Tenet Healthcare raises 2025 EBITDA guidance to $4.57B while expanding M&A and hospital investments

Earnings Call Insights: Tenet Healthcare Corporation (THC) Q3 2025

MANAGEMENT VIEW

* CEO Saumya Sutaria stated, "We had another quarter of strong performance where we exceeded our expectations for revenue, adjusted EBITDA and margins." He highlighted net operating revenues of $5.3 billion and consolidated adjusted EBITDA growth of 12% over the prior year to $1.1 billion, driven by strong same-store growth and operating efficiency.
* Sutaria reported that USPI delivered $492 million in adjusted EBITDA with 12% year-over-year growth, and same-facility revenues rose by 8.3%. He emphasized the acquisition of 11 centers and opening of 2 de novo centers focused on high acuity procedures, noting, "We have already spent nearly $300 million on M&A in this space year-to-date and expect to continue adding additional centers in the fourth quarter."
* The hospital segment adjusted EBITDA grew 13% to $607 million. Sutaria pointed to the opening of a new hospital facility in Port St. Lucie, Florida, designed to offer advanced emergency and specialty care.
* Sutaria announced, "We are once again raising our full year 2025 adjusted EBITDA guidance to a range of $4.47 billion to $4.57 billion," now up $445 million or 11% at the midpoint from the original guidance. Capital expenditures guidance was also raised to $875 million to $975 million and free cash flow minus NCI to $1.495 billion to $1.695 billion.
* Executive VP & CFO Sun Park said, "We delivered strong results in third quarter 2025 with adjusted EBITDA above the high end of our guidance range, once again driven by strong same-store revenue growth, continued high patient acuity, favorable payer mix and effective cost controls."

OUTLOOK

* Sutaria indicated continued confidence in USPI's outlook, with expectations for same-store revenue growth in line with long-term plans and a focus on high acuity cases and operational efficiencies. "We continue to deliver our commitments for sustained growth, expanding margins, a delevered balance sheet, and improved free cash flow generation."
* Park stated, "For '25, we now expect consolidated net operating revenues in the range of $21.15 billion to $21.35 billion, an increase of $150 million over prior expectations." The adjusted EBITDA outlook rose by $50 million at the midpoint to $4.47 billion to $4.57 billion.
* Free cash flow after NCI guidance increased to $1.495 billion to $1.695 billion, reflecting strong EBITDA growth and cash collection performance.

FINANCIAL RESULTS

* Park reported total net operating revenues of $5.3 billion and consolidated adjusted EBITDA of $1.1 billion, with an adjusted EBITDA margin of 20.8%.
* USPI's adjusted EBITDA margin was 38.6%, with net revenue per case up 6.1% and same-facility case volumes up 2.1%.
* Hospital segment adjusted EBITDA was $607 million with margins up to 15.1%.
* Salary, wages and benefits were 41.7% of net revenues, a 160 basis point improvement from the prior year.
* $38 million pretax impact for Medicaid supplemental revenues related to prior years was recognized, totaling $148 million year-to-date for similar items.
* Free cash flow reached $778 million in the quarter and $2.16 billion year-to-date.
* As of September 30, 2025, cash on hand was $2.98 billion with no significant debt maturities until 2027.
* 598,000 shares were repurchased in Q3 for $93 million; year-to-date repurchases totaled 7.8 million shares for $1.2 billion.

Q&A

* Kevin Fischbeck, BofA Securities, asked about Q4 guidance and utilization expectations. Sutaria responded, "We haven't built in anything nor are we seeing any kind of rush... with respect to the exchange subsidies."
* Scott Fidel, Goldman Sachs, inquired about CapEx increases. Sutaria explained increased investment in clinical program infrastructure and service line support, focusing on high acuity strategies.
* Craig Hettenbach, Morgan Stanley, questioned free cash flow sustainability. Park stated, "We believe these operational efficiencies... we obviously will work hard to make these sustainable over a long period of time."
* Jason Cassorla, Guggenheim Securities, asked about USPI's Q4 guidance deceleration. Sutaria attributed it to standard pacing and year-over-year math, not changing business demand.
* Ann Hynes, Mizuho, raised labor environment and inflation concerns. Park noted, "Our labor environment has generally been very strong and conducive to our operations," and said tariff impacts are being managed.
* Benjamin Rossi, JPMorgan, asked about Conifer's capability in patient eligibility. Sutaria confirmed investments in Conifer to support enrollment if ACA timelines change.
* Ryan Langston, TD Cowen, queried ASC and hospital service line drivers. Sutaria cited growth in ortho, spine, robotics, and GI in the ASC segment, and noted lower-than-expected respiratory volumes on the hospital side.

SENTIMENT ANALYSIS

* Analysts focused on sustainability of cash flows, labor environment, CapEx increases, and ACA subsidy exposure, with a neutral to slightly positive tone as concerns were largely addressed with confidence by management.
* Management maintained a confident tone in both prepared remarks and Q&A. Direct statements such as "We are confident in our ability to deliver on our increased outlook for 2025" (Park) reflected strong assurance.
* Compared to the previous quarter, both management and analyst sentiment remained confident, with analysts slightly more focused on forward-looking risks but reassured by management's responses.

QUARTER-OVER-QUARTER COMPARISON

* Adjusted EBITDA guidance was raised again, this time by $50 million at the midpoint, following a $395 million increase in Q2.
* CapEx and free cash flow guidance were both increased, driven by operational results and cash collections.
* Analysts continued to focus on labor costs, ACA exchange exposure, and guidance sustainability.
* Management's tone remained confident, with increased emphasis on M&A and growth investments compared to last quarter's focus on operational margin expansion.
* The shift toward higher investment in hospital assets and M&A in USPI was more pronounced this quarter.

RISKS AND CONCERNS

* Management highlighted uncertainty around enhanced premium tax subsidies and state payment program approvals for 2026.
* Labor costs and inflationary pressures, including tariffs, were acknowledged but described as manageable for the near term.
* Analysts raised concerns about ACA exchange subsidy expiration and the ability to sustain cash flow improvements. Management detailed contingency planning and investments in Conifer to address potential enrollment disruptions.

FINAL TAKEAWAY

Tenet Healthcare management underscored another quarter of operational outperformance, raising 2025 adjusted EBITDA, revenue, CapEx, and free cash flow guidance while maintaining a disciplined focus on high acuity growth, robust M&A activity, and cost management. The company highlighted its readiness to address potential policy uncertainties and emphasized its strong cash position, deleveraged balance sheet, and ongoing shareholder returns through buybacks and investments in core business expansion.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/thc/earnings/transcripts]

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