Surgery Partners, Inc.

Previous wording

As of September 30, 2024, we owned or operated, primarily in partnership with physicians, a portfolio of 166 surgical facilities comprised of 147 ASCs and 19 surgical hospitals across 33 states. We owned a majority interest in 89 of the surgical facilities and consolidated 123 of these facilities for financial reporting purposes.

Current wording

As of March 31, 2025, we owned or operated, primarily in partnership with physicians, a portfolio of 164 surgical facilities comprised of 145 ASCs and 19 surgical hospitals across 30 states. We owned a majority interest in 83 of the surgical facilities and consolidated 118 of these facilities for financial reporting purposes.

Previous wording

Total revenues for the third quarter of 2024 increased 14.3% to $770.4 million from $674.1 million for the third quarter of 2023. The increase in revenues was attributable to same-facility revenue growth and the net impact from acquisitions and divestitures completed during the twelve months ended September 30, 2024. Days adjusted same-facility revenues for the third quarter of 2024 increased 4.2% from the third quarter of 2023, with an 0.5% increase in revenue per case and a 3.7% increase in same-facility cases. Additionally, for the third quarter of 2024, Adjusted EBITDA increased 21.9% to $128.6 million compared to $105.5 million for the same period in 2023. The increase in Adjusted EBITDA was primarily attributable to revenue growth, continued cost management initiatives and acquisitions completed since the prior year period. For the third quarter of 2024, net loss attributable to Surgery Partners, Inc. was $31.7 million compared to $4.9 million for the same period in 2023. A reconciliation of non-GAAP financial measures appears below under the heading "Certain Non-GAAP Measures."

Current wording

Total revenues for the first quarter of 2025 increased 8.2% to $776.0 million from $717.4 million for the first quarter of 2024. The increase in revenues was attributable to same-facility revenue growth and the net impact from acquisitions and divestitures completed during the last twelve months ended March 31, 2025. Days adjusted same-facility revenues for the first quarter of 2025 increased 5.2% from the first quarter of 2024, with a 1.2% decrease in revenue per case and a 6.5% increase in same-facility cases. Additionally, for the first quarter of 2025, net loss attributable to Surgery Partners, Inc. was $37.7 million compared to $12.4 million for 2024. For the first quarter of 2025, Adjusted EBITDA increased 6.6% to $103.9 million compared to $97.5 million for the same period in 2024. The increase in Adjusted EBITDA was primarily attributable to revenue growth, continued cost management initiatives and acquisitions completed since the prior year period. A reconciliation of non-GAAP financial measures appears below under the heading "Certain Non-GAAP Measures."

Previous wording

We continue to focus on improving our same-facility performance, selectively acquiring established facilities, developing new facilities and other portfolio management initiatives. During the third quarter of 2024, we acquired a controlling interest in several physician practices for aggregate cash consideration of $26.6 million, net of cash acquired.

Current wording

We continue to focus on improving our same-facility performance, selectively acquiring established facilities, developing new facilities and pursuing other portfolio management initiatives. During the first quarter of 2025, we acquired a controlling interest in four surgical facilities and one physician practice for aggregate cash consideration of $44.0 million, net of cash acquired.

Previous wording

We had cash and cash equivalents of $221.8 million and $595.8 million of borrowing capacity under the Revolver as of September 30, 2024.

Current wording

We had cash and cash equivalents of $229.3 million and $388.9 million of borrowing capacity under the Revolver as of March 31, 2025.

Previous wording

Our revenues consist of patient service revenues and other service revenues. Patient service revenues consist of revenue from our Surgical Facility Services and Ancillary Services segments. Specifically, patient service revenues include fees for surgical or diagnostic procedures performed at surgical facilities that we consolidate for financial reporting purposes, as well as for patient visits to our physician practices, anesthesia services, pharmacy services and diagnostic screens ordered by our physicians. Other service revenues include management and administrative service fees derived from our non-consolidated facilities that we account for under the equity method, management of surgical facilities and physician practices in which we do not own an interest, management services we provide to physician practices for which we are not required to provide capital or additional assets and other non-patient services.

Current wording

Our revenues consist of patient service revenues and other service revenues. Patient service revenues consist of revenue from our Surgical Facilities reportable segment. Specifically, patient service revenues include fees for surgical or diagnostic procedures performed at surgical facilities that we consolidate for financial reporting purposes, as well as for patient visits to our physician practices, anesthesia services, pharmacy services and diagnostic screens ordered by our physicians. Other service revenues include management and administrative service fees derived from our non-consolidated facilities that we account for under the equity method, management of surgical facilities and physician practices in which we do not own an interest, management services we provide to physician practices for which we are not required to provide capital or additional assets and other non-patient services.

Previous wording

(1)Other is comprised of automobile liability, letters of protection and other payor types.

Current wording

(1)Comprised of automobile liability, letters of protection and other payor types.

Previous wording

The following tables summarize certain results from the statements of operations for the periods indicated (in millions):

Current wording

The following tables summarize certain results from the condensed consolidated statements of operations for the periods indicated (in millions):

Previous wording

Patient service revenues increased 13.7% to $753.2 million for the three months ended September 30, 2024 compared to $662.3 million for the three months ended September 30, 2023. The increase was primarily driven by a 4.2% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed during the twelve months ended September 30, 2024. The increase in days adjusted same-facility revenues was attributable to a 3.7% increase in same-facility case volumes and a 0.5% increase in same-facility revenue per case.

Current wording

Patient service revenues increased 7.5% to $758.4 million for the three months ended March 31, 2025 compared to $705.3 million for the three months ended March 31, 2024. The increase was primarily driven by a 5.2% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed during the twelve months ended March 31, 2025. The increase in days adjusted same-facility revenues was attributable to a 6.5% increase in same-facility case volumes and a 1.2% decrease in same-facility revenue per case.

Previous wording

Cost of Revenues. Cost of revenues was $592.9 million for the three months ended September 30, 2024 compared to $508.3 million for the three months ended September 30, 2023. The increase was primarily driven by an increase in case volume and the performance of high acuity procedures as well as acquisitions completed during the twelve months ended September 30, 2024. As a percentage of revenues, cost of revenues was 77.0% and 75.4% for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Cost of Revenues. Cost of revenues was $614.1 million for the three months ended March 31, 2025 compared to $562.1 million for the three months ended March 31, 2024. The increase was primarily driven by an increase in case volume and the performance of high acuity procedures as well as acquisitions completed during the twelve months ended March 31, 2025. As a percentage of revenues, cost of revenues was 79.1% and 78.4% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

General and Administrative Expenses. General and administrative expenses were $29.2 million and $36.8 million for the three months ended September 30, 2024 and 2023, respectively. As a percentage of revenues, general and administrative expenses were 3.8% and 5.5% for the three months ended September 30, 2024 and 2023, respectively.

Current wording

General and Administrative Expenses. General and administrative expenses were $36.0 million and $33.2 million for the three months ended March 31, 2025 and 2024, respectively. As a percentage of revenues, general and administrative expenses were 4.6% for the three months ended March 31, 2025 and 2024.

Previous wording

Depreciation and Amortization. Depreciation and amortization expenses were $50.2 million and $28.9 million for the three months ended September 30, 2024 and 2023, respectively. As a percentage of revenues, depreciation and amortization expenses were 6.5% and 4.3% for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Depreciation and Amortization. Depreciation and amortization expenses were $36.3 million and $33.7 million for the three months ended March 31, 2025 and 2024, respectively. As a percentage of revenues, depreciation and amortization expenses were 4.7% for the three months ended March 31, 2025 and 2024.

Previous wording

Transaction and Integration Costs. The Company incurred $29.4 million of transaction and integration costs for the three months ended September 30, 2024 compared to $12.8 million for the three months ended September 30, 2023. The costs for both periods primarily related to ongoing development initiatives and the integration of acquisitions.

Current wording

Transaction and Integration Costs. The Company incurred $24.7 million of transaction and integration costs for the three months ended March 31, 2025 compared to $17.4 million for the three months ended March 31, 2024. The costs for both periods primarily related to ongoing development initiatives and the integration of acquisitions. The increase was primarily driven by an increase in severance, IT implementation, and revenue cycle standardization costs.

Previous wording

Interest Expense, Net. Interest expense, net was $50.0 million for the three months ended September 30, 2024 compared to $49.8 million for the three months ended September 30, 2023. As a percentage of revenues, interest expense, net was 6.5% and 7.4% for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Interest Expense, Net. Interest expense, net was $62.2 million for the three months ended March 31, 2025 compared to $47.3 million for the three months ended March 31, 2024. As a percentage of revenues, interest expense, net was 8.0% and 6.6% for the three months ended March 31, 2025 and 2024, respectively. The increase was primarily driven by financing activities in 2024 related to the senior unsecured notes and increased borrowings on the Revolver.

Previous wording

Income Tax Expense. Income tax expense was $4.5 million and $3.1 million for the three months ended September 30, 2024 and 2023, respectively. The effective tax rate was 41.3% and 9.5% for the three months ended September 30, 2024 and 2023, respectively. See Note 1. "Organization and Summary of Accounting Policies" under the heading Income Taxes for additional information related to the Company's effective tax rates for the three months ended September 30, 2024 and September 30, 2023, including why these rates differed from the U.S. federal statutory rate of 21%.

Current wording

Income Tax Expense. Income tax expense was $0.0 million and $4.4 million for the three months ended March 31, 2025 and 2024, respectively. The effective tax rate was 0% and 15.3% for the three months ended March 31, 2025 and 2024, respectively. See Note 1. "Organization and Summary of Accounting Policies" under the heading Income Taxes for additional information related to the Company's effective tax rates for the three months ended March 31, 2025 and March 31, 2024, including why these rates differed from the U.S. federal statutory rate of 21%.

Previous wording

Net Income Attributable to Non-Controlling Interests. As a percentage of revenues, net income attributable to non-controlling interests was 4.9% and 5.1% for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Net Income Attributable to Non-Controlling Interests. As a percentage of revenues, net income attributable to non-controlling interests was 4.8% and 5.1% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

Cash and cash equivalents were $221.8 million at September 30, 2024 compared to $195.9 million at December 31, 2023.

Current wording

Cash and cash equivalents were $229.3 million at March 31, 2025 compared to $269.5 million at December 31, 2024.

Previous wording

The primary source of our operating cash flows is the collection of accounts receivable from private insurance companies, federal and state agencies (under the Medicare and Medicaid programs) and individuals. Our cash flows provided by operating activities was $188.7 million for the nine months ended September 30, 2024 compared to $231.2 million for the nine months ended September 30, 2023. The $42.5 million decrease was primarily driven by increased transaction-related costs, the timing of routine transactions involving working capital and the impact of Hurricane Helene on collections.

Current wording

The primary source of our operating cash flows is the collection of accounts receivable from private insurance companies, federal and state agencies (under the Medicare and Medicaid programs) and individuals. Our cash flows provided by operating activities was $6.0 million for the three months ended March 31, 2025 compared to $40.7 million for the three months ended March 31, 2024. The $34.7 million decrease was primarily driven by a decrease in net income and changes in other operating assets and liabilities.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 was $376.8 million compared to $167.5 million for the nine months ended September 30, 2023. The $209.3 million increase was primarily driven by an aggregate net increase of $193.9 million in payments for acquisitions (net of cash acquired) and purchases of equity method investments and a $24.3 million decrease in proceeds from sales of facilities.

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 was $76.4 million compared to $83.1 million for the three months ended March 31, 2024. The $6.7 million decrease was primarily driven by an aggregate net decrease of $8.8 million in payments for acquisitions (net of cash acquired) and purchases of equity method investments and a $3.3 million increase in proceeds from sales of facilities.

Previous wording

Net working capital was approximately $460.6 million at September 30, 2024 compared to $372.0 million at December 31, 2023.

Current wording

Net working capital was approximately $505.2 million at March 31, 2025 compared to $495.0 million at December 31, 2024.

Previous wording

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the nine months ended September 30, 2024 from those disclosed under “Material Cash Requirements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K.

Current wording

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the three months ended March 31, 2025 from those disclosed under “Material Cash Requirements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K.

Previous wording

Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with GAAP. The items excluded from this non-GAAP metric are significant components in understanding and evaluating our financial performance. We believe such adjustments are appropriate, as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance. Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used by our management to assess operating performance, make business decisions and allocate resources.

Current wording

GAAP metric are significant components in understanding and evaluating our financial performance. We believe such adjustments are appropriate, as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance. Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used by our management to assess operating performance, make business decisions and allocate resources.

Previous wording

The following table reconciles Adjusted EBITDA to income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited):

Current wording

The following table reconciles Adjusted EBITDA to (loss) income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited):

Previous wording

(2)This amount includes a litigation settlement loss of $0.5 million and $3.6 million for the three months ended September 30, 2024 and 2023, respectively. This amount also includes other litigation costs of $1.1 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively.

Current wording

(2)This amount includes a litigation settlement loss of $2.2 million and a litigation settlement gain of $1.8 million for the three months ended March 31, 2025 and 2024, respectively. This amount also includes other litigation costs of $0.5 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

(2)Represents impact of acquisitions as if each acquisition had occurred on October 1, 2023. Further this includes revenue and cost synergies from other business initiatives and de novo facilities and an adjustment for the effects of adopting the new lease accounting standard, as defined in the credit agreement governing the Credit Agreement, as amended.

Current wording

(1)Represents impact of acquisitions as if each acquisition had occurred on April 1, 2024. Further this includes revenue and cost synergies from other business initiatives and de novo facilities and an adjustment for the effects of adopting the new lease accounting standard, as defined in the credit agreement governing the Credit Agreement, as amended.