Tenet Healthcare Corporation

Good morning. Welcome to Tenet Healthcare's second quarter 2024 earnings conference call. After the speaker remarks, there will be a question and answer session for industry analysts. If you'd like to ask a question at that time, please press star 1 on your telephone keypad. Tenet respectfully asks that analysts limit themselves to one question each. I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin.

Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's second quarter 2024 results, as well as a discussion of our financial outlook. Tenet Senior Management participating in today's call will be Dr. Sam Sartoria, Chairman and Chief Executive Officer, and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenanthealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenant is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the risk factors discussed in our most recent Form 10-K, and other filings with the Securities and Exchange Commission. And with that, I'll turn the call over to Sam.

Mr. Thank you, Will, and good morning, everyone. Our second quarter performance exceeded our expectations and extends our track record of consistently strong operating results driven by fundamental growth and disciplined operations. In the second quarter, we reported net operating revenues of $5.1 billion. Consolidated adjusted EBITDA was $945 million, representing growth of 12 percent over second quarter 2023, with an adjusted EBITDA margin of 18.5 percent. USPI produced another very strong quarter with $447 million in adjusted EBITDA, representing 21 percent growth over second quarter 2023. Same facility revenues grew 7.1%, and adjusted EBITDA margins remain robust. Orthopedic volumes were strong, with total joint replacements in the ASCs up 23% over prior year, coupled with ongoing growth in urology and GI procedures. Acuity and payer mix were strong. During the quarter, we expanded our reach by adding 11 new centers, including a new partnership with the Florida Orthopedic Institute in three surgery centers that perform over 15,000 cases annually. You may recall that we acquired a larger number of centers in the first quarter of this year. The integration of those centers is on track and the operating performance of the acquired centers has been in line with our expectations. We continue to be pleased with USPI's de novo development activity with nearly 25 centers currently in syndication stages or under construction. Turning to our hospital segment, adjusted EBITDA was $498 million in the second quarter of 2024. Same store hospital admissions grew 5.2% as we are taking advantage of a strong utilization environment by opening up capacity. Second quarter 2024 revenue per adjusted admission was up 5.7% over the prior year, reflecting continued strength in acuity and payer mix. Cost control was excellent. We are making significant investments to expand our network to support growth in our markets. Soon we will open our new hospital in Westover Hills near San Antonio. This hospital will expand capacity in a geography that is growing at six times the national average. The hospital will focus on procedural services with state-of-the-art operating rooms and cath labs, a large emergency department, and an entire floor devoted to women's services. I'd like to take a moment to thank, again, the Tennant and Conifer colleagues who worked to respond to the cybersecurity attack that took place at Change Healthcare earlier this year. In addition, I would note that Conifer continues to deliver outstanding cash collection and AR days results. Turning to our full year guidance. At this point in the year, due to organic outperformance in both of our business units, and our optimism about the rest of the year based upon fundamental strengths, we are raising our full year 2024 adjusted EBITDA guidance to a range of $3.825 to $3.975 billion, which represents an increase of $300 million or another 8% at the midpoint of the range over our prior guidance increase announced after Q1. Before turning the call over to Sun, I'd like to spend some time discussing our capital deployment framework. As we fully emerge from the pandemic, our repositioned portfolio of businesses is generating stronger results with attractive margins and strong free cash flow generation. The mix of businesses can thrive in any variety of political and regulatory environments as the fundamental tailwinds in the ambulatory demand for USPI the high acuity program needs for our hospitals in growing markets, and the need for efficient, effective healthcare services like those from Conifer are strong in the marketplace. In terms of capital deployment going forward, our top capital priority remains the expansion of low-cost, high-quality ambulatory surgical centers for the communities around the country. This is a very fragmented marketplace, and we will use our disciplined approach to improve access, patient care, and performance for our physician partners to create value. Due to our strength in cash flow profile, we have increased our planned 2024 capital spend per available hospital bed above recent levels. These investments will fuel future organic growth. We've built a data-driven culture and will continue to invest to improve patient experience and clinical quality. Just as we were one of the industry's early movers in capturing savings in our offshore captive global business center, we are now investing in selected AI-enabled technologies to enhance our clinical and administrative efficiency. We embrace the opportunity for change that can ultimately improve our future earnings and cash flows. We have an ongoing commitment to deleverage the balance sheet and have retired $2.1 billion of debt so far in 2024. Our current leverage ratio on an EBITDA minus NCI basis is 3.27 as of June 30th, 2024, demonstrating our focus in this area. And finally, we will return capital to shareholders via share repurchase. We've repurchased approximately $550 million through June 30th of this year at competitively attractive trading multiples, which completed our prior repurchase authorization. We are pleased to announce that our Board has authorized a new $1.5 billion share repurchase program. With a strong and proven management team, a highly flexible balance sheet, and a low trading multiple, each of these capital deployment priorities positions us to drive value for shareholders, and we will continue to demonstrate discipline in our capital deployment. And with that, Son will now provide a more detailed review of our financial results. Son.