Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tenet Healthcare Corp (THC, Financial) reported net operating revenues of $5.1 billion for the third quarter of 2024, with a consolidated adjusted EBITDA of $978 million, marking a 15% increase over the same period in 2023.
- The company experienced strong growth in its USPI segment, with adjusted EBITDA reaching $439 million, a 19% increase from the previous year.
- Same-facility revenues grew by 8.7%, with orthopedic volumes and total joint replacements in ASCs up 19% over the prior year.
- Tenet Healthcare Corp (THC) raised its full-year 2024 guidance for adjusted EBITDA to a range of $3.9 billion to $4 billion, reflecting strong performance across its business units.
- The company has successfully deleveraged its balance sheet, achieving a leverage ratio of around 3 on an EBITDA minus NCI basis, and is well-positioned for future growth and shareholder value creation.
Negative Points
- The sale of Alabama hospitals resulted in a $100 million reduction in the company's 2024 revenue guidance at the midpoint.
- Despite strong performance, Tenet Healthcare Corp (THC) faces ongoing challenges with managed care denials and disputes, which increase administrative costs.
- The company is still in the process of adopting the two-midnight rule in the Medicare Advantage market, which has not been fully implemented.
- Hurricane impacts affected 148 facilities, with one still shut down, potentially impacting fourth-quarter performance.
- The company has not provided specific guidance for 2025, citing ongoing business planning processes and key assumption evaluations.
Q & A Highlights
Q: Could you clarify the ASC segment guidance for USPI, which seems to imply a sequential drop in EBITDA? Also, what are the expected tax payments in Q4?
A: The USPI EBITDA guidance actually implies an increase, not a drop. We expect $500 million at the midpoint for Q4, up from $439 million in Q3. Regarding tax payments, we anticipate about $700 million in Q4, part of the $875 million total deal payments for the year. (Sun Park, CFO)
Q: Can you provide more detail on your 2025 outlook, specifically regarding growth in same-store volumes?
A: We continue to see a strong demand environment and are not forecasting a decline. Our focus has been on cost-efficiently expanding capacity to accommodate volume without expensive contract labor. We expect robust demand to continue into 2025. (Saumya Sutaria, CEO)
Q: With strong free cash flow and reduced debt, are there plans to accelerate USPI development, increase buybacks, or consider dividends?
A: Accelerating USPI capital deployment is a priority as it creates significant value. We have flexibility to be proactive in capital deployment, including share repurchases, given our strong cash flow and deleveraged position. (Saumya Sutaria, CEO)
Q: Can you discuss the hospital segment's Q4 guidance, which seems different from usual trends?
A: The Q4 guidance reflects divestitures and less pronounced seasonality compared to USPI. We believe our Q4 guidance aligns with our commentary on good margins and demand environment. (Sun Park, CFO)
Q: How do you view the potential for margin expansion in the hospital segment following divestitures?
A: We focus on improving capacity utilization and optimizing operations. While we don't target specific margin numbers, we see ongoing opportunities for efficiency improvements and cost management. (Saumya Sutaria, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
