Tenet Healthcare Corporation

Good morning. Welcome to Tennant Healthcare's third quarter 2026 earnings conference call. After the speaker remarks, there will be a question and answer session for industry analysts. If you would like to ask a question, please press star 1 on your telephone keypad. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Tennant 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 third quarter 2026 results, as well as a discussion of our financial outlook. Tenet 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, 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. With that, I'll turn the call over to Saum.

Saumya Sutaria Thank you, Will, and good morning, everyone. Third quarter net operating revenues were $5.6 billion and consolidated adjusted EBITDA was $1.355 billion. adjusted diluted earnings per share increased 80% to $6.64 in the third quarter of 2026 compared to the prior year. More importantly, after adjusting for one-time items related to contract transitions that generated adjusted EBITDA of $147 million that was not reflected in our previous guidance, the core business continued its strong growth trajectory in 2026 with an adjusted EBITDA margin of 21.8% and 10% growth in adjusted EBITDA over third quarter 2025. We continue to manage through payer mix shifts and enrollment declines in the exchanges and execute on our technology enabled growth and expense management plans that support our margin strength. Our strong performance is driving significant free cash flow that we continue to deploy for the benefit of shareholders. Year to date, we have deployed over $1.6 billion for share repurchases. Now turning to our segments, USPI generated $537 million in adjusted EBITDA, which represents 9% growth over third quarter 2025. Same facility revenues grew 4.5% as our high acuity strategy continues to yield benefits and is highlighted by our strongest quarterly performance this year with 12.8% same store growth in total joint replacements in the ASCs over prior year. USPI also had a very successful quarter in development with over 100 million of investments in the third quarter alone. We remain the preferred acquirer of assets in this space and continue to have an attractive pipeline of partnerships interested in joining USPI. Additionally, we have commenced patient care at four de novo centers to date. Turning to our hospital segment, our performance in the quarter was driven by 3.2% adjusted admissions growth and many more. The investments that we have made in support of our high acuity strategy continue to pay dividends and drive incremental growth. Excluding the contract transition benefits that I mentioned, adjusted EBITDA grew a very attractive 11% over third quarter 2025, again producing results ahead of our expectations. We are pleased with our performance in both operating segments, which continue to generate strong same store revenue growth, attractive margins, and robust free cash flows. Turning to guidance for the rest of 2026, we began the year with attractive growth expectations and delivered an outsized and competitively differentiated increase to our guidance when we reported our second quarter results. At this point in the year, we are raising our full year 2026 adjusted EBITDA guidance to a range of $5.05 to $5.2 billion, which represents an increase of $195 million or 4% at the midpoint of the range over our increased guidance after the second quarter. The guidance increase is supported by our continued expectations for strong fundamental performance, as well as the one-time items in the back half of the year. Notably, over 40% of our total guidance increase for this year is from fundamental outperformance. I'd like to now spend a few minutes discussing some early thoughts on 2027. After excluding the impact of the transition activities at Conifer, we expect our enterprise to deliver overall adjusted EBITDA growth in 2027. This assumes the current known regulatory frameworks. The value of our diversified business mix support our belief in this outcome for 2027. We're still conducting business planning so details will come after the fourth quarter as usual. We're sizing further potential exchange headwinds and the estimated impact of Medicaid work requirements. USPI should not be materially impacted by these and we expect same store revenue growth, consistent margins, and further expansion of the asset portfolio in our ambulatory business. In the hospital segment, we currently see healthy patient demand that would support same-store volume growth and a stable operating environment supported by disciplined cost controls in 2027. To help you bridge the years, we now expect various transition activities at Conifer to total $450 million of adjusted EBITDA in 2026. We do not expect these contributions to recur in 2027. and I will reiterate that this is an estimate depending on how the transitions proceed operationally. We will provide an update following our fourth quarter results. We are pleased with the results of this highly attractive Conifer transaction as the total value generated from the contract sale will now increase to approximately 15 times 2025 adjusted EBITDA minus NCI. In summary, we have a transformed portfolio of businesses with strong underlying fundamentals, disciplined operations, and a business mix which is diversified from many of the reimbursement headwinds that are affecting the industry. Finally, I will again reiterate our commitment to returning free cash flow to shareholders via repurchases. especially at our attractive valuation multiple in light of recent comparable multiples for combination ASC hospital platforms. For more details on our results, I will now turn it over to Sam.