Surgery Partners, Inc. Q1 FY2025 earnings call

• Organic growth: Performed over 160,000 surgical cases in Q1 2025 vs. 153,000 in 2024, growth across core specialties with higher GI and orthopedic case volumes. Added nearly 150 new physicians, with 20 de novo facilities opened since 2022 and 10 under construction.
• Margin expansion: Slight margin pressure in Q1 due to business mix, but confidence in annual margin expansion based on growth, procurement, efficiency, and synergy from acquisitions.
• M&A: Robust pipeline of partnership opportunities, with $55 million deployed in 2025 to add 5 facilities, and sufficient liquidity to fund growth without tapping capital markets.
• Regulatory environment: Low exposure to tariff-related price increases via HealthTrust partnership, minimal risk from Medicaid/Medicare reimbursement changes (less than 5% revenue exposure).

Surgery Partners reported first quarter net revenue of $776 million and adjusted EBITDA of $103.9 million. Compared to the prior year's first quarter, adjusted EBITDA grew nearly 7% and net revenue grew 8%. Organic growth included same-facility revenue growth of over 5%, with 6.5% surgical case growth offset by a ~1% decline in rates, driven by growth in lower acuity specialties and recent de novos. Margin expansion was expected to improve throughout the year due to growth, procurement, efficiency initiatives, and synergy from acquired facilities. M&A activity in 2025 included deploying $55 million to add 5 surgical facilities at an effective multiple under 8x adjusted EBITDA.

• Reaffirmed full-year 2025 revenue guidance in range of $3.3 billion to $3.45 billion and adjusted EBITDA guidance in range of $555 million to $565 million.
• Expect full year 2025 same-facility growth at or above 6% target, with more balanced growth between volume and rate as year progresses.
• Confidence in margin expansion due to ongoing supply chain, revenue cycle improvements, and integration benefits from acquisitions/de novos.

• Tariff exposure: While 70% of spend goes through HealthTrust with visibility, remaining spend is under contract, but close monitoring continues.
• Regulatory changes: Minimal near-term risk from Medicaid/Medicare changes, but closely monitoring ongoing developments.

Q: How are current utilization trends and sustainability of same-store revenue per procedure?

A: First quarter same-store revenue growth in line with expectations, driven by strong de novos and MSK growth; mix and comp impact rate, but same-facility metric expected to end year above 6% target with balanced volume/rate.

Q: Thoughts on commercial rates and negotiations?

A: Commercial payers constructive, no change in payer mix; good visibility on contracts, rev cycle adjustments showing positive trends in denials and days sales outstanding.

Q: Impact of weather on volumes?

A: Weather impact immaterial in grand scheme, had no major effect on strong case growth.

Q: Progress on cardio procedures?

A: Cardio procedures have slower ramp but facilities adding such procedures, long-term growth expected with significant savings per case.