Tenet Health(THC) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net operating revenues of $21.3 billion for 2025, with consolidated adjusted EBITDA of $4.57 billion, representing a 14% growth over 2024 [5][13] - The adjusted EBITDA margin for the full year was 21.4%, an improvement of 210 basis points from the prior year [14] - In Q4 2025, total net operating revenues were $5.5 billion, with consolidated adjusted EBITDA of $1.183 billion, a 13% increase year-over-year [12] Business Line Data and Key Metrics Changes - The USPI segment's adjusted EBITDA grew 12% in 2025 to $2.026 billion, with same-facility revenues increasing by 7.2% [6][14] - The hospital segment's adjusted EBITDA increased by 16% to $2.54 billion, with same-store revenues per adjusted admission up 5.3% [7][14] - Same facility revenues grew 7.5%, driven by double-digit growth in total joint replacements in ASCs [7] Market Data and Key Metrics Changes - The company experienced strong same-store revenue growth, exceeding the long-term goal of 3%-6% organic growth [7] - The company anticipates a 20% reduction in overall enrollment due to the expiration of enhanced premium tax credits, which may impact the hospital segment significantly [10][11] Company Strategy and Development Direction - The company plans to continue focusing on organic growth supplemented by accretive M&A, particularly in the USPI segment, with a target of $250 million in annual M&A [8][22] - The company is also investing in technology and operational efficiencies to enhance expense management and improve clinical throughput [28][45] - The company aims to leverage its capabilities to serve patients better and expand service lines, particularly in high acuity areas [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong core earnings growth for 2026, despite anticipated headwinds from the expiration of enhanced premium tax credits [11][19] - The company expects adjusted EBITDA for 2026 to be in the range of $4.485 billion to $4.785 billion, driven by ongoing demand and acuity [9][18] - Management highlighted the importance of monitoring enrollment levels and effectuation rates as they navigate the changing healthcare landscape [11][72] Other Important Information - The company repurchased approximately 22% of its outstanding shares for around $2.5 billion since the share repurchase program began in Q4 2022 [8] - The company generated $367 million of free cash flow in Q4 2025, totaling $2.53 billion for the full year [15] Q&A Session Summary Question: Can you expand on the same-store hospital volume performance in the quarter? - Management noted that while acuity was good, the respiratory season was weaker than expected, impacting volumes [25] Question: What do you mean by tackling expense management more structurally? - Management explained that they are focusing on technology deployment for sustainable expense reduction, including automation and clinical throughput improvements [27][28] Question: Can you provide more details on the hospital admission growth guidance of 1%-2%? - Management indicated that the guidance reflects anticipated impacts from exchange exposure and investments in higher acuity capabilities [32] Question: Is the growth type sustainable in future years? - Management believes that while achieving 10% growth is ambitious, their track record of acuity growth and margin expansion supports this outlook [39][40] Question: What is the payer mix for USPI in Q4? - Management reported a consistent payer mix with net revenue per case growth of 5.5% and EBITDA margins above 40% [84]