01—Abstract
Summary
Summary of the 10-Q filed April 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation's Form 10-Q for the quarter ended March 31, 2024 reports net operating revenues of $5.368 billiona for the three months ended March 31, 2024, up from $5.021 billion a year earlier, and net income available to Tenet common shareholders of $2.151 billion, compared with $143 million.
The result was driven largely by $2.500 billionb in net gains on sales, consolidation and deconsolidation of facilities, mainly from the sales of the SC Hospitals ($1.673 billion pre-tax gain), the OCLA CA Hospitals ($529 million) and the Central CA Hospitals ($278 million). Adjusted EBITDA was $1.024 billion, versus $832 million in the prior-year period, and the filing states an Adjusted EBITDA margin of 19.1% compared with 16.6%. Balance sheet and liquidity changed significantly.
Cash and cash equivalents rose to $2.481 billionc from $1.228 billion at December 31, 2023, after $4.030 billion in proceeds from sales of facilities and other assets. Tenet used $2.100 billion of cash to redeem its 4.875% senior secured first lien notes due 2026 early, and total long-term debt fell to $12.879 billion from $15.002 billion. The filing reports a ratio of total long-term debt, net of cash, to Adjusted EBITDA of 2.79x, and $1.500 billion of availability under the Credit Agreement.
Net cash provided by operating activities was $586 milliond, compared with $449 million a year earlier. Operationally, Hospital Operations net operating revenues rose 6.2% and Ambulatory Care net operating revenues rose 9.9%, with Ambulatory Care adding 45 ASCs through acquisitions during the quarter.
The filing attributes the Hospital Operations revenue increase mainly to payer mix, higher patient volume and acuity, and negotiated commercial rate increases, and also cites $88 million of additional Michigan Medicaid supplemental revenues. AR Days rose to 58.1 from 55.4, which the company links to the February 2024 Change Healthcare cyberattack; management says it does not expect a permanent increase and targets fewer than 55 days.
02—Key points
Key Highlights
- Net income available to Tenet common shareholders was $2.151 billion ($21.38 diluted EPS), versus $143 million in Q1 2023, driven by $2.500 billion of net gains on facility sales and deconsolidations.
- Net operating revenues were $5.368 billion, up $347 million or 6.9% year over year, with Hospital Operations up 6.2% and Ambulatory Care up 9.9%.
- Adjusted EBITDA was $1.024 billion, up from $832 million, with an Adjusted EBITDA margin of 19.1% versus 16.6%.
- Divestitures of the SC Hospitals, OCLA CA Hospitals and Central CA Hospitals generated $4.030 billion of proceeds from sales of facilities and other assets in the quarter.
- Long-term debt fell to $12.879 billion from $15.002 billion after the early redemption of $2.100 billion of 4.875% senior secured first lien notes due 2026; the debt-to-Adjusted EBITDA ratio was 2.79x.
- Cash and cash equivalents increased to $2.481 billion, and the company repurchased 2.811 million shares for $278 million, leaving $272 million under its $1 billion authorization.
- AR Days increased to 58.1 from 55.4, which management attributes to the Change Healthcare cyberattack, with a stated target of less than 55 days.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed April 30, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $5.37B$5.02B | +6.9% |
| Operating Income | $3.29B$603.00M | +444.8% |
| Interest Expense | $218.00M$221.00M | −1.4% |
| Net Income | $2.15B$143.00M | +1404.2% |
| EPS (Basic) | $21.60$1.40 | +1442.9% |
| EPS (Diluted) | $21.38$1.32 | +1519.7% |
| Shares Outstanding (Basic) | 99.58M102.29M | −2.6% |
| Shares Outstanding (Diluted) | 100.60M106.01M | −5.1% |
05—Questions
Frequently Asked Questions
What drove the large jump in net income this quarter?
Net gains on sales, consolidation and deconsolidation of facilities totaled $2.500 billion, including pre-tax gains of $1.673 billion on the SC Hospitals, $529 million on the OCLA CA Hospitals, $278 million on the Central CA Hospitals and $23 million on two ASCs. Income tax expense of $750 million was also recorded, which includes a $185 million benefit from a reduced valuation allowance.
How did the hospital divestitures affect Tenet's balance sheet and debt?
Tenet received $4.030 billion of proceeds from sales of facilities and other assets and used $2.100 billion of cash to redeem its 2026 senior secured first lien notes early. Total long-term debt declined to $12.879 billion at March 31, 2024 from $15.002 billion at December 31, 2023, and cash and cash equivalents ended the quarter at $2.481 billion.
What is the outlook for AR collections after the Change Healthcare cyberattack?
The filing states that the February 2024 Change Healthcare cyberattack disrupted billing and collection of patient accounts receivable and contributed to an increase in AR Days from 55.4 to 58.1. Management says it does not expect a permanent increase and reiterates a target of less than 55 days.
Where did growth come from in the Ambulatory Care segment?
Ambulatory Care net operating revenues rose $90 million, or 9.9%, to $995 million. The filing attributes $67 million of the increase to acquisitions, and during the quarter Tenet acquired controlling interests in 45 ASCs for $439 million. Same-facility revenues increased $32 million on negotiated commercial rate increases.
Does Tenet expect to keep buying back stock?
Tenet repurchased 2.811 million shares for about $278 million, or $98.86 per share, in March 2024. The remaining authorization under the $1 billion program, which expires December 31, 2024, was $272 million at March 31, 2024. The filing notes repurchases are discretionary and the program may be suspended or discontinued.
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