(Story updated at 11:05 a.m. ET)
Technology-related acquisitions fueled a third-quarter increase in earnings for Premier, the Charlotte, N.C.-based healthcare group purchasing and performance improvement company.
Premier reported adjusted fully distributed income of $63.9 million during the three months ended March 31, up 16% from the same time the year before. Revenue was $298.7 million, up 14%, riding on gains from Premier's recent acquisitions of software vendors CECity and Healthcare Insights.
The adjusted income figure reflects ongoing exchanges of GPO member-owners' Class B stock into Class A stock after the company's initial public offering in late 2013. This figure reports the financials as if all members have exchanged their stock and the company was fully public. Shareholders have exchanged just over 40% of all shares that are eligible for exchange.
The software acquisitions helped Premier's performance services revenue grow 24% to $86.3 million, while revenue from supply chain services increased 11% to $212.4 million. Revenue from administrative fees was up 11%.
Software has been an increasingly important business for Premier, which has reported growing subscriptions and renewals of its PremierConnect software as a revenue driver in previous quarters. Yet, the businesses' recent revenue increases were not as high as expected, due to a CMS policy change as well as longer-than-expected implementations for more complex implementations, executives said.
The CMS announced in late February that it would extend the deadline to file applications for meaningful-use hardship exemptions. The agency also excluded the requirement that providers need to report public health measures, a decision which impacted software implementation.
CEO Susan DeVore said Premier experienced some challenges this quarter from the “evolution” of the quality improvement market. As some customers now require more-complex software configurations, implementation is taking four to eight months on average, up from a previous timeline of three to four months.
DeVore said the company is already adjusting to overcome those obstacles, moving sales teams and focusing on how to drive larger-scale, integrated solutions in technology and advisory services.
Nine-month revenue was up 16% at $861.2 million. Adjusted fully distributed income rose 17% to $181.7 million so far this fiscal year.
Premier is raising its mid-range estimates for supply chain revenue for fiscal 2016 based on recent performance and expectations for the fourth quarter but is lowering its guidance for performance services after the company missed expectations this quarter. That narrows its expectations for revenue for the total year to between $1.15 billion and $1.17 billion. That would still represent an 11% to 12% year-over-year increase, though lower than the company's previous guidance of $1.15 billion to $1.19 billion.