Surgery Partners(SGRY)2025-03-04 02:00Financial 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 500 million for the first time [8] - Adjusted EBITDA for Q4 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 3.45 billion and adjusted EBITDA between 565 million [27][49] Other Important Information - Surgery Partners has a strong liquidity position with 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]