Financial Data and Key Metrics Changes - First quarter revenue increased by 4% to $1.5 billion compared to the prior year, driven by a 2.7% growth in adjusted admissions and a 1.2% increase in net patient service revenue per adjusted admission [11][12] - Adjusted EBITDA grew by 2.5% to $98 million, with supply costs as a percentage of revenue declining by 60 basis points year over year [7][16] - Total cash at the end of the first quarter was $495 million, with total debt outstanding at $1.1 billion, resulting in a total available liquidity of $790 million [16][17] Business Line Data and Key Metrics Changes - Admissions grew by 7.6%, with inpatient surgery growth at 3.4%, while outpatient surgeries declined by 2.3% [5][12] - The growth rate of physician professional fees was 6%, down from 13% in the same period last year, indicating a moderation in cost growth [7][63] - The integration of 18 NexCare Urgent Care clinics is expected to generate additional downstream volumes in the Tulsa and Albuquerque markets [8] Market Data and Key Metrics Changes - The company is experiencing strong demand in its existing markets, with an average market growth rate of about 3% per year [40] - Exchange volume growth was significant, with admissions in the quarter growing by 40%, contributing to mid-single digits as a percentage of revenue [60] Company Strategy and Development Direction - The company is focused on expanding its outpatient and acute care hospital footprint, supported by approximately $500 million in cash and a favorable lease-adjusted net leverage ratio of three times [4][9] - A disciplined approach to evaluating M&A opportunities is being pursued, with increased interest in the company's joint venture model from potential academic and non-profit partners [8][9] - The company aims to achieve margin expansion of 100 to 200 basis points over the next several years through operational initiatives and supply chain efficiencies [7][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of demand, attributing strong volume growth to operational improvements and the strength of the markets [40] - The company reaffirmed its full-year 2025 financial guidance, indicating a solid start to the year and strong momentum [9][17] - Management noted that while payer claim denials have increased, they do not expect a significant impact compared to the latter half of 2024 [13][28] Other Important Information - The company is in the final stages of recruiting a Chief Development Officer to support its focus on M&A activities [4] - S&P upgraded the company's credit rating to B+ from B, reflecting improved net leverage and cash flow profile [17] Q&A Session Summary Question: Inquiry about seasonality and EBITDA decline - Management indicated that a sequential decline in EBITDA is not abnormal and attributed it to various factors including flu season impacts and timing issues [22][26] Question: Follow-up on elevated denials - Management confirmed that the increase in denials is consistent with previous trends and highlighted a slowdown in payments on clean claims [28][29] Question: Supply chain initiatives and opportunities - Management noted participation in a GPO and ongoing improvements in service line utilization as key areas for margin expansion [30][31] Question: Update on expansion initiatives - Management reported a growing pipeline for new market opportunities and emphasized the importance of strategic acquisitions [46][53] Question: New Mexico DPP program approval timeline - Management expressed hope for approval by the end of Q2, based on positive indications from state and CMS conversations [54][56] Question: Exchange volumes and payer mix - Management confirmed strong exchange growth, with admissions increasing significantly and operating in mid-single digits as a percentage of revenue [60]

Financial Data and Key Metrics Changes - In Q1 2025, total revenue was $560 million, a decline of 5% year over year due to lower volumes [15][16] - Adjusted EBITDA for the quarter was $229 million, with a margin of 40.9%, reflecting a year-over-year margin decline of 130 basis points [17] - Adjusted free cash flow amounted to $145 million at a 26% margin, which was 120 basis points higher year over year [19] Business Line Data and Key Metrics Changes - Average units on rent decreased by 5% year over year for modular and 16% for storage [15] - Total leasing revenue declined by $26 million or 6% year over year, while delivery and installation revenue fell by $12 million or 12% [16] - Value-added products and services (VAPS) represented over 17% of total revenue in the quarter, moving towards a long-term goal of 20% to 25% [18] Market Data and Key Metrics Changes - The pending order book increased by 7% year over year for both modular and storage products [7][11] - The Architectural Billings Index was reported at 44 in March, with Q1 non-residential construction square footage starts down 17% year over year [11] Company Strategy and Development Direction - The company aims to achieve $3 billion in revenue, $1.5 billion in adjusted EBITDA, and $700 million in adjusted free cash flow over the next three to five years [8] - The focus is on margin expansion initiatives and leveraging a portfolio of growth levers valued at $2.5 billion [8] - The company is actively adding sales resources and enhancing productivity tools to drive performance across local and enterprise accounts [12][14] Management's Comments on Operating Environment and Future Outlook - Management remains cautious due to macroeconomic uncertainties but is encouraged by the order book growth and sales activity [11][24] - The company expects total revenues to improve sequentially in Q2, projecting a decline of approximately 2.5% year over year, an improvement from Q1 [22] - Management is closely monitoring the impact of tariffs and economic conditions on demand, with a proactive approach to adjust operations as needed [24][26] Other Important Information - The company successfully refinanced its 2025 senior secured notes, extending maturity to February 2030 at a fixed interest rate of 6.625% [20] - A total of $45 million was returned to shareholders through share repurchases and dividends in Q1 [21] Q&A Session Summary Question: Comments on the order book and conversion time - Management noted that quoting activity has increased by 10% year over year, with no observed changes in conversion or cancellation rates [32][34] Question: Follow-up on VAPS and average pricing - Management explained that the shift to reporting VAPS as a percentage of revenue reflects the expanded portfolio and deeper penetration across product lines [36][38] Question: Q2 top line outlook and expected volume trends - Management expects Q2 volumes to improve sequentially, particularly in the modular segment, which typically sees growth during this period [42][43] Question: Insights on retail customer segment and demand - Management indicated that there has been no change in the outlook for retail-related demand, with ongoing positive conversations with larger accounts [50][51] Question: Discussion on share repurchases versus M&A - Management reiterated a balanced approach to capital allocation, remaining active in both share repurchases and pursuing M&A opportunities as they arise [52][54] Question: Clarification on local market conditions - Management confirmed that local market conditions have not improved, and efforts are focused on internal initiatives to enhance performance [98][100]

Financial Data and Key Metrics Changes - Total revenue grew by 1% year over year in the first quarter, driven by insurance repricing and stronger than expected interest income [21][24] - First quarter GAAP earnings per diluted share was $1.71, and adjusted earnings per diluted share was $1.99, with adjusted EBITDA margin at 12.6% [26] - Operating expenses decreased by 6% year over year, contributing to strong cash generation [25][26] Business Line Data and Key Metrics Changes - Professional services revenue declined by 2% due to reduced volume and the discontinuation of a specific client-level technology fee [23] - Insurance revenue grew by 1% in the first quarter, with insurance costs increasing by 4% [24][25] - Customer hiring was slightly below forecast, with approximately 340,000 total worksite employees (WSCs), down 3% year over year [21] Market Data and Key Metrics Changes - Net customer hiring is expected to remain low throughout 2025, reflecting a decline in SMB business confidence [6][9] - The decline in co-employed worksite employees was driven by reduced new sales compared to the prior year [21][22] - The company is seeing a shift in customer dynamics, with a focus on retaining clients through ASO offerings as it exits the SaaS-only business [34] Company Strategy and Development Direction - The company aims to achieve a compounded annual revenue growth rate of 4% to 6% and expand adjusted EBITDA margins to 10% to 11% [8] - New product innovations, including benefit plan bundles, are expected to simplify offerings and enhance sales processes [11][80] - The company is focusing on scaling its benefits brokerage channel and improving customer experience through proprietary technology [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving annual guidance despite economic uncertainties, citing strong customer retention and execution pace [6][18] - The company anticipates a strong second half of 2025, with expectations for improved sales results as strategic initiatives take effect [14][45] - Management noted that healthcare cost trends have stabilized, which supports pricing adequacy and future margin improvements [16][52] Other Important Information - The company announced a 10% increase in its dividend and repurchased approximately 1.2 million shares, reflecting confidence in its momentum [17][26] - The insurance cost ratio for the first quarter was 88.4%, aligning with expectations and indicating effective management of healthcare costs [25] Q&A Session Summary Question: Demand environment and sales conversions - Management acknowledged that macroeconomic uncertainty impacted sales conversions but expressed confidence in pipeline strength and upcoming initiatives [30][33] Question: Update on ASO offering and client retention - Management reported positive conversion rates into ASO products and maintained original assumptions regarding headwinds for FY 2025 [34][36] Question: Guidance and performance tracking - Management indicated that overall guidance remains on track, with slight adjustments in specific areas like expenses and attrition [41][42] Question: Healthcare utilization trends - Management confirmed that healthcare cost trends have stabilized, with low double-digit increases persisting [52][54] Question: Context of quarter-over-quarter changes - Management noted that the first quarter typically experiences normal churn, with some additional attrition due to healthcare pricing adjustments [62][64] Question: Importance of scaling broker channel - Management emphasized that both scaling the broker channel and maturing the sales force are critical for future growth [66][68] Question: Repricing strategy for healthcare book - Management indicated that the repricing strategy remains on track, with potential for quicker recovery if cost trends improve [74][76] Question: Introduction of benefit bundles - Management outlined plans to introduce simpler benefit bundles to streamline the sales process and enhance customer experience [78][80]