Tenet Healthcare Corporation · NYSE:THC
Tenet Healthcare — Q3 2018 Earnings Presentation
30 slides from Tenet Healthcare's earnings presentation, Nov 5, 2018
Slide 1: Investor Presentation – Quarter ended September 30, 2018
Investor Presentation Quarter ended September 30, 2018
Slide 2: Forward-Looking Statements; Non-GAAP Financial Information
FORWARD-LOOKING STATEMENTS This presentation includes “forward-looking statements.” These statements relate to future events, including, but not limited to, statements with respect to our business outlook and forecasts with respect to our future earnings and financial position, as well as future dev
Slide 3: Update on Key Priorities
Update on Key Priorities Adjusted EBITDA grew 2.8% on a normalized basis in Q3’18 and is up 10.3% YTD (see slide 5) Hospital segment EBITDA declined 2.9% on a normalized basis in Q3’18 and is up 4.1% YTD (see slide 6) Performance Ambulatory Adjusted EBITDA less facility-level NCI was up 11.5%
Slide 4: Q3'18 Financial Highlights
Q3’18 Financial Highlights Net Operating Revenues were $4.489 billion, down 2.1% from Q3’17 primarily due to divestitures Hospital segment same-hospital patient revenue grew 6.0% − Adjusted admissions increased 0.3%; admissions declined 2.1% − Revenue per adjusted admission increased 5.7% (or 3.6%
Slide 5: Normalized EBITDA Growth
Normalized EBITDA Growth Tenet’s Adjusted EBITDA grew 2.8% on a normalized basis in Q3’18 – projecting 8% to 10% normalized growth in 2018 $ in millions Q1'17 Q2'17 Q3'17 Q4'17 2017 Q1'18 Q2'18 Q3'18 Q4'18 (1) 2018 (1) Hospital Operations and other - Adjusted EBITDA as reported $309 $346 $269 $538 $
Slide 6: Normalized EBITDA Growth – Hospital Operations and other
Normalized EBITDA Growth – Hospital Operations and other Adjusted EBITDA in the Hospital Operations and other segment declined 2.9% on a normalized basis in Q3’18 Projecting 1% to 3% normalized growth in the hospital segment in 2018 $ in millions Q1'17 Q2'17 Q3'17 Q4'17 2017 Q1'18 Q2'18 Q3'18 Q4'1
Slide 7: Same Hospital Growth Rates
Same Hospital Growth Rates Net patient revenue grew 6.0% on a same-hospital basis – up 3.9% excluding the California Provider Fee in both periods Adjusted admissions increased 0.3% and grew approximately 1.3% excluding Detroit and targeted service line closures Detroit lowered Tenet’s same-hospi
Slide 8: Ambulatory Care Same-Facility System-Wide Growth
Ambulatory Care Same-Facility System-Wide Growth Same-facility system-wide revenue grew 6.7% in Q3’18 In the surgical business, same-facility system-wide revenue grew 6.6%, with cases up 4.0% and revenue per case up 2.5% In the non-surgical business, same-facility system-wide revenue grew 9.4%,
Slide 9: Ambulatory Care Segment Financials
Ambulatory Care Segment Financials EBITDA less facility-level NCI grew 11.5% in Q3’18 Targeting 11% EBITDA less facility-level NCI growth in 2018 Aspen sale completed 8/17/18 – Aspen generated $24 million of EBITDA in 2017 and $16 million in 2018, including $2 million in 3Q’18 $ in millions Q3'1
Slide 10: Conifer Health Solutions Segment
Conifer Health Solutions Segment Adjusted EBITDA was $81 million in Q3’18 – margins increased 210 basis points year-over-year to 21.8% Expect $350-$360 million of Adjusted EBITDA in 2018 and 4%-6% Adjusted EBITDA growth in 2019, driven by further margin improvement Targeting Adjusted EBITDA marg
Slide 11: Outlook for 2018
Outlook for 2018 Key assumptions included in the 2018 Outlook: Prior Updated Same hospital revenue growth of 2.5% to 4.5% $ in millions, except EPS Outlook Outlook Same-facility system-wide revenue growth of 4% Net Revenue $17,900 - $18,300 $18,100 - $18,300 to 6% at USPI and a promising pipelin
Slide 12: Segment Outlook for 2018
Segment Outlook for 2018 Key changes to the segment Outlook include: Lowering the midpoint of the Adjusted EBITDA Outlook for the hospital segment by $60 million to reflect: (i) ~$25 million of losses on risk- based capitated contracts in California, primarily due to adverse claims experience tren
Slide 13: Adjusted EBITDA Bridge from 2017 to 2018
Adjusted EBITDA Bridge from 2017 to 2018 ($ in millions) Hospital Ambulatory Conifer Total 2017 Adjusted EBITDA - Actuals $1,462 $699 $283 $2,444 California Provider Fee revenue (7) (7) Houston Divestiture completed in 3Q'17 (25) (25) Completed divestitures (partial year impact) (62) (8) (70) Conife
Slide 14: Notable Improvements
Notable Improvements Renewed focus on quality and service – reduced hospital-acquired infections by 18% and improved patient experience scores by 70 basis points Instituted a sharper approach to expense management – remain on track to deliver annualized run- rate cost savings of $250 million by
Slide 15: Priorities for Remainder of 2018
Priorities for Remainder of 2018 Prioritizing team’s focus and effort on executing plan to deliver organic volume growth in 2019 Hospitals Focusing capital on growth opportunities, including targeted service-lines, micro-hospitals and OCEDs Responding to negative changes in payer mix, includin
Slide 16: Appendix and Reconciliation of Non-GAAP Financial Measures
Appendix and Reconciliation of Non-GAAP Financial Measures
Slide 17: 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 18: 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 19: Revenue and EBITDA by Segment
Revenue and EBITDA by Segment $ in millions 2015 Q1'16 Q2'16 Q3'16 Q4'16 2016 Q1'17 Q2'17 Q3'17 Q4'17 2017 Q1'18 Q2'18 Q3'18 Hospital Operations and Other (1)(2) Net operating revenues $17,023 $4,397 $4,202 $4,162 $4,143 $16,904 $4,050 $4,060 $3,856 $4,184 $16,150 $3,941 $3,733 $3,754 EBITDA $1,683
Slide 20: Health Plan Financial Results
Health Plan Financial Results Health plans were included in the Adjusted EBITDA for the Hospital Operations and Other segment prior to 2017 $ in millions 2015 Q1'16 Q2'16 Q3'16 Q4'16 2016 Q1'17 0 Q3'17 Q4'17 2017 Q1'18 Q2'18 * Q3'18 * Net Operating Revenues $423 $127 $136 $122 $97 $482 $65 $25 $10 $
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: 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 YTD Net income available (loss attributable) to Tenet Healthcare Corporation common sha
Slide 23: 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 shareholders
Slide 24: Table #2 – Reconciliation to Adjusted Net Income, 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 25: Table #2 – Reconciliation to Adjusted Net Income, 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 26: 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 YTD Net cash provided by operating activities $ 113 $ 348 $ 338 $ 799 Purchases of property
Slide 27: 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) Q4 2018 2018 Low High Low High Net income available (loss attributable) to Tenet Healthcare Corporation commo
Slide 28: Table #5 – Reconciliation of Outlook 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) Q4 2018 2018 Low Hig
Slide 29: Table #6 – Reconciliation of Outlook 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) 2018 Low High Net cash provided by operating activities $ 1,060 $ 1,335 Less: Payments for restructuring charges, acquisition-related cos
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