[August 21, 2017]

Premier Inc. Reports Fiscal 2017 Fourth-Quarter and Full-Year Results

Premier Inc. (NASDAQ: PINC) today reported financial results for the fiscal 2017 fourth quarter and full fiscal year ended June 30, 2017.

Full-Year Highlights:

• Net revenue increased 25% to $1.45 billion from the prior year; Supply Chain Services segment revenue rose 33% and Performance Services segment revenue increased 6%.
• Net income rose 91% to $449.5 million from the prior year. After GAAP-required 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 was $1.51 compared with diluted earnings per share of $1.33 the prior year.
• Non-GAAP adjusted fully distributed net income* increased 15% to $267.3 million. Non-GAAP adjusted fully distributed earnings per share* was $1.89 per diluted share, an increase of 17% over $1.61 per diluted share from the prior year.
• Non-GAAP adjusted EBITDA* increased 14% to $501.6 million from the prior year.
• For the fiscal year ended June 30, 2017, the company generated cash flow from operations of $392.2 million. At June 30, 2017, the company's cash and cash equivalents totaled $156.7 million, and the company had an outstanding balance of $220.0 million on its five-year revolving credit facility.
• Non-GAAP free cash flow* for the fiscal year increased 13% to $216.5 million from $191.0 million the prior year and represented 43% of full-year non-GAAP adjusted EBITDA.
• Premier completed two acquisitions in fiscal 2017: Acro Pharmaceutical Services, LLC, acquired on August 23, 2016 for an adjusted purchase price of $62.7 million, contributed $191.1 million to revenue within the Supply Chain Services Segment during the fiscal year; Innovatix, LLC and Essensa Ventures, LLC, acquired on December 2, 2016 for an aggregate adjusted purchase price of $336.0 million; contributed $36.0 million in net administrative fees revenue during the fiscal year, and generated another $17.4 million in cash from member purchases that cannot be recognized as GAAP revenue under purchase accounting rules, but was reflected in non-GAAP adjusted EBITDA. Both acquisitions were accretive to earnings in the first year following their acquisition.

Fourth-Quarter Highlights:

• Net revenue increased 34% to $403.1 million from the same period last year; Supply Chain Services segment revenue rose 42% and Performance Services segment revenue increased 11%.
• Net income rose 47% to $73.9 million from the same period a year ago. After GAAP-required 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 $6.10 compared with diluted earnings per share of $0.30 for the same period last year.
• Non-GAAP adjusted fully distributed net income* increased 36% to $70.2 million. Non-GAAP adjusted fully distributed earnings per share* was $0.50 per diluted share, an increase of 39% over $0.36 per diluted share from the same period last year.
• Non-GAAP adjusted EBITDA* of $132.1 million increased 32% from the same period last year.

* 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.

"We are pleased with Premier's accomplishments in fiscal 2017," said Susan DeVore, president and chief executive officer. "We have continued to execute and deliver consistent growth and strong profitability in a rapidly evolving healthcare landscape.

"Operationally, in Supply Chain Services, we attained a 99% retention rate in our group purchasing (GPO) business and generated more than $56 billion in GPO volume," DeVore said. "We achieved a 95% SaaS institutional renewal rate in Performance Services and also delivered a strong fourth-quarter performance in our advisory services business. We also continued to grow and expand business relationships across our supply chain and performance services platforms, ending fiscal 2017 with approximately 3,900 member hospitals and health systems and approximately 150,000 other provider organizations.

"Looking ahead, our GPO contract renewal process is well underway and we are receiving positive feedback from our member-owners, which reinforces our confidence that the vast majority of our member owners will renew their GPO relationship with similar economics," DeVore said. "Longer term, we continue to believe that Premier is uniquely positioned to succeed in this evolving healthcare environment, as our member healthcare systems redouble their efforts to manage costs and improve quality and patient outcomes amid continued regulatory uncertainty. The breadth and depth of our comprehensive capabilities that span the entire continuum of care enable us to offer our members a total value proposition that we believe is unmatched in the industry. This positions Premier to continue to drive meaningful results for our members while building long-term value for our stockholders."

For the fiscal fourth-quarter ended June 30, 2017, Premier generated net revenue of $403.1 million, an increase of 34%, from net revenue of $301.4 million for the same period a year ago.

Net income for the fiscal fourth-quarter increased 47% to $73.9 million from $50.4 million for the same period a year ago. In accordance with GAAP, fiscal 2017 and 2016 fourth-quarter net income attributable to stockholders included non-cash adjustments of $(333.7) million and $91.1 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, which resulted from a 13% increase in the price of Premier's Class A stock to $36.00 on June 30, 2017, from $31.83 on March 31, 2017, the company reported a net loss attributable to stockholders of $313.7 million, compared with net income of $101.6 million for the same period a year ago. Fourth-quarter diluted earnings per-share results, which are based on net income adjusted for the tax expense related to Premier Inc. retaining the portion of net income attributable to income from non-controlling interest in Premier LP, reflected a loss of $6.10, compared with diluted earnings per share of $0.30 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 $132.1 million increased 32% from the same period the prior year. The growth was primarily driven by the increase in net administrative fees revenue and growth in Performance Services.

Non-GAAP adjusted fully distributed net income for the fiscal fourth quarter increased 36% to $70.2 million from $51.6 million for the same period a year ago. Non-GAAP adjusted fully distributed earnings per share increased 39% to $0.50 from $0.36 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, 2017, the Supply Chain Services segment generated net revenue of $309.7 million, an increase of 42% from $217.4 million a year ago. Revenue growth was driven by strong performance of both the company's GPO and products businesses. GPO net administrative fees revenue of $158.5 million increased $30.1 million, or 23% from a year ago. Contributions from the Innovatix and Essensa acquisitions accounted for $23.7 million of the increase, while the company's legacy GPO business increased 5%, or $6.4 million. Product revenues of $147.5 million increased 68%, from $87.5 million a year ago, primarily driven by $57.4 million in revenues from the Acro acquisition and increased sales of direct sourcing products. While Premier's legacy specialty pharmacy business declined year-over-year in certain drug categories, including Hepatitis C, fourth-quarter Hepatitis C revenues increased sequentially from the third quarter. Acro's fourth-quarter revenue exceeded management's revised expectations, reflecting improved results from the company's internally generated sales efforts to mitigate a post-acquisition drop-off in prescription volume associated with the treatment of Idiopathic Pulmonary Fibrosis. Direct sourcing revenue increased from a year ago, driven primarily by growth of the company's PremierPro™ product line and aggregated purchasing of certain products.

Supply Chain Services segment non-GAAP adjusted EBITDA of $129.5 million for the fiscal 2017 fourth quarter increased 18% from $109.4 million for the same period a year ago. The increase was largely the result of growth in net administrative fees, and to a lesser extent growth in products revenue, primarily driven by contributions from Acro.

Performance Services
For the fiscal fourth-quarter ended June 30, 2017, the Performance Services segment generated net revenue of $93.4 million, an increase of 11% from $84.0 million for the same quarter last year. The growth reflects a 26% year-over-year increase in advisory services revenue and a 5% revenue increase from the informatics and technology services business. Advisory services benefited from revenue associated with the implementation of certain large cost and clinical transformation engagements. Growth in informatics and technology services was primarily due to cost management solutions and data analytics and outcomes-based research projects.

Performance Services segment non-GAAP adjusted EBITDA of $33.6 million for the fiscal 2017 fourth quarter reflected an increase of 63% from $20.6 million for the same quarter last year, primarily due to the increase in revenue during the quarter and lower selling, general and administrative expenses as a result of comparisons against the prior year which included one-time severance costs, and more efficient management of non-billable expenses and subcontractors.

Results of Operations for the Fiscal Year Ended June 30, 2017

The company generated net revenue of $1.45 billion for the fiscal year ended June 30, 2017, a 25% increase from net revenue of $1.16 billion last year.

Net income of $449.5 million compared with $235.2 million for the prior year, and included a one-time gain of $205.1 million related to the re-measurement of the company's historical 50% equity method of investment in Innovatix to fair value upon the acquisition on December 2, 2016. In accordance with GAAP, fiscal 2017 and 2016 full-year net income attributable to stockholders required non-cash adjustments of $(37.2) million and $776.8 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, which resulted from a 10% increase in the price of Premier's Class A stock to $36.00 on June 30, 2017, from $32.70 on June 30, 2016, the company reported net income attributable to stockholders of $1.51 per diluted share, compared with a net income attributable to stockholders of $1.33 per diluted share a year ago. (See income statement in the tables section of this press release.)

Non-GAAP adjusted EBITDA for the fiscal year totaled $501.6 million, an increase of 14% from adjusted EBITDA of $441.0 million in the prior year. Non-GAAP adjusted fully distributed net income increased 15% to $267.3 million, resulting in non-GAAP adjusted fully distributed earnings per share of $1.89 per diluted share, compared to $233.3 million and $1.61 per diluted share, last year, respectively.

Supply Chain Services segment net revenue for fiscal 2017 increased 33% to $1,101.3 million from $829.4 million a year earlier. Net administrative fees revenue increased $59.1 million, or 12%, of which $36.0 million was attributable to our acquisition of Innovatix and Essensa during the fiscal second quarter. The remaining increase was primarily due to contract penetration and, to a lesser degree, the impact of conversion of new members. During the year, an additional $17.4 million of cash collections attributable to Innovatix and Essensa net administrative fees was not reported as GAAP revenue due to purchase accounting, but was reflected in non-GAAP adjusted EBITDA. Products revenue of $534.1 million increased $207.5 million, or 64% from $326.6 million the prior year. The increase was primarily driven by revenues from Acro, acquired in the fiscal first quarter, and increased sales of direct sourcing products, partially offset by a decrease in dispensing revenue associated with other specialty pharmaceuticals, primarily associated with Hepatitis C.

Supply Chain Services non-GAAP segment adjusted EBITDA increased 12%, to $493.8 million from $439.0 million the prior year. Net administrative fees drove the majority of the increase, although growth also was delivered by products revenue, including both Acro and direct sourcing, as well as from the company's 49% equity investment in FFF Enterprises Inc., a specialty products distributor.

Performance Services segment net revenue for fiscal 2017 increased 6% to $353.4 million from $333.2 million a year ago. Informatics and technology services revenue increased 6%, primarily as a result of contributions from ambulatory regulatory reporting and cost management solutions, while advisory services increased 7%, with much of the growth occurring in the fourth quarter, consistent with management projections, as some large engagements were completed.

Performance Services non-GAAP segment adjusted EBITDA increased 9% to $121.1 million from $110.8 million the prior year, due primarily to the revenue increase.

Cash Flows and Liquidity

Net cash provided by operating activities was $392.2 million for the fiscal year ended June 30, 2017, an increase of $20.7 million from $371.5 million for fiscal 2016. The increase in cash flow from operations primarily resulted from an increase in net administrative fees revenue and an increase in cash generated from gross margin on other services and support revenue. At June 30, 2017, the company's cash and cash equivalents totaled $156.7 million, compared with $248.8 million at June 30, 2016. The company had no marketable securities as of June 30, 2017, compared with $47.9 million a year earlier. The reduction in cash and cash equivalents was primarily the result of the use of cash to fund acquisitions and investments during the fiscal year.

At June 30, 2017, the company had an outstanding balance of $220.0 on its five-year $750.0 million revolving credit facility. During the fiscal fourth quarter, the company repaid $147.5 million on the credit facility.

Non-GAAP free cash flow for the fiscal fourth quarter ended June 30, 2017 totaled $61.5 million, compared with $42.7 million for the same period a year ago. The increase in free cash flow primarily resulted from an increase in net administrative fees revenue and an increase in cash generated from gross margin on other services and support revenue associated with growth in ambulatory regulatory reporting, cost management solutions and government services. Non-GAAP free cash flow for the fiscal year increased to $216.5 million from 191.0 million the prior year and represented 43% of non-GAAP adjusted EBITDA. (See free cash flow definition in "Use and Definitions of Non-GAAP Financial Measures," and reconciliation to net cash provided by operating activities is provided in the tables section of this press release).

Fiscal 2018 Outlook and Guidance

The statements in this "Fiscal 2018 Outlook and Guidance" discussion are "forward-looking statements." For additional information regarding the use and limitations of such statements, see "Forward-Looking Statements" below and the "Risk Factors" section of the company's most recent Form 10-K filed with the Securities and Exchange Commission (SEC), as updated from time to time in the company's other filings with SEC filings.

Premier believes it remains well positioned financially and operationally for fiscal 2018, and is introducing financial guidance for the fiscal year based on the following key assumptions:

• Net administrative fees growth in the range of 13% to 17% comprised of mid-single digit growth in the company's legacy GPO business augmented by contributions from Innovatix and Essensa. Mid-range revenue growth assumes a stable patient utilization environment and is expected to be achieved through increased penetration of existing members' supply spend and the addition and contract conversion ramp-up of new GPO members consistent with historical trends. Note: the full-year net administrative fee revenue growth estimate reflects the impact of incremental revenue produced by Innovatix and Essensa, for which there was no comparable revenue in the year-ago first and second quarters, due to the acquisition timing and associated revenue recognition restrictions, and only partially comparable revenue recognized in the third quarter. The revenue contribution from this acquisition is expected to reflect a normalized run rate beginning with the fourth quarter.
• Revenue growth of the company's products business approximating a year-over-year growth rate of 9 to 13 percent, including contributions from Acro.
• Performance consistent with the company's current visibility into its annual revenue stream. Assuming the continuation of historical GPO retention and SaaS institutional renewal rates that are consistent with fiscal 2017 results, approximately 89% to 94% of Premier's fiscal 2018 consolidated revenue guidance range is available under contract.
• A consolidated adjusted EBITDA margin in the range of 33% to 34%, consistent with the ongoing business mix shift associated primarily associated with the faster-growing and lower-margin products business.
• Capital expenditures of approximately $85 million to $90 million.
• An effective tax rate of approximately 39%.
• Stock-based compensation approximating $34 million to $37 million, the increase from fiscal 2017 primarily due to an increase in the number of employees eligible for equity compensation as a result of company expansion, growth in average grant size year over year and, to a lesser extent, an increase in anticipated performance achievement attributable to performance shares that vest at the end of fiscal year 2018.
• Amortization of purchased intangible assets of approximately $56 million.
• Adjusted fully distributed shares outstanding approximating 141 million.

Based on the company's current outlook, and the realization of the assumptions discussed above in all material respects, Premier has established the following financial guidance for the fiscal year ending June 30, 2018:

Conference Call

Premier management will host a conference call and live audio webcast on Monday, August 21, 2017, at 5:00 p.m. ET, to discuss the company's financial results. The conference call can be accessed through a link provided on the investor relations page on Premier's website at investors.premierinc.com. Those wanting to participate by phone may do so by dialing 844.296.7719 and providing the operator with conference ID number: 54458135. International callers should dial 574.990.1041 and provide the same passcode. The company encourages callers to dial in at least five minutes before the start of the call to register. The archived webcast will be accessible on Premier's investor relations page.

About Premier Inc.

Premier Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of approximately 3,900 U.S. hospitals and health systems and approximately 150,000 other providers and organizations to transform healthcare. With integrated data and analytics, collaboratives, supply chain solutions, and advisory and other services, Premier enables better care and outcomes at a lower cost. Premier plays a critical role in the rapidly evolving healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide. Headquartered in Charlotte, N.C., Premier is passionate about transforming American healthcare. Please visit Premier's news and investor sites on www.premierinc.com; as well as Twitter, Facebook, LinkedIn, YouTube, Instagram, Foursquare and Premier's blog for more information about the company.

Use and Definitions of Non-GAAP Financial Measures

Premier uses EBITDA, adjusted EBITDA, segment adjusted EBITDA, adjusted fully distributed net income, adjusted fully distributed earnings per share, and free cash flow to facilitate a comparison of the company's operating performance on a consistent basis from period to period and to provide measures that, when viewed in combination with its results prepared in accordance with GAAP, allow for a more complete understanding of factors and trends affecting the company's business than GAAP measures alone. The company believes adjusted EBITDA and segment adjusted EBITDA assist its board of directors, management and investors in comparing the company's operating performance on a consistent basis from period to period by removing the impact of the company's asset base (primarily depreciation and amortization) and items outside the control of management (taxes), as well as other non-cash (impairment of intangible assets and purchase accounting adjustments) and non-recurring items, from operating results. Non-recurring items are income or expenses or other items that have not been earned or incurred within the prior two years and are not expected to recur within the next two years. Such items include certain strategic and financial restructuring expenses.

In addition, adjusted fully distributed net income and adjusted fully distributed earnings per share eliminate the variability of non-controlling interest as a result of member owner exchanges of Class B common stock and corresponding Class B units into shares of Class A common stock (which exchanges are a member owner's cumulative right, but not obligation, which began on October 31, 2014, and occur each quarter thereafter, and are limited to one-seventh of the member owner's initial allocation of Class B common units per year) and other potentially dilutive equity transactions which are outside of management's control. Adjusted fully distributed net income is defined as net income attributable to Premier (i) excluding income tax expense, (ii) excluding the impact of adjustment of redeemable limited partners' capital to redemption amount, (iii) excluding the effect of non-recurring and non-cash items, (iv) assuming the exchange of all the Class B common units for shares of Class A common stock, which results in the elimination of non-controlling interest in Premier LP, and (v) reflecting an adjustment for income tax expense on non-GAAP fully distributed net income before income taxes at the company's estimated effective income tax rate. We define adjusted fully distributed earnings per share as adjusted fully distributed net income divided by diluted weighted average shares. These measures assist our board of directors, management and investors in comparing our net income and earnings per share on a consistent basis from period to period because these measures remove non-cash and non-recurring items, and eliminate the variability of non-controlling interest that results from member owner exchanges of Class B common units into shares of Class A common stock.

EBITDA is defined as net income before interest and investment income, net, income tax expense, depreciation and amortization and amortization of purchased intangible assets. Adjusted EBITDA is defined as EBITDA before merger and acquisition related expenses and non-recurring, non-cash or non-operating items, and including equity in net income of unconsolidated affiliates. Non-recurring items include certain strategic and financial restructuring expenses. Non-operating items include gain or loss on the disposal of assets. Segment adjusted EBITDA is defined as the segment's net revenue less cost of revenue and operating expenses directly attributable to the segment, excluding depreciation and amortization, amortization of purchased intangible assets, merger and acquisition related expenses and non-recurring or non-cash items, and including equity in net income of unconsolidated affiliates. Operating expenses directly attributable to the segment include expenses associated with sales and marketing, general and administrative and product development activities specific to the operation of each segment. General and administrative corporate expenses that are not specific to a particular segment are not included in the calculation of segment adjusted EBITDA. Adjusted EBITDA is a supplemental financial measure used by the company and by external users of the company's financial statements.

Management considers adjusted EBITDA an indicator of the operational strength and performance of the company's business. Adjusted EBITDA allows management to assess performance without regard to financing methods and capital structure and without the impact of other matters that management does not consider indicative of the operating performance of the business. Segment adjusted EBITDA is the primary earnings measure used by management to evaluate the performance of the company's business segments.

Free cash flow is defined as net cash provided by operating activities less distributions and tax receivable agreement payments to limited partners and purchases of property and equipment. Free cash flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayments. Management believes free cash flow is an important measure because it represents the cash that the company generates after payment of tax distributions to limited partners and capital investment to maintain existing products and services and ongoing business operations, as well as development of new and upgraded products and services to support future growth. Free cash flow is important because it allows the company to enhance stockholder value through acquisitions, partnerships, joint ventures, investments in related or complimentary businesses and/or debt reduction.

Readers are urged to review the reconciliation of these non-GAAP financial measures included at the end of this release. To properly and prudently evaluate our business, readers are encouraged to review the financial tables included at the end of this release. Readers should not rely on any single financial measure to evaluate the company's business. In addition, the non-GAAP financial measures used in this release are susceptible to varying calculations and may differ from, and may therefore not be comparable to, similarly titled measures used by other companies.

Forward-Looking Statements

Statements made in this release that are not statements of historical or current facts, such as those related to expected financial performance and growth trends in our Supply Chain and Performance Services business segments and their respective business units, anticipated GPO participation agreement renewals, expected financial contributions from our acquired businesses, and the statements related to fiscal 2018 outlook and guidance and the assumptions underlying such guidance 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 the actual results, performance or achievements of Premier to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. Accordingly, readers should not place undue reliance on any forward looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in the 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 Premier's beliefs and expectations as to future events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside Premier's control. More information on potential factors that could affect Premier's 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" sections of Premier's periodic and current filings with the SEC, including those discussed under the "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" section of Premier's Form 10-K for the year ended June 30, 2016, Form 10-Q for the quarters ended September 30, 2016, December 31, 2016, and March 31, 2017, as well as the Form 10-K for the fiscal year ended June 30, 2017, expected to be filed with the SEC shortly after the date of this release, and also made available on Premier's website at investors.premierinc.com. Forward-looking statements speak only as of the date they are made, and Premier undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events that occur after that date, or otherwise.

(Tables Follow)