Financial Data and Key Metrics Changes - Surgery Partners reported full-year adjusted EBITDA growth of 16% and net revenue growth of 13.5%, resulting in margin expansion of 30 basis points [7][17] - The company achieved revenue over $3 billion and adjusted EBITDA over $500 million for the first time [8] - Adjusted EBITDA for Q4 was $163.8 million, with a margin of 18.9%, while full-year adjusted EBITDA was $508.2 million, reflecting a 16% increase over 2023 [40][41] Business Line Data and Key Metrics Changes - The company performed over 656,000 surgical cases in 2024, an increase from 605,000 in 2023, with significant growth in orthopedic cases, which rose by 11% [12][38] - Total joint procedures within orthopedics grew by 50% in 2024, with over 70% of surgical facilities capable of performing higher acuity orthopedic procedures [13] - Same facility revenue increased by 5.6% in Q4 and 8% for the full year, exceeding the growth algorithm target of 4% to 6% [39] Market Data and Key Metrics Changes - Approximately 90% of the company's revenue was generated from commercial payers and Medicare in 2024 [18] - The managed care team secured over 99% of expected contractual rates for 2025, with Medicare rate increases projected at approximately 3% [19] Company Strategy and Development Direction - The company focuses on organic growth, margin improvement, and capital deployment for M&A as part of its growth algorithm [6][20] - Surgery Partners plans to continue investing in acquisitions, facility expansions, and service line expansions, with expectations of at least 10 de novo facilities annually [16][21] - The company aims for margin expansion in 2025 and beyond, supported by procurement and operational efficiency initiatives [20][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning relative to the current regulatory environment, noting minimal exposure to Medicaid and site neutrality legislation [28][30] - The company anticipates continued growth driven by a robust pipeline of acquisitions and strong operational execution [37][49] - Initial guidance for 2025 includes net revenue in the range of $3.3 billion to $3.45 billion and adjusted EBITDA between $555 million and $565 million [27][49] Other Important Information - Surgery Partners has a strong liquidity position with $270 million in cash and over $770 million in total liquidity [40] - The company incurred approximately $11 million in costs related to strategic alternatives considered by the Board in 2024, with expectations for similar costs in 2025 [45][134] Q&A Session Summary Question: Impact of potential legislation on site neutrality - Management indicated that the worst-case scenario would limit revenue impact to approximately 1%, with potential upside from procedures shifting from acute care to their facilities [55][60] Question: Guidance considerations for Q1 - Management noted that unusual weather patterns in January were factored into guidance, with expectations for a consistent quarterly pattern [64][66] Question: M&A strategy and pipeline - Management confirmed that the ongoing special committee review has not impacted their M&A approach, maintaining a strong pipeline for 2025 [71][74] Question: De novo facility ramp-up and costs - Management expressed optimism about the de novo pipeline, with expectations for facilities to reach breakeven within the first year [76][80] Question: Revenue impact from divestitures - Management clarified that divestitures would contribute less than 2% to revenue growth, emphasizing a focus on portfolio optimization [88][89] Question: Operating costs and EBITDA pressure - Management acknowledged higher operating costs due to performance management incentives and payer mix, but indicated these are manageable [125][128] Question: Transaction and integration costs visibility - Management expects a significant reduction in transaction and integration costs in 2025, improving free cash flow [131][132]

Financial Data and Key Metrics Changes - Surgery Partners reported full-year adjusted EBITDA growth of 16% and net revenue growth of 13.5%, resulting in margin expansion of 30 basis points [7][39] - The company achieved revenue over $3 billion and adjusted EBITDA over $500 million for the first time [8] - Adjusted EBITDA for Q4 was $163.8 million, with a margin of 18.9%, while full-year adjusted EBITDA was $508.2 million, reflecting a 16% increase over 2023 [40][41] Business Line Data and Key Metrics Changes - The company performed over 656,000 surgical cases in 2024, an increase from 605,000 cases in 2023, with significant growth in orthopedic procedures, particularly total joint procedures, which grew by 50% [12][13] - Same facility revenue growth was 8% for the year, with Q4 same facility total revenue increasing by 5.6% [39] Market Data and Key Metrics Changes - Approximately 90% of the company's revenue was generated from commercial payers and Medicare in 2024 [18] - The company expects Medicare rate increases of approximately 3% for 2025, contributing to revenue growth [19] Company Strategy and Development Direction - The company focuses on organic growth, margin improvement, and capital deployment for M&A as part of its long-term growth algorithm [6][11] - Surgery Partners plans to continue investing in acquisitions, facility expansions, and service line expansions, with a target of at least 10 de novo facilities annually [16][24] - The company aims to maintain a robust pipeline of attractive partnership opportunities, having added seven surgical facilities in 2024 [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning relative to the current regulatory environment, noting minimal exposure to Medicaid and site neutrality legislation [30][32] - The company anticipates continued margin expansion and double-digit adjusted EBITDA growth in 2025, with initial guidance for net revenue between $3.3 billion and $3.45 billion [27][49] Other Important Information - Surgery Partners has a strong liquidity position with $270 million in cash and over $770 million in total liquidity [40] - The company incurred approximately $11 million in costs related to strategic alternatives considered by the Board in 2024, with expectations for similar costs in 2025 [45][134] Q&A Session Summary Question: Impact of potential legislation on revenue - Management indicated that the worst-case scenario from site neutrality legislation could impact revenue by approximately 1%, but they expect a net positive effect as procedures may shift from acute care to their facilities [55][60] Question: Guidance for Q1 considering weather impacts - Management noted that while unusual weather conditions may cause some rescheduling, it has been factored into their guidance, expecting Q1 to contribute about 23% of the annual revenue midpoint [64][66] Question: Changes in M&A approach due to Bain Capital's proposal - Management stated that the M&A pipeline remains strong and has not been impacted by the proposal, with three facilities already closed in Q1 2025 [71][74] Question: Revenue contribution from divested assets - Management clarified that less than 2% of the projected revenue growth is related to divestitures, emphasizing a focus on portfolio optimization [88][89] Question: Visibility on reducing transaction and integration costs - Management expressed confidence in reducing transaction and integration costs in 2025, with expectations for free cash flow improvement as these costs normalize [131][132]

Group 1 - Surgery Partners reported quarterly earnings of $0.44 per share, exceeding the Zacks Consensus Estimate of $0.38 per share, with an earnings surprise of 15.79% [1] - The company posted revenues of $864.4 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 4.29%, compared to $735.4 million in the same quarter last year [2] - Surgery Partners has outperformed the S&P 500, gaining approximately 13.8% since the beginning of the year, while the S&P 500 has gained 1.2% [3] Group 2 - The current consensus EPS estimate for the upcoming quarter is $0.05 on revenues of $798.93 million, and for the current fiscal year, it is $0.91 on revenues of $3.39 billion [7] - The Medical Services industry, to which Surgery Partners belongs, is currently ranked in the top 34% of over 250 Zacks industries, indicating a favorable outlook [8]

Revenue Growth - Fourth quarter 2024 revenues increased 17.5% to $864.4 million compared to $735.4 million in Q4 2023[3] - Full year 2024 revenues rose 13.5% to $3.1 billion from $2.7 billion in 2023[4] - Same-facility revenue growth for 2024 was 8.0%, with a 4.0% increase in revenue per case and a 3.9% increase in same-facility cases[4] Adjusted EBITDA - Adjusted EBITDA for Q4 2024 was $163.8 million, a 15.1% increase from $142.3 million in Q4 2023[4] - Full year 2024 Adjusted EBITDA increased 16.0% to $508.2 million compared to $438.1 million in 2023[4] - Adjusted EBITDA for the three months ended December 31, 2024, was $163.8 million, compared to $142.3 million in 2023, marking a year-over-year increase of 15.1%[25] Net Loss and Income - The net loss attributable to Surgery Partners, Inc. for Q4 2024 was $108.5 million, and for the full year, it was $168.1 million[4] - For the three months ended December 31, 2024, the net income was $(46.6) million, compared to $46.7 million in the same period of 2023[30] - Adjusted net income attributable to common stockholders for the year ended December 31, 2024, was $118.8 million, down from $126.7 million in 2023, representing a decrease of approximately 6.2%[30] Cash and Liquidity - The liquidity position at the end of 2024 was over $770 million, including $269.5 million in cash and $501.5 million in borrowing capacity[5] - Cash and cash equivalents increased to $269.5 million in 2024 from $195.9 million in 2023, representing a growth of 37.4%[21] Assets and Liabilities - Total assets rose to $7,890.0 million in 2024, up from $6,876.7 million in 2023, reflecting an increase of 14.7%[21] - Total liabilities increased to $4,254.8 million in 2024 from $3,514.8 million in 2023, an increase of 21.0%[21] - The ratio of total net debt to EBITDA was approximately 3.7x at the end of Q4 2024[6] Acquisitions and Growth - The company deployed nearly $400 million on accretive acquisitions and opened eight new facilities in 2024[2] - The company reported a case growth of 6.8% for the three months ended December 31, 2024, compared to the same period in 2023[23] - The number of cases performed in Q4 2024 was 174,185, up from 153,193 in Q4 2023, indicating a growth of 13.7%[21] Shareholder Information - Adjusted net income per share (diluted) remained stable at $0.44 for Q4 2024, compared to $0.44 in Q4 2023[21] - The adjusted net income per share attributable to common stockholders for 2024 was $0.94 (basic) and $0.93 (diluted), compared to $1.01 (basic) and $1.00 (diluted) in 2023[30] - The weighted average common shares outstanding for basic shares was 126,209 for the three months ended December 31, 2024, compared to 125,774 in 2023[30] Costs and Expenses - The company incurred transaction, integration, and acquisition costs of $36.8 million in Q4 2024, compared to $26.1 million in Q4 2023, reflecting an increase of 40.5%[25] - Equity-based compensation expense increased to $6.2 million for the three months ended December 31, 2024, compared to $4.5 million in 2023[30] - The company reported a net loss on disposals, consolidations, and deconsolidations of $19.1 million for the three months ended December 31, 2024, up from $6.9 million in 2023[30] Future Projections - The company projects 2025 revenue to be between $3.30 billion and $3.45 billion, with Adjusted EBITDA expected to be between $555 million and $565 million[7] Tax Information - The company made income tax payments of $1.6 million and $1.4 million for the years ended December 31, 2024, and 2023, respectively[30] - No federal income tax payments were made during the years ended December 31, 2024, and 2023, due to the utilization of net operating loss carryforwards[30] Valuation Allowance - The change in valuation allowance on deferred tax assets contributed $99.5 million for the year ended December 31, 2024[30]

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]