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  "documentTitle": "Premier, Inc. (PINC)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Spruce Point Capital Management",
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  "presentationDate": "2019-09-25 00:00:00",
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  "notes": "Uses a quote-based contradiction framework to undermine management's narrative.",
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      "kind": "callout",
      "text": "With their Class B shares scheduled to vest in full on the final day of their current contracts, the hospitals due to renew or opt out on Oct 1, 2019 have little incentive to continue to accept less than half the shareback dollars that they could receive from another GPO.",
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      "text": "Class B Shares Unvested: 28.6%",
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      "text": "As analysts questioned management on the likelihood of a shareback rerating during the 2017 renewal cycle, management repeatedly claimed that its close working relationships with member hospitals and broad offering of ancillary services were enough to convince member owners to continue to accept below-market sharebacks. However, industry experts generally see the GPO industry as a highly-competitive one with low switching costs and few differentiating factors between individual players. Management plays up its new SaaS services as a meaningful draw, but most large GPO offer similar value-added services. Spruce Point believes that, with member owner hospitals accepting lower sharebacks only in return for equity in the first place, the decision to renew among member owners on five-year deals was driven primarily by their desire not to forfeit the ~30% of their Class B shares which had yet to vest. This disincentive is not present for hospitals due to renew on Oct 1, 2019.",
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      "text": "Yes. I think the expectations are similar. Economics, as has been articulated, again, if the 5-year contracts auto renew, which a lot of our organizations have indicated they will just allow them to auto renew, auto renewals are under the same terms that we have. So what I would tell you is we're saying similar. And the reason we're using the term similar is in the discussions we're having with organizations, there may be discussions about other things, resources, do they need more -- another additional system in their institution helping them to drive savings and things of that nature, but the core economics around the GPO relationship are not changing as a result of these renewals.",
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      "kind": "quote",
      "text": "Susan said on the call that the economics [of the renewed contracts] were similar to prior contracts. I think that's the other thing that people are going to really focus on is are the hospitals coming to you and trying to get a bigger shareback? So is there any color that you can provide on how things are going on in that front or what your expectations are?",
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      "text": "\"Yes. I think the expectations are similar. Economics, as has been articulated, again, if the 5-year contracts auto renew, which a lot of our organizations have indicated they will just allow them to auto renew, auto renewals are under the same terms that we have. So what I would tell you is we're saying similar. And the reason we're using the term similar is in the discussions we're having with organizations, there may be discussions about other things, resources, do they need more -- another additional system in their institution helping them to drive savings and things of that nature, but the core economics around the GPO relationship are not changing as a result of these renewals.\" — Craig McKasson, CFO, Premier",
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      "text": "PINC Class B Share Equity Vesting Schedule",
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      "kind": "title",
      "text": "Unvested Shares, Not Commoditized Services, The Most Likely Driver Behind 2017 Renewals",
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