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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 __________________________________________________________________________________________
FORM 10-Q
 __________________________________________________________________________________________
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         
Commission File Number 001-36092
 __________________________________________________________________________________________
Premier, Inc.
(Exact name of registrant as specified in its charter)
 ___________________________________________________________________________________________
Delaware 35-2477140
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
13034 Ballantyne Corporate Place
Charlotte,
North Carolina
 28277
(Address of principal executive offices) (Zip Code)
(704) 357-0022
(Registrant’s telephone number, including area code)
 __________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.01 Par ValuePINCNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒     No   ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒ No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒ Accelerated filer☐Non-accelerated filer☐
Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ☐ No   ☒
As of October 27, 2022, there were 118,762,118 shares of the registrant’s Class A common stock, par value $0.01 per share outstanding.


TABLE OF CONTENTS



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements made in this quarterly report for the three months ended September 30, 2022 for Premier, Inc. (this “Quarterly Report”) that are not statements of historical or current facts, such as those under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in conditional or future tenses or that include terms such as “believes,” “belief,” “expects,” “estimates,” “intends,” “anticipates” or “plans” to be uncertain and forward-looking. Forward-looking statements may include comments as to our beliefs and expectations regarding future events and trends affecting our business and are necessarily subject to uncertainties, many of which are outside our control. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:
•the impact of the continuing financial and operational uncertainty due to the coronavirus pandemic and/or other pandemics, associated supply chain disruptions and inflation;
•global economic and political instability and conflicts, such as the ongoing conflict between Russia and Ukraine, could adversely affect our business, financial condition or results of operations, including issues such as rising inflation and global supply-chain disruption;
•competition which could limit our ability to maintain or expand market share within our industry;
•continued consolidation in the healthcare industry;
•potential delays in recognizing or increasing revenue if the sales cycle or implementation period takes longer than expected;
•the impact to our business if members of our group purchasing organization (“GPO”) programs reduce activity levels or terminate or elect not to renew their contracts on substantially similar terms or at all;
•the rate at which the markets for our software as a service (“SaaS”) or licensed-based clinical analytics products and services develop;
•the dependency of our members on payments from third-party payors;
•our reliance on administrative fees that we receive from GPO suppliers;
•our ability to maintain third-party provider and strategic alliances and/or enter into new alliances;
•our ability to timely offer new and innovative products and services;
•the portion of our revenues that we receive from our largest members;
•risks and expenses related to future acquisition opportunities and/or integration of previous or future acquisitions;
•financial and operational risks associated with non-controlling investments in other businesses or other joint ventures that we do not control, particularly early-stage companies;
•pending and potential litigation;
•our reliance on Internet infrastructure, bandwidth providers, data center providers and other third parties and our own systems for providing services to our users;
•data loss or corruption due to failures or errors in our systems, service disruptions at our data centers, and/or breaches or failures of our security measures;
•the financial, operational and reputational consequences of cyber-attacks or other data security breaches that disrupt our operations and/or result in the dissemination of proprietary or confidential information about us or our members or other third parties;
•our ability to use, disclose, de-identify or license data and/or effectively integrate third-party technologies;
•our use of “open source” software;
4

•our dependency on contract manufacturing facilities located in various parts of the world;
•inventory risk we face in the event of a potential material decline in demand or price for the personal protective equipment or other products we may have purchased at elevated market prices or fixed prices;
•our ability to attract, hire, integrate and retain key personnel;
•adequate protection of our intellectual property and potential claims against our use of the intellectual property of third parties;
•potential sales and use tax liability in certain jurisdictions;
•changes in tax laws that materially impact our tax rate, income tax expense, anticipated tax benefits, deferred tax assets, cash flows and profitability;
•our indebtedness and our ability to obtain additional financing on favorable terms, including our ability to renew or replace our existing long-term credit facility at maturity;
•fluctuation of our quarterly cash flows, revenues and results of operations;
•changes and uncertainty in the political, economic or regulatory environment affecting healthcare organizations, including with respect to the status of the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act of 2010 and pandemic-related public health and reimbursement measures;
•our compliance with complex international, federal and state laws, rules and regulations governing financial relationships among healthcare providers and the submission of false or fraudulent healthcare claims;
•interpretation and enforcement of current or future antitrust laws and regulations;
•compliance with complex federal, state and international privacy, security and breach notification laws;
•compliance with current or future laws, rules or regulations relating to information blocking provisions of the 21st Century Cures Act issued by the Office of the National Coordinator for Health Information Technology (the “ONC Rules”) that may cause our certified Health Information Technology products to be regulated by the ONC Rules;
•compliance with current or future laws, rules and regulations adopted by the Food and Drug Administration applicable to our software applications that may be considered medical devices;
•the impact of payments required under notes payable to former limited partners related to the early termination of the Unit Exchange and Tax Receivable Acceleration Agreements (the “Unit Exchange Agreements”) issued in connection with our August 2020 Restructuring (as defined below) on our overall cash flow and our ability to fully realize the expected tax benefits to match such fixed payment obligations under those notes payable;
•provisions in our certificate of incorporation and bylaws and provisions of Delaware law and other applicable laws that discourage or prevent strategic transactions, including a takeover of us;
•failure to maintain an effective system of internal controls over financial reporting and/or an inability to remediate any weaknesses identified and the related costs of remediation;
•the impact on the price of our Class A common stock if we cease paying dividends or reduce dividend payments from current levels;
•the number of shares of Class A common stock repurchased by us pursuant to any then-existing Class A common stock repurchase program and the timing of any such repurchases;
•the number of shares of Class A common stock eligible for sale after the issuance of Class A common stock in our August 2020 Restructuring and the potential impact of such sales; and
•the risk factors discussed under the heading “Risk Factors” under Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (the “2022 Annual Report”), filed with the Securities and Exchange Commission (“SEC”) and this Quarterly Report on Form 10-Q.
More information on potential factors that could affect our financial results is included from time to time in the “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or similarly captioned sections of this Quarterly Report and our other periodic and current filings made from time to time with the SEC, which are available on our website at http://investors.premierinc.com (the
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contents of which are not part of this Quarterly Report). You should not place undue reliance on any of our forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise. Furthermore, we cannot guarantee future results, events, levels of activity, performance or achievements.
Certain Definitions
For periods prior to August 11, 2020, references to “member owners” are references to participants in our GPO programs that were also limited partners of Premier Healthcare Alliance L.P. (“Premier LP”), sometimes referred to as “LPs” or “former limited partners,” that held Class B common units of Premier LP and shares of our Class B common stock.
For periods on or after August 11, 2020, references to “members” are references to health systems and other customers that utilize any of our programs or services, some of which were formerly member owners.
References to the “August 2020 Restructuring” are references to our corporate restructuring on August 11, 2020 in which we (i) eliminated our dual-class ownership structure, through an exchange under which member owners converted their Class B common units in Premier LP and corresponding Class B common shares of Premier, Inc. into our Class A common stock, on a one-for-one basis, and (ii) exercised our right to terminate the Tax Receivable Agreement (the “TRA”) by providing all former limited partners a notice of termination and the amount of the expected payment to be made to each limited partner pursuant to the early termination provisions of the TRA with a determination date of August 10, 2020. For additional information and details regarding the August 2020 Restructuring, see our 2021 Annual Report.
References to the “Subsidiary Reorganization” are references to an internal legal reorganization of our corporate subsidiaries in December 2021 for the purpose of simplifying our subsidiary reporting structure. For additional information and details regarding the Subsidiary Reorganization, see our Quarterly Report for the period ended December 31, 2021.
References to “Prior Premier GP” are references to our former wholly owned subsidiary Premier Services, LLC, which was merged with and into Premier, Inc., with Premier, Inc. being the surviving entity as part of the Subsidiary Reorganization.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PREMIER, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
September 30, 2022June 30, 2022
Assets
Cash and cash equivalents$176,630 $86,143 
Accounts receivable (net of $1,127 and $2,043 allowance for credit losses, respectively)
105,226 114,129 
Contract assets (net of $838 and $755 allowance for credit losses, respectively)
277,571 260,061 
Inventory123,881 119,652 
Prepaid expenses and other current assets55,655 65,581 
Total current assets738,963 645,566 
Property and equipment (net of $600,970 and $578,644 accumulated depreciation, respectively)
208,862 213,379 
Intangible assets (net of $228,034 and $217,582 accumulated amortization, respectively)
346,120 356,572 
Goodwill999,913 999,913 
Deferred income tax assets722,876 725,032 
Deferred compensation plan assets41,636 47,436 
Investments in unconsolidated affiliates215,436 215,545 
Operating lease right-of-use assets36,897 39,530 
Other assets109,038 114,154 
Total assets$3,419,741 $3,357,127 
Liabilities and stockholders' equity
Accounts payable$59,803 $44,631 
Accrued expenses39,342 40,968 
Revenue share obligations247,830 245,395 
Accrued compensation and benefits54,968 93,638 
Deferred revenue28,286 30,463 
Current portion of notes payable to former limited partners98,271 97,806 
Line of credit and current portion of long-term debt252,215 153,053 
Other current liabilities57,286 47,183 
Total current liabilities838,001 753,137 
Long-term debt, less current portion1,008 2,280 
Notes payable to former limited partners, less current portion176,446 201,188 
Deferred compensation plan obligations41,636 47,436 
Deferred consideration, less current portion28,864 28,702 
Operating lease liabilities, less current portion30,237 32,960 
Other liabilities42,130 42,574 
Total liabilities1,158,322 1,108,277 
Commitments and contingencies (Note 13)
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September 30, 2022June 30, 2022
Stockholders' equity:
Class A common stock, $0.01 par value, 500,000,000 shares authorized; 125,175,648 shares issued and 118,746,273 shares outstanding at September 30, 2022 and 124,481,610 shares issued and 118,052,235 shares outstanding at June 30, 2022
1,252 1,245 
Treasury stock, at cost; 6,429,375 shares at both September 30, 2022 and June 30, 2022
(250,129)(250,129)
Additional paid-in capital2,161,000 2,166,047 
Retained earnings349,309 331,690 
Accumulated other comprehensive income(13)(3)
Total stockholders' equity2,261,419 2,248,850 
Total liabilities and stockholders' equity$3,419,741 $3,357,127 
See accompanying notes to the unaudited condensed consolidated financial statements.
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PREMIER, INC.
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
20222021
Net revenue:
Net administrative fees$150,006 $149,462 
Software licenses, other services and support105,006 97,255 
Services and software licenses255,012 246,717 
Products58,861 118,430 
Net revenue313,873 365,147 
Cost of revenue:
Services and software licenses54,014 43,809 
Products57,874 109,362 
Cost of revenue111,888 153,171 
Gross profit201,985 211,976 
Operating expenses:
Selling, general and administrative132,050 127,814 
Research and development975 994 
Amortization of purchased intangible assets10,452 10,889 
Operating expenses143,477 139,697 
Operating income58,508 72,279 
Equity in net income of unconsolidated affiliates8,243 7,058 
Interest expense, net(2,859)(2,788)
Gain on FFF Put and Call Rights— 64,110 
Other expense, net(2,164)(320)
Other income, net3,220 68,060 
Income before income taxes61,728 140,339 
Income tax expense18,769 19,033 
Net income42,959 121,306 
Net (income) loss attributable to non-controlling interest(243)698 
Net income attributable to stockholders$42,716 $122,004 
Comprehensive income:
Net income$42,959 $121,306 
Comprehensive (income) loss attributable to non-controlling interest(243)698 
Foreign currency translation loss(10)— 
Comprehensive income attributable to stockholders$42,706 $122,004 
Weighted average shares outstanding:
Basic118,351 122,945 
Diluted120,033 124,573 
Earnings per share attributable to stockholders:
Basic$0.36 $0.99 
Diluted$0.36 $0.97 
See accompanying notes to the unaudited condensed consolidated financial statements.
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PREMIER, INC.
Condensed Consolidated Statements of Stockholders' Equity
Three Months Ended September 30, 2022 and 2021
(Unaudited)
(In thousands)
Class A
Common Stock		Treasury StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossRetained EarningsTotal Stockholders' Equity
SharesAmountSharesAmount
Balance at June 30, 2022118,052 $1,245 6,429 $(250,129)$2,166,047 $(3)$331,690 $2,248,850 
Issuance of Class A common stock under equity incentive plan694 7 — — 637 — — 644 
Stock-based compensation expense— — — — 7,136 — — 7,136 
Repurchase of vested restricted units for employee tax-withholding— — — — (13,089)— — (13,089)
Net income— — — — — — 42,959 42,959 
Net income attributable to non-controlling interest— — — — 243 — (243)— 
Change in ownership of consolidated entity— — — — 26 — — 26 
Dividends ($0.21 per share)
— — — — — — (25,097)(25,097)
Foreign currency translation adjustment— — — — — (10)— (10)
Balance at September 30, 2022118,746 $1,252 6,429 $(250,129)$2,161,000 $(13)$349,309 $2,261,419 
Class A
Common Stock		Treasury StockAdditional Paid-In CapitalRetained EarningsTotal Stockholders' Equity
SharesAmountSharesAmount
Balance at June 30, 2021122,533 1,225 — — 2,059,194 169,474 2,229,893 
Issuance of Class A common stock under equity incentive plan1,239 13 — — 22,851 — 22,864 
Treasury stock(1,091)— 1,091 (42,628)— — (42,628)
Stock-based compensation expense— — — — 7,554 — 7,554 
Repurchase of vested restricted units for employee tax-withholding— — — — (9,171)— (9,171)
Net income— — — — — 121,306 121,306 
Net loss attributable to non-controlling interest— — — — (698)698 — 
Dividends ($0.20 per share)
— — — — — (24,877)(24,877)
Non-controlling interest related to acquisition— — — — 23,145 — 23,145 
Balance at September 30, 2021122,681 1,238 1,091 (42,628)2,102,875 266,601 2,328,086 
See accompanying notes to the unaudited condensed consolidated financial statements.
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PREMIER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended September 30,
20222021
Operating activities
Net income$42,959 $121,306 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization33,891 31,485 
Equity in net income of unconsolidated affiliates(8,243)(7,058)
Deferred income taxes2,156 18,700 
Stock-based compensation7,136 7,554 
Gain on FFF Put and Call Rights— (64,110)
Other10,035 518 
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable, inventories, prepaid expenses and other assets22,495 22,682 
Contract assets(11,856)(5,876)
Accounts payable, accrued expenses, deferred revenue, revenue share obligations and other liabilities(23,822)(70,014)
Net cash provided by operating activities74,751 55,187 
Investing activities
Purchases of property and equipment(18,930)(21,050)
Acquisition of businesses and equity method investments, net of cash acquired— (26,000)
Other(1,300)— 
Net cash used in investing activities(20,230)(47,050)
Financing activities
Payments made on notes payable(26,387)(26,692)
Proceeds from credit facility100,000 175,000 
Payments on credit facility— (75,000)
Proceeds from exercise of stock options under equity incentive plan644 22,864 
Cash dividends paid(25,218)(24,852)
Repurchase of Class A common stock (held as treasury stock)— (38,151)
Other(13,063)13,974 
Net cash provided by financing activities35,976 47,143 
Effect of exchange rate changes on cash flows(10)— 
Net increase in cash and cash equivalents90,487 55,280 
Cash and cash equivalents at beginning of period86,143 129,141 
Cash and cash equivalents at end of period$176,630 $184,421 
See accompanying notes to the unaudited condensed consolidated financial statements.
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PREMIER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) ORGANIZATION
Organization
Premier, Inc. (“Premier” or the “Company”) is a publicly held, for-profit Delaware corporation located in the United States. The Company is a holding company with no material business operations of its own. The Company’s primary asset is its equity interest in its wholly owned subsidiary Premier Healthcare Solutions, Inc., a Delaware corporation (“PHSI”). The Company conducts substantially all of its business operations through PHSI and its other consolidated subsidiaries. The Company, together with its subsidiaries and affiliates, is a leading healthcare performance improvement company that unites hospitals, health systems, physicians, employers, product suppliers, service providers, and other healthcare providers and organizations to improve and innovate in the clinical, financial and operational areas of their businesses to meet the demands of a rapidly evolving healthcare industry and continues to expand its capabilities to more fully address and coordinate care improvement and standardization in the employer, payor and life sciences markets. The Company also provides services to other businesses, including food service, schools and universities.
The Company’s business model and solutions are designed to provide its members and other customers access to scale efficiencies, spread the cost of their development, provide actionable intelligence derived from anonymized data in the Company’s enterprise data warehouse, mitigate the risk of innovation and disseminate best practices to help the Company’s members and other customers succeed in their transformation to higher quality and more cost-effective healthcare.
The Company, together with its subsidiaries and affiliates, delivers its integrated platform of solutions through two business segments: Supply Chain Services and Performance Services. See Note 13 - Segments for further information related to the Company’s reportable business segments. The Supply Chain Services segment includes one of the largest healthcare group purchasing organization (“GPO”) programs in the United States, supply chain co-management, purchased services and direct sourcing activities. The Performance Services segment consists of three sub-brands: PINC AITM, the Company’s technology and services platform with offerings that help optimize performance in three main areas – clinical intelligence, margin improvement and value-based care – using advanced analytics to identify improvement opportunities, consulting and managed services for clinical and operational design, and workflow solutions to hardwire sustainable change in the provider, life sciences and payer markets; Contigo Health®, the Company’s direct-to-employer business which provides third-party administrator services and management of health-benefit programs that allow employers to contract directly with healthcare providers as well as partner with healthcare providers to provide employers access to a specialized care network through Contigo Health’s centers of excellence program; and RemitraTM, the Company’s digital invoicing and payables business which provides financial support services to healthcare providers and suppliers.
Principles of Consolidation
The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC and in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company exercised control and when applicable, entities for which the Company had a controlling financial interest or was the primary beneficiary. All intercompany transactions have been eliminated upon consolidation. Accordingly, certain information and disclosures normally included in annual financial statements have been condensed or omitted. The accompanying condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, consisting of normal recurring adjustments, unless otherwise disclosed. The Company believes that the disclosures are adequate to make the information presented not misleading and should be read in conjunction with the audited consolidated financial statements and related footnotes contained in the 2022 Annual Report.
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Supplementary Cash Flows Information
The following table presents supplementary cash flows information for the three months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended September 30,
20222021
Supplemental schedule of non-cash investing and financing activities:
Increase in treasury stock related to a payable as a result of applying trade date accounting when recording the repurchase of Class A common stock$— $4,477 
Non-cash additions to property and equipment— 1,628 
Accrued dividend equivalents156 149 
Use of Estimates in the Preparation of Financial Statements
The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Significant estimates are evaluated on an ongoing basis, including, but not limited to, estimates for net administrative fees revenue, software licenses, other services and support revenue, contract assets, deferred revenue, contract costs, allowances for credit losses, reserves for net realizable value of inventory, obsolete inventory, useful lives of property and equipment, stock-based compensation, deferred tax balances including valuation allowances on deferred tax assets, uncertain tax positions, values of investments not publicly traded, projected future cash flows used in the evaluation of asset impairments, values of call rights, values of earn-out liabilities and the allocation of purchase prices. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
(2) SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes to the Company’s significant accounting policies as described in the 2022 Annual Report.
Recently Issued Accounting Standards Not Yet Adopted
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, (“ASU 2021-08”), which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The Company will early adopt ASU 2021-08 during the second quarter of fiscal 2023 and as such, this new standard will be effective for the Company for business combinations occurring in the current fiscal year. The Company is currently evaluating the impact of the adoption of the new standard on its consolidated financial statements and related disclosures.
(3) INVESTMENTS
Investments in Unconsolidated Affiliates
The Company’s investments in unconsolidated affiliates consisted of the following (in thousands):
Equity in Net Income
Carrying ValueThree Months Ended September 30,
September 30, 2022June 30, 202220222021
FFF$134,696 $137,162 $7,187 $5,945 
Exela27,871 27,733 138 — 
Qventus16,000 16,000 — — 
Prestige15,777 15,597 180 758 
Other investments21,092 19,053 738 355 
Total investments$215,436 $215,545 $8,243 $7,058 
The Company, through its indirect, wholly owned subsidiary Premier Supply Chain Improvement, Inc. (“PSCI”), held a 49% interest in FFF Enterprises, Inc. (“FFF”) through its ownership of stock of FFF at September 30, 2022 and June 30, 2022.
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The Company, through its consolidated subsidiary, ExPre Holdings, LLC (“ExPre”), held an approximate 6% interest in Exela Holdings, Inc. (“Exela”) through its ownership of Exela Class A common stock at September 30, 2022. At September 30, 2022, the Company owned approximately 15% of the membership interest of ExPre, with the remainder of the membership interests held by 11 member health systems or their affiliates.
The Company, through its consolidated subsidiary, PRAM Holdings, LLC (“PRAM”), held an approximate 20% interest in Prestige Ameritech Ltd. (“Prestige”) through its ownership of Prestige limited partnership units at September 30, 2022. At September 30, 2022, the Company owned approximately 26% of the membership interest of PRAM, with the remainder of the membership interests held by 16 member health systems or their affiliates.
The Company accounts for its investments in FFF, Exela and Prestige using the equity method of accounting and includes each investment as part of the Supply Chain Services segment.
The Company, through PHSI, purchased an approximate 7% interest in Qventus, Inc. (“Qventus”) through its ownership of Qventus Series C preferred stock. The Company accounts for its investment in Qventus at initial cost less impairments, if any, plus or minus any observable changes in fair value. The Company includes Qventus as part of the Performance Services segment.
(4) FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The following table represents the Company’s financial assets and liabilities, which are measured at fair value on a recurring basis (in thousands):
Fair Value of Financial Assets and LiabilitiesQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs
(Level 3)
September 30, 2022
Cash equivalents$75 $75 $— $— 
Deferred compensation plan assets46,291 46,291 — — 
Total assets46,366 46,366 — — 
Earn-out liabilities22,361 — — 22,361 
Total liabilities$22,361 $— $— $22,361 
June 30, 2022
Cash equivalents$75 $75 $— $— 
Deferred compensation plan assets52,718 52,718 — — 
Total assets52,793 52,793 — — 
Earn-out liabilities22,789 — — 22,789 
Total liabilities$22,789 $— $— $22,789 
Deferred compensation plan assets consisted of highly liquid mutual fund investments, which were classified as Level 1. The current portion of deferred compensation plan assets ($4.7 million and $5.3 million at September 30, 2022 and June 30, 2022, respectively) was included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets.
Financial Instruments Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
FFF Put and Call Rights
On July 29, 2021, the FFF shareholders’ agreement was amended resulting in the termination of the FFF Put Right and the derecognition of the FFF Put Right liability.
In the event of a Key Man Event (generally defined in the FFF shareholders’ agreement as the resignation, termination for cause, death or disability of the majority shareholder), the Company has a call right that requires the majority shareholder to sell its remaining interest in FFF to the Company, and is exercisable at any time within 180 calendar days after the date of a Key
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Man Event (the “Call Right”, together with the FFF Put Right, the “Put and Call Rights”). As of September 30, 2022 and June 30, 2022, the Call Right had zero value. In the event that the Call Right is exercised, the purchase price for the additional interest in FFF will be at a per share price equal to FFF’s earnings before interest, taxes, depreciation and amortization (“FFF EBITDA”) over the twelve calendar months prior to the purchase date multiplied by a market adjusted multiple, adjusted for any outstanding debt and cash and cash equivalents, divided by the number of shares of FFF common stock then outstanding (“Equity Value per Share”).
Earn-out liabilities
An earn-out liability was established in connection with the acquisition of substantially all of the assets and certain liabilities of Acurity, Inc. and Nexera, Inc. (the “Acurity and Nexera asset acquisition”) in February 2020. The earn-out liability is classified as Level 3 of the fair value hierarchy.
The earn-out liability arising from expected earn-out payments related to the Acurity and Nexera asset acquisition was measured on the acquisition date using a probability-weighted expected payment model and is remeasured periodically due to changes in management’s estimates of the number of transferred member renewals and market conditions. In determining the fair value of the contingent liabilities, management reviews the current results of the acquired business, along with projected results for the remaining earn-out period, to calculate the expected earn-out payment to be made based on the contractual terms set out in the acquisition agreement. The Acurity and Nexera earn-out liability utilized a credit spread of 1.8% at September 30, 2022 and 1.6% at June 30, 2022. As of September 30, 2022 and June 30, 2022, the undiscounted range of outcomes is between $0 and $30.0 million. A significant decrease in the probability could result in a significant decrease in the value of the earn-out liability. The fair value of the Acurity and Nexera earn-out liability at September 30, 2022 and June 30, 2022 was $22.4 million and $22.8 million, respectively.
Acurity and Nexera Earn-out (a)
Input assumptionsAs of September 30, 2022As of June 30, 2022
Probability of transferred member renewal percentage < 50%5.0 %5.0 %
Probability of transferred member renewal percentage between 50% and 65%10.0 %10.0 %
Probability of transferred member renewal percentage between 65% and 80%25.0 %25.0 %
Probability of transferred member renewal percentage > 80%60.0 %60.0 %
Credit spread1.8 %1.6 %
_________________________________
(a)The Acurity and Nexera earn-out liability was initially valued as of February 28, 2020.
A reconciliation of the Company’s Put Right and earn-out liabilities is as follows (in thousands):
Beginning Balance
Settlements(a)
(Gain)/Loss (b)
Ending Balance
Three Months Ended September 30, 2022
Earn-out liabilities$22,789 $— $(428)$22,361 
Total Level 3 liabilities$22,789 $— $(428)$22,361 
Three Months Ended September 30, 2021
Earn-out liabilities$24,249 $— $119 $24,368 
FFF put right64,110 (64,110)— — 
Total Level 3 liabilities$88,359 $(64,110)$119 $24,368 
_________________________________
(a)Settlements for the three months ended September 30, 2021 includes non-cash gain recognized as a result the termination of the FFF Put Right and the derecognition of the FFF Put Right liability.
(b)A gain on level 3 liability balances will decrease the liability ending balance whereas a loss on level 3 liability balance will increase the liability ending balance.
Non-Recurring Fair Value Measurements
As a result of the August 2020 Restructuring, the Company recorded non-interest bearing notes payable to former limited partners during the three months ended September 30, 2020. Although these notes are non-interest bearing, they include a Level 2 input associated with an implied fixed annual interest rate of 1.8% (see Note 7 - Debt and Notes Payable). As of September
15

30, 2022 and June 30, 2022, the notes payable to former limited partners were recorded net of discounts of $7.7 million and $9.1 million, respectively.
During the three months ended September 30, 2022, no non-recurring fair value measurements were required relating to the measurement of goodwill and intangible assets for impairment.
Financial Instruments For Which Fair Value Only is Disclosed
The fair values of non-interest bearing notes payable, classified as Level 2, were less than their carrying value by $0.1 million at both September 30, 2022 and June 30, 2022 based on assumed market interest rates of 1.6% for both periods.
Other Financial Instruments
The fair values of cash, accounts receivable, accounts payable, accrued liabilities, and the Credit Facility (as defined in Note 7 - Debt and Notes Payable) approximated carrying value due to the short-term nature of these financial instruments.
(5) CONTRACT BALANCES
Deferred Revenue
Revenue recognized during the three months ended September 30, 2022 that was included in the opening balance of deferred revenue at June 30, 2022 was $15.1 million, which is a result of satisfying certain performance obligations.
Performance Obligations
A performance obligation is a contractual obligation to transfer a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Contracts may have a single performance obligation as the agreement to transfer individual goods or services is not separately identifiable from other contractual obligations and, therefore, not distinct, while other contracts may have multiple performance obligations, most commonly due to the contract covering multiple phases or deliverable arrangements (licensing fees, SaaS subscription fees, maintenance and support fees, and professional fees for consulting services).
Refer to the Company’s significant accounting policies in the 2022 Annual Report for discussion of revenue recognition on contracts with customers.
Net revenue of $3.0 million was recognized during the three months ended September 30, 2022 from performance obligations that were satisfied or partially satisfied in prior periods. The net revenue recognized was driven by an increase of $4.7 million in net administrative fees revenue related to under-forecasted cash receipts received in the current period partially offset by a reduction of $1.7 million associated with revised forecasts from underlying contracts that include variable consideration components as well as additional fluctuations due to input method contracts which occur in the normal course of business.
Net revenue of $1.4 million was recognized during the three months ended September 30, 2021 from certain performance obligations that were satisfied or partially satisfied in prior periods. The net revenue recognized was driven by a $1.8 million increase in net administrative fees revenue related to under-forecasted cash receipts received in the current period, partially offset by a reduction of $0.4 million associated with revised forecasts from underlying contracts that include variable consideration components as well as additional fluctuations due to input method contracts which occur in the normal course of business.
Remaining performance obligations represent the portion of the transaction price that has not yet been satisfied or achieved. As of September 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $707.5 million. The Company expects to recognize approximately 41% of the remaining performance obligations over the next 12 months and an additional 24% over the following 12 months, with the remainder recognized thereafter.
(6) GOODWILL AND INTANGIBLE ASSETS
Goodwill
At September 30, 2022 and June 30, 2022, the Company had goodwill balances recorded at Supply Chain Services and Performance Services of $388.5 million and $611.4 million, respectively.
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Intangible Assets, Net
Intangible assets, net consisted of the following (in thousands):
Useful LifeSeptember 30, 2022June 30, 2022
Member relationships14.7 years$386,100 $386,100 
Technology7.2 years98,017 98,017 
Customer relationships10.4 years47,830 47,830 
Trade names6.9 years17,210 17,210 
Non-compete agreements5.2 years17,315 17,315 
Other (a)
10.2 years7,682 7,682 
Total intangible assets574,154 574,154 
Accumulated amortization(228,034)(217,582)
Total intangible assets, net$346,120 $356,572 
_________________________________
(a)Includes a $1.0 million indefinite-lived asset.
Intangible asset amortization was $10.5 million and $10.9 million for the three months ended September 30, 2022 and 2021, respectively.
(7) DEBT AND NOTES PAYABLE
Long-term debt and notes payable consisted of the following (in thousands):
September 30, 2022June 30, 2022
Credit facility$250,000 $150,000 
Notes payable to members, net of discount274,717 298,994 
Other notes payable3,223 5,333 
Total debt and notes payable527,940 454,327 
Less: current portion(350,486)(250,859)
Total long-term debt and notes payable$177,454 $203,468 
Credit Facility
PHSI, along with its consolidated subsidiaries, Premier LP and PSCI, as Co-Borrowers, and certain domestic subsidiaries of the Co-Borrowers, as guarantors, entered into an unsecured Credit Facility, dated as of November 9, 2018, and amended as of December 1, 2021, (the “Credit Facility”).
Outstanding borrowings under the Credit Facility bear interest on a variable rate structure with borrowings bearing interest at either London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging from 1.000% to 1.500% or the prime lending rate plus an applicable margin ranging from 0.000% to 0.500%. At September 30, 2022, the weighted average interest rate on outstanding borrowings under the Credit Facility was 3.729% and the annual commitment fee, based on the actual daily unused amount of commitments under the Credit Facility, was 0.100%.
The Credit Facility contains customary representations and warranties as well as customary affirmative and negative covenants, including, among others, limitations on liens, indebtedness, fundamental changes, dispositions, restricted payments and investments. The Company was in compliance with all such covenants at September 30, 2022. The Credit Facility also contains customary events of default, including a cross-default of any indebtedness or guarantees in excess of $75.0 million. If any event of default occurs and is continuing, the administrative agent under the Credit Facility may, with the consent, or shall, at the request of a majority of the lenders under the Credit Facility, terminate the commitments and declare all of the amounts owed under the Credit Facility to be immediately due and payable.
The Company had $250.0 million in outstanding borrowings under the Credit Facility at September 30, 2022 with $749.9 million of available borrowing capacity after reductions for outstanding borrowings and outstanding letters of credit. For the three months ended September 30, 2022, the Company borrowed $100.0 million under the Credit Facility. During the three months ended September 30, 2022, the Company did not make any payments on outstanding borrowings under the Credit Facility. In October 2022, the Company borrowed $125.0 million under the Credit Facility to partially fund the asset acquisition
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of TRPN Direct Pay, Inc. and Devon Health, Inc. (collectively, “TRPN”) (see Note 14 - Subsequent Events for further information).
Notes Payable
Notes Payable to Former Limited Partners
At September 30, 2022, the Company had $274.7 million of notes payable to former LPs, net of discounts on notes payable of $7.7 million, of which $98.3 million was recorded to current portion of notes payable to former limited partners in the accompanying Condensed Consolidated Balance Sheets. At June 30, 2022, the Company had $299.0 million of notes payable to former LPs, net of discounts on notes payable of $9.1 million, of which $97.8 million was recorded to current portion of notes payable to former limited partners in the accompanying Condensed Consolidated Balance Sheets. The notes payable to former LPs were issued in connection with the early termination of the TRA as part of the August 2020 Restructuring. Although the notes payable to former LPs are non-interest bearing, pursuant to GAAP requirements, they were recorded net of imputed interest at a fixed annual rate of 1.8%.
Other
At September 30, 2022 and June 30, 2022, the Company had $3.2 million and $5.3 million in other notes payable, respectively, of which $2.2 million and $3.1 million, respectively, were included in current portion of long-term debt in the accompanying Condensed Consolidated Balance Sheets. Other notes payable do not bear interest and generally have stated maturities of three to five years from their date of issuance.
(8) STOCKHOLDERS' EQUITY
As of September 30, 2022, there were 118,746,273 shares of the Company’s Class A common stock, par value $0.01 per share, outstanding.
During the three months ended September 30, 2022, the Company paid a cash dividend of $0.21 per share on outstanding shares of Class A common stock to stockholders of record on September 1, 2022. On October 21, 2022, the Board of Directors declared a quarterly cash dividend of $0.21 per share, payable on December 15, 2022 to stockholders of record on December 1, 2022.
(9) EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income attributable to stockholders by the weighted average number of shares of common stock outstanding for the period. Except when the effect would be anti-dilutive, the diluted earnings per share calculation, which is calculated using the treasury stock method, includes the impact of all potentially issuable dilutive shares of Class A common stock.
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The following table provides a reconciliation of the numerator and denominator used for basic and diluted earnings per share (in thousands, except per share amounts):
Three Months Ended September 30,
20222021
Numerator for basic earnings per share:
Net income attributable to stockholders (a)
$42,716 $122,004 
Numerator for diluted earnings per share:
Net income attributable to stockholders (a)
$42,716 $122,004 
Net loss attributable to non-controlling interest— (698)
Net income for diluted earnings per share$42,716 $121,306 
Denominator for earnings per share:
Basic weighted average shares outstanding (b)
118,351 122,945 
Effect of dilutive securities: (c)
Stock options146 310 
Restricted stock563 492 
Performance share awards973 826 
Diluted weighted average shares and assumed conversions120,033 124,573 
Earnings per share attributable to stockholders:
Basic$0.36 $0.99 
Diluted$0.36 $0.97 
_________________________________
(a)Net income attributable to stockholders was calculated as follows (in thousands):
Three Months Ended September 30,
20222021
Net income$42,959 $121,306 
Net (income) loss attributable to non-controlling interest(243)698 
Net income attributable to stockholders$42,716 $122,004 
(b)Weighted average number of common shares used for basic earnings per share excludes the impact of all potentially issuable dilutive shares of Class A common stock for the three months ended September 30, 2022 and 2021.
(c)For the three months ended September 30, 2022, the effect of 0.2 million stock options and restricted stock units was excluded from diluted weighted average shares outstanding as it had an anti-dilutive effect. Additionally, the effect of 0.1 million performance share awards was excluded from diluted weighted average shares outstanding as the awards had not satisfied the applicable performance criteria at the end of the period.
For the three months ended September 30, 2021, the effect of 0.3 million stock options and restricted stock units was excluded from diluted weighted average shares outstanding as it had an anti-dilutive effect. Additionally, the effect of 0.2 million performance share awards was excluded from diluted weighted average shares outstanding as the awards had not satisfied the applicable performance criteria at the end of the period.
(10) STOCK-BASED COMPENSATION
Stock-based compensation expense is recognized over the requisite service period, which generally equals the stated vesting period. The associated deferred tax benefit was calculated at a rate of 26% for the three months ended September 30, 2022 and 2021, which represents the expected effective income tax rate at the time of the compensation expense deduction and differs from the Company’s current effective income tax rate. See Note 11 - Income Taxes for further information.
Stock-based compensation expense and the resulting deferred tax benefits were as follows (in thousands):
Three Months Ended September 30,
20222021
Pre-tax stock-based compensation expense$7,136 $7,554 
Less: deferred tax benefit (a)
947 1,281 
Total stock-based compensation expense, net of tax$6,189 $6,273 
_________________________________
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(a)For the three months ended September 30, 2022 and 2021, the deferred tax benefit was reduced by $0.9 million and $0.7 million, respectively, attributable to stock-based compensation expense that is nondeductible for tax purposes pursuant to Section 162(m) as amended by the Tax Cuts and Jobs Act of 2017.
Premier 2013 Equity Incentive Plan
The Premier 2013 Equity Incentive Plan, as amended and restated (and including any further amendments thereto, the “2013 Equity Incentive Plan”) provides for grants of up to 14.8 million shares of Class A common stock, all of which are eligible to be issued as non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units or performance share awards. As of September 30, 2022, there were 3.9 million shares available for grant under the 2013 Equity Incentive Plan.
The following table includes information related to restricted stock, performance share awards and stock options for the three months ended September 30, 2022:
Restricted StockPerformance Share AwardsStock Options
Number of AwardsWeighted Average Fair Value at Grant DateNumber of AwardsWeighted Average Fair Value at Grant DateNumber of OptionsWeighted Average Exercise Price
Outstanding at June 30, 20221,201,130 $35.59 1,578,795 $33.66 896,354 $30.38 
Granted366,942 37.18 823,009 35.34 — — 
Vested/exercised(198,261)36.55 (826,743)