Tenet Healthcare : 2ndAnnual Wolfe Research Healthcare Conference - Presentation
11/18/2020 | 09:33am EST
2nd Annual Wolfe Research Healthcare Conference
November 18, 2020
Cautionary Statements
This presentation includes "forward-looking statements." These statements relate to future events, including, but not limited to, statements regarding our liquidity, operating results, future earnings, financial position, operational and strategic initiatives, and developments in legislation, regulation, and the healthcare industry more generally. These forward-looking statements represent management's expectations, based on currently available information, as to the outcome and timing of future events, but, by their nature, address matters that are uncertain, particularly with regard to developments related to COVID-19. Actual results, performance or achievements could differ materially from those expressed in any forward-looking statement.
Examples of uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements include, but are not limited to, developments related to COVID-19 and the factors described under "Forward-Looking Statements" and "Risk Factors" in our Form 10-K for the year ended December 31, 2019, subsequent Form 10-Q filings and other filings with the Securities and Exchange Commission.
We assume no obligation to update any forward-looking statements or information subsequent to the dates such statements are made. Investors are cautioned not to place undue reliance on our forward-looking statements.
NON-GAAP FINANCIAL INFORMATION
This presentation contains financial measures that are not in accordance with Generally Accepted Accounting Principles
(GAAP). Reconciliations of these non-GAAP measures to the most comparable GAAP measures and management's reasoning for using these non-GAAP measures are included in our earnings press release dated October 20, 2020. GAAP to non-GAAP reconciliations are also included at the end of this slide presentation.
2
3Q20 Quarterly Highlights
Q3 operational execution solid
Recovery continuing to progress at all levels
Hospital facilities managing well through COVID surges in certain markets
USPI demonstrating solid year/year revenue and earnings growth
Strategic focus on higher-acuity service lines
Actively expanding medical staffs
Flexible partnership model attractive
Conifer continues to execute well with an unwavering focus on client cash collection
Operational Enhancements in Prior Quarters Continuing to Show Benefits Across the System
Enhanced analytical decision support tools
Continuing to evolve and share best practices on COVID safety and care - staff infection rate ~3.75% vs. CDC avg. of 13.4%
Operational cost management tightly controlled
3
3Q20 Quarterly Highlights, continued
Proactively Issued $2.5 Billion of 8 Year Unsecured Notes at 6.125%
Attractive high-yield market conditions allowed us to:
Use proceeds to early retire all of our 2022 maturities
Nearest significant debt maturity is June 2023
Reduces annual future cash interest expense by ~$50 million
Enhances future free cash flow
Stimulus Funding
CARES Act grants
Mitigated but did not solve losses from shutdowns earlier in the year
Allowed focus to be on patient vs. financial crisis created by shutdowns
Grant guidance from HHS changed dramatically in September, which required us to reverse $70 million of grant income in 3Q20
HHS revised guidance again in October, which will be helpful to providers; we estimate the October guidance will result in us recognizing additional grant income of ~$100 million in 4Q20 based on lost revenues through 3Q20
Revised terms extend repayment period ~17 months to September 2022 and provide a more reasonable interest rate if
advances are not repaid by September 2022
4
3Q20 Financial Results - Summary
Net loss from continuing operations attributable to common shareholders in 3Q20 of $197 millionprimarily due to the early retirement of debt discussed above compared to a net loss from continuing operations of $227 million in 3Q19
ConsolidatedAdjusted EBITDA in 3Q20 of $621 million excluding a $70 million reversal of COVID stimulus grant income from 2Q20 based on revised guidance from the federal government in September 2020, or $551 million including the grant income reversal, versus $639 million in 3Q19
Hospital segment net patient service revenue per adjusted admission increased 17%on asame-hospitalbasis versus 3Q19; Ambulatory segment same-facilitysystem-wide revenue per surgical case increased 13% versus the prior year.
Ambulatory segment Adjusted EBITDA growth of 10% compared to 3Q19 excluding the impact of a $13 million reversal of grant income
Continued focus on strategic cost reduction measures and corporate efficiencieshelped mitigate the impact of COVID surges in certain markets during the quarter, including the impact of higher temporary labor and premium pay
Net cash from operations of $593 million in 3Q20 versus $419 million in 3Q19, growth of 42%; Free cash flow in 3Q20 of $507 million, or $331 million excluding $174 million of stimulus grants and $2 million of Medicare advances
received in the quarter, compared to $263 million in 3Q19, growth of 26%
5
2020 Volume Statistics
Initial Outperformance vs. Initial COVID Impact
Recovery
Percent Change from Prior Year
Percent of pre-COVID Levels (b)
Volume Statistics
Jan-Feb
March -
2H March
April
May
June
July
Aug
Sep
Oct
(a)
full month
Admissions
1.1%
(15.2%)
(~25%)
(~33%)
~80%
~90%
~90%
~87%
~88%
~90%
OP visits (c)
5.5%
(22.3%)
(~35%)
(~61%)
~60%
~77%
~86%
~82%
~83%
~86%
ER visits (d)
6.0%
(16.2%)
(~27%)
(~48%)
~65%
~77%
~80%
~76%
~74%
~79%
Hospital
0.4%
(21.1%)
(~38%)
(~55%)
~80%
~90%
~87%
~88%
~92%
~93%
surgeries (e)
USPI surgical
2.0%
(28.6%)
(~53%)
(~80%)
~70%
~90%
~94%
~93%
~96%
~96%
cases
Same-hospitalbasis for hospital statistics; USPI surgical cases are on a same-facilitysystem-wide basis
Same-business-daybasis comparing to same period in prior year
Includes ER visits and hospital outpatient surgeries
Includes both ER inpatient admissions and outpatient ER visits.
(e) Includes both hospital inpatient and hospital outpatient surgeries
6
Adjusted EBITDA with and without Grant Income
In millions
1Q20
2Q20
Jul
Aug
Sep
3Q20
YTD 3Q20
Adjusted EBITDA Excluding Grant Income
Hospital Segment
$342
$18
$112
$75
$110
$297
$657
Ambulatory Segment
156
118
77
76
75
228
502
Conifer Segment
87
73
31
30
35
96
256
Consolidated, Excluding Grant Income
$585
$209
$220
$181
$220
$621
$1,415
Grant Income
Hospital Segment
-
$474
$62
$53
($172)
($57)
$417
Ambulatory Segment
-
37
1
0
(10)
(9)
28
Ambulatory Segment Grants in Equity Earnings
-
12
1
0
(5)
(4)
8
Conifer Segment
-
-
-
-
-
-
-
Consolidated Operations
-
$523
$64
$53
($187)
($70)
$453
Adjusted EBITDA Including Grant Income
Hospital Segment
$342
$492
$174
$128
($62)
$240
$1,074
Ambulatory Segment
156
167
79
76
60
215
538
Conifer Segment
87
73
31
30
35
96
256
Consolidated, Including Grant Income
$585
$732
$284
$234
$33
$551
$1,868
7
Liquidity Update
As of November 17, 2020, we had approximately $3.475 billion of cash on hand
We had no borrowings outstanding under our $1.9 billion line of credit facility
Repayment period for ~$1.5 billion of Medicare advances has been extended by the government through September 2022
Expect to repay in full within the allocated time frame, avoiding payment of any interest
Application for and receipt of federal stimulus grant monies
To date, we have received ~$890 million of federal grant aid earmarked for healthcare providers from stimulus legislation, including the CARES Act
We've recognized only $453 million of the funds as grant income so far; an additional ~$100 million related to YTD 3Q20 expected to be recognized in 4Q20 based on revised guidance from HHS
8
3Q20 Cash Analysis (in millions)
CASH BALANCE
($ in millions)
Cash generated by the business in Q3 was $231m excluding
$4,000
cash received from stimulus funding and cash used for non-
$89
routine transactions as listed in the graph below.
$178
$3,514
$5
$3,500
$231
$3,300
$(588)
$(68)
$(34)
$3,000
$(27)
$2,500
6/30/20 Ending
Medicare
Grants
Deferred FICA
Early
Litigation
NCI
USPI
Other Cash
9/30/20 Ending
Cash
Advances
payroll tax
retirement of
Settlement
Repurchases
Acquisitions
Cash
match
debt, including
accrued
interest
9
Questions and Answers
Ron Rittenmeyer
Executive Chairman and CEO
Saum Sutaria
President and COO
Dan Cancelmi
EVP and Chief Financial Officer
Regina Nethery
Vice President - Investor Relations
10
GAAP to Non-GAAP Reconciliations
NON-GAAP FINANCIAL INFORMATION
This presentation contains financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP). Reconciliations of these non-GAAP measures to the most comparable GAAP measures and management's reasoning for using these non-GAAP measures are included in our earnings press release dated October 20, 2020. GAAP to non-GAAP reconciliations for those measures used in this slide presentation are also included on the following slides.
11
Tenet Healthcare Corporation
Additional Supplemental Non-GAAP disclosures
Table #1 - Reconciliations of Net Loss Attributable to Tenet Healthcare Corporation Common Shareholders to Adjusted Net Income Available from Continuing Operations to Common Shareholders for 2020
(Unaudited)
(Dollars in millions except per share amounts)
2020
3rd Qtr
YTD
Net loss attributable to Tenet Healthcare Corporation common shareholders
$
(196)
$
(15)
Net income from discontinued operations
1
-
Net loss from continuing operations
(197)
(15)
Less: Impairment and restructuring charges, and acquisition-related costs
(57)
(166)
Litigation and investigation costs
(9)
(13)
Net gains on sales, consolidation and deconsolidation of facilities
1
4
Loss from early extinguishment of debt
(312)
(316)
Tax impact of above items
112
140
Adjusted net income available from continuing operations to common shareholders
$
68
$
336
Diluted loss per share from continuing operations
$
(1.87)
$
(0.14)
Less: Impairment and restructuring charges, and acquisition-related costs
(0.54)
(1.57)
Litigation and investigation costs
(0.08)
(0.12)
Net gains on sales, consolidation and deconsolidation of facilities
0.01
0.04
Loss from early extinguishment of debt
(2.93)
(2.98)
Tax impact of above items
1.05
1.32
Adjusted diluted earnings per share from continuing operations
$
0.64
$
3.17
Weighted average basic shares outstanding (in thousands)
105,263
104,803
Weighted average dilutive shares outstanding (in thousands)
106,503
105,938
12
Tenet Healthcare Corporation
Additional Supplemental Non-GAAP disclosures
Table #1 - Reconciliations of Net Loss Attributable to Tenet Healthcare Corporation Common Shareholders to Adjusted Net Income Available from Continuing Operations to Common Shareholders for 2019
(Unaudited)
(Dollars in millions except per share amounts)
2019
3rd Qtr
YTD
Net loss attributable to Tenet Healthcare Corporation common shareholders
$
(226)
$
(212)
Net income from discontinued operations
1
11
Net loss from continuing operations
(227)
(223)
Less: Impairment and restructuring charges, and acquisition-related costs
(46)
(101)
Litigation and investigation costs
(84)
(115)
Net losses on sales, consolidation and deconsolidation of facilities
(1)
(3)
Loss from early extinguishment of debt
(180)
(227)
Loss from divested and closed businesses
(1)
(2)
Noncontrolling interest impact
4
4
Tax impact of above items
14
23
Adjusted net income available from continuing operations to common shareholders
$
67
$
198
Diluted loss per share from continuing operations
$
(2.19)
$
(2.16)
Less: Impairment and restructuring charges, and acquisition-related costs
(0.44)
(0.97)
Litigation and investigation costs
(0.80)
(1.10)
Net losses on sales, consolidation and deconsolidation of facilities
(0.01)
(0.03)
Loss from early extinguishment of debt
(1.72)
(2.17)
Loss from divested and closed businesses
(0.01)
(0.02)
Noncontrolling interest impact
0.04
0.04
Tax impact of above items
0.13
0.22
Adjusted diluted earnings per share from continuing operations
$
0.64
$
1.89
Weighted average basic shares outstanding (in thousands)
103,558
103,181
13
Weighted average dilutive shares outstanding (in thousands)
104,582
104,584
Tenet Healthcare Corporation
Additional Supplemental Non-GAAP disclosures
Table #2 - Reconciliations of Net Loss Attributable to Tenet Healthcare Corporation
Common Shareholders to Adjusted EBITDA for 2020
(Unaudited)
(Dollars in millions)
2020
3rd Qtr
YTD
Net loss attributable to Tenet Healthcare Corporation common shareholders
$
(196)
$
(15)
Less: Net income available to noncontrolling interests
(90)
(237)
Income from discontinued operations, net of tax
1
-
(Loss) income from continuing operations
(107)
222
Income tax benefit
197
227
Loss from early extinguishment of debt
(312)
(316)
Other non-operating income, net
-
3
Interest expense
(263)
(761)
Operating income
271
1,069
Litigation and investigation costs
(9)
(13)
Net gains on sales, consolidation and deconsolidation of facilities
1
4
Impairment and restructuring charges, and acquisition-related costs
(57)
(166)
Depreciation and amortization
(215)
(624)
Adjusted EBITDA
$
551
$
1,868
Net operating revenues
$
4,557
$
12,725
Net loss attributable to Tenet Healthcare Corporation common shareholders as a % of net
(4.3)%
(0.1)%
operating revenues
Adjusted EBITDA as a % of net operating revenues (Adjusted EBITDA margin)
12.1 %
14.7 %
14
Tenet Healthcare Corporation
Additional Supplemental Non-GAAP disclosures
Table #2 - Reconciliations of Net Loss Attributable to Tenet Healthcare Corporation
Common Shareholders to Adjusted EBITDA for 2019
(Unaudited)
(Dollars in millions)
2019
3rd Qtr
YTD
Net loss attributable to Tenet Healthcare Corporation common shareholders
$
(226)
$
(212)
Less: Net income available to noncontrolling interests
(80)
(259)
Income from discontinued operations, net of tax
1
11
(Loss) income from continuing operations
(147)
36
Income tax expense
(22)
(75)
Loss from early extinguishment of debt
(180)
(227)
Other non-operating expense, net
(3)
(3)
Interest expense
(244)
(742)
Operating income
302
1,083
Litigation and investigation costs
(84)
(115)
Net losses on sales, consolidation and deconsolidation of facilities
(1)
(3)
Impairment and restructuring charges, and acquisition-related costs
(46)
(101)
Depreciation and amortization
(205)
(627)
Loss from divested and closed businesses
(1)
(2)
Adjusted EBITDA
$
639
$
1,931
Net operating revenues
$
4,568
$
13,673
Less: Net operating revenues from health plans
-
1
Adjusted net operating revenues
$
4,568
$
13,672
Net loss attributable to Tenet Healthcare Corporation common shareholders as a % of net
(4.9)%
(1.6)%
operating revenues
Adjusted EBITDA as a % of adjusted net operating revenues (Adjusted EBITDA margin)
14.0 %
14.1 %
15
Tenet Healthcare Corporation
Additional Supplemental Non-GAAP disclosures
Table #3 - Reconciliations of Net Cash Provided by Operating Activities to Free Cash Flow
and Adjusted Free Cash Flow from Continuing Operations for 2020
(Unaudited)
(Dollars in millions)
Net cash provided by operating activities
Purchases of property and equipment
Free cash flow
Net cash used in investing activities
Net cash (used in) provided by financing activities
Net cash provided by operating activities
Less: Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements
Net cash used in operating activities from discontinued operations
Adjusted net cash provided by operating activities from continuing operations
Purchases of property and equipment
Adjusted free cash flow - continuing operations
2020
3rd Qtr
YTD
$
593
$
2,961
(86)(374)
$
507
$
2,587
$
(117)
$
(406)
$
(690)
$
483
$
593
$
2,961
(138)
(252)
(1)
(1)
732
3,214
(86)
(374)
$
646
$
2,840
16
Tenet Healthcare Corporation
Additional Supplemental Non-GAAP disclosures
Table #3 - Reconciliations of Net Cash Provided by Operating Activities to Free Cash Flow
and Adjusted Free Cash Flow from Continuing Operations for 2019
(Unaudited)
(Dollars in millions)
Net cash provided by operating activities
Purchases of property and equipment
Free cash flow
Net cash used in investing activities
Net cash used in financing activities
Net cash provided by operating activities
Less: Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements
Net cash provided by (used in) operating activities from discontinued operations
Adjusted net cash provided by operating activities from continuing operations
Tenet Healthcare Corporation published this content on 18 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 November 2020 14:32:03 UTC
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