
Tenet (THC) Q2 2025 Earnings Call Transcript
Key Takeaways
From an analytical perspective, Image source: The Motley Fool. DATETuesday, July 22, 2025 at 10 a. ETCALL PARTICIPANTSChief Executive Officer — Saumya SutariaChief Financial Officer — Sun ParkNeed a quote...
Article Overview
Quick insights and key information
14 min read
Estimated completion
investment
Article classification
July 22, 2025
11:30 AM
The Motley Fool
Original publisher
From an analytical perspective, Image source: The Motley Fool
DATETuesday, July 22, 2025 at 10 a
ETCALL PARTICIPANTSChief Executive Officer — Saumya SutariaChief Financial Officer — Sun ParkNeed a quote from one of our analysts, given current economic conditions
Nevertheless, Additionally, [ tected]TAKEAWAYSNet Operating Revenues: $5. 3 billion in net operating revenues for Q2 2025, reflecting 19% growth in consolidated adjusted EBITDA over Q2 2024 and supported by strong same-store trends and payer mix, considering recent developments
Consolidated Adjusted EBITDA: Adjusted EBITDA was $1
Furthermore, At the same time, 121 billion for Q2 2025, representing a 19% year-over-year increase with an adjusted EBITDA margin of 21. 3%, up 280 basis points
Hospital Segment EBITDA: $623 million in adjusted EBITDA for the hospital segment in Q2 2025, a 25% increase in adjusted EBITDA with adjusted EBITDA margin rising 300 basis points to 15
Additionally, 6%, driven by higher acuity and cost controls, amid market uncertainty
Additionally, USPI Segment EBITDA: $498 million in adjusted EBITDA for Q2 2025, up 11% year-over-year (adjusted EBITDA, non-GAAP) with a segment margin of 39
On the other hand, In contrast, 2%; same-facility revenues rose 7. 7% aided by an 8. 3% increase in net revenue per case and a 12. 6% growth in ASC total joint cedures, in today's financial world
Moreover, Hospital Admissions: Same-store inpatient admissions were up 1 (this bears monitoring), considering recent developments
Furthermore, 6% in Q2 2025, and revenue per adjusted admission was up 5
However, Labor Costs: Consolidated salary, wages, and benefits were 41% of net revenues for Q2 2025, a 140 basis point year-over-year imvement
Furthermore, Free Cash Flow: $743 million of free cash flow generated in Q2 2025; $2. 6 billion cash on hand; no borrowings on $1
However, 5 billion line of credit; no significant debt maturities until 2027 (an important development), given the current landscape
Repurchases: 4. 6 million s repurchased for $747 million in Q2 2025; 7
Furthermore, 2 million s for $1. 1 billion year-to-date through June 30, 2025; repurchase authorization increased by $1
Additionally, 5 billion as announced in Q2 2025. 2025 Guidance Raised: Adjusted EBITDA outlook increased to $4. 54 billion (12% year-over-year growth at midpoint) for full-year 2025; net operating revenue outlook increased by $300 million to $20 (which is quite significant)
At the same time, 25 billion for FY2025
Segment Guidance d: USPI 2025 adjusted EBITDA guidance raised by $70 million to $1. 05 billion (non-GAAP); hospital segment adjusted EBITDA guidance raised by $325 million to $2, given the current landscape. 49 billion for 2025 (which is quite significant)
USPI M&A: Added eight new ASC centers in Q2 2025; The company expects to exceed its $250 million baseline M&A spend for 2025
Medicaid Supplemental Payments: $79 million favorable pre-tax impact in Q2 2025; year-to-date run rate at $1, amid market uncertainty. 2 billion (normalized for one-time items) for the first half of 2025
Free Cash Flow Guidance: Full-year 2025 free cash flow after non-controlling interest raised by $195 million to $1
Additionally, 445 billion
ACA Exchange Admissions: 23% increase in admissions for Q2 2025 and 28% increase in revenues year over year; Exchange accounts for 8% of admissions in Q2 2025, and 7% of consolidated revenue for Q2 2025 (fascinating analysis)
Operational Initiatives: Executives highlighted advanced analytical tools and automation for revenue cycle, enhanced labor management, and sustained imvement in case mix index, with the hospital segment up 1% in Q2 2025 (which is quite significant)
On the other hand, SUMMARYManagement highlighted that both USPI and hospital segments outperformed internal expectations in Q2 2025 which supported the company's decision to raise full-year 2025 revenue and adjusted EBITDA guidance
Executives confirmed that payer contract negotiations and denial dispute cesses remain in line with expectations and are not driving any changes in financial outlook, amid market uncertainty
Furthermore, The board authorized a $1
In contrast, 5 billion increase in repurchase capacity as part of a disciplined capital allocation strategy emphasizing USPI M&A, hospital investment, deleveraging, and return of capital, amid market uncertainty
Meanwhile, The call included showing that effective labor management and automation have contributed to lower salary and wage expenses as a percent of revenues, with consolidated salary, wages, and benefits at 41% of net revenues for Q2 2025 (this bears monitoring), in light of current trends
On the other hand, Medicaid supplemental payments vided a favorable but non-recurring impact in Q2 2025, normalizing to previously guided run-rate levels of apximately $1. 2 billion for the year
No unexpected changes in ACA exchange mix, length of stay, or payer mix trends emerged beyond the previously stated growth in exchange volumes and revenues
CEO Sutaria said, "We're raising our full-year 2025 adjusted EBITDA guidance to a range of $4 (an important development). 54 billion, which represents an increase of $395 million or roughly 10% at the midpoint of the range of our prior guidance
Conversely, " (non-GAAP, FY2025) CFO Park noted, "Our leverage ratio as of June 30, 2025, was 2. 45x EBITDA or 3
On the other hand, 11 times EBITDA less NCI. "Executives confirmed investments "to expand our network to support growth" and see a "robust pipeline for M&A opportunities" in ambulatory care
Nevertheless, Furthermore, Management indicated current state and legislative changes do not affect core strategy or guidance and offered no jections on 2026 impacts from expiring subsidies, considering recent developments
Executives detailed that automated and AI-enabled nologies have compressed days sales outstanding and accelerated cash collection, particularly via Conifer (this bears monitoring)
Nevertheless, INDUSTRY GLOSSARYUSPI: United Surgical Partners International; Tenet's ambulatory surgery center and outpatient care division, amid market uncertainty
ASC: Ambulatory Surgery Center; outpatient surgical facilities for same-day cedures
Conifer: Tenet's revenue cycle management division viding billing and collection services for hospitals and healthcare viders, given the current landscape
Additionally, High Acuity: Refers to patients requiring more complex, resource-intensive medical or surgical care, often associated with higher reimbursement rates
Medicaid Supplemental Payments: Government payments int to vide additional funding to hospitals beyond standard Medicaid reimbursements, amid market uncertainty
Full Conference Call TranscriptSun Park: The second quarter continues our track record of strong outperformance in each of our es, considering recent developments
We reported second quarter 2025 net operating revenues of $5
However, On the other hand, 3 billion and consolidated adjusted EBITDA of $1
Conversely, 121 billion, which represents growth of 19% over 2024, considering recent developments
Second quarter 2025 adjusted EBITDA margin of 21
Meanwhile, 3% represents a 280 basis point imvement over the prior year, driven by strong same-store growth and very efficient operating performance
However, Additionally, USPI continues to der
Furthermore, Meanwhile, We generated $498 million in adjusted EBITDA, which represents 11% growth over quarter 2024
Furthermore, Same facility revenues grew 7, in today's market environment
At the same time, 7% in the second quarter, highlighted by a 12. 6% growth in total joint replacements in the ASCs over the prior year (this bears monitoring)
We added eight new centers in the quarter, including facilities specializing in high acuity cedures such as spine, orthopedics, and neurosurgery (an important development) (an important development), in this volatile climate
On the other hand, We continue to see a robust pipeline for M&A opportunities and expect to exceed our baseline intention for $250 million of M&A spend in 2025
Turning to our hospital segment, adjusted EBITDA grew 25% to $623 million in the second quarter of 2025
Same-store hospital admissions were up 1
Furthermore, 6% in the quarter
Second quarter 2025 revenue per adjusted admission was up 5
Furthermore, 2% over the prior year as payer mix and acuity remained strong
We're making significant investments to expand our network to support growth in our and have confidence that the demographic trends, our high acuity service line priorities, and our efficient operating platform can generate returns in this segment
Additionally, We have also reduced overhead given we downsized our hospital portfolio
Additionally, Our results in both segments exceeded our expectations and extend our track record of consistently strong fundamental execution
However, We continue to capitalize on our compelling valuation and have deployed $1, considering recent developments. 1 billion to repurchase 7 (something worth watching)
Moreover, 2 million s in the first half of 2025, considering recent developments
As we noted in our release, the board of directors has authorized a $1. 5 billion increase to our repurchase gram
Furthermore, Turning to our full-year guidance, at this point in the year, we are raising our full-year 2025 adjusted EBITDA guidance to a range of $4
Furthermore, 54 billion, which represents an increase of $395 million or 10% roughly at the midpoint of the range of our prior guidance
The guidance increase is supported by fundamental strength in our es and expectations for continued growth
Moreover, Conversely, In summary, we continue to der on our commitments to a strong balance sheet and significantly imved free cash flow generation
Finally, in closing, we are committed to a culture of quality, transparency, and compliance
This culture permeates our and is reflected in the dedication of our colleagues and caregivers that go to work each day to care for our patients and communities that we serve, in light of current trends
We're pleased that these are the values that we have instilled into our organization, which continue to drive results and outperformance
And with that, Sun Park will vide a more detailed review of our financial results
Sun, turning it over to you
Sun Park: Thank you, Saumya Sutaria
Good morning, everyone
On the other hand, We dered strong results in the second quarter of 2025, with adjusted EBITDA well above the high end of our guidance range, driven by strong fundamentals, including same-store revenue growth, continued high patient acuity, favorable payer mix, and effective cost controls, considering recent developments
We generated total net operating revenues of $5. 3 billion and consolidated adjusted EBITDA of $1. 121 billion, a 19% increase over the second quarter of 2024
Second quarter adjusted EBITDA margin was 21. 3%, a 280 basis point imvement over the prior year (which is quite significant), in today's financial world
Nevertheless, I would now to highlight some key items for each of our segments
Beginning with USPI, which again dered strong operating results
In the second quarter, USPI's adjusted EBITDA grew 11% over last year, with adjusted EBITDA margin at 39
Nevertheless, Additionally, 7% increase in same system-wide revenues, with net revenue per case up 8. 3% and case volumes down 0. 6%, reflecting our continued disciplined shift towards higher acuity services
Moreover, Turning now to our hospital segment, second quarter adjusted EBITDA was $623 million, with margins up 300 basis points over last year at 15
On the other hand, However, Same hospital inpatient admissions increased 1
Moreover, 6%, and revenue per adjusted admissions grew 5
However, Furthermore, Our consolidated salary, wages, and benefits were 41% of net revenues, a 140 basis point imvement from the prior year
And our contract labor expense, which was of consolidated SWB expense
On the other hand, This imvement has been driven by our data-driven apach to capacity and labor management and disciplined operating expense controls
Finally, we recognized a $79 million favorable pre-tax impact for additional Medicaid supplemental revenues related to prior periods in the second quarter of 2025, considering recent developments
The evidence shows includes the recently apved gram in Tennessee
Nevertheless, As a reminder, our second quarter 2024 results included a $30 million favorable pre-tax impact for additional Medicaid supplemental revenues related to the prior year
Moreover, Next, we will discuss our cash flow, balance sheet, and capital structures, considering recent developments
We generated $743 million of free cash flow in the second quarter, and as of June 30, 2025, we had $2
On the other hand, 6 billion of cash on hand, with no borrowings outstanding under our $1. 5 billion line of credit facility, amid market uncertainty
Additionally, we have no significant debt maturities until 2027 (something worth watching), given the current landscape
And finally, during the second quarter, we repurchased 4 (an important development), considering recent developments. 6 million s of our stock for $747 million, and year-to-date through June 30, we have repurchased 7
On the other hand, 2 million s for $1
Our leverage ratio as of June 30, 2025, was 2 (this bears monitoring). 45x EBITDA or 3 (an important development), amid market uncertainty
Additionally, 11 times EBITDA less NCI, given the current landscape
Driven by our outstanding operational performance and continued focus on financial discipline, we are very pleased with our cash flow generation capabilities and remain committed to a deleveraged balance sheet
We believe we have significant financial flexibility to support our capital allocation priorities and drive holder value
Let me now turn to our outlook for 2025 (remarkable data)
For 2025, we now expect consolidated net operating revenues in the range of $20 (something worth watching), considering recent developments. 25 billion, an increase of $300 million over prior expectations (which is quite significant)
As Saumya Sutaria mentioned, we are raising our 2025 adjusted EBITDA outlook by $395 million at the midpoint to $4
Conversely, 54 billion, reflecting the strong fundamental performance of our
At the midpoint of our range, we now expect our full-year 2025 adjusted EBITDA to grow 12% over 2024, given the current landscape
At USPI, we are now expecting 2025 adjusted EBITDA of $1. 05 billion, a $70 million increase from prior expectations, in today's market environment
Furthermore, In addition, we have increased our assumption for same facility USPI revenue growth by 100 basis points to 4% to 7% for 2025
In hospitals, we are raising our 2025 adjusted EBITDA by $325 million at the midpoint to $2
On the other hand, Conversely, 49 billion
Additionally, we are lowering our assumption for same hospital admissions growth by 50 basis points to 1
Conversely, 5% for 2025
Finally, we expect third quarter 2025 to be in the range of 22, in today's financial world. 5% of our full-year consolidated adjusted EBITDA (something worth watching)
At the midpoint, we expect third quarter 2025 USPI EBITDA to be in the range of 23, in today's financial world. 5% of our full-year USPI adjusted EBITDA at the midpoint
Moreover, Moreover, Turning to our cash flows for 2025, we now expect free cash flows in the range of $2
Moreover, 275 billion, distributions to non-controlling interest in the range of $780 to $830 million, resulting in free cash flow after NCI in the range of $1, in today's financial world
Meanwhile, 445 billion, an increase of $195 million at the midpoint of our range from prior outlook
Turning now to our capital deployment priorities, we are well-positioned to create value for holders through the effective deployment of free cash flow, and our priorities have not changed
Furthermore, First, we will continue to prioritize capital investments to grow USPI through M&A
Conversely, Second, we expect to continue in key hospital growth opportunities to fuel organic growth, including our focus on higher acuity service offerings
Third, we will evaluate opportunities to retire and/or refinance debt
And finally, we'll continue to have a balanced apach to repurchases, depending on market conditions and other investment opportunities
However, As Saumya Sutaria noted, our board of directors has recently authorized a $1 (an important development)
Furthermore, 5 billion increase to our repurchase gram
We continue to der consistent growth and have disciplined operations, which has translated into outstanding financial results
Nevertheless, However, We're confident in our ability to der on our increased outlook for 2025 as we continue to vide high-quality care for those in the communities we serve (this bears monitoring)
And with that, now ready to begin the Q&A
Additionally, However, At this time, we'll be conducting a question and answer session
Furthermore, However, As a reminder, Tenet Healthcare Corporation respectfully asks that analysts limit themselves to one question each, in light of current trends
A confirmation tone will indicate your line is in the question queue, considering recent developments
Our first question comes from A
Please ceed with your question, given current economic conditions
I might just ask two aspects of the backdrop in Washington, amid market uncertainty
The posed rule on outpatient hospital care as the elimination of potentially of the inpatient-only rule
On the other hand, On the other hand, Can you just on what you think that might mean for your hospital and ASC if that were to go through (noteworthy indeed), in this volatile climate
Related Articles
More insights from FinancialBooklet