Surgery Partners Inc. Reports Strong Growth Amid Challenges

Surgery Partners Inc. ((SGRY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Surgery Partners Inc. recently held its earnings call, revealing a generally positive sentiment with strong revenue and case growth. The company successfully recruited new physicians and maintained a robust M&A pipeline, suggesting a promising business trajectory. However, concerns were raised regarding slight margin pressures, increased interest expenses, and cash flow challenges in the first quarter.

Strong Revenue and EBITDA Growth

Surgery Partners reported a net revenue of $776 million and an adjusted EBITDA of $103.9 million for the first quarter, aligning with expectations. This represents an 8% growth in net revenue and a nearly 7% increase in adjusted EBITDA compared to the previous year, highlighting the company’s financial strength.

Significant Surgical Case Growth

The company saw a 4.5% increase in surgical cases, performing over 160,000 procedures in the first quarter. Orthopedic cases grew by 3.4%, with total joint procedures experiencing a significant 22% increase, underscoring the company’s expanding surgical capabilities.

Successful Physician Recruitment

Surgery Partners added nearly 150 new physicians in the first quarter, expected to drive higher acuity cases. The revenue per physician from this new cohort increased by 14% compared to the previous year, indicating effective recruitment strategies.

Robust M&A Activity

In 2025, the company deployed $55 million to add five surgical facilities, maintaining a robust M&A pipeline. The effective multiple was under 8x adjusted EBITDA, reflecting strategic growth through acquisitions.

De Novo Facility Expansion

The company opened eight new facilities in 2024 and currently has ten under construction, focusing on high-acuity specialties like orthopedics. This expansion is part of the company’s strategy to enhance its service offerings.

Slight Margin Pressure

Surgery Partners experienced slight margin pressure due to a business mix that is expected to improve throughout the year. This indicates a temporary challenge that the company aims to address.

Interest Rate Exposure

The expiration of an interest rate swap at the end of the first quarter has led to higher interest costs, with a new cap at 5% compared to the previous 2.2%. This presents a financial headwind for the company.

First Quarter Cash Flow Challenges

Operating cash flows were lower in the first quarter, attributed to seasonal patterns and working capital activities, including higher distributions to physician partners. This highlights a temporary financial challenge.

Forward-Looking Guidance

Surgery Partners projects full-year revenue growth to reach or exceed 6%, with a liquidity position of over $615 million supporting its 2025 guidance of $3.3 to $3.45 billion in revenue and $555 to $565 million in adjusted EBITDA. The company plans to expand its capabilities by adding new physicians and investing in surgical robots, aiming for sustained growth.

In conclusion, Surgery Partners Inc.’s earnings call conveyed a positive outlook with strong growth in revenue and surgical cases, successful physician recruitment, and a robust M&A strategy. While facing challenges such as margin pressure and increased interest expenses, the company remains optimistic about its future growth trajectory.