right now we're really trying to fill gaps in our end capacity to deliver the work that we have sold. The ramp up will be very, very positive and quick.

Speaker 3

Okay.

Speaker 6

As a follow-up, maybe on the tech side of the performance services, I'm just curious how you're viewing demand, I guess post July 4th and the signing of the big beautiful bill. I'm just curious with respect to maybe the SaaS offerings and then enterprise. I know you said there's not going to be many renewals here in fiscal 2026 on the enterprise license, but just any changes in demand since July 4th or anything you can provide would be helpful.

Speaker 0

there's still a lot of interest in our clinical decision support capabilities. Think of things around prior authorization, clinical coding and documentation and those kinds of things. Because of the investments we've made with Stanson and the additional capital outlay, those technologies are still getting phenomenal interest in the market. Just as<edited_transcript> Yeah, a couple thoughts on that. Then again, Dave Zito, if you'd like to add in, please do so. In general, I will tell you there's still a lot of interest in our clinical decision support capabilities. Think of things around prior authorization, clinical coding and documentation and those kinds of things. Because of the investments we've made with Stanson and the additional capital outlay, those technologies are still having a phenomenal, are getting phenomenal interest in the market.

Just as a quick reminder, AI-enabled machine learning, natural language processing, it's in a very efficient way to help these health systems with prior authorization and coding and documentation. I think Dave and team are looking to continue to expand those capabilities given the success they've had so far. I sense that there's a significant interest in a lot of that activity just because of the dynamics of the market with some of the slow pay stuff coming from payers and those kinds of things. Our capabilities really help offset that. Secondarily, I will say that what's unique about Premier is that not only can we work with our health systems and benchmark their performance and have them understand how they're performing, we've got this fantastic ability with advisory to drive significant change for those health systems.

We can use this technology really to sort of codify or leave as an artifact within the record, within the workflow, all the change that we've driven. It's very, very unique. Some of the things that we can do help drive performance improvement for these health systems. Dave, not sure if you have any other builds.

Speaker 4

I'd echo the last thing you said. Basically, if you look at the way we've developed and deployed technology, it is to drive performance improvement. We view the tools and what, and I think as customers need to.

Speaker 0

Improve performance.

Speaker 4

They're looking for and we're deploying technology that will enable change as well.

Speaker 7

Change.

Speaker 4

It's actually a driver of demand, not a, you know, the current environment is a driver of demand, not a deterrent. As long as we can demonstrate how our tech drives and supports, enables change, I think that our demand will increase.

Speaker 0

Thank you, Dave.

Thank you, Richard.

Speaker 7

The next question comes from Eric Percher with Baird. Please go ahead.

Thank you so much. Your good answers to my first questions enticed me to get back on and ask some more. On the advisory deals, would we be thinking about something in the ballpark of $5 million a year on average as a typical sizing for what you would consider a large deal and then higher than that?

Higher than that.

Speaker 3

Higher than that.

Okay, so the 25% growth in advisory off of $50 to $100 million, the reason you're, you know, that that makes sense. Other areas of the business may be a bit weaker. These are bigger deals that help offset challenges elsewhere. It sounds correct.

Just to be.

Clear to the point, we are expecting our enterprise license deals to be down in 2026 because of fewer renewals. Advisory is helping to offset that, and based upon the midpoint of our guidance for performance services as a total segment, we are expecting to grow in fiscal year 2026. It's driven by the advisory deals. Yes.

Okay, that's helpful. Are there rev rec or profit triggers in these deals that we should be aware of, such as performance or milestone-based items or true-ups at the end of a fiscal year or a calendar year? Is there anything of that nature, or is the billing and profit performance fairly ratable throughout the engagement?

No, there are milestones in these deals.

It is one of the reasons why the revenue recognition, at least for fiscal year 2026, will be more back-end loaded because we have to ramp the resources. As we hit the milestones, which will be later this year, we'll start to recognize the revenue. That is one of the dynamics about why Q1 is going to be a lower quarter than the second.

Half of the year.

If I might, just one or two quick ones. I'd really like to hear what you're doing. Could you give us some anecdotes of a unique advisory contract? Quite frankly, I've always struggled a bit with, you know, the difference between advisory and consulting. Maybe you could help parse out the nuance there between what, you know, maybe to a less informed person like myself, what is the difference between a consulting engagement and an advisory engagement?

Speaker 0

Dave, I'm going to ask you to join in here in just a second. I think people use those terms interchangeably when we talk about advisory, though, in the broader scope. Glenn, hit this. It's about revenue optimization, clinical delivery, it's workflow, workforce, and productivity and those kinds of things. Obviously, all things supply chain. Dave Zito, any builds?

Speaker 4

I would. Answering the second part first, I would say consulting and advisory are the same. They're interchangeable in my mind. These are traditional consulting and their performance improvement clients have large. They estimate what they need to, how they need to improve their performance. They break it into categories, whether it's workforce or supplies or clinical or revenue cycle or strategic growth. We develop strategies to achieve those, help them achieve their expectations and goals, and we deploy resources to partner with them to drive that change. They're very comprehensive in nature as they try to transform their business and modify their cost structure to perform in a new revenue world.

Speaker 0

It is really a strategic and operational.

Speaker 4

Transformation of their business.

Thanks, Dave.

Speaker 3

That's helpful.

Last one. We didn't seem to get any updates on the life sciences or pharma support businesses this quarter. Just curious what you're seeing on that front.

Yeah, I think overall that business is.

Performing as we had expected.

It was not a key driver of our results in the quarter.

That's why we haven't called it out. There are lots of exciting growth opportunities in terms of how we leverage our data and sell into life sciences companies, and that's a plan for us moving forward. We do expect that business to be one of the areas of growth for us in 2026 and beyond.

Thanks again.

Appreciate it.

Speaker 0

Thank.

You.

Speaker 7

This concludes our question and answer session, Premier's fiscal 2025 fourth quarter and full year conference call. Thank you for attending today's presentation. You may now disconnect.