Surgery Partners (NasdaqGS:SGRY) Q4 2025 Earnings call March 03, 2026 08:30 AM ET Company ParticipantsAndrew Mok - Director of Equity ResearchBenjamin Rossi - Healthcare Services Equity ResearchDave Doherty - EVP and CFOEric Evans - CEOJoanna Gajuk - Director of US Equity ResearchConference Call ParticipantsBrian Tanquilut - Senior Equity AnalystMatthew Gilmore - Equity Research AnalystMichael Marion - AnalystSarah James - Managing Director, Equity Analyst in Healthcare Services and HCITWhit Mayo - Senior M ...

Surgery Partners (NasdaqGS:SGRY) Q4 2025 Earnings call March 03, 2026 08:30 AM ET Speaker8Greetings, welcome to the Surgery Partners Q4 and full year 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Dav ...

Financial Data and Key Metrics Changes - Net revenue for Q3 2025 was $821.5 million, reflecting a 6.6% year-over-year increase [3][15] - Adjusted EBITDA was $136.4 million, up 6.1% year-over-year, with an adjusted EBITDA margin of 16.6% [3][15] - Same facility revenue grew by 6.3%, with same facility case growth of 3.4% and rate growth of 2.8% [15][20] Business Line Data and Key Metrics Changes - Over 166,000 surgical cases were performed in Q3, representing a 2.1% growth [15] - Growth in total joint surgeries was robust, with a 16% increase in Q3 and a 23% increase year-to-date compared to the same period last year [4][15] - Volume growth in gastrointestinal (GI) and musculoskeletal (MSK) procedures was relatively high, while ophthalmology procedures were slightly lower this quarter [4][5] Market Data and Key Metrics Changes - Payer mix showed commercial payers at 50.6% of revenues, down 160 basis points year-over-year, while governmental sources, primarily Medicare, increased by 120 basis points [5] - Same facility revenue growth for the full year is now expected to align with the midpoint of the long-term target range of 4%-6% [12][20] Company Strategy and Development Direction - The company is focused on organic growth, margin improvement, and capital deployment for M&A [3] - A strategic portfolio optimization process is underway to enhance flexibility and streamline operations [9][10] - The company plans to continue investing in DeNovo facilities, with two opened in Q3 and nine under construction [8][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged softer-than-expected same facility volume growth in recent months, prompting adjustments to the fourth quarter outlook [5][12] - The company remains confident in its long-term growth algorithm and the resilience of its business despite near-term challenges [13][21] - Revised full-year guidance expects revenue in the range of $3.275 billion to $3.3 billion and adjusted EBITDA between $535 million and $540 million [11][19] Other Important Information - The company has deployed approximately $71 million in capital for acquisitions in 2025, with a robust M&A pipeline of over $300 million under evaluation [6][8] - The company completed divestitures of three ASCs, generating cash proceeds of $45 million [18][40] - The inaugural investor day has been shifted to spring 2026 to provide a comprehensive update on portfolio optimization efforts [11] Q&A Session Summary Question: What is causing the weakness in demand or procedure volumes as you think through Q4? - Management noted broad-based weakness in volumes and payer mix, with higher government payer mix than expected [23][24] Question: Is the low level of spend on acquisitions due to deal timing or evaluation? - Management confirmed strong deal flow but emphasized a disciplined approach to acquisitions [25] Question: Can you clarify the payer mix commentary regarding commercial volumes being weaker? - Management indicated that while there is always pressure from payers, the current issue is more about the growth trend not being as strong as expected [29][30] Question: Can you break down the $20 million pressure on EBITDA guidance? - Management stated that approximately 60% of the pressure is related to development or capital timing, with the rest due to recent trend changes [31][32] Question: What are the expectations for free cash flow in Q4 and the year ahead? - Management does not provide specific guidance on free cash flow but noted strong operating cash flow and improvements in working capital [75][78]