munity Health Systems(CYH) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Highlights This section summarizes Q2 2025 performance, featuring CEO commentary on strategic progress and key financial highlights including a significant net income turnaround and strategic financing activities CEO Commentary Tim L. Hingtgen, CEO, stated that the Company is making good progress on high-priority strategic initiatives like growth projects and physician recruitment, expressing confidence in the long-term trajectory - The Company continues to make good progress with its high priority strategic initiatives such as investments into growth projects and physician recruitment[3] - We remain confident that the organization is on the right trajectory for the long term[3] Q2 2025 Financial & Operating Highlights For Q2 2025, net operating revenues slightly decreased by 0.2% to $3.133 billion, but same-store revenues increased by 6.5%. The company reported a significant turnaround in net income, reaching $282 million ($2.09 diluted EPS) from a net loss in Q2 2024. Adjusted EBITDA was $380 million, a slight decrease. Financing activities included a $700 million senior secured notes offering and a $584 million tender offer for unsecured notes Q2 2025 Key Financial Highlights | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :-------------------------------- | :----------------- | :----------------- | :--------- | | Net Operating Revenues | $3,133 | $3,140 | -0.2% | | Net Income Attributable to CYH Stockholders | $282 | $(13) | 2269.2% | | Diluted EPS | $2.09 | $(0.10) | 2190.0% | | Adjusted EBITDA | $380 | $387 | -1.8% | | Net Cash Provided by Operating Activities | $87 | $101 | -13.9% | - Completed the offering of $700 million principal amount of 10.750% Senior Secured Notes due 2033 and used the proceeds to redeem all remaining outstanding 8.000% Senior Secured Notes due 2027 and to pay related fees and expenses[4] - In addition, $584 million principal amount of outstanding 6.875% Senior Unsecured Notes due 2028 were redeemed via a tender offer using cash on hand of $438 million[4] - On a same-store basis, admissions increased 0.3 percent while adjusted admissions decreased 0.7 percent, compared to the same period in 2024[4] Detailed Financial and Operating Results This section provides a detailed analysis of the company's financial and operating performance for Q2 and H1 2025, including consolidated statements, operating metrics, balance sheets, and cash flows Three Months Ended June 30, 2025 (Q2 2025) Detailed analysis of Q2 2025 financial performance, including revenue, net income, and Adjusted EBITDA, along with key operational metrics and their year-over-year changes. The company saw a significant increase in net income driven by non-operating gains, despite a slight decrease in consolidated revenues and Adjusted EBITDA Consolidated Financial Performance This section details the consolidated financial performance for Q2 2025, showing a significant increase in net income primarily due to non-operating gains, despite a slight decrease in Adjusted EBITDA Condensed Consolidated Statements of Income (Loss) - Three Months Ended June 30 | Metric | 2025 (Millions) | % of Net Operating Revenues (2025) | 2024 (Millions) | % of Net Operating Revenues (2024) | | :------------------------------------------------ | :---------------- | :--------------------------------- | :---------------- | :--------------------------------- | | Net operating revenues | $3,133 | 100.0% | $3,140 | 100.0% | | Total operating expenses | $2,621 | 83.7% | $2,902 | 92.4% | | Income from operations | $512 | 16.3% | $238 | 7.6% | | Interest expense, net | $214 | 6.8% | $216 | 6.9% | | Gain from early extinguishment of debt | $(138) | (4.4)% | $(26) | (0.8)% | | Net income attributable to Community Health Systems, Inc. stockholders | $282 | 9.0% | $(13) | (0.4)% | | Basic EPS | $2.11 | | $(0.10) | | | Diluted EPS | $2.09 | | $(0.10) | | - Net income attributable to Community Health Systems, Inc. stockholders for the three months ended June 30, 2025, increased when compared to the net loss for the same period in 2024, primarily due to period-over-period increases in impairment and (gain) loss on the sale of businesses and gain from early extinguishment of debt, partially offset by an increase in the provision for income taxes and the factors that contributed to a decrease in Adjusted EBITDA[7] - The decrease in Adjusted EBITDA for the three months ended June 30, 2025, compared to the same period in 2024, is primarily attributable to lower outpatient volumes, lower acuity and unfavorable changes in payor mix, partially offset by increased reimbursement rates, a higher net benefit from supplemental reimbursement programs and increased non-patient revenue[7] Operating Metrics (Same-Store & Consolidated) This section presents key operating metrics for Q2 2025, including consolidated and same-store admissions, adjusted admissions, occupancy rates, and net operating revenues Selected Operating Data - Three Months Ended June 30 | Metric | 2025 Consolidated | 2024 Consolidated | % Change Consolidated | 2025 Same-Store | 2024 Same-Store | % Change Same-Store | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :---------------- | :---------------- | :-------------------- | | Number of hospitals (at end of period) | 70 | 78 | | 70 | 70 | | | Licensed beds (at end of period) | 10,478 | 11,868 | | 10,478 | 10,548 | | | Admissions | 97,902 | 105,748 | -7.4% | 97,799 | 97,514 | 0.3% | | Adjusted admissions | 223,083 | 243,343 | -8.3% | 222,673 | 224,323 | -0.7% | | Occupancy rate (average beds in service) | 50.8% | 50.0% | | 50.8% | 50.9% | | | Net operating revenues | $3,133 | $3,140 | -0.2% | $3,125 | $2,935 | 6.5% | Six Months Ended June 30, 2025 (H1 2025) Comprehensive review of H1 2025 financial and operating results, highlighting a slight increase in net operating revenues and a significant turnaround to net income from a prior-year net loss. Adjusted EBITDA saw a minor decrease, influenced by lower acuity and increased patient claim denials, partially offset by improved reimbursement rates Consolidated Financial Performance This section details the consolidated financial performance for H1 2025, showing a turnaround to net income primarily due to non-operating gains, despite a slight decrease in Adjusted EBITDA Condensed Consolidated Statements of Income (Loss) - Six Months Ended June 30 | Metric | 2025 (Millions) | % of Net Operating Revenues (2025) | 2024 (Millions) | % of Net Operating Revenues (2024) | | :------------------------------------------------ | :---------------- | :--------------------------------- | :---------------- | :--------------------------------- | | Net operating revenues | $6,292 | 100.0% | $6,279 | 100.0% | | Total operating expenses | $5,497 | 87.4% | $5,811 | 92.5% | | Income from operations | $795 | 12.6% | $468 | 7.5% | | Interest expense, net | $432 | 6.9% | $426 | 6.9% | | Gain from early extinguishment of debt | $(138) | (2.2)% | $(26) | (0.4)% | | Net income attributable to Community Health Systems, Inc. stockholders | $269 | 4.3% | $(55) | (0.9)% | | Basic EPS | $2.02 | | $(0.42) | | | Diluted EPS | $2.01 | | $(0.42) | | - Net income attributable to Community Health Systems, Inc. stockholders for the six months ended June 30, 2025, increased when compared to the net loss for the same period in 2024, primarily due to period-over-period increases in impairment and (gain) loss on the sale of businesses and gain from early extinguishment of debt, partially offset by an increase in the provision for income taxes and the factors that contributed to a decrease in Adjusted EBITDA[11] - The decrease in Adjusted EBITDA for the six months ended June 30, 2025, compared to the same period in 2024, is primarily attributable to lower acuity, increased patient claim denials and increased costs for outsourced medical specialists, partially offset by increased reimbursement rates, higher non-patient revenue, a higher net benefit from supplemental reimbursement programs and reduced expense for contract labor[11] Operating Metrics (Same-Store & Consolidated) This section presents key operating metrics for H1 2025, including consolidated and same-store admissions, adjusted admissions, occupancy rates, and net operating revenues Selected Operating Data - Six Months Ended June 30 | Metric | 2025 Consolidated | 2024 Consolidated | % Change Consolidated | 2025 Same-Store | 2024 Same-Store | % Change Same-Store | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :---------------- | :---------------- | :-------------------- | | Number of hospitals (at end of period) | 70 | 78 | | 70 | 70 | | | Licensed beds (at end of period) | 10,478 | 11,868 | | 10,478 | 10,548 | | | Admissions | 203,839 | 212,803 | -4.2% | 200,222 | 195,815 | 2.3% | | Adjusted admissions | 453,779 | 479,280 | -5.3% | 445,099 | 440,518 | 1.0% | | Occupancy rate (average beds in service) | 54.4% | 52.0% | | 53.4% | 52.9% | | | Net operating revenues | $6,292 | $6,279 | 0.2% | $6,161 | $5,869 | 5.0% | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets decreased to $13,641 million from $14,054 million at December 31, 2024. Cash and cash equivalents significantly increased to $456 million from $37 million. Long-term debt decreased to $10,840 million from $11,432 million, contributing to a reduction in total liabilities and an improvement in stockholders' deficit Condensed Consolidated Balance Sheets (Selected Items) | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------------- | :------------------------- | :--------------------------- | | Cash and cash equivalents | $456 | $37 | | Total current assets | $3,659 | $3,301 | | Property and equipment, net | $4,657 | $4,776 | | Goodwill | $3,604 | $3,789 | | Total assets | $13,641 | $14,054 | | Total current liabilities | $2,295 | $2,345 | | Long-term debt | $10,840 | $11,432 | | Total liabilities | $14,739 | $15,371 | | Total Community Health Systems, Inc. stockholders' deficit | $(1,631) | $(1,914) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities increased to $208 million from $197 million in the prior year. Investing activities generated a significant net cash inflow of $786 million, primarily due to proceeds from disposition of hospitals and other ancillary operations. Financing activities resulted in a net cash outflow of $575 million, mainly due to repayments of long-term indebtedness Condensed Consolidated Statements of Cash Flows (Selected Items) | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $208 | $197 | | Net cash provided by (used in) investing activities | $786 | $(207) | | Net cash (used in) provided by financing activities | $(575) | $11 | | Net change in cash and cash equivalents | $419 | $1 | | Cash and cash equivalents at end of period | $456 | $39 | - Proceeds from disposition of hospitals and other ancillary operations: $1,013 million (2025) vs. $0 (2024)[46] Strategic and Financing Activities This section outlines the company's strategic financial maneuvers, including significant debt refinancing and various hospital and ambulatory outreach laboratory services divestitures Financing Activity During Q2 2025, the Company issued $700 million of 10.750% Senior Secured Notes due 2033 to redeem existing 8.000% Senior Secured Notes due 2027. Additionally, a tender offer redeemed $584 million of 6.875% Senior Unsecured Notes due 2028 using $438 million cash on hand, resulting in a net pre-tax gain from early extinguishment of debt of approximately $138 million - During the three months ended June 30, 2025, the Company completed an offering of $700 million principal amount of 10.750% Senior Secured Notes due 2033, and used the proceeds to redeem all of the remaining 8.000% Senior Secured Notes due 2027, and pay related fees and expenses[13] - In addition, the Company completed a tender offer for $584 million principal amount of its outstanding 6.875% Senior Unsecured Notes due 2028 using cash on hand of $438 million[13] - These transactions resulted in the recognition of a net pre-tax gain from early extinguishment of debt of approximately $138 million during the three months ended June 30, 2025[13] Divestitures and Other Strategic Transactions In 2025, the Company divested its 50% ownership in two hospitals, its 80% ownership in one hospital, and three other hospitals. Furthermore, on July 22, 2025, the Company entered into a definitive agreement with Labcorp to sell select assets and assume certain leases of its ambulatory outreach laboratory services in 13 states for a total purchase price of $195 million - During 2025, through the date of this press release, the Company has divested (i) its 50% ownership interest in two hospitals (one of which was completed on February 1, 2025, and the other of which was completed on May 1, 2025), (ii) its 80% ownership interest in one hospital (which was completed on June 30, 2025), and (iii) three other hospitals (two of which were completed on March 1, 2025, and one of which was completed on April 1, 2025)[14] - On July 22, 2025, the Company entered into a definitive agreement with Laboratory Corporation of America Holdings ("Labcorp"), pursuant to which Labcorp will acquire select assets and assume certain leases of the ambulatory outreach laboratory services of the Company's subsidiaries in 13 states, including certain patient service centers and in-office phlebotomy locations[15] - The total purchase price payable to the Company at the closing of this transaction is $195 million, subject to certain purchase price adjustments[15] Non-GAAP Financial Measures This section defines and reconciles key non-GAAP financial measures, including Adjusted EBITDA and Adjusted Net Loss Per Share, providing insights into their calculation and management's use Adjusted EBITDA Definition and Reconciliation Adjusted EBITDA is a non-GAAP measure defined as EBITDA adjusted for noncontrolling interests, loss/gain from early extinguishment of debt, impairment/gain/loss on sale of businesses, business transformation costs, legal matters, employee termination benefits, and changes in professional liability claims accrual. It is used by management to assess operating performance and resource allocation, and for executive compensation, as it aligns with how management assesses results and is comparable to metrics in debt covenants - Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back net income attributable to noncontrolling interests and to exclude loss (gain) from early extinguishment of debt, impairment and (gain) loss on sale of businesses, expense from third-party consulting costs associated with significant process and systems redesign across multiple functions (the "Business Transformation Costs") as part of the Company's previously disclosed multi-year initiative to modernize and consolidate technology platforms and associated processes, expense related to government and other legal matters and related costs, expense related to employee termination benefits and other restructuring charges, and the impact of a change in estimate to increase the professional liability claims accrual recorded during the third quarter of 2024[49] - Adjusted EBITDA is a key measure used by management to assess the operating performance of the Company's hospital operations and to make decisions on the allocation of resources[49] Reconciliation of Adjusted EBITDA to Net Income (Loss) Attributable to Community Health Systems, Inc. Stockholders | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net income (loss) attributable to Community Health Systems, Inc. stockholders | $282 | $(13) | $269 | $(55) | | Adjustments: | | | | | | Provision for income taxes | 118 | 24 | 160 | 52 | | Depreciation and amortization | 105 | 125 | 211 | 241 | | Net income attributable to noncontrolling interests | 38 | 39 | 76 | 75 | | Interest expense, net | 214 | 216 | 432 | 426 | | Gain from early extinguishment of debt | (138) | (26) | (138) | (26) | | Impairment and (gain) loss on sale of businesses, net | (239) | 10 | (263) | 27 | | Expense from business transformation costs | - | 12 | 9 | 25 | | Adjusted EBITDA | $380 | $387 | $756 | $765 | Adjusted Net Loss Per Share Definition and Reconciliation Adjusted net loss attributable to Community Health Systems, Inc. stockholders per share (diluted) is a non-GAAP measure that adjusts reported diluted EPS for selected items used in calculating Adjusted EBITDA, such as gains from early extinguishment of debt, impairment/gain/loss on sale of businesses, and business transformation costs. This provides investors with a clearer view of underlying operating performance and facilitates period-over-period comparisons - Additionally, this press release presents adjusted net loss attributable to Community Health Systems, Inc. stockholders per share (diluted), a non-GAAP financial measure, to reflect the impact on net income (loss) attributable to Community Health Systems, Inc. stockholders per share (diluted) from the selected items used in the calculation of Adjusted EBITDA[18] - The Company believes that the presentation of non-GAAP adjusted net loss attributable to Community Health Systems, Inc. stockholders per share (diluted) presents useful information to investors by highlighting the impact on net income (loss) attributable to Community Health Systems, Inc. stockholders per share (diluted) of selected items used in calculating Adjusted EBITDA which may not reflect the Company's underlying operating performance and assisting in comparing the Company's results of operations between periods[54] Reconciliation of Net Income (Loss) Per Share (Diluted) to Adjusted Net Loss Per Share (Diluted) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) per share (diluted), as reported | $2.09 | $(0.10) | $2.01 | $(0.42) | | Adjustments: | | | | | | Gain from early extinguishment of debt | $(1.03) | $(0.20) | $(1.03) | $(0.20) | | Impairment and (gain) loss on sale of businesses, net | $(1.12) | $0.06 | $(1.11) | $0.16 | | Expense from business transformation costs | - | $0.07 | $0.05 | $0.15 | | Net loss per share (diluted), excluding adjustments | $(0.05) | $(0.17) | $(0.08) | $(0.31) | Company Overview Community Health Systems, Inc. is one of the largest healthcare companies in the U.S., operating healthcare delivery systems in 36 markets across 14 states. As of July 23, 2025, its subsidiaries own or lease 70 affiliated hospitals with over 10,000 beds and manage more than 1,000 sites of care, including various outpatient facilities - Community Health Systems, Inc. is one of the nation's largest healthcare companies[21] - The Company's affiliates are leading providers of healthcare services, developing and operating healthcare delivery systems in 36 distinct markets across 14 states[21] - As of July 23, 2025, the Company's subsidiaries own or lease 70 affiliated hospitals with more than 10,000 beds and operate more than 1,000 sites of care, including physician practices, urgent care centers, freestanding emergency departments, occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers[21] 2025 Annual Earnings Guidance This section provides the company's updated 2025 annual earnings guidance, including key financial projections and underlying assumptions for revenue, EBITDA, and cash flow Key Guidance Figures The Company updated its 2025 annual earnings guidance, projecting net operating revenues between $12.3 billion and $12.6 billion, Adjusted EBITDA between $1.45 billion and $1.55 billion, and a net loss per share (diluted) between $(0.40) and $(0.10) 2025 Projection Range | Metric | Low (Millions) | High (Millions) | | :-------------------------- | :------------- | :-------------- | | Net operating revenues | $12,300 | $12,600 | | Adjusted EBITDA | $1,450 | $1,550 | | Net loss per share - diluted | $(0.40) | $(0.10) | | Weighted-average diluted shares | 134 | 134 | Guidance Assumptions and Reconciliation The 2025 guidance incorporates the effect of completed divestitures but excludes future divestitures, debt refinancing impacts, impairment charges, and certain state Medicaid supplemental reimbursement programs. It assumes depreciation and amortization of approximately 3.4% of net operating revenues, interest expense between $840 million and $860 million, and cash provided by operating activities between $600 million and $700 million - The Company's projections include the effect on net operating revenues and Adjusted EBITDA of completing divestitures for which definitive agreements have been executed and exclude the impact of any future divestitures for which definitive agreement(s) have not yet been executed[58] - Interest expense is estimated to be between $840 million and $860 million while cash paid for interest, which excludes the amortization of deferred financing costs, is expected to be $790 million to $800 million[58] Reconciliation of Projected 2025 Adjusted EBITDA to Net Loss Attributable to Community Health Systems, Inc. Stockholders | Metric | Low (Millions) | High (Millions) | | :------------------------------------------------ | :------------- | :-------------- | | Net loss attributable to Community Health Systems, Inc. stockholders | $(54) | $(14) | | Adjustments: | | | | Depreciation and amortization | 425 | 435 | | Interest expense, net | 840 | 860 | | Provision for income taxes | 99 | 119 | | Net income attributable to noncontrolling interests | 140 | 150 | | Adjusted EBITDA | $1,450 | $1,550 | Projected Capital Expenditures and Net Cash from Operating Activities for 2025 | Metric | Guidance (Millions) | | :-------------------------------- | :------------------ | | Capital expenditures | $350 to $400 | | Net cash provided by operating activities | $600 to $700 | Forward-Looking Statements & Risk Factors This section serves as a disclaimer for forward-looking statements, emphasizing that actual results may differ materially due to significant regulatory, economic, and competitive uncertainties. It lists numerous factors that could affect future results, including general economic conditions, healthcare policy changes, substantial indebtedness, cybersecurity threats, labor market conditions, and the ability to manage acquisitions and divestitures - All statements in this press release other than statements of historical fact, including statements regarding projections, expected operating results, and other events that depend upon or refer to future events or conditions or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "thinks," and similar expressions, are forward-looking statements[63] - A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company's expected results to differ materially from those expressed in this press release[63] - These factors include, among other things: general economic and business conditions... the impact of current and future healthcare public policy developments... risks associated with our substantial indebtedness, leverage and debt service obligations... security breaches, cyber-attacks, loss of data, other cybersecurity threats or incidents... the impact of competitive labor market conditions... our ability to successfully make acquisitions or complete divestitures...[64][65][67]