Tenet Healthcare Corporation

Welcome to Tenant Healthcare's second quarter 2026 earnings conference call. After the speaker's remarks, there will be a question and answer session for industry analysts. To enter the queue, please press star 1 on your telephone keypad at any time. Tenant 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 Tenant's second quarter 2026 results, as well as a discussion of our financial outlook. Tenant Senior Management participating in today's call will be Dr. Saumya Sutaria, 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 Tenet Health.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. Tenet 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 for the Securities and Exchange Commission. And with that, I'll turn the call over to Saumya.

Thank you, Will, and good morning, everyone. We continue to deliver results exceeding our goals based on the fundamental performance of our business. Hospital volumes and same-store revenue growth in both segments are strong, reflecting our commitment to higher acuity and value for payers. Margin strength is supported by timely execution on our technology-enabled expense management plans that we described at the very start of the year. Second quarter net operating revenues were $5.6 billion and consolidated adjusted EBITDA was $1.304 billion, which represented an adjusted EBITDA margin of 23.2%. Consolidated adjusted EBITDA grew 16.3% over prior year. Year to date, our fundamental outperformance totals approximately 97 million across both segments. Adjusted diluted earnings per share increased 52% to $6.12 in the second quarter of 2026 compared to prior year. As we noted last year, we are operating in a dynamic environment characterized by paramic shifts and insurance enrollment uncertainty in both the exchanges and Medicaid. Despite these challenges, the growth and expense initiatives that we had planned and have implemented and continue to focus on enabled us to deliver a clean quarter. We are optimistic about the rest of the year and are increasing our revenue, adjusted EBITDA, and cash flow guidance for 2026. USPI generated $542 million in adjusted EBITDA, which represents 9% growth over second quarter 2025 and 25% of our full year 2026 adjusted EBITDA guidance for USPI. We are pleased with USPI's continued outperformance as we set an aggressive EBITDA target as a percent of the full year for the second quarter that we were able to exceed. Same facility revenues grew 5% as our high acuity strategy continues to yield benefits and is highlighted by 10% same store volume growth in total joint replacements in the ASCs over prior year. We have a robust pipeline of partnerships interested in joining USPI this year. USPI is the premier ambulatory surgical asset in the space and the leading provider of low cost, high quality care that benefits all stakeholders across the healthcare ecosystem. Turning to our hospital segment, second quarter 2026 adjusted EBITDA was $762 million which was well above our expectations and represented 22% growth over second quarter 2025. We reported 18% adjusted EBITDA margins in the quarter which were driven by strong volume growth, disciplined expense management, benefits from growth initiatives which were partially offset by the expected impact of reductions in exchange enrollment. Again, these drivers were ahead of our core assumptions and contributed meaningfully to our outperformance in the quarter. Importantly, we continue to see attractive growth in our commercial managed care revenues. Regarding the exchange marketplace, exchange revenues have declined a significant 17% compared to second quarter of 2025. We are seeing highest impact in states like Florida, Arizona, Michigan, South Carolina, and Texas. In light of the challenges that the decline in exchange enrollment presents, we are flexing our cost base and building an appropriate baseline on which to grow in the future with a focus on continued margin strength. Our consistent results are driven by a transformed portfolio of businesses, continued strategic focus on higher acuity specialty services, strong leadership at the local level, and an ability to effectively manage through the current dynamic environment. Additionally, it's important to note that year-to-date CONIFER results are in line with our prior expectations and we continue to manage through the conclusion of a third-party contract. We have also capitalized on our compelling valuation and deployed $1.36 billion to repurchase 7 million shares in the first half of 2026 with 5.7 million of those shares repurchased in the second quarter. The positive impact on EPS is significant as we look forward to the rest of the year. As we did note in our press release, the Board of Directors has authorized a $2 billion increase in our share repurchase program. We expect to continue to be active in share repurchase over the balance of the year. Turning to 2026, The guidance that we established at the beginning of the year was robust given the dynamics the industry was facing, but so were our plans for realizing results from our recent growth investments and our expense and AI initiatives. At this point in the year, we are raising our full year 2026 adjusted EBITDA guidance to a range of 4.83 to 5.03 billion, which represents an increase of 295 million or 6% at the midpoint of the range over our prior guidance. The guidance increase is differentiated and primarily supported by fundamental strength in our businesses and our expectations for continued growth into the second half of the year. As we note in our adjusted EBITDA bridge in the investor deck, our guidance raise is supported by approximately 100 million of fundamental outperformance in the first half of the year and an additional $60 million through a continuation of those fundamental drivers into the second half of the year. Additionally, based on the ambulatory surgical acquisitions that we have made so far this year and the robust pipeline of deals that we see ahead, we now expect to exceed $300 million in full-year M&A spend in 2026. We are confident in our ability to achieve our increased guidance as it is powered by continued strength in our core business drivers, same-store revenue growth, effective expense management, and strong free cash flow. For more details on our results in the quarter and our guidance looking ahead, I now turn it over to Sam.