Surgery Partners(US:SGRY)2024-02-26 23:53Financial Data and Key Metrics Changes - The company achieved net revenue of $2.74 billion in 2023, reflecting an 8% growth compared to the previous year, with adjusted EBITDA exceeding $438 million, representing a 15% increase [68][70][76] - Adjusted EBITDA margins improved by 100 basis points to 16.0% in 2023, driven by revenue growth, effective cost management, and contributions from equity method investments [68][76][78] - Free cash flow for the full year was approximately $110 million, marking the first year of positive cash flow for the company, although lower than previously projected due to timing-related issues [79][104] Business Line Data and Key Metrics Changes - Same-facility revenue grew over 11% in 2023, with case volume increasing approximately 4% and rate improvement of 7%, driven by acuity mix and enhanced managed care rates [52][55] - The company performed nearly 707,000 cases in 2023, with a 4% increase from 2022, and same-facility cases grew 3.9% for the full year [68][76] - The company expects continued rate improvement in 2024, particularly in orthopedic procedures, as new joint programs are introduced [55][56] Market Data and Key Metrics Changes - Revenue growth in non-consolidated entities exceeded 60% in 2023 compared to the prior year, indicating strong performance in this segment [97] - The company anticipates net revenue of at least $3 billion for 2024, reaffirming its growth outlook amid a strong pipeline of acquisition opportunities [70][105] - The company is focused on expanding its de novo portfolio, with eight centers opened in 2023 and twelve under development for 2024 and early 2025 [98] Company Strategy and Development Direction - The company aims to deploy at least $200 million annually for acquisitions, maintaining a disciplined approach to sourcing and executing strategically important transactions [53][70] - The management team is optimistic about the growth opportunities presented by the shift of more procedures to short-stay surgical facilities, particularly in orthopedic specialties [58][70] - The company is committed to forming long-term partnerships with health systems to enhance its capabilities and expand its market presence [74][98] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2024 goals, citing effective management of inflationary pressures and a strong recruiting pipeline [75][104] - The company anticipates continued margin expansion in 2024, supported by procurement efficiencies and integration benefits from recent acquisitions [81][105] - Management highlighted the importance of the upcoming leap year in 2024, which is expected to provide a favorable comparison for case volume growth [138] Other Important Information - The company completed a significant refinancing of its term loan in December 2023, extending maturity to 2030 and increasing its revolving credit facility to over $700 million [78][102] - The company added nearly 700 new physicians in 2023, with the average net revenue per case from these recruits being significantly higher than previous years [73] Q&A Session Summary Question: What are the economics and opportunities related to ankles and shoulders? - Management highlighted the significant opportunity presented by the removal of ankles and shoulders from the in-patient-only list, which allows for more procedures to be performed in ASCs, enhancing overall growth potential [111][112] Question: What are the plans for remaining debt and cash flow outlook for 2025? - Management discussed the refinancing of the term loan and the potential for interest savings from upcoming notes, indicating a positive cash flow outlook for 2025 [113][114][115] Question: Can you elaborate on the impact of higher acuity procedures on margins? - Management noted that margin expansion is expected from acquisitions and the integration of higher acuity procedures, which are anticipated to drive revenue growth [120][123] Question: What is the expected case growth for 2024? - Management indicated that case growth is predictable due to established relationships with physicians and ongoing recruitment efforts, with a focus on higher acuity procedures [131][132]