Susan DeVore - President and CEO Craig McKasson - CFO Michael Alkire – COO Jim Storey - VP of IR.

Lisa Gill – JPMorgan Securities Ryan Daniels - William Blair & Company Robert Willoughby – Bank of America Merrill Lynch Jamie Stockton - Wells Fargo Security Garen Sarafian - Citi Investment Research Sandy Draper - SunTrust Robinson Humphrey Michael Cherny – ISI Nicholas Jansen - Raymond James Mohan Naidu - Stephens Inc. .

Good afternoon and welcome to Premier Inc.'s fiscal 2015 first-quarter conference call. As a reminder, this conference call is being recorded. The call will be archived and available via webcast on the Company's website in the section entitled Investors.

(Operator Instructions) It is now my pleasure to turn the call over to the Company's Vice President of Investor Relations, Jim Storey. .

Thank you, Christina and welcome everyone to Premier Inc.’s Fiscal 2014 First Quarter Conference Call. Our speakers today are Susan DeVore, President and Chief Executive Officer; Mike Alkire, Chief Operating Officer; and Craig McKasson, Chief Financial Officer.

Susan, Mike and Craig will review the quarter’s and discuss the outlook for the remainder of our fiscal year. Before we get started, I want to remind everyone that copies of our press release and the supplemental slides accompanying this conference call, are available on the Investor Relations section of our website at investors.premierinc.com.

Management’s remarks today contain certain forward-looking statements and that actual results could differ materially from those projected today. These forward-looking statements speak as of today and we undertake no obligation to update them.

Factors that may affect future results are discussed in our filings with the SEC, including our most recent Form 10-K and we encourage you to review these detailed Safe Harbor and risk factor disclosures.

Please also note that where appropriate, we will refer to non-GAAP financial measures, such as adjusted EBITDA, segment adjusted EBITDA, and adjusted fully distributed net income to evaluate our business.

During this discussion, we also will be comparing current fiscal first quarter results with last year’s results on a non-GAAP pro forma basis since our company had not completed its reorganization and IPO until after last year’s first quarter.

Comparisons made in accordance with GAAP do not reflect the impact of the reorganization and IPO and therefore management believes they do not provide meaningful year-over-year comparisons.

Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release in the appendix of the supplemental slides accompanying this presentation and in our Form 8-K filing with the SEC which we expect to files soon. Now let me turn the call over to Susan DeVore..

Thanks Jim and welcome everyone to our conference call. I'm happy to be here today with my colleagues to discuss our fiscal 2015 first quarter results and to provide an update on our outlook for the remainder of the fiscal year.

I'm also delighted to let you know that Mike Alkire, our Chief Operating Officer, is joining this call and he’ll provide operational updates as well as other valuable insights on our business. It’s been just over two months since our last conference call and it doesn’t seem like a lot of time. However, we’ve been putting that time to very good use.

We’ve added new members, expanded our relationships with existing members. We’ve grown our revenue and earnings and we’ve continued to pursue and integrate strategic acquisitions in accordance with our capital deployment strategy. Today, we want to discuss the details of our progress in four steps.

First, I’ll provide you with an overview of our first quarter results. Second, I’ll spend a few minutes reviewing the leading position we hold in this market and the progress we’re achieving against our long term strategy.

Third, Mike will walk you through our operations in more detail, including our key business wins, acquisition integration and our expanding capabilities. And lastly, Craig will provide more detail and perspective on our financial results and our expectations for the remainder of fiscal 2015. So let8’s get started.

As our first quarter financial results demonstrate, we are off to a strong start to fiscal 2015. Consolidated revenue and adjusted EBITDA growth exceeded our expectation, as did supply chain services segment revenue growth. The performance services revenue was consistent with our expectation.

Based on our year to date execution and outlook for the remainder of the fiscal year, we are confident in affirming our full year financial guidance.

This guidance projects 11% to 14% revenue growth, 8% to 11% growth in supply chain services revenue, 21% to 24% revenue growth in performance services, 8% to 11% growth in adjusted EBITDA and % to 11% growth in adjusted fully distributed earnings per share.

Looking at the quarter more closely, net revenue of $229 million rose 15% from the prior year, driven by a 16% rise in supply chain services revenue and an 11% increase in performance services.

The growth of the supply chain services segment revenue resulted from increased utilization of our direct sourcing and specialty pharmacy businesses, as well as continued strength in our GPO net administrative fee revenue, which increased 4.1%.

Growth in net administrative fee revenue was driven by new member conversions and expanding utilization of our contracts by existing acute and alternate site members, both of which continued to grow at a rate consistent with past performance and our future expectations.

Low to mid-single digits percentage growth in acute care and we are very pleased with continuing alternate site growth, which is about double that.

In our performance services segment, the 11% revenue growth was in line with our expectations, fueled by across the board growth in SaaS-based informatics products, particularly the ongoing ramp up of our Premier Connect Enterprise engagements and contributions from population health services.

Looking forward, we are excited by the potential for continued organic growth in this segment, augmented by contributions from our Aperek and TheraDoc acquisitions, which closed on August 29 and September 1 respectively.

Our adjusted EBITDA of $90.5 million was up 9% from the prior year due to 12% growth in performance services and an 8% rise in supply chain services. Adjusted fully distributed net income totaled nearly $48 million or $0.33 cents a share, an increase of 6% from the prior year.

Before we jump further into the quarter, I want to discuss the position that we believe distinguishes Premier in this market and the long term leadership role that we play in shaping the future of U.S healthcare. It is abundantly clear to me that our nation’s healthcare challenges are massive.

They are evolving rapidly and they require a fundamental shift to a re-invented healthcare system that must be led by healthcare providers who are on the frontlines working within communities every day.

And so at Premier we are providing solutions from inside these provider systems, helping transform healthcare by leveraging our large and very aligned member channel.

The significant data resources flowing through our PremierConnect data analytics and business intelligence platforms, as well as our advisory services and performance improvement collaboratives, we believe that our comprehensive approach, which now encompasses some 3,400 hospitals or about 68% of all US community hospitals and 110,000 alternate site providers, is unique in the healthcare services market.

This approach also translates to multiple revenue drivers for our company and enables us to move forward in a leadership position built on a solid and growing base of financial strength.

Our channel and our data, our scale, our collaboration, they all enable and accelerate our ability to help our members manage the most complex and pressing cost, quality, safety and population health challenges of today.

And at the same time, the work we are going today, especially in performance services, provides practical insights to facilitate and inform future decision making.

Some recent examples of this include our collaboration with the CDC on research that we released in September related to the use of unnecessary and duplicative antibiotics in U.S hospitals.

Our partnership with the eHeath initiative on a recent study showing that poor interoperability across health information technology systems, is a real threat to continued improvement in clinical quality for many accountable care organizations.

Our peer reviewed analysis that found wide variation in the use of blood products among 1.5 million patients, revealing significant opportunities for our members to improve quality and reduce cost.

Just recently, the rapid response center and centralized Ebola preparedness team that we’ve organized to help our members identify, monitor and obtain necessary supplies and avoid supply chain disruptions until the immediate threat of the disease subsides.

We play a crucial role in connecting and educating our members on everything from crisis planning, to cost reduction, to product utilization and standardization. As I noted earlier, one of our growth areas in the first quarter and one of the key drivers of our strategic direction is population health.

We are excited about the role we are playing in enabling our health systems to take a leadership role in population health management. What are we doing specifically in this area? Here are just a few examples. We are building the nation’s first perioperative surgical home collaborative with the American Society of Anesthesiologists.

This will be piloting a surgical home model in 43 hospitals, including 17 academic medical centers across the country.

We are also assisting a major catholic IDN in building a system wide population health collaborative that includes the development of up to 20 Medicare shared savings program sites and a standardized population health operating model for their regions.

We are building a care management program for a Florida Medicare shared shavings program to manage their high-risk patients. And we are constructing a plan for a large metropolitan health system to create greater physician alignment through the development of several creative models. We’ve started the year with a great first quarter.

And just as importantly, we are continuing to invest in the future through collaboration that is yielding actionable insights to help our members succeed in the challenging environment ahead of us.

Over the long run, we will define success by the extent to which we help our nation’s healthcare providers meet the cost, quality, safety and population health challenges that lie ahead, which in turn we believe will translate to continued profitable growth for Premier and lasting value for our shareholders.

Now I’ll turn the call over to Mike Alkire, our Chief Operating Officer..

Thanks Susan and welcome everyone to our conference call. I want to start off by echoing Susan’s comments about the great start to our current fiscal year. I’m extremely pleased with our strong first quarter performance operationally as well as financially.

As Susan mentioned, since our last conference call, we’ve been working in close partnership with our members to improve their cost, quality, safety and population health strategies. My goal today is to share with you some of the strategic initiatives that we believe are driving our continued leadership role in healthcare transformation.

Today I will focus my remarks on three areas. First, we continue to win and expand member relationships. Second, we are making great progress with the ongoing ramp up and integration of our recent acquisitions. Third, we are expanding and deploying our capabilities to help members address the challenges they are facing.

As you know, we approach the market with an integrated sales and field force that focuses on comprehensive performance improvement solutions across our supply chains and performance services capabilities.

We believe our unified approach is one of the key reasons we’re winning and growing business, filling the gaps created by EHR and other technology oriented solutions.

When you look at some of our major business wins in the first quarter, Scottsdale Lincoln Health Network, Lahey Health, and Agnesian Healthcare, you see health systems that chose Premier because our scope of resources best match their needs.

We have a proven track record of accelerating and optimizing system integration, of efficiently transforming the supply chain across healthcare organizations, of quickly normalizing data and of helping our systems avoid the high cost of IT conversions, while redesigning care delivery.

That’s what is important to our new members, particularly those who are forming larger systems and preparing for the future of population health management. Let’s briefly walk through these new business wins and expansions. First, Scottsdale Lincoln represents a recent system wide affiliation between two large Arizona healthcare providers.

We were chosen to help further integrate care delivery as the health system continues its evolution to population healthcare management. While we had a previous relationship with one of the two health systems, the competition for the combined business was fierce.

At the end of the day, we believe one of our key differentiators was our proven track record in post-merger integration support.

In addition to our GPO services, Scottsdale Lincoln signed on for a PremierConnect quality, operations and supply chain solutions, as well as our Medicare breakeven program and membership in our QUEST cost and quality improvement collaborative and also in our PACT population health collaborative.

Now let’s look at Lahey Health, this nationally recognized academic and community health system based in Massachusetts, chose Premier and Yankee Alliance supply chain solutions, which is one of our larger member owners, to optimize the integration of its full continuum of care, which in turn will support the system’s population health management objectives.

In addition to our GPO, the system is using our PremierConnect quality and supply chain products to analyze spend and resource utilization data. Agnesian Healthcare in Wisconsin joined as a new Premier member to leverage our GPO and PremierConnect capabilities.

Agnesian is integrating care delivery and purchasing practices system wide to drive cost efficiencies, better promote outcomes and advance population health management. The health system also joined our ASCEND collaborative, which identifies and implements supply chain performance improvement opportunities.

Our expanding relationship with Johns Hopkins Health system is a good example of the growth potential available when we successfully execute our plan. Since joining Premier in 2013 as a member owner, Johns Hopkins Health Systems has signed on for our PremierConnect quality and operations capabilities.

It is participating in our QUEST performance improvement collaborative. It has enlisted our SYMMEDRx physician preference capabilities and it is working with MEMdata on capital equipment procurement. So these represent some of our recent new business wins and expanded relationships. Next, let's look at our acquisitions.

As you know, our primary element of our strategic focus is around acquiring new assets. Over the past 15 months, we’ve acquired 5 such companies, maintaining their talent while also creating the technology roadmaps to fully integrate these assets. Let's briefly review.

First, SYMMEDRx continues to expand its role in helping our members address the high cost and difficult to manage physician preference area. In our first fiscal quarter, SYMMEDRx signed 14 new clients, bringing our total number of customers to 72, which represents nearly 300% growth in the 14 months since we acquired it.

It continues to deliver consistent double digit cost savings to our members. The next is Meddius, our data acquisition and integration as a service product is delivering increased revenue and decreased operating expenses while improving integration capabilities across our PremierConnect solutions.

It has also proven to be instrumental in the implementation of analytics for our PremierConnect Enterprise solution. The third is MEMdata, our capital equipment planning, sourcing and analytics business, has added 11 new engagements since its acquisition in April, including three in our first quarter and three more in October.

New wins include Fairview, Johns Hopkins, Lahey, and Scottsdale Lincoln. Aperek, our supply chain workflow and analytics acquisition, has achieved full customer retention since we acquired it on August the 29th and is proving to be a key asset in our current recruiting efforts.

As we have previously discussed, Aperek is a critical element in the continuing evolution in support of our members supply chain management process. And finally, TheraDoc.

We closed this acquisition on September 1, significantly growing our market share in real-time clinical surveillance solutions, including 400 TheraDoc customers that represent new business prospects for Premier. Since the acquisition, we’ve achieved full customer retention and additional sales of TheraDoc software into new several facilities.

We also are integrating the TheraDoc solution into our PremierConnect platform to drive further clinical surveillance solutions. All of these acquired capabilities are embedded in our PremierConnect platform and are utilized by our advisory services business in support of our members.

When combined, these capabilities provide our members with the leverage to scale their individual systems. This enables the sharing of best practices on everything from dealing with a pandemic, to reducing substance, to creating uniform standards for implementing a total joint replacement.

I’m going to take a few minutes to discuss the progress we’ve been making in expanding our capabilities to help our members address the challenges they face today while preparing for the future. First, we are very pleased with the member reception to our PremierConnect Enterprise.

This extends our PremierConnect platform, giving members a unique cloud-based data warehouse and business intelligence ability to acquire, standardize, transform and integrate big data. PremierConnect Enterprise manages data from multiple health information systems and data across the care continuum.

We believe it is uniquely differentiated and that it is vendor and payer agnostic and provides hard to find expertise in data acquisition, cleansing, mapping, management and governance capabilities through the extension of Premier’s services.

Three major health systems deployed PremierConnect Enterprise in last year’s fiscal fourth quarter and we added another major health system in the first quarter, Doctors Hospitals at Renaissance in South Texas. Our Premier data alliance collaborative now consists of 10 of the nation’s leading healthcare providers.

Doctors is a long time member that just a few quarters ago went what we described as all in, with 16 of our applications, advisory and collaborative solutions. Looking at the pipeline, member interest in PremierConnect Enterprise remain very active.

Next, our partnership with Predixion Software announced in early October as part of our organically developed PremierConnect population health solution. It provides users with real time predictive capability related to patients at risk for readmissions while they are still in the hospital.

We expect this and other predictive solutions that we are developing with Predixion to benefit healthcare systems as they continue developing population health models. Our Medicare breakeven program, which we are now calling Provider of Choice, continues to gain traction.

We believe provider of choice better describes the system wide cost, quality, safety and population health management goals that our members are striving to achieve in a changing payment environment, particularly now that Medicare is moving to a star rating system for health systems and Medicaid and other payers are likely to follow.

We signed three new provider of Choice programs ion or first quarter. Currently, we are engaged in 14 active projects encompassing some $216 million in targeted savings. Finally, I’d like to offer a preview of where we are headed, as a company and as an industry.

As you probably know, access to data across the continuum of care is a major pain point for healthcare providers and is crucial as they move to new models of care. As Susan noted earlier, our recent study with eHealth initiative found that the lack of interoperability is one of the biggest barriers to implementation of ACOs.

We believe Premier’s innovation in ambulatory integration data technologies provides a compelling solution to this interoperability problem and further accelerates our population health initiatives.

Thus, we are very excited that in our first quarter, we initiated a project with a health system representing more than 2,000 physicians to integrate ambulatory data from up to 20 of its non-integrated affiliated clinics using technology acquired via our Meddius acquisition.

This effort integrates ambulatory data with our PremierConnect across a diverse set of ambulatory EMR systems. As a result, this major health system will have actionable information across both its acute care locations and its extended network of clinical affiliates. Thank you for your time today.

Now let me turn the call over to Craig McKasson, our Chief Financial Officer..

Thank you, Mike. As Susan and Mike already stated, we are very pleased with our first quarter financial results. Our company’s performance exceeded our consolidated revenue and adjusted EBITDA expectations and we affirming our guidance for the full fiscal year ending June 30, 2015.

We believe one of the strengths of our business model is that it is built on diverse revenue drivers and they continued to work together in the first quarter to drive strong year-over-year consolidated revenue and adjusted EBITDA growth. Now let’s look at the quarter in detail. Consolidated net revenues of $229.3 million increased 15% from a year ago.

These results are comprised of $170.3 million in net revenue from our supply chain services business segment, up 16% year-over-year and $59 million in revenue from performance services, up 11% over the prior year.

Looking at the segment level, the 16% revenue growth in supply chain services exceeded our expectations and was driven by our core GPO business where net administrative fee revenue increased 4.1% due to higher acute care and alternate site utilization, ongoing conversion of new members and consistent revenue share.

Our direct sourcing and specialty pharmacy product businesses combined to produce 45% topline growth in the quarter from a year ago, fueled by ongoing member support of both of these businesses.

In performance services, the 11% revenue increase was consistent with our expectations and resulted primarily from continued growth of SaaS-based informatics technology subscriptions, particularly our PremierConnect Enterprise and population health offerings and growth in our performance improvement collaborative and advisory services revenue.

Year-over-year segment revenue growth also included one month of revenue adjusted down as a result of purchase accounting from our TheraDoc and Aperek acquisitions. Each of our SaaS-based informatics products subscription, collaborative and advisory services businesses, achieved double digit percentage revenue increases during the quarter.

Adjusted EBITDA of $90.5 million for the quarter represents a 9% increase from a year ago with supply chain services increasing 8% and performance services up 12%. As a reminder, we were not yet publicly traded in the first quarter of last year and our year-over-year growth does include ramp up of certain costs to operate as a public company.

However, our overall SG&A as a percentage of revenue, is slightly lower than the prior year. The increase in supply chain services adjusted EBITDA largely reflects the growth in net administrative fee revenue as well as continued expansion of our direct sourcing activities and effective management of operating expenses.

The 12% increase in performance services adjusted EBITDA to $18.4 million for the first quarter, reflects the same factors that influenced revenue growth.

Now as I have discussed in the past, the quarter-to-quarter revenue and EBITDA growth rate can sometimes vary due to the timing of revenue recognition from certain activities that have some seasonality and from some certain advisory services engagements in which our revenue is based on a percentage of identified members savings.

This variability does not apply to our SaaS based technology subscription revenue, but on occasion can result in GPO administrative fee revenue or advisory services revenues experiencing some variability between quarters.

Looking at the bottom-line performance, non-GAAP pro forma adjusted fully distributed net income totaled $47.8 million for the quarter or $0.33 per fully diluted share, which compares with $45.1 million or $0.31 cents a share last year.

As I’ve discussed on previous calls, because of our corporate structure and the quarterly member owner share exchange process, we guide to adjusted fully distributed earnings per share.

This measure calculates income taxes at 40% on pretax income, assuming the entire company is a taxable C corporation and further assumes all of the company’s Class A and Class B common shares are held by the public and therefore included in the share count determination.

From a liquidity and balance sheet perspective, cash flow from operations for the fiscal first quarter totaled $45.9 million. This is lower than we’ve been generating the past few quarters, primarily as a result the payment of annual employee incentive compensation in the month of September, following completion of our June fiscal year end.

I do want to reiterate that we expect to continue to generate significant operating cash flow, and our annual free cash flow is expected to approximate between 30 and 40% of adjusted EBITDA. At September 30th, 2014, our cash, cash equivalents and short and long-term marketable securities totaled approximately $398.2 million.

We ended the quarter with no outstanding borrowings on our five year $750 million revolving credit facility. We remain in excellent position to deploy capital to drive our strategic direction and we continue to manage an active pipeline of potential acquisition opportunities. Now, let’s turn in more detail to guidance.

As Susan and I said earlier, we are affirming our full year guidance that we established on our last conference call on August 25.

The affirmation of our guidance results from our strong first quarter performance, our over 91% visibility into estimated revenue available under contract, as well as our 99% GPO retention rate and our 94% SaaS institutional renewal rate. The key assumptions driving our financial guidance remain consistent with what we highlighted last quarter.

In supply chain services, we anticipate continued low to mid-single digit growth in administrative fee revenues as we experienced in the first quarter. The main divers of this growth are expected to be new member growth, increased penetration of existing members acute and non-acute supply chain spend.

We do continue to monitor utilization and while we have noticed an increase from the winter months, we do not yet see any measurable year-over-year changes in this trend that warrant an adjustment to our current expectation or guidance.

Our guidance also assumes 15% to 20% revenue growth in our direct sourcing and specialty pharmacy businesses, which is consistent with our long-term growth expectations for these emerging product businesses.

The significant growth in the first quarter was stronger than anticipated, but future quarterly performance is expected to be more normalized based on the substantial growth that occurred in the second half of last fiscal year.

In the performance services segment, the anticipated 21% to 24% full year revenue growth reflects the continued strong revenue contribution from our SaaS informatics technology products, including PremierConnect Enterprise, growth in advisory service and performance improvement collaboratives and the continuation of our high SaaS institutional renewal rate.

As I just noted, we have over 91% visibility into our total estimated revenue available under contract and our SaaS institutional renewal rate was 94% last year.

Additionally, we expect our TheraDoc and Aperek acquisitions to contribute fully to our contemplated growth and performance in the second, third and fourth quarters of the fiscal year, whereas they only contributed one month of revenues in the first quarter.

Our guidance does not include contributions from any significant future acquisitions that may occur during the balance of fiscal 2015. Finally, let me provide an update on our first quarterly exchange which took place on October 31.

Per public disclosures, approximately $16 million class B common units became eligible for exchange by our member owners and approximately $4.7 million or 29% of the eligible amount were exchanged, along with the associated class B common share for class A common shares on a one for one basis.

We are pleased with the outcome of the exchange process as it will provide some additional liquidity inflow into the public markets. Of the 4.7 million shares that were exchanged, approximately 3.8 million have elected to participate in our planned underwritten, company direct offering which we do plan to conduct in a timely fashion.

Owners of the approximately 900,000 shares not participating in the company directed offering will not be able to sell their shares until 60 days following the close of the company directed offering. With that, let me turn the call back over to Susan..

Thanks Craig. This concludes our prepared remarks. Christin, you may now open the call for questions. .

(Operator instructions). Your first question comes from the line of Lisa Gill..

Thanks very much. Good afternoon every one and thank you for all the detail.

I’m not sure who’s the right person for this question, if it’s Mike or Susan or you Craig, but if I think about performance services and the guidance you have there of 21% to 24% of revenue growth versus what we saw this quarter, Can you just help us to bridge this as we go into the next three quarters? How much will the acquisitions actually contribute and are there specific things that are going to happen over the next few quarters? And then secondly, the 11% revenue growth, was that within your expectations or did it fall short of your expectations in the quarter? I’m just looking for a little more color around that..

So it did meet our expectations, Lisa. And I’ll turn it over to Craig to give you a little bit more detail into second, third and fourth quarters..

Yeah, sure. Thanks Susan. Lisa, with respect to bridging from the first quarter to the balance of the year, you may recall from our fourth quarter conference call when we provided the guidance initially we disclosed that approximately $20 million of revenue would be contributed from TheraDoc and Aperek.

And as a reminder, that is purchase accounting adjusted. So that’s not the historical run rate of revenue from the business, but we have some deferred revenue that we were unable through purchase accounting to bring over. The vast, vast majority of that $20 million is going to come into the business in the second, third and fourth quarters.

We had a nominal contribution in the first quarter.

And then as I did talk about, we can have a little bit of variability in performance services due to our advisory services component of that segment in which we do engagements where we recognize revenue as we deliver savings for our members and that recognition process, depending on the timing, can cross across borders.

We are very confident that you will see revenue growth for the balance of the fiscal year in the ranges that we provided for full year guidance now because that will have the full contribution from those businesses -- from the acquired businesses moving forward..

Okay, great. Then just my second question would be, you’ve done a really nice job of adding in incremental services. Obviously Mike talked about a number of the wins that you have. But Susan, can you maybe talk about the acquisitions landscape right now? You’re sitting on quite a bit of cash, including your line of credit.

Are there areas that you believe would be complementary to add to some of the services that you have? Are there specific things that you’re looking at in the marketplace right now that you think would be complementary? How should we think about acquisitions?.

We do have cash and capacity and we do have a full corporate development function and an active pipeline. We continue to look at capabilities in the supply chain space, including supply chain technologies, pharmacy offerings, alternate site offerings, even physician preference purchase services kind of things.

So we still are very active on the supply chain side as well as the performance services side. You heard a lot about call about population health, about ambulatory data acquisitions.

There are still care management, risk stratification, ambulatory data, population health kinds of capabilities that we look at in addition to sort of shared services and operational technology capabilities on the performance services side. The pipeline is very active. We did do two acquisitions in the first quarter and into this quarter.

So we are very active..

Your next question comes from the line of Ryan Daniels..

Yeah, thanks for taking me the questions, guys. Craig, let me start with a quick one for you. You addressed this in your prepared comments, but was surprised to see the strength in cost controls on the SG&A line being down year over year despite being a public company.

Can you give us a little bit more flavor on how we should think about that going forward and maybe why that came in so low this quarter?.

I think -- as you think about moving forward, I think broadly we will continue to be on an unadjusted basis the kind of 33% to 34 % when you think about SG&A as a percentage of revenue. So, that is in line with where we would expect to see. We will continue to look for opportunities to find operating leverage.

We are very focused on being fiscally responsible in really managing our operating expenses as we drive business and that is what helped contribute to this quarter. But overall I think you will continue to see kind of consistent trends as I’ve discussed..

Okay, that is helpful color. And then another follow up just on the performance services, can you remind us how much of that at present is related to the SaaS-based tools and how much is collaboratives and the advisory services? Again, I know that can fluctuate quarter to quarter, but just generally..

Yeah, generally speaking what we’ve talked about in the past, Ryan is that about 60% of our performance services segment revenues come from our SaaS-based technology subscriptions and about 40% are comprised of our advisory services and performance improvement collaborative work..

Okay, perfect. And then Susan, I guess a big picture question for you and you’ve discussed this in the past, but I want to get your latest state of the union if you will. It seems like hospitals that have invested a lot in the EHRs are really looking for better ways to unleash the value from all that data they are capturing.

I’m curious what you are hearing from your member base.

And I’m curious, number two if that is accelerating demand for your performance services solutions across the spectrum?.

Yeah. So we are hearing a lot and we are very active in the space of connecting data. And we do hear from our members that they are frustrated with the difficulty in connecting disparate vendors, disparate transactional systems and EMRs and they’ve spent a lot of money installing EMRs.

They are looking for more efficient ways to get data and have data and link data in the cloud and maybe not do it as capital intensively as they’ve had to do it so far.

It is driving not only our SaaS based subscriptions, but our PremierConnect Enterprise as Mike discussed and the advisory services that wrap around it because remember it's not just the technology, but it's how do you take those insights and how do you actually reduce cost or improve quality.

We are hearing actually a lot more from our members now too, something Mike mentioned, which was this need for data scientists, and data managers, and data governance and all the complexities that go with data, which we can provide as a service.

Yes, it is the pipeline for PremierConnect Enterprise as well as our as applications is good and we think that demand is continuing to increase..

Your next question comes from the line of Robert Willoughby. .

Hi, can I ask, Susan, I think I asked you this before, but just any sounds of footsteps in terms of some of your competitors [pulse] beginning after your GPO model?.

I have no idea, Bob about that. I haven’t heard anything about competitors coming after or doing different business models than the ones they currently have..

Okay, and just in terms of we are seeing a lot more in the informatics arena these days. Can you comment maybe -- and maybe the question was answered, forgive me, just in terms of pricing on transactions.

Do you consider it a rational market currently or how do we assess that?.

I would describe it as a competitive market and a rational market. I think when you can actually combined applications with services and collaboratives, and connect it to the real value associated with the ROI on that investment, it makes our pricing and our ROI equation maybe more significant and very directly correlated.

So I say it’s competitive, but the all-in connectivity to big improvement numbers is a differentiator for us..

Your next question comes from line of Jamie Stockton..

Hi, good evening. Thanks for taking my questions. I guess maybe the first one, you guys in the last quarter or two have talked about how you were negotiating some bigger deals with some of your clients and maybe the sale circle was extended a little bit as a result of that.

I'm curious if you feel like those deals are moving towards a conclusion at a pretty nice pace at this point or do you feel like the pipeline of potential business is continuing to build?.

Thanks Jamie. It’s a great question. What I would tell you is when we talked about that a couple of quarters ago, it’s when we had just launched and were rolling our PremierConnect Enterprise offering. So we were getting those into the cycle. And so at the beginning we talked about that.

What we see now is more a more normalization to our sale cycle process as we are doing our all-in engagements and are very comfortable with the activity that we are seeing the market place..

Okay, that’s great. Then maybe one other one, just on the PremierConnect Enterprise. You listed 10 health systems on the slide that I think are relying on you guys for enterprise data warehouse today and I guess a few of them are a little more analytics or data oriented.

But when you think about those organizations, have we seen all of the business or the majority of the business that you have the potential to get from them on this front start to flow through the income statement.

Or are we still in the early days? I guess I'm trying to ascertain how much of the opportunity, even with some of these early deals on PremierConnect Enterprise have you really captured..

I think we are in the early phases of it, Jamie. So I would say we are starting to see the revenue on the engagements that we have in PremierConnect Enterprise.

But typically they start out with defined projects and things that they are trying to do on the warehouse, which means those can be expanded over time as the projects get added and as the enterprise analytics connecting all of the dots. There are more numbers associated with that.

I would say we’re not the front end of that potential opportunity with even the existing PremierConnect members..

Our next question comes from the line of Garen Sarafian..

Hi guys. Thanks for taking the questions. I guess the first question is on population health. Well, first I appreciate your measured use of the term interoperability which sometimes gets a bit abused. But on that topic, it still -- it does get a lot of attention.

and I'm wondering -- I mean you say you are vender agnostic, but what metrics do you point to when prospects say others are just as interoperable as Premier?.

I guess what we say when we are in the pursuit mode, Garen is that we have already seen every data pattern there is from every vendor and payer there is in our existing data warehouse. We’ve already been pulling data from all the EHRs and all the transaction systems and ERP systems. And so we don’t have to say we can do it.

We can basically say we’ve been doing it for many, many years with many, many vendors. I think and we do it with the wrap around services and we do it from the inside as an extension of your organization. I think there is trust and there’s history and it just is a different long term capability that we are now packaging as PremierConnect Enterprise.

Did that answer your question?.

Yeah, it’s a difficult one to answer in a collective I guess. But I guess the follow up to that though would be, it's an all-encompassing solution and it’s still relatively new, less than a year old.

,but have you been able to quantify any of these benefits that you’ve achieved for your members so that you can use that to sell to new members yet, or is it too early?.

It's interesting. We do use it -- so sometimes when we are doing big, what we call Medicare breakeven or provider of choice engagements, or we have other applications that they are using, we can quantify the connected benefits in real dollars.

For some of the PremierConnect Enterprise solutions themselves, it's too early to quantify that overall big capital and operating benefits. But we clearly intend to do that as we both go forward.

Everything we do, we measure and everything we do, we try convert to savings, capital saving, quality improvements, safety improvements, population health, per capita cost improvement, those kinds of things..

Susan, if I could add -- this is Mike, Garen. We are in a couple of organizations looking at labor cost of analysts. So we’re understanding the number of analysts that is leveraging all this data.

We do believe there’s going to be a very healthy ROI with the standard data set that we provide in terms of reducing the number of analysts that each organization is going to have to employ..

They are finding out that they are spending so much time and money with all the people that are cleansing, mapping, analyzing data that they don’t have people implementing it and that’s the efficiency we are trying to bring..

Your next question comes from the, line of Sandy Draper.

Thanks very much and congratulations on the strong start. I just wanted -- a question probably for Craig because I'm not sure if I'm confused or maybe some other folks are confused.

The guidance for performance services revenue of 281 and this sort of follows up on Lisa’s question, the 281 to 288, correct me if I’m wrong, that’s a non-GAAP number that would include deferred revenue..

No, sorry. To clarify Sandy, that’s a GAAP revenue number. What we talked about on our last conference call that we would make the deferred revenue adjustment for adjusted EBITDA purposes, but we were not going to report a non-GAAP adjusted revenue number..

Okay and so the 281 to 288 is a GAAP number that would be comparable to what you report?.

That’s correct..

Okay and the $20 million of revenue is the nine months revenue that will be GAAP revenue form the acquisitions that you will actually see and then there’ll be a non-GAAP adjustment below that?.

That’s correct..

Okay..

Approximately nine months, but yeah..

Right, correct. Okay, great. That’s definitely helpful. And the second question maybe for Susan and this relates to other questions that have been asked about the analytics. One of the things that it seems to me that really separates you guys is the size of the data and the database.

There are a lot of companies out there that are starting to get some pretty slick interfaces around population health and other analytics tools.

Can you just remind us exactly what are your rights in the data and then also probably just as importantly, how successful are you in getting the majority, if not all of your members, to actually contribute their data to an aggregated data set so that you have really good comparable type of information? Just remind me where you stand along those lines.

Is there more data you can get or do you feel like you’ve got contracts that basically as you bring on new customers you’re automatically getting that data? thanks..

Yes. So I would say that our members and customers alike view us as an extension of themselves and want to use the data for operating improvements. So we have business associate agreements with all of them that come with the SaaS-based subscription. They are all sending us the data.

It’s in their best interest to send it to us, to have us cleanse it, normalize it, benchmark it and then help them figure out where they have opportunities for improvement so they select their peer groups and that sort of thing.

You also recall we acquired Meddius several months ago and the purpose of that was to give us a real time data acquisition engine that can bring data from lots of sources into the data that we have.

From our perspective, this is their data and it’s the data they want to use to deliver care differently and therefore they want to have it compared and then cleansed and really analyzed. And they view us as that efficient third party that can help them do that from the inside.

We don’t have any issues of trying to get that data from someone else because they need for us to have it in order to give them back what they want..

Operator:.

:.

.:.

I want to dive into the utilization question a bit. Craig, you mentioned there are some comments about how you’ve seen some very modest signs but nothing you are willing to really change the guidance for.

As you think about broadly speaking utilization across your book of business, I guess what are the key signs, what are the tripping factors you are looking for to really show that some of the early anecdotal evidence I guess that we’ve all seen through some of the hospital data amongst other things, are areas that are flowing directly into your business.

Along those same lines, can you back it a little bit how you are able to grow or project your growth and then admin fees relative to where you see utilization playing out?.

So, lots of comments in here. As you know, we collect data or we have data through our applications and can see what’s happening in utilization from both an inpatient and outpatient perspective, not only in admin fees, but over on the performance services side of the business. We have seen a little bit of an uptick in utilization.

We think because of exchanges, because of Medicaid exchanges, because of flu seasons and other things, we still see this shift from inpatient to outpatient and the movement isn’t big enough yet for us to think that we should change anything on a going forward basis around admin fees or our other projections. So we haven’t indicated that..

And Susan, if I could just add a couple of more things. We do see nice growth just from a percent standpoint in our ambulatory non-acute side of the business. So we are going to continue to double down on those areas as well as our non-traditional areas and I think Susan mentioned this earlier.

We are seeing really nice growth in purchase services as well as IT and facilities..

Your next question comes from the line of Nicholas Jansen..

Hey guys. Following up on that question on utilization, how should we think about if hospital volumes increased on both inpatient and equivalent omissions basis by like 50 basis points or 100 basis points relative to the fresh trend line that we’ve seen for so long.

How do we think about that flowing through in terms of the EBITDA, the revenue or how should we think about the contribution there if something like that was to happen so we get better visibility into potential upside should this trend continue to play out?.

Yeah, that’s a broad question, Nick. What I would say is that it’s really going to vary and depend where that inpatient utilization comes from. What we are really focused on is driving further and additional penetration of our member’s use of our contract.

And so obviously the higher we drive that, if we see increased improvement in utilization and there’s more patients coming through the door and supplies being used, that’s only going to augment and drive our administrative fees higher or in the case of direct sourcing, if they are using those products to drive higher penetration.

But it’s really difficult for me to quantify specifically for you and say that a 10 basis point increase in inpatient or outpatient utilization is going to drive X in revenue or EBITDA contribution..

It’s a pretty big base of revenue, the admin fee revenue today. And so we are continuing to say with the utilization trends that we see today, mid-single digit growth in acute care and it is double that in alternate sides..

Okay, that’s helpful color. Then Craig, maybe on the gross margin line, maybe my model was off, but it seems like there was a little bit of volatility there on both a year-over-year and sequential basis and I know it’s largely driven by the specialty and direct sourcing efforts. But it looked like there was a pretty sizeable step down consequentially.

Maybe the full numbers haven’t been given I don’t think in terms of the segment by segment gross margins, but how do we think about that in the world of SG&A and kind of maybe that reversing course later this year, or any thoughts on the components of margins in both segments? Thanks..

Yeah, that’s a great question. Thanks Nick.

In terms of gross margins, what I would share with you is that the gross margins in supply chain services segments are continuing to do exactly what we would expect, which is as we grow our product revenue businesses, we will -- as we strategically diversified our business, we are going to see the gross margins come down there.

We’ve been transparent and continued to reinforce that message to the investor community. What I will say in performance services in the first quarters is that we did see a dip down in the gross margins for the quarter really tied to the variability comment that I made about revenue recognition on some of our advisory services engagements.

While you’ll see that will have come down into kind of the mid-40s for the first quarter, what I would tell you is that our expectations for the year is that that gross margin percentage should be back up at around the 50% level, which is where we’ve traditionally operated and would expect to see that happen.

It really is a result of the timing of the revenue, whereas the contributors to the actual cost are amortization on the software products which you can argue were somewhat fixed as well as the labor resources that we have in place where that’s really a timing function..

Your next question comes from the line of Mohan Naidu..

Thanks for taking my questions. Susan, Mike I guess, question on the PremierConnect platform, the data warehousing you guys are doing. Are you guys seeing any strength in any particular vendors from an EHR perspective? Some vendors seem to have better solutions than others, I just want to see if you guys are seeing any particular strength.

And a follow is on the ambulatory data acquisition product Mike talked about.

Is the goal to get all the data back into this warehouse platform or it’s a totally different project?.

Let me just take the competition first and I’ll pass it back to Susan. From a competitive standpoint, obviously you are seeing a lot of entrants into the market. It is sort of a free for all, I think the players that are winning now are the ones that are able to show some form of an ROI.

And I think our solutions lend themselves very well when you wrap them around some of the services from our collaboratives as well as our advisory services to drive that ROI. We do think that it will continue to play out over the next six to eight months in a way that we’ll see additional players.

But again, you’re going to have to be in the market to take all that data and turn it into information and turn it into actionable intelligence and really to be able to drive ROI to show the real benefit of those investments..

And the answer to your second question is yes, we do want to have that ambulatory data connected to all of the acute and outpatient data that we have. It’s why we are so excited about the one we told you about that was connecting 20 unaffiliated clinics. This is not the technology play for us though.

This is technology plus all of the service wraparounds and efficiencies that go with it, but yes to your second question too..

This is Christina. Susan DeVore, please go through with your closing remarks..

I was going to do your job for you, Christina. I’m sorry about that. Thanks everybody for your interest in Premier and just a few final thoughts. I know we are running a little bit over. First, we believe we are off to a terrific start in fiscal 2015. Our financial results were strong.

We continue to win new business, expand relationships, executing on our capital deployment strategy.

We are well positioned to continue working with our member health systems from the inside, transforming healthcare tomorrow, while addressing the pressing issues that they face right now and achieving a successful future is an opportunity for all of us.

My management team and the employees of Premier also believe and I think that really is one of the true drivers of our ultimate success.

We believe that our mission to improve the health of our community is not so much an opportunity but a real responsibility, a responsibility based on what we believe is our unique and unmatched ability to make a difference. Thanks for spending time with us today and we look forward to talking to you again soon.

Operator, can you please close the call?.

Yes. Thank you and the conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..