Good afternoon, everyone. Good morning, everyone. My name is Sam Becker. I'm with Goldman Sachs Research, and I have the honor to wrap up our conference with Ardent Health CFO, Alfred Lumsdaine, and Senior VP of IR, Dave Styblo. Thank you both for joining me. Our pleasure. Thanks for having us. I guess to start, I know there's a lot going on with your recent CEO transition, but before we get into that, could you just remind us a little bit of the Ardent story and then your overall growth strategy as it stands today? Sure. Yeah, Ardent Health, we've been around a long time, 30 years. The company went public two years ago and is still a controlled public company. Off of that IPO, plan three-part growth strategy, focused, I'd say first and foremost on expanding margins. We believe we continue to have an opportunity through creating incremental scale. The company was built off of acquisition, but has transformed from being more of a holding company to more of an operating company, where we've consolidated a lot of the back office operations and oversight into a single operating unit over the last several years. We still have the opportunity to optimize that platform. We call a lot of our initiatives to expand margins, our moniker is our IMPACT Program. Second, we have transformed the company from being a hospital-centric focus to focusing on our markets, growing our ambulatory and outpatient footprint inside of our markets, investing in our markets to be sure that we are truly a health system, meeting the consumer demand where it, in the setting that the consumer wants to be seen, and often in lower cost settings than the four walls of the hospital. Lastly, the company would like to enter new markets through inorganic M&A. Again, went public two years ago with the belief that we would be entering new markets and doing inorganic M&A. The backdrop of the transaction market has not facilitated the types of transactions we are looking for. We want to be in markets that look a lot like Ardent markets, where you have stronger than average population and economic growth dynamics at play. While those have been out there, we're going to be very disciplined around what we pursue. The worst thing we could do is a bad acquisition. We've seen attractive markets at valuations that were unattractive, and we've seen attractive valuations in markets that we don't think are good long-term investments for Ardent. Haven't found that sweet spot yet, but continues to be core to our long-term growth strategy. We have such a good opportunity in those first two buckets. We're, again, going to stay very disciplined on new market M&A. Just overview of who Ardent is. We're 30 hospitals. We're in eight markets across six states, predominantly in the South, Southwest. Awesome. That sounds great. Just let's move on to the CEO transition a little bit. Could you just opine more on the board's decision to transition now? Sure. Happy to provide the overview of what Dave and I have talked to the board about. The board, their perspective on this was that it's very proactive move and couldn't be further from a reactive move. They weren't looking at this in any way reactive to anything. The board appropriately has been extremely complimentary of Marty in terms of the work that Marty did to build the organization from being a hospital-centric to being a health system, executing on the strategy of transforming the company from that holding company perspective to an operating company. The board would say Marty was absolutely the right CEO for that business transformation and executed it extremely well. As we look at the go forward challenges and headwinds, let's say, in the industry, there's the expectation that we've gone through a period of time where there's been a ton of coverage expansion. We've had the exchange growth. We've had growth in state supplemental programs. With the big, beautiful bill, certainly as one element and other dynamics and headwinds at play, the expectation is there will be more of a premium on that underlying operational execution. Dave was brought in to enhance our operations, strengthen our core operating platform, stand up and enhance our IMPACT Programs. As the board looks at the next five years, they think that dynamic of operational execution will be different. They think Dave is extremely well-positioned, given his background, not only inside of health systems, but also across scaled retail health platform. Dave's got experience with running Target's pharmacy business, with running Walmart health business, and the level of operational rigor, standardization, is at a dimension, I'd say higher than what even the health system world is typically accustomed to. Bringing that operational focus and rigor, and accelerating, enhancing our margin profile takes primacy as we look forward. Great. Was also curious, why do you think the board looked internally at Ardent instead of doing maybe a larger nationwide search? Well, I think it's a good question. I think it's, I'll say at a personal level, the easiest answer, and that is Dave has proven himself inside of the Ardent organization over the past 15 months and executed at a level that has accelerated and enhanced our operational position. In terms of really demonstrating that this was a proactive move and not a reactive move, I think that's probably no further evidence than the fact that it was an internal promotion. Great. I know you talked a little bit about Dave's experience. Are there any strengths that you'd like to highlight for him in working so closely with him? Sure, absolutely. Yeah, I've really had the pleasure of working with Dave for 15 months. I tell people who I meet and ask about Dave, he is an extraordinary leader from the standpoint of creating. He is one of the most authentic, consistent, and accountable, driven leaders that I've worked with in my career. I think, yeah, if I were to highlight three strengths, it would be just those things, and I think those are the dimensions that really make his operational rigor and acumen come to the forefront. Sam, as you think about Dave also, he has been the catalyst behind our IMPACT Program savings and initiative. Again, he's been here for 15 months plus. When we initially introduced that program, we had targeted $40 million of savings for fiscal year 2026. Since then, he's continued to drive, find, and harvest additional savings, and on our last earnings call, we raised that up to $45 million. I'm sorry, additional $15 million up to $55 million. Again, just to give the market a little flavor of just his discipline and execution ability to find things and continue to deliver, that's an additional proof point, just as the investment community introduced to Dave. Great. Transitioning a little bit to volumes. Last week, when you made the announcement, you also mentioned you observed some volume softness across your portfolio during the second quarter, and you also gave some industry-wide commentary as well. Just wanted to see if you could elaborate a little bit more on that, what you've seen across the portfolio and some of those industry trends. Absolutely. Obviously, that commentary got picked up very broadly. What we were, I guess, first and foremost doing was reaffirming our guidance for the year with this trend. Again, it goes to the fact that the CEO change was a proactive, not a reactive move. We are very comfortable and confident with our guidance as we go forward and for the rest of the year. With that reaffirmation, what we didn't want to do was not give color on kind of the shape of that. The industry data that we work with shows volume softness, particularly, most acutely on the surgical side, more acute on inpatient than outpatient, which we attribute to kind of the normal ongoing shift of procedures out of inpatient settings to outpatient settings. Yeah, we just thought we'd be remiss not to give a shape of what we're seeing and the fact with our reaffirmation of guidance that we're continuing to work on the cost structure of the organization, back to Dave Styblo comments about Dave Casper, and continuing to expand and accelerate our IMPACT Program such that we have the cost structure of the enterprise built for the overall volume environment. That's what the message we were trying to send. With the volume observations, largely, we work with, as one example, we're triangulating a number of different sources. A decent amount of our data comes through our relationship with Ensemble. Ensemble, 10x the size of Ardent, the six states and eight markets that we're in. That data suggests, again, very broad softening across, I would say, all geographies. Not the same across all geographies, across all geographies, as well as broad softness across payer type and service line. That helps provide, we think, some of the underlying rationales to the dynamics that underlie the softness, which we think certainly, overall, I'd say macroeconomic concerns, inflationary pressures, et cetera, would certainly be one thesis when you see the breadth of the volume softness. I guess within that data that you've been seeing, and you may have just mentioned to the extent that you know, what's the scale and size of that sample? Yeah. Again, I would say our biggest sample set today is off of data that we work with Ensemble. Again, I would suggest, call it 10x the size of Ardent. Then, you mentioned the IMPACT Program, but with the reiteration of guidance last week, what really gives you confidence to achieve that guide despite the soft volume? Yeah. I would point back to the IMPACT programs now. Again, don't want to get ahead of ourselves in talking specifically quantifying where we are relative to the pull-through of our IMPACT programs. We, again, as Dave mentioned, sized it at $55 million for this year at the midpoint. I would expect that number will increase given the dynamics we're talking about, that we're working to enhance and expand the throughput of that through the year as a consequence of the overall demand environment that we're working against. I would point to a couple different things. Obviously, it's easy to think about these types of programs on the cost side. Clearly, we are working on our overall organizational structure, keeping it lean for the underlying volume demand, particularly at, I'd call the middle management layers and working on having a scaled and nimble organization structured for the demand levels today and going forward, working on supply chain improvements. What can we do around pricing, unit pricing? What can we do around physician preference items and obsolescence? Broad supply chain initiatives. Then down to things like, we'll call it services, like professional services, like IT licenses. What can we do? We've seen pressure on, as more stuff has moved to the cloud, there's maybe been a little bit more pressure coming from those vendors on just sort of the belief that there aren't a lot of good alternatives. We've really looked at, okay, how do we source those? What opportunities can there be to make product switch, and how can we actually reduce the number of licenses we're using? We've actually brought in a third party to help us to move faster and add additional IMPACT initiatives. The last thing I would also call out, IMPACT Program also means enhancing our revenue opportunities. Not just on the cost side, but what are we doing to drive better rates? Not just better rates, but better terms with our payers. We've talked a lot about, internally, we've reorganized our managed care team to integrate with our revenue cycle team, creating what we call a revenue integrity function, so that when we're at the table, we're not just looking at top line rate, but also the underlying terms. How are we dealing with authorizations, denials, payment terms? Don't have a lot of data points, but we do have one recently large completed managed care negotiation that we had to take to essentially the weekend before it expired because through the transparency data, we learned we were significantly underpaid in the market for our outpatient services, but weren't getting the type of traction that we felt was appropriate in our negotiations. We've had to get more aggressive, for lack of a better word, in our negotiations, in order to ensure while we still, in many of our markets are still, we think, the value leader inside of the market, but that we're getting reimbursed appropriately. Great. Switching gears to more the policy side, how are you thinking about the proposed changes to CMS's state directed payment programs, and what could that mean for your Medicaid exposure over time? Anything you'd like to highlight in terms of timing or where you feel most insulated? Yeah, there's probably not a lot, I'd say new there. Stuff comes out every day. We quantified our exposure over the full implementation of the triple B reductions in state directed payment programs at $150 million-$175 million by 2035. It's a long time between today and 2035. We'll see if those actually go in place the way that they were crafted. Oftentimes, when you have forward-starting reductions, you see those being delayed, deferred, changed. What we know is that, as the law's drafted today, that's our exposure. Going back to Dave's comment about Dave Caspers, again, it plays to that overall environment. We want to be in a position to execute, to operate, and win in whatever reimbursement environment that we're working in. As we look forward, I would expect our IMPACT programs to continue to expand and grow and work towards us enhancing our margins. We've historically talked about Ardent moving towards an adjusted EBITDA margin in the mid-teens. We've not factored, we've not sort of renewed that expectation off of the triple B cuts until we kind of get a better feel for what the environment looks like going forward. We continue to view the multi-year journey of the IMPACT programs as the way we continue to enhance our margins over time. Having said that, we do think there will be other opportunities. Assuming that the triple B cuts happen the way that they're crafted, we do think there are programs that exist today at the state level that we would be eligible for would those cuts happen that could be partial offsets. We would also think that there would be incremental state-level programs that could provide some offsets, too. We can only control the controllables, and that's what the focus on our IMPACT programs really drives down to. As we're thinking about the proposed Medicaid work requirements too, what are you thinking about around potential impact to coverage or demand across your markets there? The recently issued CMS rule there was really consistent with our expectations. The number, the disenrollment there at full run rate of 3 million lives was a little bit lower than some of the other estimates we had seen off the CBO and other third-party research. It's certainly a challenge to try to model and forecast that. Certainly, it's been part of our business planning and our strategy. I'll come back to Alfred, what he just mentioned there. We are preparing and equipping the business to navigate through these crosscurrents, whether it's the Medicaid disenrollments, the exchange NBPP, final parameters rule that came out, where you're likely to have a little bit more exchange disruption on the margin next year. We are preparing and equipping to navigate through these and as well as into 2028 and beyond with the DPP headwinds there. Largely, as expected and that will likely stagger a little bit, so you may not really reach that full run rate impact until you move towards the second quarter of the year. Overall, consistent with our expectations. Awesome. Pivoting over to the margin side, would love to talk a little bit about the professional fees. I know they've been a multi-year headwind for you guys, and I'm curious where things stand today and what you're seeing as you progress through the year. It certainly has been sort of a we'll call it a three-year journey, which we really go back to the changes to the No Surprises Act and how that has sort of shifted responsibility for, or created an environment for a lot of compensation has shifted out of the payers to the providers and how that has worked its way through essentially every specialty now, starting with anesthesiology, hospitalists, and then particularly acute on the radiology side in 2025. We think essentially all contracts have now been reset, some, I'll say multiple times. While we don't sit here and imagine that or expect that that will go to just sort of an ordinary cost-of-living type inflationary environment, we do think as we get to the back half of 2025 and start lapping some of the big step-ups, that we will see a deceleration of the rate of increase. So far, Q1, we were right on track almost to the penny with our expectations. That gives us confidence in that we've sized this right for 2026. As we go forward, part of the question is, how do we think about this for 2026 and beyond? I do think, again, the reset has happened. We still will see inflationary pressure, and likely at above inflationary rates, we see a deceleration. I think working with our vendor partners is a part of that, ensuring how are we optimizing our efficiency in partnership with those vendors. I do think, I can imagine as radiology, for example, technology will be a helper in terms of easing the burden of not having enough radiologists. Again, I'm optimistic that the rate of change will be decreasing going forward. Great. Another headwind for you all recently, or an important theme lately has been around denials. Can you discuss what you're seeing in terms of payer behavior today, and particularly around denials and reimbursement trends? It's certainly been an extraordinarily challenging element for the whole industry, Ardent specifically, over the past two years. We saw a big step-up in the first half of 2024, got surprised with another leg up in denial activity in the last half or into Q3 of 2025. Starting from a very elevated level, I would say we've seen both a stabilization and maybe a little bit of an improvement. I would say, I would remiss not to mention the very difficult work we've done internally to standardize a lot of our processes, work with our vendor, Ensemble Health, to ensure that advantage of their AI in both responding to and avoiding denials up front, working on the collections on the back end. Early positive signs out of that work, and I think you're hearing from the MCOs better performance on their own internal underwriting, and maybe that has an element. Again, I'm not certainly ever going to declare victory on that dimension, but I do think there are early positive signs of potential improvement. Again, I would say not inconsistent with our expectations for the year. Great, I love that you mentioned some of your AI initiatives. Could you just expand a little bit more what you're doing company-wide? Yeah. How that fits into your overall strategy? I think AI hits on almost every dimension, and a lot of that ends up being procured through the partners that we work with. I've already talked about Ensemble and how they've made nine-figure investment into AI over the past 12 months. It also touches on the delivery of care, and I think that's probably a little bit of slower in terms of how it gets implemented. We, for example, everybody talks about their AI scribe capability. We work with a company called Ambience, where we went from a pilot program to a full organizational deployment within a 12-month time period, and with extraordinarily high physician satisfaction, enhancements to physician productivity. I think the reduction in documentation time is something like five hours per physician, which now means that we can address some of the access and see more issues and see more patients. We're actually now capturing the richness of the interaction because if something wasn't documented, it can't be billed even if it happened. Now it improves the documentation for purposes of ensuring that we're compensated appropriately. Another example. At the back-office level, Ardent has kicked off a transition to a new EHR, ERP. Workday is our selected ERP. That will be a two-year implementation, which I think comes at the perfect time because it allows us to re-engineer our processes while the AI revolution is happening. It's coming at a perfect time. Workday and that ERP implementation will bring a lot of embedded AI with it, as does, for EHR, we're on a single instance of Epic. Epic continues to incorporate a lot of AI into their platform, which we then have access to through our single instance of Epic. Yeah, it becomes a part of everything you do and touch. Yeah, I would say it's not one initiative. It touches almost every initiative. Great. Maybe jumping back, I know we've talked quite a bit about the IMPACT Program today, but would love to hear just what that looks like day-to-day across the organization, what you see could really drive the most impact near term. I know you've already mentioned broadly, but if you want to go into detail about any areas that might be driving additional improvement thus far. Yeah, I'll touch on top of mind, Dave, please jump in on any I miss. I do think it starts at kind of the blocking and tackling at workforce management/productivity. It's the largest expense in any health system, how are we organized? How are we optimized on our workforce management dimensions? I've touched on supply chain initiatives. I've touched on IT licensing initiatives and those revenue enhancement initiatives, although I'm sure I'm leaving some things out. No, it's okay. As I've mentioned, we are bringing in a third-party consultant as well, just because we don't want to leave any dollars on the table. We think really having how we win going forward will be to out-execute, and that is the rallying cry around, and again, is a lot of the genesis of how we think Dave is positioned to lead the company going forward. Great. I also want to talk about your outpatient strategy, and where that can potentially go long term, and some of your key priorities around your ASC build-out. Yeah, it's certainly been a long-term strategy. As we sit here today, we're still underrepresented on the outpatient assets inside of our markets. While we have a market-leading clinical enterprise, we believe in most of our markets. We have, in the last two years, grown our urgent care enterprise which is often the front door to the health system in today's environment. We moved from only a handful of urgent care to now 46, I think, across our markets, which is, I don't want to ever call that built-out, but it's closer to built-out than not. Still underrepresented on some of the other sites of care. So ASCs, we only have a handful. We have a couple under construction now. Growing that footprint will be a combination of M&A and de novo, maybe skewing a little bit heavier towards de novo, just given the dynamics and the costs and the multiples involved in often purchasing those types of assets. We do think there will be opportunities on freestanding ED, and perhaps even the opportunity to have freestanding ED combined with urgent care, because so often you have ED needs level patients showing up at urgent care and vice versa. Anyway. That all attributes to a little bit of a step-up in CapEx. Historically, the company has run a little bit under 3% of revenue in CapEx spend. This year, it will be over 3%, the growth over time largely attributable to that de novo investment in ambulatory sites of care. We could see it even get to the mid-threes here in the next couple of years as that investment in our existing markets continue to ramp. Going back to some of the other underlying dynamics that we see in the industry, we do see the consistent movement of certain things out of inpatient settings into outpatient settings, meeting the consumer where they want to be met in potentially lower cost settings. Yeah, that continues to be a strategic imperative for the organization. I think that's a great transition. Just overall, would love to hear how you're thinking about capital deployment today across internal investment versus M&A. Yeah. No, great question. Again, the company historically has been pretty judicious on its CapEx spend, running historically under 3% of CapEx, which our revenue for CapEx, which was relatively low for the industry, although somewhat reflecting the markets we are in, as well as the fact that we have maybe more of an OpEx investment relative to our size in our clinical enterprise because of the types of the markets we are in. As I mentioned, we would see a little bit of a step-up in that completely driven by our investments in ambulatory sites of care. We are going to continue to be active in the M&A market to source new markets to enter. We want those markets to be similar to the types of markets that Ardent is in today. We want to be in high growth, high population growth, higher economic growth type markets. We think that's a rising tide. hasn't been a lot of opportunities at the right multiples to enter those markets. kind of a bad news, good news, we do think, as with some of the crosscurrents that we're facing into, will likely yield more interest in potential M&A opportunities going forward. Those will really be opportunistic. We've maintained an extremely balance sheet with 2.5 times lease-adjusted net leverage. We would have the opportunity to take on more leverage for the right acquisition. Although, as we sit here today, have over $1 billion in capacity for M&A, should the right opportunity come along. The message I would want investors to be clear on is that will be done in an extremely disciplined way, and that we have so much opportunity to grow margins, to build out our existing markets, that doing a bad deal, which could just be a good deal at a bad price, is still a bad deal. Our first order of business is to be very disciplined. The element of capital deployment, obviously, we have a share repurchase authorization that we put into place in the fourth quarter of last year for $50 million. We executed $3 million of that in that quarter. again, that's an element that we may pull that lever, given certain pricing and market conditions. want to just remind you that that's out in the market as well. Great. as we wrap up here, what do you think investors most often misunderstand about the Ardent story today? Yeah. I come back to the basics that while the industry is considered as a whole, what are the things that make Ardent different, is where I focus. We are smaller than our public peers, but I would like to think that also allows us to be more nimble, and I do think that that matters in the current operating environment, in the go-ahead environment. We have an opportunity to expand our margins because we have been less optimized historically. Again, a bad news, good news, that I think that allows us to grow our margins going forward. I come back to Ardent has really been focused on being in the right markets, and we define the right markets as being markets that are growing faster, both population and economically, as well as having a model that allows us and takes advantage of having partnerships with and other not-for-profits, which yields, in many cases, type relationship. We cite our relationship as an example in East Texas with University of Texas Health System, leveraging the brand that UT brings, as well as they've built a medical school on our campus. The access that it gives us to train clinicians, doctors, nurses, really yields a very powerful relationship. I think it is a differentiator in the Ardent story. Again, we're very excited about the future, both as a continuation from the thesis that we've had and, again, under Dave's leadership and the operational enhancements to the enterprise. Sounds great. I want to thank you both for joining me today and joining us here at the Goldman Sachs Healthcare Conference. Our pleasure. Thank you. Thanks.