BRENTWOOD, Tenn., Feb. 26, 2024 (GLOBE NEWSWIRE) — Surgery Partners, Inc. (NASDAQ:SGRY) (“Surgery Partners” or the “Company”), a leading short-stay surgical facility owner and operator, today announced results for the fourth quarter and full year ended December 31, 2023.
Revenue increased 8.0% to $2.74 billion in the full-year 2023 and 4.0% to $735.4 million in the fourth quarter 2023, when compared to the comparable periods in 2022
Days adjusted same-facility revenues increased 11.3% in the full-year 2023 versus 2022
Days adjusted same-facility revenues increased 8.1% in the fourth quarter 2023 versus 2022
Net loss attributable to common stockholders was $11.9 million for the full-year 2023 and $1.0 million for the fourth quarter 2023
Adjusted EBITDA increased 15.2% to $438.1 million in the full-year 2023 versus 2022
Adjusted EBITDA increased 17.8% to $142.3 million in the fourth quarter 2023 versus 2022
Adjusted EBITDA margins were 16.0% in the full-year 2023 and 19.4% in the fourth quarter 2023
Revenue for 2024 expected to be greater than $3.0 billion and Adjusted EBITDA expected to be greater than $495 million
Wayne DeVeydt, Chairman of the Board of Surgery Partners, noted, “We are pleased to report another year of mid-teens growth with our 2023 Adjusted EBITDA exceeding $438 million, representing 15% growth over 2022. The strategic initiatives the Company implemented in 2023 will further catalyze our growth engine as we enter into 2024. We are poised to continue to capitalize on industry trends and remain optimistic about achieving sustainable mid-teens Adjusted EBITDA growth.”
Eric Evans, Chief Executive Officer, stated, “I am proud of the Company’s continued consistent and predictable growth story. Our long-term growth algorithm strategically positions us to deliver on our commitment of double-digit earnings growth. Supported by our same-facility revenue growth of greater than 11% in 2023, we are reporting top-line growth and margin expansion, consistent with our expectations, and reflecting the positive trajectory that we have experienced all year. This strong growth gives us significant momentum as we enter 2024.”
Dave Doherty, Chief Financial Officer, commented, “We are pleased to deliver these fourth quarter and full year results, which reflects our disciplined management approach, strong underlying business fundamentals and the benefits of our multi-year growth investments. With the execution of the December 2023 credit facility refinancing, we have effectively shifted any material debt maturities to the end of the decade while reducing interest costs. Based on new term loan definitions which both better reflect market practice and match assets and liabilities, the ratio of total net debt to EBITDA is now 3.5x. As we entered 2024, our liquidity position is near $900 million, which enhances our confidence in our ability to continue to fund accretive M&A. With the momentum of these results, we are reaffirming our 2024 Adjusted EBITDA guidance to be greater than $495 million and setting 2024 revenue guidance to be greater than $3.0 billion.”
Fourth Quarter 2023 Results
Revenue for the fourth quarter of 2023 increased 4.0% to $735.4 million from $707.1 million for the fourth quarter of 2022. Days adjusted same-facility revenues for the fourth quarter of 2023 increased 8.1% from the same period last year, with a 6.7% increase in revenue per case and a 1.4% increase in same-facility cases. For the fourth quarter of 2023, the Company’s Adjusted EBITDA was $142.3 million, compared to $120.8 million for the same period last year.
Full Year 2023 Results
Revenue for 2023 increased 8.0% to $2,743.3 million from $2,539.3 million in 2022. Days adjusted same-facility revenues for the year ended 2023 increased 11.3% from the prior year, with a 7.1% increase in revenue per case and a 3.9% increase in same-facility cases. For the full year 2023, the Company’s Adjusted EBITDA was $438.1 million, compared to $380.2 million in 2022.
Liquidity
Surgery Partners had cash and cash equivalents of $195.9 million and $694.3 million of borrowing capacity under its revolving credit facility at December 31, 2023. Cash flows from operating activities was $62.6 million for the fourth quarter 2023, compared to $7.2 million for the same period in 2022. Free Cash Flow, defined as operating cash flows less distributions to non-controlling interests and less maintenance-related capital expenditures, was $18.5 million for the fourth quarter of 2023.
Operating cash flows were $293.8 million for 2023, compared to $158.8 million for 2022. The increase in operating cash flows was driven primarily by reductions of $49.1 million of interest paid, net of interest income received, and $18.8 million of payments under the tax receivable agreement, operating cash flows in 2022 that did not repeat in the current year, including repayments of approximately $57.2 million of Medicare advanced payments provided through the CARES Act, partially offset by the receipt of stockholder litigation proceeds of $32.8 million, an increase in net income and the timing of routine transactions involving working capital and accrued payroll and benefits. Free Cash Flow was $109.9 million for full year 2023.
The Company’s ratio of total net debt to EBITDA, as calculated under the Company’s credit agreement, was 3.5x at the end of 2023.
2024 Outlook
The Company projects 2024 revenues to be greater than $3.0 billion, projects 2024 Adjusted EBITDA to be greater than $495 million.
Conference Call Information
Surgery Partners will hold a conference call today, February 26, 2024 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 13744429. The replay will be available until March 11, 2024.
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 33 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 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023. 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.
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in millions, except per share amounts, shares in thousands)
(Unaudited)
Three Months Ended December 31,
Year Ended December 31,
2023
2022
2023
2022
Revenues
$
735.4
$
707.1
$
2,743.3
$
2,539.3
Operating expenses:
Salaries and benefits
201.4
200.1
793.8
746.4
Supplies
195.2
191.4
745.0
709.7
Professional and medical fees
76.9
70.8
296.8
269.2
Lease expense
20.6
20.6
84.9
82.4
Other operating expenses
47.7
39.9
175.3
156.7
Cost of revenues
541.8
522.8
2,095.8
1,964.4
General and administrative expenses
20.9
28.7
120.9
102.2
Depreciation and amortization
31.1
29.6
118.1
114.8
Transaction and integration costs
24.4
19.7
61.7
47.5
Grant funds
—
(0.6
)
(1.1
)
(2.4
)
Net loss on disposals, consolidations and deconsolidations
6.9
7.9
14.4
11.1
Equity in earnings of unconsolidated affiliates
(4.8
)
(4.4
)
(14.2
)
(12.5
)
Litigation settlement
2.5
3.5
10.6
(29.3
)
Loss on debt extinguishment
15.5
14.9
15.5
14.9
Other income, net
(4.3
)
(9.2
)
(6.4
)
(16.6
)
634.0
612.9
2,415.3
2,194.1
Operating income
101.4
94.2
328.0
345.2
Interest expense, net
(48.7
)
(61.0
)
(193.0
)
(234.9
)
Income before income taxes
52.7
33.2
135.0
110.3
Income tax (expense) benefit
(6.0
)
(9.9
)
0.3
(23.3
)
Net income
46.7
23.3
135.3
87.0
Less: Net income attributable to non-controlling interests
(47.7
)
(46.7
)
(147.2
)
(141.6
)
Net loss attributable to Surgery Partners, Inc.
$
(1.0
)
$
(23.4
)
$
(11.9
)
$
(54.6
)
Net loss per share attributable to common stockholders
Basic
$
(0.01
)
$
(0.23
)
$
(0.09
)
$
(0.59
)
Diluted(1)
$
(0.01
)
$
(0.23
)
$
(0.09
)
$
(0.59
)
Weighted average common shares outstanding
Basic
125,774
101,888
125,613
91,952
Diluted(1)
125,774
101,888
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