Credit Suisse https://www.credit-suisse.com had a post quarterly conference call with Premier Inc. (PINC) https://www.premierinc.com management to review FY4Q20 results, business performance by segment, and expectations for FY 2021.
Management decided not to issue their FY21 outlook since there is so much uncertainty associated with the pace of recovery. Currently utilization trends vary by geography but are currently within 80-95% of the pre-COVID levels.
Management suggests that when patient confidence improves, the pace of recovery will move forward and clarified that the $100-$110 min drag related to the GPO agreement restructuring is primarily related to the recent restructuring.
The Greater N.Y. Hospital Association transaction closing earlier this year will have additional drag on FY21 revenue/earnings (annualized $25-30 min impact which was roughly 25% of what was realized in FY20.)
PINC saw around $20 min of negative EBITDA hit because of the shutdown and surgeries cancellations etc. due to the pandemic. In FY4Q20, the company suspects some of the COVID impact will continue into FY1Q21 but will not be as severe as $20 min, however, further sequential improvement is expected in FY2Q21.
With respect to the margins by segment, PINC notes that if the forward buys and incremental revenues continue, their Supply Chain business margins are expected to be in the 50% range. For Performance Services, PINC sees margins in the low to mid 30s.
In looking at Long Term Growth Drivers, PINC reiterated their FY22 and beyond revenue, EBITDA, and Earnings Per Share (EPS) growth outlook to be in the MSD-HSD range. For their supply chain services business, PINC sees the growth returning to LSD-MSD range.
Further, the company sees their direct sourcing business to grow in the LDD range as the company continues to procure some additional product categories and expand the penetration and use across their membership.
For performance services, PINC sees growth in the MSD-HSD range. The company will continue to make ongoing incremental investments in their strategic expansion in FY21 in the $5-$10 min range to further their Contigo Health initiative and their technology-enabled supply chain services initiatives to go above and beyond ongoing run rates.
Credit Suisse analysts are now updating their model for the FY4Q release and FY21 commentary. The analysts estimate that their FY21 EPS estimate to be $2.10 (vs. $2.39, previously), and the Price Target (PT) to remain unchanged at $35 (8.5x is the analysts Calendar Year 21 EBITDA estimate.}
For more information and to provide feedback, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.