Financial Data and Key Metrics Changes - Net revenue for Q3 2025 was $821.5 million, reflecting a 6.6% year-over-year increase [4][17] - Adjusted EBITDA was $136.4 million, up 6.1% year-over-year, with an adjusted EBITDA margin of 16.6% [4][17] - Same facility revenue grew by 6.3%, with same facility case growth of 3.4% and rate growth of 2.8% [17][22] Business Line Data and Key Metrics Changes - Over 166,000 surgical cases were performed in Q3, representing a 2.1% growth, with significant increases in GI and MSK procedures [5][17] - Total joint surgeries in ASC facilities grew by 16% in Q3 and 23% year-to-date compared to the same period last year [5][17] - The payer mix showed commercial payers at 50.6% of revenues, down 160 basis points year-over-year, while governmental sources increased by 120 basis points [7][17] Market Data and Key Metrics Changes - The company observed softer-than-expected same facility volume growth in recent months, prompting adjustments to the fourth quarter outlook [7][15] - The revised guidance for full-year revenue is now expected to be in the range of $3.275 billion to $3.3 billion [12][21] Company Strategy and Development Direction - The company is focused on three growth pillars: organic growth, margin improvement, and capital deployment for M&A [4] - A strategic portfolio optimization process is underway to enhance flexibility and streamline operations, with a focus on divesting larger surgical hospitals [11][12] - The company plans to open two new DeNovo facilities in Q3, with nine under construction and more than a dozen in the development pipeline, primarily targeting higher acuity specialties [9][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged recent trends in surgical demand and payer mix, particularly among commercial patients, which have led to a more cautious outlook for Q4 [15][22] - The company remains confident in its long-term growth algorithm and the resilience of its business model despite near-term challenges [15][22] Other Important Information - The company has deployed approximately $71 million in capital for acquisitions in 2025 and anticipates a return to normal levels of annual capital investment moving into 2026 [8][9] - The cash balance at the end of the quarter was $203.4 million, with total available liquidity exceeding $600 million [18] Q&A Session Summary Question: What is causing the weakness in demand or procedure volumes as you think through Q4? - Management noted broad-based weakness in volumes and payer mix, with higher government payer mix than expected entering Q4, but still anticipates growth in cases and rates [24][25] Question: Is the low level of spend on acquisitions due to deal timing or evaluation? - Management confirmed strong deal flow but emphasized a disciplined approach to acquisitions, indicating that timing is a factor [26] Question: Can you elaborate on the payer mix commentary? - Management indicated that while there is always pressure from payers, the current issue is more about a weaker growth trend rather than systematic problems [30][31] Question: How do you expect free cash flow to land in Q4 and the year ahead? - Management refrained from providing specific guidance on free cash flow but noted strong operating cash flow and improvements in working capital [76][80] Question: What are the implications of the portfolio review process? - Management is focused on optimizing the portfolio to enhance cash flow and reduce leverage, with potential partnerships or divestitures being considered [55][60]

Financial Data and Key Metrics Changes - Net revenue for Q3 2025 was $821.5 million, reflecting a year-over-year increase of 6.6% [4][17] - Adjusted EBITDA for the quarter was $136.4 million, up 6.1% year-over-year, with an adjusted EBITDA margin of 16.6% [4][17] - Same facility revenue grew by 6.3%, with same facility case growth of 3.4% and rate growth of 2.8% [17][22] Business Line Data and Key Metrics Changes - Over 166,000 surgical cases were performed in Q3, representing a 2.1% growth, with significant increases in GI and MSK procedures [5][17] - Total joint surgeries in ASC facilities grew by 16% in Q3 and 23% year-to-date compared to the same period last year [5][17] - The payer mix showed commercial payers at 50.6% of revenues, down 160 basis points year-over-year, while governmental sources increased by 120 basis points [7] Market Data and Key Metrics Changes - The company observed softer-than-expected same facility volume growth in recent months, prompting adjustments to the fourth quarter outlook [7][15] - The revised guidance for full-year revenue is now expected to be in the range of $3.275 billion to $3.3 billion, with adjusted EBITDA between $535 million and $540 million [12][21] Company Strategy and Development Direction - The company is focused on three growth pillars: organic growth, margin improvement, and capital deployment for M&A [4] - A strategic portfolio optimization review is underway to enhance flexibility and streamline operations, with a focus on divesting larger surgical hospitals that do not align with the core ASC service lines [10][11] - The company plans to open two new de novo facilities in Q3, with nine under construction and more than a dozen in the development pipeline, primarily targeting higher acuity specialties [9][21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged recent trends in surgical demand and payer mix, particularly among commercial patients, and is taking a cautious approach heading into Q4 [15][22] - The company remains confident in its long-term growth algorithm and the resilience of its business model despite near-term challenges [15][22] - Management emphasized the importance of disciplined capital employment and operational excellence for sustainable growth beyond 2025 [15] Other Important Information - The company has deployed approximately $71 million in capital for acquisitions in 2025 and anticipates a robust M&A pipeline with over $300 million in opportunities under evaluation [8][9] - The cash balance at the end of Q3 was $203.4 million, with total available liquidity exceeding $600 million [18] Q&A Session Summary Question: What is causing the weakness in demand or procedure volumes as you think through Q4? - Management noted broad-based weakness in volumes and payer mix, with higher government payer mix than expected entering Q4, but still anticipates growth in cases and rates [24][25] Question: Is the low level of spend on acquisitions due to deal timing or evaluation? - Management confirmed strong deal flow and a disciplined approach to acquisitions, indicating that timing is a factor but they expect to return to normal M&A flow [26] Question: Can you clarify the payer mix commentary regarding commercial volumes? - Management indicated that while there is always pressure from payers, the current issue is not due to systematic changes but rather a weaker growth trend than expected [30][31] Question: How do you expect free cash flow to land in Q4 and the year ahead? - Management refrained from providing specific guidance on free cash flow but indicated strong operating cash flow and improvements in working capital [76][80] Question: What are the expectations for de novo facilities going into next year? - Management expressed excitement about de novo opportunities, emphasizing that they are primarily focused on higher acuity facilities and have a strong pipeline [46][48]

Financial Data and Key Metrics Changes - Net revenue for Q3 2025 was $821.5 million, reflecting a 6.6% year-over-year increase [3][15] - Adjusted EBITDA was $136.4 million, up 6.1% year-over-year, with an adjusted EBITDA margin of 16.6% [3][15] - Same facility revenue grew by 6.3%, with same facility case growth of 3.4% and rate growth of 2.8% [15][20] Business Line Data and Key Metrics Changes - Over 166,000 surgical cases were performed in Q3, representing a 2.1% growth [15] - Growth in total joint surgeries was robust, with a 16% increase in Q3 and a 23% increase year-to-date compared to the same period last year [4][15] - Volume growth in gastrointestinal (GI) and musculoskeletal (MSK) procedures was relatively high, while ophthalmology procedures were slightly lower this quarter [4][5] Market Data and Key Metrics Changes - Payer mix showed commercial payers at 50.6% of revenues, down 160 basis points year-over-year, while governmental sources, primarily Medicare, increased by 120 basis points [5] - Same facility revenue growth for the full year is now expected to align with the midpoint of the long-term target range of 4%-6% [12][20] Company Strategy and Development Direction - The company is focused on organic growth, margin improvement, and capital deployment for M&A [3] - A strategic portfolio optimization process is underway to enhance flexibility and streamline operations [9][10] - The company plans to continue investing in DeNovo facilities, with two opened in Q3 and nine under construction [8][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged softer-than-expected same facility volume growth in recent months, prompting adjustments to the fourth quarter outlook [5][12] - The company remains confident in its long-term growth algorithm and the resilience of its business despite near-term challenges [13][21] - Revised full-year guidance expects revenue in the range of $3.275 billion to $3.3 billion and adjusted EBITDA between $535 million and $540 million [11][19] Other Important Information - The company has deployed approximately $71 million in capital for acquisitions in 2025, with a robust M&A pipeline of over $300 million under evaluation [6][8] - The company completed divestitures of three ASCs, generating cash proceeds of $45 million [18][40] - The inaugural investor day has been shifted to spring 2026 to provide a comprehensive update on portfolio optimization efforts [11] Q&A Session Summary Question: What is causing the weakness in demand or procedure volumes as you think through Q4? - Management noted broad-based weakness in volumes and payer mix, with higher government payer mix than expected [23][24] Question: Is the low level of spend on acquisitions due to deal timing or evaluation? - Management confirmed strong deal flow but emphasized a disciplined approach to acquisitions [25] Question: Can you clarify the payer mix commentary regarding commercial volumes being weaker? - Management indicated that while there is always pressure from payers, the current issue is more about the growth trend not being as strong as expected [29][30] Question: Can you break down the $20 million pressure on EBITDA guidance? - Management stated that approximately 60% of the pressure is related to development or capital timing, with the rest due to recent trend changes [31][32] Question: What are the expectations for free cash flow in Q4 and the year ahead? - Management does not provide specific guidance on free cash flow but noted strong operating cash flow and improvements in working capital [75][78]

Core Insights - Surgery Partners (NASDAQ:SGRY) met Wall Street's revenue expectations for Q3 CY2025, reporting a 6.6% year-on-year sales increase to $821.5 million, although its full-year revenue guidance of $3.29 billion was 2% below analysts' estimates [1][6] - The company's non-GAAP profit of $0.13 per share was 19% lower than analysts' consensus estimates [1][6] Company Overview - Surgery Partners operates a national network of outpatient surgical facilities, including over 180 locations across 33 states, providing alternatives to traditional hospital settings [3] Revenue Growth - The company has demonstrated solid long-term sales performance with a 12.4% annualized revenue growth over the last five years, outperforming the average healthcare company [4] - In the last two years, Surgery Partners achieved an annualized revenue growth of 10%, which is below its five-year trend but still considered respectable [5] Financial Performance - Q3 CY2025 revenue was $821.5 million, slightly below analyst estimates of $821.8 million, with a 6.6% year-on-year growth [6] - Adjusted EPS was $0.13, missing analyst expectations of $0.16 by 19% [6] - Adjusted EBITDA was $136.4 million, in line with analyst estimates, with a margin of 16.6% [6] - The company revised its full-year revenue guidance down to $3.29 billion from $3.38 billion, reflecting a 2.6% decrease [6] - Full-year EBITDA guidance is set at $537.5 million, below analyst estimates of $556.1 million [6] - Operating margin improved to 12.9%, up from 7.9% in the same quarter last year [6] - Free cash flow margin increased to 7.8%, compared to 5.8% in the same quarter last year [6] Sales Volumes - Sales volumes rose by 3.4% year on year, compared to a 5.4% increase in the same quarter last year [6] - Over the last two years, units sold averaged a 3.8% year-on-year growth, indicating that revenue growth was supported by price increases [7]

Revenue Performance - Third quarter 2025 revenues increased by 6.6% to $821.5 million compared to $770.4 million in the third quarter of 2024[3] - Same-facility revenues for the third quarter of 2025 rose by 6.3%, with a 2.8% increase in revenue per case and a 3.4% increase in same-facility cases[3] - Year-to-date 2025 revenues increased by 7.7% to $2,423.7 million compared to $2,249.9 million for the same period in 2024[4] - Full year 2025 revenue guidance is projected to be between $3.275 billion and $3.30 billion[2] Adjusted EBITDA - Adjusted EBITDA for the third quarter of 2025 was $136.4 million, reflecting a 6.1% increase from $128.6 million in the same period last year[5] - Year-to-date Adjusted EBITDA was $369.3 million, up from $344.4 million in the prior year[4] - Adjusted EBITDA for the three months ended September 30, 2025, was $136.4 million, up from $128.6 million in 2024, representing a growth of 6.1%[20] - Adjusted EBITDA guidance of $535 million to $540 million[2] Net Income and Loss - The company reported a net loss attributable to Surgery Partners, Inc. of $22.7 million for the third quarter of 2025, compared to a net loss of $31.7 million in the same quarter of 2024[5] - Net income for Q3 2025 was $25.3 million, compared to $6.4 million in Q3 2024, representing a significant increase[28] - Adjusted net income attributable to common stockholders for Q3 2025 was $16.5 million, down from $23.9 million in Q3 2024, indicating a decrease of approximately 30.5%[28] - For the nine months ended September 30, 2025, net income was $69.9 million, compared to $59.1 million for the same period in 2024, an increase of 18.8%[28] Cash and Debt - Cash and cash equivalents stood at $203.4 million, with an additional $405.9 million available under the revolving credit facility as of September 30, 2025[5] - The ratio of total net debt to EBITDA was approximately 4.2x at the end of the third quarter of 2025[7] Assets and Liabilities - As of September 30, 2025, total assets increased to $7,946.6 million from $7,890.0 million as of December 31, 2024, reflecting a growth of 0.7%[20] - Total liabilities increased to $4,393.6 million as of September 30, 2025, from $4,254.8 million at the end of 2024, reflecting a rise of 3.3%[20] Case Volume and Facilities - Case volume for the three months ended September 30, 2025, was 166,106, an increase from 162,635 in 2024, marking a growth of 2.9%[20] - The number of surgical facilities remained stable at 165 as of September 30, 2025, compared to 166 in the previous year[20] - For the nine months ended September 30, 2025, the company reported a total of 499,264 cases, an increase from 482,547 cases in 2024, representing a growth of 3.4%[20] Operating Activities - The company reported a net cash provided by operating activities of $83.6 million for the three months ended September 30, 2025, compared to $65.2 million in 2024, indicating a 28.5% increase[20] Transaction Costs and Expenses - Transaction and integration costs for Q3 2025 amounted to $12.6 million, down from $29.4 million in Q3 2024, a decrease of 57.3%[28] - Equity-based compensation expense decreased to $2.6 million in Q3 2025 from $7.1 million in Q3 2024, a reduction of 63.4%[28] Shareholder Information - Adjusted net income per share (diluted) for the three months ended September 30, 2025, was $0.13, down from $0.19 in 2024, a decrease of 31.6%[20] - Diluted adjusted net income per share for the nine months ended September 30, 2025 was $0.34, compared to $0.49 in 2024, a decline of 30.6%[28] - Weighted average common shares outstanding (basic) increased to 127,206 in Q3 2025 from 126,172 in Q3 2024, an increase of 0.8%[28] M&A and Portfolio Optimization - The company continues to evaluate M&A opportunities and portfolio optimization to drive sustained success[2]

Core Insights - Surgery Partners, Inc. reported a 6.6% increase in revenues for Q3 2025, reaching $821.5 million compared to $770.4 million in Q3 2024, with same-facility revenues up 6.3% [3][4] - The company adjusted its full-year 2025 revenue guidance to a range of $3.275 billion to $3.30 billion and Adjusted EBITDA guidance to $535 million to $540 million, reflecting a cautious outlook due to softer volume and payor mix trends [2][4] - Adjusted EBITDA for Q3 2025 was $136.4 million, a 6.1% increase from $128.6 million in Q3 2024, indicating operational resilience despite challenges [3][7] Financial Performance - Year-to-date revenues for 2025 increased by 7.7% to $2,423.7 million compared to $2,249.9 million in the same period of 2024, with same-facility revenues up 5.4% [4][6] - The company reported a net loss attributable to Surgery Partners, Inc. of $22.7 million for Q3 2025, an improvement from a loss of $31.7 million in Q3 2024 [7][19] - Operating cash flows for Q3 2025 were $83.6 million, up from $65.2 million in Q3 2024, driven by operational growth and reduced transaction-related costs [5][6] Operational Metrics - The number of surgical cases increased by 2.1% in Q3 2025, with same-facility cases rising by 3.4% [7][25] - Revenue per case for Q3 2025 was $4,946, reflecting a 2.8% increase from the previous year [25][27] - As of September 30, 2025, Surgery Partners operated 165 surgical facilities, maintaining the same number as the previous year [25][21] Liquidity and Debt - As of September 30, 2025, the company had cash and cash equivalents of $203.4 million and $405.9 million in borrowing capacity under its revolving credit facility [5][21] - The ratio of total net debt to EBITDA was approximately 4.2x at the end of Q3 2025, indicating a stable leverage position [8][21]

Core Insights - Surgery Partners is set to announce earnings results, with expectations of revenue growth slowing compared to the previous year [1][2] - The company reported a strong performance last quarter, exceeding revenue expectations by 1.2% [1] Revenue Expectations - Analysts expect Surgery Partners' revenue to grow 6.7% year on year to $821.8 million, down from a 14.3% increase in the same quarter last year [2] - The company reported revenues of $826.2 million last quarter, reflecting an 8.4% year-on-year increase [1] Earnings Performance - Adjusted earnings per share (EPS) are anticipated to be $0.16 [2] - Surgery Partners has missed Wall Street's revenue estimates three times in the past two years [3] Peer Comparison - In the outpatient & specialty care segment, Select Medical reported a 7.2% year-on-year revenue growth, while U.S. Physical Therapy saw a 17.3% increase [4] - Select Medical and U.S. Physical Therapy both experienced declines in share price following their earnings reports [4] Market Sentiment - There is positive sentiment in the outpatient & specialty care segment, with average share prices up 3.9% over the last month [5] - Surgery Partners' share price has increased by 11.1% during the same period, with an average analyst price target of $30.82 compared to the current share price of $21.93 [5]

Core Viewpoint - Surgery Partners, Inc. is set to release its third quarter 2025 results on November 10, 2025, followed by a conference call for investors [1]. Company Overview - Surgery Partners is a leading healthcare services company headquartered in Brentwood, Tennessee, focusing on high-quality, cost-effective surgical and ancillary care solutions [3]. - The company operates over 200 locations across 30 states, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices, and urgent care facilities [3]. - Founded in 2004, Surgery Partners is recognized as one of the largest and fastest-growing surgical services businesses in the United States [3]. Investor Relations - Interested parties can access the conference call via a live webcast on the company's Investor Relations website, with a replay available for a limited time [1]. - Contact information for investor relations includes a dedicated phone line and email for inquiries [4].

Core Viewpoint - Surgery Partners reported mixed financial results for Q2 2025, with revenue exceeding expectations but non-GAAP EPS slightly missing consensus estimates, reflecting ongoing net losses and higher costs associated with network growth [1][2][5] Financial Performance - GAAP revenue reached $826.2 million, surpassing analyst estimates of $818.4 million, and showing an 8.4% increase from $762.1 million in Q2 2024 [2][5] - Non-GAAP EPS was $0.17, missing the consensus estimate of $0.18 and down 19.0% from $0.21 in Q2 2024 [2] - Adjusted EBITDA grew 9.0% year-over-year to $129.0 million, with an adjusted EBITDA margin of 15.6%, slightly above the prior year's margin [2][6] Business Overview - Surgery Partners operates over 160 ambulatory surgery centers (ASCs) and surgical hospitals, focusing on same-day, minimally invasive procedures [3] - The company aims to provide efficient, cost-effective, and high-quality outpatient settings for patients, physicians, and payors [3] Strategic Focus - Recent growth strategies include acquisitions, new site development, and optimizing the facility portfolio for improved profitability [4] - Key success factors involve expanding physician partnerships, negotiating favorable insurance contracts, and ensuring regulatory compliance [4] Operational Highlights - Total cases performed increased to 172,858, up 3.8% year-over-year, with same-facility revenue growth of 5.1% [5] - The company reduced its facility count to 162 from 167, reflecting acquisitions and targeted divestitures [8] - Net interest expense rose to $67.9 million due to higher debt and interest rates [9] Market Trends - Strong volume growth was noted in gastrointestinal and orthopedic surgeries, with outpatient GI endoscopy growing faster than the company average [7][10] - The company maintains low exposure to Medicaid or ACA plans, with over 70% of supply purchases through group purchasing contracts [11] Future Guidance - Surgery Partners reaffirmed its full-year revenue guidance of $3.30–3.45 billion and adjusted EBITDA of $555–565 million, projecting further EBITDA margin expansion [14] - Key areas to monitor include the integration and profitability of newly acquired facilities, elevated debt service costs, and operational execution in working capital management [15]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, and cash flow statements, with accompanying notes [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section provides key financial metrics, including total assets of $7.95 billion and Q2 2025 revenues of $826.2 million Financial Position (in millions) | Financial Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Total current assets | $1,105.3 | $1,119.4 | | Total assets | $7,954.8 | $7,890.0 | | **Liabilities & Equity** | | | | Total current liabilities | $573.3 | $624.4 | | Long-term debt, less current maturities | $3,465.2 | $3,268.9 | | Total stockholders' equity | $3,156.5 | $3,196.4 | Consolidated Statements of Operations (in millions, except EPS) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $826.2 | $762.1 | $1,602.2 | $1,479.5 | | Operating income | $111.7 | $84.8 | $173.6 | $160.8 | | Net loss attributable to Surgery Partners, Inc. | $(2.5) | $(15.5) | $(40.2) | $(27.9) | | Basic and Diluted EPS | $(0.02) | $(0.12) | $(0.32) | $(0.22) | Consolidated Statements of Cash Flows (in millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $87.3 | $123.5 | | Net cash used in investing activities | $(74.3) | $(327.2) | | Net cash (used in) provided by financing activities | $(32.4) | $221.3 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, segment reporting, acquisitions, and payor mix for the company's 162 surgical facilities - As of June 30, 2025, the company owned or operated a portfolio of **162 surgical facilities**, including 143 ambulatory surgery centers (ASCs) and 19 surgical hospitals, across 30 states[25](index=25&type=chunk) Patient Service Revenues by Payor (%) | Payor | % of Patient Service Revenues (H1 2025) | % of Patient Service Revenues (H1 2024) | | :--- | :--- | :--- | | Private insurance | 52.6% | 52.2% | | Government | 42.5% | 42.2% | | Self-pay | 2.7% | 2.8% | | Other | 2.2% | 2.8% | - During the first six months of 2025, the company acquired a controlling interest in **four surgical facilities and two physician practices** for aggregate cash consideration of **$48.0 million**, net of cash acquired[62](index=62&type=chunk) - Goodwill increased from **$5,068.0 million** at year-end 2024 to **$5,098.6 million** as of June 30, 2025, primarily due to acquisitions (**$76.1 million**) net of disposals (**$45.5 million**)[48](index=48&type=chunk) - The company operates as a single reportable segment, **"Surgical Facilities,"** which includes ASCs, surgical hospitals, anesthesia services, and physician practices, generating **$289.9 million** in Adjusted EBITDA for the six months ended June 30, 2025[89](index=89&type=chunk)[90](index=90&type=chunk)[94](index=94&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, including an 8.3% revenue increase in Q2 2025, liquidity, capital resources, and non-GAAP reconciliations [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section details Q2 2025 revenue growth of 8.3% to $826.2 million, driven by same-facility increases, and changes in net loss Consolidated Results (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $826.2 | $762.1 | 8.4% | | Cost of Revenues | $630.6 | $582.9 | 8.2% | | Operating Income | $111.7 | $84.8 | 31.7% | | Net Loss Attributable to Surgery Partners, Inc. | $(2.5) | $(15.5) | 83.9% improvement | - The increase in Q2 2025 patient service revenues was driven by a **5.1% increase** in days-adjusted same-facility revenues, resulting from a **3.4% increase** in same-facility case volumes and a **1.6% increase** in same-facility revenue per case[113](index=113&type=chunk) - Interest expense for Q2 2025 increased to **$67.9 million** from **$51.5 million** in Q2 2024, primarily due to 2024 financing activities, increased Revolver borrowings, and maturing interest rate swaps[119](index=119&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$250.1 million** in cash and **$394.9 million** available on its revolver, despite a decrease in operating cash flow Liquidity Metrics (in millions) | Liquidity Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $250.1 | $269.5 | | Revolver borrowing capacity | $394.9 | N/A | | Net working capital | $532.0 | $495.0 | - The decrease in operating cash flow for H1 2025 compared to H1 2024 was primarily driven by **higher cash interest payments** and the **timing of changes in working capital**[132](index=132&type=chunk) - Management believes that cash flows from operations, available cash, revolver capacity, and access to capital markets will be adequate to meet both short-term and long-term liquidity needs[139](index=139&type=chunk) [Certain Non-GAAP Measures](index=26&type=section&id=Certain%20Non-GAAP%20Measures) This section reconciles non-GAAP measures, showing Q2 2025 Adjusted EBITDA increased 9.0% to **$129.0 million** Adjusted EBITDA Reconciliation (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Income before income taxes | $43.8 | $33.3 | $43.5 | $62.0 | | Adjusted EBITDA | $129.0 | $118.3 | $232.9 | $215.8 | Credit Agreement EBITDA (in millions) | Metric | Twelve Months Ended June 30, 2025 | | :--- | :--- | | Cash flows from operating activities | $263.9 | | Credit Agreement EBITDA | $579.0 | [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk on its variable-rate debt through hedging strategies, anticipating no material impact on 2025 earnings - The company's main market risk is exposure to changes in interest rates on its **variable-rate debt**, primarily indexed to the prime rate or SOFR[149](index=149&type=chunk)[150](index=150&type=chunk) - To mitigate interest rate risk, the company uses a mix of debt maturities and types, and periodically enters into **interest rate swap and cap agreements**[149](index=149&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's **disclosure controls and procedures were effective** as of June 30, 2025[152](index=152&type=chunk) - There were **no material changes** in internal control over financial reporting during the quarter ended June 30, 2025[153](index=153&type=chunk) [PART II - OTHER INFORMATION](index=29&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, and other disclosures, including equity sales and trading arrangements [Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) Management believes no current legal proceedings will have a material adverse effect on the company's business or financial condition - In management's opinion, the company is not currently a party to any proceedings that would have a **material adverse effect** on its business, financial condition, or results of operations[155](index=155&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred regarding the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - There have been **no material changes** with respect to the risk factors discussed in the company's 2024 Annual Report on Form 10-K[156](index=156&type=chunk) [Other Information (Items 2-6)](index=29&type=section&id=Other%20Information%20%28Items%202-6%29) This section confirms no unregistered equity sales, no defaults on senior securities, and no Rule 10b5-1 trading arrangement changes - The company reports **no unregistered sales of equity securities** and **no defaults upon senior securities**[157](index=157&type=chunk)[158](index=158&type=chunk) - During the three months ended June 30, 2025, none of the company's directors or officers adopted or terminated any **Rule 10b5-1 trading arrangement**[160](index=160&type=chunk)