BRENTWOOD, Tenn., Aug. 01, 2023 (GLOBE NEWSWIRE) -- Surgery Partners, Inc. (SGRY, Financial) ("Surgery Partners" or the "Company"), a leading provider of surgical services, today announced financial results for the second quarter ended June 30, 2023.
- Revenues were $667.6 million representing 8.5% growth and are inclusive of an $8 million cyber event headwind
- Same-facility revenues increased 8.3% on an unadjusted basis and approximately 10% adjusting for the cyber event
- Non-consolidated minority interest revenue increased by over 30%
- Net income attributable to Surgery Partners was $18.9 million
- Adjusted EBITDA was $100.2 million, representing 16.4% growth
- Adjusted EBITDA margin improved by over 100 basis points year-over-year to 15.0%
- Combined, consolidated and unconsolidated surgical case volume grew 5%
- Full year Adjusted EBITDA guidance raised to greater than $435 million, revenue reaffirmed at greater than $2.75 billion, inclusive of the cyber event, and free cash flow reaffirmed at greater than $140 million.
Wayne DeVeydt, Executive Chairman of the Board of Surgery Partners, noted, “Revenue and Adjusted EBITDA both exceeded our expectations for the quarter, inclusive of the cyber event headwind we experienced. We are extremely pleased with the momentum we continue to see in all pillars of our growth algorithm with same facility revenue, margin expansion and capital deployment all performing at levels that support raising our full year adjusted EBITDA outlook to greater than $435 million.”
Eric Evans, Chief Executive Officer, stated, “The company continued its consistent growth and expense management execution in Q2. We are also pleased to report significant progress in our de novo investments with over 15 facilities expected to open in the next 18 months. These investments, coupled with our robust growth in high acuity procedures and the addition of three unconsolidated minority interest partnerships acquired in connection with our new health system partnership with Methodist Health System in Dallas, Texas, give us further confidence in our long-term mid-teen growth targets.”
Dave Doherty, Chief Financial Officer, commented, “We deployed approximately $60 million in capital in the quarter with the majority used to purchase minority interest in high growth markets. Our non-consolidated investments have driven over 30% revenue growth on a year-over-year basis in unconsolidated revenue, and we expect these to continue to ramp up over the next 18 months.”
Second Quarter 2023 Results
Revenue for the second quarter of 2023 increased 8.5% to $667.6 million from $615.4 million for the second quarter of 2022. Days adjusted same-facility revenues for the second quarter of 2023 increased 8.3% from the same period last year, with an increase in revenue per case of 5.8% and an increase in same-facility cases of 2.3%. For the second quarter of 2023, the Company’s net income (loss) attributable to Surgery Partners, Inc. and Adjusted EBITDA was $18.9 million and $100.2 million, respectively, compared to ($18.4) million and $86.1 million, respectively, for the same period last year.
Year-to-Date 2023 Results
Revenue year-to-date 2023 increased 10.1% to $1,333.8 million from $1,211.6 million for the 2022 period. Days adjusted same-facility revenues for year-to-date 2023 increased 9.3% from the same period last year, with an increase in revenue per case of 5.2% and an increase in same-facility cases of 3.9%. For year-to-date 2023, the Company’s net loss attributable to Surgery Partners, Inc. and Adjusted EBITDA was $6.0 million and $190.3 million, respectively, compared to $6.2 million and $163.2 million for the same period last year. For both year-to-date 2023 and 2022, Adjusted EBITDA benefited from recognition of $1.1 million of CARES Act grants. Excluding CARES Act grants for year-to-date 2023 and 2022, Adjusted EBITDA would have been $189.2 million and $162.1 million, respectively.
Liquidity
Surgery Partners had cash and cash equivalents of $177.4 million, and $545.9 million of borrowing capacity under its revolving credit facility, at June 30, 2023. Cash flows from operating activities was $52.1 million in the second quarter of 2023, compared to $42.1 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 $7.7 million for the second quarter of 2023.
Year-to-date, operating cash flows were $126.6 million compared to $121.9 million in the prior year period. Free Cash Flow, defined as operating cash flows less distributions to non-controlling interests and less maintenance-related capital expenditures, was $28.2 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 4.2x at the end of the second quarter of 2023.
2023 Outlook
The Company raises projected 2023 Adjusted EBITDA to be greater than $435 million.
Conference Call Information
Surgery Partners will hold a conference call today, August 1, 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 13739956. The replay will be available until August 15, 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 32 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; 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 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. Selected Consolidated Financial Data (Dollars in millions, except per share amounts, shares in thousands) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues | $ | 667.6 | $ | 615.4 | $ | 1,333.8 | $ | 1,211.6 | |||||||
| Operating expenses: | |||||||||||||||
| Salaries and benefits | 195.2 | 181.9 | 397.4 | 360.8 | |||||||||||
| Supplies | 182.2 | 173.5 | 370.6 | 345.1 | |||||||||||
| Professional and medical fees | 72.9 | 66.7 | 147.5 | 130.3 | |||||||||||
| Lease expense | 21.8 | 20.2 | 43.2 | 40.2 | |||||||||||
| Other operating expenses | 41.4 | 38.5 | 87.0 | 75.8 | |||||||||||
| Cost of revenues | 513.5 | 480.8 | 1,045.7 | 952.2 | |||||||||||
| General and administrative expenses | 31.2 | 26.1 | 63.2 | 55.6 | |||||||||||
| Depreciation and amortization | 24.4 | 28.0 | 58.1 | 55.4 | |||||||||||
| Transaction and integration costs | 12.0 | 8.2 | 24.5 | 15.3 | |||||||||||
| Grant funds | — | (0.1 | ) | (1.1 | ) | (1.3 | ) | ||||||||
| Net (gain) loss on disposals, consolidations and deconsolidations | (8.8 | ) | 1.1 | 1.7 | 1.0 | ||||||||||
| Equity in earnings of unconsolidated affiliates | (2.6 | ) | (2.6 | ) | (5.9 | ) | (5.7 | ) | |||||||
| Litigation settlements | 1.5 | — | 4.5 | (32.8 | ) | ||||||||||
| Other income, net | (1.2 | ) | (2.6 | ) | (0.9 | ) | (5.0 | ) | |||||||
| 570.0 | 538.9 | 1,189.8 | 1,034.7 | ||||||||||||
| Operating income | 97.6 | 76.5 | 144.0 | 176.9 | |||||||||||
| Interest expense, net | (47.7 | ) | (56.9 | ) | (94.5 | ) | (113.2 | ) | |||||||
| Income before income taxes | 49.9 | 19.6 | 49.5 | 63.7 | |||||||||||
| Income tax benefit (expense) | 7.8 | (4.3 | ) | 9.4 | (5.6 | ) | |||||||||
| Net income | 57.7 | 15.3 | 58.9 | 58.1 | |||||||||||
| Less: Net income attributable to non-controlling interests | (38.8 | ) | (33.7 | ) | (64.9 | ) | (64.3 | ) | |||||||
| Net income (loss) attributable to Surgery Partners, Inc. | $ | 18.9 | $ | (18.4 | ) | $ | (6.0 | ) | $ | (6.2 | ) | ||||
| Net income (loss) per share attributable to common stockholders | |||||||||||||||
| Basic | $ | 0.15 | $ | (0.21 | ) | $ | (0.05 | ) | $ | (0.07 | ) | ||||
| Diluted (1) | $ | 0.15 | $ | (0.21 | ) | $ | (0.05 | ) | $ | (0.07 | ) | ||||
| Weighted average common shares outstanding | |||||||||||||||
| Basic | 125,718 | 88,900 | 125,463 | 88,450 | |||||||||||
| Diluted (1) | 127,370 | 88,900 | 125,463 | 88,450 | |||||||||||
| (1) The impact of potentially dilutive securities for the three months ended June 30, 2022 and the six months ended June 30, 2023 and 2022, was not considered because the effect would be anti-dilutive. | |||||||||||||||
| SURGERY PARTNERS, INC. Selected Financial and Operating Data (Dollars in millions, except per case and per share amounts) | |||||
| June 30, 2023 | December 31, 2022 | ||||
| Balance Sheet Data: | |||||
| Cash and cash equivalents | $ | 177.4 | $ | 282.9 | |
| Total current assets | 810.2 | 921.0 | |||
| Total assets | 6,620.6 | 6,682.1 | |||
| Current maturities of long-term debt | 64.7 | 62.8 | |||
| Total current liabilities | 458.6 | 493.4 | |||
| Long-term debt, less current maturities | 2,504.8 | 2,559.0 | |||
| Total liabilities | 3,309.7 | 3,399.2 | |||
| Non-controlling interests—redeemable | 328.1 | 342.0 | |||
| Total Surgery Partners, Inc. stockholders' equity | 2,018.2 | 1,998.2 | |||
| Non-controlling interests—non-redeemable | 964.6 | 942.7 | |||
| Total stockholders' equity | 2,982.8 | 2,940.9 | |||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Cash Flow Data: | |||||||||||||||
