Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Surgery Partners Inc (SGRY, Financial) reported a net revenue of approximately $717 million, a growth of 7.7% over the prior-year quarter.
- Same-facility net revenues grew by 10.2% compared to the same period last year, driven by both case and net revenue per case growth.
- Adjusted EBITDA increased to $97.5 million, up 8.2% from the previous year, with margins improving by 10 basis points to 13.6%.
- Total joint replacements surged by 54% over the first quarter of 2023, indicating strong performance in higher acuity procedures.
- Surgery Partners Inc (SGRY) successfully closed acquisitions worth approximately $200 million to $250 million in the second quarter, demonstrating robust capital deployment activities.
Negative Points
- The company faces ongoing challenges with inflationary pressures, particularly related to labor and supply costs, although these are beginning to abate.
- Despite robust revenue growth, the company noted approximately $36 million in revenue headwinds due to facilities divested in 2023.
- Surgery Partners Inc (SGRY) continues to navigate complexities in managed care negotiations and state-based reimbursement programs which require careful management.
- The company's reliance on high-acuity procedures, while beneficial for revenue per case, necessitates continuous investment in physician recruitment and facility upgrades.
- While the company has a robust pipeline for acquisitions, the timing and execution of these deals can be unpredictable and may affect financial performance.
Q & A Highlights
Q: What is driving the significant number of deals in the second quarter, and can you share details on the margin profile for these assets?
A: Wayne DeVeydt, Executive Chairman of the Board, explained that the timing of the deals is a result of extensive relationship-building efforts from the previous year, culminating in the second quarter. He emphasized the ongoing robust pipeline for M&A, independent of macroeconomic factors, attributing it to the value Surgery Partners brings through partnerships. Eric Evans, CEO, added that the acquisitions are MSK-heavy, matching the overall portfolio's margin and seasonality, and highlighted the growth opportunities within the MSK service line, especially with new CMS changes.
Q: How should we think about the impact of Idaho payments on growth rates this year?
A: Eric Evans, CEO, clarified that Medicaid, including state programs like Idaho's, constitutes a small part (4%) of their business, both in cases and revenue. He emphasized that these programs are sustainable and expanding but will remain immaterial to the overall business. The timing of reimbursements under these programs can be unpredictable, which was a factor last year.
Q: Can you discuss the anticipated impact of revenue cycle initiatives now that you're on one clearing house?
A: David Doherty, CFO, stated that revenue cycle initiatives continue to contribute to growth, reflecting in the quarter's revenue and cash flows. Wayne DeVeydt added that these initiatives are expected to provide a long-term growth avenue, enhancing the company's ability to collect more efficiently for services rendered.
Q: What is the expected impact of calendar variations on volume numbers, considering concerns about Q1 performance?
A: Eric Evans, CEO, acknowledged the impact of weather and calendar on Q1 but expressed confidence in achieving the upper end or exceeding volume growth targets for the year. Wayne DeVeydt noted that while Q1 did not benefit from leap year adjustments, additional business days in Q3 and Q4 would positively impact volumes.
Q: How are the professional fees and other operating expenses expected to trend for the rest of the year following a double-digit increase?
A: David Doherty, CFO, explained that the increase in operating expenses in Q1 includes adjustments for provider taxes. He anticipates these costs will normalize throughout the year as they continue to manage margins effectively.
Q: Can you provide insights into the recruitment performance this quarter and expectations for the remainder of the year?
A: Eric Evans, CEO, highlighted the strong recruitment performance in Q1, driven by a data-focused veteran team targeting specific service lines. He expects recruitment to continue at an elevated pace throughout the year, contributing positively to the company's growth trajectory.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
