Core Insights - Surgery Partners, Inc. reported a strong financial performance for the fourth quarter and full year of 2024, with revenues increasing by 17.5% to $864.4 million in Q4 and 13.5% to $3.1 billion for the full year [3][4][6] - The company achieved same-facility revenue growth of 5.6% in Q4 and 8.0% for the full year, indicating consistent organic growth [3][4][6] - Adjusted EBITDA for Q4 was $163.8 million, a 15.1% increase year-over-year, while full year Adjusted EBITDA rose 16.0% to $508.2 million [6][4] - Surgery Partners anticipates 2025 revenue in the range of $3.30 billion to $3.45 billion and Adjusted EBITDA between $555 million and $565 million [8] Financial Highlights - Q4 2024 revenues increased to $864.4 million from $735.4 million in Q4 2023, while full year revenues rose to $3.1 billion from $2.7 billion in 2023 [3][4] - Same-facility cases grew by 5.1% in Q4 and 3.9% for the full year, with revenue per case increasing by 0.5% in Q4 and 4.0% for the full year [6][4] - The net loss attributable to Surgery Partners was $108.5 million for Q4 and $168.1 million for the full year, primarily due to a non-cash valuation allowance against deferred tax assets [6][4] Liquidity and Cash Flow - As of December 31, 2024, Surgery Partners had cash and cash equivalents of $269.5 million and $501.5 million in borrowing capacity under its revolving credit facility [5][19] - Operating cash flows for Q4 were $111.4 million, up from $62.6 million in Q4 2023, reflecting operational growth and working capital improvements [5][20] - The company ended 2024 with a liquidity position exceeding $770 million, enhancing its ability to fund future acquisitions without accessing capital markets [2][5] 2025 Outlook - The company projects full year 2025 revenue between $3.30 billion and $3.45 billion, with Adjusted EBITDA expected to be in the range of $555 million to $565 million [8][2] - The guidance includes approximately $11 million of Adjusted EBITDA related to divestitures that occurred late in Q4 2024 [8]

Core Viewpoint - Surgery Partners, Inc. is set to release its fourth quarter 2024 results on March 3, 2025, before market opening, followed by a conference call at 8:30 a.m. Eastern Time [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 31 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 afterward [1][2]. - Contact information for investor relations includes a dedicated phone line and email for inquiries [4].

Company Overview - Surgery Partners (SGRY) shares increased by 21.2% to close at $25.75, with trading volume significantly higher than usual [1] - The stock has seen a 3.3% gain over the past four weeks [1] Acquisition Proposal - Bain Capital Private Equity proposed a non-binding acquisition of all outstanding shares of Surgery Partners not already owned by them for $25.75 per share [2] Earnings Expectations - Surgery Partners is expected to report quarterly earnings of $0.40 per share, reflecting a year-over-year decline of 9.1% [3] - Revenue is projected to be $828.84 million, which is a 12.7% increase from the same quarter last year [3] Earnings Estimate Trends - The consensus EPS estimate for Surgery Partners has remained unchanged over the last 30 days [4] - A lack of trend in earnings estimate revisions typically correlates with stock price movements, indicating the need to monitor SGRY for potential future strength [4] Industry Context - Surgery Partners is part of the Zacks Medical Services industry, which includes other companies like Teladoc (TDOC) [4] - Teladoc's consensus EPS estimate has also remained unchanged at -$0.21, representing a 23.5% decline from the previous year [5]

Core Viewpoint - Surgery Partners, Inc. has received a non-binding acquisition proposal from Bain Capital Private Equity to acquire all outstanding shares not already owned by Bain Capital for $25.75 per share [1] Group 1: Acquisition Proposal - Bain Capital currently owns approximately 39% of Surgery Partners' outstanding common stock [1] - A Special Committee of independent directors will evaluate the Bain Capital Proposal with the help of independent financial and legal advisors [2] - The proposal requires approval from a majority of the shares not owned by Bain Capital and the approval of a fully empowered Special Committee comprised solely of independent directors [3] Group 2: Company Overview - Surgery Partners is a leading healthcare services company focused on high-quality, cost-effective surgical and ancillary care solutions [5] - The company operates over 200 locations across 33 states, including ambulatory surgery centers and surgical hospitals [5] - Founded in 2004, Surgery Partners is one of the largest and fastest-growing surgical services businesses in the United States [5]

Board Appointment - Dr Laura L Forese has been appointed as an independent director on Surgery Partners' Board of Directors, effective January 10, 2025, increasing the Board size to eleven members [1] Dr Forese's Background - Dr Forese has over 40 years of healthcare administration experience, most recently as executive vice president and chief operating officer for New York-Presbyterian, which includes 10 hospital campuses, approximately 200 primary and specialty care clinics, and over 45,000 employees and affiliated physicians [2] - She established the New York-Presbyterian Medical Groups to expand the organization's regional footprint and standardize financial, operational, and clinical practices [2] - Dr Forese is an orthopedic surgeon with a medical degree from Columbia University College of Physicians & Surgeons, a master's degree in health services management from Columbia University School of Public Health, and a bachelor's degree in civil engineering and operations research from Princeton University [4] Industry and Company Positioning - Surgery Partners is a leading healthcare services company with a differentiated outpatient delivery model focused on providing high quality, cost-effective surgical and related ancillary care [6] - The company is one of the largest and fastest-growing surgical services businesses in the country, with over 200 locations in 33 states, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices, and urgent care facilities [6] - The company is well-positioned to support surgeons in establishing high quality, exceptional value ambulatory surgical centers while providing meaningful savings for patients and payors [5]

Financial Performance - Total revenues for Q3 2024 increased 14.3% to $770.4 million from $674.1 million in Q3 2023[70] - Adjusted EBITDA for Q3 2024 rose 21.9% to $128.6 million compared to $105.5 million in Q3 2023[70] - Patient service revenues increased 13.7% to $753.2 million for Q3 2024, up from $662.3 million in Q3 2023[78] - Revenues for the nine months ended September 30, 2024, were $2,249.9 million, an increase of 12.0% from $2,007.9 million in the same period of 2023[81] - Patient service revenues increased by 11.6% to $2,206.6 million for the nine months ended September 30, 2024, driven by an 8.7% increase in same-facility revenues[83] Operational Metrics - Days adjusted same-facility revenues for Q3 2024 increased 4.2% year-over-year, driven by a 3.7% increase in same-facility case volumes[70] - As of September 30, 2024, the company operated 166 surgical facilities, including 147 ASCs and 19 surgical hospitals across 33 states[70] - Orthopedics and pain management represented 40.4% of cases performed in Q3 2024, up from 35.7% in Q3 2023[75] Expenses and Costs - Cost of revenues increased to $592.9 million for Q3 2024, up from $508.3 million in Q3 2023, representing 77.0% of revenues compared to 75.4%[79] - General and administrative expenses decreased to $29.2 million in Q3 2024 from $36.8 million in Q3 2023, accounting for 3.8% of revenues versus 5.5%[79] - Depreciation and amortization expenses rose to $50.2 million in Q3 2024 from $28.9 million in Q3 2023, representing 6.5% of revenues compared to 4.3%[80] - Transaction and integration costs increased to $29.4 million in Q3 2024 from $12.8 million in Q3 2023, primarily related to ongoing development initiatives and acquisitions[80] Net Income and Loss - Net loss attributable to Surgery Partners, Inc. was $31.7 million in Q3 2024, compared to a net loss of $4.9 million in Q3 2023[77] - Net loss attributable to Surgery Partners, Inc. was $(59.6) million for the nine months ended September 30, 2024, compared to $(10.9) million in the same period of 2023[81] - Net income attributable to non-controlling interests for Q3 2024 was $(38.1) million, compared to $(34.6) million in Q3 2023[91] Cash and Financing - Cash and cash equivalents stood at $221.8 million with $595.8 million of borrowing capacity under the Revolver as of September 30, 2024[70] - Net cash provided by financing activities was $214.0 million for the nine months ended September 30, 2024, compared to net cash used of $110.6 million in the same period of 2023, a $324.6 million increase[86] - Cash and cash equivalents were $221.8 million at September 30, 2024, up from $195.9 million at December 31, 2023[84] - Cash flows from operating activities for the twelve months ended September 30, 2024, were $251.3 million[93] Tax and Interest - The effective tax rate was 41.3% for Q3 2024, significantly higher than 9.5% for Q3 2023, reflecting changes in tax obligations[80] - Interest expense for Q3 2024 was $50.0 million, slightly up from $49.8 million in Q3 2023[91] Other Financial Information - The company reported a net loss on disposals of $14.7 million in Q3 2024, compared to $5.8 million in Q3 2023[91] - The company expects no material effect on net earnings or cash flows in 2024 due to interest rate changes[94] - The company utilizes interest rate swap and cap agreements to manage exposure to interest rate fluctuations[94]

Financial Data and Key Metrics Changes - The company reported net revenue of $770 million, representing growth of over 14% compared to the prior year quarter [5][22] - Adjusted EBITDA grew 22% to $128.6 million, with adjusted EBITDA margins expanding by 100 basis points to 16.7% [6][25] - Same-facility net revenue growth was 4.2%, with surgical case volume growth of 3.7% [14][23] Business Line Data and Key Metrics Changes - Total joint replacements in ASCs increased by 53% in the quarter, with a five-year CAGR exceeding 80% [7] - The company performed nearly 163,000 consolidated surgical cases in the third quarter, with a focus on high acuity business lines [15][22] - Musculoskeletal-related procedures grew by 21% year-to-date, with total joint cases in ASCs growing over 50% in the quarter [17] Market Data and Key Metrics Changes - The company continues to expand its footprint in high-growth markets such as Florida, Texas, California, New York, and Illinois [8][9] - The company completed acquisitions in targeted high-growth markets, including two multi-specialty orthopedic-focused ASCs in Chicago [9][10] Company Strategy and Development Direction - The company is focused on expanding its footprint in existing markets and entering new high-growth markets through M&A and de novo investments [8][11] - The management emphasized the importance of physician recruitment and the expansion of total joint programs as key growth drivers [7][15] - The company aims to maintain a growth algorithm of 4% to 6% for same-facility net revenue in 2024, with a full-year outlook of high single-digit growth [23][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, projecting full-year net revenue and adjusted EBITDA of over $3.075 billion and $508 million, respectively [12][29] - The impact of Hurricane Helene was noted, but all facilities have reopened, and the company is optimistic about future performance [6][44] - Management highlighted the ongoing shift of higher acuity procedures into lower-cost, higher-quality settings as a long-term growth opportunity [18][50] Other Important Information - The company ended the quarter with $222 million in cash and over $815 million in total liquidity [25] - The ratio of total net debt-to-EBITDA was 3.8x, consistent with the prior quarter, with a projection to reduce this ratio below 3.0x over time [28] Q&A Session Summary Question: Free cash flow expectations - Management indicated that cash flow generation remains strong, but higher transaction costs have impacted free cash flow expectations [31][32] Question: Impact of hurricanes on volumes - Management confirmed that the hurricanes had a marginal impact on revenue and cases, with one facility operating on a partial schedule [43][44] Question: Physician recruitment and market dynamics - Management noted strong interest from physicians in joining the company, emphasizing the benefits of efficiency and autonomy [66][68] Question: Cardiology growth potential - Management expressed excitement about the future of cardiology procedures moving into ASCs, highlighting the potential for rapid growth [82][84] Question: M&A strategy and pipeline - Management stated that they remain opportunistic in M&A, with a focus on high acuity procedures and a strong pipeline of opportunities [90][92]

Group 1 - Surgery Partners reported quarterly earnings of $0.19 per share, missing the Zacks Consensus Estimate of $0.25 per share, representing an earnings surprise of -24% [1] - The company posted revenues of $770.4 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.17%, compared to year-ago revenues of $674.1 million [2] - Over the last four quarters, Surgery Partners has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Group 2 - The stock has underperformed the market, losing about 1.8% since the beginning of the year, while the S&P 500 gained 25.8% [3] - The current consensus EPS estimate for the coming quarter is $0.50 on revenues of $834.38 million, and for the current fiscal year, it is $1.07 on revenues of $3.08 billion [7] - The Zacks Industry Rank indicates that the Medical Services sector is currently in the bottom 45% of over 250 Zacks industries, which may impact stock performance [8]

Revenue Performance - Revenues for Q3 2024 increased 14.3% to $770.4 million compared to $674.1 million in Q3 2023[2] - Year-to-date revenues for 2024 increased 12.1% to $2,249.9 million from $2,007.9 million in the prior year[3] - Total revenue for the three months ended September 30, 2024, was $770.4 million, a 14.3% increase from $674.1 million in the same period of 2023[16] - Same-facility revenues rose 4.2% year-over-year, with a 3.7% increase in same-facility cases[2] Adjusted EBITDA and Margins - Adjusted EBITDA for Q3 2024 was $128.6 million, reflecting a 21.9% growth from $105.5 million in Q3 2023[2] - The adjusted EBITDA margin expanded by 100 basis points to 16.7%[1] - Adjusted EBITDA for the three months ended September 30, 2024, was $128.6 million, up from $105.5 million in the prior year, representing a 21.8% increase[16] - The adjusted EBITDA margin for the three months ended September 30, 2024, was 16.7%, up from 15.7% in the prior year[14] Cash Flow and Debt - The company ended Q3 2024 with $222 million in cash and $596 million in revolver capacity[4] - Operating cash flows for Q3 2024 were $65.2 million, down from $104.6 million in the prior year quarter[4] - The total net debt to EBITDA ratio was approximately 3.8x at the end of Q3 2024[4] - Long-term debt, less current maturities, rose to $3,094.2 million as of September 30, 2024, compared to $2,701.8 million at the end of 2023, indicating a 14.6% increase[12] Surgical Facilities and Cases - The number of surgical facilities increased to 166 as of September 30, 2024, compared to 152 at the end of the previous year[14] - Cases performed in the three months ended September 30, 2024, totaled 162,635, a 11.1% increase from 146,514 in the same period of 2023[14] - Revenue per case for the three months ended September 30, 2024, was $4,737, compared to $4,601 in the prior year, reflecting a 2.9% increase[14] Net Income and Earnings - Adjusted net income per share attributable to common stockholders for the three months ended September 30, 2024, was $0.19, unchanged from the same period in 2023[14] - Adjusted net income attributable to common stockholders for Q3 2024 was $23.9 million, slightly up from $23.7 million in Q3 2023, indicating a 0.8% increase[24] - Net income for Q3 2024 was $6.4 million, a significant decrease from $29.7 million in Q3 2023, reflecting a decline of 78.5%[24] - Adjusted net income per share attributable to common stockholders remained stable at $0.19 for both Q3 2024 and Q3 2023[24] Costs and Expenses - Transaction, integration, and acquisition costs for Q3 2024 were $31.5 million, compared to $13.0 million in Q3 2023, marking a 142.3% increase[24] - Start-up costs related to unconsolidated de novo surgical facilities increased to $0.9 million in Q3 2024 from $0.5 million in Q3 2023, a rise of 80%[22] Management and Affiliates - Adjusted EBITDA related to unconsolidated affiliates for Q3 2024 was $12.9 million, up from $10.2 million in Q3 2023, representing a 26.5% increase[22] - Equity in earnings of unconsolidated affiliates rose to $5.2 million in Q3 2024 from $3.5 million in Q3 2023, a growth of 48.6%[22] - Management fee revenues increased to $6.8 million in Q3 2024 from $6.2 million in Q3 2023, a growth of 9.7%[22] Shareholder Information - Basic weighted average common shares outstanding increased to 126,172 in Q3 2024 from 125,747 in Q3 2023[24] - Diluted weighted average common shares outstanding rose to 127,640 in Q3 2024 from 127,376 in Q3 2023[24]

Wall Street expects a year-over-year increase in earnings on higher revenues when Surgery Partners (SGRY) reports results for the quarter ended September 2024. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on November 12, 2024, might help the stock move higher if these key numbers are bette ...