ARDT earnings call transcript, November 4, 2026

Thanks, Matt.

So, which, again, I think is indicative of the macroeconomic environment we're in and consistent with what we saw in Q2. Okay. And then, obviously, as you've gone through the... Review of the portfolio and thinking about moving forward strategically, getting everything on track. How should we think about development from here, JVs, acquisitions, opportunities? For inorganic growth, is that still a little ways out, or do you feel like the company's ready for that, and what kind of a pipeline might there be on those type of transactions? Appreciate your question. This is Dave. You know, the focus on having a strong foundation enables us to prepare as we find the right opportunities. One of the things that I'm really pleased with about our platform is that we're a bit ambidextrous. The right opportunity sometimes will or will not have JV partners. We know how to succeed in both of those environments. We are encouraged by the pipeline that's there. We are diligently looking at options to create a future. That is right for the long term value of ARDENT. That's where we're positioning the team with the foundation with an execution engine is working hard to create that visible path.

Need to unlock by reducing friction and ensuring that we're making the process of converting the top of the funnel to the bottom of the funnel easier. Great. And then just going into the next year, I'm sorry if I missed this, but. Have you outlined maybe high level tailwinds and headwinds we should consider for next year? No, thanks for the question. You know, we think it's too early to speak to 27 in terms of any level of specificity, but of course. That's not your question was really around headwinds and tailwinds. Tailwinds, I think, are pretty well known broadly as we think about Medicaid work requirements, as we think about HICs, as we think about just premiums. Increases further driving higher deductibles and higher co-pays. So obviously those are, again, well known throughout the industry. As we think about tailwinds and clearly our impact. Program, which is a multi-year initiative. So, you know, we're not going to stop at the $70 million this year. We're going to continue to load the conveyor belt with opportunity and we'll have the pull through from the existing programs and the RAP. of that into next year as well. So, and then obviously you probably saw the finalization of the OPPS last night and, you know, that should have a modest tailwind for us as well. And, and again, I cite that just as specific examples of, of certain headwinds and tailwinds. We'll look forward to, you know, providing a fulsome bridge when we, when we report year-end results.

One thing, just Dave here, one thing I really appreciate about our team and our strategy most is that we work really hard to control the controllables and to improve those things that are within our objective to maximize the value, no matter the headwinds or tailwinds that come and, and that. is the foundation that is building consistency and reliability for our future.

Dave here Ben you are thinking right on the money on how capacity IQ drives us to smart demand smart acuity and smart patient care, we are definitely aimed in that direction to be sure. that the tools that the team needs in order to grow that business are lined up that the facility maintenance happens in a way that expedites access and and and care, but that is the thinking of capacity IQ. is, you know, a disciplined smart growth approach care and margin at the same time.

Got it. And then just a quick follow up as the impact program becomes kind of ingrained in your operating culture there. You know, what are some things as you look forward additional potential levers you can pull on that? To continue to move that forward. Yeah, I appreciate your question. And you are spot on. You know, impact is a way of life for us. That strategy is a way of life for us. And it will always have a conveyor belt. of projects and opportunities that strengthen our value, whether it is workforce enhancements with productivity, whether it's optimizing supply chain with contracts and drug lists, whether it's AI efficiencies that make care. Efficiency easier or its revenue cycle excellence tools, you're going to see that we're going to keep that conveyor belt very full, very focused, because frankly, that's what sharpens our execution. And improves our value.

Those are the areas that the work is getting done so that the top of the funnel that has that health can flow through in a way that the customer gets what they need in the timeline that they can get it accomplished.

What that would imply from like an annualized run rate or like a fourth quarter exit rate for us to think about for next year. You know, I'm getting to something close to like a 20 million, maybe higher kind of benefit as as what you've implemented this year kind of runs in the next year. But just any thoughts. around how we think about the impact, the flow through of that into the fourth quarter, as well as, you know, the benefits into 27 would be helpful. Thanks. Sure. No, thanks for the question, Jason. Yeah, I think Dave's been. And clear as we think about impact, it's not a project. It's a way of life. And so when you think about a conveyor belt, it moves at a, you know, we'll call it at a constant speed. So to your point, there will be a wrap into next year. And there will be growth from Q3 to Q4 as that, you know, we consistently load initiatives into our impact set of initiatives. So to go back to the genesis of the question, though. We would expect that wrap from the 70 to be, you know, call it if you just kind of do the math of normalizing, you know, it would be in the 20 to 25 million dollar range. Now, again, I would go back with caution not to. As you think about next year, too early to put full quantification on all the headwinds and tailwinds. But if we just isolate on the wraparound of this year's initiatives before we get to next year's initiatives, we would put that as a 20 to 20.

$25 million tailwind.

Thanks, Sean.

Dave here. You know, as our teams focus on operational excellence and strengthening margin, it gives us very clear lens on how we best optimize and perform in the operating room and other areas where we leverage. Professional support teams have been very diligent about all of that work and it's paying off. And of course, it takes time and it's delicate to hold. And it is an important part of how we perform on an ongoing basis. So I'm very pleased at how our teams are negotiating through those situations, how they're organizing through those situations, and how they're optimizing through those situations without hampering any potential volume. And if we just look at the numbers underneath of it, Sean, I think it's been good progress this year, 13% in Q1 year over year, 10% Q2, called 7.5% Q3. We've been clear that we were expecting a decline to highs. Single digits over the back half. And that trend may not always be linear, right? You can have a little bit of spikes in any quarter. I would always focus you to kind of think about it longitudinally. We would. Expect that next year, you know, it will still be, you know, an above inflationary rate of increase in this area, but we would expect the overall rate of increase in 27 to be lower than what we experienced on the whole in 20. Okay, great. Thank you. And then the rollout of the ambient documentation tool that Dave, you mentioned in the top part of the call, is that done now? Do all the clinicians have access?

Access to those capabilities. And you said it was very impactful in helping drive productivity and enabling them to see more patients each day. Is there any kind of quantification you share around like how much of an enhancement this has been for productivity?

Sure. First of all, we reached our one and a half million encounters mark and we're picking up speed, which is great. Secondarily, of all the things that have benefited providers that they feel most excited about. This is one of those tools that is good for efficiency. It is good for the patient care. It is great for the provider's way of life to get some time back. We have about nine. 100 providers of our total 2,000 that are up and running, 2,000 employed and affiliated. So we have a ways to go. And, you know, those tools and technologies are finding new places to connect dots to improve things. So we're very early on. And if I had to say, you know, even what base or where I'd first base at moving forward with this and a long ways to go, it will have impact over time to strengthen coding, et cetera, and drive care efficiency. What we do know for sure is the math and science shows about an 8% productivity gain. Today, we are at that mark as we look to advance, you know, more providers. In the future, and use it in places that demonstrate even more value. But we're very encouraged by the results.

Thank you for the question.

I'll start with your comment. On the one-to-one, we would actually, you know, as we have looked at the data of just an exchange patient who came in, saw us in 25, and then saw us again in 26, and were they uninsured or did they have it? their coverage. We actually found a majority showed up with other coverage, whether that was, you know, could they found commercial coverage, whether they were able to qualify for Medicaid. Out of the exchange book. So, you know, we would expect that, you know, while I would certainly expect it will have an impact on uninsured, continue to have an impact similar to what it was. In 2026. Again, I would expect a significant amount of that population to find other coverage. So, yeah, we've talked about, you know, clearly these will be another headwind as we go into next year, the Medicaid work requirements. We'll be, you know, I'll say new above what we saw from a 26 perspective. But too early to talk about as we think about all of the headwinds and tailwinds for next year to put a quantification on that as we. really do our work preparing for for next year. Thank you. And then on the reduction in salaries, wages and benefits this quarter, can you break out the benefit from like the workforce reductions versus contract labor and how much of the quantified 15. or 20 million of, you know, those workforce reductions that you would size are now going to be in the fourth quarter? And just generally, how should we think about the run rate of this line going forward? Sure. This is Alfred.

Yeah, clearly, you know, we're very happy with all of the progress we've made. Clearly, it's been the biggest component so far in terms of the pull through of our impact initiatives and in controlling the control. And clearly, the reduction in contract labor has been a significant component of controlling SWMB. As we've said, it's gone from three and a half percent. SWMB, you know, all the way down to two percent, which reflects a 45 percent reduction. So relatively. But, you know, we continue to focus on other aspects of SWMB, whether that's our overhead load. Whether that's our efficiencies and our organization structure, you know, all three. So, again, I would say in the quantum of opportunity, that's been the nearest and earliest. For us to actually have in the largest component of our 70 million dollar impact impact this year. Adding adding on to Alfred's answer here, which is sort of implied, but I want to make it really clear our. Our H.R. teams are doing an exceptional job at picking up the pace on speed to hire. I bring this up because it would be easy to imagine the contract labor going back if all we did was constrain that. That is not what's happening. Operational excellence runs all the way through who we hire, how we hire, the speed to onboard to ensure that what we're building is sustainable and durable over time. Operator, why don't we go ahead and take one more question?

elements on operating costs and strategic projects, I guess within your JV model, just curious how your partners have reacted to the changes and whether you're getting any pushback to the operational rigor being put forward.

The impact, of course, has been very strong. Our JV partners obviously operate in the same business environments that we do and experience many of the same challenges. We do. You are astute, though, in noticing that we're moving a little faster by pulling hard work forward so that we can set the company up for advantages by doing so. That does come with. Some pressure and pain. And as we navigate our future to be excellent in all three categories, excellent in care, excellent in culture, and excellent in the financial value that we create for one another, that is an important part of us doing that well in a JV structure. Today, tomorrow, and in the future.