01—Abstract
Summary
Summary of the 10-Q filed July 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation reported net operating revenues of $5.103 billiona for the three months ended June 30, 2024, up $21 million, or 0.4%, from $5.082 billion a year earlier.
Results were heavily affected by divestitures: net income for the six months was $2.811 billionb, compared with $589 million in the prior-year period, driven mainly by $2.558 billion of net gains on sales, consolidation and deconsolidation of facilities. Those gains include a $1.677 billion pre-tax gain on the sale of three South Carolina hospitals, a $526 million gain on four Orange County and Los Angeles County, California hospitals, and a $275 million gain on two San Luis Obispo County hospitals. Diluted earnings per share were $24.22 for the six months, versus $2.47 in the prior-year period.
Adjusted EBITDA, a non-GAAP measure, was $945 millionc for the quarter, up from $843 million, and $1.969 billion for the six months, up from $1.675 billion. The balance sheet improved substantially. Cash and cash equivalents rose to $2.880 billion at June 30, 2024 from $1.228 billion at December 31, 2023, and total long-term debt fell to $12.871 billion from $15.002 billion, reflecting the March 2024 redemption of all $2.100 billion of 4.875% senior secured first lien notes due 2026 using cash on hand.
Net cash provided by operating activities was $1.333 billiond for the six months, compared with $1.047 billion a year earlier. The company also repurchased $548 million of common stock during the six months, and in July 2024 its board authorized a new repurchase program of up to $1.5 billion with no expiration date. The filing notes $342 million of advances received from managed care payers tied to the February 2024 cyberattack on Change Healthcare, and states that the company is currently unable to predict when these advances will be repaid.
Operationally, the Hospital Operations segment's total admissions declined 6.1% in the quarter, primarily due to the divested hospitals, while same-hospital net operating revenues rose 8.0%, attributed to payer mix, patient volume and acuity, Medicaid supplemental revenue and commercial rate increases. The Ambulatory Care segment's net operating revenues increased 21.1% in the quarter, driven by acquired ambulatory surgery centers. The company reported that the ratio of total long-term debt, net of cash, to Adjusted EBITDA was 2.61x at June 30, 2024.
02—Key points
Key Highlights
- Net income for the six months ended June 30, 2024 was $2.811 billion, versus $589 million in the prior-year period, largely reflecting $2.558 billion of net gains on facility sales, consolidations and deconsolidations.
- Net gains for the six months include a $1.677 billion pre-tax gain on the sale of the SC Hospitals, a $526 million gain on the OCLA CA Hospitals and a $275 million gain on the Central CA Hospitals.
- Adjusted EBITDA was $945 million for the quarter (versus $843 million) and $1.969 billion for the six months (versus $1.675 billion); the quarterly Adjusted EBITDA margin was 18.5%.
- Cash and cash equivalents increased to $2.880 billion at June 30, 2024 from $1.228 billion at December 31, 2023, and total long-term debt decreased to $12.871 billion from $15.002 billion.
- Diluted earnings per share were $2.64 for the quarter and $24.22 for the six months, compared with $1.15 and $2.47 in the prior-year periods.
- The company repurchased 4,801 thousand shares for $548 million in the six months, and in July 2024 authorized a new $1.5 billion share repurchase program with no expiration date.
- Managed care payers advanced $342 million to providers following the February 2024 Change Healthcare cyberattack; the filing states repayment timing cannot currently be predicted.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 30, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $5.11B$5.08B | +0.5% |
| Operating Income | $761.00M$604.00M | +26.0% |
| Net Income | $259.00M$123.00M | +110.6% |
| EPS (Basic) | $2.66$1.21 | +119.8% |
| EPS (Diluted) | $2.64$1.15 | +129.6% |
| Shares Outstanding (Basic) | 97.27M101.77M | −4.4% |
| Shares Outstanding (Diluted) | 98.44M104.78M | −6.0% |
05—Questions
Frequently Asked Questions
What drove the large increase in net income in the first half of 2024?
Net income for the six months ended June 30, 2024 was $2.811 billion, compared with $589 million a year earlier. The main driver was $2.558 billion of net gains on sales, consolidation and deconsolidation of facilities, principally the pre-tax gains on the sales of the SC Hospitals ($1.677 billion), the OCLA CA Hospitals ($526 million) and the Central CA Hospitals ($275 million). These gains are non-recurring in nature and are excluded from Adjusted EBITDA.
How did underlying operating performance look excluding the divestitures?
The filing reports that same-hospital net operating revenues increased $294 million, or 8.0%, in the quarter and $618 million, or 8.4%, in the six months, driven by a more favorable payer mix, higher patient volume and acuity, growth in Medicaid supplemental revenue and negotiated commercial rate increases. Ambulatory Care net operating revenues increased 21.1% in the quarter, largely from acquired surgery centers. Total Hospital Operations admissions fell 6.1% in the quarter, which the company attributes primarily to the divested hospitals.
How has the company's debt position changed?
Total long-term debt was $12.871 billion at June 30, 2024, down from $15.002 billion at December 31, 2023. The company redeemed all $2.100 billion of its 4.875% senior secured first lien notes due 2026 in March 2024 using cash on hand, recording an $8 million loss on early extinguishment of debt. At June 30, 2024 the company had no cash borrowings under its $1.500 billion Credit Agreement, and the filing reports a ratio of total long-term debt, net of cash, to Adjusted EBITDA of 2.61x.
What is the status of the managed care advances related to the Change Healthcare cyberattack?
At June 30, 2024, $342 million of advances received from managed care payers was included in other current liabilities. The advances were designed to assist healthcare providers experiencing cash flow disruptions from the February 2024 cyberattack on Change Healthcare, a medical claims clearinghouse. The filing states the company is currently unable to predict when these advances will be repaid.
What are the company's capital return plans?
During the six months ended June 30, 2024, the company paid $548 million to repurchase 4,801 thousand shares at an average price of $114.19. The prior $1 billion program, authorized in October 2022, has been fully used, with $998 million repurchased in total, and the company does not intend to make further repurchases under it. In July 2024 the board authorized a new program of up to $1.5 billion with no expiration date. Repurchases are at management's discretion and subject to market conditions.
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