TENET HEALTHCARE CORP Q4 FY2024 earnings call

• Delivered outstanding 2024 performance with $20.7 billion operating revenues and $4 billion consolidated adjusted EBITDA (13% growth over 2023).
• Portfolio transactions in 2024 included selling 14 hospitals for $5 billion gross proceeds, deleveraging balance sheet, and adding nearly 70 ambulatory surgical centers.
• Returned capital to shareholders via share repurchases, retiring ~14% of outstanding shares for $1.12 billion since Q4 2022.
• USPI had strong Q4 adjusted EBITDA growth (14%) and 8.6% increase in same-facility system-wide revenues.
• Hospital segment benefited from strong same-store revenue growth, high patient acuity, and favorable payer mix.

USPI: Fourth quarter adjusted EBITDA grew 14% over last year with an adjusted EBITDA margin of 42.1%. For full-year 2024, USPI generated $1.81 billion in adjusted EBITDA, representing 17% growth over 2023, with same-facility revenues growing 7.8%. High acuity volume growth was highlighted by total joint replacements in ASCs up 19% over prior year. Hospital: In 2024, despite selling 14 hospitals, it generated $2.185 billion of adjusted EBITDA, a 9% growth over prior year. Fourth quarter adjusted EBITDA was $518 million, with a margin of 13.6%. Same-hospital inpatient admissions increased 5% and revenue per adjusted admission grew 0.6%.

• Projected full-year 2025 adjusted EBITDA $3.975 billion to $4.175 billion (7% growth midpoint).
• USPI expected 8.5% adjusted EBITDA growth midpoint in 2025, driven by 3%-6% same-facility revenue growth, acuity strength, and M&A/de novo sites.
• Hospital segment expected 5.7% adjusted EBITDA growth midpoint in 2025, driven by 2%-3% adjusted admissions growth and strategic capital deployment.
• Intend to invest $250 million annually in M&A for ambulatory space and add 10-12 de novo centers in 2025.

• Potential regulatory changes, including site neutrality rules affecting ASCs.
• Impact of Medicaid policy changes and potential administrative cuts, though USPI has minimal Medicaid exposure.
• Competitive landscape in the ASC space and potential challenges in executing de novo and M&A plans.

Q: ASC transaction competition and de novo growth?

A: Saum says de novo development is critical for value shift, competitive landscape unchanged, and de novo long-term returns on capital higher due to lower building costs and shorter time frames.

Q: Fourth quarter seasonal uptick and normalization?

A: Saum notes Q4 seasonality tempered by deductibles and weather events, but general demand environment remains strong.

Q: USPI competitive landscape and de novo partners?

A: Saum says competitive landscape assessed by center counts, de novo growth multipronged with existing and new partners, and USPI works effectively with both partners and without.

Q: USPI ASC growth expectations and cardiology procedures?

A: Saum anticipates continuing focus on orthopedics, with cardiology procedures evolving slower due to patient safety and CapEx considerations, but USPI will participate cautiously.