Surgery Partners (SGRY) 9 Nov 172017 Q3 Earnings call transcript

Company Profile

Participants

Clifford Adlerz	Interim Chief Executive Officer
Teresa Sparks	CFO
Brian Tanquilut	Jefferies
Kevin Fischbeck	Bank of America/Merrill Lynch
Tejus Ujjani	Goldman Sachs Group Inc
Bill Sutherland	The Benchmark Company
John Ransom	Raymond James
Seth Canetto	Stifel
Frank Morgan	RBC Capital Markets
Kyle Smith	Jefferies LLC
Rishi Parikh	Barclays

Call transcript

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Operator

Good morning. And welcome to the Surgery Partners' Inc.

Third Quarter 2017 Earnings Conference Call. All participants will be in a listen only mode. [Operator Instructions] Please note this event is being recorded. to conference like Sparks. to now would turn over the Teresa I go Please ahead.

Teresa Sparks

Good you conference And today you, morning. Thank Operator. thank Partners' quarter for third for XXXX earnings call. Surgery us joining

Form me remind may the posted Act or management are statements and provided meaning on risks, Before we materially indicated any implied the certain about and begin, from report everyone during on to Securities factors such Surgery remarks XX-K make statements each in our this include does to forward-looking future and with and set constitute of of annual Private the statements. Form The that, those to that and prospects. the is of Partners' Such duty not call, report a statements. within Reform update filed in XX-Q statements other release let the company and These beliefs, results plans Exchange expectations, that XXXX. forward-looking estimates, Commission. factors subject risks quarterly Such are Securities variety forth actual website could by Litigation uncertainties earnings other anticipations, undertake on cause company's our differ such

quarterly over Interim . Clifford on can call Partners. in in in the considered surgerypartners.com call, our isolation I'll Additionally, XX-Q. during should release, of earnings or with presentation our income we and is Officer Surgery under our report evaluating posted a A Chief measures to earnings back accordance With non-GAAP adjusted our The GAAP. Form and adjusted be EBITDA can which GAAP as of the will for today's net that, in company be at discuss our believe found on performance. in turn calculated reconciliation information Adlerz, prepared Executive to net most results recent useful this be website not of substitute which additional

Clifford Adlerz

been has few in call. you joining months Interim thank Good morning. a for my dynamic role the It And CEO. as first

our was the wellbeing markets challenge areas. first of ensuring main impacting of our several in and and Our our colleagues these priority the was natural disasters safety

pleased of report are employees that to We are our okay. all

Our facilities our response suffered swift team appreciate by needs. entire we immediate damages the in addressing minor only and

my is to around three morning's this earnings call As up this like topics. frame I'd primary discussion

on each core First, want Teresa are about before ahead focus I'll of the more the an given through brief pre of with will and to I and financial to headwinds how our advantage outpatient our are clearly well around Surgery discipline in integration cost aligned number for our I'll moving quarter long-term efficient on year-to-date facilities. And of status on increasing NSH and and XXst. the efforts provide to of we and update are high operations. October outline improve a results we procedures Partners At third update stepping performance. which and these the of our finally achieve efforts is surgical state creating topics opportunities and onset am quality, provide related trend these some I to business three take undertaking the underlying release tailwinds an leveraging the to then growth of very efforts XXXX line the excited

NSH benefits scale this including investors. corresponding Integrating appropriate guidance to organization the setting achieve of Moving a more larger, organization. to on our growth and key is forward, objectives initiatives the several diversified focused providing

on same I'll to Focusing elaborate of results for and achieve margins, of on are that driving and the short by backdrop, and and facility increased performance facilities. our stay over efforts improvements With let core outlook. these facilities me to near evaluating the these organizational outpatient Teresa financial acquisitions our term completing in further but growth call enhance surgical focus hand update accretive action. items main short areas and on an surgical

Teresa Sparks

Cliff. Thanks

pre financial regarding saw their updated the we the business, we the during announced state on you select of the impact in transparency last results to any financial in order week quarter XXXX challenges greater As results. and quarter face provide for and our guidance

and the $XXX.X from increased Total XX.X% X.X% to offset basis total the by one $XXX a to total partially reflect quarter business, the revenues NSH hurricanes. For contribution of of revenues quarter, the for of $XXX.X normalized industry revenues impact third revenues of certain the from million million XXXX. increased million. headwinds On month

one our from the a As hurricanes prerelease. impact time in reminder, for the well disclosed adjusted as earnings normalized as adjustment is revenue

payor. revenues and seen result net of a normalized by slight in a X.X%, and Our reflecting a in increased is in basis forma commercial government NSH revenue both same case have stabilization facility increase offset pro a case On which per we sequential between the the X.X% mix the decrease quarter volumes. payor basis, acquisition on in

from EBITDA declined decline driven an duty of an and adverse revenue compared XX.X% higher margin quarter shift supply in This primarily adjusted third year. increase a medical XX.X% our commercial. implant cases the last and normalized by basis was driven of on to payor Our to by mix within margin as cost

$XX.X in on $XXX.X million, procurement same XXXX XXXX. this increased was year-to-date from period quarter up XXXX. increased year-to-date We $XX.X for EBITDA of quarter a elaborate supplies. same million, medical moment. will X.X% revenues margin impact launched normalized revenues from million during initiatives period to to and the of third last charges million our during year. of On adjusted a On $XXX.X specific compared the to $XXX.X million $XXX.X basis to prerelease and have with excludes address a earnings identified in Normalized hurricanes third the Cliff which the on focus

X.X% normalized Additionally, basis cases per revenues case X.X%. in our of an acquisition, on net the NSH increase increased a forma increase pro and and the facility for X.X% with same revenue in

to Net under has financial including capital operating million company an approximately $X.X approximately and availability operating ended expenses of $XX.X million sheet. cash turning and less to covenant notes. Now with of facility. tax on loan the $XXX flexible flow non-controlling no payments flow, adjusting We million of or and term balance $XX the the merger million. appropriately quarter interest cash credit revolving The cash unsecured with for equivalence the related distributions receivable and senior our were structure our

Our balance growth sheet is well positioned and inorganic cash initiatives. with ample fund organic both to

items his the in call for of to to $XXX towards disclosed expectations anticipated $XXX billon business of our assessing and the our Finally, EBITDA adjustment company's more back the impact including certain year remainder outlook adjusted initiative. hurricanes prerelease. in to performance. of million, and reserve partial highlights of the as is for our $X.X This non the of $X.XX for of for expected the impact is which performing NSH billion the hand acquisition earnings With recurring the full range the range million is year over which now conservative of the efforts XXXX XXXX. of the integration revenue and the the in Cliff normalization impact commentary that me for and approach Cliff? on let The operational inclusive

Clifford Adlerz

Thanks Teresa.

about industry we for term feel the impacted more than our create and ever our ability certain growth. by near were quarter profitable and hurricanes, to long-term headwinds business outlook the the confident Although

larger diversified providers. believe on services, procedures the set seamless integration quality, a of a operating and our as patients, delivering on of that in on effective current combined focused a cost more integration is high growing to will proceeding surgical number effective payors The expected. leverage focus to scale company and of assets. is the core NSH Our be the We opportunity operating

beginning are organization. operate to We scale larger with efficiencies and of a a

physicians. XXX of As practices physician a a affiliated and in facilities, reminder, with the combined than company portfolio more ancillary and surgical XX X,XXX services now complementary has states operates XX

with majority unique $XX captured challenges our in We rate run continue the to underlying synergies deliver continue core to in XXXX. the the in expect growth. assets quarter, approximately million Despite

compared our same stated, quarter procedures We demonstrates growth facility As a the third growth revenue X.X% quarter and to as growth same was in the market continued for previously than and the of year-to-date underlying rates demand facility on surgical facilities. X.X% outpatient strong the XXXX basis. of we believe year-to-date exhibited

the are cost expected new marketing are recruitment as proposal procedures business proposed that our is pay add These to target list. even a CMS in short to strengthened driver to to that initiatives for surgical surgical growth ASC convicted procedures rules to high facilities. business more long-term and stay towards We covered trend settings its expand coupled long represents a patient the significant quality, with increase dividends three belief further was our is opportunity our effective for the in market finalizing more This term. our procedures is

initiatives of limited growth in accelerate We a our expanding to recruitment lines our are team growth our supportive of first on acquisitions. support our but strategy focus which We've total be launched number primary forward. our joints. also not positioned leveraging of positive long-term including to industry, facility sheet comprised same and surgery balance our and over our organic the trends well dedicated marketing assets tuck-in or stay enhancing initiative additional including and capitalize growth to new relate of service XX% capabilities This revenue will to will moving short be to

the by opportunities analyzing combined opportunities we margins a better practices deep initially when than power already and of utilizing We've assessment such anticipated of purchasing across the the NSH improve believe organization. to the acquisition. harnessing entities initiatives procurement dive and implementing Second, the completed are best had

to enable to us the understand, act procedures. opportunities locations improvements evaluate tools Third, on and across fully leveraging analytical for our all enhanced and margin

We underway we resources, and term and actions. These external sustainable enter the a and actively deliver business organic are a on to teams stronger, financial will take position with such programs other with performance. and initiatives improved, basis. that time action growth efforts diversified internal our more taking dedicated believe Importantly, specific real will and opportunities will this implementing dynamic more long-term company XXXX near maximize

XXXX tailwinds. to and Moving headwinds

acquisition the improved regarding We optimistic opportunities for are XXXX. in

cash to Related of of $XX and accretive at $XXX of new with Ben to Development payor, balance significant inorganically tuck-in continue for actions Officer sheet, leadership the NSH. to A invest Jacobs formally to are in we the the in care tailwinds custody the do integration softness and remain a run million approximately Partners, of repeat resulting hurricanes are we in $XX number Surgery we synergies significant begin year with NSH hopeful our that enter new synergies to positioned XXXX, within healthy coupled organically with be in execute, are our pipeline the balance we While under to our over well to achieve XXXX in including addition and million our in deployment our industry undrawn initiatives as both of confident Chief growth. approximately taken for we to from of encountered revolver, strong XXXX. the aforementioned the have build million we not we sheet that and ability rate acquisitions in

being surgical stay We of our have surgery and operator, outpatients independent partner focus. setting. short for We procedures. positioning facility who growth musculoskeletal heading trajectory. the our look M&A will on add focused particularly currently This us unmanageable XXXX; our the initiatives benefits and focused strategically any to do premier strategy a predominantly short with nation's executing the refocused on Through significant disciplined into tuck-in our short facilities to desire headwinds will on effort focus physicians forward the largest, stay be see strategy begin as surgical those to with stay renewed not

guidance XXXX. to like session. the in during call February the turn detail quarter our operator more provide over the will to earnings fourth to back now question-and-answer begin call I'd We

Operator

Please from comes go question Brian Tanquilut first Our ahead. Jefferies. with Instructions] [Operator

Brian Tanquilut

Cliff, welcome Surgery to back Partners. guess I the

assets the question are portfolio. know you First you. these lot that a of for Obviously in

you you block things tackling this coming think few a pivot assets that strategy this the it this issues? through mind last to is or were the the So get need of in Where we as the where to from what your the growth kind at the about these outside in crack? business? fix a story back the to to need and do more a years. point is certain know of I fell you basic things have point you So so watch national think I over in you And said

Clifford Adlerz

team thanks big running. It's come and no, in I hit turnaround kind XX% the believe and senior see I great to know just the even you really VP focus a like as a ground level I group in don't is short and of or - don't and back our over our group is It Yes, a really here, down a and be familiarity with team surgical it got the got assets of so. I Brian. great our stay of are management facility. situation pivot. and not to great operators issue is presidents our good who

should we outpatient very business patient forward are trends So going feel extremely a focus in outcome low that cost positive so cost patient all and great business, that business the shift, we that effective, know that well, setting, high inpatient it's good long really about be the our term. satisfaction,

in and assets it's our on core business assets. optimize starting our So those I really focusing think core and

Brian Tanquilut

stabilizing it. the as Got the quarter good then about performance revenue be I seems your pretty to and Teresa as in right. And hurricanes payor think mix look actually

see higher So of we in. think to push room or given those is these all coming or know patients are I higher cases that about and ortho margins there types how but should the right of now -- talk even types we you taking about acuity ample reset you this is in things margin cases as procurement

Teresa Sparks

Yes, question. good

margin look on we although the are CMS acuity in supported had just we with an has towards from our of shift aligned cases in Cliff the as payor. perspective mentioned commercial and a very to broader business that inpatient from the industry outpatient terms trends trends to as seeing So impact by business obviously well at the

emerges being think our our really that lower cost. trend clearly as and profile having margin particularly and these implant our does focus upon as business focuses we about supplies So accelerate the attention continues cases to a that

are really based term on a term bringing And long standpoint and to GPO, to restructuring these tiers trends term procurement term supplies, you things so really opportunity physician higher look continuum near cost leveraging term related acuity on those NSH and rebate, with opportunities that and combining you pricing that the long perspective near the initiative of those to focusing at term focus cases GPO, near on preference and , you a address from to med in move supply item. together near from

tackling we about way it, the really think think business that's improving So about and the margin.

Clifford Adlerz

we warehouses outside think helpful resources some on analytics, very We've for sometime to data is also building information time a be real with getting got focus going that and we in and time we are improve and that give real partners which us care will focusing data time effort real finishing trending contracting managed case us will information, data. give on up costing, improved

to structure in our got start missing cases. that to acuity about do quickly we make those we our higher cases sure opportunity if we've for So in and very of those and cost evaluate cases got determine and/or what structure line we've types need revenue

I a to group those efforts addition are they dedicated we've a So infrastructure. using physician expanding They company good our think have the team, in got analytics in sales target recruitment. sales very very and strong to

just with is in So make it's sure surgery then developing same market to effort group group matter other centers. expanding store our And of a now acquisitions are cohort supporting presidents and we that our really in really tuck-in market. right our that

and we thing So we've bit kind have presidents rebuild market. the that group capital know to develop little our of that our letting are we to and ability got pipeline ready

physician or market portfolio in looking ASCs combine have or markets do holding we you are if one our into so in the another that. to ASC combine at at ASCs So off a ability then our into are that if of you one smaller acquisitions we looking to

know our well. the because growth to that. market And that's we do have for often capital do And we that. effective development We have team us to very the so

started we've that So will in help some we think place tremendously. got initiatives already us

Operator

comes with from Please Fischbeck ahead. question next Our BOAML. go Kevin

Kevin Fischbeck

Great, thanks.

it guess pushed thought the going of and companies weak guys year back I to because included of seasonality seasonality? half was is in volumes the year around throughout So the high are rebound to what I first saw you be you or pace, guidance volumes your an normal the volumes seasonality QX? Is QX forecasting of half still in growth high accelerated a assumption deductible

Teresa Sparks

Yes. Thanks Kevin.

persist those we quarter So in seasonality as trends the third fourth some emerging in that muted really you second in layout mean would fourth I quarter then really in and expected these and the identify projections quarter. trends the our continuing mentioned with the

quarter. from projections laid thoughts the and how fourth related that out QX to So perspective we is our

Kevin Fischbeck

right. All

given you backdrop, that headwinds muted that for any in perspective, you it next are weren’t sounds this holistic there unmanageable thought this about is I more taking for in there next better next reason like the year. So this for year. about growth business the even hurricanes talking I or that talked about the headwinds am your is year year I industry mean will year in think like specifically, just is year, a that next When tailwinds likely seen you've indicated and from guess the backdrop guess are core year the after year. the industry I the this really to of you view pressure that you industry year when think to that than a be it the growth the the assumption not persist

Clifford Adlerz

timing next like about that But but that tailwinds and the base for is obviously are timing -- into CMS going for on rule near the be specifically. we business next with is there that from uncertain push enhanced into of as outpatient we Yes, Depending cases know this has the that's emerged the has think to the just acceptance at the we've continued term. established a going setting. inpatient we larger NSH and towards there, definitely platform the as opportunities forward feel from out year look perspective into the us a certainly ASC year point final we

far mentioned XXXX. more and specific rate some to to to growth and point initiatives So normalized I of all those a think definitely normalized return Cliff things approach as that things as

Kevin Fischbeck

about X tuck-in company on you I How guess organically fact some I sense I term X in maybe X think or past that? longer rate do really rate on re we plus talked then the building right guess think then centers X growth deals and business that what specifically to get appreciate to growth center some some about that help that the about the focus mostly think guess how focusing XXXX you X this the or about business? are X Okay. think acquisition X to some core X that new you ancillary and long blocks do would can you you the deals. and then make us What surgery and I does the not surgery think guys

Teresa Sparks

data Well I revenue I you you absence the actually over XX%. as quarter M&A pointing year, of were our around can for give XX% our assets some of color in point company to third next surgical think And specifically mentioned on spend. core the we is refocused Cliff which in mentioned the specific at we

that of how core the that with the gives of NSH platform to and an material combined So is indicator business. you just and the kind new

year, to year surgical our in So million continue our going that's I expect largely about next you think spend to I as level facilities. following on normalized spend in look focused transaction a talked the terms We'll for $XXX primarily physician of we about we had each M&A good the on overall roughly year think very us spend. target capital M&A muted approach at up we circled think lower a and can focused one into transaction practice off a as

the did of couple one about we points and business and move how point data we So thought the year. year have you just the data we another throughout a about throughout as think as

We high and for kind and peg trends the from same just year the of to X% kind year. the emerging. through growth of range If for is in that the of end move X% facility did which the that we the land on X% saw quarter as X% you

underway. line our our it's being about as cost. supplies, focus to top And converting revenue initiative the then think secure levels and related med So and on a at med of matter primarily related initiatives those to is which revenue those are we focused well specifically implant

that talk beyond and that's outline today. XXXX to we So just ready absence metric are we how really I about of would specific in think not the

Kevin Fischbeck

within Medicare happened commercial commercial, mix Okay. payor there negative stable there? you mentioned perspective And what then was was you explain from but mix can that shift

Clifford Adlerz

Yes.

I sequentially between So highlight well stabilize we points think mix the as from wanted of mix is the payor of did to see and government payor as in just this mix terms that one commercial. couple quarter-over-quarter in just we

we payor get some Number standard a things commercial mix. mean a within bucket continuing one, that's to so still we from However, to new trends just about the affect has we we shift that I vendors seeing variability that are again commercial commercial where are the moving rate the pressure are and with are the to been increases rapidly seeing tax rate our been and we've responding consistent, new higher our trend emerged talking of those like on this -- cases. are side. these cost is to acuity payors are

so commercial we through pockets mix that continued that workers business. of that pressure some pockets where within some had just some rate existed variability for we've some commercial variability we the that prevailing and commercial is within where network mix side and not the but And have the example had on has pressure throughout comp had

Kevin Fischbeck

Okay guess talk lastly could mentioned press release about and account then there? if in you happened receivables, the what you I

Clifford Adlerz

Yes.

the as primarily we we to a known the that very had give as decided related can a some quarter is really During probability of events. a that results collection -- those has to and known there and quarter and I record event we evaluate known rate known older certain XXXX result to quarter because we of of collection we but prior of we back but where and been dating us gave have of we new that had mentioned this information to those and prior quarter a as where it some we determine four those environment in that accounts look segments probability give ancillary XXXX occurred to that and had take examples I events information that some certain during know that live the the have and new accounts you of data information can really low together that first these at quarter events that of services first back really to volatile new all they kind

Kevin Fischbeck

Examples be great. would Yes.

Clifford Adlerz

Yes.

example this in services again For in contract in side a go the is we into quarter the ancillary entered primarily to third network.

network just this So particular one payor is with again example. and we at out were

see it's of management related new and make do of everything opportunity this to settle independent as that's outstanding so into to contract with typically there forward those there clean and that a have let's that it going contract as contract you'll time negotiations, its what part to from want the is under to time we And business and disputing, been of which settle has enter decision forward in when this because of the take standpoint you the you has old forward. that taking merit terms but going again those slate are anything contract and discussion you going if payor, that's -- in slate its let's to that's contracts is at on has resources but entering also up, merit forward. And hey into this own be its been point wipe and right sort own been business we've sure on that that out that own, account, move stands stand clean the wipe

So as those result a entering of occurred that payor contract. in settlement into network

Kevin Fischbeck

some business over so at ultimate network? of AR issue run about out have a of booking revenue year issue, EBITDA like AR old the old more rate effect ongoing the changing at views your last not last And that collection rate because why and reason point still year you the conservative it's run is rate the

Clifford Adlerz

that's exactly Yes, right.

really and at exactly first booking XXXX going did those agreed it basically were those-- So dispute those accounts pivot time but contract older of that was in forward. in then and upon rates leave point made that quarter that

Operator

Our comes Please go Goldman Tejus next Sachs. from ahead. question with Ujjani

Tejus Ujjani

Tejus its here Hi, thanks.

lab clinical Just staying on recent expecting schedule? any from lab are the you impact fee there, topic updates

Clifford Adlerz

the for thanks Yes, Tejus. Hey, question.

really business, finalized FFEMA November reimbursement you of standpoint rules in impact the were $X and in retain is As will you going rate company from of the scope revenue of year. the terms and the any all expected will of impact we to less forward. that next know is us an look to than reduction overall significant but immaterial be want the dollar the million which -- have overall important it at we When of

Tejus Ujjani

Great, very much. thanks

question earnings back a I sense you Just going normalized I trying XXXX rate that for to exit are as expected year am are that not we as of XXXX get just what's any but to providing guidance acquisitions your know end. we think closed of base another EBITDA run they of should about.

Clifford Adlerz

Yes.

off So we bigger result our as one transaction we on NSH we attention the M&A talked about emerged beginning year as that, the in really focused on diverted a of the NSH transaction.

base just that for transaction. thing so to pro really the is this you the into year, that's only forma need the really And would NSH

Tejus Ujjani

of exiting run weather assuming but normalized the these what is for everything power No was rate of end year on like or QX the business. the accounting like seasonality guess I items EBITDA

to the do rate future business Forget just growth expect be? what curious rate on about run you

Clifford Adlerz

a even take XXX, on range of the the we basis quarter would be range. fourth low the difficult to of I it's forma it's Well call it end as in sort of pro the think

quarter can it's always continue the while of which that projecting we are trends to it's sort annualize the that annualize annualizing have for the the You fourth difficult business always take quarter. fourth and even tricky but to

the forma two business the it about year. today stands the and of as synergies for pro things. think One, would I next the expected So

Tejus Ujjani

Okay.

So kind of like - XXX plus that XX is

Clifford Adlerz

we very a so you --in could XX say is into the year Well, general two I synergy timeframe would captured plus over that XX about think the would XXXX. think be term XXX how

Tejus Ujjani

from Got you. expect EBITDA growth And topic how it, you follow the that's of on thank and M&A. can to just much helpful,

done deal. the You've sizeable NSH

got chunk of a the understand organization strategy guess trying still rolling But for from this you you your of within practices. you sense I is pro am but side opposed M&A a just you because from kind big this ASC to from actual I now? hospitals facility got of have that how I outpatient. of lot physicians I mostly are it are understand now M&A makes larger focused contribution surgical hospital ASCs, EBITDA you But facilities the think is smaller you forward of much a up base going to XX% about assets if base have any that's as forma on the EBITDA side there the larger concern about hospital more is

Clifford Adlerz

so. stay think market. don't I short surgery I No. the we mean generally in consider ourselves

from it's M&A the all or surgical opportunity stay whether to comes short surgery develop ASCs facility. our So hospitals

So spend get million that's hospital. will EBITDA approximately centers us at look from surgery or surgery surgical whether short stay and we that $XXX

which think So acquisitions we on. is expand facility are as we our to well type M&A indifferent a that great tuck-in as the arenas as to footprint, opportunity there focused both but in we of are

kind is think and great stay So are multi independent expand to I ability there company only there. again of a short the out we specialty surgery

great develop business. think So a we we opportunity to have the

Tejus Ujjani

potentially that - et kind how runway give sense less many fragmented centers more there mean familiar is specially that I hospitals a But of of physicians if I I many of roughly what just is opportunity on law don't the there. can out are to these clarify on based what think you that think of there, Yes. I I them guess in of you people known so rough still X,XXX can't most the could lot of surgical landscape with free us think current independent the the I US, sense. standing or around highly a cetera M&A are be so space think the how and lot are makes that And a US target. build people ASC familiar centers just

Clifford Adlerz

Yes.

and is XXX there. there think still out over I plus physicians hospital surgical

And that's opportunity facilities us. so still you obviously ownership cap on shares of ownership. within that that move acquire ownership for is those but and great physician within a is could the There

an and go So into ability you it. an it asset underperforming have develop to retool and

the still there area. as well in surgical opportunity So as lot a hospital the area ASC of

there is a for think I time. continue plenty quite we opportunities develop So like opportunity long a both to company our to of and there

Teresa Sparks

markets in executed the ancillary Tejus hospital is to side, services on market. to we've surgical well thing across the done continue couple in particularly very one those particular and expand a platform that in of

those acquiring expansion of facility, and/or there that opportunity market. that practices, each So of a out a across within within benefit an network, within lot is platform those of from enormous hospitals and an wound the whether had in effectively rolling of care bed standpoint have on medical very physician our executed care, urgent and ancillary some we've existing the and market existing without oncology, success amount

Tejus Ujjani

ASC? promise. question room many thanks. hospitals surgical on I Great, having average versus operating Last your are How

Clifford Adlerz

Well, varies XX and they we -- to standpoint can they I beds. from XX beds up -- bed especially can have mean a

it's a range. wide So

Clifford Adlerz

be X it Yes, the on facility. to could to depending X or/are just X

range reasonable. of say I'd X X a So is to

Tejus Ujjani

the For hospital you are saying.

Clifford Adlerz

to but XX% point outpatient nature. are Right your they in

So I on. think to this focus is

Operator

question Bill Company. with comes ahead. Please Sutherland Our Benchmark next from go

Bill Sutherland

you early its all going take of be a Thanks, the impact to course to of through good or is that you? making. could going is procurement give that And morning. XXXX anyway the move you year? Are any us on something quite to the thinking sense much of I efforts in bit of how are curious am

Clifford Adlerz

estimate right to hard just because an has give It's started. effort that now Yes.

purchasing for it's be given example we sneaking from to physicians that implant with the we cost and net we opportunity and we if the different after we But be pricing get for at that. be should right that back our lower preference the if phase and two effort look to with the a but now for able it started We determine to of about just that. items rebate contracts we data would difficult just and GPOs, has about think some spend are will certainly opportunity first you pricing, get items are maybe going now take until certain to maybe the but think first predict change flow combined you physicians renegotiate because the phase price we companies estimate after two very throughout -- are the where right now the the will starting phase partners so year get with will to what using that difficult down that It to other our compare best and implant. work

that just through have on any tell rollout to purchasing definitely will early the now. returns right do are have have it great first benefit, items since currently but So will and a it's don't year too we pricing phase on we getting early But we effort that. that underway

Bill Sutherland

been it seeing look kind there sorry, areas from you To out Teresa. seeing utilization else and Is what that disruption then occur go obviously you in date seasonal have to to related ahead the still issue of degree widespread? where -- been some quarter of and are everyone October. uptick been normal has and the sense and aside still with Yes, pocket cost. Make all at that's you this

Clifford Adlerz

No, somewhat that's hurricanes to of think fourth into residual It's fourth point. the quarter. into clouded just today. visibility primarily what of impact quarter due that has And the a the the been we good rolling I the first have part visibility

Some facilities of then had to closed a that our three facilities number weeks. were of closed were for we three but days

And so impact of close and to we way you really of life. and extended back struggling up that that gives the of community sort the where had ramp to the quo status on normal indication an period community

emerge impact we it as thought about visibility residual fourth the that and seasonality trends of So the return quarter hurricane. the for to clouded to somewhat I looking was the that and think by

Bill Sutherland

quarters? which what the most thankfully first to of the three to we've do your is in is feel country you the like what kind normalcy So country, of if seen parts degree you un-impacted the just through compared seasonality of to look there

Teresa Sparks

with returned the Yes, site it country in you where pockets that mostly fourth XX -- a of there has seeing are not quarter are other multi and demand are the are pockets operates expect would the in return. but as vast there states we there where

would at across prudent experienced would industry we point but and we to -- obviously seasonality and the that trends what projections those are the consistent our expecting been in hearing that third broader trends that encouraged are fourth. into with second remained they return quarter we but process trends So the I and and I that think we've the broader are board the fact this prudent think

Bill Sutherland

Okay.

in So year range? mix. it's XXXX that's a same what your full of store guide is your implied then kind And

Clifford Adlerz

Yes.

the I -- So X% have I point X.X% third the and the think into I am kind year-to-date. X.X% quarter sorry in in of

still what the expectation expected guidance. think flat. had I we volume the projected we kind our with that's to trends pick fourth; the through reflected basically things Again but in the be of just is in

Bill Sutherland

you That's very some Okay. okay. With Thank pricing, much. it.

Operator

comes with Please ahead. from John James. next question go Ransom Raymond Our

John Ransom

Good morning, everybody. Cliff, welcome back.

of When it orthopedic pain and down, kind drill Just more or specialty implant other? the you about talk have good lot of is questions than a asked. is been pressure that costs one

Clifford Adlerz

out on good we and and orthopedic going cases on about we that but it's those making But revenue joint pain, and we the job while of pain cases our that It's and cost developing now manage those need a recruiting sure done understand side. procedures. down we've to and total focus both

John Ransom

Okay.

that EBITDA made Is when an doctor able public provide capital. being to no lot longer which incredible two to the practices just of case? know seemed of to years three little use company a was became the be these I Now ago there us for times

Clifford Adlerz

acquiring are our we still interested John and think saying No. but our surgery tuck-ins and it in centers be support we what obviously I very to are markets. practices will

you their so focus assets independent is definitely our in physician on toolkit not one as employment, are and have toolkit have independent for all those they far off That's size. off physician as the employment our we physicians we saying not acquisition acquisitions, will acquire we market as they our well supporting operators we use. merger market toolkit look are our if going on. the are markets what surgery going of at market. our group and to to operators within are So toolkit developing In go What Those are going of they physician as out have. tuck-ins just and what recruitment to to outside to focus our a core one

do going continue to surgery and will center we support we to asset. So our those core are

John Ransom

Okay.

acquisition, your to and that take So the is if the you what and now where mix with at with by like three M&A look you strategy. would strategy top your procedure revenue development company

Teresa Sparks

Right.

base the multi are leverages cases those result is that as to it type of GI when a margin continues platform these still that I of overall, We which stand you still and your basis. the that or of bring an required. the higher the We will in mix even the specialty trend you higher bread cases incremental that and orthopedic. from fixed compression think standpoint if facility inherent individual cases about total as and is if far really cases joint you are ophthalmology diverse, kind acuity the as about that the has squad as revenue it mean just your enhances think covering covering be the pain butter you have implant on very a and cost, into

we we for and multi specialty for most. off business the and to go to steady orthopedic opportunity accommodate eye M&A are interests have pain the state that's always lines always environment of proven which of And be butter good ophthalmology the and has GI us bread us the the business out look we so But as side what is not and taking our that.

John Ransom

Thanks. as expensive patient maybe Cliff business are from mean I -- and kind better at manage that But other learned pain is guess in It in And the volatility mean mix -- deadly what onboard -- experience question a you you margin. way business money when shift to thinking a I be. with that had of loser look your so What is I that don't much mean coming something know a a business last are I've may what that business. an new and you commercial not that I what well. there you that have you implant -- I was patient me sacks of a I some is that Medicare been the of as for of you took like

Clifford Adlerz

No.

is still business a there there. I think good

pain recruit developing correctly physician we managing specialty employed the And I that base we opportunity. we think and business. I do got there well manage an if it's particularly got the lines definitely that think of to focus that we side But on business I We a multi develop for can other we've Florida. just business just make our sure physicians business. think to like opportunity And there of that an is understand along business got We we our with down it like said to us Teresa sure with other as is develop on is in it. focus lot and the our got implants and think it. our orthopedic but to make we quite opportunity

an good So matter focus, business. in the I of is there again for think it are just stay but we there sure. fundamentals just opportunity kind with understanding It's the

Operator

from ahead. Canetto comes Seth question with next Our Stifel. go Please

Seth Canetto

My Hey, question on your good morning. is commentary. just opening

you in assessment said the program? You opportunity guys for deep what you anticipated better just that a than unpack you be a led comment that mentioned optimization find procurement you that margin, that kind NSH. to it, the are that dive really initially is and what completed Can Is reflected did little of more? the opportunities

Clifford Adlerz

Yes.

you I manage the you those go get kind and of to so implant but cases leverage look the think something best from like size both go it's now you to our to out company, to gives getting you if and cases best making side. of the renegotiate practices the about opportunity also leverage and renegotiate, the revenue you -- starting sure out practices just pricing implant think combined gives better, companies best if

is that a just negotiate I one the there getting. to are there think already items net other system and just out immediate looking pricing the is go pricing or opportunity opportunity that we that both is great best currently buying companies from the and at company there across for an

we feel change get second -- working phase we do with then So opportunity of so you you can our phase long probably developing that term maybe like is implant to haven't there third gotten good that's of we when two, that and to. purchasing because how start opportunity a behavior get cost some a physicians see kind our lower also in

what makes terms feel opportunity the and best to using So kind to longer get there seeing we and think to here. of I it are resource get term opportunity an like procurement pricing this you immediate a referring in opportunity outside that's is of there

Seth Canetto

And All million synergies the the mentioned majority then right, in in with you XXXX. realized $XX great.

are synergies pricing Given captured that any are assumed XQ opportunity XQ, in there you your in you guidance? that immediate

Teresa Sparks

Yes.

to level operational about So and other half with $XX the team related general that down duplicative there. synergies would operational initiatives roughly and the to XX% headcounts and is supplies, think in of as that related expect roughly initiatives you you procurement remaining million just that and corporate in executive break having the you headcount to other XX% corporate duplicate

the -- identified been So so extent XX% roughly and that that XX% to focused corporate has and of is the headcount on forth executed.

So month pro been is quarter to there fourth effect. rata and in the quarter the continue some a third those from that and synergies as into we reflected have operate business the to

Seth Canetto

just mentioned the were days, impact on then three some three to hurricane. some closed up And you the great. for know weeks. $X facilities Okay, I focusing million from

slower in about XX quarter EBITDA XQ that that volumes well given just relative in states because high trickles that should million the and is are kind you impact mean expecting and the in $X of XQ some that? how seems are to as Just you like it I we think of is into

Teresa Sparks

that to impacted. But Georgia ASCs that quarter. range of one impacted. keep have projected so at were has we gave in Corpus XX midpoint and you hospital even we normalized NSH two a and We outcome Savanna, hospitals third Christi look that and mind were in Yes. roughly peg the the have

primarily been that in our And as well are the facility base, so surgical Florida. just as focused ancillaries

you surgical a where revenue and the you a practice lose closure well. the facility, from have lose physician of as So you lab anesthesia,

back so physicians effect just up there and normal. communities quarter. So of staff is to to leaves leave, evacuation were flow mandatory that the These they in ancillary and clinical ramp

Operator

Our RBC. ahead Morgan comes Please go next from with Frank question

Frank Morgan

any curious and around hear cost replacements would to by a focus hopped the some just on to surgery bit asset but really the in base volume knee any taking that the top just rules great. little strategies just on have. outpatient just line strategies and color service opportunity. commentary Really been differential share. opportunities Thanks. line out want there from new But late just also but am just final have any growth And really drive to be questions if of coming specifically morning. the management specifically then and see that know going already rate I laboratory within you rate organic the Good base there on we of there. procurement you opportunity of I I lot surgery, market you color asked. so is on you terms curious that I related and that forward growth the

Clifford Adlerz

a talk growth about I'll side. little bit the

I targeted sales They have specific areas that got a now I developing process analytics and in function is add specific and immediate us and markets think to think the add to will very their our develop term start to as earlier are in that start solid team refine They recruitment in company. so developing. markets. immediately long continue business they have we've of we refer and and to our resource to infrastructure, great here use going help effort our is where

those that up kind pay is and our pipeline is for. dividends area just had opportunity I tuck-ins in of always other to market solid presidents think We've of just and the the we'll group acquisitions. a opening

think two those single an and centers, those our a are multi opportunities acquiring one for focused that on opportunity. us is into specialty hospitals whether a ASC, we specialty tremendous So there identifying combining then there and acquiring center, getting specialty multi I of opportunity converting surgical

that then our pay us and So opportunities. market think future dividends will developing obviously for we in the new

go at and a out look market building opportunity. team to are development We new

So line force will after our that all core forward going their product markets. I development think these a physician be end market a operators going particularly but that's activities our driver acquisition, the develop will help -- recruitment tuck-in

Teresa Sparks

of point procedures obviously think inpatient that shifting type view total a a I from which side think this announced of to this of XX% we we into the only it anticipate as the to kind the just orthopedic outpatient phased cases last precursor in service a discount. very much inpatient part standpoint, the month a view pricing as service of far of final to rule are as your the as the is standpoint to a perform at positive CMS to this interest the from reminder, side as just approach really a and joint I appropriate question from their as a rule we ASCs in which allowing still in

the So appropriate encouragement see side getting there in is again is and of and precursor the CMS phased service. we rule to approach finally this a to

Frank Morgan

Got I'll one hop. you. and final Maybe then

Just acquisition South Thanks. update any couple down one some practice brought Georgia you any your on any kind that color there, of a ago. Any the on progress in that quarters problems front. or update

Teresa Sparks

anniversaried now. financial business the line Sure. Hopefully if impact. terms of in and of you platform that the practice with is larger about think platform, new Jacksonville isolated We've in

We are on our continuing to plan. execute

leadership and challenges with that physician there plan few challenges. those a have that had I think are we executing through really working

that I plans, you focus of think we the such in the good smaller so those company business and overall see kind that combined operational component will to NSH while within our again specially or a the impact on combined continue that news the such -- become of hear less you light transaction saw is a from perspective going as even there we us about talk of it we the -- practice. and financially anniversaried financial is decline less will impact forward in from

Operator

Okay.

from with Please question next comes go Our Smith Jefferies. Kyle ahead.

Kyle Smith

here. back Yes, good aboard morning. welcome Cliff,

have First leadership balance follow-on company's and been the here, with the leverage? changes and target thoughts question me the is any about for changes sheet in ownership to there

Teresa Sparks

Yes.

about think mentioned appropriately flexible for the company. balance balance as is we both we sheet As sheet the the

sheet. cash balance on the We approximately $XXX have million of

we We on and have technical a a do from covenant have terms draw down at the XX% no financial springing revolver. covenant

current phase it's So in is X.Xx.

financial covenant. have we no again So

M&A sufficient in sheet. We And the about to and on grow expand the of opportunities business excited are growth. have and deploy manner opportunities terms we continue leverage capital the those and that continue on to focusing balance to neutral cash

Kyle Smith

in repayment. of focusing about And how debt on terms

relatively that that you're inexpensive a little this down that's road? giving in capital longer-dated something coupon the for to but got maturity. got is further shorter bond at point? Or bit you've You've Is consideration there, high

Clifford Adlerz

about alternative this considering I in settled structure we we in road. August cash our saying settled and sheet that so will XX like newly with and we are we the we point term since are feel capital of always am balance newly point having terms strategic this balance flexibility sheet our at Yes. and are to and enjoying down at on think disclosed the but user into revolver the we I are

Kyle Smith

some And first how physician that? what's quickly great. could areas leadership physician How question, then open realize of was the its in of opportunity there? And listed. item a been up leadership magnitude recruiting there physician solid a unlock, you you year the underutilized facilities the physician the past big was think challenges over just magnitude wondering Okay, was a whether And docs, where challenges, recruitment I that in initiative the can I of value. that can retired is in couple couple here. a have

Clifford Adlerz

that earlier. with Teresa are I acquisitions to range you And and and significant talked is store of pay to part that into same in so constantly about, to the store development. flat toolkit of of to tuck-in quarter about that's think and growth same adds these metric kind again basically is acquisitions X% so X% growth goal this had get those revenue talking all and same all All same a think goal to, develop there same whether turns is our Teresa we the something up that that physicians' volume. we so store that the to recruitment, X% relate store was opportunity attention store going get volume its constantly our or into it's

good are have activities -- that on feel store we same to and volume. going positive that So impact we with those

Kyle Smith

question slower And opportunity just that transition flipping hospitals in last your the it's the box from allowing that Okay, ASCs, light is switch? knee total like possibility of for the in CMS replacement great. you a into facilities? with there? And is magnitude would me where a be of then can Or something

Teresa Sparks

of example I that but to our that our but of mean our are its terms preparing we shift. material is type detailed well just very of guide are step on partners very ahead comprehensive and make in they us physician and obviously that is preparing can that patient the sure the final we we here are education through at give distribute. this this can ahead that manual to you transition preparation working really that And something a for

Operator

ahead. Our next [Rishi Please question Barclays. Parikh] go comes from with

Rishi Parikh

How you are make for on contribution acquisition the I late best terms in contribution jumped But -- you want call. looking I sure Just I the are on in apologize just side said doing? I think the on of had the past Xx same metrics? to we still EBITDA way is that working rate. roughly Are with looking you XX% the in that stated a you

Teresa Sparks

you turn I'd the how so benefit still and Xx right to is to is on at multiple that are Correct. about it. talked arriving get you usually seeing the Xx The one pricing are we that the we you turn, X ranges effective say yes as pricing are from Xx

Rishi Parikh

you allocating acquisition the What what XXXX for allocated for have of and remainder XXXX? towards are you

Teresa Sparks

in amount we've be for an as NSH Well in and at those $XXX but transaction think to approach a opportunities a year this million but you timing still that around active there a decision the entered very would normalized returning we I Again into uncertain circling normalized and M&A. year. active place are XXXX with the of M&A to just XXXX those With about to and to pipeline approach will obviously is be kind of $XXX those NSH talked enormous -- normalized M&A, those think we I made we in on that completed Those opportunity we put would we while the opportunities million see we continue to on transaction. hold on moment. out evaluate a and hold range spend

Rishi Parikh

you I these acquire mean these guess approaching happened I issue with how of might acquisitions And for are you more and be then plans that I the change stated you how physicians' the Jacksonville looking that facility still some you to believe offices. Okay. would incentive given doctors?

Clifford Adlerz

groups our What facility. of as either is we continued operating is toolkit outside we to short independent group of our to I not would We what to large that we core acquire for be employ, surgery is that our acquisition our market off do use. are continue think one stay in market. to want market going do think there to opportunity like physician there acquire our supporting physicians but assets within to

that what short activity, So we acquire are is in for want core core facilities. not asset our supporting markets we will continue physician to don't groups that our do surgery independent stay

Rishi Parikh

then mix And XXX basis just coming of you forma a the the EBITDA a EBITDA is that on pro from mentioned. based on hospitals? surgical of What going Okay.

Teresa Sparks

given breakout haven't because business. procedures short outpatient. XX% that's are facilities, that their of operate and not we These primarily stay approximately We are the how surgical they are

our we on centers that's operating we and stay facility. at ambulatory that focus of groups look you surgical short the and have surgery a mix when hospitals how so surgical business And

Rishi Parikh

it if ask could look payor flowing procedure or the surgical -- commercial? mix, a at Okay. Speakers] is another the is [Multiple -- Well mostly the through you it Medicare way hospitals, then Because if the

Teresa Sparks

XX% ophthalmology hospitals a as NSH company or you and have It's general whether and whole ASC XX% for on but with we'll about of a GI will in a higher commercial be surgical focus government that mix business. some commercial similar it's combine have mix, the facilities

Rishi Parikh

ophthalmology Is Okay. is a I guess I surgical XX% that's what centers mostly because mean I roughly as I why was trying GI? to getting other if and it your is mix look the high commercial commercial. figure your to, XX%-XX% not it call of out as at comps. you their that just

Teresa Sparks

Yes.

are approach that specialty and multi We GI having having ophthalmology.

which fairly You consistent. have a government is mix of

it's consistent, and If multi of mix. you to government pretty that ophthalmology corresponding with look across and specialty appears normalized pretty that the portfolio, GI us kind commercial each it facility mix so

Clifford Adlerz

are companies. There consistent. we commercial specialty consistent I would specialty time all specialty think just and pretty other through you historically looking are we but the very have business that higher with if multi a at currently some maybe maybe companies multi single

Rishi Parikh

that last but about already you question turning and or what Okay. maybe to update that quantify if is talked you during Jacksonville quarter pressure any you if see as and And of was? color apologize Did or on impact the terms had in facility just EBITDA I any it how could color around?

Teresa Sparks

been the for quarter. Yes. improvement. I well consistent earlier we It's plan mentioned pretty saw have that in with what operational second And stabilized, we

to comment not We mean business. our of some less leadership have my component earlier we the about will had this we again smaller that but year. on challenges out to are plan overall it a that that few hear becomes laid continuing operational you had overall related as earlier But the that in in improvement market doesn’t focus is and

Operator

This to remarks. concludes the conference Clifford for closing any like our turn question-and-answer session. back over Adlerz I'd to

Clifford Adlerz

XXXX. we closing, although In we you. the Thank quarter, as some future move experienced challenges Surgery during about enthusiastic the towards remain of we Partners

focused combined maximizing the believe scale short focused be on NSH in set to surgery efficient shift in of that towards As the more We are we larger our effected assets. on stay will a diversified continues industry successfully a services, care, more acquisition. integrating the operating delivering

evolving the of the equation We environment. are side cost healthcare a right on in complex

continued from evidenced our our facility and trends As rate growth business. in same underlying

the result, quality, effective continue cost well is positioned a deliver company high As to solutions. to

a in stay work procedure providers company. support the moving to We objectives more time appreciate really to our and call. morning to for and are your everybody's interest and you Thank We surgical in diversified participating with platform short payors. significant stronger continue forward our this to deliver growth volume patient

Operator

for The conference today's has Thank concluded. presentation. now you attending

disconnect. now may You

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