SEGMENTS (Tables)

12 Months Ended

Jun. 30, 2018

Reconciliation of Net Revenue and EBITDA

Segment information was as follows (in thousands):



	Year Ended June 30,
	2018		2017		2016
Net revenue:
Supply Chain Services
Net administrative fees	$	643,839	$	557,468	$	498,394
Other services and support	11,454		9,704		4,385
Services	655,293		567,172		502,779
Products	645,284		534,118		326,646
Total Supply Chain Services	1,300,577		1,101,290		829,425
Performance Services	360,679		353,383		333,169
Net revenue	$	1,661,256	$	1,454,673	$	1,162,594

Depreciation and amortization expense ^(a):
Supply Chain Services	$	21,734	$	14,209	$	1,401
Performance Services	95,808		85,299		76,500
Corporate	9,217		7,703		6,255
Total depreciation and amortization expense	$	126,759	$	107,211	$	84,156

Capital expenditures:
Supply Chain Services	$	1,691	$	483	$	914
Performance Services	80,900		66,686		62,337
Corporate	10,089		4,203		13,739
Total capital expenditures	$	92,680	$	71,372	$	76,990

			June 30,
Total assets:			2018		2017
Supply Chain Services			$	991,837	$	1,017,023
Performance Services			860,409		888,862
Corporate			459,970		601,951
Total assets			$	2,312,216	$	2,507,836


(a)	Includes amortization of purchased intangible assets.

Reconciliation of Segment Adjusted EBITDA to Operating Income

A reconciliation of income before income taxes to Segment Adjusted EBITDA is as follows (in thousands):



	Year Ended June 30,
	2018			2017			2016
Income before income taxes	$	516,804		$	531,291		$	284,882
Remeasurement gain attributable to acquisition of Innovatix, LLC	—			(205,146		)	—
Equity in net income of unconsolidated affiliates ^(a)	(1,174		)	(14,745		)	(21,647		)
Interest and investment loss, net ^(b)	5,300			4,512			1,021
Loss on disposal of long-lived assets	2,376			2,422			—
Other expense (income)	16,324			(614		)	1,692
Operating income	539,630			317,720			265,948
Depreciation and amortization	71,312			58,884			51,102
Amortization of purchased intangible assets	55,447			48,327			33,054
Stock-based compensation ^(c)	29,799			26,860			49,081
Acquisition related expenses	8,335			15,790			15,804
Strategic and financial restructuring expenses ^(d)	2,512			31			268
Remeasurement of tax receivable agreement liabilities^(e)	(177,174		)	(5,447		)	(4,818		)
ERP implementation expenses^(f)	1,000			2,028			4,870
Acquisition related adjustment - revenue^(g)	300			18,049			5,624
Equity in net income of unconsolidated affiliates^(a)	1,174			14,745			21,647
Impairment on investments ^(a)	5,002			—			—
Deferred compensation plan income (expense) ^(h)	3,960			4,020			(1,605		)
Other income	1,752			584			—
Adjusted EBITDA	$	543,049		$	501,591		$	440,975

Segment Adjusted EBITDA:
Supply Chain Services	$	535,380		$	493,763		$	439,013
Performance Services	123,429			121,090			110,787
Corporate	(115,760		)	(113,262		)	(108,825		)
Adjusted EBITDA	$	543,049		$	501,591		$	440,975


(a)	Refer to Note 4 - Investments for further information.


(b)	Represents interest expense, net and realized gains and losses on our marketable securities.


(c)	Represents non-cash employee stock-based compensation expense and stock purchase plan expense of $0.4 million during both of the years ended June 30, 2018 and 2017.


(d)	Represents legal, accounting and other expenses directly related to strategic and financial restructuring expenses.

(e)

Represents adjustments to TRA liabilities for a 14% decrease in the U.S. federal corporate income tax rate that occurred during the year ended June 30, 2018, which is a result of the TCJA that was enacted on December 22, 2017, an increase in income apportioned to California and a 1.5% decrease in the North Carolina state income tax rate during the year ended June 30, 2017, and an adjustment for a 1% decrease in North Carolina state income tax rate during the year ended June 30, 2016.


(f)	Represents implementation and other costs associated with the implementation of our enterprise resource planning ("ERP") system.

(g)

This item includes non-cash adjustments to deferred revenue of acquired entities of $0.3 million, $0.6 million and $5.6 million for the years ended June 30, 2018, 2017 and 2016, respectively. Business combination accounting rules require the Company to record a deferred revenue liability at its fair value only if the acquired deferred revenue represents a legal performance obligation assumed by the acquirer. The fair value is based on direct and indirect incremental costs of providing the services plus a normal profit margin. Generally, this results in a reduction to the purchased deferred revenue balance, which was based on upfront software license update fees and product support contracts assumed in connection with acquisitions. Because these support contracts are typically one year in duration, our GAAP revenues for the one-year period subsequent to the acquisition of a business do not reflect the full amount of support revenues on these assumed support contracts that would have otherwise been recorded by the acquired entity. The Non-GAAP adjustment to software license update fees and product support revenues is intended to include, and thus reflect, the full amount of such revenues.

Also, during the year ended June 30, 2017 we recorded $17.4 million of purchase accounting adjustments to Adjusted EBITDA related to our acquisition of Innovatix and Essensa on December 2, 2016. This adjustment reflects the fair value of administrative fees related to member purchases that occurred prior to December 2, 2016, but were reported to us subsequent to that date through June 30, 2017. Under our revenue recognition accounting policy, which is in accordance with GAAP, these administrative fees would be ordinarily recorded as revenue when reported to us; however, the acquisition method of accounting requires us to estimate the amount of purchases prior to the acquisition date and to record the fair value of the administrative fees to be received from those purchases as an account receivable (as opposed to recognizing revenue when these transactions are reported to us) and record any corresponding revenue share obligation as a liability. The purchase accounting adjustment amounted to an estimated $21.2 million of accounts receivable relating to these administrative fees and an estimated $3.8 million for the related revenue share obligation through June 30, 2017.


(h)	Represents realized and unrealized gains and losses and dividend income on deferred compensation plan assets.