CHARLOTTE, N.C.--(BUSINESS WIRE)--Aug 21, 2018--Premier Inc. (NASDAQ: PINC) today reported financial results for the fiscal 2018 fourth quarter and full fiscal year ended June 30, 2018.

Full-Year 2018 Highlights:

Net revenue increased 14% to $1.66 billion from the prior year; Supply Chain Services segment revenue rose 18% to $1.30 billion and Performance Services segment revenue increased 2% to $360.7 million. Due to a one-time re-measurement of deferred taxes related to tax reform, income tax expense increased more than 200%, resulting in a 43% decline in net income to $257.6 million from the prior year. After non-cash adjustments to reflect the change in the redemption value of limited partners’ Class B common unit ownership at the end of each period, diluted earnings per share totaled $1.36 compared with $1.51 the prior year. Non-GAAP adjusted EBITDA* increased 8% to $543.0 million from the prior year. Non-GAAP adjusted fully distributed net income* increased 19% to $317.1 million, representing $2.31 per diluted share, an increase of 22% over $1.89 per diluted share from the prior year. For the fiscal year ended June 30, 2018, the company generated cash flow from operations of $507.7 million. At June 30, 2018, the company’s cash and cash equivalents totaled $152.4 million, and the company had an outstanding balance of $100 million on its five-year revolving $750 million credit facility. Non-GAAP free cash flow* for the fiscal year increased 55% to $335.8 million from $216.5 million the prior year and represented 62% of full-year non-GAAP adjusted EBITDA. Premier established a $250 million stock repurchase plan for fiscal 2019 and completed its previous $200.0 million stock repurchase plan implemented during fiscal 2018.

Q4 2018 Highlights:

Net revenue increased 8% to $434.0 million from the same period last year; Supply Chain Services segment revenue rose 10% to $339.2 million and Performance Services segment revenue increased 2% to $94.8 million. Net income rose 36% to $100.6 million from the same period a year ago. After non-cash adjustments to reflect the change in the redemption value of limited partners’ Class B common unit ownership at the end of each period, diluted earnings per share reflected a loss of $6.17 compared with a loss of $6.10 for the same period last year. Non-GAAP adjusted EBITDA* of $148.1 million increased 12% from the same period last year. Non-GAAP adjusted fully distributed net income* increased 35% to $94.8 million, representing $0.70 per diluted share, an increase of 41% over $0.50 per diluted share from a year ago.

* Descriptions of adjusted EBITDA, adjusted fully distributed net income, adjusted fully distributed earnings per share, free cash flow and other non-GAAP financial measures are provided in “Use and Definition of Non-GAAP Measures,” and reconciliations are provided in the tables at the end of this release.

“Premier’s fourth quarter delivered a very successful finish to fiscal 2018, as stronger-than-anticipated revenue performance across our Supply Chain and Performance Services businesses produced earnings results that exceeded our expectations,” said Susan DeVore, president and chief executive officer. “These results capped a solid fiscal 2018 performance, once again demonstrating Premier’s consistent financial strength and operational excellence, which we believe solidify our continued leadership as we work with our nation’s health systems and other providers to transform healthcare delivery in America.

“Operationally, we finished the year with a 98% retention rate in our group purchasing (GPO) business, which generated approximately $60 billion in contract volume,” DeVore said. “We also achieved a 97% SaaS institutional renewal rate within our Performance Services segment, and our consulting services business delivered year-over-year growth for both the quarter and year. We continue to grow and expand our relationships and further refine our supply chain and performance services offerings. We finished fiscal 2018 with more than 4,000 member hospitals and health systems and approximately 165,000 other providers and organizations.

“Looking forward, we remain confident that Premier is uniquely well positioned to succeed in this dynamically evolving marketplace,” DeVore said. “Our comprehensive, data-driven analytics and consulting services provide health systems with a total value proposition aimed at comprehensively reducing costs, improving quality and safety, and moving our industry towards value-based care. In partnership with our members, we are constantly striving to expand and evolve our offerings to leverage new technologies and capitalize on new opportunities emerging in the marketplace. We believe Premier will continue to deliver meaningful value for our members, meaningful growth for our company, and long-term return and value for our stockholders.”

For the fiscal fourth-quarter ended June 30, 2018, Premier generated net revenue of $434.0 million, an increase of 8%, from net revenue of $403.1 million for the same period a year ago.

Net income for the fiscal fourth-quarter increased 36% to $100.6 million from $73.9 million for the same period a year ago. In accordance with GAAP, fiscal 2018 and 2017 fourth-quarter net income attributable to stockholders included non-cash adjustments of $(353.7) million and $(333.7) million, respectively, to reflect the change in the redemption value of limited partners’ Class B common unit ownership at the end of each period. These non-cash adjustments result primarily from changes in the number of Class B common shares outstanding and the company’s stock price between periods and do not reflect results of the company’s business operations. After these GAAP non-cash adjustments, the company reported a net loss attributable to stockholders of $323.2 million, compared with a net loss of $313.7 million for the same period a year ago. The fourth-quarter net loss per diluted share of $6.17 compared with a net loss of $6.10 for the same period a year ago. See “Calculation of GAAP Earnings per Share” in the income statement section of this press release.

Fiscal fourth-quarter non-GAAP adjusted EBITDA of $148.1 million increased 12% from $132.1 million for the same period a year ago. The growth was primarily driven by an increase in net administrative fees revenue in the company’s group purchasing business and revenue growth coupled with diligent expense management in the company’s Performance Services segment.

Non-GAAP adjusted fully distributed net income for the fiscal fourth quarter increased 35% to $94.8 million from $70.2 million for the same period a year ago. Non-GAAP adjusted fully distributed earnings per share increased 41% to $0.70 from $0.50 for the same period a year ago. Adjusted fully distributed earnings per share represents net income, adjusted for non-recurring and non-cash items, attributable to all stockholders as if all Class B stockholders exchanged their Class B common units and associated Class B common shares for Class A common shares.

Segment Results

Supply Chain Services

For the fiscal fourth-quarter ended June 30, 2018, the Supply Chain Services segment generated net revenue of $339.2 million, an increase of 10% from $309.7 million the prior year. Revenue growth was driven by strong performance of both the company’s GPO and products businesses. GPO net administrative fees revenue of $171.9 million increased 8% from a year ago, driven by ongoing contract penetration of new and existing members augmented by timing of cash collections as well as higher than anticipated recoveries of past due administrative fees. Product revenues of $164.3 million increased 11% from a year ago, resulting from continued growth in the integrated pharmacy and direct sourcing business.

Supply Chain Services segment non-GAAP adjusted EBITDA of $142.5 million for the fiscal 2018 fourth quarter increased 10% from $129.5 million for the same period a year ago. The increase primarily resulted from the increase in net administrative fees revenue.

Performance Services

For the fiscal fourth-quarter ended June 30, 2018, the Performance Services segment generated net revenue of $94.8 million, an increase of 2% from $93.4 million for the same quarter last year. The growth reflects increases in the areas of SaaS informatics products subscription revenue associated with cost management, clinical surveillance and ambulatory regulatory reporting, as well as a year-over-year increase in consulting services revenue.

Performance Services segment non-GAAP adjusted EBITDA of $37.6 million for the fiscal 2018 fourth quarter reflected an increase of 12% from $33.6 million for the same quarter last year, driven primarily by the increased revenue and diligent management of costs.

Results of Operations for the Fiscal Year Ended June 30, 2018

The company generated net revenue of $1.66 billion for the fiscal year ended June 30, 2018, a 14% increase from net revenue of $1.45 billion last year.

Net income decreased $191.9 million, or 43%, to $257.6 million for the fiscal year from $449.5 million for the prior year, due almost entirely to a one-time re-measurement of deferred taxes to a lower federal income tax rate resulting from the Tax Cuts and Jobs Act, which resulted in a more than 200% increase in income tax expense to $259.2 million in fiscal 2018 from $81.8 million the prior year. Fiscal 2018 and 2017 full-year net income attributable to stockholders required non-cash adjustments of $157.6 million and $(37.2) million, respectively, to reflect changes in redemption value of the limited partners’ Class B common unit ownership at the end of each period. These non-cash adjustments result from changes in the number of Class B common shares outstanding and the company’s stock price between periods and do not reflect results of the company’s business operations. After these non-cash adjustments based on the changes in stock price, and after the one-time re-measurement of deferred taxes, the company reported net income attributable to stockholders of $1.36 per diluted share, compared with $1.51 per diluted share a year ago. (See income statement in the tables section of this press release.)

For the fiscal year ended June 30, 2018, non-GAAP adjusted EBITDA of $543.0 million increased 8% from $501.6 million the prior year. Non-GAAP adjusted fully distributed net income increased 19% to $317.1 million from $267.3 million the prior year, representing $2.31 per diluted share, a 22% increase from $1.89.

Supply Chain Services segment net revenue for fiscal 2018 increased 18% to $1.30 billion from $1.10 billion a year earlier. Supply Chain Services non-GAAP segment adjusted EBITDA increased 8%, to $535.4 million, from the prior year.

Performance Services segment net revenue for fiscal 2018 increased 2% to $360.7 million from $353.4 million a year ago. Performance Services non-GAAP segment adjusted EBITDA increased 2%, to $123.4 million, from the prior year.

Cash Flows and Liquidity

Net cash provided by operating activities was $507.7 million for the fiscal year ended June 30, 2018, an increase of 29% from $392.2 million for fiscal 2017. The increase in cash flow from operations primarily resulted from the increase in net administrative fees revenue and decreased working capital needs. At June 30, 2018, the company’s cash and cash equivalents totaled $152.4 million, compared with $156.7 million at June 30, 2017. At June 30, 2018, the company had an outstanding balance of $100.0 million on its five-year $750.0 million revolving credit facility. During the fiscal fourth quarter, the company repaid $100.0 million on the credit facility.

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