• Net Operating Revenues: $20.7 billion for 2024.
• Consolidated Adjusted EBITDA: $4 billion for 2024, representing 13% growth over 2023.
• Adjusted EBITDA Margin: 19.3% for 2024, improved over 200 basis points from prior year.
• USPI Adjusted EBITDA: $1.81 billion for 2024, 17% growth over 2023.
• USPI Adjusted EBITDA Margin: 42.1% in Q4 2024.
• Same-Facility Revenues Growth (USPI): 7.8% for 2024.
• Hospital Segment Adjusted EBITDA: $2.185 billion for 2024, 9% growth over prior year.
• Same-Store Hospital Admissions Growth: 4.7% for 2024.
• Free Cash Flow: $1.1 billion for 2024, excluding $855 million in income taxes from divestitures.
• Share Repurchase: 5.6 million shares for $672 million in 2024.
• Cash on Hand: Over $3 billion at year-end 2024.
• Leverage Ratio: 2.5 times EBITDA at year-end 2024.
• 2025 Revenue Guidance: $20.6 billion to $21.0 billion.
• 2025 Adjusted EBITDA Guidance: $3.975 billion to $4.175 billion.
• 2025 Free Cash Flow Guidance: $1.8 billion to $2.05 billion.

• Warning! GuruFocus has detected 7 Warning Signs with GNRC.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tenet Healthcare Corp (NYSE:THC) reported strong financial performance in 2024, with net operating revenues of $20.7 billion and consolidated adjusted EBITDA of $4 billion, representing a 13% growth over 2023.
• The company achieved a full-year adjusted EBITDA margin of 19.3%, improving over 200 basis points from the prior year.
• USPI, a segment of THC, generated $1.81 billion in adjusted EBITDA, marking a 17% growth over 2023, with same-facility revenues growing 7.8%.
• THC successfully executed portfolio transactions, including the sale of 14 hospitals, generating $5 billion in gross proceeds and enabling significant balance sheet deleveraging.
• The company returned capital to shareholders by repurchasing approximately 14% of its outstanding shares for $1.12 billion since the fourth quarter of 2022.

Negative Points

• Despite strong performance, THC faces potential regulatory changes that could impact its operations, particularly in the hospital segment.
• The company reported a slight increase in supply costs as a percentage of revenue, attributed to its push towards higher acuity services.
• THC's guidance for 2025 reflects a more normalized growth rate, with projected adjusted EBITDA growth of 7% at the midpoint, which is lower than the 13% growth achieved in 2024.
• The company anticipates a reduction in adjusted EBITDA due to the divestiture of facilities and non-recurring supplemental Medicaid payments.
• THC's hospital segment faces challenges from potential changes in Medicaid policies and health insurance exchanges, which could impact revenue and profitability.

Q & A Highlights

Q: Can you refresh us on what your ideal target leverage ratios are, and should we be modeling the rest of that going to share repurchase at this point? A: Saumya Sutaria, CEO, stated that Tenet Healthcare is comfortable with its current leverage, which provides strategic flexibility for growth and share repurchase, especially at current valuation multiples. The company plans to be active in share repurchases, given the attractive return compared to debt repayment.

Q: Can you discuss the volume environment and expectations for 2025? A: Saumya Sutaria, CEO, noted that the volume environment remains strong, with no significant changes observed from the end of 2024 to the start of 2025. The company expects continued strong demand, supported by favorable coverage and employment environments, and attractive demographics in their operational areas.

Q: How are you preparing for potential changes in healthcare policy, particularly regarding Medicaid and health insurance exchanges? A: Saumya Sutaria, CEO, emphasized the importance of operating discipline and understanding business economics to navigate potential policy changes. He highlighted that USPI has minimal Medicaid exposure and operates on freestanding ASC rates, insulating it from certain regulatory risks. The company is focused on maintaining efficiency and advocating for the importance of Medicaid programs in providing access to care.

Q: Can you explain the drivers behind the high single-digit same-store revenue growth in ASCs despite minimal case growth? A: Saumya Sutaria, CEO, explained that the growth is driven by increasing acuity, particularly in high-acuity orthopedic cases like joint replacements. The company is focusing on reducing low-revenue cases and enhancing the value of its ASC operations by increasing the net revenue per case.

Q: What are your expectations for ASC total joint procedures and cardiology procedures in 2025 and beyond? A: Saumya Sutaria, CEO, stated that Tenet Healthcare anticipates continued focus on orthopedic procedures, with a tailwind from ambulatory surgical growth. While there is potential in cardiovascular procedures, the company expects this market to evolve slowly due to patient safety and economic considerations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.