Surgery Partners, Inc. Announces Third Quarter 2024 Results
SGRY 11.12.2024
About Gravity Analytica
- Revenues increased 14.3% to
$770.4 million compared to the prior year period- Same-facility revenues increased 4.2%
- Same-facility cases increased 3.7%
- Net loss attributable to
Surgery Partners, Inc. was$31.7 million - Adjusted EBITDA was
$128.6 million , representing 21.9% growth compared to the prior year period
- Adjusted EBITDA was
- Adjusted EBITDA margin was 16.7%, expanding 100 basis points from the prior year period
- Full year 2024 revenue and Adjusted EBITDA guidance reaffirmed at greater than
$3 .075 billion and greater than $508 million, respectively
ThirdQuarter2024Results
Revenues for the third quarter of 2024 increased 14.3% to
Year-to-Date2024Results
Revenues year-to-date 2024 increased 12.1% to
Liquidity
Year-to-date, operating cash flows were
The Company’s ratio of total net debt to EBITDA, as calculated under the Company’s credit agreement, was approximately 3.8x at the end of the third quarter of 2024.
2024 Outlook
The Company reaffirmed its outlook for 2024 revenues and Adjusted EBITDA to be greater than
Conference Call Information
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 atwww.surgerypartners.com. The replay will also be available on this same website for a limited time following the call.
To learn more about
About Surgery Partners
Headquartered in
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 or developed 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 or operating 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 on our business; and the risks and uncertainties identified and discussed from time to time in the Company’s reports filed with the
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,
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.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | 770.4 | $ | 674.1 | $ | 2,249.9 | $ | 2,007.9 | ||||||||
| Operating expenses: | ||||||||||||||||
| Salaries and benefits | 228.4 | 195.0 | 666.8 | 592.4 | ||||||||||||
| Supplies | 201.4 | 179.2 | 589.9 | 549.8 | ||||||||||||
| Professional and medical fees | 91.0 | 72.4 | 266.0 | 219.9 | ||||||||||||
| Lease expense | 23.9 | 21.1 | 67.5 | 64.3 | ||||||||||||
| Other operating expenses | 48.2 | 40.6 | 147.7 | 127.6 | ||||||||||||
| Cost of revenues | 592.9 | 508.3 | 1,737.9 | 1,554.0 | ||||||||||||
| General and administrative expenses | 29.2 | 36.8 | 102.7 | 100.0 | ||||||||||||
| Depreciation and amortization | 50.2 | 28.9 | 118.7 | 87.0 | ||||||||||||
| Transaction and integration costs | 29.4 | 12.8 | 66.1 | 37.3 | ||||||||||||
| Net loss on disposals, consolidations and deconsolidations | 14.7 | 5.8 | 21.5 | 7.5 | ||||||||||||
| Equity in earnings of unconsolidated affiliates | (5.2 | ) | (3.5 | ) | (12.3 | ) | (9.4 | ) | ||||||||
| Litigation settlement | 0.5 | 3.6 | (0.8 | ) | 8.1 | |||||||||||
| Loss on debt extinguishment | — | — | 5.1 | — | ||||||||||||
| Other income, net | (2.2 | ) | (1.2 | ) | (10.7 | ) | (3.2 | ) | ||||||||
| 709.5 | 591.5 | 2,028.2 | 1,781.3 | |||||||||||||
| Operating income | 60.9 | 82.6 | 221.7 | 226.6 | ||||||||||||
| Interest expense, net | (50.0 | ) | (49.8 | ) | (148.8 | ) | (144.3 | ) | ||||||||
| Income before income taxes | 10.9 | 32.8 | 72.9 | 82.3 | ||||||||||||
| Income tax (expense) benefit | (4.5 | ) | (3.1 | ) | (13.8 | ) | 6.3 | |||||||||
| Net income | 6.4 | 29.7 | 59.1 | 88.6 | ||||||||||||
| Less: Net income attributable to non-controlling interests | (38.1 | ) | (34.6 | ) | (118.7 | ) | (99.5 | ) | ||||||||
| Net loss attributable to | $ | (31.7 | ) | $ | (4.9 | ) | $ | (59.6 | ) | $ | (10.9 | ) | ||||
| Net loss per share attributable to common stockholders | ||||||||||||||||
| Basic | $ | (0.25 | ) | $ | (0.04 | ) | $ | (0.47 | ) | $ | (0.09 | ) | ||||
| Diluted(1) | $ | (0.25 | ) | $ | (0.04 | ) | $ | (0.47 | ) | $ | (0.09 | ) | ||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 126,172 | 125,747 | 126,093 | 125,559 | ||||||||||||
| Diluted(1) | 126,172 | 125,747 | 126,093 | 125,559 | ||||||||||||
(1)The impact of potentially dilutive securities for all periods was not considered because the effect would be anti-dilutive.
| Balance Sheet Data (at period end): | ||||||||
| Cash and cash equivalents | $ | 221.8 | $ | 195.9 | ||||
| Total current assets | 1,035.8 | 895.0 | ||||||
| Total assets | 7,534.4 | 6,876.7 | ||||||
| Current maturities of long-term debt | 97.3 | 73.3 | ||||||
| Total current liabilities | 575.2 | 523.0 | ||||||
| Long-term debt, less current maturities | 3,094.2 | 2,701.8 | ||||||
| Total liabilities | 3,986.1 | 3,514.8 | ||||||
| Non-controlling interests—redeemable | 436.4 | 327.4 | ||||||
| 1,896.5 | 1,987.2 | |||||||
| Non-controlling interests—non-redeemable | 1,215.4 | 1,047.3 | ||||||
| Total stockholders' equity | 3,111.9 | 3,034.5 | ||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Cash Flow Data: | ||||||||||||||||
| Net cash provided by (used in): | ||||||||||||||||
| Operating activities | $ | 65.2 | $ | 104.6 | $ | 188.7 | $ | 231.2 | ||||||||
| Investing activities | (49.6 | ) | (25.6 | ) | (376.8 | ) | (167.5 | ) | ||||||||
| Purchases of property and equipment | (20.2 | ) | (18.9 | ) | (68.1 | ) | (69.0 | ) | ||||||||
| Payments for acquisitions, net of cash acquired | (26.6 | ) | (5.3 | ) | (291.2 | ) | (48.8 | ) | ||||||||
| Purchases of equity investments | — | (1.8 | ) | (1.7 | ) | (50.2 | ) | |||||||||
| Financing activities | (7.3 | ) | (20.4 | ) | 214.0 | (110.6 | ) | |||||||||
| Distributions to non-controlling interest holders | (41.7 | ) | (34.1 | ) | (122.4 | ) | (111.0 | ) | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Other Data: | ||||||||||||||||
| Number of surgical facilities as of the end of period | 166 | 152 | 166 | 152 | ||||||||||||
| Number of consolidated surgical facilities as of the end of period | 123 | 119 | 123 | 119 | ||||||||||||
| Cases | 162,635 | 146,514 | 482,547 | 452,653 | ||||||||||||
| Revenue per case | $ | 4,737 | $ | 4,601 | $ | 4,663 | $ | 4,436 | ||||||||
| Adjusted EBITDA(1) | $ | 128.6 | $ | 105.5 | $ | 344.4 | $ | 295.8 | ||||||||
| Adjusted EBITDA margin(2) | 16.7 | % | 15.7 | % | 15.3 | % | 14.7 | % | ||||||||
| Adjusted net income per share attributable to common stockholders - Basic(1) | $ | 0.19 | $ | 0.19 | $ | 0.50 | $ | 0.56 | ||||||||
| Adjusted net income per share attributable to common stockholders - Diluted(1) | $ | 0.19 | $ | 0.19 | $ | 0.49 | $ | 0.55 | ||||||||
(1)A reconciliation of these non-GAAP financial measures appears below.
(2)Defined as Adjusted EBITDA as a % of Revenues.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Same-facility Information(1): | ||||||||||||||||
| Cases | 176,650 | 167,646 | 515,642 | 496,135 | ||||||||||||
| Case growth | 5.4 | % | N/A | 3.9 | % | N/A | ||||||||||
| Revenue per case | $ | 4,717 | $ | 4,695 | $ | 4,463 | $ | 4,244 | ||||||||
| Revenue per case growth | 0.5 | % | N/A | 5.2 | % | N/A | ||||||||||
| Number of work days in the period | 64 | 63 | 192 | 191 | ||||||||||||
| Case growth (days adjusted) | 3.7 | % | N/A | 3.4 | % | N/A | ||||||||||
| Revenue growth (days adjusted) | 4.2 | % | N/A | 8.7 | % | N/A | ||||||||||
(1)Same-facility information includes cases and revenues from our consolidated and non-consolidated surgical facilities (excluding facilities acquired in new markets or divested during the current and prior periods).
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Segment Revenues: | ||||||||||||||||
| Surgical Facility Services | $ | 735.4 | $ | 657.3 | $ | 2,158.5 | $ | 1,956.5 | ||||||||
| Ancillary Services | 35.0 | 16.8 | 91.4 | 51.4 | ||||||||||||
| Total revenues | $ | 770.4 | $ | 674.1 | $ | 2,249.9 | $ | 2,007.9 | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Surgical Facility Services | $ | 149.6 | $ | 138.6 | $ | 419.3 | $ | 384.1 | ||||||||
| Ancillary Services | 0.7 | (1.2 | ) | (0.6 | ) | (2.7 | ) | |||||||||
| All other | (21.7 | ) | (31.9 | ) | (74.3 | ) | (85.6 | ) | ||||||||
| Total Adjusted EBITDA | $ | 128.6 | $ | 105.5 | $ | 344.4 | $ | 295.8 | ||||||||
The following table reconciles Adjusted EBITDA to income before income taxes in the reported consolidated financial information, the most directly comparable GAAP financial measure:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Income before income taxes | $ | 10.9 | $ | 32.8 | $ | 72.9 | $ | 82.3 | ||||||||
| Net income attributable to non-controlling interests | (38.1 | ) | (34.6 | ) | (118.7 | ) | (99.5 | ) | ||||||||
| Interest expense, net | 50.0 | 49.8 | 148.8 | 144.3 | ||||||||||||
| Depreciation and amortization | 50.2 | 28.9 | 118.7 | 87.0 | ||||||||||||
| Equity-based compensation expense | 7.1 | 4.4 | 27.1 | 13.2 | ||||||||||||
| Transaction, integration and acquisition costs(1) | 31.5 | 13.0 | 71.2 | 38.8 | ||||||||||||
| Net loss on disposals, consolidations and deconsolidations | 14.7 | 5.8 | 21.5 | 7.5 | ||||||||||||
| Litigation settlements and regulatory change impact(2) | 1.6 | 4.2 | 1.5 | 13.9 | ||||||||||||
| Loss on debt extinguishment | — | — | 5.1 | — | ||||||||||||
| Undesignated derivative activity | — | — | — | 0.6 | ||||||||||||
| Other(3) | 0.7 | 1.2 | (3.7 | ) | 7.7 | |||||||||||
| Adjusted EBITDA(4) | $ | 128.6 | $ | 105.5 | $ | 344.4 | $ | 295.8 | ||||||||
(1)This amount includes transaction and integration costs of
This amount includes transaction and integration costs of
(2)This amount includes a litigation settlement loss of
This amount includes a litigation settlements gain of
(3)For the three months ended
For the nine months ended
(4)We use Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used by management to assess operating performance, make business decisions and allocate resources. Non-controlling interests represent the interests of third parties, such as physicians, and in some cases, healthcare systems that own an interest in surgical facilities that we consolidate for financial reporting purposes. We believe that it is helpful to investors to present Adjusted EBITDA as defined above because it excludes the portion of net income attributable to these third-party interests and clarifies for investors our portion of Adjusted EBITDA generated by our surgical facilities and other operations. 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 Adjusted EBITDA 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.
The following table provides supplemental information for Adjusted EBITDA related to unconsolidated affiliates:
| Three Months Ended | Nine Months Ended | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Adjusted EBITDA related to unconsolidated affiliates: | |||||||||||||||
| Management fee revenues(1)(2) | $ | 6.8 | $ | 6.2 | $ | 20.0 | $ | 16.4 | |||||||
| Equity in earnings of unconsolidated affiliates(2) | 5.2 | 3.5 | 12.3 | 9.4 | |||||||||||
| Plus: | |||||||||||||||
| Start-up costs related to unconsolidated de novo surgical facilities(3) | 0.9 | 0.5 | 2.9 | 1.3 | |||||||||||
| Adjusted EBITDA related to unconsolidated affiliates | $ | 12.9 | $ | 10.2 | $ | 35.2 | $ | 27.1 | |||||||
(1)Includes management and administrative service fees derived from the non-consolidated facilities that the Company accounts for under the equity method and management of surgical facilities in which it does not own an interest. Management fee revenues are included in Revenues on the Consolidated Statements of Operations.
(2)Included as a component of income before income taxes in the Adjusted EBITDA reconciliation table above.
(3)Start-up costs related to de novo surgical facilities are included in Transaction, integration and acquisition costs in the Adjusted EBITDA reconciliation table above.
From time to time, the Company incurs certain non-recurring gains or losses that are normally non-operational in nature and management does not consider relevant in assessing its ongoing operating performance. When significant, Surgery Partners’ management and the Company's Board of Directors typically exclude these gains or losses when evaluating the Company’s operating performance and in certain instances when evaluating performance for incentive compensation purposes. Additionally, management believes that certain investors and equity analysts exclude these or similar items when evaluating the Company’s current or future operating performance and in making informed investment decisions regarding the Company. Accordingly, the Company provides adjusted net income attributable to common stockholders and adjusted net income per share attributable to common stockholders as supplements to the comparable GAAP financial measures. Adjusted net income attributable to common stockholders and adjusted net income per share attributable to common stockholders should not be considered measures of financial performance under GAAP, and the items excluded from such measures are significant components in understanding and assessing financial performance. These measures should not be considered in isolation or as an alternative to the comparable GAAP measures as presented in the consolidated financial statements.
The following table reconciles net income as reflected in the consolidated statements of operations to adjusted net income attributable to common stockholders used to calculate adjusted net income per share attributable to common stockholders:
| Three Months Ended | Nine Months Ended | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Consolidated Statements of Operations Data: | |||||||||||||||
| Net income | $ | 6.4 | $ | 29.7 | $ | 59.1 | $ | 88.6 | |||||||
| Plus (minus): | |||||||||||||||
| Net income attributable to non-controlling interests | (38.1 | ) | (34.6 | ) | (118.7 | ) | (99.5 | ) | |||||||
| Equity-based compensation expense | 7.1 | 4.4 | 27.1 | 13.2 | |||||||||||
| Transaction, integration and acquisition costs | 31.5 | 13.0 | 71.2 | 38.8 | |||||||||||
| Net loss on disposals, consolidations and deconsolidations | 14.7 | 5.8 | 21.5 | 7.5 | |||||||||||
| Litigation settlements and regulatory change impact | 1.6 | 4.2 | 1.5 | 13.9 | |||||||||||
| Loss on debt extinguishment | — | — | 5.1 | — | |||||||||||
| Other | 0.7 | 1.2 | (3.7 | ) | 7.7 | ||||||||||
| Adjusted net income attributable to common stockholders | $ | 23.9 | $ | 23.7 | $ | 63.1 | $ | 70.2 | |||||||
| Adjusted net income per share attributable to common stockholders | |||||||||||||||
| Basic | $ | 0.19 | $ | 0.19 | $ | 0.50 | $ | 0.56 | |||||||
| Diluted | $ | 0.19 | $ | 0.19 | $ | 0.49 | $ | 0.55 | |||||||
| Weighted average common shares outstanding | |||||||||||||||
| Basic | 126,172 | 125,747 | 126,093 | 125,559 | |||||||||||
| Diluted | 127,640 | 127,376 | 127,521 | 127,173 | |||||||||||
Contact
Surgery Partners Investor Relations(615) 234-8940IR@surgerypartners.com
Source: Surgery Partners, Inc.