Okay, great. We're gonna begin our next session here with Premier. I'm Steven Valiquette, the healthcare services analyst here at Barclays. With us from Premier, we have Mike Alkire, the company's CEO, and also Craig McKasson, the CFO. This will be a fireside chat. I think with that, I guess we'll just dive right in. Thanks, Steve. All right. Yeah, I guess first question here. For those that don't know Premier Inc, you know, break their business down into two segments, you know, the SCS segment and PS segment. A lot of acronyms, I think very appropriate for healthcare services. That's certainly par for the course. Maybe just touching on the SCS segment first, which, you know, is really kinda mainly the, kind of the core GPO business but also some other parts in there as well, obviously. So within SCS, you know, there's been a couple of moving parts within that business given the broader markets. Maybe just starting with maybe your thoughts on provider utilization trends. Just give us the latest update on what you're seeing among your customer base, and has utilization or demand, you know, changed at all since your commentary on the last quarterly earnings call? Thanks, Steve. Let me start, and then Craig, please add in. Just to bring some meaning to some of those initials that you were talking about. Two segments of Premier. We have our Supply Chain business, our Performance Services business. Supply Chain, we have a group purchasing entity that focuses on helping our healthcare systems reduce costs. We also have a direct sourcing business, where we actually either manufacture or directly manufacture products for our healthcare systems. Performance Services, we have a few different capabilities there, primarily all driven around helping healthcare systems drive performance improvement, reducing costs, improving quality. We have a fairly substantial, robust analytics business as well as Clinical Decision Support. We have a couple of other businesses that we call adjacent businesses that use that data and that technology to help our health systems go direct to employers, and that's called Contigo Health. We have a business called Remitra, which is all about e-invoicing and e-payables. We have a Life Sciences business that actually started working with big pharma to really appropriately utilize drugs based on the data. As it gets to answer your question as it relates to what's happening in healthcare at large and utilization patterns. First of all, in general, utilization continues to move outside the four walls of the hospital. We're seeing obviously growth in the non-acute setting. Those would be your surgery centers, labs, long-term care facilities, those kinds of assets. The acute setting has been pretty flat to sort of a shrinking area. I will tell you, as it relates to seeing the trends, it's incredibly regional, in terms of what's happening from utilization patterns. As you might expect, the areas of the country that have the, you know, strongest economies are also experiencing typically the best growth. Those areas that maybe are not seeing the economic expansion are seeing obviously slower growth if not a reduction of revenue. Okay, great. That's helpful. I guess notwithstanding the utilization trend, sometimes the your business can maybe deviate slightly from correlation to that because of just, you know, inventory levels moving in and up and down. Maybe, you know, I think on that topic, you pointed to some provider customer stockpiling inventory as another factor behind, you know, maybe demand being a little bit lighter over the last couple of quarters, but also something that should probably improve from here. Just curious if you have any, you know, any updates today on the timing of the workdown of inventory. You know, what kind of levels on average do you think health systems are currently at? Just any color on that might be helpful as well. Sure. Prior to the pandemic, I would tell you that healthcare was very much a just-in-time inventory sort of management system. That as soon as, you know, healthcare systems needed products, they would alert their distributors, and obviously, distributors would hold enough product to meet the needs of those health systems. During COVID, I would tell you that, you know, a number of the health systems were caught flat-footed and built out capabilities to create stockpiles, to create higher levels of inventory and those kinds of things, in some cases, way too much. I will tell you, I think what you've seen over the last year or so is the health system is burning down their current inventory levels to actually get to more of a sort of 30-90-day kind of inventory level. I think that's where they're kinda settling. I will tell you it's still sort of working its way through the system in that it's not just the healthcare systems, but you had distributors, you had a lot of people produce products during COVID that historically had not been in that chain. A lot of products were produced, and a lot of that was put in inventory. I'll tell you, I think that a lot of that, again, is continuing to work through. I would tell you it's probably gonna be another couple of quarters before we get through all that inventory. Okay. All right. That's helpful. You know, for my first question, one of the first things you mentioned in the answer was, you know, some of the patient volume still, you know, flowing out of the inpatient setting and into outpatient. Maybe just to build on your mentioning of that, can you remind us just where your customer portfolio mix is right now between, you know, inpatient versus outpatient? I know it's kind of hard to do that perfectly across all the different offerings and everything else, but to the extent you can maybe just give us some, you know, some rough frame of reference might be helpful. Also, more importantly, just how well, you know, is the company positioned to capitalize on this trend, you know, of just more of the volume flowing out of inpatient and into the outpatient setting? Sure. From a GPO standpoint, which is the lion's share of where inpatient, outpatient would affect us, about 60% of our GPO is in the acute four walls of the hospital, and about 40% is outside the walls of the hospital. To give that some context, if you were to go back five, six years ago, it was 70/30. Definitely seeing a shift and a trend outside the walls of the hospital in terms of where the spend's coming. In terms of positioning, we've always serviced health systems, and so we've always had an eye towards making sure we can cover all aspects and classes of trade beyond the four walls of the hospital. It was an underpinning a bit of our acquisition of Innovatix and Essensa a number of years ago, which actually bolstered our capability in the non-acute space as well. In the future, we think there remain to be opportunities to further technology enable non-acute providers to improve contract attachment and penetration in the non-acute space. Okay. Okay, that's certainly helpful. Again, I think still kind of within the SCS segment, you know, just kinda thinking about inflationary trends. You guys obviously kind of live in the middle to some degree between some of the manufacturers and some of the providers. You know, just maybe give us some updated thoughts on, you know, price increase mechanics that maybe some of your suppliers are trying to push through, you know, in some of the GPO contracts, and how you guys kinda respond to that in this, you know, what's still perceived as a inflationary environment. Yeah. I will tell you, I think, the reason that Premier was designed from a supply chain standpoint was really to manage inflation. We have a lot of mechanisms that are in place in terms of how we agree to price increases through our committee structures. What are the sort of the data inputs that we look at to determine whether or not, or working with our health systems, whether or not we'll accept a price increase, and to include whether or not there's healthy markets, right? We don't wanna actually, you know, create a scenario where somebody isn't gonna be a viable long-term business partner. We wanna make sure that we're balancing agreeing to inflation, you know, or price increases vis-a-vis, the number of players in a specific market. We want very specific targets in terms of the number of suppliers in a specific category. As it relates to your question, I think we have about 3,000 contracts across Premier, couple thousands in MedSurg. I will tell you, I think over the last number of months, we had about 300 requests for price increases. I would guess about 50% of that was probably approved. That gives you some perspective and context on the increases. That's been over a course of a number of months. Yeah. I think the only additional color I would provide to that is those requests are sort of out of cycle requests. Typically our contracts have, in that particular part of the portfolio of MedSurg, have fixed firm pricing. Those are actually suppliers coming in the middle of a contract term asking for a price increase. We have a pretty formal process with our, the supply chain executives from our health systems actually being the ones to evaluate, facilitated by us, but whether they should actually approve that increase or not. Broadly have not seen a material tailwind to our business due to inflation because despite those increases in the 50% of those 300 requests that came through, we've also seen price decreases in other parts of our portfolio, primarily pharmacy, I would highlight, which we had done a rebid on back at the beginning of the fiscal year. We have parts of our portfolio, Steve, that move with inflation. For example, our food program has variable pricing based on inflation and deflation, we actually have seen an increase in prices. Those have sort of normalized and are starting to come back down. Okay. Yeah, those numbers are kind of interesting. When you first mentioned it, the 3,000 contracts, there's, and then of that, 300 asked for a price increase. That jumped out to me as being kinda actually low initially. I think you framing that maybe gave a little more color. Like, gosh, only 10% of people are asking for price increases? It It should be way higher than that, maybe. But I guess really that 300 number, though. It's really about 15%. It's mid-single. Yeah. I was Yeah. I was gonna say, how does that compare to the historical average, roughly? Is it higher than average? Significantly more. Okay. Just, okay, that's helpful just to... Okay. You would have probably had literally a handful that would have had some economic reason to try to get a price increase mid-cycle. It is significantly more than any year, obviously, prior to COVID influence. Okay. The inbound requests have slowed down from what we were seeing in 2022. Okay. That's certainly helpful. Yeah, 'cause look, I mean, across some of our coverage, you know, there's some larger publicly traded, you know, commodity medical supply manufacturers that have talked about, you know, part of their relief on their rising manufacturing costs is to go to GPOs and ask for price increases. Sounds like those larger companies are not alone given the numbers you're talking about as far as people, you know, trying to, you know, push through some price increases. You know, just wondering, you know, are you seeing, I mean, it's hard to generalize for the overall commodity, you know, medical manufacturing, set of companies you're talking to, but is there any, you know, bias that the larger companies are getting, you know, better pricing versus smaller ones, you know, on the just on the manufacturing side? Within those numbers you talked about, any trends that stick out to you along those lines? Nothing. There's not really any trending. We had some of these questions earlier in our one-on-ones. If you have a product base that, you know, typically has differentiation, you know, there's, you know, as opposed to maybe something that's commodity, and, you know, you're pressured from a cost standpoint. There's high degree of switching costs from one product to another. Obviously, there's gonna be, you know, a lot more openness on behalf of the health systems to transition from, you know, one product. There's gonna be less if there's significant difference between the products. If it's a commodity, obviously they're gonna be a lot more open to switching from one product to another. That's where I think there's, you know, there's the opportunity for us, you know, to continue to manage those costs. Having said all that, I will tell you, that, you know, we're kind of designed working with our clinical teams and our clinical committees to make sure that, you know, to the degree that, we can influence those decisions and help those health systems not take those costs. That's what we need to do. 'Cause at the end of the day, many of our health systems are still underwater from a margin standpoint. They don't have the ability to pick up a lot of these inflationary costs. You know, they're doing everything in their power to either move to different contracts or to different products or those kinds of things, so they don't have to take those costs. Yeah. The one thing I would clarify is I don't think, Steve, it is based on a large company or a small company. I think pricing is based on a contracted category and the health and the competitive friction in that category. Market share would dictate— Absolutely — for whether there's gonna be inflation, and that could be a small company that is focused on one product or a large company. It's not that just because someone's a large company, they have more influence to drive price increase. 'Cause we're actually looking down at the individual contracted category, not their entire universe of products. Got it. Okay. All right, great. Maybe we'll shift gears here a little bit now and talk more about your Performance Services segment, which I still think of as kind of the, you know, the health chart technology segment. Yeah. Simplification purposes. Within that, maybe just give us an update on, you know, the sales pipeline. Just for backdrop, by the way, you know, we do a lot of quarterly surveys of hospitals and try to assess their healthcare IT spending. First of all, whether that's, you know, increasing or decreasing within their CapEx budgets, but also what categories they're spending on. I guess I'm curious, just from you guys, though, just an update on, you know, the sales pipeline, where you're seeing demand, and just, you know, general provider appetite for discretionary healthcare IT spend based on what you're seeing right now. Yeah. Performance Services is primarily made up of, as you said, technology. We do have a Performance Services advisory services group that wraps around that technology to help drive performance improvement opportunities for those health systems. It's got the technology, and it's also got the advisory services business. The pipeline itself still seems solid for us. Obviously, our focus is to bring technology into the healthcare setting that's gonna automate a lot of manual procedures and processes and thereby reducing costs. That's really where our sweet spot is. How are we working with them to drive, you know, better levels of performance and improvement and efficiency and those kinds of things? The pipeline from that standpoint is going well. The only other thing that, you know, where we're seeing really a positive momentum is that there's a lot of point solutions, you know, that our healthcare systems utilize. One of the things that we are doing is working with our health systems to rationalize what are those technologies that they need to drive, you know, more efficiency from a cost standpoint and higher levels of quality, and how can we step into the middle of that and provide a more cohesive solution as opposed to all these point solutions. Yeah. The only color I would add is I think the demand we're seeing is for pretty rapid improvement. It's not projects where they're looking for some long-term change. It's more, can we either implement technology or put wraparound services that will deliver a pretty quick ROI in terms of helping with their margin profile, given the challenges and the pressure that they're under. Within this segment, obviously, it's a bunch of different solutions that we could talk about, but it seems like one of the ones that was, you know, more of a topic of discussion on the last, you know, quarterly conference call or two was around Remitra, and that's the e-invoicing service offering within PINC for artificial intelligence. I think you called out some softer than anticipated adoption on that last call. Maybe just give us a status update on just operational improvement plans, you know, for this part of the business and whether or not the demand dynamics have shifted, which I wouldn't think so. I think there's still be good demand for this, but just wanted to get an update on that as well. If I could just at the very highest level. Remitra is a technology that we use to drive e-invoicing and e-payables for the healthcare system. We still think 70%-80% of invoices are still transacted manually, not digitized. We think there's a huge opportunity there to actually bring a lot more value and automation to that whole process. Remitra is that opportunity for us. What we talked a little bit about, I think, you know, sales cycles were a little bit longer than we anticipated, of course, some market conditions obviously impacted our CFO offering. I will tell you though, some of the things that we've been doing since the earnings call. We had an accelerated solutions design event with a number of suppliers to talk about the value of Remitra and how could they see value fairly quickly by implementing it. We have a very similar event with our health systems here in the next couple of weeks in a very similar sort of nature to ensure that they truly understand how the value of Remitra can actually bring down their overall costs on managing invoices and payments. I think just to add a little color, Mike referenced what he called the CFO offering. It's an offering called Cash Flow Optimizer, which is really supply chain financing to actually improve the time flow and the working capital benefit for paying suppliers more quickly and for the benefit of healthcare providers. That's what's actually seen a slower uptake given the increase in cost of capital that we've been experiencing in the marketplace. Still believe longer term, there's a lot of opportunity there. I wouldn't say the demand for that part has increased yet. That's part of what, just with interest rates is sort of, you know, fintech companies also are seeing a little bit more challenge in that part of the market. Okay. All right. Now, you know, also within the PS segment, I guess for better or for worse, there can be some lumpiness in the earnings. Sometimes it's a good guy, sometimes it's a bad guy. Just remind us, you know, just among all the offerings, you know, which one maybe, you know, provides, you know, most of that potential volatility around just that lumpiness in the earnings. Also how you kind of factor that into the, you know, the segment revenue guidance. You know, and also how you know, just think about the trajectory of large license agreements as you could be signing. Yep. The two areas that would have the most opportunity to create lumpiness in our Performance Services kind of cadence quarter-to-quarter is enterprise license agreements or advisory services if we're doing a large performance-based type cost reduction engagement. On the enterprise licenses, the nature of those, that's enterprise analytics, where they are buying the whole suite of products, with a typically, on average, I would say five-year license. The way the revenue recognition on those licenses works is the majority, about 70% of the revenue is recognized at the point that the license is actually delivered and made available to the customer. That's what can create when we see those, an uptick in revenue in a particular quarter and the nature of the engagement, a lot of profitability at the time that that occurs. You know, today, that represents about 10%-15% of our Performance Services revenue. The majority is still our SaaS-based technology that's more stable, That can create some variability. Our advisory services business, which is consultative, if we're doing a large engagement to take cost out of the system, sometimes the revenue and the associated EBITDA are tied to when we're actually delivering the benefit and getting sign-off from the member that we've achieved the targeted savings. Those are the two items that can create some of that variability. We factor in based on our pipelines and visibility, and the long-term perspective of how those are performing in terms of how we establish the guidance for the segment. Okay. Okay. You know, I think also, just on the acquisition front, you know, you guys announced, not too long ago this, acquisition of the, 100 Top Hospitals Program. just curious how that kind of fits into the, you know, your overall service offerings and the rationale for that deal, and also how it maybe bolsters, you know, some of your brands, maybe in AI in particular. Just curious to hear more about that one as well. Yeah. Steve, as you know, over the years, you know, one of the primary drivers of Premier is to truly differentiate our health systems, by having higher quality outcomes and doing it with lower costs. I think, the Top Hospitals Program actually provides us analytics and algorithms that will be very beneficial to our healthcare systems in terms of understanding what high performance looks like. We wanna leverage that as we think about deploying tools and advisory services, and building out those plans to help our health systems achieve some of that recognition. It's sort of that pointy end of the spear, we do it very similarly when we think about our Contigo initiative, which is our offering to employers. We wanna help our health systems actually engage more meaningfully with employers both nationally and in their market. We wanna help them participate in centers of excellence programs and those kinds of things to support, you know, big employers as they're trying to, you know, sort of change the way that healthcare is provided to their employee population. Yeah. The only quick piece of color I would add on the Top 100 Hospitals program is it is objectively determined based on available market data, so any healthcare, hospital or healthcare provider can actually achieve that Top 100. What it does is gives us, through PINC AI, the ability to actually find the key drivers to actually improve that performance and link it to actually a better possibility of being recognized as a Top 100 Hospital moving forward. Yep. Okay. Maybe a final real quick question. I was kind of just thinking to myself, it's been about almost, you know, about 10 years or so since you guys came public. I think part of the reason to come public was to just, you know, have more access to capital and grow through acquisitions, you know, especially on the, you know, healthcare technology side. Luckily, it's been super, you know, quiet and consistent operating environment the last 10 years. Just given where we are today, obviously, you know, where do things stand currently on your appetite to still, you know, focus on strategic M&A? Are you still focused more on, you know, the healthcare IT side of the business, you know, for those M&A dollars? Just, you know, just talk more about kind of what you're, you know, targeting for things to still add to the, you know, the service offering. Sure. If I could start. I've been in my role almost two years as the CEO, and I think that over that timeframe, Craig and I have taken a very focused effort to really highlight the fast-growing parts of our business. We talked at length about those adjacent businesses, Clinical Decision Support, Contigo Health, Remitra, and life sciences. Those are those areas of business that we think are growing in excess of 30% - 30% or more. As you think about where we want to deploy capital in the future, it's in those markets to help support and drive more capabilities within each of those offerings. Yeah. The only two quick things I would add is we're gonna continue to have a balanced approach to capital deployment, so we will balance it with shareholder return. We do have our dividend in place. We'll continue to look at share repurchase where appropriate, although we don't have an authorization in effect right now. We are being measured in this capital environment in terms of how aggressive we are, but do continue to look for areas to target. The only other thing I would highlight, I know we're running out of time, but in the Supply Chain side, we will also look to further improve technology enablement, particularly in the non-acute space, back to the earlier commentary about seeing more growth in that part of the Supply Chain business. Okay, great. Yeah, with that, I think we're out of time, maybe over a minute or two. I think we'll wrap it up there. I wanna thank you guys for your time today. Thank you. Enjoy the rest of the conference. Thanks, Steve. Thanks.