Revenue Growth - Fourth quarter 2024 revenues increased 17.5% to $864.4 million compared to $735.4 million in Q4 2023[3] - Full year 2024 revenues rose 13.5% to $3.1 billion from $2.7 billion in 2023[4] - Same-facility revenue growth for 2024 was 8.0%, with a 4.0% increase in revenue per case and a 3.9% increase in same-facility cases[4] Adjusted EBITDA - Adjusted EBITDA for Q4 2024 was $163.8 million, a 15.1% increase from $142.3 million in Q4 2023[4] - Full year 2024 Adjusted EBITDA increased 16.0% to $508.2 million compared to $438.1 million in 2023[4] - Adjusted EBITDA for the three months ended December 31, 2024, was $163.8 million, compared to $142.3 million in 2023, marking a year-over-year increase of 15.1%[25] Net Loss and Income - The net loss attributable to Surgery Partners, Inc. for Q4 2024 was $108.5 million, and for the full year, it was $168.1 million[4] - For the three months ended December 31, 2024, the net income was $(46.6) million, compared to $46.7 million in the same period of 2023[30] - Adjusted net income attributable to common stockholders for the year ended December 31, 2024, was $118.8 million, down from $126.7 million in 2023, representing a decrease of approximately 6.2%[30] Cash and Liquidity - The liquidity position at the end of 2024 was over $770 million, including $269.5 million in cash and $501.5 million in borrowing capacity[5] - Cash and cash equivalents increased to $269.5 million in 2024 from $195.9 million in 2023, representing a growth of 37.4%[21] Assets and Liabilities - Total assets rose to $7,890.0 million in 2024, up from $6,876.7 million in 2023, reflecting an increase of 14.7%[21] - Total liabilities increased to $4,254.8 million in 2024 from $3,514.8 million in 2023, an increase of 21.0%[21] - The ratio of total net debt to EBITDA was approximately 3.7x at the end of Q4 2024[6] Acquisitions and Growth - The company deployed nearly $400 million on accretive acquisitions and opened eight new facilities in 2024[2] - The company reported a case growth of 6.8% for the three months ended December 31, 2024, compared to the same period in 2023[23] - The number of cases performed in Q4 2024 was 174,185, up from 153,193 in Q4 2023, indicating a growth of 13.7%[21] Shareholder Information - Adjusted net income per share (diluted) remained stable at $0.44 for Q4 2024, compared to $0.44 in Q4 2023[21] - The adjusted net income per share attributable to common stockholders for 2024 was $0.94 (basic) and $0.93 (diluted), compared to $1.01 (basic) and $1.00 (diluted) in 2023[30] - The weighted average common shares outstanding for basic shares was 126,209 for the three months ended December 31, 2024, compared to 125,774 in 2023[30] Costs and Expenses - The company incurred transaction, integration, and acquisition costs of $36.8 million in Q4 2024, compared to $26.1 million in Q4 2023, reflecting an increase of 40.5%[25] - Equity-based compensation expense increased to $6.2 million for the three months ended December 31, 2024, compared to $4.5 million in 2023[30] - The company reported a net loss on disposals, consolidations, and deconsolidations of $19.1 million for the three months ended December 31, 2024, up from $6.9 million in 2023[30] Future Projections - The company projects 2025 revenue to be between $3.30 billion and $3.45 billion, with Adjusted EBITDA expected to be between $555 million and $565 million[7] Tax Information - The company made income tax payments of $1.6 million and $1.4 million for the years ended December 31, 2024, and 2023, respectively[30] - No federal income tax payments were made during the years ended December 31, 2024, and 2023, due to the utilization of net operating loss carryforwards[30] Valuation Allowance - The change in valuation allowance on deferred tax assets contributed $99.5 million for the year ended December 31, 2024[30]

Core Insights - Surgery Partners, Inc. reported a strong financial performance for the fourth quarter and full year of 2024, with revenues increasing by 17.5% to $864.4 million in Q4 and 13.5% to $3.1 billion for the full year [3][4][6] - The company achieved same-facility revenue growth of 5.6% in Q4 and 8.0% for the full year, indicating consistent organic growth [3][4][6] - Adjusted EBITDA for Q4 was $163.8 million, a 15.1% increase year-over-year, while full year Adjusted EBITDA rose 16.0% to $508.2 million [6][4] - Surgery Partners anticipates 2025 revenue in the range of $3.30 billion to $3.45 billion and Adjusted EBITDA between $555 million and $565 million [8] Financial Highlights - Q4 2024 revenues increased to $864.4 million from $735.4 million in Q4 2023, while full year revenues rose to $3.1 billion from $2.7 billion in 2023 [3][4] - Same-facility cases grew by 5.1% in Q4 and 3.9% for the full year, with revenue per case increasing by 0.5% in Q4 and 4.0% for the full year [6][4] - The net loss attributable to Surgery Partners was $108.5 million for Q4 and $168.1 million for the full year, primarily due to a non-cash valuation allowance against deferred tax assets [6][4] Liquidity and Cash Flow - As of December 31, 2024, Surgery Partners had cash and cash equivalents of $269.5 million and $501.5 million in borrowing capacity under its revolving credit facility [5][19] - Operating cash flows for Q4 were $111.4 million, up from $62.6 million in Q4 2023, reflecting operational growth and working capital improvements [5][20] - The company ended 2024 with a liquidity position exceeding $770 million, enhancing its ability to fund future acquisitions without accessing capital markets [2][5] 2025 Outlook - The company projects full year 2025 revenue between $3.30 billion and $3.45 billion, with Adjusted EBITDA expected to be in the range of $555 million to $565 million [8][2] - The guidance includes approximately $11 million of Adjusted EBITDA related to divestitures that occurred late in Q4 2024 [8]

Core Viewpoint - Surgery Partners, Inc. is set to release its fourth quarter 2024 results on March 3, 2025, before market opening, followed by a conference call at 8:30 a.m. Eastern Time [1]. Company Overview - Surgery Partners is a leading healthcare services company headquartered in Brentwood, Tennessee, focusing on high-quality, cost-effective surgical and ancillary care solutions [3]. - The company operates over 200 locations across 31 states, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices, and urgent care facilities [3]. - Founded in 2004, Surgery Partners is recognized as one of the largest and fastest-growing surgical services businesses in the United States [3]. Investor Relations - Interested parties can access the conference call via a live webcast on the company's Investor Relations website, with a replay available for a limited time afterward [1][2]. - Contact information for investor relations includes a dedicated phone line and email for inquiries [4].

Company Overview - Surgery Partners (SGRY) shares increased by 21.2% to close at $25.75, with trading volume significantly higher than usual [1] - The stock has seen a 3.3% gain over the past four weeks [1] Acquisition Proposal - Bain Capital Private Equity proposed a non-binding acquisition of all outstanding shares of Surgery Partners not already owned by them for $25.75 per share [2] Earnings Expectations - Surgery Partners is expected to report quarterly earnings of $0.40 per share, reflecting a year-over-year decline of 9.1% [3] - Revenue is projected to be $828.84 million, which is a 12.7% increase from the same quarter last year [3] Earnings Estimate Trends - The consensus EPS estimate for Surgery Partners has remained unchanged over the last 30 days [4] - A lack of trend in earnings estimate revisions typically correlates with stock price movements, indicating the need to monitor SGRY for potential future strength [4] Industry Context - Surgery Partners is part of the Zacks Medical Services industry, which includes other companies like Teladoc (TDOC) [4] - Teladoc's consensus EPS estimate has also remained unchanged at -$0.21, representing a 23.5% decline from the previous year [5]

Core Viewpoint - Surgery Partners, Inc. has received a non-binding acquisition proposal from Bain Capital Private Equity to acquire all outstanding shares not already owned by Bain Capital for $25.75 per share [1] Group 1: Acquisition Proposal - Bain Capital currently owns approximately 39% of Surgery Partners' outstanding common stock [1] - A Special Committee of independent directors will evaluate the Bain Capital Proposal with the help of independent financial and legal advisors [2] - The proposal requires approval from a majority of the shares not owned by Bain Capital and the approval of a fully empowered Special Committee comprised solely of independent directors [3] Group 2: Company Overview - Surgery Partners is a leading healthcare services company focused on high-quality, cost-effective surgical and ancillary care solutions [5] - The company operates over 200 locations across 33 states, including ambulatory surgery centers and surgical hospitals [5] - Founded in 2004, Surgery Partners is one of the largest and fastest-growing surgical services businesses in the United States [5]

Board Appointment - Dr Laura L Forese has been appointed as an independent director on Surgery Partners' Board of Directors, effective January 10, 2025, increasing the Board size to eleven members [1] Dr Forese's Background - Dr Forese has over 40 years of healthcare administration experience, most recently as executive vice president and chief operating officer for New York-Presbyterian, which includes 10 hospital campuses, approximately 200 primary and specialty care clinics, and over 45,000 employees and affiliated physicians [2] - She established the New York-Presbyterian Medical Groups to expand the organization's regional footprint and standardize financial, operational, and clinical practices [2] - Dr Forese is an orthopedic surgeon with a medical degree from Columbia University College of Physicians & Surgeons, a master's degree in health services management from Columbia University School of Public Health, and a bachelor's degree in civil engineering and operations research from Princeton University [4] Industry and Company Positioning - Surgery Partners is a leading healthcare services company with a differentiated outpatient delivery model focused on providing high quality, cost-effective surgical and related ancillary care [6] - The company is one of the largest and fastest-growing surgical services businesses in the country, with over 200 locations in 33 states, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices, and urgent care facilities [6] - The company is well-positioned to support surgeons in establishing high quality, exceptional value ambulatory surgical centers while providing meaningful savings for patients and payors [5]

Financial Performance - Total revenues for Q3 2024 increased 14.3% to $770.4 million from $674.1 million in Q3 2023[70] - Adjusted EBITDA for Q3 2024 rose 21.9% to $128.6 million compared to $105.5 million in Q3 2023[70] - Patient service revenues increased 13.7% to $753.2 million for Q3 2024, up from $662.3 million in Q3 2023[78] - Revenues for the nine months ended September 30, 2024, were $2,249.9 million, an increase of 12.0% from $2,007.9 million in the same period of 2023[81] - Patient service revenues increased by 11.6% to $2,206.6 million for the nine months ended September 30, 2024, driven by an 8.7% increase in same-facility revenues[83] Operational Metrics - Days adjusted same-facility revenues for Q3 2024 increased 4.2% year-over-year, driven by a 3.7% increase in same-facility case volumes[70] - As of September 30, 2024, the company operated 166 surgical facilities, including 147 ASCs and 19 surgical hospitals across 33 states[70] - Orthopedics and pain management represented 40.4% of cases performed in Q3 2024, up from 35.7% in Q3 2023[75] Expenses and Costs - Cost of revenues increased to $592.9 million for Q3 2024, up from $508.3 million in Q3 2023, representing 77.0% of revenues compared to 75.4%[79] - General and administrative expenses decreased to $29.2 million in Q3 2024 from $36.8 million in Q3 2023, accounting for 3.8% of revenues versus 5.5%[79] - Depreciation and amortization expenses rose to $50.2 million in Q3 2024 from $28.9 million in Q3 2023, representing 6.5% of revenues compared to 4.3%[80] - Transaction and integration costs increased to $29.4 million in Q3 2024 from $12.8 million in Q3 2023, primarily related to ongoing development initiatives and acquisitions[80] Net Income and Loss - Net loss attributable to Surgery Partners, Inc. was $31.7 million in Q3 2024, compared to a net loss of $4.9 million in Q3 2023[77] - Net loss attributable to Surgery Partners, Inc. was $(59.6) million for the nine months ended September 30, 2024, compared to $(10.9) million in the same period of 2023[81] - Net income attributable to non-controlling interests for Q3 2024 was $(38.1) million, compared to $(34.6) million in Q3 2023[91] Cash and Financing - Cash and cash equivalents stood at $221.8 million with $595.8 million of borrowing capacity under the Revolver as of September 30, 2024[70] - Net cash provided by financing activities was $214.0 million for the nine months ended September 30, 2024, compared to net cash used of $110.6 million in the same period of 2023, a $324.6 million increase[86] - Cash and cash equivalents were $221.8 million at September 30, 2024, up from $195.9 million at December 31, 2023[84] - Cash flows from operating activities for the twelve months ended September 30, 2024, were $251.3 million[93] Tax and Interest - The effective tax rate was 41.3% for Q3 2024, significantly higher than 9.5% for Q3 2023, reflecting changes in tax obligations[80] - Interest expense for Q3 2024 was $50.0 million, slightly up from $49.8 million in Q3 2023[91] Other Financial Information - The company reported a net loss on disposals of $14.7 million in Q3 2024, compared to $5.8 million in Q3 2023[91] - The company expects no material effect on net earnings or cash flows in 2024 due to interest rate changes[94] - The company utilizes interest rate swap and cap agreements to manage exposure to interest rate fluctuations[94]

Financial Data and Key Metrics Changes - The company reported net revenue of $770 million, representing growth of over 14% compared to the prior year quarter [5][22] - Adjusted EBITDA grew 22% to $128.6 million, with adjusted EBITDA margins expanding by 100 basis points to 16.7% [6][25] - Same-facility net revenue growth was 4.2%, with surgical case volume growth of 3.7% [14][23] Business Line Data and Key Metrics Changes - Total joint replacements in ASCs increased by 53% in the quarter, with a five-year CAGR exceeding 80% [7] - The company performed nearly 163,000 consolidated surgical cases in the third quarter, with a focus on high acuity business lines [15][22] - Musculoskeletal-related procedures grew by 21% year-to-date, with total joint cases in ASCs growing over 50% in the quarter [17] Market Data and Key Metrics Changes - The company continues to expand its footprint in high-growth markets such as Florida, Texas, California, New York, and Illinois [8][9] - The company completed acquisitions in targeted high-growth markets, including two multi-specialty orthopedic-focused ASCs in Chicago [9][10] Company Strategy and Development Direction - The company is focused on expanding its footprint in existing markets and entering new high-growth markets through M&A and de novo investments [8][11] - The management emphasized the importance of physician recruitment and the expansion of total joint programs as key growth drivers [7][15] - The company aims to maintain a growth algorithm of 4% to 6% for same-facility net revenue in 2024, with a full-year outlook of high single-digit growth [23][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, projecting full-year net revenue and adjusted EBITDA of over $3.075 billion and $508 million, respectively [12][29] - The impact of Hurricane Helene was noted, but all facilities have reopened, and the company is optimistic about future performance [6][44] - Management highlighted the ongoing shift of higher acuity procedures into lower-cost, higher-quality settings as a long-term growth opportunity [18][50] Other Important Information - The company ended the quarter with $222 million in cash and over $815 million in total liquidity [25] - The ratio of total net debt-to-EBITDA was 3.8x, consistent with the prior quarter, with a projection to reduce this ratio below 3.0x over time [28] Q&A Session Summary Question: Free cash flow expectations - Management indicated that cash flow generation remains strong, but higher transaction costs have impacted free cash flow expectations [31][32] Question: Impact of hurricanes on volumes - Management confirmed that the hurricanes had a marginal impact on revenue and cases, with one facility operating on a partial schedule [43][44] Question: Physician recruitment and market dynamics - Management noted strong interest from physicians in joining the company, emphasizing the benefits of efficiency and autonomy [66][68] Question: Cardiology growth potential - Management expressed excitement about the future of cardiology procedures moving into ASCs, highlighting the potential for rapid growth [82][84] Question: M&A strategy and pipeline - Management stated that they remain opportunistic in M&A, with a focus on high acuity procedures and a strong pipeline of opportunities [90][92]

Group 1 - Surgery Partners reported quarterly earnings of $0.19 per share, missing the Zacks Consensus Estimate of $0.25 per share, representing an earnings surprise of -24% [1] - The company posted revenues of $770.4 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.17%, compared to year-ago revenues of $674.1 million [2] - Over the last four quarters, Surgery Partners has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Group 2 - The stock has underperformed the market, losing about 1.8% since the beginning of the year, while the S&P 500 gained 25.8% [3] - The current consensus EPS estimate for the coming quarter is $0.50 on revenues of $834.38 million, and for the current fiscal year, it is $1.07 on revenues of $3.08 billion [7] - The Zacks Industry Rank indicates that the Medical Services sector is currently in the bottom 45% of over 250 Zacks industries, which may impact stock performance [8]

Revenue Performance - Revenues for Q3 2024 increased 14.3% to $770.4 million compared to $674.1 million in Q3 2023[2] - Year-to-date revenues for 2024 increased 12.1% to $2,249.9 million from $2,007.9 million in the prior year[3] - Total revenue for the three months ended September 30, 2024, was $770.4 million, a 14.3% increase from $674.1 million in the same period of 2023[16] - Same-facility revenues rose 4.2% year-over-year, with a 3.7% increase in same-facility cases[2] Adjusted EBITDA and Margins - Adjusted EBITDA for Q3 2024 was $128.6 million, reflecting a 21.9% growth from $105.5 million in Q3 2023[2] - The adjusted EBITDA margin expanded by 100 basis points to 16.7%[1] - Adjusted EBITDA for the three months ended September 30, 2024, was $128.6 million, up from $105.5 million in the prior year, representing a 21.8% increase[16] - The adjusted EBITDA margin for the three months ended September 30, 2024, was 16.7%, up from 15.7% in the prior year[14] Cash Flow and Debt - The company ended Q3 2024 with $222 million in cash and $596 million in revolver capacity[4] - Operating cash flows for Q3 2024 were $65.2 million, down from $104.6 million in the prior year quarter[4] - The total net debt to EBITDA ratio was approximately 3.8x at the end of Q3 2024[4] - Long-term debt, less current maturities, rose to $3,094.2 million as of September 30, 2024, compared to $2,701.8 million at the end of 2023, indicating a 14.6% increase[12] Surgical Facilities and Cases - The number of surgical facilities increased to 166 as of September 30, 2024, compared to 152 at the end of the previous year[14] - Cases performed in the three months ended September 30, 2024, totaled 162,635, a 11.1% increase from 146,514 in the same period of 2023[14] - Revenue per case for the three months ended September 30, 2024, was $4,737, compared to $4,601 in the prior year, reflecting a 2.9% increase[14] Net Income and Earnings - Adjusted net income per share attributable to common stockholders for the three months ended September 30, 2024, was $0.19, unchanged from the same period in 2023[14] - Adjusted net income attributable to common stockholders for Q3 2024 was $23.9 million, slightly up from $23.7 million in Q3 2023, indicating a 0.8% increase[24] - Net income for Q3 2024 was $6.4 million, a significant decrease from $29.7 million in Q3 2023, reflecting a decline of 78.5%[24] - Adjusted net income per share attributable to common stockholders remained stable at $0.19 for both Q3 2024 and Q3 2023[24] Costs and Expenses - Transaction, integration, and acquisition costs for Q3 2024 were $31.5 million, compared to $13.0 million in Q3 2023, marking a 142.3% increase[24] - Start-up costs related to unconsolidated de novo surgical facilities increased to $0.9 million in Q3 2024 from $0.5 million in Q3 2023, a rise of 80%[22] Management and Affiliates - Adjusted EBITDA related to unconsolidated affiliates for Q3 2024 was $12.9 million, up from $10.2 million in Q3 2023, representing a 26.5% increase[22] - Equity in earnings of unconsolidated affiliates rose to $5.2 million in Q3 2024 from $3.5 million in Q3 2023, a growth of 48.6%[22] - Management fee revenues increased to $6.8 million in Q3 2024 from $6.2 million in Q3 2023, a growth of 9.7%[22] Shareholder Information - Basic weighted average common shares outstanding increased to 126,172 in Q3 2024 from 125,747 in Q3 2023[24] - Diluted weighted average common shares outstanding rose to 127,640 in Q3 2024 from 127,376 in Q3 2023[24]