• 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.

Positive Points

• 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.

Negative Points

• 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 & A Highlights

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.