Good day, ladies and gentlemen, and welcome to Premier's Fiscal Year 2019 Second Quarter Results and Conference Call. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Jim Storey with Investor Relations. Sir, you may begin..

Thank you, Shannon, and welcome everyone to Premier, Inc.'s fiscal 2019 second 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 performance, provide an operations update and discuss our outlook for the remainder of the year.

Before we get started, I want to remind everyone that copies of our earnings release and the supplemental slides accompanying this conference call are available in the Investor Relations section of our website at investors.premierinc.com.

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

Factors that might affect future results are discussed in our filings with the SEC, including our fiscal 2018 Form 10-K and fiscal 2019 Quarterly Report on Form 10-Q, which we expect to file soon. 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 to evaluate our business.

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 earnings release Form 8-K, which we expect to furnish to the SEC soon. Now let me turn the call over to Susan DeVore..

Thanks, Jim, and thanks, everyone for joining us this morning. I'll start with an overview of our second quarter performance and a look ahead to the rest of the year. Mike will provide an operational update and Craig will walk through the quarter's financials in more detail. And then we'll open the call to questions.

I'm pleased to report another successful quarter as Premier continued to deliver steady revenue and earnings growth across our reporting segments and for the Company as a whole.

Specifically, we produced $421.9 million in consolidated net revenue, $142 million in consolidated non-GAAP adjusted EBITDA and non-GAAP adjusted fully distributed earnings per share totaling $0.66. Additionally, year-over-year non-GAAP free cash flow for the quarter increased 29% to $114.8 million.

And we continue to deploy capital to invest in the future growth of the business as well as return value to stockholders through our ongoing share repurchase program. Operationally, our businesses are performing well and we continue to build and expand relationships with our healthcare provider members.

We remained steadfastly focused on fully integrating and broadening our capabilities to further strengthen Premier as an enterprise-wide innovator and disruptor in Supply Chain Services, Analytics and Performance improvement.

And we believe this ongoing strategy will generate significant value for our members as well as long-term growth for our Company and our stockholders. Based on the first half performance, our business outlook and financial expectations for the rest of the year remained consistent with the guidance ranges that we discussed last quarter.

As such, we are reiterating these guidance ranges and their underlying assumptions today. Craig will discuss additional details when he reviews guidance.

Looking at our results from an operational perspective, we drove steady growth in our group purchasing business during the quarter, supported by a continuing stable patient utilization environment and ongoing contract penetration among existing and new members.

In our Performance Services segment, we also continued to make solid progress in driving our innovative solutions, cultivating new engagement, and working with our members to achieve real performance improvements.

Our integrated consulting and technology teams managed significant member engagements in the areas of total cost management, enterprise performance improvement, and physician alignment. Our Applied Sciences business also generated strong revenue growth during the quarter. Mike will expand on some of these achievements.

On a broader front, we further advanced our efforts to leverage Premier’s unique assets in the development of a high-value care network to enable providers to engage directly with employers to improve clinical outcomes and reduce overall total cost of care.

Although still currently in its early stages, we believe this represents an exciting opportunity to be accompanied by new revenue and growth potential in the future. Looking forward, we remain a leader across our current businesses and are developing our longer-term vision based on six major emerging and evolving healthcare trends.

First is the acceleration in the shift to value-based care delivery and risk-based payment models. Second, we continue to see increased physician participation in and alignment with these alternative payment programs. Third is the growing trend of employers contracting directly with providers accompanied by active consumer engagement.

Fourth is the continuing proposals for drug pricing and pharmaceutical market reform. Fifth is the gaining momentum around turning data into actionable insights at the point of care.

And sixth, industry consolidation continues and represents an opportunity for us to leverage our platforms for enterprise supply chain, enterprise analytics and performance improvement.

These are significant trends that will greatly influence the future of healthcare delivery in America, and we believe Premier remains at the forefront in addressing them. A critical component of these trends is rapidly evolving healthcare technology, the great enabler of dynamic change in our industry.

At Premier, data analytics is the fuel that drives our abilities to address the trends that I've just described. I also believe that our vast data driven capabilities which we've developed, expanded and cultivated over decades uniquely differentiate Premier in the marketplace.

In fact, at HIMS this year, I'll have the opportunity as a keynote speaker to highlight Premier’s vision for a smarter, more responsive healthcare system, one that's consumer-centric and provider led, one where data must flow seamlessly, be analyzed effectively and be leveraged to guide the caregiver in real time at the point of care.

Our vision represents a big step forward from the current environment where constant uncurated data flow is fueling fragmented care, duplication, quality gaps, and clinician burnout.

At Premier, we are collaborating with healthcare providers and we are leveraging our data and our assets, now including Stanson to address these significant provider care issues. In the meantime, the speed at which some of these trends drive urgency in the current environment is being influenced by the political and regulatory climate in Washington.

While the political environment is as uncertain as ever, the regulatory front seems to have cleared somewhat in recent months. We believe this bodes well for the nation's ongoing move to lowering costs, improving quality, and shifting to value-based care delivery and payment models over the next few years.

So to sum up, Premier delivered consistent growth in the second quarter financially, operationally, and strategically. We expanded our partnership with healthcare providers to address their evolving cost, quality and safety challenges, and to enable future success in a value-based data insights driven healthcare environment.

Longer-term, we remain focused on building out our end-to-end supply chain strategy as well as our enterprise analytics and performance improvement strategy and we are pursuing key capabilities necessary to execute both. Thanks so much, and now here is Mike Alkire, our Chief Operating Officer..

Thank you, Susan, and thanks, everyone for joining our call. Today in reviewing our operational performance, I'll provide an update on the integration of Stanson Health as well as our ongoing strategy to further address the nation's generic drug shortage challenge.

I'll also highlight some of our strategic initiatives and applied sciences and review some notable business development achievements. As discussed last quarter, Stanson is a highly strategic acquisition.

It includes intelligent clinical decision support technology that will enable evidence-based content, along with our data and analytics to be channeled directly into the physician workflow. We expect this to further enable healthcare providers to reduce unjustified variation in care delivery and cost.

In fact, a study published last August in the American Journal of Managed Care found that patients or physicians who did not follow the Stanson EHR notifications, compared with those who did experience the 29% increase in complications and a 6% increase in length-of-stay.

Additionally, the same study revealed that patient or physicians not following the Stanson notifications experienced the 7% increase in cost of care or nearly $1,000 per patient, compared to the physicians who followed the notifications.

To provide an update, we are integrating the Stanson’s team and technologies with our other clinical analytics and performance improvement solutions and the process is going well.

We're also making good progress and combining our sales and marketing functions and I am happy to report that Stanson generated strong sales bookings during the second quarter.

In addition, we are driving potential revenue synergies from cross-selling as well as the integration of Stanson’s proficiency into Premier’s existing and planned clinical offerings.

We’re also furthering development of our unique solution initiated by Stanson, in partnership with a large payer for automated prior authorization covering both medical and pharmacy benefits.

Once completed, this solution is expected to automate an expedite prior authorization tasks, saving providers the time and expense of securing these approvals, enhancing physician and patient convenience, and providing Premier with incremental growth opportunities. So we remain very excited about the opportunity and potential represented by Stanson.

This is a valuable component as we continue to build out our longer-term enterprise analytics and performance improvement strategies. Stanson also represents a key enabler for the high value provider network strategy as Susan mentioned earlier.

Turning to the generic drug shortage, we believe Premier is ahead of all others in the market and developing and achieving comprehensive solutions to ensure health systems and patients have continuous and affordable access to shortage medications.

While members of other GPO struggled to get access to shortage drugs, Premier has been able to ensure uninterrupted access to 92 shortage products. Our ongoing strategy is built on a six-year legacy of deep manufacturer relationships and the direct sourcing experience in this area.

In addition, our new generic sourcing subsidiary ProvideGx extends and expands this ongoing effort by working with manufacturers to supply shortage products, and by securing contracts for active pharmaceutical ingredients to ensure consistent supply.

ProvideGx is currently focused on ensuring uninterrupted access to 60 additional critical sterile injectable products, targeting drugs inactive shortage, as well as those that may be vulnerable to shortage in the future.

Just last week, we secured a contract with Baxter Healthcare Corporation to manufacture metoprolol injection and emergency blood pressure drug that has been subject to shortages since 2016. We also continue to enhance our Applied Sciences’ research business with new Subject Matter Expertise, Partnerships, data and proficiencies.

These growing business partnerships with industry leaders to develop, test, research, and teach care delivery practices, and real-world interventions for healthcare improvement.

With the recent enhancements to this offering, Premier clinicians can now leverage new data and analytics abilities to conduct research that tracks the total patient journey, identifies patients with pre-existing conditions or diagnoses outside of the acute-care setting, and traces pre- and post-hospital patient encounters, such as medication fills, adherence and primary care visits.

Our partners on these types of projects include Amgen, Janssen and Merck. As Susan mentioned earlier, healthcare provider consolidation as a trend that continues to prevail in the market and I am pleased to report that we are experiencing good success retaining and recruiting members as a result of consolidation.

We have just renewed and expanded our information technology partnership with the recently merged Bon Secours and Mercy Health, one of the country's largest Catholic health systems to continue to access a range of our Performance Services solutions.

This agreement expands their use of Premier's enterprise, data warehouse and analytics platform, designed to help improve quality and efficiency and lower costs for the nations largest U.S. health systems.

The solution leverages our control power strategy, which includes a dedicated team of subject matter experts and our newly acquired Stanson Clinical Decision Support analytics to embed inside EHR workflow. And we're in the process of finalizing an expansive agreement with Advocate Health, Aurora Health.

The nation's 10th largest not for profit integrated health system. Advocate and Aurora has chosen Premier as a strategic partner to provide a customized suite of enterprise-wide its supply chain and performance improvement services.

This includes group purchasing services as well as clinical, financial, and operational intelligence and performance improvement enabling analytics.

The relationship also includes participation in our bundled payment and population health collaboratives, which enable the sharing of insights and best practices as well as provide access to sophisticated clients data and analytics that are needed for successful high value networks and risk-based payment models.

So in conclusion, we remain very excited with the future opportunities presented by our new and evolving resources. We intend to continue to refine these skills to help provide incremental value for our member healthcare providers and deliver long-term growth and value for our stockholders.

Looking forward, our plan remains to organically reinvest in our existing businesses, innovate and co-develop new solutions with our member healthcare providers and evaluate strategic partnerships and acquisitions that align with our long-term strategy. Thank you for your time today.

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

Thanks, Mike. Before we walk through the results, I want to remind everyone, the beginning in fiscal 2019 we adopted the new revenue recognition standard ASC 606 using the modified retrospective approach, which means we did not restate prior year results under the new standard.

As a result, we are comparing our fiscal 2019, three and six-month results using the new standard to prior year results under the previous revenue recognition standard. As Susan noted, we perform well in the second quarter, demonstrating consistent growth across our business segments and for the Company as a whole.

Now, let's walk through the quarter’s performance in more detail. From a GAAP standpoint, consolidated second quarter net revenue of $421.9 million increased $10.5 million from $411.4 million a year-ago. Supply Chain Services net revenue of $327 million compared to $324.9 million from the same period a year ago.

Net administrative fees revenue of $165.7 million increased $6.4 or 4% from the same period a year-ago, primarily driven by further contract penetration of existing members and to a lesser degree, the impact of conversion of new members. Within supply chain services products revenue of $157.5 million decreased from $162.1 million a year ago.

Growth in oncology and respiratory related revenue in our Integrated Pharmacy business was primarily offset by the impact of gross to net revenue recognition changes associated with the adoption of ASC 606 and to a lesser extent by reimbursement compression in specialty pharmacy.

Turning to Performance Services, second quarter revenue of $94.9 million increased from $86.5 million the same period a year ago. We experienced growth in our applied sciences and analytics services as well as in cost management consulting services.

Under the new accounting standard, consulting services revenue is now recognized proportionally to when services are provided, and we generally no longer have to defer revenue recognition until certain performance conditions are met. Looking at profitability, GAAP net income increased to $104.8 million for the quarter from $19.8 million a year ago.

Year ago net income was impacted by a decrease in the effective tax rate due to federal tax reform, resulting in a measurement of tax receivable agreement liabilities totaling $177.2 million, offset by an increase in tax expense of $231.5 million attributable to the remeasurement of deferred tax balances.

This resulted in an income tax expense of $231.5 million for the year ago quarter, compared with $1.8 million in the current quarter.

After a GAAP required non-cash positive adjustment of $651.7 million to reflect the decrease in the redemption value of limited partners Class B common unit ownership, based largely on our stock price change between periods, we reported GAAP net income of $0.69 per share.

Consolidated non-GAAP adjusted EBITDA of $142 million for the quarter increased 6% from $133.5 million for the same period a year ago. From a segment perspective, Supply Chain Services non-GAAP adjusted EBITDA of $134.1 million increased $2.1 million from a year ago.

Growth in net administrative fees revenue and decreased selling, general and administrative expenses were partially offset by reimbursement compression in specialty pharmacy and by some increased product-related costs in direct sourcing.

In Performance Services, non-GAAP adjusted EBITDA of $37.1 million increased $9.2 million from the same period a year ago. The increase was primarily the result of higher revenue as well as a reduction in expenses.

Under the new accounting standard, revenue is now recognized proportionally to when services are provided, and commission and implementation costs are capitalized and recognized over the life of the project.

Second quarter non-GAAP adjusted fully distributed net income of $88.4 million increased $18.4 million or 26% from the same period a year ago, representing non-GAAP adjusted fully distributed earnings per share of $0.66 compared with $0.50 a year ago.

The increase is attributable to adjusted EBITDA growth and the lower tax rate resulting from tax reform. From a liquidity and balance sheet perspective, cash flow from operations for the six-month period was $212.3 million compared with $206.5 million last year.

The increase was primarily driven by increased net administrative fess and other services and support revenue and decreased selling, general and administrative expenses partially offset by increased working capital needs.

Non-GAAP free cash flow for the six-month period totaled $116.6 million or approximately 42% of non-GAAP adjusted EBITDA compared with $122.2 million for the same period a year ago.

A $5.8 million year-over-year increase in cash provided by operating activities and decreased distributions to limited partners were offset by the $18 million tax receivable agreement payment to member owners in the first quarter of fiscal 2019.

As previously noted, the timing of this annual tax receivable agreement payment shifted to July this year from June in prior years as a result of the change in the company's federal tax filing deadline. Other factors impacting free cash flow included growth in our internally developed software initiatives.

For the full fiscal year, we expect that non-GAAP free cash flow will exceed 50% of our non-GAAP adjusted EBITDA.

Our cash and cash equivalents totaled $110.6 million at December 31, 2018, compared with $152.4 million at June 30, 2018, and we ended the quarter with an outstanding balance of $100 million on our five-year $1 billion revolving credit facility.

Regarding our ongoing $250 million share repurchase program through the close of trading on December 31, 2018, we had repurchased approximately 2.9 million shares for $109.5 million, averaging $38.13 per share. This added approximately $0.01 to diluted per share results for the six-month period. Now let's turn in more detail to our guidance.

Based upon first half performance and our current outlook for the remainder of the year, we are reaffirming our full-year fiscal 2019 financial guidance ranges and their underlying key assumptions that we adjusted for the impact of ASC 606 on our first quarter conference call November 6.

The only assumption that is changed relates to stock-based compensation expense, which we now project at $29 million to $31 million. As a reminder, we are no longer providing or updating guidance under the previous revenue standard.

We do expect the back half of the fiscal year to reflect tougher year-over-year profitability comparisons relative to the first half.

This is largely due to the timing related impact of revenue recognition under the new revenue standard and to a lesser extent to planned incremental investments in future growth opportunities as well as the impact of reimbursement compression and competitive price pressure on gross margins in the products business.

As a result, we currently anticipate that non-GAAP adjusted EBITDA and non-GAAP adjusted fully distributed earnings per share may be below the midpoint of their respective full-year guidance ranges. Finally, I would like to provide a brief update on our ongoing quarterly exchange process.

Regarding the exchange, as we already disclosed, approximately $3.7 million Class B units were exchanged on a one-for-one basis for shares of Class A common stock on January 31. Our next quarterly exchange will occur on April 30. With that, let me turn the call back over to Susan..

So let me close our prepared remarks with a few final thoughts. We've shared with you today our analysis of the past quarter as well as our view of the future. To sum it all up, Premier is progressing steadily through the current fiscal year, delivering on the financial and operational objectives that we initially shared with you last August.

We are moving forward confident that our Company is well positioned in the marketplace as a long-term industry leader. All of us at Premier come to work excited each day about the impact that we can have in helping lead the transformation of healthcare delivery across our country.

We do this by collaborating with our member health systems to better manage costs and improve quality, while at the same time building out our end-to-end supply chain services and enterprise analytics and performance improvement strategies.

We are committed long-term to building and acquiring and continuing to do that, the abilities that we need to continue to deliver on these unique solutions and we will always strive to create lasting value for our members and for our stockholders. Thank you for your time today. Operator, please open the call for questions..

Thank you. [Operator Instructions] Our first question comes from Michael Cherny with Bank of America Merrill Lynch. Your line is open..

Good morning, and thanks for all the color so far. Craig, I want to just tie it back on that last comment you made at the end about where you see yourself shaking out relative to the midpoint of guidance.

What's changed in your business or I guess, what are some of the data points you've seen that would potentially lead in the event you do come below the midpoint of guidance across the various different segments versus how you performed so far in the first half of the year?.

Sure. Thanks, Michael. So I think a couple of comments or additional color I would provide with respect to guidance for the full-year and specifically the third and fourth quarter. Again, we are reiterating the full guidance ranges, but do anticipate we may perform below the midpoint on adjusted EBITDA and adjusted fully distributed earnings per share.

From a quarterly cadence perspective, in Supply Chain Services, we expect third quarter net administrative fees revenue to grow low-to-mid single-digits and third quarter products revenue to reflect low single-digit growth relative to year ago results under the previous revenue standard.

As previously discussed, we expect fourth quarter net administrative fees revenue growth will be lower due to a high prior year comparable as a result of the acceleration of cash in the prior year fourth quarter in anticipation of adoption of the new revenue standard.

Overall, we continue to expect to achieve the previously discussed assumptions for full-year Supply Chain Services revenue of low-to-mid single-digit growth for net administrative fees revenue.

And for product revenue, we would continue to expect 0% to 4% growth after the adjustment for gross to net revenue recognition impacted our original growth range of 7% to 11%.

If we turn to revenue on the Performance Services side, year-over-year revenue comparisons will be more challenging in the second half of the year as a result of two factors related to the adoption of ASC 606.

First is the acceleration of revenue recognition under the new standard that has resulted in the ability to recognize some additional revenue in the first half of the year. Second is the previously discussed impact of license revenue that was pulled onto the balance sheet as of July 1, 2018 as a result of the adoption of ASC 606.

Those two factors will make year-over-year comparisons more challenging in the third and fourth quarter, particularly in the fourth quarter as a result of some revenue recognition on performance-based engagements under the previous revenue standard last year.

We had previously estimated that fiscal 2019 Performance Services revenue would be recognized approximately 47% in the first half and 53% in the second half of the year, but we now expect that to be more equally weighted given some acceleration of revenue into the second quarter.

From a profitability standpoint, we currently expect to achieve, as I said, our initially established range, although, may perform below that midpoint, and in the second half of the year, we may experience challenging year-over-year comparisons in third and fourth quarter non-GAAP adjusted EBITDA and adjusted fully distributed earnings per share, particularly in the fourth quarter as a result of the revenue recognition considerations that I just highlighted following the adoption of 606.

In addition, we do have some planned investments that we are making for the integration of Stanson, the ongoing development of our high-value network, and to address the drug-shortage initiative through ProvideGX that we are absorbing into the overall business..

Okay. That's very helpful in terms of thinking about the moving pieces. And then just one quick follow-up on ProvideGX.

As you think about the financial impact, do you have, or I guess, I'm sure you do, but anything you can talk about in terms of how big this could be as a total piece of your company over time? Is there a vision for where you want this to go from a revenue perspective other than obviously the value-added perspective that you have for your clients with these drug shortages?.

Yes. This is Mike Alkire. It is a very strategic play. So for us, it's really about creating a healthy supply market.

So we think that the opportunity from a competition standpoint is about us having those drugs and allowing us to win more group purchasing sort of opportunities or to win maybe bringing in our entire pharmacy portfolio into an account that we don't currently have today.

So it's truly more of a differentiation strategy that allows our core business to grow..

Great. Thanks..

And from an investment perspective, Michael, we wouldn't expect really substantial and significant investments today. There will be nominal places where we will make incremental investment to ensure that adequate supply will be available, but it's not a big play in terms of huge amounts of capital deployment to this initiative..

Thank you. Our next question comes from Sean Dodge with Jefferies. Your line is open..

Good morning. Thanks. Maybe going back to the revenue cadence and Performance Services, just for a moment. As we head into the third quarter that's historically been seasonally one of the stronger ones for you.

It sounds like, Craig, you're saying that there were some items you were expecting to recognize in the third quarter that were maybe pulled forward into the second.

Even though we see the seasonal tick-up in the ambulatory reporting business sequentially is not going to be much revenue progression, am I following right?.

Yes. Sequentially, I would still anticipate that you will see the high watermark be the third quarter, which is traditionally presented itself, but maybe not as high as it would have been and we not accelerated a couple of revenue recognition components into the second quarter..

Okay. Very good. And then in the products business, you mentioned some headwind from reimbursement compression in the integrated pharmacy business.

Can you give just a bit more color on that? Maybe some bookends around how big the headwind has been and what's behind that?.

Sure. This is Craig. So consistent with the industry, we are continuing to see some pressure from payers around DIR fees which have been growing.

They're still not material to our overall adjusted EBITDA as a business, but they have been a headwind to the specialty pharmacy itself from a standpoint of what we're doing to try and address that reimbursement compression that we saw.

We are continuing to focus on delivering the exceptional clinical care and service that we provide today, delivering higher medical adherence ratios than others in the marketplace, and that's positioning us to perform relatively well on performance-based DIR contracts that are out there.

We are working to expand our higher margin services and revenue streams, including expanding relationships with key manufacturers to provide additional value added services to deliver margin and we're looking to improve our purchasing economics for targeted high volume drugs it was certain manufacturers.

And so those are the efforts that we're putting in place to try and remedy, the pressure that we've been seeing, but its consistent pressure, Sean, that we're seeing across the industry relative to the expansion of DIR fees..

Okay. Very helpful. Thank you..

Thank you. Our next question comes from Ryan Daniels with William Blair. Your line is open..

Yes. Thanks for the color and for taking the question.

Susan, one for you and your comments, you talked about the political environment remaining uncertain, but the regulatory environment being favorable? Can you speak a little bit more detail to what that means? Is it relates to maybe Medicare ACOs, I know they are winding down the next gen and moving to pathways to success that's still outstanding.

Is that that noise causing any consternation in your client base or is it still kind of all systems go towards more value based care?.

Yes. Our perspective is that even with the political uncertainty, the regulatory bodies are putting out new proposals, new programs. So the ACO rules came out actually moving providers to double sided risk in a more accelerated fashion.

We think that creates opportunity for more infrastructure needs; if you will as these health systems, accept more risk. They're moving forward with the bundled payment program and we've had a pretty good growth in our bundled payment collaborative.

They're putting out proposals and we expect additional proposals around interoperability in IT and so from a regulatory perspective, we see all of the discussion and verbal communication is about how do we get to value based care programs faster and how do we shift risk to providers and we think beyond even the regulatory environment, the commercial payers and employers are also speaking that way and talking about moving to these alternative payment programs.

So we continue to believe it's both a short-term, mid-term and long-term, opportunity for us as we provide the infrastructure to help health systems, adopt these new payment models and delivery models..

Okay. Very helpful.

And then as my follow-up, it seems like both in the press release and then in your comments, you mentioned the admin fee growth being driven more by complaints at this point versus a new wins and rolling on new GPO contracts? Can you speak to the competitive environment? I know it's probably settled down a little bit, but kind of what have your, what have you seen of late, what's the vision for the next 12 to 18 months on the GPO for in particular? Thanks..

Yes. So we do continue to have a recruiting pipeline and so it feels a little bit more like a – a more normalized sales opportunity. We've been a market taker for the last several years, five years, six years and the pipeline of continues to be good. The announcement of Advocate and Aurora was a big one for us.

Because Advocate was not historically doing any business with Premier and so that merger and that customer coming to us we think is a good thing and maybe indicative of the broad-based platform capabilities we have across supply chain and performance services.

So we continue to have some academic pipeline, we have some pipeline from our competitors and we think we will continue to be a market taker, although it feels like a more normalized level..

Okay, great. Thank you for the color..

Thanks..

Thank you. Our next question comes from Eric Coldwell with Baird. Your line is open..

Thanks. Good morning. Specialty pharmacy sort of been a challenge for you guys, since you bought it, first it was the optics on margin than it was operational issues and now it's arguably three years of DIR fee increases. The business was barely profitable in the beginning.

So I'm curious, one is profitable now and two does it makes sense to be in this business? I don't think it does, but I'd love to your views..

Sure. Thanks Eric. So I'll start and then Susan can add some color.

From a profitability standpoint we do still anticipate on a full-year basis that specialty pharmacy is a profitable venture, albeit it is at a lower level of profit as we've always discussed, given the – obviously high acquisition costs of it running through the P&L, but do anticipate that it is still profitable on a full-year basis..

Yes, and from our perspective, Eric, our pharmacy strategy, we think we have the assets we need. So we're not planning on future acquisitions in that area. I think that it is part of the broader cost improvement, quality improvement, outcomes improvement that we're focused on.

And so we have – our core GPO business, our Performance Services business, doing very well. We know these are low margin businesses, but it's an integrated capability that helps healthcare system solve their cost quality and population health challenges.

And so we're always thinking through all the aspects of our business and what is the best way to go-to-market and will continue to do that. But we view the business long-term in an integrated way..

Thank you. Our next question comes from Jamie Stockton with Wells Fargo. Your line is open..

Thanks for taking my questions. Good morning. I guess maybe a first of all, the Performance Services performance in the quarter, is it fair for us to say, hey, it was very strong and mostly just hang that on consulting, and the notion that it was a very strong quarter for consulting..

I think it was really both parts of the business, Jamie. I think we had a very solid technology related quarter, but yes, we did have benefit from strong consulting in the second quarter as well..

Yes, we actually felt good about Technology, Applied Sciences and Consulting, so it was just a good quarter for Performance Services..

Okay, that's great. And then maybe just one more on Performance Services, given the way the quarters are going to flow this year, the growth rates a little all over the Board.

And so I think it would be helpful if you had any commentary about what level of growth that you are trying to manage this business to achieve, maybe over the next few years that would be great?.

Sure. This is Craig. I'll start. So obviously from a standpoint of growth this year, again prior to the adoption of 606 in the current uncertain political and regulatory environment, we had set a guidance range of 1% to 5% for this year.

We did have the changes associated with 606 or Performance Services, which lower that percentage growth given we had to pull some of that license revenue onto the balance sheet as a result of the adoption. And again, as a reminder, the majority of that impacts hitting us in the back half of the year.

So it is more of a low to mid single-digit growth business in the current environment. Our longer-term perspective is clearly and will continue to be to get back to a mid to high single-digit organic growth business from a Performance Services standpoint.

And then obviously we'll look and hopefully be in a position to deploy capital to deliver incremental growth above that..

Okay, thank you..

Thank you. Our next question comes from David Larsen with Leerink. Your line is open..

Hi, just maybe get a little more clarity on the Performance Services.

Did you have any ACO type of engagements in the quarter, where docs are preparing – some more downside risk and you were able to deploy some of your solutions to help manage that? Can you give any more color? Like what exactly is Applied Sciences and then do you expect a pretty significant, sequential declined from 3Q to 4Q in Performance Services revenue? Thanks..

So I'll start and then Craig or Mike can add in. From a ACO perspective and from a Applied Sciences perspective, those are sort of two different things.

The ACO bundled payment is really all of the consulting work and technology measurement, work that we do with all of the participants in our ACO network collaborative and also our bundled payment collaborative. So those continue to experience growth as I mentioned earlier.

On the Applied Sciences that's effectively taking the data assets we have and working with pharma companies around improvements and research around interventions that that they're interested in that also experienced growth in the quarter. I don't know, Craig, if you want to give some insight into the revenue back half..

Sure. What I would indicate from a cadence perspective, third, fourth quarter, we actually typically do see sequential decline from third quarter to fourth quarter given that the third quarter has traditionally been the higher watermark as a result of the ambulatory regulatory reporting that does occur in that third quarter.

So generally would expect, we may see a bit of a sequential decline. The only thing I would caveat is that, we do have the potential for a little bit of variability across the quarters depending if we have revenue recognition between third and fourth quarters in a similar fashion that we had a little bit.

We’re fortunate to pull into the second quarter that just closed December 31. But broadly I would tell you right now, our perspective would be, you should expect to see a sequential decline in Q4..

Thanks Craig.

And any more color on the incremental investments that will be required in the back half of the year?.

Sure. So the big three initiatives that we have – obviously, we acquired Stanson in November, so we are in the process of integrating that business and we’ll continue to make investments to do that.

Obviously, it was an entrepreneurial more startup type company, so not a tremendous amount of profitability, actually an investment that we're making in that business to get it integrated and up and running to strategically differentiate ourselves long-term as Mike articulated.

We aren't talking about multimillion dollars of investment, but there is investment of dollars that needs to take place to make that work with the rest of our clinical analytics capabilities.

The high value network, I can let Mike provide some additional color strategically and operationally, but we'll continue to – we've hired some individuals to lead that initiative for us already and we will be continuing to look for some additional resources to really drive that opportunity for us to actually connect large employers directly with our healthcare systems to provide high-quality care and eliminate unjustified variation in the care of certain procedures that we're piloting.

And then when you move to the ProvideGX, as I mentioned earlier, while not a tremendous amount of substantial investment, we will look for opportunities where if we can deploy and make an investment to ensure that adequate drug supply will be available for shortage drugs that could be helping to fund the development of an ANDA in order to get approval to manufacture that drug, et cetera.

We would make those investments and then the revenue that we would get from a future GPO agreement or something of that nature would come downstream. So it is a situation of making some investment upfront. Mike, I don’t know if there is anything you would add..

You've covered it..

Thank you. Our next question comes from Steve Valiquette with Barclays. Your line is open..

Hi. This is Chun-Wai Yong for Steve.

Just back on Performance Services, can you size how much of the pull forward was from 3Q into 2Q?.

Yes, just a few million dollars..

Okay, thanks.

And then back on the products business, the DIR fees, is it more of a performance-related issue related to your specialty pharmacy? Or is it more just increasing prevalence of DIR contracts that are kind of pressuring the business?.

Yes. It's definitely an industry phenomenon across the industry for all specialty pharmacies. It's not specific to our specialty pharmacy.

We actually historically and believe we will continue, have actually relatively done very well on a DIR fee basis given that we do have an ability to evidence higher care coordination, higher medical adherence, which relatively makes us perform well vis-à-vis other specialty pharmacy..

Okay. That’s it. Thanks..

Thank you. Our next question comes from Anne Samuel with JPMorgan. Your line is open..

Hi. Thanks very much.

Can you speak about the hospital utilization trend? And then what sort of utilization expectation you have backed into your current guidance?.

Sure. This is Craig. So from a utilization perspective, we continue to see in our data and we do continue to mind our clinical analytics data to look at utilization trends.

We continue to see kind of slightly flat – relatively flat, slightly declining inpatient utilization, overall flat outpatient utilization and continuing growth in the non-acute utilization space.

As we continue to talk about the past couple of quarters, effectively normalized over the past year, and from a guidance perspective that is what's in our kind of midpoint low-to-mid single-digit growth net administrative fee revenue guidance.

So to the extent that we do see utilization pickups that can cause us to perform on the higher end of that performance range, obviously the impact on utilization does vary across geographic markets based on factors such as Medicaid expansion and things of that nature.

So oftentimes the for-profits given where they may be working you'll hear it public indications about volumes, but overall consistently kind of the trends that we're seeing or what we're seeing broadly across our membership base..

Great. Thanks.

And then just one more going back to some of the acceleration that you've seen on the value based care side? How do we think about the timing of how quickly those initiatives out of Washington flow through to your P&L and maybe what kind of benefit you're seeing at the moment?.

I think for us, because we have had those collaboratives in place, it just accelerates the growth rate in some of those existing collaboratives and brings additional customers and I think it plays out, over time. It doesn't play out immediately. It plays out as they apply for those programs.

They come into the collaborative, they begin to use the technology, and they began to use consulting and the ones who are there continued to use it.

And so we like to see the flow of multiple programs, bundled payment programs, ACO programs, physician payment programs, and we think that they are accelerating through the innovation center and through CMS those programs. But it just picks up the growth rate in performance services..

Great. Thanks very much..

Thank you. Our next question comes from Mohan Naidu with Oppenheimer. Your line is open..

Thanks for taking my questions.

Susan, just following up on that prior question there from Anne, it feels like the hospitals need to make a significant investment in infrastructure and solutions to make this transition to this double sided risk, majority of the hospitals? What are you hearing from your clients are they're ready to do this investment and it feels again the timeframe seems pretty short in the next couple of years?.

Yes. So I think that for the most part, they see the writing on the wall, meaning that CMS Medicare Advantage, commercial insurers, employers are all moving to providers owning quality and safety risk and also owning total cost of care risk. The ACO new rules give two-year time window. And so it doesn't maybe for them feel urgent today.

I think they do think they have to build that infrastructure over time. And I think they need to be building it faster then maybe then they think they need to be building it.

But what I would say is that I think they mostly recognize that they are going to be moved to risk based models and they need data, they need technology, they needed in the workflow, hence our Stanson acquisition.

They need – they are all talking about significant cost takeout, because they know they’re revenues are going to be pressured and they're going to be holding that risk. And so we just think it all points to the right potential tailwinds for us. But it will play out over time..

Hey, Mohan, this is Mike. The only build on that, for Susan is that it follows any sort of maturity model for disruption in any industry.

So we're currently working with the 10% of the innovators right now is we're trialing through what that double sided risk looks like and the technology and the services that they're looking that they're going to need.

And obviously then there's that the big next layer of organizations that are falling those innovators and we're not quite there but we are building out the capabilities to support them once they determine that the double sided risk is in their best interest..

Thanks Mike.

Susan, maybe a quick one on Stanson, Craig, how much are you embedding in the current guidance from Stanson for the remaining second half of the year?.

Yes. Stanson was a very small company, so included within the existing guidance ranges, revenue is somewhere in the range of $3 million to $5 million. So not a material impact on the performance at all and actually not a significant impact on a profitability basis either..

Okay. Thank you very much for taking my questions..

Thank you. Our next question comes from Eric Percher with Nephron Research. Your line is open..

Thank you. Craig, a question for you, I think when you initially said we may be pointed toward the midpoint or below that is cause for concern and then as you went through that long list of items impacting you, it felt like most of those you've spoken to in the past and many are timing or related to the revenue recognition changes.

So when I look at your midpoint of $561 and the EBITDA line versus $572.

My question is, does that feel – does it feel like the core operations are fundamentally different recognizing some pressure and products and how much of what drives you to the midpoint versus high or low is investment driven versus operational?.

Sure. Eric, thank you for the question. So from a core operational perspective, the GPO performing right online with expectations, Performance Services, performing online with profitability expectations, we do have some challenges in the product revenues space, due to the integrated pharmacy headwinds I've already discussed.

And then some higher product costs in our direct sourcing business due to a couple of drivers. One, we have experienced a little bit higher warehousing in freight costs on inventory that we've had. We're addressing that as we move forward through some consolidation and efficiency of the way that we're managing, distribution through our warehousing.

We did have a little bit of a cleanup on some outstanding inventory related to some of the bulk buys that we had done in the past that was lower margin as we cleared that out, but that's behind us now. So we think that we'll see some improvement moving forward.

We did make a strategic change in the resources that we use around the globe to source product and so we had some incremental expense in the front half of the year to actually get those folks up and running that will deliver better acquisition of product costs moving forward.

And then we have seen a little bit of competitive price pressure in that marketplace as well. So that the products business, I would say operationally has not performed at the level we'd originally anticipated. But we have taken operational efforts and steps to actually remedy that as we move forward.

So that's what I would say relative to the core operations part of the business, and then when I think about the incremental investments that we're making, it's a multimillion but not $10 million investment of expense that we would be looking to make between now and the end of the year as we continue to get those new initiatives seated to deliver future growth..

It's very helpful. Thank you..

Thank you. Our next question comes from Stephanie Demko with Citi. Your line is open..

Hey guys. Thank you for taking my question. Now, Susan you talked a bit about actionable insights.

Can you tell me more about how this will shape the evolution via current analytics product, but started more as a benchmarking focus kind of solution?.

Yes. Thanks Stephanie. So as you know, we have several applications that deliver analytics around supply chain and labor productivity and clinical outcomes and total cost of care and population health. So we have all kinds of analytics with the acquisition of Stanson.

We have the ability to take those analytics as well as clinical content into the workflow.

And so our vision for this and why that that acquisition was so strategic for us is that we see that when a provider is sitting in front of a patient in near real time and they can get clinical evidence and they can also see if they're buying on or off formulary and they can see, whether they are clinical decisions and outcomes are outliers or better than, or worse than their peers.

We think that is a very differentiated set of technology and data analytics at the point of care that can really change the decisions and drive better outcomes and lower costs.

And so we view all of these technology assets and data assets as an integrated way of truly having a near real time control tower that allows providers to make better decisions. It also, we think will help health systems deal with a lot of provider burnout that they have posts, sort of EHR implementation.

And so this is very deliberate for us and its part of the longer-term control tower, enterprise analytics, because we just think all these fragmented point solutions that are retrospective and not predictive are not going to allow health systems to be able to assume the risks that they need to assume going forward..

Hey Stephanie. This is Mike. Just another build on that. So Stanson also provides us sort of the insights as to whether or not clinicians are actually following the care protocols.

So if you think about our healthcare systems that have ACOs that are taking two-sided risks, we did not have the ability to understand whether or not in near-term whether these protocols were being followed and Stanson provides a sort of audit functionality that's very unique in healthcare.

So we're looking forward to the point that especially for those entities that have the significant risk that some of these new models are coming out on..

Got it. That's very helpful.

So when looking at your kind of a prior analytics product that had more benchmarking, is that going to be more of replace as you expand the Stanson solution? Or do you still see value in that for your consultant products?.

We actually still see value in that because you could put that benchmarking in those comparisons right in the workflow. So Dr. [A can] – when he gets ready to order, those interventions you can see, wow, I ordered 10 times more of these than best practice or I don't order these when the clinical protocols would indicate that I should.

So we definitely continue to see that comparable information on a thousand healthcare systems across the country as being very useful in their decision making..

Thank you..

Thank you..

Our next question comes from Erin Wright with Credit Suisse. Your line is open..

Great. Thanks. Can you speak to where you stand in Performance Services and your relationships with pharma in applied science and research and how you would characterize this opportunity or any sort of size of the opportunity? And can you speak to some of the enhanced applied sciences offerings that where you are seeing traction? Thanks..

Sure. This is Mike. So first let me just start by saying over the last I'd say 18 months, we've totally sort of re-looked at the way that our commercial organization within applied sciences has been created. So we brought in some really, really strong talent from the industry really to help us with our strategy and our business development.

So we're really, really excited about the team that we've been able to build out. So that's number one. Number two, we do have these unique data assets and learning management systems, that pharma is very, very interested in figuring out ways to leverage.

So for us that intersection is how are we working with pharma to bring in lower-cost drugs, think of biosimilars and other products that really are going to move the mark in terms of how care is actually being provided, especially as our healthcare assistants are taking on more risks.

So there is this really nice intersection of opportunity working with pharma to bring down costs.

So what pharma is really interested in, obviously as they're thinking about deploying some of these lower cost pharmaceuticals, is they want to make sure that they're – in the real world are focused on the patients that are going to get the best clinical benefit and so we have some capabilities to a, help, figure out where to target some of those pharmaceuticals.

Once we understand where the positive clinical outcomes are occurring. We have the ability to sort of take that and standardize that and leverage our learning management system to broadly push that to the rest of our healthcare system. So we think we have some very, very unique capabilities that others don't have in the market..

Okay, great.

And then going back I guess to the integrated pharmacy and what is sort of the longer-term strategy, and I think you mentioned in a previous question kind of no incremental acquisitions anticipated in the segment, but would you say you are deemphasizing the business at all or can you just speak to your competitive positioning in the specialty offering? Thanks..

I do think with drug shortages, with drug pricing challenges and with pharma being an intervention that in a population health world can affect positively or negatively the overall total cost of care.

Our pharmacy GPO, our pharmacy analytics, our generic company subsidiary, all those things are important for healthcare systems to manage the total cost of care. I think we have – there are always options in terms of how you deliver that specialty pharmacy business to healthcare systems, some of them do it themselves, some of them do it through us.

And so we'll continue to really think through what are the best ways to solve the pharmacy challenges in the healthcare system. And so I would say we're focused on the generic shortage.

We're focused on competition to drive pricing, we're focused on the portfolio in the GPO and we need to make sure that our healthcare systems know how to get that specialty pharmacy delivered in the ambulatory setting. But there are a lot of ways to do that and we'll continue to think through all those ways of doing that..

Okay, great. Thank you..

Thank you. Our next question comes from John Ransom with Raymond James. Your line is open..

Hi, just kind of a simplistic question. There's – we've been hearing about value based care for almost a decade.

If you had swag at hospital has $100 of revenue, typical client of yours? How much of that revenue is really at risk today and how much do you think will be at risk three years to five years from now? And is it all going to be government led or you saying anything with some of the commercial payers?.

Yes. So our perspective of it is there's probably 10% to 15% that's really at risk today. It varies by market, so it's all over the map, but kind of on average we would say 10% to 15%.

We would say that CMS is actively pushing Medicare Advantage is actively pushing double sided risk, has basically come out publicly and said, if I'm at 20% today, I want to be at 50% in 2020 and I want to be at 100% in 2025.

Commercial insurers, we think always often follow what CMS is doing and we think the state level Medicaid programs are also moving to risk based programs. So I think we, we've been hearing about it for a while. We now have two different administrations who are focusing – who have focused on at the democrats and the republicans are now.

It doesn't change the ultimate problem which is lowering the cost and improving the outcomes and shifting the risk and we think that will play out between now in 2025 and it will be significantly more than 10% to 15% and large employers will get into the game as well.

But it's not something that happens overnight because it is truly a fundamental shift in the way the country pays for healthcare from a piecemeal, fragmented fee-for-service method to a total cost of care, value based, risk based method.

And so there will be a lot of permutations of this over time and what we keep saying to our health systems and what we keep doing internally is building the infrastructure in real time to manage costs, to manage infections, to manage quality, to measure clinical outcomes and to do that in an integrated way.

But to your point, this will continue to morph over time, but we do think that we're going to too much more significant levels of risk in the next three years to five years. .

Okay. My second question, thanks for that. That was a great answer.

My second question is just going back to your pharmacy? Can you describe when you have this thing fully operational? What is the approximate mix? Is this going to be mostly a generic sourcing pharmacy or is it going to be a mix of generics and high cost branded specialty? Where do you see migrating that over time as you build out some of the things you discussed?.

Yes. So for this subsidiary company, it truly is focused on drugs that are in short supply. So today we think that there's probably a 130 drugs that are in that short supply and it's so the focus really is how do we close that gap. Because of costs or healthcare systems hundreds of millions of dollars to actually work around these drug shortages.

So I think that's number one. But I think Susan said earlier and I said earlier, I think the big differentiation of this program, for us. It's really all about supporting the base GPO. And it's to create differentiation within our program, because we'll have access to these drugs that our health care systems.

So desperately need and because of all the work that actually quite frankly we've been doing for the last five years or six years. We have created differentiation and that has gone into some of the reasons that we've been winning market share over time.

So we're looking just to continue to evolve that strategy and really use it as that sort of adjacency to helping us could create increased market share..

Yes. Just to clarify, it's not the specialty pharmacy, integrated pharmacy. It is generic drugs in the hospital and health system setting through the GPO that we're just trying to get more suppliers, more drugs on contract, more access to those drugs for the GPO side of the business..

And then with – this is Craig. With our integrated pharmacy, specialty pharmacy business, again, that is where it is limited distribution drugs for patients outside the walls of the hospital and the ambulatory sector.

And that entire strategy initially was a population health strategy to help keep control of the patient once they're discharged from the hospital.

And as Susan articulator, we will continue to identify the best way either through our owning and operating or other approaches to make sure that that part of care is continuing to be delivered for our health system systems..

Right. And Susan last one for me, the direct contracting interesting. Do you have any anecdotes of – we went direct between this employer in this system and we were able to recontract at a savings of X.

What are you trying to get with those?.

Yes. We have a never members today who go direct to employers within their markets. What they haven't been able to bring is a national network behind that and they have been able to shift market share and to drive cost improvement. So some of our members are centers of excellence for particular employers, some have direct contracts.

We're taking all the learnings, both from a cost management and a clinical outcomes management the learning from all of those. We're now trying to leverage those at a national level with national employers using our data, our infrastructure, and our collaboration ability to try to have more impact at scale for these national employers..

Are you targeting a cost savings with that?.

Yes..

Yes. I mean I think the employers would continue to say there is 20% to 30% variation and cost challenge in their health benefit budget. And they have, I think decided, and we are working with them to figure out how you go direct to the providers. Still using all the claims data and all the insurance and TPA capabilities that others provide.

But how do you actually shift the clinical and financial performance of individual providers at scale with a national network..

Gotcha. Okay. Thanks very much..

Thank you..

Thank you. Our next question comes from Sandy Draper with SunTrust. Your line is open..

Thank you very much for squeezing me at the end. I'll try to be quick here.

Maybe Susan or Mike, when I think about there are lot – obviously a lot of moving parts and there has obviously been a lot of questions about the pharmacy business, similar to what was the little bit [indiscernible] on the supply – on the net admin fees and Performance Services.

When you think about just long-term, if we break it down really simply, price and volume, how do you see the long-term opportunity for the broad pharmacy business, taking into consideration all the mix of – how much is volume going to drive growth, how much is price going to drive growth or being offset to growth? Just trying to think about how you guys see that, because there's obviously a lot going on in there that we don't have all the insight into.

So sometimes it's hard for us to see all the moving parts and think about, where the growth is and where the risks are? Thanks..

Yes, what I would say, Sandy on the GPO side and the pharma side there, we do not get growth from price increases there. Our goal there is to try to create competitive friction and drive price down.

So with generic bandwidth, the overall pharmacy portfolio and the GPO, the goal is to drive price down and to drive contract compliance, penetration, market share, new recruiting to drive revenue up. And so that all gets factored in, along with utilization to that sort of mid single-digit growth rate on the GPO.

From a speciality pharmacy perspective, others on the call have mentioned, when we got into that business several years ago, it had mid-to-high single-digit or double-digit growth now kind of a mid single-digit topline growth business, it has challenging margins and it has challenging DIR fees.

And so we have both of those pieces today, and so that's why you see sort of the mix of the two businesses, affecting the overall result..

Well we do Susan – I think on the lifesciences though, as it relates to pharmacy. We do see that as a higher area of opportunity and growth for us. So our lifesciences business were again – we're leveraging our data assets and our collaborative capabilities.

We do have this – we think significant opportunity in the market to continue to grow that aspect of the business and we're going to continue to deploy more and more resources to that area..

And pharmacy as a whole is you know, 30% of the expenditure, you know in these healthcare systems. So we do have opportunities over on the Performance Services side, with pharma companies, we have opportunities in the GPO side to grow market share and drive contract compliance. And we have – we don't intend to get there through price increases.

In fact, the goal is to try to get the total cost of pharmacy managed..

Okay, great. That's really helpful. Thanks..

Thanks..

Thank you. Our next question comes from Bill Sutherland with Benchmark Company. Your line is open..

Yes, let me just ask a real quick one. I'm curious, as you've checked the boxes here with Stanson and the most recent acquisition, where you might be most interested in committing resources for future M&A, and are you possibly looking a little bit further out or are there some near-term opportunities? Thanks..

Yes.

So from a capital deployment perspective, given our end-to-end supply chain strategy, our end-to-end performance improvement, analytics – enterprise analytics strategy; we continue to be interested and we are making organic investments and looking at capital deployment in front-end, e-commerce, machine learning, new technologies and supply chain, purchase services or other GPO capabilities.

On the Performance Services side, claims data, additional ambulatory data sets, physician productivity, claims analytics, subject matter expertise.

I mean what we think is a real differentiator for us, is the ability to take technology data and wrap around very sophisticated consulting capabilities to really drive significant financial improvement and clinical improvement, and so those would be the areas in both segments..

That's quite a list. Thank you..

Yes. Thank you..

Thank you. I'm showing no further questions at this time. I’d like to turn the call back over to Susan DeVore for closing remarks..

Thank you, operator. And thanks everyone for joining us today. Our next quarterly earnings call is currently scheduled for May 7, and we look forward to seeing and speaking with many of you over the next few months. Thanks so much..

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day..