Ardent Health, Inc.

Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the Ardent Health Third Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw a question again, press this star one. I would now like to turn the conference over to Dave Stiblow, Senior Vice President of Investor Relations. You may begin.

Thank you, operator, and welcome to Ardent Health's third quarter 2025 earnings conference call. Joining me today is Ardent President and Chief Executive Officer Marty Bonick and Chief Financial Officer Alfred Lumsdain. Marty and Alfred will provide prepared remarks, and then we will open the line to questions. Before I turn the call over to Marty, I want to remind everyone that today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include the discussion of certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDAR. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release, which was issued yesterday evening after the market closed and is available at artandhealth.com. With that, I'll turn the call over to Marty.

Thank you, Dave, and good morning. We appreciate everyone joining the call and webcast. Arden finished the quarter with two contrasting realities. On one hand, our performance reflects a continuation of growth momentum we've experienced across our business, driven by robust demand, improving surgical trends, and disciplined execution. Year-to-date adjusted EBITDA is up 30%, and we've made meaningful progress on margin expansion, cash flow, and our balance sheet, with least adjusted net leverage improving one and a half turns since our IPO last summer. On the other hand, our earnings performance this quarter did not meet our expectations. As noted in our release, we've revised our full-year adjusted EBITDA guidance to $530 million to $555 million, reflecting persistent industry-wide cost pressures, particularly those around professional fees and payer denials that have proven more durable than anticipated. We view this revision as a prudent recalibration grounded in a pragmatic assessment of current conditions and establishing a reset baseline from which we can build. These pressures are not demand-driven and our revenue guidance remains unchanged. But our earnings pull-through has been impacted and we are taking decisive actions to address it. Through our impact program, we've already launched targeted initiatives to further optimize cost and strengthen margins. These actions have been building momentum and are expected to begin contributing in the fourth quarter and will continue to ramp through 2026. With strong demand across our markets and a solid balance sheet, we remain confident in our ability to deliver sustainable growth and long-term shareholder value. To frame today's conversation, I'm going to focus my comments on three key areas. First, I'll walk you through our three key results and the strong demand environment. Second, I will provide color on the industry headwinds that are impacting 2025 earnings more than previously anticipated. And third, I will provide details of how we are already working to address and mitigate these challenges. Let's start with our third quarter performance. At a high level, we generated strong volumes and revenue growth driven by improving surgical trends and sustained strength in industry demand. Our markets are growing two to three times faster than the national average and are further bolstered by rising care complexity, structural trends that reinforce our long-term growth thesis. Arden's leading positions in these growing midsize urban markets give us a durable advantage and these demand dynamics provide a strong foundation for continued strategic inpatient and outpatient growth. Our strong platform, combined with initiatives to improve capacity and efficiency, drove admissions growth of 5.8% in the quarter. This is a continuation of the favorable trends we've observed in the first half of 2025, with year-to-date admissions growing 6.7%, well above the 2% to 3% population growth we see across our markets. Additionally, adjusted emissions increased 2.9%, landing near the top end of our 2025 guidance range of 2 to 3%. Surgical volumes also improved, with total surgeries up 1.4% in the third quarter, reversing a small decline of 0.4% in the first half of the year. Turning to financial performance, revenue grew 8.8% in the quarter, or 11.7%, excluding a one-time revenue adjustment that Alfred will detail later. Adjusted EBITDA increased 46% in the third quarter to $143 million, with margins expanding 240 basis points to 9.1%, and further lowering our least adjusted net leverage from 2.7 times to 2.5 times. Of note, third quarter adjusted EBITDA included approximately $15 to $20 million of earnings we previously expected to realize in the fourth quarter. Excluding this timing benefit, underlying third quarter adjusted EBITDA was below our expectations, which we factored into our updated guidance. That's a good segue to the second topic of today's discussion, industry headwinds. While our revenue growth has been strong, earnings did not reflect the level of pull-through we anticipated. First, professional fee expense growth. This has been a persistent challenge across the industry for several years now. For Ardent, growth peaked at over 30% in 2023, moderated to 12% in 2024, and was expected to moderate further this year. Instead, professional fees increased 6% in the first quarter, 9% in the second quarter, and accelerated to 11% in the third quarter. We now expect second half growth in the low double digits versus the high single digits previously assumed. This accounts for roughly half of the 2025 adjusted EBITDA guidance reduction. Payer denials were the second factor impacting our adjusted EBITDA guidance outlook. After a sharp increase in denials beginning in the second quarter of 2024, trends largely stabilized through the first half of 2025, consistent with our outlook. However, these payer pressures moved higher again in the third quarter, and our updated adjusted EBITDA guidance reflects the development of this trend throughout the second half of 2025. In summary, our updated outlook prudently assumes these industry headwinds observed in the third quarter will persist at elevated levels in the fourth quarter. While these dynamics are industry-wide, we are taking decisive action to mitigate their impact and strengthen our performance. Which brings us to my third and most important takeaway, what we are doing to close the earnings gap. We are taking swift and decisive action to improve our near-term earnings profile while maintaining a disciplined approach to strategic investments that support long-term growth. Immediate priorities, including contract renegotiations and targeted staffing adjustments, are already underway, with additional initiatives ramping in early 2026 that are expected to drive measurable impact across revenue cycle, labor, and supply chain performance. Under our impact program, we have launched an expanded set of margin enhancement and efficiency initiatives. As an example, we've renegotiated terms of an exchange plan to secure meaningful rate improvement with an additional step up in 2027. We've recently completed a targeted reduction in workforce, and we revised the key agency labor contract to lower base rates and reduce premium pay. These three actions will phase in during the fourth quarter and reach full run rate benefit in early 2026 generating an expected annual benefit of more than $40 million. Beyond these near-term actions, we are executing on initiatives to build momentum in 2026 and beyond under the leadership of our Chief Operating Officer, Dave Kaspers. These include precision staffing to better align patient care resources with real-time volumes, optimizing contract labor, and accelerating speed to hire. We are also driving supply chain discipline and savings through vendor consolidation, commodity standardization, and tighter inventory management. In our operating rooms, our OR Excellence program is focusing on improving case mix and evaluating additional service line rationalization opportunities to ensure the right surgeries happen at the right time in the right setting. While payer headwinds remain an industry-wide challenge, we are taking proactive steps within our control to drive sustainable improvement. We've mobilized a multidisciplinary team that combines expertise in clinical operations, contracting, and revenue cycle management to respond with an integrated strategy. This team is leveraging innovative processes and advanced analytics to reduce denials and align payer contracting to maximize net yield. Early results are promising, and we anticipate broader impact as these initiatives scale in the near term. We are also taking steps to right-size professional fees. We are renegotiating certain vendor contracts, particularly in anesthesia, to introduce more flexible cost structures that better align with patient volumes, helping to eliminate excess fixed costs in our business. Additionally, given our increased scale, we are strategically replacing locums with more cost-efficient full-time hires. Collectively, these initiatives are strengthening the organization and will better position us for future earnings growth. While industry headwinds remain, we are confident in our ability to execute with discipline and deliver long-term shareholder value. With that, I'll turn it over to Alfred to provide more detail on our third quarter financial performance and outlook.