Matthew Mardula

Matthew Mardula inquired about any acceleration in the trend of facilities outsourcing Environmental or Dietary Services, considering HCSG's significant market share, and the long-term growth potential of this outsourcing trend.

Answer

CEO Ted Wahl explained that HCSG sees strong demand, acting as a market maker in a sector with low outsourcing penetration (less than 15% for EVS, less than 8% for dining). He noted that outsourcing, especially for dietary services, has become more acceptable due to HCSG's value proposition and managerial expertise. Wahl emphasized no long-term limitations on growth, with continued execution on management development being key. He also provided an update on Genesis Healthcare, stating HCSG continues to provide services without disruption, with bid procedures approved and a potential sale closing by late spring or summer.

Matthew Mardula inquired about the outsourcing trends for Environmental and Dietary Services, asking if HCSG is observing an acceleration in facilities choosing to outsource, and the long-term growth potential within this market. He also requested an update on Genesis HealthCare's bankruptcy process, including any facility closures or transitions of ownership, and the new owners' receptiveness to continuing HCSG's services.

Answer

CEO Ted Wahl stated that HCSG, with over 80% of the outsourced market, sees demand for services exceeding capacity, acting as a market maker. He noted that outsourcing, especially for dietary services, has become more acceptable due to HCSG's value proposition and managerial expertise, seeing no long-term limitations to growth dependent on management development. Regarding Genesis HealthCare, Ted Wahl confirmed continued service provision without disruption, detailing the DIP loan and bid procedures approval, and an expected sale process timeline into late spring/summer.

On behalf of Ryan Daniels, Matthew Mardula inquired about the progress of cross-selling dining services to existing environmental services clients and the outlook for this strategy. He also asked for an update on the education segment's performance and outlook for the second half of the year.

Answer

Chief Communications Officer Matthew McKee explained that the new business pipeline is evenly split, but the preference is to lead with Environmental Services (EVS) and then cross-sell dining, a strategy with high demand as they are only 50% penetrated in the existing EVS base. Regarding education, he stated that while it's still less than 5% of total revenue, the company has seen nice wins, the returns are positive, and it remains a strategic commitment for growth.

Matthew Mardula, on for Ryan Daniels, asked about the anticipated impact of California's legislation restricting new Medicaid enrollment for undocumented immigrants. He also requested an update on the strategic plans for the hospital and pharmacy units acquired with Prospect.

Answer

President & CEO Brandon Sim acknowledged some exposure to this population, stating that a conservative estimate of a high single-digit to low-teens percentage impact is already factored into their scenario analysis. He described the acquired pharmacy as a value-added unit for managing Part B costs and noted the hospital is primarily used as an integrated care site, making it less exposed to fee-for-service trends.

Matthew Mardula, on for Ryan Daniels, asked about the anticipated impact of recent California legislation prohibiting new Medicaid enrollment for undocumented immigrants. He also requested an update on the strategic plans for the hospital and pharmacy units acquired with Prospect.

Answer

President & CEO Brandon Sim stated that the company has modeled this exposure and that his earlier conservative scenario of a potential high single-digit to low-teens percentage enrollment drop already accounts for this. He described the acquired pharmacy unit as a value-add for managing costs and the hospital as a core care delivery site within their value-based model, making it less exposed to fee-for-service trends.

Matthew Mardula, on for Ryan Daniels, asked about the potential impact of recent California legislation prohibiting new Medicaid enrollment for undocumented immigrants on Astrana's business. He also requested an update on the hospital and pharmacy units acquired with Prospect.

Answer

President & CEO Brandon Sim stated that the company has modeled this exposure and that the potential impact is already factored into its conservative scenario planning. Regarding the acquired assets, he described the pharmacy unit as a value-added capability for managing drug costs and the hospital as a key care delivery site within their value-based model, making it less exposed to fee-for-service trends. He added that the company is continuously evaluating its asset portfolio.

Matthew Mardula of William Blair inquired about the potential impact of increasing state-level AI regulation on Lifestance's business, asking if it represents a headwind or an opportunity.

Answer

CEO David Bourdon responded that Lifestance views AI as a supportive technology to enhance the clinician and patient experience, for example, by streamlining documentation. He emphasized that the company does not see AI as a replacement for clinician-provided care, positioning its strategy to align with a regulated environment.

Matthew Mardula, on behalf of Ryan Daniels at William Blair, asked for the expected growth trajectory for the Direct-to-Enterprise (DTE) business in H2 2025 and questioned the impact of competition on patient acquisition and retention in the payer segment.

Answer

CFO Ian Harris projected low single-digit full-year growth for DTE, with revenue ramping in Q3 and Q4 due to delayed deal closings. CEO Jon Cohen responded that competition is not a major factor, as Talkspace's growth is driven by the vast, underserved market for mental health services rather than market share battles.

Matthew Mardula, on for Ryan Daniels of William Blair, asked for the outlook on Direct-to-Enterprise (DTE) revenue for the second half of the year and inquired about the competitive intensity in the payer market.

Answer

CFO Ian Harris reiterated expectations for low single-digit full-year growth in DTE, with an anticipated ramp in Q3 and Q4 due to delayed deal implementations. CEO Jon Cohen commented that the competitive landscape is not a primary concern, as the total addressable market is vast and Talkspace's growth is fueled by the significant unmet need for mental health services.

Matthew Mardula, on for Ryan Daniels, asked how the next-generation OCS platform will improve penetration in the lung transplant market and its long-term growth potential.

Answer

CEO Waleed Hassanein explained the next-gen OCS Lung is designed to overcome historical concerns by reducing edema and enabling longer perfusion. He stated the goal of the large randomized trial is to deliver Level 1 evidence of superiority over cold storage, positioning OCS as the new standard of care.