Surgery Partners, Inc. Announces Third Quarter 2023 Results

BRENTWOOD, Tenn., Nov. 07, 2023 (GLOBE NEWSWIRE) -- Surgery Partners, Inc. (NASDAQ:SGRY) ("Surgery Partners" or the "Company"), a leading operator of surgical facilities, today announced financial results for the third quarter ended September 30, 2023.

• Revenues were $674.1 million representing 8.6% growth
  
  • Days Adjusted Same-facility revenues increased 14.2%

• Net loss attributable to Surgery Partners was $4.9 million
  
  • Adjusted EBITDA was $105.5 million, representing 9.7% growth
  • Adjusted EBITDA margin improved year-over-year to 15.7%

• Equity earnings in unconsolidated affiliates increased 45.8% to $3.5 million
  
  • Revenues from facilities not consolidated increased by 71.2% to $159.6 million
  • Adjusted EBITDA contribution from unconsolidated affiliates was $10.2 million, 29.1% higher than 2022

• Full year Adjusted EBITDA guidance raised to a range of $436 million to $440 million with revenue of approximately $2.75 billion

"We are pleased to report another quarter of double-digit same facility growth across our portfolio, driven by the consistent execution of our operating model, which resulted in revenue and Adjusted EBITDA that exceeded our expectations," said Wayne DeVeydt, Executive Chairman of Surgery Partners.

Eric Evans, Chief Executive Officer, noted, "Surgical case volume, particularly in higher acuity and strategically important growth areas, remained strong this quarter, unaffected by any material external events. We continue to benefit from the migration of surgical cases to the optimal site of care, a trend that benefits all constituents of the health care system. We continue to invest in these targeted growth areas through physician recruitment, business development and de novo buildouts."

Dave Doherty, Chief Financial Officer, commented "Our third quarter Free Cash Flow generation accelerated to $63 million, bringing our year-to-date generation to $91 million, enhancing the company's liquidity profile. We ended the quarter with $236 million of consolidated cash and an untapped revolver capacity of $545 million, positioning us well in this macro-economic environment."

Third Quarter 2023 Results

Revenues for the third quarter of 2023 increased 8.6% to $674.1 million from $620.6 million for the third quarter of 2022. Days adjusted same-facility revenues for the third quarter of 2023 increased 14.2% from the same period last year, with an increase in revenue per case of 11.0% and an increase in days adjusted same-facility cases of 2.9%. For the third quarter of 2023, the Company's net loss attributable to Surgery Partners, Inc. and Adjusted EBITDA was $4.9 million and $105.5 million, respectively, compared to $25.0 million and $96.2 million, respectively, for the same period last year.

Year-to-Date 2023 Results

Revenues year-to-date 2023 increased 9.6% to $2,007.9 million from $1,832.2 million for the 2022 period. Days adjusted same-facility revenues for year-to-date 2023 increased 10.6% from the same period last year, with an increase in revenue per case of 6.9% and an increase in days adjusted same-facility cases of 3.5%. For year-to-date 2023, the Company's net loss attributable to Surgery Partners, Inc. and Adjusted EBITDA was $10.9 million and $295.8 million, respectively, compared to $31.2 million and $259.4 million, respectively, for the same period last year. For year-to-date 2023 and 2022, Adjusted EBITDA benefited from the recognition of $1.1 million and $1.4 million, respectively, of CARES Act grants. Excluding CARES Act grants for year-to-date 2023 and 2022, Adjusted EBITDA would have been $294.7 million and $258.0 million, respectively.

Liquidity

Surgery Partners had cash and cash equivalents of $236.0 million, and $544.9 million of borrowing capacity under its revolving credit facility, at September 30, 2023. Cash flows from operating activities was $104.6 million in the third quarter of 2023, compared to $29.7 million in the prior year quarter. Free Cash Flow, defined as operating cash flows less distributions to non-controlling interests and less maintenance-related capital expenditures, was $63.2 million for the third quarter of 2023.

Year-to-date, operating cash flows were $231.2 million compared to $151.6 million in the prior year period. Free Cash Flow was $91.4 million for year-to-date 2023.

The Company's ratio of total net debt to EBITDA, as calculated under the Company's credit agreement, was approximately 4.1x at the end of the third quarter of 2023.

2023 Outlook

The Company raised projected 2023 Adjusted EBITDA to a range of $436 million to $440 million and anticipates revenue at approximately $2.75 billion.

Conference Call Information

Surgery Partners will hold a conference call today, November 7, 2023, at 8:30 a.m. (Eastern Time). The conference call can be accessed live over the phone by dialing 1-877-451-6152, or for international callers, 1-201-389-0879. A replay will be available three hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the live call and the replay is 13741353. The replay will be available until November 21, 2023.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investor Relations section of the Company's website at www.surgerypartners.com. The replay will also be available on this same website for a limited time following the call.

To learn more about Surgery Partners, please visit the Company's website at www.surgerypartners.com. Surgery Partners uses its website as a channel of distribution for material Company information. Financial and other material information regarding Surgery Partners is routinely posted on the Company's website and is readily accessible.

About Surgery Partners

Headquartered in Brentwood, Tennessee, Surgery Partners is a leading healthcare services company with a differentiated outpatient delivery model focused on providing high-quality, cost-effective solutions for surgical and related ancillary care in support of both patients and physicians. Founded in 2004, Surgery Partners is one of the largest and fastest growing surgical services businesses in the country, with more than 180 locations in 31 states, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices and urgent care facilities. For additional information, visit www.surgerypartners.com.

Forward-Looking Statements

This press release contains forward-looking statements, including those regarding growth, our anticipated operating results for future periods and other similar statements. These statements can be identified by the use of words such as "believes," "anticipates," "expects," "intends," "plans," "continues," "estimates," "predicts," "projects," "forecasts," "may," "could," and similar expressions. All forward-looking statements are based on current expectations and beliefs as of the date of this release and are subject to risks, uncertainties and other factors that may cause actual results to differ materially from the expectations discussed in, or implied by, the forward-looking statements. Many of these factors are beyond our ability to control or predict including, without limitation, reductions in payments from government health care programs and private insurance payors, such as health maintenance organizations, preferred provider organizations, and other managed care organizations and employers; our ability to contract with private insurance payors; changes in our payor mix or surgical case mix; failure to maintain or develop relationships with physicians on beneficial or favorable terms, or at all; the impact of payor controls designed to reduce the number of surgical procedures; our efforts to integrate operations of acquired businesses and surgical facilities, attract new physician partners, or acquire additional surgical facilities; supply chain issues, including shortages or quality control issues with surgery-related products, equipment and medical supplies; competition for physicians, nurses, strategic relationships, acquisitions and managed care contracts; our ability to attract and retain qualified health care professionals; our ability to enforce non-compete restrictions against our physicians; our ability to manage material liabilities whether known or unknown incurred as a result of acquiring surgical facilities; the impact of future legislation and other health care regulatory reform actions, and the effect of that legislation and other regulatory actions on our business; our ability to comply with current health care laws and regulations; the outcome of legal and regulatory proceedings that have been or may be brought against us; the impact of cybersecurity attacks or intrusions, changes in the regulatory, economic and other conditions of the states where our surgical facilities are located; our indebtedness; the social and economic impact of a pandemic, epidemic or outbreak of a contagious disease, such as COVID-19, on our business; and the risks and uncertainties identified and discussed from time to time in the Company's reports filed with the SEC, including in Item 1A under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Except as required by law, the Company undertakes no obligation to revise or update publicly any forward-looking statements to reflect events or circumstances after the date of this report, or to reflect the occurrence of unanticipated events or circumstances.

Use of Non-GAAP Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles in the United States ("GAAP") provided throughout this press release, Surgery Partners has presented the following non-GAAP financial measures: Adjusted net income (loss) attributable to common stockholders, Adjusted net income (loss) per share attributable to common stockholders, Adjusted EBITDA, Adjusted EBITDA excluding grant funds, Adjusted EBITDA related to unconsolidated affiliates, and Free Cash Flow, which exclude various items detailed in the "Reconciliation of Non-GAAP Financial Measures" below.

These non-GAAP financial measures are not intended to replace financial performance measures determined in accordance with GAAP. Rather, they are presented as supplemental measures of the Company's performance that management believes may enhance the evaluation of the Company's ongoing operating results. These non-GAAP financial measures are not presented in accordance with GAAP, and the Company's computation of these non-GAAP financial measures may vary from similar measures used by other companies. These measures have limitations as an analytical tool and should not be considered in isolation or as a substitute or alternative to revenue, net income or loss, operating income or loss, cash flows from operating activities, total indebtedness or any other measures of operating performance, liquidity or indebtedness derived in accordance with GAAP.

SURGERY PARTNERS, INC.
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