Surgery Partners(SGRY) - 2025 Q2 - Quarterly Report

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