Ladies and gentlemen, thank you for standing by, and welcome to the Ardent Health Partners First 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 that time, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one. As a reminder, today's call is being recorded. I will now hand today's call over to David Styblo, Senior Vice President of Investor Relations. Please go ahead. Thank you, Operator, and welcome to Ardent Health first quarter 2025 earnings conference call. Joining me today is Ardent President and Chief Executive Officer Marty Bonick and Chief Financial Officer Alfred Lumsdaine. 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 we issued yesterday evening after the market closed and is available at ardenthealth.com. With that, I'll turn the call over to Marty. Thank you, Dave, and good morning. We appreciate everyone joining on the call and the webcast. We are pleased to report another solid quarter of financial and operating performance results as we build a track record of disciplined execution in support of our strategic growth initiatives. Before diving into the details, I want to step back to focus on the big picture and underscore that Ardent is well-positioned for multifaceted long-term growth with an emphasis on three key areas. First, we have ample opportunities to drive strong market share growth within our existing footprint, leveraging our strong position platform and consumer-first strategy. Second, we are focused on expanding our outpatient and acute care hospital footprint and are well-positioned to support this expansion with approximately $500 million of cash and a favorable lease-adjusted net leverage ratio of three times. Finally, we continue to drive margin expansion through operational initiatives, leveraging our scale, supply chain efficiencies, and other cost-saving strategies. In support of our focus on execution, I'm pleased to welcome Dave Caspers as our Chief Operating Officer effective March 31st. Dave's experience driving strategic growth at Walmart Health, Banner Health, and Target Corporation's retail healthcare business will significantly complement our executive management team. Additionally, we are in the final stages of recruiting a Chief Development Officer to support our focus on M&A activities. Turning to first-quarter results, we continue to deliver against our strategic objectives. Volume growth was once again solid. Admissions grew 7.6%, driven by strong underlying growth and heightened flu season. Inpatient surgery growth of 3.4% was strong and benefited from our efforts to optimize transfer center operations to capture additional demand. Adjusted admissions increased 2.7%, which is on the upper end of our full-year 2025 outlook of 2%-3%. First-quarter revenue increased 4%, and that patient service revenue per adjusted admission grew 1.2%. Those growth rates were tempered by approximately 70 basis points due to the strategic transfer of certain oncology and infusion services to a health system partner in the middle of last year. Recall we discussed this mechanical headwind during the third quarter 2024 earnings call, and we will lap that event after second quarter 2025 results. These services produced roughly $10 million of revenue but were break-even EBITDA. Additionally, I would note that our first-quarter results exclude any benefit from the 2025 New Mexico DPP program that is awaiting final CMS approval. First quarter 2025 adjusted EBITDA grew 2.5% to $98 million. In pursuit of our strategic operational excellence initiatives, we made additional progress on our supply chain during the first quarter. Supply cost as a percent of revenue declined 60 basis points year- over- year. We have a number of projects in the pipeline that we expect will create additional efficiencies over the next several years and continue to see an opportunity to improve margins by 100-200 basis points over the next three to four years through scale, supply chain optimization, and other operating cost initiatives. Also, on the cost side, the growth rate of physician professional fees was 6% in the first quarter of 2025, down from 13% growth during the same period last year. While hospital-based physician subsidies remain a headwind, we are beginning to see hopeful signs that the growth rates are moderating. On the ambulatory front, we are pleased with the integration of the 18 NextCare Urgent C are clinics that we acquired on January 1st, 2025. As the year progresses, we expect this transaction to generate additional downstream volumes in our Tulsa and Albuquerque markets. Consistent with our focus on high-growth, midsize urban markets, we expect to continue to strategically expand ambulatory access points to meet consumer demand and drive growth. In terms of M&A, we are seeing more potential acquisition candidates as providers assess optionality in the marketplace in a more uncertain regulatory environment. We are seeing increased interest in our unique joint venture model from potential academic and not-for-profit partners that are in this exploratory phase. We will continue to evaluate these potential opportunities in a disciplined manner and have the balance sheet to move forward when a stockholder value-enhancing opportunity presents itself. In summary, we continue to successfully execute on our strategic growth priorities during the first quarter of 2025, creating strong momentum to start the year. This puts us firmly on track to meet our full-year 2025 financial guidance, which we are reaffirming today. With that, I will turn over the call to Alfred. Thanks, Marty, and good morning to everyone on the call today. As Marty indicated, Q1 of 2025 represented a very solid start to the year, and we expect to maintain our operating momentum throughout 2025. At a high level, we continue to execute across numerous key strategic initiatives during the first quarter that help set the stage for attractive long-term growth. We captured incremental supply chain cost savings, improved transfer center operations, and integrated the NextCare Urgent Care acquisition. Additionally, while our earnings exposure from tariffs is minimal for 2025, we're working proactively to mitigate potential future impacts. Like many peers, we benefit from a strong relationship with our GPO partner, HealthTrust, and have fixed pricing for a large majority of our supplies this year. Recognizing that the tariff outlook is fluid, we estimate the 2025 EBITDA impact is no more than a mid-single digit million-dollar amount based on the current tariffs in place. That said, I'll move on to first-quarter results, which excluded any financial benefit from the 2025 New Mexico DPP program. While CMS has not approved the renewal yet, we're encouraged by signs of a typical program approval process between the state and CMS. First quarter revenue increased 4% to $1.5 billion compared to the prior year, driven by adjusted admissions growth of 2.7% and net patient service revenue per adjusted admission growth of 1.2%. Excluding the infusion and oncology transfer that Marty mentioned, growth rates for revenue and net patient service revenue per adjusted admission were 4.7% and 1.9% respectively. From a volume standpoint, demand remains durable. Admissions growth was a very strong 7.6%, and adjusted admissions increased 2.7% year- over- year, which we believe speaks to our strong market position and growth opportunities within our current markets. Inpatient surgery growth was a solid 3.4% in the first quarter, while outpatient surgeries declined 2.3%. Overall, we estimate year-over-year surgical volume was impacted by approximately 1.5% from the timing of leap year. Adjusted EBITDA increased 2.5% in the first quarter to $98 million, which is consistent with our expectation towards achieving full-year 2025 guidance. The growth rate was impacted by a notable increase in payer claim denials when compared to the first quarter of 2024. To be clear, we aren't seeing a significant increase in denials compared to the back half of 2024, but it does create a year-over-year headwind. That said, we expect underlying EBITDA growth to accelerate as we lap this dynamic in the back half of the year. Turning to some specific line items, salaries and benefits expense as a percentage of revenue increased 70 basis points on a reported basis, but virtually all of that increase was driven by post-IPO stock compensation. We're pleased with our operational improvement around contract labor, which declined 60 basis points year- over- year to 3.8% as a percentage of total salaries and benefits. We continue to see strong nursing retention rates and a stable contract labor rate environment. Marty already covered our improving trends in professional fees and supplies, so I won't rehash those. Moving on to cash flow and liquidity, we ended the first quarter with total cash of $495 million and total debt outstanding of $1.1 billion. Our total available liquidity at the end of the first quarter was $790 million. Cash used in operating activities during the first quarter was $25 million compared to $15 million used in the first quarter of 2024. As a reminder, Q1 is traditionally our weakest cash flow quarter, largely due to payment timing related to year-end accruals. Capital expenditures during the first quarter were $23 million, and we expect that to ramp throughout the year. Our total net leverage, as calculated under our credit agreements, was 1.4 x, and our lease-adjusted net leverage was 3x. On a related note, I'm pleased to share that late last month, S&P upgraded our credit rating to B + from B, reflecting our improved net leverage and cash flow profile. This action affirms the results of our fiscal and operating strategies and will help strengthen any future financing opportunities. Overall, we remain firmly on track to achieve our 2025 financial outlook, which we are reaffirming today. With that, I'd like to turn the call back to Marty for a few final comments on the quarter before we open the call to questions. Marty? Thank you, Alfred. In summary, we continue to make substantial progress as we execute on our strategic growth initiatives and leverage the consumer-focused platform we have built to create long-term stockholder value. We are pleased with our solid start to 2025, underscored by strong demand trends. We continue to sharpen our focus on market share growth, taking a disciplined approach to evaluating opportunities in both the ambulatory space as well as acute care hospitals. With leverage of three times and ample cash, we will continue to assess opportunities to execute on this strategy. Finally, we remain focused on operational excellence initiatives to drive margin expansion over the next several years. I want to close by thanking our 25,000 team members and more than 1,800 employed and affiliated providers who continue to deliver exceptional care to patients across the communities we serve. Together, we are focused on making healthcare better and advancing our purpose of caring for our patients, our communities, and one another. With that, Operator, please open the line for questions. At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star followed by the number one. We'll pause for just a moment to compile the Q&A roster. Your first question is from the line of Anne Hines with Mizuho. Anne, your line is open. There's no response from that line. We'll go to the next question. Your next question is from Whit Mayo with Leerink Partners. Hey, thanks. I'm still trying to get a feel for the seasonality of this business. When I exclude the supplemental payments from the fourth quarter of last year, it looks like EBITDA may have declined, call it 20% or so. Is that a normal sequential decline? You referenced stronger flu and the volumes look really good, so I would have expected to see better than normal sequential growth. I'm trying to put this sort of in perspective with normal seasonal patterns to the way your earnings develop. Thanks. Sure. Thanks for the question, Whit, this is Alfred. Yeah, I would say it's not abnormal. There's obviously any number of puts and takes. From our perspective, the strength of the flu season is not a particular tailwind to the business. It certainly drives higher volumes, but also comes with some lower acuity and some incumbent higher cost premium pay as we care for those patients. Yeah, I would not put that into the tailwind category. Clearly, we mentioned payer denials, but again, on a sequential basis, we didn't really see that as a sequential. It was more of a year-over-year impact than a sequential impact. Again, with some amount of normal puts and takes, I think you can put that into the balance of a normal type of seasonality with the strength of year-end and then the reset of deductibles and copays at the start of the year and then other kind of timing things like reset of payroll taxes, etc. You have a little bit of a cost burden in Q1 that happens as well, and our raises go into effect in Q1. Again, there is just a little bit of a sequential dynamic there, but yeah, I would not call out anything outside of the bounds of normal. Okay. Maybe just to follow up on the elevated denials, I presume that that's MA. What I'm hearing, I guess, is this is a continuation of what you saw from last year, or are there new changes in payer behavior or dispute resolution? Any changes with length of stay on MA? Just any additional color might be helpful. Thanks. I think what you're hearing is very consistent with what we're experiencing. Yes, a continuation of last year. We really saw that step up happen in the middle of the year. A couple of things we would call out there. I would say there has been a continuation of a slowdown in payments, even on clean claims. That's maybe, again, while denials have not accelerated, there's maybe been a bit of an acceleration from just length of time to pay a clean claim, and that's certainly showing up, impacting our cash flow numbers. No, we're not, again, how you frame the question is consistent with what we're seeing. Your next question is from the line of Anne Hines with Mizuho. Hi. I'm sorry about that. I had some technical difficulties. Maybe just on the supply chain initiatives, can you tell us why you actually have so much opportunity versus your peers? Are you involved in a GPO? And maybe if you really can dig into the type of opportunities you have that will create that type of margin expansion, that would be very helpful. Yeah. Yeah, this is Marty. Thanks for the question. We do participate with HealthTrust as our GPO partner and very similar to our peer group. That helps us with our day-to-day contracting, but the utilization within our service lines is where we still see opportunity for improvement. This is an ongoing journey that we have and have continued to see improvement as we've gone through both certain stages of utilization as well as looking at physician preference items and most notably the action we took last summer by partnering with one of our academic institutions to move some of our oncology infusion services. The drug costs for those services have varying reimbursements based upon the geographies and markets that we're in. We continue to see opportunities to further address those drug costs in concert with our partners, as well as just general physician preference items that we're continuing to negotiate across key service lines as we're seeing volumes improve. I'm great. It sounds like underlying admission growth was better than your expectations. Besides flu, were there any other areas that you would call out? Thanks. Yeah, this is Marty. We have had a big focus around our transfer centers and making sure both from an internal efficiency that we have good bed turnover through length of stay initiatives and optimizing the transfer centers that we have regionalized across the company. I think you are seeing the strong impact of the flu as the principal reason that we have coming through there. As we have gone through service line rationalizations, that helped lead to an increase in our inpatient surgeries and again, the focus on the transfer centers of bringing in cases from across our regions into our tertiary centers. The combination of those activities is what is driving that growth. This is Alfred. I would just add that, again, we believe it is also a representative of the strength of the markets we are in and the underlying growth of those markets. Your next question is from the line of Craig Hettenbach with Morgan Stanley. Thank you. Marty, can you just build on the commentary of just durability of demand? Any areas of care where you're seeing that most pronounced and anything to note in terms of how broad-based this is versus market-specific? Yeah, Craig, this is Marty. Just as building on what Alfred said, we've referenced before the strength of our markets growing on average about 3% a year. We see that as very durable. We know that there's some commentary between the payers and the providers in terms of whether there's pent-up demand. We don't subscribe to that theory. The strength of our markets coupled with the strength of our performance gives us strong conviction that we will continue to see strong volume growth. We accentuate that by the operational improvements we're making to be able to service that growth. The strength of the markets that we're in gives us good conviction that these volumes are durable from a positive growth rate perspective. Got it. Just as a follow-up on the COO hire, just any areas of strategic focus for him and then also kind of experience he brings to the organization as you continue to look to scale the business? Yeah, Dave's about one month on the job with us and is doing a great job. Really just helping to, again, complement the existing executive team that we've put together. We've got great subject matter expertise across our hospitals, our health services, and our corporate services. Dave's background with both a consumer and retail focus will accentuate our consumer growth strategies as we go through the markets. Just to focus on continued focus on integration and optimization of the entire platform. We've talked about the centralized services that we've created in the years leading up to the IPO last summer, but we also said that we know that we've got 100-200 basis points of margin expansion to achieve over the next several years. Dave will be a key focus in driving that performance improvement, coupled with the expected growth that we will see in new market and/or new hospital growth complementing our existing markets. That integration activity will be paramount to making sure we can extract value from any transactions and making those accretive for the company until he'll have purview over the execution of our ongoing initiatives as well as that integration of new activity and growth into the system. Your next question is from the line of Ben Hendrix with RBC Capital Markets. Great. Thank you very much. Just wanted to get an update on the expansion initiatives or the strategic initiatives you called out, specifically expanding your outpatient and acute footprint. Just any update on how conversations are going with potential new market opportunities and sellers in those markets? How are they thinking about valuation amid the uncertainty on the Medicaid policy changes and kind of just what you're seeing in terms of seller appetite? Thanks. Yeah, Ben, this is Marty again. Thanks for the question. We continue to focus on a multi-part growth strategy. The first we always said was going to be inside of our markets. While we've got very strong inpatient market share, we know that there's still a lot of outpatient development work to be captured. Again, the acquisition we did with the NextCare Urgent Care assets in our Albuquerque and Tulsa markets, the 18 urgent care centers we bought, is a great indicator of that continued focus that we're going to have of strengthening the access points in our market, strengthening our positions in those markets, and building out a more robust footprint first and foremost. On the second part, in terms of new markets or new hospital growth, I would say the pipeline continues to build. Since going public, our visibility has taken a new stage, and we've got more inbound calls coming from academic partners in particular that have taken note of the model that we have and have a desire to grow inside of their respective regions, but may not have the balance sheet or the integrating operating experience to expand into new regions and see Ardent as a good target partner. I'll say the conversations and the pipeline are growing, which is the reason that we're focusing on bringing in a dedicated Chief Development Officer into the company to be able to capitalize on those opportunities. In terms of valuations, you've certainly seen some headline valuations that are above historic norms and averages. I would characterize those as largely sort of one-off strategic acquisitions for certain existing systems in a given geography. We believe that the overall valuations will continue to trade somewhere in the normal sense of where this industry has historically been. Any acquisition that we focus on is going to have to be something that we see as accretive to the company in the near term, called the first 24 months, where we can see absent purchase price synergies that will help us to deleverage transaction and make it accretive for shareholders. Great. Thanks for the color. Your next question is from the line of Joanna Gajuk with Bank of America. Hi, good morning. Thanks so much for taking the question. I guess a follow-up on that comment around, I guess, related to the prior question. You mentioned that there's interest, it sounds like, receiving from the nonprofits and academic centers to partner. Can you give us a sense of those preliminary systems waiting essentially to see what's going to happen or they're kind of ready to kind of do something right now? Essentially what I'm asking is sort of a close of getting something done. Should we expect something this year, or is it more kind of like next year when the dust settles? Any kind of indication, I guess, would be helpful. Thank you. Yeah, Joanna, this is Marty. It's Alfred to chime in if there's additional. We've been pretty open that we went public with the expectation of growth. We believe we've got a strong operating model that would be valuable to enter into new markets where we could create a partnership and create something more valuable for that target seller than they were able to achieve on their own. We don't have anything definitive to announce today, obviously, and we will appropriately message that when there is. I would say that there's a mix of conversations going on with potential near-term opportunities as well as exploratory conversations about what future growth can look like in a given geography. We are focusing on a mix of hospital acquisitions that would be both complementary to our existing markets or state footprints we're in as well as new. We are just encouraged by the pipeline of growth and, again, the reason why we are bringing on a dedicated Chief Development Officer to help nurture those relationships, conversations, and bring those to fruition. We have been saying we are hopeful that we will see some type of a transaction, whether that is a tuck-in or a new market, still in this calendar year. Can you comment on the New Mexico DPP? Like you said, no approval yet, but there's some approvals coming out. Any indication would you assume to get this finalized by the end of Q2? I mean, we're already in May. Thank you. Yeah, this is Marty again. On the DPP programs, we are starting to see a number of analysts noting the renewals of other states happening. We remain convicted that these programs are durable. From our conversations at Washington, DC, with elected officials, they know the importance of these programs to the states. Again, these DPPs were started under the first Trump administration. I think the sense that we're seeing these new other state approvals come through are consistent with our conversations that we're having with the elected officials, both in the state and CMS, that it's just a matter of processing through these. We are expecting approval. The timing, we are hopeful for to see a Q2 approval, but obviously, we can't control that. This is Alfred, Joanne. The only thing I would add is that we stay close to our contacts in New Mexico, and I think we've been clear that all of the indications are that things are progressing as you would expect and a very normal tracking towards an approval. Your next question is from the line of Matthew Gilmore with KeyBanc. Hey, thanks. Wanted to ask about exchange volumes and payer mix. I think the presentation made reference to strength with exchange volumes. Can you provide some details in terms of the magnitude of the growth in the quarter and maybe update us in terms of the percent of revenue that's tied to exchanges versus, I think, the 3.6% you talked about for 2024? Sure, Matt. This is Alfred. Like all of our peers, we are seeing very strong exchange growth. For example, admissions in the quarter grew 40% in Q1. That is a combination of improvement in our additional enrollment in exchanges as well as new plans that we have that are ramping. Our exchange volume growth was significant. Today, Q1, we are operating in the mid-single digits as a percent of revenue. Got it. That's helpful. Following up on the comment around the moderation in professional expenses, I was hoping you could sort of unpack that a little in terms of the hospital-based physician expense. Where are you seeing improvement? Are you confident and comfortable that that'll be sort of a durable moderation? Any additional details there would be great. Thanks. Yeah, Matt, this is Marty. We have expected to see, as we could get guidance earlier in the year, that this was still going to be an inflation that was north of sort of general inflation. And we've modeled that as such, and we are seeing that continue. We are encouraged that it is moderating from the peak in 2023. The rates came down a bit in 2024. The growth, I should say, came down a bit in 2024. We expect that to continue to moderate in 2025, but still be above normal inflation levels. While Q1 was slightly ahead of where we thought things might be, we know, just given some of the uncertainty, uncertain specialties, radiology is one that has been a bigger growth area, as well as continued pressures in anesthesiology, that we expect to see some continuation of this trend going throughout the remainder of the year as we had forecasted and guided earlier in the year. As a reminder to ask a question, press star followed by the number one on your telephone keypad. Your next question is from the line of Benjamin Rossi with JP Morgan. Great. Thanks for the question. With Q1 revenue per adjusted admission at about 1.2% on the respiratory drain to acuity and more challenging year-over-year comp, to start there, is there anything else from a payer mix or acuity perspective that we aren't seeing within there, such as additional direct from your efforts in rationalizing your outpatient surgery offerings? In reaffirming your guide, what puts and takes are you factoring into reaching the lower end or upper end of your 2025 pricing guidance of 2.1%-4.4% year-over-year? Thanks. Hey, Ben, it's Alfred. I'll start with the first part of your question on the NPR per AA growth of 1.2%. You touched on a piece of it, the service mix and acuity. Clearly, that was on a year-over-year basis, a drag. We continue to see good, the year-over-year commercial rate increases have been very consistent with our expectations. The other items that were a drag on a year-over-year basis, we talked about the denials, which we will lap in the middle of the year. You'll get a more normalized growth rate on a year-over-year basis. The last thing is that the transfer—Marty touched on it in his comments—the transfer of the oncology services, that was about 70 basis points as well. Really, those three items were the drag on a year-over-year basis. Great. As a follow-up on the transfer center operations, you mentioned the improvements to your transfer center more broadly on a regional basis. Could you just walk us through those efforts and your approach more broadly to inpatient capacity and related patient throughput during this elevated patient utilization backdrop? Yeah, Ben, this is Marty. We have regionalized our transfer center operations. As you all know, we have one instance of Epic as our electronic health record and really our clinical operating system that helps us drive and have visibility in terms of where we have capacity opportunities. Taking that technology and the organization of those services, it's allowed us to have a very seamless process for outlying rural regional hospitals to be able to transfer patients into our networks and help us to drive that volume to the most appropriate setting. Not only are we trying to maximize volumes coming into our tertiary hospitals, but our secondary hospitals, which may not have gotten the original call, we're able to relocate those patients where we've got the appropriate clinical mix of physicians and services to service those patients and manage capacity and demand across a broader network. Before that, that was all happening on a one-off basis. If you called Hospital X and they had availability, they'd accept it. Now you're calling the market, and the market is helping to distribute those patients more effectively across our footprint, which is helping us to see increased pull-through in those transfers getting placed in one of our hospital beds. Ben, this is Alfred. I want to go back to the first part of your question because you asked about kind of what are the range of outcome in terms of the items that would affect the range from the top end to the bottom end of our guidance. Obviously, we're very pleased with the start of the year and the solid Q1 that we had. I would just point you back to the things we've talked about: the pressure of professional fees, the payer behaviors and denials, is there variance to those expectations? Of course, tariffs we've touched on, relatively minor in terms of the overall exposure, but certainly not something that we had anticipated in our guide. At this time, there are no further questions. I will now hand the call back over to management for closing remarks. Thank you, everybody, for your time and attention. We appreciate the support of Ardent and our performance. If there's any follow-up questions, please refer those to Dave Styblo, Head of Investor R elations for Ardent. Thank you, everybody. This concludes today's call. Thank you for joining. You may now disconnect your lines.