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]