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01/10 19:55
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed but overall positive outlook. The increase in 2025 EPS guidance and positive EBITDA from new facilities are strong positives. Despite some challenges, such as startup losses and cannibalization, the optimistic guidance and strategic expansions in behavioral health are promising. The Q&A reveals some concerns, but the overall sentiment leans positive, especially with increased guidance and strategic growth plans. No strong negative factors were highlighted, and the company's proactive approach to challenges suggests a likely positive stock price movement.
Adjusted Net Income per Share $5.69 per share, representing a 53% increase from the third quarter of 2024. The increase was driven by growth in the acute care operating environment, modest volume improvement in the behavioral health segment, and solid pricing across both segments.
Revenue Growth 13.4% year-over-year for the third quarter of 2025. This growth reflects continued growth in the acute care operating environment, modest volume improvement in the behavioral health segment, and solid pricing across both segments.
Net Benefit from Supplemental Medicaid Program $90 million net benefit during the third quarter of 2025 from the District of Columbia supplemental Medicaid program. Approximately $73 million of this benefit was recognized in acute care results, and the remaining in behavioral results.
Acute Care Same-Facility Net Revenues Increased by 12.8% during the third quarter of 2025 on a reported basis compared to last year's third quarter, and increased 9.4% after excluding the impact of the insurance subsidiary and prior period net benefit from the District of Columbia supplemental Medicaid program.
Acute Care Same-Facility Revenue per Adjusted Admission Increased by 9.8% during the third quarter of 2025 on a reported basis, and increased 7.3% after excluding the impact of the insurance subsidiary and prior period impact of the District of Columbia supplemental Medicaid benefit.
Operating Expenses per Adjusted Admission Increased by 4.0% on a same-facility basis over last year's third quarter after excluding the impact of the insurance subsidiary. This reflects effective expense management across labor, supplies, and other categories.
Same-Facility EBITDA Margin for Acute Care Increased by 190 basis points year-over-year to 15.8% during the third quarter of 2025 after excluding the prior period impact of the District of Columbia's supplemental benefit. This was driven by solid acute care revenues and effective expense controls.
Behavioral Health Same-Facility Net Revenues Increased by 9.3% on a reported basis during the third quarter of 2025, and were up 8.5% excluding the prior period impact of the District of Columbia supplemental Medicaid program. Revenue growth was driven by a 7.9% increase in revenue per adjusted patient day.
Behavioral Health Same-Facility Revenue per Adjusted Patient Day Increased by 7.9% during the third quarter of 2025 on a reported basis, and increased 7.1% excluding the prior period impact of the District of Columbia supplemental Medicaid program.
Behavioral Health Same-Facility Adjusted Patient Days Increased by 1.3% during the third quarter of 2025 compared to the prior year's third quarter. This reflects modest volume growth.
Behavioral Health Same-Facility EBITDA Increased by 7.6% during the third quarter of 2025 compared to the third quarter of 2024 after excluding the prior period impact of the District of Columbia supplemental benefit. This was supported by stable margins and improved hiring trends.
Cash Generated from Operating Activities Approximately $1.3 billion during the first 9 months of 2025, compared to approximately $1.4 billion during the same period in 2024. The decrease reflects changes in operating cash flow dynamics.
Capital Expenditures $734 million during the first 9 months of 2025, with close to 30% related to the new hospital in Florida and a replacement facility in California.
Stock Repurchase Acquired 3.19 million shares at a total cost of approximately $566 million during the first 9 months of 2025, including 1.315 million shares purchased during the third quarter of 2025.
New acute care hospital openings: Progress in two recent acute care hospital openings: West Henderson Hospital in Henderson, Nevada, and Cedar Hill Regional Medical Center in Washington, D.C. Cedar Hill achieved accreditation in early September, and financial drag from certification timing delay and start-up issues began to subside. The Alan B. Miller Medical Center in Palm Beach Gardens is slated to open in spring 2026.
Outpatient expansion: Opened 4 freestanding emergency departments (FEDs) year-to-date, bringing the total to 34. Operates 45 outpatient access points, including freestanding emergency departments, surgery centers, and other ambulatory services.
Behavioral health outpatient growth: On track to open 10 step-in programs under local brands and the new 1,000 branches wellness brand, supporting outpatient services through virtual and in-person settings.
Revenue growth: Third quarter 2025 revenue growth of 13.4% year-over-year, driven by acute care and behavioral health segments.
Supplemental Medicaid program: $90 million net benefit from the District of Columbia supplemental Medicaid program, contributing to revenue growth.
Operational efficiencies in acute care: Same-facility adjusted admissions in acute care hospitals increased by 2.0% year-over-year. Acute care same-facility revenue per adjusted admission increased by 9.8% on a reported basis.
Behavioral health operational improvements: Same-facility net revenues in behavioral health increased by 9.3% year-over-year. Same-facility adjusted patient days increased by 1.3%.
Stock repurchase program: Board authorized a $1.5 billion increase to the stock repurchase program, bringing total authorization to $1.759 billion.
Capital expenditures: Spent $734 million on capital expenditures in the first 9 months of 2025, with 30% allocated to new hospital projects in Florida and California.
Medicaid Supplemental Payment Programs: The company faces potential reductions in Medicaid supplemental payment programs due to changes in OB3 legislation. Starting in 2028, the annual net benefit is expected to decrease by $420 million to $470 million by 2032, which could significantly impact financial performance.
Labor Market Tightness: The behavioral health segment continues to experience labor tightness in some markets, which could constrain operational efficiency and growth.
Certification Delays and Start-Up Issues: The Cedar Hill Regional Medical Center faced financial drag due to certification timing delays and start-up issues, although these are expected to subside by year-end 2025.
Capital Expenditures: High capital expenditures, including $734 million spent in the first 9 months of 2025, could strain financial resources, especially if returns on these investments are delayed or lower than expected.
Regulatory Approvals: Pending CMS approvals for Medicaid supplemental programs introduce uncertainty in financial planning and revenue projections.
2025 Adjusted EPS Guidance: The midpoint of the 2025 adjusted EPS guidance has been increased by 6% to $21.80 per diluted share from $20.50 per diluted share previously.
Cedar Hill Regional Medical Center Outlook: The financial drag from certification timing delay and start-up issues is expected to subside by the end of 2025, with the facility expected to achieve breakeven or better, positioning it strongly for 2026.
Alan B. Miller Medical Center Opening: The new hospital in Palm Beach Gardens is on track to open in the spring of 2026, with significant community and healthcare professional interest.
Behavioral Health Segment Growth: The company is on track to open 10 new outpatient step-in programs in 2025, aiming to accelerate outpatient growth, diversify payer mix, and meet strong demand in the behavioral health market.
Acute Care Segment Expansion: Four freestanding emergency departments (FEDs) have been opened year-to-date in 2025, bringing the total to 34, with the FED strategy complementing acute care operations.
Behavioral Health Volume Growth: Same-facility adjusted patient day growth is expected to be in the 2% to 3% range for the near term, with expectations at the lower end of this range.
Medicaid Supplemental Payment Programs: The projected 2025 full-year net benefit from various approved programs is $1.3 billion, with additional amounts expected in Q4 2025. However, starting in 2028, the aggregate net benefit is estimated to reduce annually by $420 million to $470 million by 2032 due to legislative changes.
Dividends paid to shareholders: Approximately $340 million in dividends have been paid to shareholders since 2019.
Share repurchase program: During the first 9 months of 2025, the company acquired 3.19 million of its own shares at a total cost of approximately $566 million, including 1.315 million shares purchased during the third quarter of 2025. The Board of Directors authorized a new $1.5 billion increase to the stock repurchase program, bringing the total authorization to $1.759 billion. Since 2019, approximately 36% of the company's outstanding shares have been repurchased.
The earnings call presents a mixed but overall positive outlook. The increase in 2025 EPS guidance and positive EBITDA from new facilities are strong positives. Despite some challenges, such as startup losses and cannibalization, the optimistic guidance and strategic expansions in behavioral health are promising. The Q&A reveals some concerns, but the overall sentiment leans positive, especially with increased guidance and strategic growth plans. No strong negative factors were highlighted, and the company's proactive approach to challenges suggests a likely positive stock price movement.
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