Surgery Partners, Inc. (NASDAQ:SGRY) ("Surgery Partners" or
the "Company"), a leading provider of surgical services, today
announced results for the first quarter ended March 31,
2016.
- Revenues increased 19.2% over first quarter 2015 to $267.1
million
- Same-facility revenue increased 13.3% over first quarter 2015
to $259.7 million
- Adjusted EBITDA increased 6.8% over first quarter 2015 to $38.4
million
“The first quarter of 2016 continued the momentum we enjoyed in
2015, with solid operating performance and further expansion of our
network of surgical facilities, physician practices and ancillary
services,” said Mike Doyle, Chief Executive Officer of Surgery
Partners. “Our growing portfolio of healthcare facilities and
services continues to deliver high quality healthcare in a cost
effective manner across 29 states. Our integrated approach
drives consistent same-facility case growth, favorable patient and
physician surveys and strong financial performance.”
“During the first quarter we completed three in-market
transactions, including two in-market physician practices and one
in-market surgical facility. Subsequent to quarter end, we continue
to focus on our in-market strategy completing a platform
transaction in Jacksonville, FL to significantly strengthen our
presence in this market with a second ambulatory surgery center, an
integrated physician practice with multiple locations and related
ancillary services. This expansion in the northeast Florida market
enhances our strategic focus of providing multiple complimentary
service lines in the five largest markets in the state.”
As of March 31, 2016, the Company owned or operated 101
surgical facilities primarily in partnership with physicians and,
on a select basis, physicians and health systems, in addition to a
network of 48 physician practices.
First Quarter 2016 Results
Total revenues for the first quarter of 2016 increased 19.2% to
$267.1 million from $224.1 million for the first quarter of 2015.
Same-facility revenues for the first quarter of 2016 increased
13.3% to $259.7 million from $229.3 million in the same period last
year. Results were driven by increased same-facility cases of
11.6%.
For the first quarter of 2016, the Company’s Adjusted EBITDA was
$38.4 million compared to Adjusted EBITDA of $36.0 million for the
same period last year.
Liquidity
Surgery Partners had cash and cash equivalents of $135.0 million
at March 31, 2016 and availability of $146.8 million under its
revolving credit facility. Net operating cash flow, including
operating cash flow less distributions to non-controlling
interests, was $7.7 million for the first quarter. Normalized
free cash flow for the first quarter was $11.4 million. As
expected, the Company’s ratio of total debt to EBITDA at the end of
the first quarter of 2016, as calculated under the Company’s credit
agreement, was 6.0x reflecting the financing of transaction costs
related to the issuance of $400 million senior unsecured notes
during the first quarter.
Full Year 2016 Guidance
For 2016, the Company reiterates the guidance provided on our
conference call in March of this year. The Company continues
to expect Adjusted EBITDA in the range of $184.0 million to $191.0
million representing growth of 16% to 21% over 2015.
Conference Call Information
Surgery Partners will hold its conference call tomorrow, May 6,
2016 at 8:30 a.m. (Eastern Time). The conference call can be
accessed live over the phone by dialing 1-877-407-0789, or for
international callers, 1-201-689-8562. A replay will be
available two hours after the call and can be accessed by dialing
1-877-870-5176 or for international callers, 1-858-384-5517.
The passcode for the live call and the replay is 13635670. The
replay will be available until May 20, 2016.
Interested investors and other parties may also listen to a
simultaneous webcast of the conference call by logging onto the
Investor Relations section of the Company's website at
www.surgerypartners.com. The on-line replay will remain
available for a limited time beginning immediately following the
call.
To learn more about Surgery Partners, please visit the company's
website at www.surgerypartners.com. Surgery Partners uses its
website as a channel of distribution for material Company
information. Financial and other material information
regarding Surgery Partners is routinely posted on the Company's
website and is readily accessible.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements, which have been included in reliance of
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, involve risks and uncertainties and assumptions
relating to our operations, financial condition, business,
prospects, growth strategy and liquidity, which may cause our
actual results to differ materially from those projected by such
forward-looking statements, and the Company cannot give assurances
that such statements will prove to be correct. You can identify
forward-looking statements because they do not relate strictly to
historical or current facts. These statements may include words
such as “aim,” “anticipate,” “believe,” “estimate,” “expect,”
“forecast,” “outlook,” “potential,” “project,” “projection,”
“plan,” “intend,” “seek,” “may,” “could,” “would,” “will,”
“should,” “can,” “can have,” “likely,” the negatives thereof and
other words and terms of similar meaning in connection with any
discussion of the timing or nature of future operating or financial
performance or other events.
The forward-looking statements appear in a number of places
throughout this press release and include statements regarding our
intentions, beliefs or current expectations concerning, among other
things, our results of operations, financial condition, liquidity,
prospects, growth, strategies and the industry in which we operate.
All forward-looking statements are subject to risks and
uncertainties, including but not limited to those risks and
uncertainties described in “Risk Factors” in our Annual Report on
form 10-K for the year ended December 31, 2015 that may cause
actual results to differ materially from those that we
expected.
The forward-looking statements made in this press release are
made only as of the date of the hereof. Except as required by law,
we undertake no obligation to update any forward-looking statement,
whether as a result of new information or otherwise. More
information about potential factors that could affect our business
and financial results is included in our filings with
the Securities and Exchange Commission.
Use of Non-GAAP Financial Measures
In addition to the results prepared in accordance with generally
accepted accounting principles in the United
States ("GAAP") provided throughout this press release,
Surgery Partners has presented the following non-GAAP financial
measures: EBITDA and Adjusted EBITDA, which exclude various items
detailed in the attached "Reconciliation of Non-GAAP Financial
Measures".
These non-GAAP financial measures are not intended to replace
financial performance measures determined in accordance with GAAP.
Rather, they are presented as supplemental measures of the
Company's performance that management believes may enhance the
evaluation of the Company's ongoing operating results. These
non-GAAP financial measures are not presented in accordance with
GAAP, and the Company’s computation of these non-GAAP financial
measures may vary from those used by other companies. These
measures have limitations as an analytical tool, and should not be
considered in isolation or as a substitute or alternative to net
income or loss, operating income or loss, cash flows from operating
activities, total indebtedness or any other measures of operating
performance, liquidity or indebtedness derived in accordance with
GAAP.
About Surgery Partners
Headquartered in Nashville, Tennessee, Surgery Partners is a
leading healthcare services company with a differentiated
outpatient delivery model focused on providing high quality, cost
effective solutions for surgical and related ancillary care in
support of both patients and physicians. Founded in 2004, Surgery
Partners is one of the largest and fastest growing surgical
services businesses in the country, with more than 140 locations in
29 states, including ambulatory surgical facilities, surgical
hospitals, a diagnostic laboratory, multi-specialty physician
practices and urgent care facilities.
SURGERY PARTNERS,
INC. |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Amounts in
thousands, except shares and per share amounts) |
(Unaudited) |
|
|
|
|
|
Three Months Ended March 31, |
|
|
2016 |
|
2015 |
|
|
|
|
|
Revenues |
|
$ |
267,074 |
|
|
$ |
224,143 |
|
Operating
expenses: |
|
|
|
|
Salaries and benefits |
|
86,886 |
|
|
60,151 |
|
Supplies |
|
63,662 |
|
|
57,086 |
|
Professional and medical fees |
|
19,654 |
|
|
14,740 |
|
Lease expense |
|
12,434 |
|
|
10,960 |
|
Other operating expenses |
|
14,067 |
|
|
12,836 |
|
Cost of revenues |
|
196,703 |
|
|
155,773 |
|
General and administrative
expenses |
|
12,197 |
|
|
11,862 |
|
Depreciation and amortization |
|
9,568 |
|
|
8,462 |
|
Provision for doubtful
accounts |
|
3,873 |
|
|
5,186 |
|
Income from equity investments |
|
(758 |
) |
|
(707 |
) |
(Gain) loss on disposal or
impairment of long-lived assets, net |
|
(206 |
) |
|
223 |
|
Loss on debt refinancing |
|
8,281 |
|
|
— |
|
Merger transaction and integration
costs |
|
3,172 |
|
|
5,006 |
|
Electronic health records incentive
income |
|
(93 |
) |
|
— |
|
Other expense (income) |
|
57 |
|
|
(13 |
) |
Total operating expenses |
|
232,794 |
|
|
185,792 |
|
Operating income |
|
34,280 |
|
|
38,351 |
|
Interest expense,
net |
|
(22,153 |
) |
|
(25,756 |
) |
Income before income taxes |
|
12,127 |
|
|
12,595 |
|
Income tax expense |
|
1,770 |
|
|
2,107 |
|
Net income |
|
10,357 |
|
|
10,488 |
|
Less: Net income
attributable to non-controlling interests |
|
(17,547 |
) |
|
(17,250 |
) |
Net loss attributable to Surgery
Partners, Inc. |
|
$ |
(7,190 |
) |
|
$ |
(6,762 |
) |
|
|
|
|
|
Net loss per share
attributable to common stockholders |
|
|
|
|
Basic |
|
$ |
(0.15 |
) |
|
$ |
(0.21 |
) |
Diluted (1) |
|
$ |
(0.15 |
) |
|
$ |
(0.21 |
) |
Weighted average common
shares outstanding |
|
|
|
|
Basic |
|
48,017,226 |
|
|
32,054,089 |
|
Diluted (1) |
|
48,017,226 |
|
|
32,054,089 |
|
|
|
|
|
|
|
|
(1) The
impact of potentially dilutive securities for the three months
March 31, 2016 and 2015 was not considered because the effect
would be anti-dilutive in each of those periods. |
|
|
|
|
|
|
|
SURGERY PARTNERS,
INC. |
Unaudited
Selected Financial and Operating Data |
(Amounts in
thousands, except shares and per share amounts) |
|
|
|
|
|
|
March 31,
2016 |
|
December
31, 2015 |
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at period
end): |
|
|
|
Cash and cash equivalents |
|
$ |
135,047 |
|
|
$ |
57,933 |
|
Total current assets |
|
|
394,886 |
|
|
|
310,957 |
|
Total assets |
|
|
2,202,340 |
|
|
|
2,104,443 |
|
|
|
|
|
Current maturities of long-term debt |
|
|
27,169 |
|
|
|
27,247 |
|
Total current liabilities |
|
|
183,781 |
|
|
|
181,289 |
|
Long-term debt, less current maturities |
|
|
1,328,739 |
|
|
|
1,228,112 |
|
Total liabilities |
|
|
1,727,078 |
|
|
|
1,623,077 |
|
|
|
|
|
Total Surgery Partners, Inc. stockholders'
deficit |
|
|
(9,887 |
) |
|
|
(4,028 |
) |
Noncontrolling interests--non-redeemable |
|
|
302,121 |
|
|
|
301,955 |
|
Total stockholders' equity |
|
|
292,234 |
|
|
|
297,927 |
|
|
|
|
|
|
|
Three
Months Ended March 31, |
|
|
2016 |
|
2015 |
|
|
|
|
Cash Flow Data: |
|
|
|
Net cash provided by (used in): |
|
|
|
Operating activities |
|
$ |
25,244 |
|
|
$ |
9,514 |
|
Investing activities |
|
|
(18,853 |
) |
|
|
(5,196 |
) |
Capital expenditures |
|
|
(11,804 |
) |
|
|
(5,461 |
) |
Investments in new businesses |
|
|
(7,049 |
) |
|
|
(8,102 |
) |
Financing activities |
|
|
70,723 |
|
|
|
(22,794 |
) |
Distributions to noncontrolling
interests |
|
|
(17,513 |
) |
|
|
(16,059 |
) |
|
|
|
|
|
|
Three
Months Ended March 31, |
|
|
2016 |
|
2015 |
Other Data: |
|
|
|
Cases |
|
|
100,756 |
|
|
|
91,208 |
|
Revenue per case |
|
$ |
2,651 |
|
|
$ |
2,457 |
|
Adjusted EBITDA |
|
$ |
38,426 |
|
|
$ |
35,968 |
|
Adjusted EBITDA as a % of revenues |
|
|
14.4 |
% |
|
|
16.0 |
% |
Number of surgical facilities as of the end of
period |
|
|
101 |
|
|
|
102 |
|
Number of consolidated surgical facilities as of
the end of period |
|
|
90 |
|
|
|
90 |
|
|
|
|
|
|
|
|
|
|
SURGERY PARTNERS,
INC. |
Supplemental
Information |
(Unaudited, in
thousands, except cases and growth rates) |
|
|
|
|
|
|
|
Three
Months Ended March 31, |
|
|
2016 |
|
2015 |
Same-facility
Information: (2) |
|
|
|
|
Cases |
|
|
103,296 |
|
|
|
92,574 |
|
Case growth |
|
|
11.6 |
% |
|
|
N/A |
|
Revenue per case |
|
$ |
2,514 |
|
|
$ |
2,476 |
|
Revenue per case growth |
|
|
1.5 |
% |
|
|
N/A |
|
(2) Includes cases and revenues from
non-consolidated facilities. |
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, |
|
|
2016 |
|
2015 |
Segment Revenues: |
|
|
|
|
Surgical facility services |
|
$ |
245,670 |
|
|
$ |
207,684 |
|
Ancillary services |
|
|
17,780 |
|
|
|
12,719 |
|
Optical services |
|
|
3,624 |
|
|
|
3,740 |
|
Total revenues |
|
$ |
267,074 |
|
|
$ |
224,143 |
|
|
|
|
|
|
|
|
Three
Months Ended March 31, |
|
|
2016 |
|
2015 |
Segment Operating Income: |
|
|
|
|
Surgical facility services |
|
$ |
56,201 |
|
|
$ |
52,253 |
|
Ancillary services |
|
|
2,458 |
|
|
|
3,442 |
|
Optical services |
|
|
506 |
|
|
|
610 |
|
Total |
|
$ |
59,165 |
|
|
$ |
56,305 |
|
|
|
|
|
|
General and administrative |
|
$ |
(13,638 |
) |
|
$ |
(12,725 |
) |
Gain (loss) on disposal or impairment of
long-lived assets, net |
|
|
206 |
|
|
|
(223 |
) |
Loss on debt extinguishment |
|
|
(8,281 |
) |
|
|
— |
|
Merger transaction and integration costs |
|
|
(3,172 |
) |
|
|
(5,006 |
) |
Total operating income |
|
$ |
34,280 |
|
|
$ |
38,351 |
|
|
|
|
|
|
SURGERY PARTNERS,
INC. |
Reconciliation of
Non-GAAP Financial Measures |
(Unaudited,
Amounts in thousands) |
|
|
|
|
|
Three
Months Ended March 31, |
|
|
2016 |
|
2015 |
Consolidated
Statements of Operations Data (in thousands): |
|
|
|
|
Net
income |
|
$ |
10,357 |
|
|
$ |
10,488 |
|
(Minus): |
|
|
|
|
Net income attributable to
non-controlling interests |
|
17,547 |
|
|
17,250 |
|
Plus (minus): |
|
|
|
|
Income tax expense |
|
1,770 |
|
|
2,107 |
|
Interest and other expense,
net |
|
22,153 |
|
|
25,756 |
|
Depreciation and amortization |
|
9,568 |
|
|
8,462 |
|
EBITDA |
|
26,301 |
|
|
29,563 |
|
Plus: |
|
|
|
|
Management fee (5) |
|
— |
|
|
750 |
|
Merger transaction, integration and
practice acquisition costs |
|
3,917 |
|
|
5,006 |
|
Non-cash stock compensation
expense |
|
133 |
|
|
426 |
|
Loss on debt refinancing |
|
8,281 |
|
|
— |
|
(Gain) loss on disposal of
investments and long-lived assets, net |
|
(206 |
) |
|
223 |
|
Adjusted
EBITDA |
|
$ |
38,426 |
|
|
$ |
35,968 |
|
|
|
|
|
|
|
|
|
|
(5) Fee
payable pursuant to the Management and Investment Advisory Services
Agreement between the Company and Bayside Capital, Inc., which was
terminated in connection with our IPO. |
|
|
|
|
|
|
|
|
|
Contact
Teresa Sparks, CFO
Surgery Partners, Inc.
(615) 234-8940
IR@surgerypartners.com
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