Ardent Health Partners, LLC Q3 FY2025 earnings call

• 3Q Results and Strong Demand: Generated strong volumes and revenue growth driven by improving surgical trends and industry demand. Markets growing 2x-3x faster than national average. Admissions grew 5.8% in Q3, year-to-date admissions up 6.7%, surgical volumes up 1.4% in Q3.
• Industry Headwinds Impacting 2025 Earnings: Persistent professional fee expense growth (accelerated to 11% in Q3 vs. previous expectations), and resurgent payer denials in Q3 after stabilizing earlier. These account for the revised adjusted EBITDA guidance.
• Actions to Close Earnings Gap: Under IMPACT program, initiatives like contract renegotiations, targeted staffing adjustments, and expanded margin enhancement and efficiency initiatives are underway. Immediate priorities include contract renegotiations and staffing adjustments, with additional initiatives ramping in early 2026 to impact revenue cycle, labor, and supply chain performance.

Ardent Health's third quarter performance showed strong volumes and revenue growth. Revenue grew 8.8% to $1.58 billion in the quarter, with adjusted EBITDA increasing 46% to $143 million and margins expanding to 9.1%. Admissions grew 5.8%, and surgical volumes improved. Year-to-date, adjusted EBITDA is up 30%, and lease-adjusted net leverage has improved. Revenue contribution by product segment isn't specifically detailed, but overall financial performance includes these key figures.

• Revised 2025 adjusted EBITDA guidance to $530 million to $555 million, reflecting industry cost pressures. Revenue guidance remains unchanged at $6.2 billion to $6.45 billion.
• IMPACT program initiatives expected to generate an annual run rate benefit of more than $40 million starting in 2026. The program is ramping and expected to contribute measurable impact across various areas.
• Will provide 2026 guidance in February, considering pro fees, payer dynamics, and IMPACT program progress.

• Industry-wide cost pressures, including persistent professional fee growth and resurgent payer denials, which have impacted adjusted EBITDA guidance.
• Social inflationary pressures in the New Mexico market leading to an increase in professional and general liability reserves.
• Accounting estimate changes, such as the transition to the Kodiak RCA net revenue platform, resulting in a $43 million revenue reduction in Q3.

Q: Jason Cassorla asks about 2026 guidance and share repurchases.

A: Marty says they'll provide 2026 guidance in February, and Alfred states it's premature to speak to share repurchases but management is committed to optimizing shareholder value.

Q: Whit Mayo asks about malpractice development and revenue cycle impact.

A: Alfred explains the New Mexico malpractice charge is specific to the market and social inflation, and the AR charge is a change in accounting estimate with no long-term impact on revenue yield.

Q: Scott Fidel asks about payer denials and 4Q modeling.

A: Marty says payer denials are across managed payers, and Alfred clarifies the $15M-$20M is related to revenue per adjusted admission and that payer behavior is expected to remain elevated with actions taken to address it.

Q: Kevin Fischbeck asks about 2025 base modeling and margin pressure vs growth.

A: Alfred says it's prudent to reset for current headwinds, and Marty states growth initiatives continue with the balance sheet supporting expansion despite margin pressure.

Q: Matthew Gillmor asks about professional fees drivers.

A: Marty says professional fees have cycled, with recent pressure on radiology, and better visibility in contract renewals.

Q: Benjamin Rossi asks about commercial negotiations for 2026 and beyond.

A: Alfred says close to 3 quarters contracted for 2026, headline rates hedged down, and focus on yield under contracts rather than just top-line rates.