Tenet Reports First Quarter 2022 Results; Retired over $800 Million of Debt to Date in 2022; Maintains 2022 Adjusted EBITDA Outlook

• Net income from continuing operations available to common shareholders in Q1’22 of $139 million ($135 million excluding grant income) versus net income from continuing operations of $97 million in Q1’21 ($73 million excluding grant income)

• Consolidated Adjusted EBITDA in Q1’22 of $888 million ($882 million excluding $6 million of grant income), exceeding the Company's Q1’22 Outlook range, versus $777 million in Q1’21 ($740 million excluding $37 million of grant income); Q1'22 included a $69 million gain from the sale of certain medical office buildings for net cash proceeds of $147 million

• Diluted earnings per share from continuing operations available to common shareholders in Q1’22 of $1.27 ($1.23 per share excluding grant income) compared to $0.90 in Q1’21 ($0.68 per share excluding grant income); Adjusted diluted earnings per share from continuing operations of $1.93 in Q1’22 ($1.89 per share excluding grant income) compared to $1.30 in Q1’21 ($1.07 per share excluding grant income)

• Same-facility system-wide ambulatory surgical cases increased 8.0 percent versus Q1’21, reflecting continuing volume recovery from the impact of the pandemic, particularly in orthopedic and gastrointestinal procedures

• Due to the impact from the surge of Omicron, same-hospital adjusted admissions for Q1’22 decreased 1.4 percent versus Q1’21

• Net cash provided by operating activities in Q1’22 of $228 million ($422 million excluding $194 million of repayments associated with pandemic-related Medicare Advance Payments received in 2020); free cash flow of $73 million in Q1’22 ($267 million excluding the repayment of Medicare advances)

• The Company has early retired $824 million of debt to date in 2022, including its previously announced retirement of $700 million of 7.5 percent senior secured notes due in 2025; expects annual cash interest savings of $61 million

Tenet Healthcare Corporation (Tenet) (NYSE: THC) today announced its results for the quarter ended March 31, 2022 (Q1’22). Tenet’s results for Q1’22 versus the quarter ended March 31, 2021 (Q1’21) follow:

“We had a strong start to the year, generating Adjusted EBITDA above our expectations and further improving our balance sheet in the quarter,” said Saum Sutaria, M.D., Chief Executive Officer. “We demonstrated operational discipline across each operating segment, including impressive case growth at USPI, strong and consistent performance in our hospitals and continued margin enhancement at Conifer.”

COVID-19 Pandemic (COVID)

The Company continues to treat COVID patients and effectively manage the operational and financial impact of the pandemic on its operations. The Company experienced an acceleration in COVID cases associated with the Omicron variant during January 2022 with cases declining over 90 percent from that peak by the end of Q1’22.

Results from Continuing Operations Available to Tenet Common Shareholders

Net income from continuing operations available to the Company’s common shareholders in Q1’22 was $139 million, or $1.27 per diluted share, versus net income from continuing operations of $97 million, or $0.90 per diluted share, in Q1’21. The following items were included in the Q1’22 and Q1’21 periods:

• Q1’22 included COVID-related stimulus grant income of $6 million pre-tax ($4 million after-tax, or $0.04 per diluted share) versus $37 million pre-tax grant income ($24 million after-tax, or $0.22 per diluted share) in Q1’21.

Adjusted Net Income from Continuing Operations Available to Tenet Common Shareholders

Reconciliations of net income available to Tenet common shareholders to Adjusted net income from continuing operations available to Tenet common shareholders are contained in Table #1 at the end of this release.

Tenet’s Q1’22 Adjusted net income from continuing operations available to its common shareholders was $213 million, or $1.93 per diluted share, compared to $140 million, or $1.30 per diluted share, in Q1’21.

Adjusted EBITDA

Reconciliations of net income available to Tenet common shareholders to Adjusted EBITDA are contained in Table #2 at the end of this release.

Adjusted EBITDA in Q1’22 was $888 million ($882 million excluding $6 million of grant income) compared to $777 million in Q1’21 ($740 million excluding $37 million of grant income).

Early Retirement of Debt

In Q1’22, the Company retired $700 million aggregate principal amount of its 7.50 percent senior secured notes due in 2025, for a total redemption price of approximately $730 million, using available cash on hand. Also, to date in 2022, the Company has purchased approximately $124 million aggregate principal amount of its 6.75 percent senior unsecured notes due in 2023 on the open market for approximately $129 million using available cash on hand ($103 million of which was purchased in Q1’22). In conjunction with these transactions, Tenet expects its future annual cash interest payments will be reduced by $61 million.

In Q1’21, the Company retired $478 million of 7.00 percent senior unsecured notes due in 2025 using available cash on hand, reducing annual cash interest payments by $33 million.

Ambulatory Care (Ambulatory) Segment Results

Tenet’s Ambulatory business segment is comprised of the operations of United Surgical Partners International (USPI). As of March 31, 2022, USPI had interests in 404 ambulatory surgery centers (253 consolidated) and 24 surgical hospitals (eight consolidated) in 34 states. Results for Q1’21 included USPI’s imaging centers (realigned under the Hospital segment as of April 1, 2021) and its urgent care centers (sold in April 2021). The Company owns 95 percent of USPI.

Revenues and Volumes

• The Ambulatory segment produced net operating revenues of $738 million in Q1’22, an increase of 14.2 percent compared to $646 million in Q1’21. This increase primarily related to higher volumes in Q1’22 than in Q1’21, new service line growth and additional revenues associated with the SurgCenter Development (SCD) acquisition completed in December 2021, partially offset by the absence of revenues from USPI’s urgent care centers, which were sold in the second quarter of 2021, and the realignment of USPI’s imaging centers under the Company’s Hospital segment also in the second quarter of 2021.
• Surgical business same-facility system-wide net operating revenues increased 9.3 percent in Q1’22 compared to Q1’21, with cases up 8.0 percent and revenue per case up 1.1 percent.

Adjusted EBITDA

• Ambulatory segment Adjusted EBITDA was $282 million in Q1’22 ($280 million excluding $2 million of grant income) compared to $257 million in Q1’21 ($244 million excluding $13 million of grant income).
• Adjusted EBITDA margin for the Ambulatory segment excluding grant income was 37.9 percent in Q1’22 compared to 37.8 percent in Q1’21.
• Adjusted EBITDA less facility-level NCI in Q1’22 was $187 million ($186 million excluding grant income) compared to $169 million in Q1’21 ($160 million excluding grant income).

Hospital Operations and Other (Hospital) Segment Results

Tenet’s Hospital business segment is primarily comprised of acute care and specialty hospitals, imaging centers, ancillary outpatient facilities, micro-hospitals and physician practices. Effective April 1, 2021, the Company’s imaging centers that were previously operated under USPI were realigned under the Hospital segment.

Revenues and Volumes

• Net operating revenues (which exclude grant income) in the Hospital segment were $3.798 billion in Q1’22, a decline of 3.8 percent from $3.947 billion in Q1’21. The decrease in revenues was primarily due to the sale of the Company’s Miami-area hospitals in Q3’21, partially offset by improved pricing yield.
• Same-hospital net patient service revenues were $3.478 billion in Q1’22, growth of 2.5 percent from $3.392 billion in Q1’21.
• Same-hospital net patient service revenue per adjusted admission increased 4.0 percent year-over-year for Q1’22 primarily reflecting improved pricing yield.

Adjusted EBITDA

• Adjusted EBITDA in the segment was $514 million in Q1’22 ($510 million excluding $4 million of grant income) compared to $434 million in Q1’21 ($410 million excluding $24 million of grant income). The Adjusted EBITDA margin excluding grant income was 13.4 percent in Q1’22 compared to 10.4 percent in Q1’21, and reflects continued strength in patient acuity due to the Company's focus on growing higher acuity services, partially offset by elevated contract labor rates and premium pay.
• Adjusted EBITDA in Q1’22 included a $69 million gain on the sale of certain medical office buildings for cash proceeds of approximately $147 million. Additionally, as a result of the approval of Texas’ Medicaid supplemental funding programs by the Centers for Medicare & Medicaid Services (CMS) in March 2022, the Company recognized approximately $57 million of revenue in Q1’22, which represented revenue from September 2021 through March 2022.

Conifer Segment Results

Tenet’s Conifer business segment provides comprehensive end-to-end and focused-point business process services, including hospital and physician revenue cycle management, patient communications and engagement support and value-based care solutions to hospitals, health systems, physician practices, employers and other clients.

As announced on March 1, 2022, based on ongoing shareholder value creation opportunities and improved business fundamentals, the Company is no longer pursuing a spinoff of its Conifer Health Solutions subsidiary.

Revenues

Conifer segment revenues in Q1’22 were $324 million compared to $310 million in Q1’21, an increase of 4.5 percent, primarily due to contractual rate increases and new business expansion.

Adjusted EBITDA

Conifer generated $92 million of Adjusted EBITDA in Q1’22 compared to $86 million in Q1’21 primarily due to the impact of 4.5 percent revenue growth and continued effective cost management. Conifer’s Adjusted EBITDA margin was 28.4 percent in Q1’22 versus 27.7 percent in Q1’21.

Balance Sheet, Cash Flows and Liquidity

Balance Sheet Highlights

• Cash and cash equivalents at March 31, 2022 were $959 million lower than December 31, 2021 primarily due to the Company’s early retirement of $700 million of debt during Q1’22 as well as the Company’s purchase of $103 million of 6.75 percent senior unsecured notes due in 2023 during Q1’22.
• In the year ended December 31, 2020 (FY 2020), the Company received approximately $1.5 billion of Medicare advance payments from CMS. Approximately $194 million of the Medicare advances were repaid during Q1’22 by the Company, with approximately $616 million of these advances having been repaid by the Company during the year ended December 31, 2021. Repayment terms for the Medicare advance payments began in April 2021 (12 months from the Company’s receipt of the advance payments in April 2020). An annual interest rate of 4.0 percent will be assessed on any outstanding balances 29 months from the initial advance. The Company began repaying these advance payments in April 2021 and expects to fully repay the advances before interest starts to accrue in September 2022.
• The Company had no outstanding borrowings on its $1.5 billion line of credit as of March 31, 2022.
• The Company’s ratio of net debt plus the Medicare advances liability to Adjusted EBITDA was 3.93x at March 31, 2022 compared to 4.07x at December 31, 2021.
• Accounts receivable days outstanding increased to 58.9 days at March 31, 2022 compared to 57.0 days at December 31, 2021. This change is primarily due to the approval of Texas’ Medicaid supplemental funding programs by CMS at the end of March 2022, which resulted in the Company recognizing approximately $57 million of revenue in Q1’22 that has not been collected yet since the program was just recently approved.

Cash flows and liquidity

Reconciliations of net cash provided by operating activities to both Free Cash Flow and Adjusted Free Cash Flow are contained in Table #3 at the end of this release.

• The Company produced free cash flow of $73 million in Q1’22 ($267 million excluding $194 million of repayments in Q1’22 associated with Medicare advances received in 2020). There were no repayments of Medicare advances in Q1’21.
• Also, free cash flow in Q1’22 included $5 million of pandemic-related grant receipts compared to $31 million in Q1’21.

Company Outlook

• Reconciliations of Outlook net income available to Tenet common shareholders to Outlook Adjusted EBITDA for the year ending December 31, 2022 (FY 2022) and the quarter ending June 30, 2022 (Q2’22) are contained in Table #4 at the end of this release.
• Reconciliations of Outlook net income available to Tenet common shareholders to Outlook Adjusted net income from continuing operations to common shareholders for FY 2022 and Q2'22 are contained in Table #5 at the end of this release.
• Reconciliations of Outlook net cash provided by operating activities to Outlook free cash flow and Outlook Adjusted free cash flow from continuing operations for FY 2022 are contained in Table #6 at the end of this release.

Tenet’s Outlook for FY 2022 (consolidated and by segment) and Q2'22 follows:

Management’s Webcast Discussion of Results

Tenet management will discuss the Company’s Q1’22 results in a webcast scheduled for 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on April 21, 2022. Investors can access the webcast through the Company’s website at www.tenethealth.com/investors.

The slide presentation associated with the webcast referenced above, a copy of this earnings press release and a related supplemental financial disclosures document will be available on the Company’s Investor Relations website on April 20, 2022.

Cautionary Statement

This release contains “forward-looking statements” - that is, statements that relate to future, not past, events. In this context, forward-looking statements often address the Company’s expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “assume,” “believe,” “budget,” “estimate,” “forecast,” “intend,” “plan,” “predict,” “project,” “seek,” “see,” “target,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain, especially with regards to developments related to COVID-19. Particular uncertainties that could cause the Company’s actual results to be materially different than those expressed in the Company’s forward-looking statements include, but are not limited to, the impact of the COVID-19 pandemic and other factors disclosed under “Forward-Looking Statements” and “Risk Factors” in our Form 10-K for the year ended December 31, 2021 and other filings with the Securities and Exchange Commission.

About Tenet Healthcare

Tenet Healthcare Corporation (NYSE: THC) is a diversified healthcare services company headquartered in Dallas. Our care delivery network includes United Surgical Partners International, the largest ambulatory platform in the country, which operates or has ownership interests in approximately 440 ambulatory surgery centers and surgical hospitals. We also operate 60 acute care and specialty hospitals, approximately 110 other outpatient facilities, a network of leading employed physicians and a global business center in Manila, Philippines. Our Conifer Health Solutions subsidiary provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients. Across the Tenet enterprise, we are united by our mission to deliver quality, compassionate care in the communities we serve. For more information, please visit www.tenethealth.com.

Non-GAAP Financial Measures

• Adjusted EBITDA, a non-GAAP measure, is defined by the Company as net income available (loss attributable) to Tenet common shareholders before (1) the cumulative effect of changes in accounting principles, (2) net loss attributable (income available) to noncontrolling interests, (3) income (loss) from discontinued operations, net of tax, (4) income tax benefit (expense), (5) gain (loss) from early extinguishment of debt, (6) other non-operating income (expense), net, (7) interest expense, (8) litigation and investigation benefit (costs), net of insurance recoveries, (9) net gains (losses) on sales, consolidation and deconsolidation of facilities, (10) impairment and restructuring charges and acquisition-related costs, (11) depreciation and amortization and (12) income (loss) from divested and closed businesses (i.e., health plan businesses). Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.
• Adjusted diluted earnings (loss) per share from continuing operations, a non-GAAP measure, is defined by the Company as Adjusted net income available (loss attributable) from continuing operations to Tenet common shareholders, divided by the weighted average diluted shares outstanding in the reporting period.
• Adjusted net income available (loss attributable) from continuing operations to Tenet common shareholders, a non-GAAP measure, is defined by the Company as net income available (loss attributable) to Tenet common shareholders before (1) income (loss) from discontinued operations, net of tax, (2) gain (loss) from early extinguishment of debt, (3) litigation and investigation benefit (costs), net of insurance recoveries, (4) net gains (losses) on sales, consolidation and deconsolidation of facilities, (5) impairment and restructuring charges and acquisition-related costs, (6) income (loss) from divested and closed businesses (i.e., health plan businesses) and (7) the associated impact of these items on taxes and noncontrolling interests. Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.
• Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) net cash provided by (used in) operating activities, less (2) purchases of property and equipment for continuing operations.
• Free Cash Flow excluding repayments of Medicare Advances and Deferred Payroll Tax Payments, a non-GAAP measure, is defined by the Company as (1) Free Cash Flow plus (2) repayments of Medicare Advances and Deferred Payroll Tax Payments.
• Adjusted Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) Adjusted net cash provided by (used in) operating activities from continuing operations, less (2) purchases of property and equipment from continuing operations.
• Adjusted Free Cash Flow excluding repayments of Medicare Advances and Deferred Payroll Tax Payments, a non-GAAP measure, is defined by the Company as (1) Adjusted Free Cash Flow plus (2) repayments of Medicare Advances and Deferred Payroll Tax Payments.
• Adjusted net cash provided by (used in) operating activities, a non-GAAP measure, is defined by the Company as cash provided by (used in) operating activities prior to (1) payments for restructuring charges, acquisition-related costs and litigation costs and settlements, and (2) net cash provided by (used in) operating activities from discontinued operations.

The Company believes the foregoing non-GAAP measures are useful to investors and analysts because they present additional information on the Company’s financial performance. Investors, analysts, Company management and the Company’s Board of Directors utilize these non-GAAP measures, in addition to GAAP measures, to track the Company’s financial and operating performance and compare the Company’s performance to its peer companies, which use similar non-GAAP financial measures in their presentations and earnings releases. The Human Resources Committee of the Company’s Board of Directors also uses certain of these measures to evaluate management’s performance for the purpose of determining incentive compensation. Additional information regarding the purpose and utility of specific non-GAAP measures used in this release is set forth below.

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 estimated fair value of shares of the Company’s common stock. Company management also regularly reviews the Adjusted EBITDA performance for each operating segment. The Company does not use Adjusted EBITDA to measure liquidity, but instead to measure operating performance.

The Company uses, and believes investors use, Free Cash Flow and Adjusted Free Cash Flow, and Free Cash Flow and Adjusted Free Cash Flow excluding repayments of Medicare Advances and Deferred Payroll Tax Payments as supplemental non-GAAP measures to analyze cash flows generated from the Company’s operations. The Company believes these measures are useful to investors in evaluating its ability to fund distributions paid to noncontrolling interests or for acquisitions, purchasing equity interests in joint ventures or repaying debt.

These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Because these measures exclude many items that are included in the Company’s financial statements, they do not provide a complete measure of the Company’s operating performance. For example, the Company’s definitions of Free Cash Flow and Adjusted Free Cash Flow do not include other important uses of cash including (1) cash used to purchase businesses or joint venture interests, or (2) any items that are classified as Cash Flows From Financing Activities on the Company’s Consolidated Statement of Cash Flows, including items such as (i) cash used to repay borrowings, (ii) distributions paid to noncontrolling interests, or (iii) payments under the Put/Call Agreement for USPI's redeemable noncontrolling interest, which are recorded on the Statement of Cash Flows as the purchase of noncontrolling interest. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance.