01—Abstract
Summary
Summary of the 10-Q filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
HCA Healthcare's first quarter 2024 results showed strong top-line and earnings growth.
Revenues rose 11.2% to $17.339 billiona from $15.591 billion, driven by a 7.1% increase in equivalent admissions and a 3.9% rise in revenue per equivalent admission (same facility revenues up 8.8%). Net income attributable to HCA Healthcare rose 16.7% to $1.591 billion, or $5.93 per diluted share, versus $4.85 a year earlier. The quarter was helped by a $201 million pretax gain on sales of facilities (primarily a California hospital sale, worth $0.57 per diluted share), while the prior-year quarter included a $145 million one-time revenue benefit from resolving disputed payer claims.
Excluding these items, underlying growth was still solid, though operating cost pressure was evident: other operating expenses rose to 20.9% of revenues from 18.7%, driven by professional fees and state provider fees, while salaries and benefits improved to 44.4% of revenues from 45.4%. Cash generation and capital allocation were robust. Operating cash flow increased to $2.469 billionb from $1.803 billion, helped by working capital changes.
HCA issued $4.5 billionc of senior notes in February 2024 and used proceeds to repay its asset-based revolver, then repaid $2.0 billion of 2024 maturities. Total debt was $40.191 billion at quarter end, and the company repurchased 3.894 million shares for about $1.18 billion.
Management reiterated planned 2024 capital expenditures of $5.1 to $5.3 billiond and declared a $0.66 quarterly dividend. Investors should weigh the high leverage and rising debt-service costs, with interest expense up 6.9% to $512 million, against the strong volume growth, favorable pricing, and disciplined capital returns.
02—Key points
Key Highlights
- Revenues grew 11.2% to $17.339 billion; same facility revenues grew 8.8%, supported by 5.2% same facility equivalent admission growth and 3.5% higher revenue per equivalent admission.
- Diluted EPS rose to $5.93 from $4.85 (up about 22%), and net income attributable to HCA rose 16.7% to $1.591 billion, though Q1 2024 included a $201 million gain on facility sales (about $0.57 per diluted share).
- Q1 2023 revenue included a one-time $145 million benefit from resolving disputed prior-year claims with a commercial payer, which makes the year-over-year comparison less clean.
- Operating margin pressure in other operating expenses: this line rose to 20.9% of revenues from 18.7%, mainly on professional fees and state provider fees, while salaries and benefits improved to 44.4% from 45.4%.
- Operating cash flow increased 37% to $2.469 billion, aided by a $512 million working capital improvement, mainly in accounts payable and accrued expenses.
- Total debt reached $40.191 billion after a $4.5 billion senior notes issuance, with interest expense up 6.9% to $512 million and the average effective interest rate at 5.1%.
- Capital returns continued: $1.18 billion of share repurchases in Q1 (3.894 million shares at an average $303.06), $5.595 billion of authorization remaining, and a $0.66 quarterly dividend declared April 25, 2024.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 2, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $17.34B$15.59B | +11.2% |
| Operating Expenses | $15.09B$13.67B | +10.4% |
| Interest Expense | $512.00M$479.00M | +6.9% |
| Net Income | $1.59B$1.36B | +16.7% |
| EPS (Basic) | $6.01$4.92 | +22.2% |
| EPS (Diluted) | $5.93$4.85 | +22.3% |
| Shares Outstanding (Basic) | 264.44M276.91M | −4.5% |
| Shares Outstanding (Diluted) | 268.02M280.96M | −4.6% |
05—Questions
Frequently Asked Questions
What drove HCA's revenue growth in the first quarter of 2024?
Consolidated revenue rose 11.2% to $17.339 billion. Equivalent admissions grew 7.1% and revenue per equivalent admission grew 3.9%. On a same facility basis, revenue grew 8.8%. Emergency department visits rose 7.8% and admissions rose 6.8%, while surgeries declined 0.1%.
Is HCA's Q1 2024 earnings growth sustainable, given one-time items?
Part of the reported growth was non-recurring. Q1 2024 included a $201 million pretax gain on facility sales, equal to about $0.57 per diluted share, mainly from a California hospital sale. Q1 2023 included a $145 million one-time payer settlement benefit in revenue, and a $15 million loss on facility sales. Excluding these items, underlying growth was still positive but smaller, and investors should focus on recurring operating trends such as volume and pricing.
How is HCA managing its debt and interest costs?
In February 2024 HCA issued $4.5 billion of senior notes due 2031 to 2064 at coupons of 5.45% to 6.10%. It used the proceeds to repay its asset-based revolver and repaid $2.0 billion of 5.0% notes at maturity in March. Total debt rose to $40.191 billion, and interest expense increased to $512 million from $479 million. Roughly 97% of long-term debt is fixed rate, and management estimates a 1% rate increase would reduce pretax earnings by about $13 million annually.
What are the main cost pressures facing HCA?
Other operating expenses rose to 20.9% of revenues from 18.7%, mainly due to professional fees and state provider fees in certain states. Supply costs per equivalent admission rose 3.0%. Management also noted that inflation is expected to continue pressuring operating expenses. Labor costs improved, with salaries and benefits falling to 44.4% of revenues from 45.4%, but management cautioned that future labor costs depend on market conditions.
What is HCA's outlook for capital spending and shareholder returns?
HCA plans 2024 capital expenditures of $5.1 to $5.3 billion and has about $4.6 billion more to spend on projects under construction over the next five years. In Q1 2024 it repurchased about $1.18 billion of stock and has $5.595 billion of authorization remaining. It declared a $0.66 quarterly dividend, up from $0.60, payable June 28, 2024. Available liquidity includes $7.987 billion under senior secured credit facilities.
06—Continue