HCA Healthcare, Inc.

Good morning and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen, and our CFO, Mike Marks. Sam and Mike will provide some prepared remarks and then we'll take some questions. Before I turn the call over to Sam, let me remind everyone that should today's call contain any forward-looking statements, they're based on management's current expectations. Numerous risks, uncertainties, and other factors may cause actual results to differ materially from those that might be expressed today. More information on forward-looking statements and these factors are listed in today's press release and in our various SEC filings. On this morning's call, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure. A table providing supplemental information on adjusted EBITDA and reconciling net income attributable to HCA is included in today's release. This morning's call is being recorded and a replay of the call will be available later today. With that, I'll now turn the call over to Sam. All right.

Thank you, Frank, and good morning to everyone. The company's results for the second quarter were positive across the board and reflected strong demand for our services. In addition, our teams continued to execute our strategic plan effectively and produce positive outcomes for our patients while also enhancing efficiencies in our facilities, including better throughput and case management. I want to thank our HCA colleagues for their outstanding work and their continued pursuits to innovate and deliver on our mission. As compared to the prior year, diluted earnings per share, as adjusted, increased 28% to $5.50. Consistent with the first quarter, we saw broad-based volume growth across our markets and service lines. On the same facilities basis in the second quarter, Inpatient admissions grew 5.8%. Equivalent admissions grew 5.2%. Emergency room visits increased 5.5%. Inpatient surgeries were up 2.6%. Outpatient surgery cases were down 2%. And like the first quarter, the declines were mostly explained by lower volumes in Medicaid and self-paid categories. Similar to the past few quarters, other volume categories, including cardiac procedures and inpatient rehab services, experienced strong growth. Payor mix improved year over year, with commercial volumes representing 36.2% of equivalent admissions. And lastly, the acuity of our inpatient services, as reflected in our case index, increased slightly as compared to last year. These factors help generate the same facility revenue growth of 10%. Also in the quarter, we progressed further on our cost agenda and produced solid operating margins. As we transition to the last half of 2024, we are encouraged by the company's results. We believe the increased investments we are making in our people and facilities along with our disciplined approach to operations, will continue to produce positive outcomes for our stakeholders. In closing, given our year-to-date performance and the backdrop of strong demand that we forecast for the remainder of the year, we have updated our guidance for the year as indicated in our press release. With that, let me turn the call over to Mike for more details.

Thank you, Sam, and good morning, everyone. The second quarter showed continued solid performance with strong demand, improved margins, and a balanced allocation of capital. Sam reviewed our top-line results, so I will cover operating costs in the quarter. Operating costs were well-managed, resulting in a margin improvement of 100 basis points to prior year and sequentially to the first quarter. Labor costs as percent of revenue improved 200 basis points from the prior year, and we continued to see good results on contract labor, which declined 25.7% from the prior year, and represented 4.8% of total labor costs. Supply costs as a percent of revenues improved 50 basis points from the prior year. On other operating costs as a percent of revenue, they did grow compared to the prior year, but it remained relatively consistent for the past four quarters. We were encouraged that year over year, same facility professional fee cost growth moderated to approximately 13% in the second quarter, which compares favorably to the 20% increase we experienced in the first quarter. Adjusted EBITDA was $3.55 billion in the quarter, which represents a 16% increase over the prior year and included a modest benefit from Medicaid supplemental payments. As a management team, we're very pleased with the operational performance of the company. Now moving to capital allocation, we continue to deploy a balanced strategy of allocating capital for long-term value creation. Cash flow from operations was just under $2 billion in the quarter, which is a decline of $500 million the prior year, driven by increase in tax payments and timing of Medicaid supplemental program accruals and cash receipts. Capital expenditures totaled $1.28 billion, and we repurchased $1.37 billion of our outstanding shares during the quarter. We also paid about $170 million in dividends. Our debt to adjusted EBITDA leverage remains near the low end of our stated guidance range, and we believe we are well positioned from a balance sheet perspective. Finally, in our release this morning, we are updating estimated guidance for 2024. For revenues, our new guidance range is $69.75 billion to $71.75 billion. Net income attributable to HCA Healthcare, $5.675 billion to $5.975 billion. adjusted EBITDA $13.75 billion to $14.25 billion, and diluted earnings per share $21.60 to $22.80 per share. Based on the strength of our year-to-date results and our revised outlook, we estimate that share repurchases will be around $6 billion in 2024, subject to market conditions. With that, I'll turn the call over to you, Frank, for questions and answers.