Accendra Health, Inc.

Good morning and thank you for standing by. Welcome to the Ascendra Health second quarter 2026 earnings conference call. Please be advised that today's conference call is being recorded. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one in your telephone keypad. If you'd like to withdraw your question, again, press star one. Thank you. I would now like to hand the conference call over to your first speaker today, Will Parrish, Vice President, Strategy, Corporate Development, and Investor Relations.

Will Parrish, Vice President, Strategy, Corporate Development, and Investor Relations Thank you, operator, and good morning, everyone. I'd like to welcome you to Accendra Health's second quarter earnings call. Our comments on the call will be focused on the financial results of the second quarter of 2026, all of which are included in today's press release. The press release, along with the second quarter 2026 supplemental slides, which we will refer to throughout the call, are posted in the investor relations section of our website. Please note that during this call, we will make forward-looking statements that reflect the current views of Ascender Health about our business, financial performance, and future events. The matters addressed in these statements are subject to risks and uncertainties, which could cause actual results that differ materially from those projected or implied here today. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs, and projections will result or be achieved. Please refer to our SEC filings for a full description of these risks and uncertainties, including the risk factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call, in our earnings press release, or in our supplemental slides are as of today, and we undertake no obligation to update these statements as a result of new information or future events. except to the extent required by applicable law. In our discussion today, we will refer to non-GAAP financial measures and believe they might help investors to better understand our performance or business trends. Information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release. Today, I am joined by Ed Pesicka, Ascender Health's President and Chief Executive Officer, John Leon, the Company's Chief Financial Officer, and Perry Bernocchi, the Company's Chief Operating Officer. I will now turn the call over to Ed. Ed?

Thank you, Will. Good morning, everyone, and thank you for joining us on the call today. Before I dive into our second quarter results and the outlook for the balance of the year, I'd like to take a moment to address the announcement included in today's press release that I have informed the Board of Directors of my intention to retire by the end of 2026. The decision to retire is never easy. However, after considerations with my family and careful thought, I've decided that now is the right time. It has been an honor and privilege to serve as president and CEO for nearly eight years. During that time, we initially stabilized the company when I joined, enabling us to successfully guide the company through the unprecedented challenges of COVID-19 pandemic, then navigate the company through post-pandemic environments, completed the sale of the P&HS segment, and most recently executed our balance sheet optimization and debt realignment. Together, these milestones have transformed the company into a focused pure play home-based healthcare business with a strong strategic foundation. With these important milestones largely behind us, I believe the company is well positioned for its next chapter. The timing is right to begin a thoughtful leadership transition that allows the next CEO to build on the foundations we've established, capitalize on the opportunities ahead and create long-term value for our patients, customers, employees and shareholders. The board has a long-standing succession planning process and I'm confident that we will have a successful CEO transition. In closing, I would like to personally thank the board of directors, the company leadership team and our 6,000 teammates for all the dedication, hard work and support over the last eight years. Now let me turn to the business updates. Looking at our second quarter performance, our results did not meet the expectations we set for ourselves. At the same time, the quarter reflected continued progress in several areas that are critical to our long-term transformation. We successfully advanced our separation from Owens and Minor, remained on schedule with the transition away from a large commercial payer earlier this year, and continue to strengthen the operational foundation of the business as Ascendra Health. That said, our results also demonstrate that we have additional work to do to optimize our cost structure and improve execution. As I'll discuss in a moment, we have already implemented a number of these initiatives and have additional actions planned that are designated to streamline our operations, improve efficiencies, and reduce costs. We also experienced several discrete headwinds during the quarter that we believe are temporary in nature and affect our near-term financial performance and cash flow. I'll provide more detail on these shortly. Importantly, the quarter also included several accomplishments that reinforce our confidence in the future. We made meaningful progress in a number of strategic initiatives that we believe have the potential to drive attractive growth beginning in late 2026 and continuing into 2027. Turning now to the key drivers of our second quarter performance, there were three primary factors that contributed to the variance from our forecast. One, revenue growth below our expectations. Two, the timing of planned cost reductions. And three, slower than expected recovery of our collection rates. Starting with revenue, while we were pleased to see revenue growth improve sequentially from the first quarter to the second quarter, excluding the impact of the large commercial payer exits, overall growth remained below both our expectations and the level this business is capable of delivering. To accelerate growth, we have made targeted changes within our commercial and operational organizations to improve customer responsiveness, strengthen execution, and reinvigorate our sales force. We are already seeing positive momentum and several important initiatives are either underway or expect to begin contributing over the coming quarters. Starting with the renewal of our largest soft good contract with our largest commercial payer. which we discussed during the last earnings call but was formally executed during the second quarter. This provides greater stability across an important portion of our commercial payer portfolio for years to come. Building on that success, we also signed a new sole source agreement with the regional health system that is expected to launch early 2027. In addition, we executed a broader enterprise-wide fee-for-service agreement with another payer that we believe will drive additional patient volume improved capacity utilization, and create meaningful value for both organizations. Moving now to cost reductions. Following our separation from Owens & Miner on December 31st and the transition away from the large commercial payer during the first quarter, we identified and eliminated more than $125 million of annualized costs. Soon after completing this takeout, we identified the need to allow the business to settle and stabilize from these changes. before introducing additional cost reductions which could have created disruption while we were, one, settling in as a new pure play home-based healthcare business, two, completing the exit of the large commercial payer, and three, executing our balance sheet optimization. In addition, while our transition service agreements with Owens & Miner continue to wind down on schedule, those temporary interdependencies have limited our ability to fully optimize our organizational structure during the first half of the year. Although the timing has been somewhat later than originally anticipated, our commitment to improving our cost structure has not changed. Approximately one month into the third quarter, we have already executed the next phase of targeted cost reductions and will continue evaluating additional opportunities in the coming months. Another example of our ongoing efforts to reduce our cost to serve is the pursuit of new arrangements with leading logistics providers for inventory management and fulfillment across select product categories. We expect the arrangements to go live later this year and believe they will both lower our operating costs and reduce inventory, thereby improving cash flow. Looking further ahead, continued investment in technology, automation, and process improvement should enable us to operate even more efficiently while supporting future growth. Continuing with the theme of operational efficiencies and cost reductions, we continue to advance our national rollout of our Sleep Center of Excellence during the second quarter. While there is still work to complete, we remain optimistic about this program's ability to contribute to both growth and profitability beginning in late 2026 and continuing into 2027. Finally, Moving on to slow payment of collections from payers. We continue to see reimbursement collection rates below the historical norm of the business's typical performance. This has negatively impacted our revenue and adjusted EBITDA in the range of nearly $20 million in the first half of the year. The underlying cause is related to several factors, including growing pains associated with recent technology investments and slower payer payments. John will discuss this further in his prepared remarks specifically related to some discrete inefficiencies with specific commercial payer processes that affected collections and increased AR. Importantly, we have already implemented mitigation plans with those payers and are seeing encouraging progress. And we expect this issue to recover towards the end of the year and into next year. But we acknowledge that this is taking longer than we initially anticipated. Looking ahead, as I mentioned earlier, We are excited about the commercial and operation changes, the logistics arrangements, as well as several strategic agreements that we believe can increase throughput with key commercial payers and further strengthen our competitive position. It is also important to recognize the significant work completed this year to strengthen our financial foundation. In June, we successfully completed our balance sheet optimization, significantly reducing debt. In closing, while we are not satisfied with our second quarter financial performance, We are encouraged by the progress we continue to make in transforming the business. The operational actions underway, the commercial opportunities we have secured, and the investments we are making today give us the confidence in our ability to improve execution, accelerate growth, and expand profitability over time. As I look forward to the remainder of the year and into 2027, I believe Ascender Health is well positioned and I remain excited about the opportunities ahead for the company. Let me now turn the call over to John. John.