Tenet Healthcare Corporation

Good morning and welcome to Tenet Healthcare's third quarter 2024 earnings conference call. After the speaker remarks, there will be a question and answer session for industry analysts. At that time, if you'd like to ask a question, please press star one 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 now 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 third quarter 2024 results, as well as a discussion of our financial outlook. Tenet Senior Management participating in today's call will be Dr. Sam Satoria, 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.

Thanks, Will, and good morning, everybody. Before we discuss our third quarter results, I'd like to take a moment to acknowledge and pay respect to those impacted by the hurricanes in our company, in our peers in those markets, and in our partners and suppliers who operate in those regions. The devastation is significant, but the energy to recover and rebuild shows the best of the American spirit rallying together in a crisis. Moving on to our results. Once again, our performance in the third quarter exceeded our expectations and represents a continuation of consistently strong operating results driven by volume growth and disciplined operations. In the third quarter, we reported net operating revenues of $5.1 billion, Consolidated adjusted EBITDA was $978 million, representing growth of 15% over third quarter 2023, and an adjusted EBITDA margin of 19.1%. USPI's results were once again strong, with $439 million in adjusted EBITDA, which represents 19% growth over third quarter 2023. Same facility revenues grew 8.7%, and adjusted EBITDA margins remain robust. Orthopedic volumes are strong, and total joint replacements in the ASCs were up 19% over prior year, coupled with the ongoing growth in urology and GI procedures. We did open six new de novos in the quarter, including a new partnership with Synergy Orthopedics, establishing the largest dedicated musculoskeletal outpatient surgery center in San Diego, California. De novo development activity remains an important part of USPI's growth story and We have nearly 20 centers currently in syndication stages or under construction. Turning to our hospital segment, adjusted EBITDA was $539 million in the third quarter, representing 11% growth over the third quarter of 2023, and importantly, strong sequential growth. The strong utilization environment remains, with same-store hospital admissions up 5.2% as we continue to open up capacity in a cost-efficient way. Third quarter 2024 revenue per adjusted admission was up 3.3% over prior year, reflecting continued strength and acuity in mix. We've proven our ability to succeed in tough operating environments leading the way in 2022 and 2023 in cost management in the aftermath of COVID and now in 2024 with robust demand where our efficient operating chassis has allowed us to deliver stronger results than expected throughout the year. As such, we are continuing to make significant investments in expanding our network to support growth in our markets over the coming years. In July, we opened our newest hospital in Westover Hills, a rapidly growing area near San Antonio. The hospital is focused 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. Additionally, construction of our next hospital in Port St. Lucie, Florida, continues. with an opening planned for 2025. Turning to our full-year 2024 guidance, we are once again raising our full-year 2024 guidance to a range of $3.9 to $4 billion based on the fundamental organic outperformance in both of our business units. This represents an increase of $50 million at the midpoint of the range over our prior guidance increased and announced at the second quarter call. We've now raised our adjusted EBITDA guidance by nearly $600 million from our initial expectations this year. Clearly, we are pleased with our strong performance throughout the year. Before I turn the call over to Son, I'd like to spend a little bit of time discussing our portfolio transformation. We completed the sale of our Alabama hospitals on September 30th. All of the sales that we have executed on have been at high multiples to reflect the operational improvements that we have made to each of these facilities over the last several years. More importantly, as a result of these sales, our current hospital portfolio has an enhanced return profile. More attractive geographies for us and our business model, higher expected returns on invested capital that should result. Conifer has retained and in many cases expanded its relationship with the acquirers of the hospitals, demonstrating the value we deliver to providers in revenue cycle management. While our hospitals are well positioned to benefit from a favorable operating environment, we've built a leadership team and a culture of operating discipline to be able to execute and deliver results during more challenging times as well. The actions we have taken have enabled us to significantly improve our leverage ratio, and we are committed to a deleveraged balance sheet going forward. After accounting for the tax payments that are still due on asset sales, our leverage ratio on an EBITDA minus NCI basis is around 3%, We are very pleased with the deleveraging accomplished to date. Looking forward, we are well-positioned to create value for shareholders through stronger free cash flow generation. Our transformed portfolio provides us with a high degree of capital and financial flexibility. We will continue to deploy capital to enhance growth in our industry-leading ambulatory surgical business through M&A and de novo development, increase capital spending to fuel organic growth, and return excess capital to shareholders via share repurchase, given that we believe our equity continues to trade at attractive multiples relative to the market. The combination of an established management team, a focused strategy, and consistent operations and disciplined capital deployment positions us to drive significant value for physicians, patients, and in turn our shareholders. And with that, Sun will now provide a more detailed view of our financial results. Sam?