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PI

Premier, Inc. (PINC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 delivered total net revenue of $240.3M and adjusted EPS of $0.25 ($0.27 excluding Contigo Health), with headline GAAP diluted EPS at $(0.60) driven by a $126.8M goodwill impairment in the Performance Services data/technology business .
  • Supply Chain Services outperformed internal expectations (gross admin fees growth ~5% YTD); Premier raised the midpoint of FY2025 Supply Chain Services revenue guidance by $25M and lowered Performance Services by $25M; adjusted EPS guidance midpoint increased by $0.08 .
  • Management reaffirmed FY2025 midpoints for total net revenue excluding Contigo and adjusted EBITDA; expects GPO net administrative fees to be flat-to-slightly higher in Q3, then sequentially higher in Q4 (helped by a one-time member payment) .
  • Capital return remains a catalyst: ~29M shares repurchased for $600M by January 2025, $0.21 quarterly dividend declared, and a new $200M ASR initiated in February 2025 .

What Went Well and What Went Wrong

What Went Well

  • Gross administrative fees growth and new wins supported Supply Chain Services; management cited “better-than-expected” results and raised segment revenue guidance midpoint by $25M .
  • Digital supply chain strategy moved beyond pilot with first major partner agreement; Premier highlighted AI-enabled back-office efficiencies and enhanced data utilization to improve purchasing and resilience .
  • Strong cash generation: H1 FY2025 operating cash flow $193.7M; free cash flow $73.9M, aided by derivative settlement and minority investment distribution .

Selected quotes:

  • “We are reaffirming the midpoints of our consolidated fiscal 2025 revenue and adjusted EBITDA guidance… increasing our adjusted earnings per share guidance” – CEO Michael Alkire .
  • “Adjusted EPS… excluding Contigo Health was $0.27 and in line with our expectations” – CAFO Glenn Coleman .

What Went Wrong

  • Performance Services revenue declined 19% YoY; segment adjusted EBITDA fell 71% in Q2 (shift to subscription in Applied Sciences; weaker consulting demand) .
  • GAAP results impacted by a non-cash goodwill impairment of $126.8M in the Performance Services data/technology business, driving GAAP diluted EPS to $(0.60) .
  • Net administrative fee share moved to low-60s, pressuring net admin fees (13% YoY decline to $131.4M in Q2) despite gross admin fee growth; fee share expected to stabilize in high-60s post renewals .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Net Revenue ($USD Millions)$350.3 $248.1 $240.3
Net Revenue Excl. Contigo ($USD Millions)N/A$240.5 $232.2
GAAP Diluted EPS – Continuing Ops ($USD)$0.57 $0.72 $(0.60)
Adjusted EPS ($USD)$0.69 $0.34 $0.25
Adjusted EPS Excl. Contigo ($USD)N/AN/A$0.27
Adjusted EBITDA ($USD Millions)$118.7 $62.4 $50.1

Segment breakdown:

Segment MetricQ4 2024Q1 2025Q2 2025
Supply Chain Services Net Revenue ($M)$230.0 $151.4 $148.7
Net Administrative Fees ($M)$165.4 $132.6 $131.4
Software Licenses, Other Services & Support ($M)$13.8 $18.8 $17.3
Performance Services Net Revenue ($M)$120.4 $96.8 $91.5
Performance Services Excl. Contigo ($M)N/AN/A$83.5
Supply Chain Services Adjusted EBITDA ($M)$123.4 $77.5 $73.7
Performance Services Adjusted EBITDA ($M)$33.7 $14.9 $9.1

KPIs and cash:

KPIQ4 2024 / FY ContextQ1–Q2 2025
Operating Cash Flow ($M)FY2024: $296.6 H1 FY2025: $193.7
Free Cash Flow ($M)FY2024: $115.7 H1 FY2025: $73.9
Cash & Equivalents ($M)6/30/24: $125.1 12/31/24: $85.9
Revolving Credit Facility ($M)No balance at 6/30/24 $100.0 outstanding; $65.0 repaid Jan-25
DividendsFY2024 paid $95.2 $0.21 declared Jan-23, payable Mar-15
Share RepurchasesASR $400M completed Jul-24 >29M shares; $600M repurchases by Jan-25

Guidance Changes

MetricPeriodPrevious Guidance (Nov 5, 2024)Current Guidance (Feb 4, 2025)Change
Supply Chain Services Revenue ($M)FY2025$560–$610 $590–$630 Raised midpoint by $25M
Performance Services Excl. Contigo ($M)FY2025$370–$410 $350–$380 Lowered midpoint by $25M
Total Net Revenue Excl. Contigo ($M)FY2025$930–$1,020 $940–$1,010 Midpoint unchanged
Adjusted EBITDA ($M)FY2025$235–$255 $237–$253 Midpoint reaffirmed
Adjusted Net Income ($M)FY2025Not disclosed$119–$129 New disclosure
Adjusted EPS ($)FY2025$1.16–$1.28 $1.26–$1.34 Midpoint +$0.08
Diluted Weighted Avg. Shares (M)FY2025Not disclosed94–96 New disclosure
Effective Tax Rate (%)FY202525–27 24–26 Lowered
Net Administrative Fees ($M)FY2025$495–$525 $525–$545 (incl. $60–$75 non-healthcare) Raised
Capex ($M)FY2025$90–$100 $90–$100 Maintained
Free Cash Flow (% of Adj. EBITDA)FY202545–55 45–55 Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Prior Year)Q1 2025 (Prior Quarter)Q2 2025 (Current)Trend
AI/technology initiativesERP adoption; AI prior auth win; Remitra aligned to GPO Focus on tech to capture off-contract spend; continued AI-enabled capabilities Digital supply chain beyond pilot; first major partner; AI-enabled back office/processes Building momentum
Supply chain resiliency/shortagesBroad supply chain savings; co-management deals Addressing IV solution shortages (coordination with FDA/HHS; conservation; alternative supply) Emphasis on 503B program and provider-focused data to accelerate shortage relief Proactive/expanding
Tariffs/macroNot central in Q4 commentaryNo pull-forward from tariffs; diversification to domestic/nearshore Contracts “firm for term” protect providers; supplier absorbs tariffs; continued diversification Managed risk
GPO admin fee share & renewalsMove to high-50s; strong retention (97%) Low-60s in FY2025; renewals 55% addressed; expect >75% by FY2025 Low-60s for FY2025; stabilize high-60s post renewal; 69% addressed by Dec 31 Stabilizing by FY2026
Performance Services demandGrowth YoY in Q4; double-digit adjacents Consulting softness; Applied Sciences timing Shift to SaaS subscriptions; weaker consulting; funnel expected to convert in H2 Transitioning mix
Capital allocation$200M repurchase approved; $400M ASR completed Continued open-market repurchases and dividends $200M Jan-25 repurchase completed; $0.21 dividend; new $200M ASR Feb-25 Ongoing returns

Management Commentary

  • Strategy: “We are AI-enabling manual back-office processes… enhancing our data… embedding evidence-based decision-making into workflows… enhancing supply chain transparency” – CEO Michael Alkire .
  • Outlook: “Adjusted EPS… excluding Contigo Health was $0.27 and in line with our expectations… we repurchased over 29 million shares… $600 million” – CAFO Glenn Coleman .
  • Fee share/renewals: “Aggregate blended fee share… low 60% range for the full fiscal year 2025… likely stabilize in the high 60s once we’ve completed the renewal process” – CAFO Glenn Coleman .
  • Performance Services plan: “Reinvigorate this business… recruiting new talent… refocusing… leveraging collaboratives… extending AI capabilities” – CAFO Glenn Coleman .
  • Tariffs protection: “Firm for the term pricing… supplier… have to absorb those tariffs, not Premier… and not the health systems” – CEO Michael Alkire .

Q&A Highlights

  • Tariffs: Contracts include protections; supplier absorbs tariffs; ongoing diversification away from overreliance on single geographies .
  • Admin fees dynamics: Gross admin fees up ~4% in Q2 and ~5% YTD; renewals 69% completed; fee share trending favorably vs plan; new member wins kicking in (e.g., AllSpire from Jan 1) .
  • Performance Services cadence: Applied Sciences softness in calendar Q4; pipeline expected to convert in fiscal Q3–Q4; shift from license to subscription spreading revenue .
  • One-time items: $17.6M minority investment distribution excluded from adjusted results; Q4 expected member payment embedded in guidance but undisclosed .
  • Contigo: Sold network assets in Jan for $15M; remaining TPA and COE assets still being divested .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q2 FY2025 were unavailable due to data access limits at the time of this analysis. Management indicated adjusted EPS was in line with internal expectations; without external consensus, we cannot assess beats/misses versus Street estimates .
  • Implication: Absent consensus data, focus shifts to trajectory versus prior quarter/year and guidance changes; Performance Services weakness and non-cash impairment were the primary negatives, while Supply Chain Services strength and capital returns supported adjusted EPS.

Key Takeaways for Investors

  • Supply Chain Services resilience: Despite fee share pressure, gross admin fees grew and guidance midpoint rose by $25M; watch H2 ramp (new members, one-time payment) for margin leverage .
  • Performance Services reset: Mix shift to subscriptions and weaker consulting hit Q2; management expects back-half improvement and is executing a turnaround under new segment leadership .
  • Non-cash impairment overshadows GAAP: The $126.8M goodwill charge materially impacted GAAP EPS; adjusted metrics better reflect operating performance .
  • Capital returns as support: Significant buybacks and dividends, plus a new $200M ASR, enhance per-share metrics and may underpin the equity story into H2 FY2025 .
  • Fee share stabilization by FY2026: Expect aggregate blended fee share to settle in the high-60s post renewals; monitor renewal progress and gross admin fee momentum .
  • Shortage solutions as differentiator: 503B expertise and provider-focused data are strategic assets; potential growth area for adjacent services and manufacturer relationships .
  • Near-term trading lens: Limited Street estimate visibility tempers beat/miss calls; focus on H2 catalysts (administrative fees sequential uplift; Performance Services funnel conversion; capital deployment) .