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Yahoo
5 days ago
- Business
- Yahoo
Eric Evans, Ph.D., Appointed Chair of AFFOA's Board of Directors
The non-profit, Manufacturing USA Institute, focused on revitalizing America's textiles industry through advanced technologies and manufacturing innovation, welcomes a new Chair of the Board at a critical time in US manufacturing. CAMBRIDGE, Mass., June 17, 2025 /PRNewswire/ -- Advanced Functional Fabrics of America (AFFOA) is pleased to announce that Dr. Eric Evans has been appointed as the new Chair of the AFFOA Board of Directors. Dr. Evans brings a wealth of experience and knowledge in defense technology and innovation to AFFOA, positioning the organization for continued leadership in the field of advanced textiles. Dr. Evans has a distinguished career spanning over three decades, where he has been at the forefront of research and development for new defense systems and technology. Evans served as the Director of MIT Lincoln Laboratory for 18 years from 2006 to 2024, where he led significant advances across many national security mission areas, making him a natural fit for the challenges and opportunities that lie ahead for AFFOA. He is now a Professor of Practice and Senior Fellow at MIT campus. "We are honored to welcome Dr. Evans as our new Chair," said Dr. Sasha Stolyarov, CEO of AFFOA. "His extensive expertise in defense innovation and his commitment to fostering collaboration between academia, industry, and government will be invaluable as we continue to push the boundaries of what is possible in functional fabrics technology and manufacturing." As Chair of AFFOA, Dr. Evans will help lead the organization in its mission to accelerate the development and commercialization of advanced textile technologies that integrate electronics, sensors, and other advanced functionalities. Under his guidance, AFFOA aims to enhance the capabilities of the U.S. workforce and drive economic growth through innovation in textile technology and advanced manufacturing processes. "I am honored to take on this role at such a pivotal time for AFFOA," said Dr. Evans. "I look forward to working with the very talented team at AFFOA to create new textile and technology capabilities for both defense and civilian applications." Dr. Evans officially assumed his position as Chair of AFFOA's Board of Directors on May 1, 2025. The organization is excited about the direction and vision he will bring to its initiatives and partnerships, and looks forward to his leadership in shaping the future of advanced textiles. Dr. Evans has received two Distinguished Public Service Medals from the Secretary of Defense for his leadership of MIT Lincoln Laboratory and the Defense Science Board. He is a Fellow of the IEEE, a Fellow of the AIAA, and a member of the National Academy of Engineering. About AFFOA AFFOA is a non-profit, public private partnership and one of the Manufacturing USA Innovation Institutes headquartered in Cambridge, MA. AFFOA's mission is to "Rekindle the domestic textiles industry by leading a nationwide enterprise for advanced fiber & fabric technology development and manufacturing, enabling revolutionary system capabilities for national security and commercial markets." Learn more at Contact:Joshua RapozaDirector of CommunicationsAFFOAPhone: (508)558-6682Email: jrapoza@ View original content to download multimedia: SOURCE AFFOA
Yahoo
04-06-2025
- Business
- Yahoo
SGRY Q1 Earnings Call: Volume Growth and Business Mix Shape Outlook Amid Margin Pressures
Healthcare company Surgery Partners (NASDAQ:SGRY) missed Wall Street's revenue expectations in Q1 CY2025, but sales rose 8.2% year on year to $776 million. Its non-GAAP profit of $0.04 per share was 1.4 cents below analysts' consensus estimates. Is now the time to buy SGRY? Find out in our full research report (it's free). Revenue: $776 million (8.2% year-on-year growth) Adjusted EPS: $0.04 vs analyst estimates of $0.05 ($0.01 miss) Adjusted Operating Income: $89.6 million vs analyst estimates of $64.31 million (11.5% margin, 39.3% beat) EBITDA guidance for the full year is $560 million at the midpoint, in line with analyst expectations Operating Margin: 8%, down from 10.6% in the same quarter last year Sales Volumes rose 4.8% year on year (1.3% in the same quarter last year) Market Capitalization: $2.96 billion Surgery Partners' first quarter results were shaped by higher surgical case volumes and a shift in procedure mix. Management pointed to 6.5% surgical case growth, led by gastrointestinal and musculoskeletal procedures, as the main driver behind revenue gains. CEO Eric Evans credited the company's expanding de novo (new facility) pipeline and robust physician recruitment, particularly in orthopedics, as key contributors to this momentum. However, Evans acknowledged that growth in lower-acuity specialties like GI, which carry lower reimbursement rates, pressured revenue per procedure. CFO David Doherty added that seasonality and calendar effects also influenced the mix and rate dynamics. Management maintained that these trends were anticipated and remain consistent with their internal expectations for the quarter. Looking forward, Surgery Partners' guidance centers on continued surgical volume increases, margin expansion initiatives, and sustained investment in both M&A and de novo facility openings. Management reiterated confidence in achieving its long-term growth algorithm, underpinned by ongoing physician recruitment and integration of recent acquisitions. CEO Eric Evans highlighted, 'We expect same-facility growth at or above the high end of our target, with more balanced volume and rate contributions as the year progresses.' CFO David Doherty cautioned that interest expense would be a headwind in coming quarters due to higher rates, but emphasized the company's strong liquidity and ability to fund growth without raising new debt or equity. Management reported no material supply chain risks from tariffs and minimal exposure to changes in Medicaid reimbursement, supporting the company's outlook for steady performance. Management attributed the quarter's performance to strong organic surgical case growth, strategic physician recruitment, and continued investment in new facilities, while acknowledging margin pressure from business mix and external cost factors. Surgical volume growth: Case growth was driven by higher volumes in gastrointestinal and orthopedic procedures, with total joint surgeries up 22% year-on-year. This reflects targeted investments in facility capabilities and recruitment of specialists. De novo facility expansion: The company's pipeline of newly opened and under-construction facilities is heavily weighted toward higher-acuity specialties like orthopedics. These new sites are expected to deliver long-term growth at a lower capital outlay compared to traditional acquisitions. Physician recruitment impact: Nearly 150 new physicians joined in the quarter, with this cohort bringing in higher-acuity and higher-revenue cases relative to prior years. Management expects this compounding effect to continue as new recruits ramp up their case volumes. Margin pressure from mix: A shift toward lower-acuity GI procedures, which receive lower reimbursement rates, led to lower revenue per case and contributed to a decline in operating margin. Management expects business mix to normalize over the course of the year. Investment in operating efficiency: Ongoing standardization of revenue cycle management and process integration from recent acquisitions are intended to drive future margin improvements. Management cited early benefits from these initiatives, particularly in reducing days sales outstanding and improving cash conversion. Surgery Partners' outlook for the remainder of 2025 is anchored by expectations for continued volume growth, margin recovery, and disciplined capital deployment. Balanced volume and rate growth: Management anticipates a more even contribution from both surgical volume and reimbursement rates as the year progresses, with particular emphasis on ramping newly recruited physicians and de novo facilities. Margin improvement initiatives: The company is pursuing ongoing cost efficiency efforts, including standardized revenue cycle management and operational improvements, to offset prior margin compression. Integration of recent acquisitions is expected to yield further gains. Capital allocation and liquidity: Leadership underlined sufficient liquidity and stable leverage to support targeted M&A and de novo development, without the need for additional debt or equity issuance. However, rising interest expense will be a headwind to free cash flow in the next few quarters. Key areas to monitor in upcoming quarters include (1) the pace at which new de novo facilities and recruited physicians ramp up case volumes, (2) the success of ongoing margin improvement and revenue cycle initiatives, and (3) progress in integrating recent acquisitions to drive incremental earnings. Continued stability in payer mix and the absence of supply chain disruptions will also be important indicators of execution. Surgery Partners currently trades at a forward P/E ratio of 21.3×. At this valuation, is it a buy or sell post earnings? Find out in our full research report (it's free). Market indices reached historic highs following Donald Trump's presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has caused many investors to adopt a "fearful" wait-and-see approach, we're leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-05-2025
- Business
- Yahoo
Q1 2025 Surgery Partners Inc Earnings Call
David Doherty; Chief Financial Officer, Executive Vice President; Surgery Partners Inc J. Eric Evans; Chief Executive Officer, Director; Surgery Partners Inc Brian Tanquilut; Analyst; Jefferies Joanna Gajuk; Analyst; Bank of America Ben Rossi; Analyst; JPMorgan Sarah James; Analyst; Cantor Fitzgerald Andrew Mok; Analyst; Barclays A.J. Rice; Analyst; UBS Will Spivack; Analyst; TD Cowen Matthew Gillmor; Analyst; KeyBanc Capital Markets Benjamin Mayo; Analyst; Leerink Partners Benjamin Hendrix; Analyst; RBC Capital Markets Operator Greetings, and welcome to Surgery Partners' first quarter 2025 earnings call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dave Doherty, CFO. Thank you. You may begin David Doherty Good morning, and thank you for joining Surgery Partners' first quarter 2025 earnings Call. My name is Dave Doherty, CFO of Surgery Partners. I am joined today by Eric Evans, our CEO. During this call, we will make forward-looking statements. There are risk factors that could cause future results to be materially different from these statements that are described in this morning's press release and the reports we filed with the SEC, each of which are available on our corporate website. The company does not undertake any duty to update these forward-looking statements. In addition, we reference certain financial measures that are non-GAAP, which we believe can be useful in evaluating our performance. We reconcile these measures to the most applicable GAAP measure in this morning's press release. With that, I will turn the call over to Eric Evans, our CEO. Eric? J. Eric Evans Thank you, Dave. Good morning, and thank you all for joining us today. My opening comments will briefly highlight our first quarter results and the consistency of our long-term growth algorithm. Then I will provide additional color on the strong business execution and underpinning of each of the three pillars of our growth algorithm: organic growth, margin improvement and deploying capital for M&A. I will also provide our views on how our business is positioned in the current regulatory environment as well as our outlook for the remainder of the year. We are pleased to report Surgery Partners' first quarter net revenue of $776 million and adjusted EBITDA of $103.9 million, both in line with our expectations. The financial results announced this morning are a testament to the focus of our colleagues and physician partners who serve our communities with valuable, high quality and convenient care. Our team continues to deliver on our mission to enhance patient quality of life through partnership. Compared to the prior year's first quarter, adjusted EBITDA grew nearly 7% and net revenue grew 8%, with contributions from each pillar of our long-term growth algorithm. Our growth in 2025 is attributed to continued strong organic results including same-facility revenue growth of over 5%. Revenue growth was comprised of 6.5% surgical case growth, offset by a decline in rates of approximately 1%, driven primarily by robust growth in lower acuity specialties in the quarter, including growth from recently open de novos as well as a very strong prior year comp. These components of our same-facility revenue growth are consistent with our internal expectations that we shared on our fourth quarter earnings call in March. We continue to expect full year 2025 same-facility growth to be at or above the high end of our growth algorithm target of 6% with a more balanced growth between volume and rate as the year progresses. Dave will elaborate on our financial results next, but these results give us increased confidence throughout the company's growth trajectory and in a more near-term basis, our guidance for 2025. Let me touch on some of the initiatives that are critical to our sustained long-term growth, starting with our organic growth activities. In the facilities that we consolidate, we performed over 160,000 surgical cases in the first quarter of 2025 compared to 153,000 in 2024. In the first quarter, we experienced growth across all of our core specialties. The volume growth in GI procedures was relatively higher and because these procedures build in a relatively lower reimbursement rates when compared to the blended company average, that slight shift in business mix mathematically resulted in rate pressure in our same-facility rate metric. Having said that, we are still experiencing growth in our orthopedic cases driven by an increase in total joint surgeries. To illustrate this, we performed over 29,000 orthopedic cases in the first quarter of 2025, 3.4% more than 2024. Most of this growth in orthopedic procedures is driven by total joint procedures, which grew 22% in the first quarter compared to the prior year. As a reminder, 80% of our surgical facilities have the capability to perform higher acuity orthopedic procedures. And currently, 48% of our facilities perform total joint procedures. This capability provides significant additional growth as we continue to position our assets to meet the expanding orthopedic demand with targeted recruitment and investments in additional equipment, including robotics. Within our portfolio, we have invested in 68 surgical robots that enable our physician partners to perform increasingly more complex and higher acuity procedures. These investments also help support our strong physician recruitment process. In the first quarter, we added nearly 150 new physicians to our facilities, many of which we expect to eventually become partners. This recruiting class includes all our specialties with SKUs towards orthopedic-focused positions. It's early in the year, but so far, these newly recruited physicians are bringing surgical cases with higher overall acuity compared to the 2024 cohort. Based on our experience with prior recruiting classes, we fully expect 2025 recruits to continue to grow and have a meaningful impact in 2025 and beyond. As I mentioned on our last call, in 2024, we opened 8 de novo facilities. Since 2022, we've opened 20 de novo facilities, and we currently have 10 under construction as well as a robust pipeline of future de novos, we expect to begin development soon. De novos represent an exciting growth prospect for Surgery Partners, given the low cost of entry and opportunity to bring the scale of our operations to growth-oriented partners. As a reminder, those under development are heavily weighted towards higher acuity specialties such as orthopedics. Although they take time to develop and construct, the effective multiples on these assets are a fraction of traditional acquisition multiples. Moving to our second pillar, margin expansion. During the quarter, we saw a slight margin pressure primarily due to the mix of business that will improve throughout the year. When we consider our continued growth, ongoing procurement, operating efficiency initiatives and synergy achieved on previously acquired facilities, we have high confidence to deliver margin expansion annually as our guidance implies for 2025. The third and final leg of our long-term growth algorithm is acquiring and integrating accretive surgical facilities into our platform. I'm immensely proud of our dedicated development team that manages and maintains a robust pipeline of attractive partnership opportunities. To date in 2025, we deployed $55 million and have added 5 surgical facilities at an effective multiple under 8 times adjusted EBITDA. Acquisitions are an important part of our growth algorithm, not only because of the immediate earnings they may contribute, but also the margin expansion we experienced as we integrate these facilities into our platform. The pipeline of attractive assets is robust and supportive of our 2025 guidance. And as Dave will discuss, we have sufficient liquidity to fund this growth in the short and long term without having to tap the capital markets. The level of activity supporting our comprehensive M&A strategy requires incremental variable costs in terms of due diligence, transaction costs, integration costs and de novo working capital investment. As we discussed on our last call, transaction and integration efforts were higher than typical given the level and complexity of acquisitions completed in 2024, but we expect this level of spend to significantly diminish in the second half of 2025 based on a more normalized volume of expected M&A. Next, I would like to briefly comment on how Surgery Partners is positioned given the current significant regulatory uncertainty. I'll start with tariffs and their potential impact on Surgery Partners. Like many of our peers, our primary purchasing organization is HealthTrust. Nearly 70% of our purchased goods go through this GPO. HealthTrust has been a great partner for several reasons, but in this case, the significant contracting transparency they provide gives us confidence in estimating our exposure to global trade. For example, working with HealthTrust, we know the country of origin for our spend, our contract renewal risks as well as our mitigation options available. Similarly, through our dedicated professional supply chain team, we have visibility to where we have tariff exposure. We can confidently report that we don't have material exposure in the near to midterm to any tariff-related price increases nor do we believe there is a substantial risk to our supply chain. Regarding potential legislative changes to Medicaid and exchange-based reimbursement programs, I would like to remind listeners that our exposure to these payer groups is less than 5% of our revenue, and we do not consider prospective changes to either program as a risk to our short or long-term growth prospects. We will continue to closely monitor ongoing regulatory developments and remain prepared to adjust our approach as needed to ensure continued growth. Before I turn it over to Dave, I would like to briefly update you on the nonbinding acquisition proposal that Bain Capital sent to our Board of Directors in late January. Bain has been a long-standing investor in Surgery Partners and a valued partner to us over the years with representation on our Board. As we noted in our press release on January 28 and our fourth quarter earnings call, our Board formed a special committee comprised of independent directors that are not affiliated with Bain Capital to consider this proposal with the help of leading independent financial and legal advisers. Out of respect for the process underway with the special committee, our Executive Chair, Wayne DeVeydt, who serves as a Managing Director at Bain, continues to remove himself from many of his normal activities with Surgery Partners, including this call. We will not be commenting further on this matter unless or until there is a material update. Overall, I am pleased with the start of 2025 as the company continues to deliver growth that is consistent with our long-term algorithm. Our continued focus on maximizing the performance of our portfolio, robust M&A pipeline, steady improvements in enabling greater operating efficiencies and bullish outlook on surgical trends and the regulatory landscape have positioned us to continue to deliver industry-leading earnings growth in 2025 and beyond. With that, I will now turn the call over to Dave to provide more color on our financial results. Dave? David Doherty Thanks, Eric. Starting with the top line, we performed over 160,000 surgical cases in our consolidated facilities in the first quarter, 4.5% higher than 2024. These cases spanned across all our specialties with higher relative growth in gastrointestinal and MSK procedures, including continued growth in orthopedic cases. This case growth drove our first quarter revenue to $776 million, 8.2% higher than the first quarter of 2024. Our same-facility total revenue increased 5.2% in the first quarter, consistent with our growth algorithm target of 4% to 6% and in line with our expectations for the quarter. Adjusted EBITDA was $103.9 million for the first quarter, giving us a margin of 13.4%. We ended the quarter with $229 million in cash. When combined with the available revolver capacity, we have over $615 million in total liquidity. We reported operating cash flows of $6 million in the first quarter of 2025, distributed $62 million to our physician partners and incurred $6 million in maintenance-related capital expenditures. As a reminder, operating cash flows are typically lower in the first quarter of the year due primarily to quarterly earnings patterns, but these results can also be impacted by the timing of working capital activities. For example, accounts payable were processed at a significantly faster clip in the first quarter versus at year-end as a result of payment schedules related to the holidays at the end of December. Also, we are pleased that our first quarter distributions to our partners were higher than the prior year based on facility level timing of certain distributions that effectively doubled the impact in the first quarter, as well as higher distributions related to stronger results in the fourth quarter. We are committed to providing transparency into the drivers of our cash flow generation. We are seeing incremental improvements in the cash conversion of our revenue with the metric of days sales outstanding decreasing two days from the fourth quarter, which is critical to convert the company's growing earnings. We remain pleased with the disciplined management of capital deployed for maintenance-related purchases. Moving to the balance sheet. We have $2.2 billion in outstanding corporate debt with no maturity dates until 2030. The effective interest rate on our corporate debt was fixed at approximately 6% through March 31, 2025. Our $1.4 billion term loan is now protected by interest rate caps that limit the variable rate of the interest rate to 5%. That floating rate is currently 4.3%, but that could change throughout the year. Our first quarter ratio of total net debt-to-EBITDA as calculated under our credit agreement was 4.1 times, consistent with our expectations given recent acquisitions. Leverage calculated using consolidated debt from our balance sheet divided by EBITDA was 4.8 times. Leverage will decrease based on our continued earnings growth. As we have discussed previously, our short- and long-term financial models highlight that we will have sufficient liquidity from our cash on hand, our revolver capacity and cash generated from operations to support future M&A at levels that support our long-term growth algorithm without having to access incremental capital from the debt or equity markets over the next five years. The results we reported today and all metrics are very much aligned with our internal expectations that support our guidance that we are reiterating this morning. Specifically, we are reaffirming full year 2025 revenue and adjusted EBITDA guidance to be in the range of $3.3 billion to $3.45 billion and $555 million to $565 million, respectively. Our guidance implies continued margin expansion in line with our long-term growth algorithm, reflecting our ongoing and accretive progress in supply chain and revenue cycle as well as the integration benefits from recent acquisitions and contributions from de novos we opened last year. We have high confidence in these growth areas based on our historical experience and the compounding effect of activity that has already occurred in areas like physician recruiting and managed care contracting. With that, I would like to turn the call back over to the operator for questions. Operator? Operator (Operator Instructions) Brian Tanquilut from Jefferies. Brian Tanquilut Hey, good morning guys. Eric, congrats on the strong volume quarter. So just curious how you're thinking about current utilization trends and the sustainability of that? And then maybe the other side of this question would just be the same-store revenue per procedure, obviously, a little softer this past quarter. I mean, is that just a tough comp? Or is there anything we should be thinking about as we model out same-store going forward? Thank you. J. Eric Evans Yeah, hey, Brian, thank you. Appreciate the question. I would say, obviously, there's a tough comp associated with the pricing, but let me give you a little bit more detail. I think first quarter same-store revenue growth was very much in line with where we thought it would be. The case growth is a reflection of some stronger de novos that are coming online and some MSK growth that I think is pushing that up because you think about this, as I mentioned in my comments, higher volume, lower revenue. It's really just a mix and a little bit of a comp as you point out. As a reminder, our same-facility metric is based on the number of operating days per quarter, which was 63 in the first quarter. And in our business, the days of the week matter for certain volumes. Internally, as we've talked about in the past, we don't place a lot of stock in kind of any given quarter. We talked about this metric we would expect by the end of the year to be at the high end or above our long-term range with balance between volume and growth. And so we -- this is very much in line with where we thought we'd be. We did have very strong growth across all our core service lines, particularly in GI and MSK, both of which were kind of growing at rates that are above our long-term assumptions. In addition to the typical growth expected in our portfolio, we also experienced, as I mentioned, this growth in de novos, that opened in late '23. De novos ramped up to full run rate typically over a couple of years, and that time to breakeven is with an initial 6 to 12 months. So these de novos are performing very well out of the gate, and they're kind of on their way to their full run rate. And that is having an effect on this mix, which you're seeing show up in rate. Again, GI, really, really happy with the GI growth in the first quarter. It has a lot to do with the calendar and the way these cases tend to fall. But the rate pressure really is just a matter of the underlying commercial and government mix, nothing there to really read into. And I would just point you back to, we expect to be kind of more balanced between rate and volume, much like we finished last year over the course of the year. Brian Tanquilut No, it makes sense. And then maybe, Dave, as a follow-up, as I think about your comments on free cash flow generation. Obviously, Q1 is seasonally weaker. It sounds like there were a few kind of like timing issues there, but curious how we should be thinking about the seasonality of free cash flow generation over the course of the year? David Doherty Yeah, for sure, the view that we have on forward-looking operating cash flows is we should see some overall improvement as the earnings growth manifested as you look at our earnings growth guidance that we have out there should be translating nicely over the course of the year. And much like we've seen in the past, it tends to skew better as the year progresses, second quarter being relatively strong and fourth quarter being our strongest quarter from a cash flow generation perspective. So we do believe, as we think and as we've talked about, I think, on the call a little bit earlier and as we talked about in the fourth quarter, distributions, which is an offset to cash as you kind of look at this from a free cash flow perspective, distribution should also grow as we go throughout the course of the year. Now we did effectively double up on our distributions inside the first quarter, which did create that little bit of a pressure point. That should normalize as we go throughout the year. The only watch out on cash flows as we look at the year that is kind of unrelated to the underlying strength of our operating performance and better working capital management would be related to our interest cost. As you know, we were protected by an interest rate swap on our $1.4 billion term loan. That swap expired at the end of the first quarter is being replaced by an interest rate cap, that caps our interest rate exposure at 5%. We feel really good about that over the life of the term loan. However, that will create a headwind for us as we go into the balance of this year. The math that we look at this does create some exposure based on where we think SOFR rates currently are, which is at roughly 4.4%. That would be compared to effectively a 2.2% interest rate cap that we had through the swap that just expired. So you have about 220 basis point exposure that will be a headwind on cash flows for the last nine months of the year. J. Eric Evans Yeah, Brian, I might add to that, though, just big picture, stepping back a little bit. The business continues to produce a lot of strong cash flow, right? We know it's a big focus of investors. And when we reiterate our long-term growth algorithm, we do rely on investing in M&A. So we appreciate there's a sensitivity of equity holders on leverage. But I would just reiterate that we have no concerns with the generation of sufficient free cash flow, given our current liquidity to fund our short- and long-term growth without needing to go back to the equity or debt market. So we feel good of where it's going. We do expect that to strengthen throughout the year and to continue to grow with the company as we move forward. Brian Tanquilut That's it. Thank you. J. Eric Evans Yeah, thanks, Brian. Operator Joanna Gajuk from Bank of America. Joanna Gajuk Hi, good morning. Thanks so much for taking the question. So I guess a little bit of a follow-up on the pricing discussion. So on the Q4 call, I think you alluded to a slight pressure on payer mix. So have you actually seen that in '25? So is it essentially alluding to the idea of Medicare cases growing faster? J. Eric Evans Hey Joanna, I'm not sure -- I don't recall us talking about that, but I would say that there's been no change in payer mix. Actually, it's been quite strong commercially. We continue to feel good about our growth in Medicare and commercial, but no real mix changes other than what might happen with a given acquisition timing. But in general, no pressure on payer mix. Joanna Gajuk Okay. Glad we clarified that. And then I guess related to that, my question on commercial rates for this year. I guess, where are you tracking, I guess, for this year? And I guess, how are the negotiations for the upcoming cycle? And have you seen any change in contracting with these commercial payers or maybe MA payers for that matter because obviously, there's a lot of pressure on these guys on higher trends. So I just want to check if there's anything that's changing. And maybe I can throw in there, any change to denials and things like that. Thank you. J. Eric Evans Joanna, thanks for the questions. So I'll just start with, it's always nice to be in a business where your three major constituents are -- prefer you, right? So patients prefer us because of their experience and their outcomes. Doctors prefer us because of our efficiency and they can be at the table. And of course, payers prefer us because we are the low-cost alternative. They continue to be very constructive with us. I think we continue to find ways to try to work with them to move patients to the right side of care. There's nothing that's really changed in those negotiations. I think there's, again, a pretty warm reception for us trying to work together to create value for those companies and move patients to the right site of care. So I think the trends you've seen over the last couple of years are still holding true. As we've mentioned, we're pretty much fully contracted for this year. If you think about where we start the year. So those -- we have really good visibility in our outlook and guidance as far as rate goes. And with MA, I mean, MA, obviously, there's some challenges -- your hear about some challenges with MA. We obviously have great MA relationships. We're a value provider, don't see that changing. And then I think you had one other question at the end. I'm going to let Dave answer that. David Doherty Yes, it's a rev cycle question. And it's a good one because in the third quarter last year, we did talk about changing dynamic in the way payers were processing medical necessity and denial charges. We did see it. We talked a little bit about that pressure in the fourth quarter call. You may recall, Joanna, we did talk about the adjustments that we put in place on our rev cycle as part of our standardization journey that we're taking inside that world. I'm pleased to say, inside the first quarter, that continued. So we did not see any adverse change in our denial patterns. To the contrary, rather, we're now seeing a little bit more on the positive side. Again, the nature of our business almost entirely across the platform is scheduled procedures. That enables us to do a lot of work on a preservice basis to get in front of many medical necessity or any changing requirements from the payer community. And I'm pleased to say that we've implemented that, and you can see that in our days sales outstanding, that metric continues to improve. I think we improved two days inside the quarter, so a really positive trend for us. Joanna Gajuk Great, thank you so much for the call. Operator Ben Rossi from JPMorgan. Ben Rossi Great. Just turning to expenses on professional fees that came in a little high here versus expectations. Just given some of the broader industry pressure here, how would you describe current labor dynamics for specialty areas like anesthesia during 1Q? And then are there any particular specialties or geographies where this growth has been noticeably accelerating in that over the quarter? Thanks. David Doherty Yeah, Ben, thanks for the question. I'll just take one exception to the way you -- the preamble to your question there. This was actually in line with our expectations from a pro fee perspective. Pro fees, the driver behind that is primarily associated with two of the significant acquisitions that we did last year. At the beginning of the year, we acquired Key-Whitman that came with several practices. That's an ophthalmology book of business, couple ASCs, several practices. And in the middle of the year as we talked about we did an acquisition, a pretty significant acquisition up in Milwaukee, that too came with Associated Physician Practices, which carry some costs that kind of sit inside there. . The anesthesia pressure for us, although we have seen that anesthesia cost marginally being affected, is across some of our facilities. Most of our facilities still are not being affected by adversity in either the availability of anesthesia or the revenue guarantees required for them. And I think that goes -- that speaks to the nature of our business. I think, as Eric and I have talked about in prior meetings. So we see no notable change inside the first quarter. And at this point, we're not seeing that being a major headwind for us in 2025 or beyond. Ben Rossi Great. I appreciate the clarification there. I guess just as a follow-up, just on the physician recruiting, it sounds like this year's 150-person cohort has come together nicely across specialties and you're getting maybe some of the compounding growth potential from last year's class. I guess what is the percentage of doctors from this class coming from higher acuity service lines? Is it north of 50%? J. Eric Evans Yeah, I would start off with we're certainly proud of it. It's another strong start for the year for recruiting, definitely in line with our historical run rate and our expectations. We have a very diverse recruiting class. It spans all of our specialties. I don't know that I have that percentage breakdown as far as whether it's mostly high acuity. Although I think the mix of orthopedic continues to grow. Relative to '24, which was a record-setting year, this class really skews higher in revenue generated per doctor. So that net revenue per physician is up about 14% versus what we saw last year. We remain optimistic in our ability to recruit the 500 to 600 docs that we have built into our plan. We've been doing that consistently and I think become a lot more targeted. As a reminder, we've seen strong multiyear gains in our recruiting cohorts. For example, the doctors we recruited in Q1 of last year, they brought an additional 160% more cases in the first quarter of 2025 with 182% more revenue. So it's a compounding effect. You guys have heard us talk about this in that first year. You usually expect to see the second year double for each cohort. And so certainly a big focus area for us. We spend a lot of time on it, and we're constantly trying to refine the way we target the right doctors for our facilities. Ben Rossi Great, thanks for the commentary there. Operator Sarah James with Cantor Fitzgerald. Sarah James Thank you. So you guys have been talking for a while about the GI mix. And I think the last data point that we have is that it was going up about 1% a year and it was 24% in '23. So what does it look like now? And can you give us a little context for every percent it goes up? What type of headwind is that on your revenue per case? David Doherty Yeah, So we did experience growth in the GI portfolio, and I think it had a marginal impact on the relative share of GI cases in our mix, the total mix that we have. So I think that 24% I look at it, check your numbers there, Sarah, just because I don't have them handy in front of me. So if we did see some benefit that kind of sat inside there, it's going to be relatively minor, I would think in terms of basis points year-over-year. However, as Eric mentioned, it's all the nature of kind of the calendar. And you've heard me say this before, I really just like a quarterly view of same-store metrics because of the influence of the calendar that sits inside there 63 days. And depending on the day of the week and the days that happen inside any particular facility, you could have a large number of procedures that does adversely or in this case, positively affect the same-store case metrics, which cases look great, and the rate then will suffer just because on a relative basis, you have relatively low acuity GI procedures that sit in there. Great new story for us. We are experiencing -- I will say this, we are experiencing GI case volume over the last six months that is slightly higher than our long-term growth algorithm. We're really pleased about that. We do expect that to be a continuation as we go throughout the year. Nothing significantly out of the norm, but that volume increase, again, primarily related to the calendar inside the quarter did affect that rate pressure. And I'll remind you what Eric mentioned about their forward look on same-facility rate. Any given quarter is going to have some unusual variance just because of that calendar that normalizes. And as we project out, we do budget and our budget process does look at every single day of the week. So we have some pretty good visibility to it. We predicted that we were going to see rate pressure relative to case growth inside the first quarter. You might recall that from our fourth quarter call a few weeks ago, we will see this kind of return to somewhat more balanced growth but still end the year at a same-facility revenue number that's above our growth algorithm of 4% to 6%. So I think it will look at the end of the year somewhat consistent with what we saw last year. J. Eric Evans Yeah, and Sarah, I would just reiterate the GI growth, we're really pleased with that service line. We have three businesses that make up the majority of our business. All three of them, ophthalmology, GI, MSK growing at nice clips. We talk a lot about orthopedics because it's one that drives tremendous value for payers and patients and it's moving so quickly, but we really like our GI and ophthalmology business and they continue to grow nicely. Operator Andrew Mok with Barclays. Andrew Mok Hi, good morning. Your projected confidence in the near to midterm tariff exposure in your prepared remarks. Can you elaborate on what's driving that confidence? Is that driven more by pricing protections built into your supply contracts or total exposure to countries with tariffs? Any detail there would be helpful. Thanks. David Doherty Yeah, I can't provide a whole lot more than what we talked about earlier. 70% of our spend right now goes through HealthTrust. And as you probably have heard from several of our peer groups, that relationship with HealthTrust is remarkable in terms of the contract protection that sits underneath it, but also good visibility as to where you could have tariff exposure going forward. This is what we like about that increased visibility to it. . We know when contracts will expire and we know alternatives that we can start to talk to our physician partners about well in advance of any potential impact if the tariffs were to survive. But inside the year, we see very little exposure to any contract renewals that could ultimately take any tariff exposure that kind of sits inside there. We don't really see any material change in that in the -- even in the midterm forward-looking view. The remaining spend, so if you look at 70% of our spend going through HealthTrust, the remaining amount, majority -- a large majority of that is also under contract. This is just what our professional procurement team does. And likewise, we have good visibility to both the future state when you may be exposed by looking at the country of origin that sits there as well as when that could occur and what alternatives we may have available to us. So we feel pretty good. This is what a professional procurement team is responsible for doing. This is certainly our expectations of both that team as well as our relationship with HealthTrust. And they have helped us significantly, if you look back -- all the way back to COVID, just the way for us to navigate through disruptions that could occur either from a pricing perspective or from an availability perspective. At this point, we see no major headwinds that sit out there, but it's definitely something that we're paying very close attention to. Andrew Mok Great. And then maybe a follow-up on the cash flow. You talked about the timing impact on operating cash flows, but it also looks like the 1Q NCI payout is up meaningfully both year-over-year and relative to the 4Q NCI expense. Is there anything impacting the timing or payout to NCI partners in the quarter? David Doherty Yeah, It's really just timing. I'll remind everybody about how the calendar looked. I hate to kind of always talk about the calendar, but the calendar at the end of the year had holidays kind of awkwardly in the middle of the weeks. Our distributions to our physician partners and to surgery partners happens at a facility level. It's not a centrally controlled process, although the formulas that sit behind that are largely the same, those checks are cut at the facility level. So what we experienced at the end of the fourth quarter was slightly lower distribution. Some of those, in many cases, some of the larger ones occurred in the first week of January. Normally, they will happen at the end of any given month. So you saw basically a double up. I think we were at $62 million or $63 million of distributions, that's about $22 million more than kind of what's typical. That's an unusual number for any given quarter. Again, we believe that's going to normalize back to traditional levels and relative to earnings growth should grow as the course of the year and a macro annual number. Andrew Mok Great, thank you. Operator A.J. Rice from UBS. A.J. Rice Hi, everybody. Just first, maybe on the comments about the balance sheet and leverage. How -- so I know you say that on your growth targets, you can do what you want to do in M&A and development with internal cash flow. Just to remind us what are the parameters as we think out over the next few years on what would be a normal year for M&A and development for you? And do you have an ultimate goal as to where you'd like to see those leverage levels get to? David Doherty Yeah, Great question, A.J. Thank you so much for asking that again. So leverage, what we've talked about from a leverage perspective is really a factor of the growth -- the substantial growth and outsized growth that this company has experienced, right? Double-digit, mid-teens has been this company's story for the history. At least the past eight years, it's something that we do expect to see going forward. And a key element to that, of course, is deploying capital for M&A and de novo activities. We target around $200 million of M&A. Midyear convention, we assume kind of relatively stable pricing on that. We've experienced roughly 8x historical earnings. Again, for the past eight years, I think we've averaged something just slightly below that 8 times. But for modeling purposes, we assume 8 times going forward. And at that level of spend every single year with immediate accretion that comes from there, we do think it converts to cash flow quite nicely. So our models do suggest continued conversion of cash on both existing assets as well as newly acquired ones, coupled with that growth in the mid-teens level, will spit off cash sufficient for us to keep that overall leverage number going downwards. So whether you look at this on a credit agreement basis or use the face of the balance sheet, you see the slope of the line going down. Using credit agreement leverage what we have talked about is we target a sub-3 leverage number. I think we're at 4.1 at the end of the first. We do expect that number is going to come down to roughly around in the 3 range at the end of this year and will continue to go down over the next few years. So if your modeling does suggest anything different than that, it's a relatively simple model, then let's talk to the team about that because we do -- in every model that we've looked at, we do see that coming down over time. A.J. Rice Okay. And if I could just maybe have a follow-up. Talking about the same-store metrics, pricing and case volumes, you're just coming off a year of above-average M&A and development activity. Can you just remind us when those get into the same-store mix? And will those acquisitions and development be enough to skew either more positively or more negatively what we're likely to see on same-store pricing and same-store volumes? David Doherty Sure. Again, great question because this company rate, as we've talked about, can be significantly affected by the mix of business that you see. If you look at last year's acquisitions at the beginning of the year, Key-Whitman was an ophthalmology book of business. Middle of the year, and for the most part, the acquisitions that we completed in the balance were more orthopedic and MSK-related focus, which do tend to have a higher net revenue per case. So when they do come into our calculations, you should see some change that happens. We include them in our same facility calculation when they are in there at the beginning and the end of the period. So if you're doing a year-over-year comparison, any acquisition that we completed inside the second quarter last year would start to come into our same facility calculation in the third quarter of 2025. A.J. Rice Okay, great, thanks. So much. You're welcome thanks. Operator Will Spivack from TD Cowen. Will Spivack Hey there. Just a quick one. Any impact from weather in the first quarter? And if so, would you mind quantifying it? And then the second thing is, I know you don't guide to free cash flow anymore. But given the puts and takes on better RCM, improved earnings, offset by higher interest expense and transaction fees, do you think free cash flow in 2024 will be higher, lower or similar versus -- sorry, this year versus prior year? J. Eric Evans William, probably I can knock both those out, I think, pretty quickly. So on the weather side, we did have weather in the first quarter. We never really fully recapture it. But honestly, we don't talk about it just because it was immaterial in the grand scheme of things. Certainly, it had some impact, but not worth talking about still had really strong case growth. And as you can see, we outran any kind of major impacts there. As far as free cash flow goes, we do expect -- and we talked about this, we expect the business to grow free cash flow with the business. And I think you should expect that this year even with timing, but more or less free cash flow to us is a metric. We understand everybody is focused on it. We have the liquidity we need, and we expect to continue to grow that as we grow our business. Will Spivack Got it. Thanks very much. Operator Matthew Gillmor from KeyBanc Capital Markets Inc. Matthew Gillmor Hey, thanks for the question. Maybe following up on some of the margin comments. In the press release, there was a comment about ongoing operating system improvements that will help drive margin expansion. Maybe that was in reference to rev cycle, but just wanted to get a sense for what those efforts are focused on to drive margins higher? J. Eric Evans Yeah, So I'd say there's several things that go into our operating system, obviously. And a big part of that is rev cycle and Dave can talk about some specifics on that. Also, the supply chain, it's scheduling efficiency, all those things impact costs. The more efficient we are on scheduling, the better utilization we drive out of a given facility, the lower anesthesia costs because they're more efficient. There's just a bunch of things that are part of our operating system. But I think in relation to what was mentioned in the script, certainly, revenue cycle is a big part of that, and Dave can talk a little bit about that journey. David Doherty Yeah, So rev cycle, for us is -- and as we've talked about this a lot last year, we embarked upon a multiyear journey to come up with one standardized rep cycle approach across the organization. This is after years of underlying IT integration, building a data warehouse that enables us to look across the platform and drive directly into billing systems. So we've made a lot of that investment in the early years, positioned ourselves nicely to start this journey last year that focuses not only on process but using better data to make informed decisions, which ultimately will turn right back around to higher revenue generation and greater use of the scale of the company. . So we're awfully proud of that. It's a multiyear journey, as I mentioned. And as we go through that process, much like you saw in the fourth quarter and the first quarter, we should begin to see some benefits coming through how we manage receivables and the overall net revenue pull-through that we get from that. That will continue for a period of time. We'll talk about that as we go throughout the year and perhaps into 2026. I'll say this, the work that we do to integrate companies and the maintenance of that kind of process is critical to us. So for example, over the past several years, we've included some relatively larger acquisitions, including the one we did in the second quarter of last year that do require us to plug-and-play data from the revenue or billing systems from some of our facilities. The larger the facility, the more deliberate we have to be in terms of integrating or migrating to a common platform. At the end of the year last year and as we go into this year, we are completing three of those migrations. Those migrations much like every other integration that we do, will turn into an enhanced margin generation, again, for the same reasons that we talked about. Having common data platforms enables us to bring the scale of the company, not only from a revenue cycle perspective but also managed care, clinical variation, supply chain, all of that. So we're very excited about that. It does require some investment, ongoing focus in that space, and that's what you're seeing kind of happen this year. Thank you for the question. Matthew Gillmor Got it. And then one quick follow-up. Anything to call out in terms of how flu impacted volumes or even case mix in the quarter? J. Eric Evans Yes. No, honestly, for us, scheduled surgical cases really doesn't have an impact. I mean actually, the only impact it could have for us is a negative one, which we didn't really see from an impact on staffing or canceled cases. Matthew Gillmor Got it. Thank you. Operator Benjamin Mayo from Leerink Partners. Benjamin Mayo Hey, thanks. I think you said that you've closed five acquisitions or five facilities this year. Were those consolidated or unconsolidated, Dave? And then just remind me on the de novo targets for this year? David Doherty Yeah, the five acquisitions that we did, 4 inside the first quarter, I think 1 slipped into the beginning of the second quarter, all consolidating assets, all ASCs that will provide immediate benefit to us. The de novos, we opened 10 last year. They're in various stages of development. As soon as they flip to breakeven, we'll start to see that benefit come through to our EBITDA line item. I think we have close to that number currently in development or under construction that we expect the number of them to open up in 2025, some of them flipping into 2026. And we have a handful, I think, north of or close to our annual target of 10 in the pipeline and under syndication opportunities right now. So we're really pleased, and thank you for asking that question. The de novo track for us is a very intentional focus for us as an organization where we target to have 10 under development every single year. So last year, a great year for us. This year is shaping up to be very good, and the pipeline looks good from an ongoing perspective going forward. Benjamin Mayo And on those de novos, are those consolidated or mostly unconsolidated? And then really my follow-up is just more around the portfolio refresh that you went through last year. Just wanted to get any more thoughts on additional activity. J. Eric Evans Yeah, Thanks, Whit. So most of those are going to be -- de novos are going to be unconsolidated at least at the beginning. Probably we expect that maybe half of those will end up being consolidating at some point in the future, but they start out as minority investments. And quite honestly, the one thing that I would just add on the de novo side, they're beneficial to us for lots of reasons. One of the big reasons is that they typically are set up in a place where you're pulling directly out of the traditional acute care system. And so it's a really opportunity to work with payers in a way that's different because you're creating a ton of value. So it gives us a reset there, and they tend to be really higher acuity as well. So there's so many angles to the de novos that we're excited about. As far as the refresh, as you know, we did do a fair amount of divestitures at the end of last year, don't expect any kind of near that size this year as far as kind of full divestiture. So that won't be an ongoing play. David Doherty Yes. Having said that, with managing a portfolio of over 160 facilities, we'll always have some degree of activity. But as Eric mentioned, last year was an unusually high year, relatively small impact to the company. That's why we're not talking about that as a major headwind this year, but we will constantly refresh that portfolio. We've got a team that's kind of dedicated to making sure that we're maximizing those -- the value that kind of sits inside there for the communities that they serve. Thanks. Operator Benjamin Hendrix from RBC Capital Markets. Benjamin Hendrix Great, thank you for squeezing me in. Just wanted to follow up on your growth commentary around GI and MSK. I just wanted to see kind of where cardio procedures are fitting in on that. I know, in the past, you've talked about that being a longer ramp, but just wanted to see kind of how growth there is progressing and how that's fitting into your recruiting and development efforts? Thanks. J. Eric Evans Hey Ben, thanks for the question. Yes, definitely, I talked about this in the past. Over the long run, we're quite excited about this moving over. But in the near term, there's still a lot of things that make it a slow growth kind of service line, just a number of states that still haven't actually caught up with Medicare on this. But I will say, we have a number of facilities that are adding cardiac, CRM, cardiac rhythm management procedures, EP. We did just -- I was just at a grand opening for our first cardiac cath lab-based ASC recently. So we're seeing those come into the platform. But I would just tell you that the end growth should be quite strong, I think, over the next few years, but again, it's a small end. We are excited about that, though, Ben, because I do think long term, it's much like ortho. It's one of those procedures where our savings in our side of care is five-figures-plus per case. And so I definitely think as you look at the cost pressures in the health system, I think it's one of those areas that we do expect over time. If ortho ever does slow down, which is not anywhere near slowing down at this point, lots left to convert, but that one is a huge part of that kind of, let's call it, $100 billion that's going to transition out of traditional acute care system into our side of care over the next several years. David Doherty Great, thank you very much. Operator At this time, I would like to turn the floor back to Eric Evans for closing remarks. J. Eric Evans Great. Thank you. I just want to -- before we conclude, I did want to just say thank you to my colleagues and physician partners who collaborate each and every day to deliver on our mission, which is to enhance patient quality of life through partnership. Thank you for joining our call this morning, and have a nice day. Operator Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day. Sign in to access your portfolio
Yahoo
12-05-2025
- Business
- Yahoo
Surgery Partners (NASDAQ:SGRY) Posts Q1 Sales In Line With Estimates But Stock Drops
Healthcare company Surgery Partners (NASDAQ:SGRY) met Wall Street's revenue expectations in Q1 CY2025, with sales up 8.2% year on year to $776 million. The company's outlook for the full year was close to analysts' estimates with revenue guided to $3.38 billion at the midpoint. Its non-GAAP profit of $0.04 per share was $0.01 below analysts' consensus estimates. Is now the time to buy Surgery Partners? Find out in our full research report. Revenue: $776 million vs analyst estimates of $779.6 million (8.2% year-on-year growth, in line) Adjusted EPS: $0.04 vs analyst estimates of $0.05 ($0.01 miss) Adjusted EBITDA: $103.9 million vs analyst estimates of $104 million (13.4% margin, in line) The company reconfirmed its revenue guidance for the full year of $3.38 billion at the midpoint EBITDA guidance for the full year is $560 million at the midpoint, in line with analyst expectations Operating Margin: 8%, down from 10.6% in the same quarter last year Free Cash Flow was -$16.7 million, down from $19.7 million in the same quarter last year Sales Volumes rose 6.5% year on year (1.3% in the same quarter last year) Market Capitalization: $2.82 billion Eric Evans, Chief Executive Officer, stated, 'I am pleased with our strong start to 2025, as the Company continues to deliver growth that is consistent with Surgery Partners' long-term growth algorithm. Our continued focus on maximizing portfolio performance, advancing a robust M&A pipeline and driving greater operating efficiencies, combined with a bullish outlook on surgical trends and the regulatory landscape, have us positioned to continue delivering industry leading earnings growth in 2025 and beyond.' With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ:SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals. A company's long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Surgery Partners's 11.3% annualized revenue growth over the last five years was decent. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers. We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Surgery Partners's annualized revenue growth of 10.3% over the last two years is below its five-year trend, but we still think the results were respectable. Surgery Partners also reports its number of units sold. Over the last two years, Surgery Partners's units sold averaged 3.2% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases. This quarter, Surgery Partners grew its revenue by 8.2% year on year, and its $776 million of revenue was in line with Wall Street's estimates. Looking ahead, sell-side analysts expect revenue to grow 9.1% over the next 12 months, similar to its two-year rate. Still, this projection is healthy and implies the market sees success for its products and services. Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we've identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link. Surgery Partners has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 12.1%, higher than the broader healthcare sector. Analyzing the trend in its profitability, Surgery Partners's operating margin decreased by 1 percentage points over the last five years. A silver lining is that on a two-year basis, its margin has stabilized. Still, shareholders will want to see Surgery Partners become more profitable in the future. This quarter, Surgery Partners generated an operating profit margin of 8%, down 2.6 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue. We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth is profitable. Surgery Partners's full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it's at a critical moment in its life. In Q1, Surgery Partners reported EPS at $0.04, down from $0.10 in the same quarter last year. This print missed analysts' estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Surgery Partners's full-year EPS of $0.88 to grow 24.6%. We were impressed by how significantly Surgery Partners beat analysts' sales volume expectations this quarter. On the other hand, its EPS missed significantly and its revenue was just in line with Wall Street's estimates. Overall, this quarter could have been better. The stock traded down 5.1% to $21 immediately following the results. Big picture, is Surgery Partners a buy here and now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
04-03-2025
- Business
- Yahoo
Surgery Partners Inc (SGRY) Q4 2024 Earnings Call Highlights: Record Revenue and Strategic Expansion
Revenue Growth: 13.5% increase to $3.1 billion for the full year 2024. Adjusted EBITDA Growth: 16% increase to $508.2 million for the full year 2024. Margin Expansion: 30 basis points improvement to 16.3% for 2024. Same-Facility Revenue Growth: 8% for the full year 2024. Surgical Cases: 657,000 cases performed in 2024, an 8.4% increase from 2023. Orthopedic Cases: 11% increase in 2024, with total joint procedures growing 50%. De Novo Facilities: 8 opened in 2024, with 12 more in the pipeline for 2025. Acquisitions: 7 surgical facilities added in 2024, with $400 million capital deployed. Cash and Liquidity: $270 million in cash and over $770 million in total liquidity at year-end 2024. Debt: $2.2 billion in outstanding corporate debt with no maturities until 2030. 2025 Revenue Guidance: $3.3 billion to $3.45 billion. 2025 Adjusted EBITDA Guidance: $555 million to $565 million. Warning! GuruFocus has detected 4 Warning Signs with SGRY. Release Date: March 03, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Surgery Partners Inc (NASDAQ:SGRY) reported a full year adjusted EBITDA growth of 16% and net revenue growth of 13.5%, marking the first time the company recorded revenue over $3 billion and adjusted EBITDA over $0.5 billion. The company experienced strong organic growth with same-facility revenue growth of 8%, driven by both case volume and rate improvements. Surgery Partners Inc (NASDAQ:SGRY) added 14 surgical robots in 2024, enhancing their capability to perform complex and higher acuity procedures, particularly in orthopedics. The company successfully recruited over 750 new physicians in 2024, with a focus on orthopedic specialists, which is expected to significantly impact growth in 2025. Surgery Partners Inc (NASDAQ:SGRY) opened eight de novo facilities in 2024 and has 12 more in the pipeline, indicating a strong commitment to expanding their operational footprint. The company incurred higher than typical transaction and integration costs in 2024 due to an increased number of acquisitions and de novo investments. Operating cash flows in 2024 were lower than originally estimated due to increased variable costs associated with acquisitions, incremental interest costs, and restructuring expenses. Surgery Partners Inc (NASDAQ:SGRY) faces potential legislative risks related to site neutrality policies, although they estimate the worst-case scenario would impact only 1% of their net revenue. The company reported a change in the valuation allowance for deferred tax assets of $100 million, which could be misinterpreted as a negative financial indicator. Despite strong revenue growth, the company did not see significant operating leverage in the fourth quarter, with EBITDA in line with expectations despite a revenue beat. Q: Can you provide more details on the potential impact of site neutrality legislation on your revenue? A: J. Eric Evans, CEO, explained that the worst-case scenario would impact approximately 1% of revenue. However, the company expects a net positive effect as procedures may shift from traditional acute care systems to their facilities. David Doherty, CFO, added that the impact would be more significant in larger facilities than in ASCs, with about two-thirds of the exposure in larger facilities. Q: How is the weather and flu season affecting your Q1 guidance? A: David Doherty, CFO, stated that while there were some weather-related disruptions, most cases are rescheduled, and any fixed cost burdens have been factored into the guidance. The company expects Q1 to contribute about 23% of the annual revenue guidance and 18.5% of adjusted earnings. Q: Has the acquisition proposal from Bain Capital affected your M&A strategy for 2025? A: J. Eric Evans, CEO, noted that the proposal has not impacted their M&A strategy. The company continues to focus on its long-term growth algorithm, with a strong pipeline and recent acquisitions in California and Texas. Q: Can you elaborate on the divestitures and their impact on revenue? A: J. Eric Evans, CEO, explained that the divestitures were part of a portfolio analysis to focus on markets with better growth prospects. David Doherty, CFO, added that the divestitures account for less than 2% of the projected revenue growth for 2025. Q: What is the outlook for your revenue cycle and procurement initiatives? A: J. Eric Evans, CEO, mentioned that there is still significant opportunity in revenue cycle improvements and supply chain management. David Doherty, CFO, highlighted a three-day improvement in DSO and effective management of tariff exposures, indicating ongoing benefits from these initiatives. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Sign in to access your portfolio
