• Net Operating Revenues: $5.2 billion for Q1 2025.
• Consolidated Adjusted EBITDA: $1.163 billion, a 14% increase over Q1 2024.
• Adjusted EBITDA Margin: 22.3%, a 320 basis point improvement over the prior year.
• USPI Adjusted EBITDA: $456 million, a 16% growth over Q1 2024.
• Same-Facility Revenues Growth: 6.8% in Q1 2025.
• Hospital Segment Adjusted EBITDA: $707 million, a 12% increase over Q1 2024.
• Same-Store Hospital Admissions: Increased by 4.4%.
• Revenue per Adjusted Admission: Up 2.8% over the prior year.
• Free Cash Flow: $642 million generated in Q1 2025.
• Cash on Hand: $3 billion as of March 31, 2025.
• Net Debt to EBITDA Ratio: 3:1 as of March 31, 2025.
• Share Repurchase: 2.6 million shares repurchased for $348 million in Q1 2025.

• Warning! GuruFocus has detected 8 Warning Signs with EPD.

Release Date: April 29, 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 first-quarter 2025 net operating revenues of $5.2 billion and consolidated adjusted EBITDA of $1.163 billion, representing a 14% growth over 2024.
• The adjusted EBITDA margin improved by 320 basis points to 22.3% in the first quarter of 2025, indicating strong growth and operating discipline.
• USPI's adjusted EBITDA grew 16% over the previous year, with same-facility revenues increasing by 6.8%, driven by a 12% growth in total joint replacements.
• The Hospital Segment's adjusted EBITDA grew 12% to $707 million, with same-store hospital admissions up 4.4% and revenue per adjusted admission up 2.8%.
• THC has significantly deleveraged its balance sheet, achieving a net debt to EBITDA minus NCI ratio of 3:1, providing financial flexibility for capital deployment and shareholder value creation.

Negative Points

• Despite strong first-quarter performance, THC is not updating its full-year 2025 guidance, citing the early stage of the year and potential uncertainties.
• The company faces ongoing healthcare policy uncertainty, which could impact future operations and financial performance.
• There is a noted decrease in case volumes by 2.1% at USPI, reflecting a shift towards higher acuity services, which may impact overall volume growth.
• THC's reliance on Medicaid supplemental revenues, with $35 million of net revenues from Tennessee programs not yet fully approved, poses a risk to future revenue streams.
• The company acknowledges potential challenges in maintaining labor performance improvements, particularly in managing contract labor and retaining staff.

Q & A Highlights

Q: Can you explain the impact of the $40 million Medicaid supplemental revenue on Q1 results and the factors driving USPI's revenue per case growth? A: Saumya Sutaria, CEO, stated that the $40 million Medicaid supplemental revenue is not a recurring item and does not affect guidance. The growth in USPI's revenue per case is driven by contracting, higher acuity services, and strategic shifts towards low-acuity work. The growth in joint replacements is expected to continue as the platform expands.

Q: What is the outlook for USPI's acquisition pipeline and the ability to deploy $250 million in investments? A: Saumya Sutaria, CEO, expressed confidence in the healthy pipeline for USPI acquisitions, with a goal of deploying $250 million annually. The focus is on centers where USPI can diversify service lines, such as adding orthopedic services, and the multiples for acquisitions remain stable.

Q: What contributed to the strong performance in the Hospital Segment, particularly in terms of margins? A: Saumya Sutaria, CEO, and Sun Park, CFO, highlighted effective expense management, improved retention rates, and reduced contract labor as key factors. The Hospital Segment's margins benefited from a strong payer mix, high patient acuity, and operational discipline, resulting in a 310 basis point improvement.

Q: How does Tenet plan to manage labor costs and improve labor performance? A: Saumya Sutaria, CEO, emphasized the importance of reducing contract labor and focusing on recruiting and retaining full-time employees. The strategy includes leveraging relationships with nursing schools and improving retention rates to maintain a stable workforce and manage salary, wages, and benefits effectively.

Q: What are the drivers behind the revenue per adjusted admission growth in the Hospital Segment, and how does exchange volume growth factor in? A: Sun Park, CFO, noted that the growth is driven by strong acuity and payer mix, with managed care accounting for 70% of net patient revenues. Exchange admissions increased by 35%, contributing to revenue growth, and exchanges now represent about 7% of total consolidated revenues.

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