Tenet Healthcare Corporation · NYSE:THC
Tenet Healthcare — Q4 2018 Earnings Presentation
31 slides from Tenet Healthcare's earnings presentation, Feb 25, 2019
Slide 1: Fourth Quarter 2018 Financial Results
Fourth Quarter 2018 Financial Results February 25, 2019
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation includes “forward-looking statements.” These statements relate to future events, including, but not limited to, statements regarding our future earnings, financial position, operational and strategic initiatives, and developments in the healthcare industr
Slide 3: Key Accomplishments in 2018
Key Accomplishments in 2018 Achieved strong financial performance Delivered on cost reduction targets Enhanced portfolio Completed buy-up of USPI Upgraded leadership and strengthened governance Reduced leverage to 5.63x (down from 5.86x at YE 2017) Q4’18 – February 25, 2019 3
Slide 4: 2019 Priorities
2019 Priorities Growth Preferred by patients and physicians; ambulatory expansion; Conifer pipeline Operational Excellence Improved agility; consistency in execution; enhanced efficiencies Talent & Culture Deepening bench of future leaders; renewed energy; grounded in accountability 4 Q4’18 – Februa
Slide 5: 2018 Financial Summary
2018 Financial Summary Revenues were $18.313 billion, Ambulatory up, Hospitals and Conifer down due to divestitures • Hospital segment same-hospital patient revenue grew 3.6% • Ambulatory Care same-facility system-wide surgical revenue grew 4.9% • Conifer’s revenue declined 4.0% due to divestitures
Slide 6: Q4'18 Financial Summary
Q4’18 Financial Summary Revenues were $4.619 billion, down 7.2% from Q4’17 due to California Provider Fee revenue and divestitures • Same-hospital patient revenue grew 4.6% excluding California Provider Fee revenues in both periods • Ambulatory Care same-facility system-wide surgical revenue grew 3.
Slide 7: Normalized EBITDA Growth
Normalized EBITDA Growth 9.0% growth in Adjusted EBITDA in 2018 on a normalized basis $ in millions Q1'17 Q2'17 Q3'17 Q4'17 2017 Q1'18 Q2'18 Q3'18 Q4'18 2018 Hospital Operations and other - Adjusted EBITDA as reported $309 $346 $269 $538 $1,462 $402 $345 $312 $352 $1,411 Plus: Normalizing items (det
Slide 8: Normalized EBITDA Growth – Hospital Operations and other
Normalized EBITDA Growth – Hospital Operations and other 2.4% growth in Adjusted EBITDA in the Hospital segment on a normalized basis in 2018 $ in millions Q1'17 Q2'17 Q3'17 Q4'17 2017 Q1'18 Q2'18 Q3'18 Q4'18 2018 Hospital Operations and other - Adjusted EBITDA as reported $309 $346 $269 $538 $1,462
Slide 9: Same Hospital Growth Rates
Same Hospital Growth Rates 4.6% growth in same-hospital net patient revenue in Q4’18 excluding California Provider Fee revenues Adjusted admissions were flat in Q4’18 and increased 0.6% in 2018 excluding Chicago and targeted service line closures Admissions declined 2.0% in Q4’18 and 1.1% in 201
Slide 10: Ambulatory Care Same-Facility System-Wide Growth
Ambulatory Care Same-Facility System-Wide Growth 3.8% growth in same-facility system-wide revenue in Q4’18 and 5.1% growth in 2018, excluding Aspen 2016 Q1 '17 Q2 '17 Q3 '17 Q4 '17 2017 Q1 '18 Q2 '18 Q3 '18 Q4 '18 2018 (1) Surgical (ASCs & Surgical Hospitals) Revenue 9.4% 6.9% 4.1% 1.1% 7.0% 4.9% 2.
Slide 11: Ambulatory Care Segment Financials
Ambulatory Care Segment Financials 7.1% growth in EBITDA less facility-level NCI in Q4’18 and 12.7% growth in 2018, excluding Aspen $ in millions 2016 Q1'17 Q2'17 Q3'17 Q4'17 2017 Q1'18 Q2'18 Q3'18 Q4'18 2018 Net operating revenues $1,797 $455 $472 $468 $545 $1,940 $498 $531 $502 $554 $2,085 Less: A
Slide 12: Conifer Health Solutions Segment
Conifer Health Solutions Segment Adjusted EBITDA was $87 million in Q4’18 – improved margin by 330 basis points in Q4’18 and 560 basis points in 2018 $ in millions 2016 Q1'17 Q2'17 Q3'17 Q4'17 2017 Q1'18 Q2'18 Q3'18 Q4'18 2018 Revenue from Tenet $651 $159 $155 $149 $155 $618 $150 $144 $146 $150 $590
Slide 13: 2019 Outlook Summary – 4% to 7% growth in Adjusted EBITDA
2019 Outlook Summary – 4% to 7% growth in Adjusted EBITDA Hospitals • Same-hospital revenue growth of 1.5% to 4.5% • Adjusted admissions growth of (1%) to 1% • Revenue per adjusted admissions growth of 2.5% to 3.5% • Adjusted EBITDA growth of 1% to 6% Ambulatory Care • Same-facility system-wide reve
Slide 14: Outlook for 2019
Outlook for 2019 Key assumptions: Outlook $ in millions, except EPS for 2019 • New $200 million cost reduction initiative; Net Revenue $18,000 - $18,400 (1) Adjusted EBITDA $2,650 - $2,750 expect to realize $50 million in 2019 and achieve Adjusted EBITDA Margin (1) 14.7% - 14.9% $200 million of annu
Slide 15: Outlook for 2019 – Segment Details
Outlook for 2019 – Segment Details Hospital Operations Ambulatory Conifer and Other Segment Segment Segment Net Operating Revenue ($M) (1) $15,150 - $15,400 Net Operating Revenue ($M) $2,050 - $2,150 Net Operating Revenue ($M) $1,375 - $1,425 Adjusted EBITDA ($M) $1,430 - $1,490 Adjusted EBITDA ($M)
Slide 16: Adjusted EBITDA Bridge from 2018 to 2019
Adjusted EBITDA Bridge from 2018 to 2019 ($ in millions) Hospitals Ambulatory Conifer Total 2018 Adjusted EBITDA - Actuals $1,411 $792 $357 $2,560 Hospital divestitures (1) $32 $32 Aspen divestiture ($16) ($16) Conifer Impact from Tenet and other client hospital divestitures ($40) ($40) Customer ter
Slide 17: Items reducing EBITDA Growth in Q1'19 compared to Q1'18
Items reducing EBITDA Growth in Q1’19 compared to Q1’18 Increased malpractice expense: ~$15 million Conifer customer termination fee revenue: $10 million Losses on risk-based contracting business in California: ~$10 million Aspen divestiture: $7 million Difficult volume comparison following a very s
Slide 18: Appendix and Reconciliation of Non-GAAP Financial Measures
Appendix and Reconciliation of Non-GAAP Financial Measures
Slide 19: Revenue and EBITDA by Segment
Revenue and EBITDA by Segment $ in millions 2016 Q1'17 Q2'17 Q3'17 Q4'17 2017 Q1'18 Q2'18 Q3'18 Q4'18 2018 Hospital Operations and Other Net operating revenues (1)(2) $16,904 $4,050 $4,060 $3,856 $4,184 $16,150 $3,941 $3,733 $3,754 $3,843 $15,271 EBITDA $1,521 $309 $346 $269 $538 $1,462 $402 $345 $3
Slide 20: Health Plan Financial Results
Health Plan Financial Results $ in millions 2016 Q1'17 Q2'17 Q3'17 Q4'17 2017 Q1'18 Q2'18 Q3'18 Q4'18 2018 Net Operating Revenues $482 $65 $25 $10 $10 $110 $6 $0 $8 $0 $14 Equity in earnings of unconsolidated affiliates $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Salaries and Benefits -$23 -$5 -$4 -$4 -$3 -$16
Slide 21: Uncompensated Care Trends
Uncompensated Care Trends Revenue Recognition Accounting Rules and Uncompensated Care • Effective January 1, 2018, Tenet adopted FASB ASU 2014-09 using a modified retrospective method of application. Under ASU 2014-09, the estimated uncollectible amounts due from uninsured and underinsured patients
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted EBITDA, a non-GAAP measure, is defined by the Company as net income available (loss attributable) to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, (2) net loss attributable (income available)
Slide 23: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued from the prior page) The Company believes that Adjusted EBITDA is a useful measure, in part, because certain investors and analysts use both historical and projected Adjusted EBITDA, in addition to other GAAP and non-GAAP measures, as factors in determining the
Slide 24: Table #1 – Reconciliation to Adjusted EBITDA for 2018
Table #1 – Reconciliation of Net Income Available (Loss Attributable) to Tenet Healthcare Corporation Common Shareholders to Adjusted EBITDA for 2018 (Unaudited) (Dollars in millions) 2018 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD Net income available (loss attributable) to Tenet Healthcare $ 99 $ 26 $ (9
Slide 25: Table #1 – Reconciliation to Adjusted EBITDA for 2017
Table #1 – Reconciliation of Net Income Available (Loss Attributable) to Tenet Healthcare Corporation Common Shareholders to Adjusted EBITDA for 2017 (Unaudited) (Dollars in millions) 2017 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total Net loss attributable to Tenet Healthcare Corporation common $ (53) $ (55
Slide 26: Table #2 – Reconciliation to Adjusted Net Income for 2018
Table #2 – Reconciliation of Net Income Available (Loss Attributable) to Tenet Healthcare Corporation Common Shareholders to Adjusted Net Income Available from Continuing Operations to Common Shareholders for 2018 (Unaudited) (Dollars in millions except per share amounts) 2018 1st Qtr 2nd Qtr 3rd Qt
Slide 27: Table #2 – Reconciliation to Adjusted Net Income for 2017
Table #2 – Reconciliation of Net Loss Attributable to Tenet Healthcare Corporation Common Shareholders to Adjusted Net Income Available (Loss Attributable) from Continuing Operations to Common Shareholders for 2017 (Unaudited) (Dollars in millions except per share amounts) 2017 1st Qtr 2nd Qtr 3rd Q
Slide 28: Table #3 – Reconciliations to Free Cash Flow and Adjusted Free Cash Flow
Table #3 – Reconciliations of Net Cash Provided By Operating Activities to Free Cash Flow and Adjusted Free Cash Flow from Continuing Operations (Unaudited) (Dollars in millions) 2018 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD Net cash provided by operating activities $ 113 $ 348 $ 338 $ 250 $ 1,049 Purcha
Slide 29: Table #4 – Reconciliation of Outlook to Outlook Adjusted EBITDA
Table #4 – Reconciliation of Outlook Net Income Available (Loss Attributable) to Tenet Healthcare Corporation Common Shareholders to Outlook Adjusted EBITDA (Unaudited) (Dollars in millions) Q1 2019 2019 Low High Low High Net income available (loss attributable) to Tenet Healthcare Corporation commo
Slide 30: Table #5 – Reconciliation of Outlook to Adjusted Net Income
Table #5 – Reconciliation of Outlook Net Income Available (Loss Attributable) to Tenet Healthcare Corporation Common Shareholders to Outlook Adjusted Net Income Available from Continuing Operations to Common Shareholders (Unaudited) (Dollars in millions except per share amounts) Q1 2019 2019 Low Hig
Slide 31: Table #6 – Reconciliation of Outlook Operating Cash Flow to Adjusted Free Cash Flow
Table #6 – Reconciliation of Outlook Net Cash Provided by Operating Activities to Outlook Adjusted Free Cash Flow from Continuing Operations (Dollars in millions) 2019 Low High Net cash provided by operating activities $ 1,070 $ 1,375 Less: Payments for restructuring charges, acquisition-related cos