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TENET HEALTHCARE CORP (THC)·Q2 2025 Earnings Summary

Executive Summary

  • Strong quarter with broad-based outperformance: revenue of $5.27B, adjusted EBITDA of $1.12B (21.3% margin), and adjusted EPS of $4.02; y/y EPS up 74% and EBITDA up 18.6% on favorable mix/acuity, USPI strength, and expense discipline .
  • Material beats vs S&P Global consensus: revenue and adjusted EPS both ahead; company raised FY25 adjusted EBITDA guidance by ~$395M at the midpoint to $4.40–$4.54B and increased the buyback authorization by $1.5B .
  • Ambulatory (USPI) remained a key engine: $498M adjusted EBITDA (39.2% margin), +11% y/y; hospital EBITDA rose to $623M (15.6% margin), aided by high-acuity mix and $79M of prior-period Medicaid supplemental revenue .
  • Cash generation stayed robust (Q2 FCF $743M; Q2 CFO $936M), leverage stable at 2.45x; management guided Q3 adjusted EBITDA to 22.5–23.5% of FY25 at the midpoint, framing a strong 2H cadence .

What Went Well and What Went Wrong

  • What Went Well

    • Sustained EBITDA and margin expansion: consolidated adjusted EBITDA +19% y/y with margin +280 bps y/y to 21.3%, driven by same-store growth, high acuity, and cost control .
    • USPI execution and mix: same-facility revenue +7.7% with net revenue/case +8.3% and cases -0.6%, reflecting deliberate mix shift to higher-acuity service lines; USPI EBITDA +11% y/y to $498M (39.2% margin) .
    • Capital deployment and flexibility: $743M Q2 free cash flow; $747M shares repurchased in Q2; new $1.5B repurchase authorization; no significant maturities until 2027; leverage 2.45x .

  • What Went Wrong

    • Soft volumes in spots: hospital same-hospital admissions +1.6% and adjusted admissions +0.4% y/y; hospital surgeries -1.7% and ER visits -4.7% y/y, with management trimming full-year hospital adjusted admissions growth assumption by 50 bps (to 1.5–2.5%) .
    • Continued payer friction: management cited elevated disputes/denials post-COVID as an ongoing industry headwind, though Tenet is mitigating via automation and standardized workflows (Conifer) .
    • Out-of-period items create noise: hospital segment included a $79M favorable pre-tax Medicaid supplemental catch-up in Q2 (Q2’24 had $30M), complicating clean run-rate analysis .

Financial Results

Overall P&L, margins, and cash flow (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($B)$5.072 $5.223 $5.271
Adjusted EBITDA ($B)$1.048 $1.163 $1.121
Adjusted EBITDA Margin (%)20.7% 22.3% 21.3%
GAAP Diluted EPS ($)$3.32 $4.27 $3.14
Adjusted Diluted EPS ($)$3.44 $4.36 $4.02
Cash from Operations ($B)$(0.331) $0.815 $0.936
Free Cash Flow ($B)$(0.661) $0.642 $0.743

Q2 vs S&P Global consensus (company actuals vs Street*)

MetricConsensus*ActualResult
Revenue ($B)$5.162*$5.271 Beat
Adjusted EBITDA ($B)$0.992*$1.121 Beat
Adjusted EPS ($)$2.87*$4.02 Beat

Values with asterisks (*) retrieved from S&P Global.

Segment performance (oldest → newest)

SegmentQ4 2024 Revenue ($B)Q4 2024 EBITDA ($M)MarginQ1 2025 Revenue ($B)Q1 2025 EBITDA ($M)MarginQ2 2025 Revenue ($B)Q2 2025 EBITDA ($M)Margin
Ambulatory (USPI)$1.259 530 42.1% $1.194 456 38.2% $1.270 498 39.2%
Hospital$3.813 518 13.6% $4.029 707 17.5% $4.001 623 15.6%

Key operating KPIs (oldest → newest)

KPIQ4 2024Q1 2025Q2 2025
USPI same-facility revenue y/y+8.6% +6.8% +7.7%
USPI net revenue per case y/y+8.5% +9.1% +8.3%
USPI case volume y/y+0.1% (2.1)% (0.6)%
Hospital same-hospital admissions y/y+5.0% +4.4% +1.6%
Hospital adjusted admissions y/y+3.1% +2.9% +0.4%
Hospital revenue/adj. admission y/y+0.6% +2.8% +5.2%
Hospital ER visits y/y(2.4)% +1.4% (4.7)%
Hospital surgeries y/y+0.2% (1.4)% (1.7)%

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Consolidated Net Operating Revenues ($B)FY 2025$20.60–$21.00 $20.95–$21.25 Raised
Consolidated Adjusted EBITDA ($B)FY 2025$3.975–$4.175 $4.400–$4.540 Raised (~$0.395B at midpoint)
Adjusted Diluted EPS ($)FY 2025$11.99–$13.12 $15.55–$16.21 Raised
Free Cash Flow ($B)FY 2025$1.80–$2.05 $2.025–$2.275 Raised
USPI Adjusted EBITDA ($B)FY 2025$1.915–$1.985 $1.990–$2.050 Raised
Hospital Adjusted EBITDA ($B)FY 2025$2.060–$2.190 $2.410–$2.490 Raised
USPI same-facility revenueFY 2025Up 3–6% Up 4–7% Raised
Hospital admissions (same-hospital)FY 2025Up 2–3% Up 2–3% (no change) Maintained
Hospital adjusted admissionsFY 2025Up 2–3% Up 1.5–2.5% Lowered
Q3’25 Adj. EBITDA cadenceQ3 2025—22.5–23.5% of FY at midpoint New quarterly cadence
Share repurchase authorization——+$1.5B (remaining $1.781B as of 7/22) Increased

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
AI/automation in revenue cycleEmphasis on data-driven operating discipline; no explicit AI in Q4/Q1 transcripts we reviewed Using AI-enabled automation and standardized workflows at Conifer to counter elevated denials/disputes, speeding collections Increasing deployment/impact
Payer dynamics & denialsStable multi-year contracting; rising denial activity industry-wide; adapting processes (Q1) No unusual shifts in contracting; denial/dispute intensity remains elevated; tech/automation helping yields Steady headwind, mitigated operationally
Exchanges (ACA) & payer mixQ4: mix tailwinds; Q1: exchange admissions +35% y/y; exchanges ~7% of consolidated rev Q2: exchange admissions +23% y/y; exchange revenues +28% y/y; ~8% of admissions, ~7% of revenue Continued growth; mix supportive
High-acuity strategy (hospitals)Q4: high acuity and MI Medicaid supplements; Q1: strong acuity and asset mix after divestitures Ongoing driver of margin expansion; focus on cardio/ortho/spine/neurosurgery/trauma; transfer strategy Structural margin driver
USPI mix & M&A pipelineQ4: strong net revenue/case; Q1: 6 new centers, robust pipeline, baseline $250M M&A Q2: 8 new centers; expect to exceed $250M M&A; total joints +12.6% y/y in ASCs Growing platform and acuity
Supplemental MedicaidQ4: MI supplemental uplift; Q1: $40M out-of-period recognized Q2: $79M out-of-period catch-up; run-rate ~$1.1–$1.2B for FY after normalization Elevated; timing variability
Tariffs/supply chainQ1: aligned with HealthTrust; no special issues noted No incremental pressure cited; continued procurement discipline Stable

Management Commentary

  • “We reported…consolidated adjusted EBITDA of $1.121 billion…21.3%…driven by strong same-store growth and very efficient operating performance. USPI continues to deliver…$498 million in adjusted EBITDA…We added eight new centers in the quarter…” — CEO .
  • “We recognized a $79 million favorable pre-tax impact for additional Medicaid supplemental revenues related to prior periods…We generated $743 million of free cash flow in the second quarter…cash on hand $2.6 billion…no significant debt maturities until 2027.” — CFO .
  • “We are raising our full-year 2025 adjusted EBITDA guidance to $4.4–$4.54 billion…supported by fundamental strength…We…authorized a $1.5 billion increase to our share repurchase program.” — CEO/CFO .
  • “Adapting to the current environment from a collection standpoint is a critical capability…moved from…manual…to much more technology-driven and workflow automation-driven.” — CEO on Conifer .

Q&A Highlights

  • Policy/exchange exposure: Exchange admissions +23% y/y and revenues +28% y/y in Q2; exchanges now ~8% of admissions and ~7% of consolidated revenue; management emphasized importance of subsidy extensions but gave no 2026 guidance .
  • USPI drivers: Guidance raise underpinned by high-acuity case mix, payer mix, expense discipline, and M&A contributions; total joints +12.6% y/y in ASCs; expectation to exceed baseline $250M M&A in 2025 .
  • Hospital volumes/mix: Modest admissions growth (+1.6% y/y) with strong revenue/adjusted admission (+5.2% y/y) on payer/acuity; hospital volume outlook for adjusted admissions lowered 50 bps to 1.5–2.5% .
  • Denials/collections: Elevated denials/disputes persist industry-wide; Tenet cites standardized workflows and AI-enabled automation improving yields and speeding collections .
  • Supplemental Medicaid cadence: ~$350M recorded in Q2; ~$675M 1H’25; normalized FY run-rate ~$1.1–$1.2B (post one-timers) .

Estimates Context

  • Q2’25 results vs S&P Global consensus: revenue $5.27B vs $5.16B*, adjusted EBITDA $1.12B vs $0.99B*, adjusted EPS $4.02 vs $2.87* — broad beats that, combined with the FY guidance raise, likely prompt upward estimate revisions to align closer to the new outlook .
  • Street breadth: 19 EPS estimates and 17 revenue estimates underpin the consensus used for comparisons*.

Values with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Tenet delivered clean beats across revenue, EBITDA, and adjusted EPS, and raised FY25 guidance materially; this combination is a positive near-term stock catalyst, especially with a larger buyback in place .
  • USPI remains a secular compounder: sustained double-digit net revenue per case growth, stable high-30s to low-40s margins, and an active M&A/de novo pipeline; total joints momentum underscores durable acuity mix gains .
  • Hospital margins are structurally higher on acuity strategy, payer mix, and cost discipline; watch for timing noise from supplemental Medicaid (Q2 $79M catch-up) and modest volume growth pacing .
  • Cash generation is strong (Q2 FCF $743M) with modest leverage (2.45x) and no near-term maturities; capital returns (repurchases) likely remain active alongside USPI M&A and targeted hospital capex .
  • Policy watch: exchange subsidy extensions are strategically important; exchange volumes continued to grow and support payer mix; management actively engaged on DC developments .
  • Execution focus: continued AI-enabled automation (Conifer) to mitigate denials/collections friction; labor discipline and standardized workflows should support margins through 2H .
  • Near-term setup: Q3 is guided to ~22.5–23.5% of FY EBITDA, implying sustained 2H strength; monitor cadence vs the raised FY outlook and any incremental USPI acquisitions .

Citations:

  • 8-K Q2 2025 press release and financials .
  • Q2 2025 earnings call transcript .
  • Q1 2025 8-K and call for prior-quarter context .
  • Q4 2024 8-K for two-quarter trend context .