SGRY — Surgery Partners, Inc.

Surgery Partners Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Net Revenue: Approximately $811 million.
• Same-Facility Revenue Growth: 4.4%, aligning with expectations.
• Adjusted EBITDA: Approximately $102 million, with an adjusted EBITDA margin of 12.6%.
• Same-Facility Case Growth: 0.6%, below long-term growth expectations due to weather-related disruptions.
• Operating Cash Flow: Approximately $12 million, up from $6 million year-over-year.
• Net Leverage: Approximately 4.3x under credit agreement; GAAP net debt to adjusted EBITDA at 5.1x.
• Capital Deployment: $4 million in acquisitions during the quarter, with a target of $200 million for the year.

2. Strategic Updates and Business Highlights:

• Operational Stability: Early signs of recovery from headwinds faced in 2025, particularly in surgical hospitals.
• Organic Growth Focus: Continued emphasis on expanding surgical case volumes, especially in higher acuity procedures.
• Physician Recruitment: Approximately 140 physicians recruited, primarily in orthopedics and other priority specialties.
• De Novo Development: Opened one new facility, totaling nine new openings in the last 12 months, focusing on musculoskeletal services.
• Technological Investment: Portfolio includes 73 surgical robots, supporting higher acuity procedures.

3. Forward Guidance and Outlook:

• Full Year 2026 Revenue Guidance: $3.35 billion to $3.45 billion; adjusted EBITDA guidance of at least $530 million.
• Q2 Expectations: Revenue expected to represent 24% to 24.5% of annual target; adjusted EBITDA to be 23% to 23.5%.
• Long-Term Growth Strategy: Confidence in returning to consistent growth through operational efficiencies and M&A activities.

4. Challenges and Points of Concern:

• Case Growth Pressure: Weather-related disruptions impacted lower acuity case growth, affecting overall performance.
• Payer Mix Pressure: Modest pressure noted in payer mix, although trends are improving compared to late 2025.
• Cost Management Headwinds: Anticipated increases in provider taxes and reestablishment of incentive compensation may pressure margins in upcoming quarters.
• Interest Expense Increase: Year-over-year increase of approximately $7 million due to higher rates post-interest rate swap expiration.

5. Notable Q&A Insights:

• Operational Observations: COO Justin Oppenheimer emphasized a strong company culture and the importance of execution in driving organic growth and operational excellence.
• Payer Mix Dynamics: Management noted that while pressures remain, they are focused on recovering commercial market share and improving profitability.
• Portfolio Optimization: Advanced discussions on a key opportunity in a larger surgical hospital market, with a target announcement in mid-2026.
• Physician Recruitment Strategy: The focus remains on recruiting higher net revenue-generating physicians, with a balanced approach to replacing retirees and adding new talent.
• De Novo Facilities: Management highlighted the long-term growth potential of de novo centers, with plans for further consolidation in the future.

Overall, Surgery Partners demonstrated a solid start to 2026, with strategic initiatives in place to address challenges and capitalize on growth opportunities, despite facing some operational headwinds.