Core Viewpoint - Surgery Partners, Inc. has reaffirmed its confidence in its long-term growth prospects and reiterated its full-year 2025 financial guidance, indicating a strong outlook for the company as an independent entity [1][2]. Company Overview - Surgery Partners is a leading healthcare services company focused on outpatient surgical care, operating over 200 locations across 30 states [6][8]. - The company utilizes a joint venture model and has a strong track record in mergers and acquisitions, positioning it well in the high-growth outpatient surgical care market [3]. Financial Guidance - The company expects 2025 revenues to be in the range of $3.30 billion to $3.45 billion and Adjusted EBITDA to be between $555 million and $565 million [5]. Strategic Initiatives - Surgery Partners plans to host an Investor Day in the second half of 2025 to discuss its future growth plans, industry trends, and strategies for maximizing portfolio performance and operational efficiencies [4]. Board and Management Confidence - The Independent Committee of the Board, after reviewing a non-binding acquisition proposal from Bain Capital, concluded that remaining independent would better serve the long-term interests of the company and its shareholders [2][3]. - The management team, led by CEO Eric Evans, expressed confidence in achieving the financial guidance for 2025, supported by favorable surgical trends and a positive regulatory outlook [3].

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Surgery Partners, Inc., including detailed notes on accounting policies, acquisitions, debt, leases, and segment reporting [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) The balance sheet shows a slight increase in total assets and total liabilities from December 31, 2024, to March 31, 2025, while total stockholders' equity decreased Condensed Consolidated Balance Sheets (Unaudited) | Metric | March 31, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | | :----------------------------- | :-------------------------- | :--------------------------- | :---------------- | | Total Assets | $7,949.2 | $7,890.0 | +$59.2 | | Total Liabilities | $4,362.3 | $4,184.8 | +$177.5 | | Total Stockholders' Equity | $3,156.0 | $3,196.4 | -$40.4 | | Cash and Cash Equivalents | $229.3 | $269.5 | -$40.2 | | Long-term debt, less current maturities | $3,446.9 | $3,268.9 | +$178.0 | [Condensed Consolidated Statements of Operations (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) For the three months ended March 31, 2025, the company reported increased revenues but a net loss attributable to Surgery Partners, Inc., primarily due to higher interest expense and transaction/integration costs Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended March 31, 2025 (Millions) | Three Months Ended March 31, 2024 (Millions) | Change (Millions) | Change (%) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :---------------- | :--------- | | Revenues | $776.0 | $717.4 | +$58.6 | +8.2% | | Operating Income | $61.9 | $76.0 | -$14.1 | -18.6% | | Interest Expense, Net | $(62.2) | $(47.3) | -$(14.9) | +31.5% | | Net (Loss) Income | $(0.3) | $24.3 | -$(24.6) | -101.2% | | Net Loss Attributable to Surgery Partners, Inc. | $(37.7) | $(12.4) | -$(25.3) | +204.0% | | Basic Net Loss Per Share | $(0.30) | $(0.10) | -$(0.20) | +200.0% | [Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Unaudited)) The company reported a comprehensive loss for the three months ended March 31, 2025, significantly higher than the prior year, primarily due to derivative activity Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | Metric | Three Months Ended March 31, 2025 (Millions) | Three Months Ended March 31, 2024 (Millions) | Change (Millions) | Change (%) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :---------------- | :--------- | | Net (Loss) Income | $(0.3) | $24.3 | -$(24.6) | -101.2% | | Other Comprehensive (Loss) Income, net of tax | $(16.6) | $(5.5) | -$(11.1) | +201.8% | | Comprehensive (Loss) Income | $(16.9) | $18.8 | -$(35.7) | -189.9% | | Comprehensive Loss Attributable to Surgery Partners, Inc. | $(54.3) | $(17.9) | -$(36.4) | +203.4% | [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) Total stockholders' equity decreased from December 31, 2024, to March 31, 2025, mainly due to net loss and other comprehensive loss, partially offset by equity-based compensation and non-controlling interest adjustments Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | Metric | Balance as of March 31, 2025 (Millions) | Balance as of December 31, 2024 (Millions) | Change (Millions) | | :------------------------------------ | :-------------------------------------- | :--------------------------------------- | :---------------- | | Total Stockholders' Equity | $3,156.0 | $3,196.4 | -$40.4 | | Net (Loss) Income | $(37.7) | N/A | N/A | | Equity-based compensation | $7.6 | N/A | N/A | | Other comprehensive loss | $(16.6) | N/A | N/A | | Distributions to non-controlling interests | $(49.3) | N/A | N/A | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Cash flows from operating activities significantly decreased in Q1 2025 compared to Q1 2024, while net cash used in investing activities slightly decreased, and net cash provided by financing activities also saw a minor decrease Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric | Three Months Ended March 31, 2025 (Millions) | Three Months Ended March 31, 2024 (Millions) | Change (Millions) | Change (%) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :---------------- | :--------- | | Net Cash Provided by Operating Activities | $6.0 | $40.7 | -$34.7 | -85.3% | | Net Cash Used in Investing Activities | $(76.4) | $(83.1) | +$6.7 | -8.1% | | Net Cash Provided by Financing Activities | $30.2 | $31.7 | -$1.5 | -4.7% | | Net Decrease in Cash and Cash Equivalents | $(40.2) | $(10.7) | -$29.5 | +275.7% | | Cash and Cash Equivalents at End of Period | $229.3 | $185.2 | +$44.1 | +23.8% | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes provide detailed explanations of the company's accounting policies, including revenue recognition, income taxes, goodwill, and financial instruments, along with significant activities such as acquisitions, debt, leases, derivatives, earnings per share, and segment reporting [1. Organization and Summary of Accounting Policies](index=9&type=section&id=1.%20Organization%20and%20Summary%20of%20Accounting%20Policies) This note outlines the company's business as a national network of surgical facilities and ancillary services, detailing its portfolio, financial statement presentation, revenue recognition, accounts receivable, income tax, goodwill, derivative instruments, redeemable non-controlling interests, fair value measurements, and variable interest entities - As of March 31, 2025, Surgery Partners owned or operated **164 surgical facilities** (145 ASCs and 19 surgical hospitals) in 30 states, with a majority interest in 83 facilities and consolidating 118 for financial reporting[23](index=23&type=chunk) Revenues by Service Type (Percentage of Total Revenues) | Service Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Patient service revenues | 97.8 % | 98.3 % | | Other service revenues | 2.2 % | 1.7 % | | Total revenues | 100.0 % | 100.0 % | Patient Service Revenues by Payor Type (Percentage of Total Patient Service Revenues) | Payor Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------- | :-------------------------------- | :-------------------------------- | | Private insurance | 53.6 % | 51.2 % | | Government | 41.7 % | 43.0 % | | Self-pay | 2.6 % | 2.8 % | | Other | 2.1 % | 3.0 % | | Total | 100.0 % | 100.0 % | - The effective tax rate was **0% for Q1 2025**, differing from the U.S. federal statutory rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in valuation allowance for interest expense limitations, and permanent differences in stock compensation expense, a significant change from the **15.3% effective tax rate in Q1 2024**[45](index=45&type=chunk)[46](index=46&type=chunk) Goodwill Activity (Millions) | Metric | Amount (Millions) | | :---------------------------- | :---------------- | | Balance as of December 31, 2024 | $5,068.0 | | Acquisitions, including post acquisition adjustments | $69.6 | | Disposals | $(11.4) | | Balance as of March 31, 2025 | $5,126.2 | [2. Acquisitions, Disposals and Deconsolidations](index=13&type=section&id=2.%20Acquisitions,%20Disposals%20and%20Deconsolidations) In Q1 2025, the company acquired four surgical facilities and one physician practice for $44.0 million cash, recognizing $70.2 million in goodwill, and also disposed of interests in two surgical facilities, resulting in a net loss on deconsolidation and a net gain from other disposals - During Q1 2025, the Company acquired a controlling interest in four surgical facilities and one physician practice for **$44.0 million cash**, recognizing **$28.0 million in non-controlling interests** and **$70.2 million in goodwill**[61](index=61&type=chunk) - During Q1 2025, the Company sold a portion of its interests in one surgical facility, resulting in a pre-tax **net loss on deconsolidation of $3.0 million**, and disposed of controlling interests in two surgical facilities for **$4.3 million cash**, recognizing a pre-tax **net gain of $0.5 million**[67](index=67&type=chunk) - During Q1 2024, the Company acquired a controlling interest in two surgical facilities and several physician practices for **$66.0 million cash** and **$1.1 million non-cash consideration**, recognizing **$21.2 million in non-controlling interests** and **$77.2 million in goodwill**[60](index=60&type=chunk) - During Q1 2024, the Company sold a portion of its interests in a surgical facility, resulting in a pre-tax **net gain on deconsolidation of $2.7 million**[63](index=63&type=chunk) [3. Long-Term Debt](index=14&type=section&id=3.%20Long-Term%20Debt) Total debt increased to $3,550.8 million as of March 31, 2025, from $3,370.3 million at December 31, 2024, primarily due to increased borrowings on the senior secured revolving credit facility and finance lease obligations Long-Term Debt Summary (Millions) | Debt Type | March 31, 2025 | December 31, 2024 | | :------------------------------ | :------------- | :---------------- | | Senior secured term loan | $1,384.6 | $1,388.1 | | Senior secured revolving credit facility | $304.0 | $192.0 | | 7.250% senior unsecured notes due 2032 | $800.0 | $800.0 | | Notes payable and other secured loans | $227.5 | $224.4 | | Finance lease obligations | $866.6 | $798.7 | | Less: unamortized debt issuance costs and discounts | $(31.9) | $(32.9) | | Total debt | $3,550.8 | $3,370.3 | | Less: current maturities | $103.9 | $101.4 | | Total long-term debt | $3,446.9 | $3,268.9 | - Availability on the **$703.8 million senior secured revolving credit facility** was **$388.9 million** as of March 31, 2025, with the increase in outstanding borrowings primarily due to the timing of acquisitions[65](index=65&type=chunk) [4. Leases](index=14&type=section&id=4.%20Leases) The company's total leased assets increased to $994.5 million as of March 31, 2025, with a corresponding increase in total lease liabilities, and lease expenses also rose, driven by higher finance lease costs Total Leased Assets and Liabilities (Millions) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Total leased assets | $994.5 | $951.3 | | Total lease liabilities | $1,179.1 | $1,131.8 | Total Lease Costs (Millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------ | :-------------------------------- | :-------------------------------- | | Operating lease costs | $16.5 | $15.9 | | Finance lease costs | $34.2 | $24.8 | | Variable and short-term lease costs | $4.6 | $5.8 | | Total lease costs | $55.3 | $46.5 | [5. Derivatives and Hedging Activities](index=16&type=section&id=5.%20Derivatives%20and%20Hedging%20Activities) The company uses interest rate swaps and caps to manage interest rate risk, with several agreements maturing and new deferred premium interest rate cap agreements with a total notional amount of $1.4 billion becoming active on March 31, 2025, to limit interest rate exposure - The Company's interest rate swaps and caps are used to add stability to interest expense and manage exposure to interest rate movements[71](index=71&type=chunk) - As of March 31, 2025, five deferred premium interest rate cap agreements with a total notional amount of **$1.4 billion** became active, designated in cash flow hedging relationships to limit interest rate exposure on the term loan[74](index=74&type=chunk) - The fair value of derivatives in cash flow hedging relationships shifted from a net asset of **$10.8 million** at December 31, 2024, to a net liability of **$11.8 million** at March 31, 2025, primarily due to the maturity of previous swaps/caps and the new cap agreements[79](index=79&type=chunk) - An estimated **$5.6 million** will be reclassified as an increase to interest expense from accumulated OCI over the next 12 months[77](index=77&type=chunk) [6. Earnings Per Share](index=17&type=section&id=6.%20Earnings%20Per%20Share) Basic and diluted net loss per share attributable to common stockholders increased to $(0.30) for Q1 2025 from $(0.10) for Q1 2024, with potentially dilutive securities not included due to their anti-dilutive effect Net Loss Per Share Attributable to Common Stockholders | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss attributable to Surgery Partners, Inc. | $(37.7) | $(12.4) | | Basic Net Loss Per Share | $(0.30) | $(0.10) | | Diluted Net Loss Per Share | $(0.30) | $(0.10) | | Weighted Average Common Shares Outstanding (Basic/Diluted) | 126,602 | 125,972 | [7. Other Current Liabilities](index=18&type=section&id=7.%20Other%20Current%20Liabilities) Total other current liabilities decreased to $233.5 million at March 31, 2025, from $253.9 million at December 31, 2024, primarily due to a decrease in accrued expenses and other, partially offset by an increase in interest payable Other Current Liabilities (Millions) | Liability Type | March 31, 2025 | December 31, 2024 | | :------------------------------ | :------------- | :---------------- | | Right-of-use operating lease liabilities | $39.6 | $41.0 | | Cost report liabilities | $20.7 | $21.3 | | Amounts due to patients and payors | $38.6 | $31.8 | | Interest payable | $28.1 | $13.4 | | Interest rate swaps | $— | $3.5 | | Accrued expenses and other | $106.5 | $142.9 | | Total | $233.5 | $253.9 | [8. Commitments and Contingencies](index=18&type=section&id=8.%20Commitments%20and%20Contingencies) The company is subject to various claims and legal actions in the ordinary course of business, maintaining professional, general, workers' compensation, and cyber liability insurance, with management believing no current proceedings will have a material adverse effect - The Company is subject to claims and legal actions in the ordinary course of business, including patient treatment, employment practices, and personal injuries[85](index=85&type=chunk) - Total professional, general, and workers' compensation claim liabilities were **$19.7 million** as of March 31, 2025, with expected insurance recoveries of **$9.6 million**[85](index=85&type=chunk) [9. Segment Reporting](index=18&type=section&id=9.%20Segment%20Reporting) Surgery Partners operates as a single reportable segment: Surgical Facilities, which includes ASCs, surgical hospitals, anesthesia services, and multi-specialty physician practices, using Adjusted EBITDA to assess performance and allocate resources - Surgery Partners has one reportable segment: Surgical Facilities, which includes ASCs, surgical hospitals, anesthesia services, and multi-specialty physician practices[86](index=86&type=chunk)[87](index=87&type=chunk) - The operating segment previously defined as 'Ancillary services' was included with Surgical Facilities based on changes in operational management[88](index=88&type=chunk) Adjusted Surgical Facilities EBITDA (Millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------------------- | :-------------------------------- | :-------------------------------- | | Surgical Facilities Revenues | $776.0 | $717.4 | | Adjusted Surgical Facilities EBITDA | $132.0 | $125.3 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three months ended March 31, 2025, highlighting revenue growth, increased net loss, and discussions on liquidity, capital resources, and non-GAAP financial measures [Cautionary Note Regarding Forward-Looking Statements](index=20&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises readers that the report contains forward-looking statements based on current expectations, estimates, and assumptions, which involve risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to risks, uncertainties, and other factors that may cause actual results to differ from expectations[95](index=95&type=chunk) - Key risk factors include reductions in payments from government and private health care programs, ability to contract with private insurance payors, changes in payor or surgical case mix, and ability to maintain physician relationships[95](index=95&type=chunk) [Executive Overview](index=20&type=section&id=Executive%20Overview) As of March 31, 2025, Surgery Partners operated 164 surgical facilities, with total revenues increasing by 8.2% to $776.0 million, driven by same-facility revenue growth and acquisitions, while net loss attributable to Surgery Partners, Inc. increased significantly to $37.7 million, and Adjusted EBITDA grew by 6.6% to $103.9 million - As of March 31, 2025, Surgery Partners owned or operated **164 surgical facilities** (145 ASCs and 19 surgical hospitals) across 30 states[98](index=98&type=chunk) Key Financial Highlights (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | Change (Millions) | Change (%) | | :----------------------------------------- | :----------------- | :----------------- | :---------------- | :--------- | | Total Revenues | $776.0 | $717.4 | +$58.6 | +8.2% | | Days Adjusted Same-Facility Revenues Growth | 5.2% | N/A | N/A | N/A | | Same-Facility Cases Growth | 6.5% | N/A | N/A | N/A | | Net Loss Attributable to Surgery Partners, Inc. | $(37.7) | $(12.4) | -$(25.3) | +204.0% | | Adjusted EBITDA | $103.9 | $97.5 | +$6.4 | +6.6% | - The company acquired a controlling interest in four surgical facilities and one physician practice for **$44.0 million cash** during Q1 2025[99](index=99&type=chunk) - Cash and cash equivalents were **$229.3 million**, with **$388.9 million** borrowing capacity under the Revolver as of March 31, 2025[100](index=100&type=chunk) [Revenues](index=21&type=section&id=Revenues) Revenues are primarily derived from patient service revenues (97.8% in Q1 2025), which include fees for surgical procedures, physician visits, and anesthesia services, with other service revenues constituting a smaller portion - Patient service revenues accounted for **97.8% of total revenues** in Q1 2025, slightly down from **98.3% in Q1 2024**[102](index=102&type=chunk) - Other service revenues increased to **2.2% of total revenues** in Q1 2025 from **1.7% in Q1 2024**[102](index=102&type=chunk) [Payor Mix](index=21&type=section&id=Payor%20Mix) The payor mix for patient service revenues in Q1 2025 showed an increased reliance on private insurance payors (53.6%) and a decreased reliance on government payors (41.7%) compared to Q1 2024 Patient Service Revenues by Payor Type (Percentage) | Payor Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------- | :-------------------------------- | :-------------------------------- | | Private insurance payors | 53.6 % | 51.2 % | | Government payors | 41.7 % | 43.0 % | | Self-pay payors | 2.6 % | 2.8 % | | Other payors | 2.1 % | 3.0 % | | Total | 100.0 % | 100.0 % | [Surgical Case Mix](index=21&type=section&id=Surgical%20Case%20Mix) The company's surgical case mix remains diversified across multiple specialties, with Orthopedics and pain management, Ophthalmology, and Gastrointestinal procedures being the largest categories, showing a slight shift towards Orthopedics and pain management and Gastrointestinal cases in Q1 2025 Surgical Cases by Specialty (Percentage) | Specialty | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Orthopedics and pain management | 40.5 % | 40.0 % | | Ophthalmology | 21.9 % | 23.5 % | | Gastrointestinal | 24.3 % | 22.1 % | | General surgery | 2.2 % | 2.3 % | | Other | 11.1 % | 12.1 % | | Total | 100.0 % | 100.0 % | [Critical Accounting Policies](index=21&type=section&id=Critical%20Accounting%20Policies) There have been no material changes in the nature or application of the company's critical accounting policies since December 31, 2024 - No material changes in critical accounting policies or their application since December 31, 2024[106](index=106&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of operating results for Q1 2025 versus Q1 2024, showing revenues increased by 8.2%, driven by higher case volumes and acquisitions, but operating income decreased due to higher cost of revenues, transaction and integration costs, and significantly increased interest expense, leading to a substantial net loss attributable to Surgery Partners, Inc Summary of Operating Results (Millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (Millions) | Change (%) | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | :---------------- | :--------- | | Revenues | $776.0 | $717.4 | +$58.6 | +8.2% | | Cost of Revenues | $614.1 | $562.1 | +$52.0 | +9.2% | | General and Administrative Expenses | $36.0 | $33.2 | +$2.8 | +8.4% | | Depreciation and Amortization | $36.3 | $33.7 | +$2.6 | +7.7% | | Transaction and Integration Costs | $24.7 | $17.4 | +$7.3 | +42.0% | | Net Loss on Disposals, Consolidations and Deconsolidations | $6.4 | $1.5 | +$4.9 | +326.7% | | Operating Income | $61.9 | $76.0 | -$14.1 | -18.6% | | Interest Expense, Net | $(62.2) | $(47.3) | -$(14.9) | +31.5% | | Net Loss Attributable to Surgery Partners, Inc. | $(37.7) | $(12.4) | -$(25.3) | +204.0% | - Patient service revenues increased **7.5% to $758.4 million**, driven by a **5.2% increase in days adjusted same-facility revenues** (6.5% increase in case volumes, 1.2% decrease in revenue per case) and net impact from acquisitions/divestitures[107](index=107&type=chunk) - Cost of revenues as a percentage of revenues increased to **79.1% in Q1 2025** from **78.4% in Q1 2024**, driven by increased case volume and high acuity procedures[108](index=108&type=chunk) - Transaction and integration costs increased by **$7.3 million**, primarily due to higher severance, IT implementation, and revenue cycle standardization costs[111](index=111&type=chunk) - Interest expense, net, increased by **$14.9 million**, primarily due to financing activities in 2024 related to senior unsecured notes and increased borrowings on the Revolver[113](index=113&type=chunk) - Income tax expense was **$0.0 million in Q1 2025** (0% effective tax rate) compared to **$4.4 million in Q1 2024** (15.3% effective tax rate), mainly due to non-controlling interests, valuation allowance, and stock compensation differences[114](index=114&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased to $229.3 million at March 31, 2025, with operating cash flows significantly declining, while investing and financing cash flows saw minor changes, but the company believes its current cash, available credit, and access to capital markets are sufficient to meet short-term and long-term liquidity needs despite broad economic factors - Cash and cash equivalents decreased to **$229.3 million** at March 31, 2025, from **$269.5 million** at December 31, 2024[116](index=116&type=chunk) - Net cash provided by operating activities decreased by **$34.7 million to $6.0 million** in Q1 2025, primarily due to a decrease in net income and changes in other operating assets and liabilities[117](index=117&type=chunk) - Net cash used in investing activities decreased by **$6.7 million to $76.4 million**, driven by lower payments for acquisitions and increased proceeds from asset sales[118](index=118&type=chunk) - Net cash provided by financing activities decreased by **$1.5 million to $30.2 million**, mainly due to higher distributions to non-controlling interest holders, partially offset by increased long-term debt borrowings[119](index=119&type=chunk) - Net working capital increased to **$505.2 million** at March 31, 2025, from **$495.0 million** at December 31, 2024[120](index=120&type=chunk) - The company anticipates cash flows from operations, available cash, Revolver capacity, and capital market access will be adequate for short-term and long-term liquidity needs[124](index=124&type=chunk) [Certain Non-GAAP Measures](index=23&type=section&id=Certain%20Non-GAAP%20Measures) This section defines and reconciles non-GAAP financial measures, Adjusted EBITDA and Credit Agreement EBITDA, to their most directly comparable GAAP measures, with Adjusted EBITDA increasing by 6.6% to $103.9 million in Q1 2025, and Credit Agreement EBITDA at $588.7 million for the trailing twelve months ended March 31, 2025 - Adjusted EBITDA is a non-GAAP measure used by management to assess operating performance, make business decisions, and allocate resources[126](index=126&type=chunk) Adjusted EBITDA Reconciliation (Millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | (Loss) income before income taxes | $(0.3) | $28.7 | | Net income attributable to non-controlling interests | $(37.4) | $(36.7) | | Interest expense, net | $62.2 | $47.3 | | Depreciation and amortization | $36.3 | $33.7 | | Equity-based compensation expense | $7.6 | $4.9 | | Transaction and integration costs | $24.7 | $17.4 | | De novo start-up costs | $1.7 | $1.5 | | Net loss on disposals, consolidations and deconsolidations | $6.4 | $1.5 | | Litigation settlements and other litigation costs | $2.7 | $(1.2) | | Other | $— | $0.4 | | **Adjusted EBITDA** | **$103.9** | **$97.5** | - Credit Agreement EBITDA, used for liquidity and covenant compliance, was **$588.7 million** for the trailing twelve months ended March 31, 2025, including adjustments for acquisitions and synergies[129](index=129&type=chunk)[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risk primarily from interest rate changes, which it manages through a balanced mix of fixed and variable rate debt and the use of interest rate swap and cap agreements, and does not expect changes in interest rates to materially affect net earnings or cash flows in 2025 due to its hedging strategies - The Company is subject to market risk primarily from exposure to changes in interest rates[132](index=132&type=chunk) - Interest rate risk is managed using a balanced mix of maturities, fixed and variable rate debt, and interest rate swap and cap agreements[132](index=132&type=chunk) - Based on current indebtedness and effective hedging, the Company does not expect changes in interest rates to have a material effect on net earnings or cash flows in 2025[133](index=133&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective as of March 31, 2025[135](index=135&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025[136](index=136&type=chunk) [PART II - OTHER INFORMATION](index=26&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company is routinely involved in claims and legal actions related to its business, but management believes no current proceedings would have a material adverse effect on its financial condition or results of operations - The Company is subject to claims and suits in the ordinary course of business, including those related to patient treatment, employment, and personal injuries[138](index=138&type=chunk) - Management believes no current legal proceedings would have a material adverse effect on the Company's business, financial condition, or results of operations[138](index=138&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously discussed in the company's 2024 Annual Report on Form 10-K - No material changes to the risk factors discussed in the 2024 Annual Report on Form 10-K[139](index=139&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds during the period - None[140](index=140&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - None[141](index=141&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[142](index=142&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements were adopted or terminated by the company's directors or officers during the three months ended March 31, 2025 - No Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q1 2025[143](index=143&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and various XBRL taxonomy documents - Includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1)[144](index=144&type=chunk) - Includes Inline XBRL Taxonomy Extension documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE) and the cover page formatted in Inline XBRL (Exhibit 104)[144](index=144&type=chunk)

While Surgery Partners has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Surgery Partners (SGRY) came out with quarterly earnings of $0.04 per share, ...

Financial Data and Key Metrics Changes - Surgery Partners reported first quarter net revenue of $776 million and adjusted EBITDA of $103.9 million, reflecting an 8% increase in net revenue and nearly 7% growth in adjusted EBITDA compared to the prior year's first quarter [5][18][24] - Same facility revenue growth was over 5%, driven by 6.5% surgical case growth, although there was a slight decline in rates of approximately 1% due to a shift towards lower acuity specialties [6][18] - The company ended the quarter with $229 million in cash and over $615 million in total liquidity, with a net debt to EBITDA ratio of 4.1 times [19][22][23] Business Line Data and Key Metrics Changes - The company performed over 160,000 surgical cases in the first quarter, a 4.5% increase from 2024, with notable growth in gastrointestinal (GI) and orthopedic procedures [18][7] - Orthopedic cases grew by 3.4% year-over-year, with total joint procedures increasing by 22% [8][9] - The company added nearly 50 new physicians in the first quarter, with a focus on orthopedic specialties, which are expected to contribute to higher acuity surgical cases [9][56] Market Data and Key Metrics Changes - The company continues to experience strong growth in Medicare and commercial payer segments, with no significant changes in payer mix reported [40][43] - The company has a robust pipeline of de novo facilities, with 10 currently under construction and a target of 10 new openings each year [10][108] Company Strategy and Development Direction - Surgery Partners focuses on three pillars for growth: organic growth, margin improvement, and capital deployment for mergers and acquisitions (M&A) [4][11] - The company is committed to margin expansion through operational efficiencies and integration of acquired facilities, with a target of maintaining a leverage ratio below 3 times [12][82] - The company is actively monitoring regulatory changes and has minimal exposure to tariff-related price increases, ensuring a stable operational environment [15][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, expecting same facility growth to be at or above the high end of the 6% target for 2025 [6][17] - The company anticipates continued improvements in cash flow generation as the year progresses, despite some headwinds from interest costs [32][36] - Management remains optimistic about the impact of new physician recruits and de novo facilities on future performance [9][56] Other Important Information - Surgery Partners is currently evaluating a nonbinding acquisition proposal from Bain Capital, with a special committee formed to consider the proposal [16] - The company has invested $55 million in five surgical facilities in 2025, with an effective multiple under eight times adjusted EBITDA [12] Q&A Session Summary Question: Current utilization trends and sustainability - Management noted that first quarter same store revenue growth was in line with expectations, with case growth driven by stronger de novos and MSK growth [26][28] Question: Seasonality of free cash flow generation - Management expects overall improvement in operating cash flows as earnings grow, with the second and fourth quarters typically being stronger [31][32] Question: Changes in payer mix and commercial rates - Management confirmed no significant changes in payer mix, with strong commercial growth and constructive negotiations with payers [40][43] Question: Labor dynamics and specialty areas - Management indicated that professional fees were in line with expectations, driven by recent acquisitions, and that anesthesia costs were not a major headwind [51][53] Question: Impact of GI mix on revenue per case - Management acknowledged growth in the GI portfolio but noted that its impact on revenue per case was marginal [60][62] Question: Confidence in tariff exposure - Management expressed confidence in minimal tariff exposure due to strong relationships with suppliers and contract protections [69][72] Question: Free cash flow expectations - Management expects free cash flow to grow alongside business growth, despite some timing issues in the first quarter [91] Question: Margin expansion efforts - Management highlighted ongoing improvements in revenue cycle management and operational efficiencies as key drivers for margin expansion [94][96]

Financial Data and Key Metrics Changes - Surgery Partners reported first quarter net revenue of $776 million and adjusted EBITDA of $103.9 million, both meeting expectations [5][18] - Adjusted EBITDA grew nearly 7% and net revenue grew 8% compared to the prior year's first quarter [5][18] - Same facility revenue growth was over 5%, with total revenue increasing by 5.2% in the first quarter [5][18] Business Line Data and Key Metrics Changes - Surgical case growth was 6.5%, with a decline in rates of approximately 1%, primarily due to growth in lower acuity specialties [6][8] - Orthopedic cases grew by 3.4% year-over-year, driven by a 22% increase in total joint procedures [9][10] - The company performed over 60,000 surgical cases in the first quarter, with growth across all core specialties [8][18] Market Data and Key Metrics Changes - The company expects full year 2025 same facility growth to be at or above the high end of the target of 6% [7] - The company has opened 20 de novo facilities since February 2022, with 10 currently under construction [11] Company Strategy and Development Direction - Surgery Partners focuses on organic growth, margin improvement, and capital deployment for mergers and acquisitions (M&A) [4][12] - The company has a robust pipeline of attractive partnership opportunities and has deployed $55 million in 2025 for five surgical facilities [12][13] - The company aims to maintain a balance between volume and rate growth as the year progresses [7][30] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory and the ability to navigate regulatory uncertainties [15][17] - The company does not foresee material exposure to tariff-related price increases or significant risks from potential legislative changes to Medicaid [15] - Management reiterated guidance for full year 2025 revenue and adjusted EBITDA, expecting continued margin expansion [23][22] Other Important Information - The company ended the quarter with $229 million in cash and over $615 million in total liquidity [19][22] - The effective interest rate on corporate debt is fixed at approximately 6%, with no maturity until 2030 [21] Q&A Session Summary Question: Current utilization trends and sustainability - Management acknowledged tough comparisons but noted strong growth in de novos and MSK procedures contributing to case growth [25][26] Question: Pricing and payer mix - Management confirmed no significant changes in payer mix, with strong commercial growth and good visibility in rate negotiations [41][43] Question: Labor dynamics and specialty areas - Management indicated that professional fees were in line with expectations, driven by recent acquisitions, and noted no major headwinds from anesthesia costs [52][54] Question: Physician recruiting and acuity - Management highlighted a diverse recruiting class with a focus on higher acuity service lines, noting a 14% increase in net revenue per physician compared to last year [56][57] Question: Impact of GI mix on revenue - Management reported slight growth in GI cases, with a marginal impact on revenue per case, and expects continued growth throughout the year [61][64] Question: Tariff exposure confidence - Management expressed confidence due to strong relationships with HealthTrust and good visibility into contract protections [70][74] Question: Free cash flow expectations - Management expects free cash flow to improve as the year progresses, despite some timing issues in the first quarter [92][94] Question: Margin expansion efforts - Management discussed ongoing improvements in revenue cycle management and operational efficiencies as key drivers for margin expansion [97][100]

Financial Data and Key Metrics Changes - Surgery Partners reported first quarter net revenue of $776 million and adjusted EBITDA of $103.9 million, both meeting expectations. Adjusted EBITDA grew nearly 7% and net revenue grew 8% compared to the prior year's first quarter [4][16] - The company experienced same facility revenue growth of over 5%, driven by 6.5% surgical case growth, although there was a decline in rates of approximately 1% due to a shift towards lower acuity specialties [5][6] - The adjusted EBITDA margin for the first quarter was 13.4%, with total net debt to EBITDA ratio at 4.1 times, consistent with expectations [17][20] Business Line Data and Key Metrics Changes - The company performed over 160,000 surgical cases in the first quarter, a 4.5% increase from 2024, with significant growth in gastrointestinal (GI) and musculoskeletal (MSK) procedures [16][6] - Orthopedic cases grew by 3.4% year-over-year, with total joint procedures increasing by 22% [7][6] - The company added nearly 50 new physicians in the first quarter, with a focus on orthopedic specialties, which are expected to contribute to higher acuity surgical cases [8][56] Market Data and Key Metrics Changes - The company reported strong growth across all core specialties, particularly in GI and orthopedic procedures, which are expected to continue throughout the year [6][67] - The company has a robust pipeline of de novo facilities, with 10 currently under construction and a target of 10 new facilities each year [9][108] Company Strategy and Development Direction - Surgery Partners focuses on three pillars for growth: organic growth, margin improvement, and capital deployment for mergers and acquisitions (M&A) [3][10] - The company is committed to margin expansion through operational efficiencies and integration of acquired facilities, with a target of maintaining a leverage ratio below 3 times [20][84] - The company is actively monitoring regulatory changes and has minimal exposure to tariff-related price increases, with less than 5% of revenue coming from Medicaid and exchange-based reimbursement programs [13][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory and reaffirmed guidance for full-year 2025 revenue and adjusted EBITDA in the range of $3.3 billion to $3.45 billion and $555 million to $565 million, respectively [21][22] - The management noted that the first quarter's results align with internal expectations and highlighted the importance of physician recruitment and operational efficiencies in driving future growth [15][35] Other Important Information - Surgery Partners has sufficient liquidity, with $229 million in cash and over $615 million in total liquidity, to support growth without needing to access capital markets [17][20] - The company is currently evaluating a nonbinding acquisition proposal from Bain Capital, with a special committee formed to consider the proposal [14] Q&A Session Summary Question: Current utilization trends and sustainability - Management acknowledged tough comparisons due to pricing but noted that first quarter same store revenue growth was in line with expectations, driven by strong growth in de novos and MSK procedures [24][25] Question: Free cash flow generation seasonality - Management indicated that free cash flow is expected to improve as the year progresses, with the second and fourth quarters typically being stronger for cash flow generation [30][31] Question: Changes in payer mix and commercial rates - Management confirmed no significant changes in payer mix and expressed confidence in ongoing constructive negotiations with commercial payers [40][43] Question: Impact of professional fees and labor dynamics - Management clarified that professional fees were in line with expectations, primarily due to recent acquisitions, and noted no significant labor pressures affecting operations [51][52] Question: Physician recruiting and acuity service lines - Management reported a diverse recruiting class with a focus on higher acuity service lines, indicating a 14% increase in net revenue per physician compared to the previous year [56][57] Question: Impact of GI mix on revenue per case - Management noted slight growth in the GI portfolio, with a marginal impact on revenue per case, and emphasized the importance of calendar effects on same store metrics [61][62] Question: Confidence in tariff exposure - Management reiterated confidence in minimal tariff exposure due to strong relationships with suppliers and effective procurement strategies [70][74] Question: Timing of NCI payouts - Management explained that the increase in NCI payouts was due to timing issues related to the holiday calendar, which should normalize throughout the year [75][78]

Surgery Partners, Inc. First Quarter 2025 Results [Financial Highlights and 2025 Guidance](index=1&type=section&id=Financial%20Highlights%20and%202025%20Guidance) Surgery Partners reported strong first-quarter 2025 results, with an 8.2% increase in revenue and a 6.6% rise in Adjusted EBITDA year-over-year, reaffirming its full-year 2025 guidance Q1 2025 Financial Highlights (YoY, in millions) | Metric | Q1 2025 | Change | | :--- | :--- | :--- | | Revenue | $776.0 | +8.2% | | Same-facility revenues | N/A | +5.2% | | Same-facility cases | N/A | +6.5% | | Net loss attributable to Surgery Partners, Inc. | $37.7 | N/A | | Adjusted EBITDA | $103.9 | +6.6% | Reaffirmed Full Year 2025 Guidance (in billions/millions) | Metric | Guidance Range | | :--- | :--- | | Revenues | $3.30 billion to $3.45 billion | | Adjusted EBITDA | $555 million to $565 million | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management expressed satisfaction with the strong start to 2025, driven by portfolio performance, M&A pipeline, and operational efficiencies, while reaffirming guidance and liquidity - CEO Eric Evans stated the **strong start to 2025** is consistent with the company's long-term growth algorithm, driven by maximizing portfolio performance, advancing the M&A pipeline, and improving operating efficiencies[2](index=2&type=chunk) - CFO Dave Doherty noted that results align with internal expectations, giving confidence in reaffirming guidance, anticipating **continued margin expansion** and **sufficient liquidity** to fund future M&A without accessing capital markets for the next five years[2](index=2&type=chunk) [First Quarter 2025 Performance Analysis](index=1&type=section&id=First%20Quarter%202025%20Performance%20Analysis) Q1 2025 revenues grew 8.2% to $776.0 million, primarily from a 5.2% increase in same-facility revenues driven by higher cases, despite a slight decrease in revenue per case Q1 2025 vs Q1 2024 Performance (in millions) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $776.0 | $717.4 | +8.2% | | Same-facility Revenues Growth | 5.2% | N/A | N/A | | Same-facility Cases Growth | 6.5% | N/A | N/A | | Same-facility Revenue per Case Growth | (1.2)% | N/A | N/A | | Adjusted EBITDA | $103.9 | $97.5 | +6.6% | [Financial Position and Liquidity](index=1&type=section&id=Financial%20Position%20and%20Liquidity) As of March 31, 2025, Surgery Partners maintained a strong liquidity position with $229.3 million in cash and $388.9 million in revolving credit capacity, despite a decrease in operating cash flow - As of March 31, 2025, the company had **$229.3 million in cash** and cash equivalents and **$388.9 million of borrowing capacity** under its revolving credit facility[4](index=4&type=chunk) - Cash flow from operating activities was **$6.0 million** for Q1 2025, down from **$40.7 million** in Q1 2024, due to the timing of routine working capital transactions[4](index=4&type=chunk) - The ratio of total net debt to EBITDA, as calculated under the Company's credit agreement, was approximately **4.1x** at the end of Q1 2025[5](index=5&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents detailed consolidated financial data, including income statement, balance sheet, cash flow, and key operating metrics [Selected Consolidated Financial Data (Income Statement)](index=4&type=section&id=Selected%20Consolidated%20Financial%20Data%20(Income%20Statement)) For Q1 2025, the company reported revenues of $776.0 million and an increased net loss attributable to Surgery Partners, Inc. of $37.7 million Q1 2025 vs Q1 2024 Income Statement Highlights (in millions, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $776.0 | $717.4 | | Operating Income | $61.9 | $76.0 | | Net Loss Attributable to Surgery Partners, Inc. | $(37.7) | $(12.4) | | Basic & Diluted Net Loss Per Share | $(0.30) | $(0.10) | [Selected Financial and Operating Data (Balance Sheet, Cash Flow & Key Metrics)](index=5&type=section&id=Selected%20Financial%20and%20Operating%20Data%20(Balance%20Sheet,%20Cash%20Flow%20%26%20Key%20Metrics)) As of March 31, 2025, total assets were $7.95 billion, with net cash from operating activities at $6.0 million, and the company operated 164 surgical facilities Balance Sheet Data (in millions) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $229.3 | $269.5 | | Total assets | $7,949.2 | $7,890.0 | | Total liabilities | $4,362.7 | $4,254.8 | | Total Surgery Partners, Inc. stockholders' equity | $1,740.4 | $1,789.7 | Cash Flow Data for Three Months Ended March 31 (in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from Operating activities | $6.0 | $40.7 | | Net cash used in Investing activities | $(76.4) | $(83.1) | | Net cash from Financing activities | $30.2 | $31.7 | Other Operating Data for Three Months Ended March 31 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Number of surgical facilities | 164 | 165 | | Cases | 160,300 | 153,392 | | Adjusted EBITDA margin | 13.4% | 13.6% | [Supplemental and Non-GAAP Information](index=6&type=section&id=Supplemental%20and%20Non-GAAP%20Information) This section provides supplemental data, including same-facility performance and reconciliations of non-GAAP financial measures [Same-Facility Information](index=6&type=section&id=Same-Facility%20Information) For Q1 2025, same-facility cases grew 6.5% on a days-adjusted basis, contributing to a 5.2% days-adjusted revenue growth Q1 2025 Same-Facility Information (YoY) | Metric | Value | | :--- | :--- | | Case growth | 4.8% | | Revenue per case growth | (1.2)% | | Case growth (days adjusted) | 6.5% | | Revenue growth (days adjusted) | 5.2% | [Reconciliation of Non-GAAP Financial Measures](index=6&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) The company reconciled its GAAP loss before income taxes to an Adjusted EBITDA of $103.9 million and its GAAP net loss to an Adjusted Net Income of $5.4 million for Q1 2025 Reconciliation to Adjusted EBITDA (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | (Loss) income before income taxes | $(0.3) | $28.7 | | Adjustments (Interest, D&A, etc.) | $104.2 | $68.8 | | **Adjusted EBITDA** | **$103.9** | **$97.5** | Reconciliation to Adjusted Net Income (in millions, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (loss) income | $(0.3) | $24.3 | | Adjustments | $5.7 | $(12.2) | | **Adjusted net income attributable to common stockholders** | **$5.4** | **$12.1** | | **Adjusted diluted EPS** | **$0.04** | **$0.10** |

Core Insights - Surgery Partners, Inc. reported a strong start to 2025 with revenues increasing by 8.2% year-over-year to $776.0 million, driven by a 5.2% increase in same-facility revenues and a 6.5% increase in same-facility cases [3][6][21] - The company reaffirmed its full-year 2025 revenue guidance in the range of $3.30 billion to $3.45 billion and Adjusted EBITDA guidance between $555 million and $565 million, indicating confidence in continued growth and margin expansion [2][6] - Despite the positive revenue growth, the company reported a net loss attributable to Surgery Partners, Inc. of $37.7 million for the first quarter, compared to a net loss of $12.4 million in the same period last year [3][21] Financial Performance - Adjusted EBITDA for the first quarter of 2025 was $103.9 million, reflecting a 6.6% increase from $97.5 million in the first quarter of 2024 [3][21] - The company's operating income decreased to $61.9 million from $76.0 million year-over-year, primarily due to increased operating expenses [21] - The ratio of total net debt to EBITDA was approximately 4.1x at the end of the first quarter of 2025, indicating the company's leverage position [5] Liquidity and Cash Flow - As of March 31, 2025, Surgery Partners had cash and cash equivalents of $229.3 million and $388.9 million available under its revolving credit facility [4][20] - Cash flows from operating activities decreased to $6.0 million in the first quarter of 2025 from $40.7 million in the same period of 2024, attributed to timing of routine transactions involving working capital [4][20] Operational Highlights - The number of surgical facilities decreased slightly to 164 as of March 31, 2025, from 165 a year earlier, while the number of consolidated surgical facilities also declined to 118 from 124 [20][21] - Revenue per case increased to $4,841 in the first quarter of 2025, up from $4,677 in the same period of 2024, despite a 1.2% decrease in revenue per case year-over-year [21][23]

Group 1 - Surgery Partners, Inc. will release its first quarter 2025 results on May 12, 2025, before the market opens, followed by a conference call at 8:30 a.m. Eastern Time [1] - Interested parties can access the conference call via a webcast on the company's Investor Relations website, with a replay available for a limited time [1] - The company is headquartered in Brentwood, Tennessee, and operates over 200 locations across 30 states, focusing on outpatient surgical services [3] Group 2 - Surgery Partners is recognized as a leading healthcare services company, emphasizing high-quality and cost-effective surgical solutions [3] - The company was founded in 2004 and has rapidly grown to become one of the largest surgical services businesses in the United States [3] - The company operates various facilities, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices, and urgent care facilities [3]

Financial Performance - Surgery Partners, Inc. reported net losses of $168.1 million, $11.9 million, and $54.6 million for the years 2024, 2023, and 2022, respectively, indicating ongoing challenges in achieving profitability[137]. - The company’s ability to generate cash flow is critical for servicing its debt, and any failure to do so may adversely affect its financial condition[140]. - The company’s financial condition may be adversely affected if it fails to comply with restrictive covenants in its debt instruments[145]. - The company is exposed to significant financial penalties under the False Claims Act for any false claims submitted, which could lead to treble damages[181]. - The company's insurance coverage may not adequately protect against all claims, potentially impacting financial condition and operational results[191]. Debt and Indebtedness - As of December 31, 2024, the company had approximately $3.4 billion in total indebtedness, including $1.4 billion in senior secured term loans and $800 million in senior unsecured notes due 2032[139]. - The company had $192 million in outstanding borrowings under its $703.8 million senior secured revolving credit facility, leaving $501.5 million available for additional borrowings[139]. - The company may incur additional indebtedness in the future, which could exacerbate existing risks associated with its leverage[147]. - The company is exposed to interest rate risk due to variable rate indebtedness, which could increase debt service obligations if interest rates rise[153]. - The company’s subsidiaries are subject to various business considerations and statutory restrictions that may limit the distribution of earnings necessary to meet debt obligations[149]. Regulatory and Compliance Risks - The company is subject to various federal and state laws and regulations, which could result in significant penalties or operational changes if not complied with[164]. - The Affordable Care Act has changed how healthcare services are covered and reimbursed, potentially impacting the company's financial condition and operations[169]. - Violations of self-referral laws could lead to civil or criminal penalties, including up to $15,000 per prohibited service billed and exclusion from Medicare and Medicaid programs[178]. - The company’s surgical facilities do not meet the requirements for safe harbors under the federal Anti-Kickback Statute, which could expose it to penalties and loss of revenue[173]. - The company is regularly subject to federal and state audits, which could result in material repayments and penalties[186]. Legal and Operational Challenges - The company faces potential legal liabilities from ongoing lawsuits and investigations, which could divert resources and negatively impact its business[188]. - The company’s surgical hospitals are restricted from expanding capacity due to the Affordable Care Act, limiting growth opportunities[179]. - The company’s management agreements may not fully comply with the Anti-Kickback Statute, posing risks of legal challenges[174]. - The company faces potential legal claims from former employees alleging violations of labor regulations, which could result in significant financial liabilities[189]. - Increasing malpractice and legal claims against healthcare providers may lead to substantial damages that are not fully covered by insurance[190]. Medicare and Quality Metrics - Compliance with Medicare's conditions is critical, as failure to meet quality metrics could result in reduced payments and significant penalties[193]. - The company is at risk of decreased Medicare payments if it fails to report and meet various quality metrics, which could affect patient volumes[195]. Ownership and Governance - As of December 31, 2024, Bain Capital owns approximately 39.3% of the company's outstanding common stock, influencing key decisions[199]. - The company's charter provisions may deter beneficial takeover efforts, impacting stockholder value[200]. Cybersecurity - Cybersecurity remains a priority, with the company experiencing an immaterial cybersecurity incident in May 2023 that temporarily disrupted operations in Idaho[158]. Interest Rate Management - The company utilizes interest rate swap and cap agreements to manage exposure to interest rate fluctuations, with no expected material effect on net earnings in 2025[292].