SGRY - Earnings call 4 2023 | Surgery Partners, Inc.

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Operator

Greetings, and welcome to the Surgery Partners Fourth Quarter 2023 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Dave Doherty, Chief Financial Officer of Surgery Partners. you. Thank

begin. may You

David Doherty

name today Doherty, and by Executive My Partners. Wayne of I'm Chairman. joined Eric is morning. CFO Dave Surgery DeVeydt, Good Evans, CEO;

website, factors forward-looking call, we materially to be file The the not each this forward-looking these surgerypartners.com. factors SEC, There will morning's this risk from cause of make with undertake These statements. available described During are results the we different on risk does which reports are duty that statements. to press could future and our statements. company are any in these release update

we accordance considered can turn Wayne? results this measures that measure be in a isolation addition, GAAP with information most The are believe These evaluating reference to in With this we call performance. or in our will Wayne. as the which for over In certain reconciled prepared that, useful GAAP. measures presentation the will are be considered substitute not financial I applicable of release. morning's non-GAAP, press in to should

Wayne DeVeydt

as the you catalyst Eric you, My along call to full for morning, into operating and details Good insights XXXX and our all Dave. to head we our environment, I'll with this XXXX. then thank on turn the results morning joining remarks us see will Thank we into over focus year today. positive quarter. the provide further for

full quarter guidance on additional our with the Finally, updated year and color conclude strength an calendar XXXX. associated to year Dave of view will and balance sheet with related the

Starting with our results. XXXX

catalyze to into these our the as substantial with how we our strategic further XXXX. growth and initiatives enter engine extremely related achieved we initiatives are pleased We progress

global approximately line EBITDA anticipate X% XXXX, discipline, revenue excess the $X.XX and the mid-teens the in of tailwinds for XXXX, divested on revenue the the year. our algorithm margins adjusted to cases with costs growth over with XXXX the than annual basis expanded of expectations. adjusted industry early from net acquisitions, of by over X% EBITDA at targeted associated run all deeper abated or These scale. and grown $XXX compound performed annum over the and million, pandemic, and past Specifically, benefits by XXXX. Digging the contributions points, year When our margins enhanced continues and year basis our labor in adjusted XXXX slowly a deliver including million results. reflecting continue inflationary of with improved increased of points. X representing our Despite acuity rate XXX,XXX throughout facilities growing per grew specialties $XXX more previous approximately rates. in and impact unconsolidated macro our our our mix faced to growth have and combined into growth recent We pricing XX% XXX and inclusive headwinds billion, full to cost initiatives to our company supply EBITDA The rate combination by exceeding with growth we cost has XXX recognize years, represent as consolidated acuity XX% our in headwinds

by XXXX approximately managed Our of improvement X% volume and facility with representing XX%, enhanced revenue X%, case of rates. was growing care more growth than balanced driven rate mix same acuity and

executing basis. a with and sub-Xx XXXX, associated million pre-synergized continued deployed approximately multiples. at story, multiple growth we we Rounding our transactions approach at attractive on acquisitions strategically our In important on disciplined an out to sourcing XX aggregate $XXX

as impact had early in discuss acquisitions of The nominal in Dave that timing goal below additional January While this and tailwind quarter. number our our a is we our anticipated an at earnings. had $XXX XXXX million transactions results, XXXX also million serve least of per we the closed targeted a to will closing year, as in fourth $XX on

remain and team opportunities, development deploying manage of committed pipeline $XXX to business robust attractive a Our continues at to annually. least we million

transactions has of morning's Similar and XXXX. under XXXX, our LOI, new As strong of predict, difficult mid-year our source to use acquisitions we the continue deals. related outlook when we and pipeline can this continue to call, to team and timing a a of be to providing for activity convention

the All growth in, our to pillars either our we are growth expectations. approach balanced or long-term algorithm, of all pleased with exceeding meeting with

call the over of in terms our sheet. debt to some pricing, highlight the accomplishments Before term of favorable majority to I XXXX. and the loan refinance want The extending our additional balance related I to year was effectively to at to maturity our turn company late Eric, able the outstanding

term from with increase leverage also was this agreement loan, in end support strength with algorithm. this our X.Xx refinancing to able banking reflecting our were with the new the business syndicate, million, defined facility our credit elaborate further. continued our of $XXX we year. revolving But will Associated our at growth credit model confidence the of and Dave to

growth management and of fellow net Based growth the with algorithm. board adjusted continued recently completed the we on team company-specific line by are long-term budgeting encouraged tailwinds. my our Together revenue, benefits the process, members, of XXXX capture this to and the in expect we EBITDA focus strong with margin industry

of are net billion reaffirming and Specifically, providing adjusted previously revenue $XXX guidance than at we EBITDA of provided for million. least greater are $X our initial

over and recent that our the you initiatives, with look an company's industry of the to with We strive some We me year amount to unfolds. to provide conservatism. the our of progress updating that, activities. Eric? growth Eric operational trends balances to appropriate you investment optimism as With forward on our highlight turn for call guidance let

J. Evans

results XXXX. I for everyone. echo Wayne's pride our outlook morning, XXXX the good in and will Wayne, Thanks, for and initial

past our predictable. Importantly, for our consistent investors and and per my performance comments, remains

possible them safe, on focus shift Together, company partnership and for the they will feeling our X a input environment. and local earned pandemic our part patients unique strong to consistent the the us win invaluable their scaled of differentiate patients inflationary and their win, deliver this integral and their bring our an our facility best global connection a care surgical high-quality allowing care partners happens, past to from keeping importantly, independence enabling our challenging facilities. over site payers COVID our reputation the while day we Our preserves the our reputation that to approach we have facilities. every despite This model work and benefit macro . We allows to help partners partners benefits to surgical results management continued get remain needs. of professional community and of physician approach build. the done preferences have knowing managing When as years most cost-effective naturally the our high-quality care strong

provide let XXXX, we XXXX As begin some highlights. finish and me

Our strong organic year into line top XXXX just a initiatives translated full same-facility growth growth XX%. over of

Our and X.X% rates grew X.X%. same-facility in XXXX grew cases

which same we've ASC in are ASCs. and as in As improvements XX% XX% acuity we growth. now in joint our increase facilities our benefiting of consistently joints. total short-stay rate rate perform demonstrated existing facility the specializing we are in orthopedic our strategic In procedures recruiting the higher facilities total factor procedures in in our seeing a total is of from seen procedures XX% our XXXX, alone, over procedures joint facilities We such on physicians, over contributing focus a in surgical

which orthopedic fully are novos of de and our rate acquisitions are this the majority long-term we see at expect integrated into recent portfolio, XXXX. improvement or our growth assumptions based, remain in As above to

acquisitions organic consolidating growth, combining to Net with impact revenue de novos the XXXX of and our $X.XX billion same-facility grew of divestitures. X% in overcome

nonconsolidated facilities in year, In exceeded under compared in consolidate XXXX, acquisitions XXXX our accounting on the do in basis. we addition, nearly growth of XX% as were Revenue to but significant that a in generate XXXX. our growth rules, expect in half deconsolidated continued prior and revenue entities not

our remains in market Our continue and each core underlying of story position growth of to portfolio we earn consistent share specialties. assets our to

Moving to recruiting physician efforts. our

positions by that Our that team are focus recruits in new physicians core our physicians banner relationship of MSK long-term strategically net interested per another than those create than recruited those facilities related all and revenue long-term value that on across XX% XXX physicians our to perform recruiting higher recruiting recruiting bring XX% Their added prior recruited in XXXX higher had is capabilities the helping We procedures. an are with new competency with and these positions important efforts class. facilities and average our a the nearly of year case specialties portfolio. XXXX year a in the increased

recruited compounding growth multiyear our that confidence recently bring increased is factor XXXX growth. Based in giving experience, our us physicians a on there

CAGR an additional and XXXX are we we to transition seeing are have These done Since our X-year and inpatient-only hips started have know, on now ASC do highest removed as value that returning facilities. are both ankle from ASCs been XX%. Such regarding to of you new future first programs and of who permitted the joints list, surgeries of early into initially surgeons with migration in a bring we're excited innings We the surgical this the our the time. our about additional for being procedures see joint the XXXX. done with focus with be years, patients for in experienced these removed short-stay not our Medicare the working we're to knees settings, nor shoulder total excited in continue ASCs setting. inpatient-only setting from growth inpatient the total orthopedic number and procedures in the in list. slowing to of a cases In the opportunities procedures commercial term be for in As safely are XXXX, total to growth total cases near

the to Moving development front. business

syndicated our health development, and portfolio, We openings and in selective in under X and early XXXX. about systems. fast-growing novo XX partnership are which other opportunities opened with XXXX in excited are of XXXX remain for currently de scheduled We

in community-based to capabilities share de organizations on with we exist, state a us. expand highly aligned a we last with partners with the cost the announced that at Parkview similar to our high of Health, development opportunities Last year in health system joined partnership we premier who multiple partnerships deliver accretive will This While our accelerate Indiana. as quality partnerships to and novo we like-minded announced our capabilities as efforts home look partnership we my sustainable with are earnings. a like-minded forming are focused week, system long-term

facilities vein, Intermountain managed-only novos. working In on integration Health's de with progressing are we a planned, similar as Utah is and syndicated our actively them in with

long-term Although material XXXX to these prospects our a the attractive. contributor incredibly are won't growth, be

our As in focus at development opportunities, are XX de expand annually. we on manage positioning to least we our team novo novo de centers

$XXX These transactions months. we XX at the less to de million addition multiples, past on XX novo Wayne than were our earnings. In averaging mentioned, deployed as Xx transactions historical bought in approximately attractive

goal core into benefit the our months of of and first to January $XXX deployment be remain managed acquisitions bringing physician will We the to our which We within care annual continue synergies yield integrate ownership. to teams operations, in cycle, the $XX of XX year. million, least procurement, deployed rapidly at recruiting in our to revenue full million committed this significant addition of capital

In over the past many of managing physician closing, and proud effectively team our and through and inflationary few for years. talented our pressures management colleagues labor I'm partners supply

coupled effectively operations, teams have on not pressures recruiting, well across With anesthesia goals. and our managed our initiatives our which, managed we care, XXXX is abating, as executing that to confident effectively we are development, revenue expense a with achieve within challenges are material our a Additionally, costs will cycle structure. we procurement, business reminder, related inflationary how

optimism M&A results XXXX growing over Dave the mid-teens Dave? I've future is greater, growth. to on and with to deep been purpose-built as will and these short-stay sustainable that, With to The further leadership and to as our the more growth number our I and need experienced of and tailwinds. team has now optimistic coupled surgical company This associated business. positioned an more move impacting pipeline tailwinds turn adjusted provide existing facilities well never financial regarding EBITDA Doherty and to industry-leading talented, deliver long-term our provides procedures our call a outlook. the been never desire with color for additional

David Doherty

we X% we talk will results XXX,XXX financial line, Thanks, our and third our and top first about of nearly detail XXXX. in growth performed consecutive Eric. of with same-facility associated consolidated divested same-facility X.X% of the revenue inclusive headwinds case quarter specific has facilities on combined our X.X% growth for grew million liquidity year, the cases outlook with growth growth early in for the supported I fourth impact and quarter XXX,XXX $XXX quarter continued On the been alone. the year, cases long-term This care in acquisitions, a marks revenue XXth in quarter consolidated XXXX. this actions year. above the full basis, over rate. growth we the the fourth managed target facilities and consecutive and of and higher-acuity of before XXXX The surgical specialties, case for providing Starting the in in X% our approximately

a for the XX.X% On in these X.X% fourth same-facility X.X% total quarter basis, growth year. revenue Same-facility for increased the and was respectively. X.X% rate periods, and

this driven higher have year, growth procedures. primarily rate all seen We by acuity

growth was This XXXX. revenue our growth, $XXX.X XX.X% gives margin XXX strong of million was year. Our reflected the higher higher a than fourth adjusted us which basis equally in XX.X%, in EBITDA points than quarter, last

XX.X%. that margin another to equity method expanded we mentioned, minority of effective and our our adjusted sometimes benefited mid-teens Wayne year just growth, revenue growth basis Eric As and XXX cost investments, year management XX%. million, as reference which $XXX.X points Margins was contributions a marking at over partnerships. from full has [indiscernible] from EBITDA

Moving balance sheet. to our

significant we Concurrent December, our revolving refinancing, increased loan credit with As extending this Wayne mentioned, we completed of refinancing term maturity a facility. extended favorable more our terms. XXXX in with and to the

fortunate borrowing a to banking strong in capacity excess a syndicate supporting are $XXX We has that of revolver a have million.

we will have we demonstrated, the As markets. capital approaching opportunistic be in

We here come X manage our to notes due interest smaller coming we hedge forward will quarters. the look the more relatively as discipline have X over that I next exposures. sharing look to rate years, the opportunities that about in future and same

of $X.X billion, of approximately interest XXXX rate an end debt was with at fixed the corporate average Our X.X%.

liabilities the other market X calculation asset-backed finance to total a in agreement, definition change under our debt. assets from X.Xx. credit of documents used constructed dated net was as full to nature to calculation. net the and year of practice language credit new net the ago. leases over calculation there that revised of treated and terms in XXXX operating fundamental as is of asset-backed now debt consistently reflective ratio the Our with EBITDA calculated and debt the and more excluded agreement This definition With of Under prior new the conforms back was leases of years

benefited to the Relative approximately loan term the former turns. change by definition, calculation this X.X

of With will calculation. acquisitions expect, the are ratio temporarily to we pressure this confident the earnings could growth we continue this although decline, timing

year $XX quarter, In flow the generated giving of free $XXX cash million, flow we cash fourth million. free approximately of us full

amount The incredibly to into turned are previously company lower cash have I proud is to than must a messaged. timing positive matters. we position, Although this primarily flow acknowledge is difference X due that we this related

these but the that collections will certain the our experiencing, related in The in that Neither for government the programs new we and positive settle the associated state-based billings original with these we items. threat paper-based delayed And in did we amounts second cyber on of first being timing are reflect not factors XXXX. in affect insurance of related the collections projections trajectory earned experienced Idaho was XXXX to recoveries XXXX.

from flow our this in the Having our sustainable free company's meaningfully position. free our the turning comes adjusted a was to fact the This company's in first positive the a to way. continue that liquidity pride EBITDA, growth is in flow to trend growth closely expect year we said cash enhance that, linked cash

consolidated are to revolver million $XXX This reflect to cash untapped our and to in setting reflects Our value maintain future ended quarter cash giving with $XXX.X $XXX range more our flow the current core of We long-term view and million posture conservative a view the with exceeding $XXX for free projecting, in well, annually least of believe positions updated cash of expectations. deploying the at XXXX view of flexibility is and while for $XXX combined million. million M&A. we we us us acquisition When free liquidity an million. flow our

are strong XXXX We effectively. XXXX to of momentum engines our carrying of finish operating the growth the all into with

adjusted EBITDA XXXX. growth guidance for at our reaffirming over million, greater are $XXX we XX% than least result, a XXXX As representing to

Additionally, revenue greater be to than are setting XXXX $X we guidance billion.

we the at timing $XX underway. addition additional management opportunities in and deploy on portfolio least of spend depending in January, of M&A million capital to expect to any deployed We the million $XXX with

risks subject are we our Generally, and for the we with early always of timing guidance built There outlook opportunities puts to have we to pursue. capital deployment. a conservative takes feel and we track XXXX, our

mentioned, Wayne of As $XXX million with with under the pipeline over is consolidating representing strong LOI entities. majority already transactions the the

for the is to and shareholders. agnostic are we deal our reminder, right the company if a As treatment the accounting

Our guidance the contributions novos open as ongoing we recent cycle and year. from to benefits from procurement revenue and in as this implies accretive reflecting margin expect acquisitions progress well and continued integration expansion, de our

have recruiting and in effect the based growth on physician high compounding activity areas levers of care that confidence We like contracting. our in managed occurred and these historical already has experience

firing would Once the enables guide in questions. company Operator? proven turn operator again, well-established back double-digit adjusted and like beyond. to margin I that, expansion our is and XXXX and With growth the on to growth call the and to EBITDA for to algorithm confidently all over cylinders

Operator

[Operator question from line comes Brian Instructions] first the Tanquilut Our Jefferies. of with

Brian Tanquilut

and because a legacy little also and obviously, it Congrats the made the shoulders the the maybe guess different with can to on economics first understanding contribution P&L. ankles share business the sizing opportunity of the Wayne year. us hips, Eric, relative of in terms when profile knees the you in from solid -- question, anything comment and businesses my the terms of that of added and you you was that margin about I or

you ankles share what and shoulders? us on curious just with So can

Wayne DeVeydt

about want our expand and seeing do we this -- the shoulders, total all also I we have kind And enjoy procedures the ankles the from expands list reasons total to of joints programs. recognize is get while in will that to is to continued that on -- One highlight programs consistently of from of on. a X details talk joint what inpatient-only case, few capitalize we it of in important other ecosystem going Eric investors the and it's these to which give get thing this. I'm we the more for

of conclude an in with just that joints So what joints, got growth [indiscernible] total the surgeons you orthopedic as growth, just over procedures. look but were over we've X I comes bring over years a their other to CAGR those X% if example, at orthopedic absolute last joints,

our from a going great joints and about to our is the talk facilities value up on to additional surgeons elaborate But bring due Eric, economic total that first Eric lack not historically what's are regarding to it so of But ability us the foremost, perspective, opens to you more actually have considered of obviously that. want doing the that? may And important even us. to can the joints. even anything

J. Evans

ankles Sure. and We're the taken the And shoulders and thanks the about really for getting Brian, question, excited off inpatient-only comments. list.

walls, do this you COVID, procedures. were we remember, these about talked able they As a had to during we probably ASCs safely hospital without

been of that thousands evidence for to so amongst cases the There has are the do these. surgeons while And place we're apparent bring they can't best a our existing today.

it's meaningful So opportunity. a

We've -- fall specialists where cases us tend real we to in that's already our pipeline. now a opportunity February. convenience. mentioned, those We're for And that have working know doctors Wayne there's we lot hospital, again, who surgeons move And a they our at going. And take recruitment been hard then have schedule day, to their exactly over into -- too, to right? shoulder markets on when as that existing that. a obviously use in our As just right working see those cases those in cases, so are January. of

in value joint get ASC more we Surgery for certainly confidence create were Partners total the and excited just things the list, opportunity to value as create about reinforces growth. example system the added to to is shareholders our And is So tremendous. X the opportunity and for

Brian Tanquilut

my follow-up, so for Eric, That's awesome. And Dave. maybe then

can of call about what that think and out in refinance I know thesis does or million your about opportunities of XXXX, terms those just As thoughts cash with past, think either any you've talked remaining you us share debt then the the as are about goal -- a the million flow on there for in to -- getting can $XXX you cash I that I outlook there in $XX free maybe of things? anything

David Doherty

Yes. Brian. Thanks,

of You're of sheet. kind right. our you balance where on I'll just sit we give a reminder

did we this refinance as do gave hedges, terms that we term took I have loan rate well. that December, as some modernize off, protected you the in First favorable leverage to address will of think, over XXXX. which that But also pretty the pretty debt And The as which were see situations. can that's current out for you our course do the currently we mention know, to the with we'll interest rates, by -- year. us

XXXX, notes about We also very X.XX%. favorable One out both million X senior sit have a small. $XXX They're there. is carries of in that due rate coupon

right that So looks market get the than X can in rates you better now.

for you're until makes us again. that at . So hold sense until look probably it to to going to we that on --

of be will focus I year. the to when area try best the that is million interest and us we loan relatively But represent of to judicious about in both us of about easy for you will as look that steps carries note. small advantage that in term to other so both coupon those par go a fantastic we middle to $XXX XXXX the as to years, does of the when past to That note in balance XX%. rate things, talking we address, the seen they're us XX% coupon The the savings we opportunity forward remain take for possibly through a X down several enter create to think for That sheet, hedge a that. opportunistic our can. of environment over on interest But an market April. that of we of really we'll And Brian, the address you've refinancing and X that I do be kind related

Operator

the of line next America. with Bank comes Kevin of from Fischbeck Our question

Kevin Fischbeck

revenue strong case the I wanted on focus to in the quarter, which again. per was

then a mentioned the dynamic, quarter? the was as wondering you think a And was how far as maybe revenue out guess, trying rate? far as the cash cash I if payments. in think flow revenue flesh could then, I is breaking to for how as you flow just I about mix And out much as you if also that understand benefit . drag as year. per far the state much versus case, supplemental that

Wayne DeVeydt

for But fairly question. to capture just Dave programs Thanks on whole de and the to upper to state continue the level, more operating let I'm actually But got to the remind try and going that I these, Eric expanding and want a more limit a minimis payment these. little to specifics. very everyone bit high a deeper throughout our these are to are we've programs happen and earnings as that year. at we

throughout initiatives reflection quarter material in very rather heavy to of year company the a but continue due the you a just commercial is And specifics of been So overall the expand. doing terms quarter, to deductible. know, as fourth quarter many us not of an of for impact, that the typically has the to

So to you get continue that.

the of that the we non fourth last more majority-owned get to would I these that quarter. highlight thing did in to ramp these we And rate run had facilities. made we've start if of investments up, an impact the then is in And of those non-consolidating

the more and want rate year Dave getting see in elaborate new out we'll impact run the to or But well. start smooth go because start now into though anything on? QX we that as of as to QX you Eric, You'll that

J. Evans

Yes.

of kind it's primarily mix would specifically, program and more rate, question, Before Like acuity recruitment little success, mix. around question. that talk I specific to lines. -- to most hand in But it on rate our focus increased you the is obviously, just turn about and to over but what I Dave, over that of had a this on higher and drives it I'll we've service acuity Dave

David Doherty

you. thank And Yes. Yes.

to year. been benefit that as growth the get from impact change know be point pretty Kevin, and I significant of nonconsolidating that's reiterate coming this acuity, really go through before, is focusing obviously, to big going forward. the novo to seen we've we've is that acuity on about going we've -- which engine off, good that I us rate on those First in those is as procedures, the we all you've a high talked what it really and de

So sits by that inside kind driver far, biggest is, of that the there.

or And reimbursement I 'XX As of X the state-based this bit something when of year. had create issues that our little a portfolio. Wayne in mentioned, a the in of come It's we those in and that earlier to rates kind process. those projecting terms came we little us flow, X happened, always more programs. was we've the reimbursements There the timing through and bit was the we think expected. cash operate that And a in that program -- when states in new in did through 'XX. some expect it wasn't of with in what That

coming As through Wayne mentioned, exclusively the driver of rate not from was there.

on talking the it the We're that for created pressure seen only rate we've those of cash about over us piece. the because of base the fact, programs In year. course flow

Kevin Fischbeck

cash in And the was flow? how much that

David Doherty

the don't About half There's around about about of cash in. mix, to talking maybe want of of is somewhere -- concern I This little [indiscernible] this. million doubt the been any reiterate, no to that. again, coming those $XXX leave just when a are before. we've of on flows And bit recovery half just versus timing that the

Kevin Fischbeck

then maybe question. a Okay. And just second

why have can guys bit where little just coming expansion -- talk some margin for you about exactly just remind that And reason from? overcoming looking with to to then . the -- is that should growth a a the seen you You margin part margin that expansion? and headwind year. of margin think us or Orthopedics. expansion is again we this in Can seeing a that's tailwind be you margin And you're

Wayne DeVeydt

elaborate. Dave. me ahead, go Let Yes,

David Doherty

Thank you. Yes.

right is control, come past kind So effectively the the on if a for naturally as our reasons. really focus of should couple of try we're job to the of years. key to on to us over margin cost couple we've create naturally we margin One, done pretty that going equation, side of doing rate expansion which

can on of past -- kind over supply You -- back and of improvement if benefits. that upon SWB so continued salaries, those at you basis year, look and XX wages to points I'm and high-level sorry, on both we've metrics the this look plus the improve

which going you're a -- which should that, on. So you you of get to count what is driver should

expansion to as turn also a from investments, margin with we facilities. equity revenue. those able don't importantly, take interest holding We into off get minority integrate being of acquisitions our the come done the method and those that those we've And things

So for at of coming the holders. going us. through growth rate on that as margin look will in change And to through acuity, acuity a see come when that you of some interest just you're lot the those pure minority

But this going the not we is changes. would little think. arrest as just margin see our backwards pressure. So margin were doesn't bit. It come mix It take those a margins of really modeled on the them margin pressure not you're There rate have the of actually as right. And cases, is pressure to. kind XXX% as that where you growth to on our referring you're you through consolidated

with that contributions the So we're interest that and our growth we the partners. outgrow able to still revenue minority see from

Operator

Cassorla question next Citi. comes with of line from the Jason Our

Jason Cassorla

And program to flow clear your to be target? in those midpoint million that Dave, of flow start? wanted bridge just was free million there, X million miss on that just items to items plus $XX flow this, us of would the for maybe dollar [indiscernible] be of completely free value cash those would just flagged, you then kind the up X between total that more 'XX? just expect free the state difference kind $XXX from the insurance commentary. that [indiscernible] for point, there to I on you the to color Great great help -- follow And recoup cash $XXX cash any

David Doherty

to. Yes, happy

is we went never from But year-over-year first me -- free worth flow this. change we so. through company, kind as last doing we let off, first it's This worth So million. $XXX is our me before, has this say see that negative a to And of noting, company look the year pause year remarkable, this let right? generated just cash

that of underlying of comes the the growth hey, the lack just of items unusual company. and Most operations some of from, pure

how do foundation this in that out, a revenue into that But 'XX. beginning place but fourth is to to of acknowledge, our come back as the our how the we I at go X million this And prudent missed as we complexity long as We items. those majority we're come some those. state took next pointed XXXX, was were of as of going must repeatable trying that the particularly we that guidance payers year. through result paper-based year that have could the there. through, a you of to to billings the strong, out had those we So we attribute Again, going quarter that large a cyber within just impacts that programs take and give to doing of predominant as miss be as and $XXX expect of majority event about that there. collections the majority We talked before

going of underlying we of that programs those source a earlier, going see collections business through. continue the certainly, state-based But have. So for we benefit us. from They're the you're just mentioned as to part natural

won't flows cash those in. So come

we our some for what there include metric year, in So going to that happens be natural doing last outlook [indiscernible] of on that piece XXXX. be in that will offsetting we're the prudent

implied through And as underlying in that would on go guide our the have organization question now I right? of million, to specifically, growth more the to will of so say $XXX This year-over-year company a forward year. what's the in your we earnings in growth? on driving answer guidance flows. giving an of I kind the into operations look cash path updated It's predictable converting

Jason Cassorla

flagged and Great. that just more . -- help or be way would there's a the partnerships to kind right? but be would any want bit the within timing these just hop of those maybe development to for over helpful. you And thinking attribution, how 'XX to you're about size of Could opportunity if frame contribution partnerships? You hospital partnerships, maybe on minimal just the those get

Wayne DeVeydt

of Intermountain, which de good in the partnership Parkview to I us how focus. terms kind that? do on with But to elaborate of are finished rapidly fourth that you Eric, want facilities, a highlight maturity existing taking see this last like know I of evolving, know the just way these more you you recently be probably the novo week. occurring partnerships would some of are of which of the management over but of other these

J. Evans

health have or partnerships. states And talk we on like-minded selective our Sure. of excited or has about markets it's Happy been that should hard been system I about reiterate, either very a partners partners. entry lot on to enter. otherwise have our inbound system constrained where been to choosing We're health that. choosing we're

All period. us along to partners of entered nicely. to get quite actually will the we partnerships looking over a think about for ASCs those X- we're are to we moving have double-digit that partnerships allow X-year that When

are within we have year, that, because this got But our XXXX. be these the this expect acquisitions. So timing so of meaningful novo, of will de partnerships. guidance for -- we've is much . The timing we some there obviously

strategic the transition are to And and the care partners the system. are they window. goal should partner right I create us about exactly double-digit long-term who excited of will on be of side timing X-year that I this we're like-minded to think period, partner, X but you each surgical happen for X- a system hard of with a to to we've X-year think a to value to health centers our thinking say when X- our is it's announced, super get with cases partners sign over within to

Operator

with JPMorgan. Our Gill from line Lisa next question comes the of

Lisa Gill

maybe little I to just want a to can I'm what And XXXX wondering you guidance. case back more if XXXX? for give us just just your in expecting growth about think talk type with cases 'XX? we the talking expecting start just as wondering of question also I'm ankle and you're can first about that the you shoulders. if about maybe go color you're you on

Wayne DeVeydt

and be we of course, to generally start as demographics. just look level, what so And of you the kind that able target markets if in is there's should if of with the to annually, growth a -- ophthalmology we've So create with to from base seen stakes, we like that really X. orthopedics, which let algorithm, we builds at any the expect X in table X% the baselines the or facility you the we changes believe team volume -- perspective, generally we is normal X% plan unique growth me GI, its do our our at understand it

being That these procedures will first. pursue we said, then obviously higher acuity

there. a cases them, As know, to with the the OR a great but of more little you higher due have that's they in rate procedures acuity require these many time

per of Of last better course, of what several of the level volume flow. outperform to time is a years. that The range terms of converter cash they're done to at aggregate OR an in think X% as target about still of always end still say high we But I is minute X%. the -- the goal kind would we've

to building the to in we high the be want you ultimately, of terms at that. budget ought to so that how than end, able add we're our anything do And outlook? says Dave, slightly to better maybe least

David Doherty

is would budget I said, Yes. the I the level. reiterate you built that everything at right? -- facility mean

all as years, past rapidly. we've good quite for us. sight frankly, about, of through we Case as business change sit there. kind X One, talking of is couple solid growth we year. reasons doesn't been the the we So for fairly predictable line saw have of for And as a

there's a passed unless business. you our pandemic, have -- which since COVID in So we've no long

They're Our strong. relationships practices very their with block physicians time, long-standing. our is are

fairly we underlying we base an So that have think is predictable.

in pattern very compounds really as you us. predictable has from Our recruiting strong, for pipeline been XXXX guys a know, that

I'm that confidence we rate with at because all very It our guide will you underlying in of so hard be growth -- that's sorry, those. that will mentioned. growth Wayne least And in focus on line case see across specialties that

see to those of as interest pressure shoulders, where we However, will partnerships try see have already you'll continued of relationships. our take to you upward minority there. advantage And and kind a mature, ankles continue on us in particularly

of number Those a So to so positive. bullish have how large those small cases we're pretty are relatively should going that to year. on on continue cases for next impact be very look that's revenue,

Lisa Gill

then sorry And -- go ahead. I'm

Wayne DeVeydt

record, we'll year. say guidance No, our going thing throughout as only as was we track those Lisa, raise I then that the to exceed the has we been extent to expectations, move the

outlook we thoughtful then a But if you'll as create So quarter. I think done in that continue each outperform conservative we like see baseline. again, that to we've our baseline, to historically, reflected try to

Lisa Gill

very That's helpful.

more XXXX far in what have the minute. for X on as staying also there sure go. to understand want make Just just just you as acquisitions guidance I I

in acquisitions. the I you about think, much about you talked how . talk 'XX but some if Dave, slipping in 'XX, your comment, for you from can revenue into guidance have

Wayne DeVeydt

sorry, you. and I'm with Dave, flip this I let me to this, want just start to

the got we $XX view in done doing early we January, as Just just in 'XX. finalizing million we a reminder, that were what that

forward. move is that going to so And

that we done I'm believe everything ahead. this . go we $XXX Dave, going would So sorry, Dave incremental is is get to talk year. million, about the

David Doherty

Yes. Yes.

million. do So we're to our going guide right that now another $XXX implies

just the million midyear Just a that talked in just as we've do would that the early and all Wayne we as completed we is come much is encourage is through that that of about and converts exclusive revenue to it models, before, about The our convention, going how us past, learned consolidate from that $XX Think I lesson this nonconsolidated. as to January. versus to using mentioned of

currently manage the million very strong of at we Now than we But in pipeline under LOI. pipeline consolidated facilities. now, $XXX a the are a majority goes that's those that as look right deeper

to look how kind we will of And guide year. the . manifest. continue so That's to what we we'll those to see ultimately through look as

pressure is create the we're other which the we're at last at did at level last we looking least divestiture significant points side, this point. that year, looking us as at type as not that gave some at our portfolio as will that of talking we're year As headwind point anything

Operator

with question next the from comes Our Company. of The line Benchmark Sutherland Bill

William Sutherland

below a that's a matter at I'm the the quarter. the in procedures that bit X%. growth more higher just assuming taking mix why it to wanted OR case I of Is acuity time. look into was harder little

Wayne DeVeydt

No, want and Bill, question, asked I a this little clarity. glad provide actually, really you I'm to

quarters, last foremost, and first case generated two X% growth. we Xth volume So that remember the

on we Monday. And unique majority and continue the So know, we anomaly that them that's actually vast in procedures, to And open this Mondays year, quarter occur the of a QX. was note are while of occur, had can fell that our a to growth very for rate Monday of of very important as a aligned with Christmas fourth our reason on which compound Friday, the expectations, off was large the you is Tuesdays. which through majority

not this year, closing but we're of in And as on for so many our only facilities well. closed Monday, were particular the the actually Tuesday

this dynamic. And year-over-year so unique comp get you

have in And As we have day X because in it get pushed the XXXX, year, move us, to we for Wednesday, a into getting is we'll addition Christmas to a tailwind back. quarter this means becomes the Monday, fourth actually Tuesday which year. that, actually leap additional upcoming we a of

before it last versus concerns we what algorithm but creates in terms think and year, no of an of terms X% of basic odd comps this and in the achieving X% year a that So the is to bit of anomaly year plus. little

William Sutherland

de the as it. at they line the of novos . Got look also them come And was curious then cadence I impacting top on? what's you the could and if

Wayne DeVeydt

Dave, that? highlight to do you want

David Doherty

we'll [indiscernible] up are opportunity buy year. that a they past process happy the could interest for of point great Bill, their to through de kind of to over up that with in again, some kind those announced Yes, the as to. be to And especially come start going level. look Most our as partnerships, question, Yes. -- partners at we've it's confusing. because somewhat coming consolidating in are minority time, through And a new novos

short somewhat should in run. revenue the be muted the impact So on

our that exclusive not that we an And impact won't you be of in There statement. we are a some huge look at that's in novos case, XXXX. Now gate, of will consolidating. out that see de the

heads on something is contributor revenue it ramp. give period a novos becomes our relatively that's a a probably you for guide, that. to material up When gestation de we'll long the But

take seeds to year this them about. planting last the X year So or talking and the be that provide the meaningful before will growth we'll another see start you seeds year we planted we're

XX today, we're about about just so sit As managing excited here a year. or we

Operator

Our Cantor next Fitzgerald. Sarah of the question comes James with line from

Sarah James

assets the I on of RCM below margin if for well drivers runway core wanted that? consensus. lifting to to have expansion of is guiding minority margins. can back left the How would I to much on go And on then also you And interest clarify mechanics your book. But margins. be appreciate talking you that, while. you been the G&A improving a also about came 'XX, in

So as anything continue you would there and can point into to 'XX? the if quarter that driver the in

Wayne DeVeydt

as will interest. foremost, well our be book Sarah, first minority and as expanding margins core the

from no perspective. So that changes

scale to -- it cost get over more while couple that industry continue And that of we get last cost managed environment. around return a of effectively benefits supply. as the think both I were we've a was means benefits headwinds in suffering the many and overcoming structure the cases, to that we also of labor to and able years, the well, we been kind normal of maintain we'll we

good So I feel very that from perspective.

to continue you soon. at where front, RCM exist. done slowing and bit see the I to of as down we amazed opportunities we the think and runway? do more I don't continually that am what anytime Dave elaborate see work this On And team have the a on want the Dave,

David Doherty

organization. something in the is for both continue integrations happens journey as that's as recent to to cycle multiyear rev right teams across from and our of cycle continuing better across get bring as we the Rep portfolio us as the it kind standardize And the front. you. in probably well that of approach a Thank right. Yes, bringing we benefit

as both still long contributing there cash uptake. for will So of as that sits I kind there's think in that conversion runway enhanced well revenue that factor be a a

particular kind at just on the line, folks longer-term and on we that G&A, really Your Sarah, encourage on of I quarter. as Again, a downs look question flex business would the ups the that to the it's of of through basis. go

to the help some you of smooth item. the impact of kind So months sits view will line X XX-month G&A of that out that underneath flexing

biggest viewpoints. incentive your As there the you comp imagine, probably inside is on can piece

Operator

of Cowen. Our comes the Gary question next Taylor with from TD line

Gary Taylor

a G&A I the commercial, how the Most strong I questions to sense but have be my answered. up I is just point. of you'd would G&A following that guess, looking side, my guess, that needing did it fourth or a just questions quarter of quarter expense couple on lower. wasn't particularly be with usually given on it flex maybe

that I wanted understand just bit just little to So comment better. a

much. other the on And tend other the It doesn't was then other seasonally went way amount. up expense. a to was -- as fair operating increase question that

be maybe bit line offset little those items, of between a but the in would So there's little X color terms helpful. a of impact more

Wayne DeVeydt

year also Yes. not Dave, obviously, the in see let year, year, a any you'll our early G&A on start or going anything Gary, I'm associated mind to but other QX throughout in But of front. point that we investments the single couple as to recognize on consolidated we though to obviously want those facilities anomalies a to those consolidated Dave you little bit the quarter. growth going seeing dive versus to year It's going item, elaborate those out. to started in you're to show making are important the well entities fully with up certain line further divested [indiscernible] fourth the the comparing which last of nonconsolidated in. that this A keep things full in as impact

David Doherty

happy yes, to. Yes,

business thinks on corporate and at you're kind of of and strong of inside So driving overall kind this the about the strength up right of organization the down how teams kind you kind you look our side, flex on will incentivizing how G&A performance. based

have expectations. very internal very, high We

see to so you movement result that basis. that, inside got in look And of at any multi-quarter given some a a Again, on that as you'll quarter. particular

for The have other the is one. question It relates great expense part. most to provider operating taxes you a

state a programs some level latter at part that in exist of the states we of the some on in year. that experienced the taxes of the So

Operator

the question final comes Hendrix our of from gentlemen, and RBC Ladies line with Capital Ben Markets.

Benjamin Hendrix

tech quick a geared momentum the med hearing the Just the about question. side robotics towards a We're on opportunity. shoulder lot of

your of years. $XXX about CapEx . the wanted see general, how to of next you're $XXX the Just And for how for into the in plans towards factors in $XXX million kind kind CapEx that thinking kind we million look of to couple of XXXX. as million

Wayne DeVeydt

seeing to Eric, highlight provide want do you're the little how robotics you evolve? clarity continue And the a to numbers? Dave then around

J. Evans

We've added demand We've in would be say that XX there Yes, to this XXXX, little might grown related robots. robotics. bit just at portfolio our few ankles, a shoulders I and Sure. we're our a for quite happy lot. nearly of a to. robotics

well a lot We have covered. those of

I add we I would also locally. those that you, say robotics, financed when remind are

been CapEx And actually, So the those incredibly strong. not a huge on impact. ROI have

do facilities. our robotics we though. that enthusiasm the on in tech continue so grow We to And offensively the with med agree opportunity to

and just think this know new than it's for a us, to opportunities the that. add of anything? who kind you a often Dave, to So I different to peers service enthusiasm if of business new you want keep of on are about this, for do offensive up we'll is share book attract same robotics into go with upgrading would technology and bit really lines, play, really great It's we our Medtech's that. don't to little some

David Doherty

what like-minded of see is opportunity kind out right? to see say with we've suppliers we -- been Yes. a on the the thing, The who very world side able X same see. the of medtech I'll just partnership procurement stronger that there

where since in growth this is this following the we've of shift. closely So they're the came of kind They see right hips us capture availability out seen kind equipment. of market working to and knees ASC the with behind

or favorable opportunistic And finding financing so financing more those you're kind of opportunities.

eventually asset-backed financing properly to around those is the strong. the paying only part, if will cash. But and ROI we for come enter they're most Now

Operator

to comments. back Ladies for session. that concludes final our and the gentlemen, I'll floor Mr. Evans turn question-and-answer

J. Evans

Sure. you. Thank

who to patient life up, reiterate of Before of deliver consistent am proud our working we I to how to colleagues through to us my and deliver Their I partners physician on quality mission enhance allow wrap contributions care professionalism like partnership. provide. highest would our in sustained serve they growth for predictable to the and are importantly, drive all known setting to our facilities Most low-cost and also with results all a clinical communities of the and convenience stakeholders. continue our collaborate with

for all and Thank great morning, call this you our joining a have day.

Operator

This concludes call. conference you. Thank today's

Thank your You you may lines time. disconnect this for at your participation. .

Surgery Partners (SGRY) 26 Feb 242023 Q4 Earnings call transcript