Tenet Healthcare Corporation · NYSE:THC
Tenet Healthcare — Q2 2009 Earnings Presentation
24 slides from Tenet Healthcare's earnings presentation, Aug 4, 2009
Slide 1: Q2'09 Earnings Call
Q2’09 Earnings Call August 4, 2009
Slide 2: Forward-looking statements
Forward-looking statements Certain statements contained in this presentation constitute forward-looking statements. Such forward-looking statements are based on management's current expectations and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual
Slide 3: Trevor Fetter, President & Chief Executive Officer
Trevor Fetter President & Chief Executive Officer
Slide 4: Q2'09 Highlights
Q2’09 Highlights 5.5% growth in net operating revenues (a) 51% growth in adjusted EBITDA (a) Adjusted EBITDA Outlook increased to $810-875mm $524mm YTD 1H’09 performance supported by: Solid revenue growth Excellent cost control Outpatient volume growth (a) Total-company, Q2’09 as compared to Q2’08 4
Slide 5: Net revenue growth sustained despite weak economy
Net revenue growth sustained despite weak economy Same-hospital 8.1% 8% 6.6% 6.3% 6.4% 6% 5.3% 4.9% Y-o-Y Growth 4.5% 4.2% 4.1% 3.9% 4% 2.9% 1.9% 2% 0.9% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -0.6% -2% 2006 2007 2008 2009 -4% 5
Slide 6: Volume growth trends (same-hospital)
Volume growth trends (1) (same-hospital) 6.0% Paying O/P Visits (2) 4.0% Total O/P Visits 2.0% Annual Growth 0.0% Total Admits Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 -2.0% Paying Admits (2) -4.0% -6.0% -8.0% 2006 2007 2008 2009 (1) Q1’09 growth rates data not adjusted
Slide 7: Outpatient growth sparked Q2'09 performance
Outpatient growth sparked Q2’09 performance 4.5% increase in outpatient visits (same-hospital, Q2’09 vs Q2’08) Commercial outpatient visits grew by 0.6% 3.5% growth in outpatient surgeries Outpatient growth driven by multiple factors: Capex focused on outpatient Net growth in active medical staff De
Slide 8: Recent volume trends
Recent volume trends Q2’09: 5.7% decline in commercial admissions (same- hospital, Q2’09 vs Q2’08) April 1 - May 26(a) : 7.0% decline in commercial admissions June ‘09: Commercial admissions decline moderated July 1 – July 28(b): 2.3% decline in commercial admissions 0.8% increase in commercial outp
Slide 9: 2H'09 performance sensitivities
2H’09 performance sensitivities Cost efficiencies Likely to be sustainable Sensitive to volume volatility at the hospital level Bad debt Could be sensitive to continuing macroeconomic softness and rising unemployment Tenet has been proactive in addressing bad debt issues Tenet remains an industry le
Slide 10: Cash position strengthened
Cash position strengthened $758mm in cash at 6/30/09 1H’09 adjusted free cash flow approximately breakeven Despite seasonal cash use in first quarter July ’09: used approx $60mm in cash to repurchase $68mm par value debt 10
Slide 11: Tenet's geography could benefit from broader coverage of the uninsured
Tenet’s geography could benefit from broader coverage of the uninsured Percent of State Population which is Uninsured (Average for 2005 – 2007) (States with Tenet hospitals are highlighted with red boxes) PA NE MO CA NC TN SC < 10.0% AL GA 10.0% - 14.9% 15.0% - 19.9% TX AK FL ≥ 20.0% HI Source: US C
Slide 12: Q2'09 Summary
Q2’09 Summary Positive momentum heading into 2H’09 Strong cost culture in place Outpatient growth trend has strengthened 12
Slide 13: Stephen L. Newman, M.D., Chief Operating Officer
Stephen L. Newman, M.D. Chief Operating Officer
Slide 14: Cost control has been excellent
Cost control has been excellent Controllable Expenses(1) per Adjusted Patient Day 8% 6% 5.8 5.6 Y-o-Y Growth 4.7 4.8 4.6 4.2 4.2 3.9 4% 2.9 2.3 2.2 2% 1.1 0.8 0.3 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2006 2007 2008 2009 (1) Same-hospital controllable expenses defined as SWB, supplies, and ot
Slide 15: Strong cost culture
Strong cost culture 0.9% increase in SW&B per adjusted patient day (same-hospital) 29% decline in overtime and contract labor expense 26% decline in employee turnover 29% decline in registered nurse turnover 0.1% decline in supply expenses as percent of net operating expenses despite 1.5% increase i
Slide 16: Volume initiatives are being aggressively implemented
Volume initiatives are being aggressively implemented B2B – Business to business marketing Direct to consumer data base marketing 16
Slide 17: Active medical staff physicians
PRP 19.9% net growth in active physicians since Jan 1, 2007 of Net Growth (3) et G r owth of 340 or 5.1% N r 9.0% w th of 1,122 o r o Net G r 7.3% Active medical staff physicians 846 o Class of 2009 Class of 2008 (580) 920 (946) Class of 2007 2,068 (2) (898) 1,744(1) 13,571 13,911 12,449 Active Acti
Slide 18: PRP Volume growth from physician Classes of 2007 and 2008
PRP Volume growth from physician Classes of 2007 and 2008 Class of 2007 Averaged 8.6 admissions per active physician in Q2’09 18% increase in total admissions (Q2’09 vs Q2’08) 15% increase in commercial managed care admissions 67,000 outpatient referrals in Q2’09 2.7% increase (Q2’09 vs Q2’08) Class
Slide 19: Biggs C. Porter, Chief Financial Officer
Biggs C. Porter Chief Financial Officer
Slide 20: 2009 Outlook Assumptions
2009 Outlook Assumptions Prior Current Assumptions Assumptions (6/01/09) Admissions - growth (a) (%) n/c (1.0) – 0.0 Outpatient visits – growth (a) (%) n/c 1.5 – 3.0 Net operating revenues – growth (%) n/c 3.0 – 5.0 Net operating revenues ($Bil) n/c 8.9 – 9.1 Controllable operating expenses PAPD – g
Slide 21: 2009 adjusted EBITDA walk-forward
2009 adjusted EBITDA walk-forward (Continuing operations) Revised Outlook - Aug 4, 2009 ($mm) Bad Prior Revenue Debt Controllable Adjusted Change Outlook Expense Cost EBITDA (6/1/09) 1 2008 (a) 8,585 (628) (7,218) 739 7 732 2 Volume – assuming constant mix (b) 25 (2) (14) 9 - 9 3 – impact from adver
Slide 22: 2009 Cash Walk Forward
2009 Cash Walk Forward Revised Prior ($mm) Change Low High Low High 2009 EBITDA 810 875 50 760 825 Add Back: Stock Compensation Charges 20 25 - 20 25 Changes in Cash from Operating Assets and Liabilities (120) (100) - (120) (100) Interest Payments (420) (435) - (420) (435) Adjusted Net Cash Provided
Slide 23: July 1 – Dec 31, 2009 Cash Walk Forward
July 1 – Dec 31, 2009 - - Cash Walk Forward ($mm) Low High EBITDA Outlook (Q3’09-Q4’09) 286 351 Add Back: Stock Compensation Charges 7 12 Changes in Cash from Operating Assets and Liabilities 12 32 Interest Payments (185) (200) Adjusted Net Cash Provided by Operating Activities – Continuing Operatio
Slide 24: Summary
Summary Strong Q2’09 performance: Solid revenue growth Excellent cost control Strong cash flow Outpatient volume acceleration has mitigated impact of softer commercial admissions Bad debt pressures have been manageable Further upside potential if stability in: Bad debt Payor mix State government rei