Tenet Healthcare Corp. ((THC)) has held its Q4 earnings call. Read on for the main highlights of the call.
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During Tenet Healthcare’s recent earnings call, the overall sentiment was positive, reflecting strong financial performance in 2024. The company showcased its strategic growth, particularly in the United Surgical Partners International (USPI) segment, and highlighted significant share repurchases. However, challenges such as the impact of hospital divestitures and non-recurring Medicaid payments were acknowledged as potential headwinds. The results and outlook indicate a balanced approach to managing growth and operational efficiency.
Strong Financial Performance
Tenet Healthcare reported impressive financial results for 2024, with operating revenues reaching $20.7 billion and consolidated adjusted EBITDA hitting $4 billion. This marks a 13% growth over the previous year, demonstrating the company’s robust financial health.
Improved EBITDA Margin
The company’s full-year adjusted EBITDA margin saw significant improvement, increasing by over 200 basis points to 19.3% compared to the last year. This improvement underscores Tenet’s focus on enhancing operational efficiency.
USPI Segment Growth
The USPI segment was a standout performer, generating $1.81 billion in adjusted EBITDA in 2024, representing a 17% growth over 2023. The segment achieved impressive adjusted EBITDA margins of 42.1%, highlighting its significant contribution to the company’s overall growth.
Hospital Segment Performance
Despite the divestiture of 14 hospitals, Tenet’s Hospital segment delivered $2.185 billion in adjusted EBITDA, marking a 9% increase over the prior year. This performance indicates the segment’s resilience and ability to adapt to changes.
Significant Share Repurchase
Tenet demonstrated its commitment to returning capital to shareholders by repurchasing approximately 14% of its outstanding shares for $1.12 billion since late 2022, reinforcing confidence in the company’s financial strategy.
Deleveraged Balance Sheet
The year-end leverage ratio improved to 2.5x EBITDA, supported by strategic hospital divestitures and strong operational performance, showcasing the company’s efforts to strengthen its financial position.
Hospital Divestitures
The sale of 14 hospitals led to a reduction of $114 million in adjusted EBITDA from facilities that will not contribute in 2025, presenting a challenge for future revenue generation.
Supplemental Medicaid Payment Challenges
Tenet received $74 million in out-of-period supplemental Medicaid payments in 2024, which will not recur in 2025, highlighting potential revenue pressures moving forward.
Supply Cost Increase
The company reported an increase in supply costs to 18.3% of revenue, attributed to higher acuity procedures. This rise poses a challenge to managing costs effectively.
Forward-Looking Guidance
Looking ahead to 2025, Tenet Healthcare projects full-year adjusted EBITDA between $3.975 billion and $4.175 billion, indicating a 7% growth at the midpoint. The USPI segment is expected to grow its adjusted EBITDA by approximately 8.5%, with the addition of 10 to 12 de novo centers. The Hospital segment anticipates 5.7% growth in adjusted EBITDA, driven by increased admissions. The company plans to invest $250 million annually in ambulatory M&A and forecasts net operating revenues between $20.6 billion and $21.0 billion. Substantial free cash flow, projected between $1.8 billion and $2.05 billion, is expected after capital expenditures.
In summary, Tenet Healthcare’s earnings call presented a picture of strong financial performance, strategic growth, and forward-looking optimism tempered by certain challenges. The company’s robust results and projections for 2025 emphasize its focus on efficiency and shareholder value.
