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TENET HEALTHCARE CORP (THC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was operationally strong: Adjusted EBITDA rose to $1.048B (20.7% margin) vs $1.012B (18.8%) in Q4 2023 on higher same-hospital admissions, strong ambulatory net revenue per case, favorable payer mix, and Michigan supplemental Medicaid, partially offset by divested hospitals and a $52M Q4’23 Medicaid adjustment tailwind in comps .
  • GAAP diluted EPS was $3.32; Adjusted diluted EPS was $3.44, up from $2.68 in Q4 2023, despite net operating revenue declining to $5.072B due to 2024 hospital divestitures (offset by same-facility growth and ASC acquisitions) .
  • FY25 outlook guides Adjusted EBITDA to $3.975–$4.175B (19.3%–19.9% margin), free cash flow $1.8–$2.05B, capex $700–$800M; USPI same-facility revenue +3–6% and hospital adjusted admissions +2–3% expected, with Q1 typically 24–25% of full-year EBITDA .
  • Strategic narrative: portfolio transformation (14 hospital divestitures), deleveraging (net debt/EBITDA 2.54x vs 3.89x), and intent to be “active repurchasers” in 2025; catalysts include sustained ASC acuity mix lift, hospital volume tailwinds, and capital deployment .

What Went Well and What Went Wrong

  • What Went Well

    • USPI (Ambulatory) posted another standout quarter: Adjusted EBITDA $530M (+14.2% YoY), net operating revenue +16.9% on 8.5% net revenue per case growth (acuity/payer mix) with cases up 0.1% .
    • Hospital segment margin expanded to 13.6% (+90 bps YoY) on +5.0% same-hospital admissions and +0.6% revenue per adjusted admission; “best hospitals” saw ~13% EBITDA growth YoY .
    • Deleveraging and cash generation: year-end net debt/Adj. EBITDA improved to 2.54x (from 3.89x), free cash flow $1.116B (after $855M tax on asset sales), and management signaling active buybacks in 2025 .
    • Management quote: “2024 was an outstanding year… portfolio transformation that drove substantial balance sheet deleveraging” (CEO) .

  • What Went Wrong

    • Consolidated net operating revenues declined 5.7% YoY to $5.072B due to 2024 hospital divestitures (partly offset by same-facility growth and ASC acquisitions) .
    • Hospital Adjusted EBITDA fell to $518M (from $548M) as divestitures and a $52M Medicaid adjustment tailwind in Q4’23 weighed on comps .
    • Supplies ratio ticked up to 18.3% of revenue (+100 bps YoY), linked to higher acuity; management expects a balanced cost profile into 2025, but mix-driven supply intensity bears monitoring .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Operating Revenues ($B)$5.379 $5.122 $5.072
GAAP Diluted EPS ($)$2.30 $4.89 (includes divestiture gains) $3.32
Adjusted Diluted EPS ($)$2.68 $2.93 $3.44
Adjusted EBITDA ($B)$1.012 $0.978 $1.048
Adjusted EBITDA Margin (%)18.8% 19.1% 20.7%
Consensus (Rev/EPS/EBITDA)N/A – SPGI unavailableN/A – SPGI unavailableN/A – SPGI unavailable
  • Consensus via S&P Global was unavailable at time of analysis due to access limits; will update when available.

Segment Breakdown (Q4 2024 vs Q4 2023)

SegmentQ4 2023Q4 2024
Ambulatory Net Operating Revenues ($M)$1,077 $1,259
Ambulatory Adjusted EBITDA ($M)$464 $530
Ambulatory Adjusted EBITDA Margin (%)43.1% 42.1%
Hospital Net Operating Revenues ($M)$4,302 $3,813
Hospital Adjusted EBITDA ($M)$548 $518
Hospital Adjusted EBITDA Margin (%)12.7% 13.6%

KPIs (Q4 2024 YoY and cost mix)

KPIQ4 2024 vs Q4 2023
Same-hospital admissions+5.0%
Same-hospital adjusted admissions+3.1%
Same-hospital revenue per adjusted admission+0.6%
Hospital surgeries+0.2%
USPI same-facility system-wide net patient service revenue+8.6% (cases +0.1%, net revenue/case +8.5%)
Salaries, Wages & Benefits (% of net revenue)41.3% in Q4’24 vs 43.0% in Q4’23
Contract labor (% of SWB) commentary~2.1% in Q4’24 vs ~2.8% in Q4’23 (mgmt comments)

Non-GAAP/one-offs to note

  • 2024 GAAP results include $2.916B pre-tax gain ($2.143B after-tax; $21.89/sh) primarily from hospital divestitures; Adjusted metrics exclude these .
  • Q4’23 included ~$52M favorable Medicaid supplemental adjustments (CA/TX), making Hospital comps tougher .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Operating Revenues ($B)FY 2025N/A (first issuance)$20.6–$21.0 New
Adjusted EBITDA ($B)FY 2025N/A$3.975–$4.175 (19.3%–19.9% margin) New
GAAP Diluted EPS ($)FY 2025N/A$10.95–$12.47 New
Adjusted Diluted EPS ($)FY 2025N/A$11.74–$12.84 New
Free Cash Flow ($B)FY 2025N/A$1.8–$2.05 New
Adjusted Free Cash Flow ($B)FY 2025N/A$1.9–$2.1 New
Net Cash from Ops ($B)FY 2025N/A$2.5–$2.85 New
Capex ($B)FY 2025N/A$0.7–$0.8 New
USPI same-facility revenueFY 2025N/A+3% to +6% New
Hospital admissions/adjusted admissionsFY 2025N/A+2% to +3% / +2% to +3% New
Q1 EBITDA seasonality (implied)Q1 2025N/A24–25% of full-year; USPI 21–22% of FY New

Earnings Call Themes & Trends

TopicQ-2 (Q2 2024)Q-1 (Q3 2024)Current (Q4 2024)Trend
Ambulatory acuity & growthUSPI Adj. EBITDA +20.8%; mix/NRPC drove +7.1% same-facility NPR; noted TX/MI supplemental tailwinds USPI Adj. EBITDA +18.6%; same-facility NPR +8.7% (cases +1.0%, NRPC +7.6%) USPI Adj. EBITDA +14.2%; same-facility NPR +8.6% (cases +0.1%, NRPC +8.5%) Sustained high-acuity mix and pricing tailwinds
Hospital volumes & marginAdmissions +5.2%; margin 12.6% Admissions +5.2%; margin 13.5% Admissions +5.0%; margin 13.6% Steady volume strength; margin expansion
Medicaid supplementalMI and TX recognized (incl. $30M TX prior-year in Q2) Higher MI supplemental; noted in results FY24 includes out-of-period MI/TX; 2025 assumes ~$35M TN; normalize +7% EBITDA growth midpoint after nonrecurring Normalizing; modest tailwinds
Regulatory/policy——Site neutrality risk mitigated at USPI (freestanding ASC rates); disciplined ops and low Medicaid exposure at USPI Managed exposure; watch policy
Capital allocationNew $1.5B buyback (Q2) Deleveraging ongoing Plan to be active repurchasers in 2025; leverage ~2.5x EBITDA More buybacks, flexible balance sheet

Management Commentary

  • “Our fourth quarter results were above our expectations… full year adjusted EBITDA ended the year over $600 million higher than the midpoint of our initial expectations” – CEO .
  • “USPI had a fantastic year in 2024… $1.81 billion in adjusted EBITDA… total joint replacements in the ASCs, up 19% over prior year” – CEO .
  • “We plan to be active repurchasers of our shares, particularly at our current valuation multiples” – CEO .
  • “For 2025 we project consolidated adjusted EBITDA of $3.975–$4.175 billion… after normalizing for divestiture and out-of-period items, 7% growth at midpoint” – CFO .
  • “Our ASCs operate with freestanding ASC rates which insulates that important part of our business from potential changes in site neutrality rules” – CEO .

Q&A Highlights

  • Capital deployment and leverage: With ~$1.05–$1.25B FCF after NCI in FY25, management is comfortable with leverage and prioritizes buybacks alongside USPI M&A; minimal near-term maturities .
  • Volume outlook: Demand trends steady into 2025; coverage and employment supportive; capacity expansion continues selectively .
  • Policy risk: USPI’s minimal Medicaid exposure and freestanding rates reduce risk; acute segment focuses on efficiencies and advocacy; states likely key allies in Medicaid discussions .
  • Cost dynamics: Supplies % uptick tied to higher acuity; management expects balance in 2025; labor metrics improved with lower SWB% and contract labor mix vs prior year .
  • USPI trajectory: Ongoing shift to higher acuity (e.g., total joints); de novo pipeline 10–12 in 2025; de novo returns attractive; cardiology opportunity real but slower due to safety/payer mix/capex .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4’24 revenue/EPS/EBITDA was unavailable at time of analysis due to access limits; as a result, beat/miss vs consensus cannot be assessed here and will be updated when S&P Global data is accessible. Management noted Q4 results were above internal expectations .

Key Takeaways for Investors

  • Mix-led growth durable: ASC net revenue per case +8.5% with stable volumes; hospital admissions +5.0% – consistent evidence of demand and acuity tailwinds supporting margins into 2025 .
  • Portfolio reset de-risked comps and improved capital efficiency: divestitures drove deleveraging to 2.54x net debt/EBITDA and $1.116B FCF despite $855M tax outflow; FY25 FCF guided to $1.8–$2.05B, enabling buybacks and selective USPI M&A .
  • FY25 guide credible with normalization disclosed: midpoint growth ~7% after removing nonrecurring FY24 items; Q1 seasonality (24–25% of FY EBITDA) offers near-term checkpoint .
  • Regulatory watch but insulated ASC model: freestanding ASC rates and low Medicaid exposure at USPI mitigate site neutrality/Medicaid risks; acute segment focused on efficiency and payer dynamics (commercial +3–5% rate environment, >90% 2025 contracted) .
  • Trading setup: Narrative anchored on sustained ASC acuity lift, hospital volume resilience, cash return (buybacks), and visibility from contracting; monitor supply mix costs and supplemental Medicaid normalization for EPS cadence .