Surgery Partners(SGRY) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Full-year adjusted EBITDA reached $258.6 million, representing a growth of 10.1% over 2018 [13] - Adjusted revenues for the fourth quarter grew 4.2% to $520.7 million, while full-year adjusted revenues rose to $1.86 billion, reflecting nearly 3% year-over-year growth [28][30] - Adjusted EBITDA margin improved to 16.2% in the fourth quarter from 14.7% in the prior year period, and full-year adjusted EBITDA margin increased by 90 basis points to 13.9% [31] Business Line Data and Key Metrics Changes - Same facility revenue growth was nearly 8% year-over-year, with fourth-quarter adjusted same facility revenue increasing by 7.9% [9][14] - Approximately 138,000 surgical cases were performed in the fourth quarter, ending the year with around 525,000 cases [27] - The company reported strong growth in higher acuity cases, with about 1,300 total joint procedures performed in 2019, nearly double the total from 2018 [18] Market Data and Key Metrics Changes - The company achieved double-digit commercial rate increases in multiple markets, contributing to fourth-quarter net revenue per case growth [19] - The company expects its base business to grow at a long-term sustainable rate of 2% to 3% on volume and 2% to 3% on rate, yielding 4% to 6% same facility revenue growth [20] Company Strategy and Development Direction - The company is focused on physician recruiting, managed care, procurement, and revenue cycle management to differentiate itself as the operator of choice [8] - The company is actively pursuing a robust pipeline of tuck-in acquisitions and expects to see increased opportunities for acquisitions at attractive multiples in 2020 [10][11] - The company aims to expand its capabilities in multi-specialty centers, particularly in total joint procedures, with a goal of increasing the percentage of centers performing these procedures [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit adjusted EBITDA growth for both the immediate and long-term future [9] - The company has not yet seen any impact from the coronavirus on its operations, but is taking precautions to ensure safety [43] - Management anticipates continued strong same facility revenue growth and margin expansion as strategic initiatives take hold [41] Other Important Information - The company opened a new hospital in Idaho Falls in November 2019, which is expected to be a material contributor to adjusted EBITDA in the coming years [33][34] - The company ended 2019 with a cash balance of approximately $93 million and no borrowings on its revolving credit facility [33] Q&A Session Summary Question: Impact of coronavirus on operations - Management stated that there has been no impact from the coronavirus to date, but they are monitoring the situation closely [43] Question: Cash flow expectations for 2020 - Management noted that higher interest expenses and startup costs for the Idaho Falls hospital impacted cash flow, but they expect to grow double-digit earnings in 2020 [44][47] Question: M&A outlook and potential deals - Management confirmed a robust M&A pipeline and expects to announce more transactions in 2020 than in the previous year [51][65] Question: Physician recruitment and volume ramp-up - Management anticipates a slight increase in physician recruitment numbers in 2020 compared to previous years, with a focus on targeted specialties [55] Question: Total joint procedures and market expansion - Management indicated that they expect to increase the number of facilities capable of performing total joint procedures, with minimal capital requirements for many of these expansions [86]