Surgery Partners, Inc. (NASDAQ:SGRY) (the “Company”), a leading
healthcare services company, today announced preliminary financial
results for its third quarter ended September 30, 2017. While these
financial results are subject to finalization of the Company’s
quarterly financial and accounting procedures, the preliminary
results reflect the impact of certain non-recurring items and
expectations for the business for the remainder of 2017.
Surgery Partners anticipates revenues for the
third quarter of 2017 of approximately $306.3 million compared to
$282.7 million in the third quarter of 2016. Loss before income
taxes for the third quarter is expected to be approximately $21.9
million, compared to income of $12.6 million in the third quarter
of 2016.
During the third quarter of 2017, the Company
experienced lower than expected revenue and incurred certain
expenses related to Hurricanes Harvey and Irma, primarily driven by
electrical outages at, and temporary closures of, certain of our
facilities in affected areas. While all affected facilities are
currently open and the Company’s operations have returned to
normal, the Company anticipates residual impact from the hurricanes
on fourth quarter 2017 results. During the second half of
2017, the Company expects the total impact from the hurricanes to
be an approximately $7.0 million to $9.0 million decrease in
expected revenue and approximately $4.0 million to $6.0 million in
Adjusted EBITDA reduction, with a majority of the impact being
recognized in the third quarter.
Additionally, as part of a review of operations
subsequent to the investment by Bain Capital to create a
solid foundation to support Surgery Partner’s long-term growth
objectives, in the third quarter the Company incurred a
non-recurring adjustment to revenue of $15.6 million and a
corresponding reduction to Adjusted EBITDA of $14.9 million each
attributable to an increase in reserves for certain accounts
receivable. This increase in reserves results from certain
known events and actions during the third quarter of 2017 related
to select payors primarily in the Company’s ancillary services
segment. Upon consideration of such additional information,
related receivables were determined to have a low likelihood of
collection. The majority of this adjustment related to receivables
with balances from the first quarter of 2016 and prior. The
Company believes it has accounted for all necessary reserve
adjustments at this time.
On a normalized basis and including the pro
forma effect of the NSH acquisition, same facility revenues for the
third quarter of 2017 increased 2.9% over the same period last year
and 5.7% year to date. For the third quarter, same facility revenue
per case increased 3.3% and same facility cases decreased 0.3%.
Year to date, same facility revenue per case increased 4.3% and
same facility cases increased 1.3%.
Adjusted EBITDA for the third quarter of 2017,
excluding the impact from the hurricanes and the charges identified
in the review of operations noted above, is expected to be
approximately $43.1 million, compared to $44.7 million in the
previous year’s third quarter. Adjusted EBITDA is a non-GAAP
financial measure. A table reconciling expected net income before
income tax to expected Adjusted EBITDA and Normalized Adjusted
EBITDA is included in this release.
“The Company remains well capitalized to fund
both internal and acquisition driven growth initiatives,” stated
Teresa Sparks, CFO of Surgery Partners. “Our future growth
initiatives are supported with cash on the balance sheet of
approximately $200 million, in addition to $75 million of undrawn
revolver capacity and no financial covenants on the term loan or
senior unsecured notes.”
As a result of the continuation of broader
industry softness related to residual effects of the hurricanes as
well as the ongoing impact of slower volumes and a less favorable
payor mix, the Company’s 2017 guidance ranges for the year have
been updated from the range issued in our second quarter earnings
press release. Including the partial year impact of the NSH
acquisition, which is performing as anticipated, revenue is now
expected in the range of $1.30 billion to $1.33
billion and Adjusted EBITDA in the range of $178 million
to $185 million which includes the normalization for the impact of
hurricanes and the reserve adjustment.
“While we experienced some unique challenges in
the quarter, our normalized same facility revenue growth
demonstrates the underlying market demand for outpatient surgical
procedures at our facilities,” stated Clifford Adlerz, Interim CEO
of Surgery Partners. “Additionally, the integration of NSH is going
well and we are focused on achieving synergies and the scale
benefits of a larger organization. Our leadership is dedicated to
quickly addressing and resolving any near-term issues that have
impacted the Company’s performance and have launched specific
initiatives to accelerate same facility cases, act on accretive
surgical facility tuck-in acquisitions, and implement procurement
optimization initiatives to improve margins. We are moving forward
with a stronger, more diversified platform to support our short
stay surgical procedure growth objectives, and delivering
significant value to patients, providers and payors.”
The company will provide a detailed assessment of its third
quarter performance when it reports third quarter 2017 financial
results on November 8, 2017.
Forward-Looking Statements
This press release contains forward-looking statements. These
statements 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. 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, including our revenue and Adjusted EBITDA guidance for
the remainder of 2017, growth, including our outlook for 2018,
strategies and the industry in which we operate. All
forward-looking statements are subject to risks and uncertainties,
including but not limited to the risk that the reported results are
preliminary, are subject to finalization of the Company’s quarterly
financial and accounting procedures and may change and such changes
may be material, that the ultimate impact from the hurricanes is
difficult to predict and recovery may happen more quickly or slowly
than anticipated and those risks and uncertainties described in
“Risk Factors” in our Quarterly Report on form 10-Q for the three
months ended June 30, 2017 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, Inc.
Headquartered in Nashville, Tennessee, Surgery
Partners, Inc. 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 180
locations in 32 states, including ambulatory surgical facilities,
surgical hospitals, a diagnostic laboratory, multi-specialty
physician practices and urgent care facilities.
SURGERY PARTNERS, INC. |
Unaudited Selected Financial and Operating
Data |
(Amounts in thousands, except cases and per
case amounts) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Other
Data: |
|
|
|
|
|
|
|
Number of surgical
facilities as of the end of period |
124 |
|
|
104 |
|
|
124 |
|
|
104 |
|
Number of consolidated
surgical facilities as of the end of period |
109 |
|
|
93 |
|
|
109 |
|
|
93 |
|
|
|
|
|
|
|
|
|
Revenues |
$ |
306,337 |
|
|
$ |
282,682 |
|
|
$ |
880,873 |
|
|
$ |
839,437 |
|
Cases |
111,748 |
|
|
106,821 |
|
|
332,335 |
|
|
315,508 |
|
Revenue per case |
$ |
2,741 |
|
|
$ |
2,646 |
|
|
$ |
2,651 |
|
|
$ |
2,661 |
|
Normalized
Revenues |
$ |
329,909 |
|
|
$ |
282,682 |
|
|
$ |
904,445 |
|
|
$ |
839,437 |
|
Adjusted EBITDA |
$ |
23,244 |
|
|
$ |
44,748 |
|
|
$ |
100,406 |
|
|
$ |
129,205 |
|
Adjusted EBITDA as a %
of revenues |
7.6 |
% |
|
15.8 |
% |
|
11.4 |
% |
|
15.4 |
% |
Normalized Adjusted
EBITDA |
$ |
43,112 |
|
|
$ |
44,748 |
|
|
$ |
120,274 |
|
|
$ |
129,205 |
|
Normalized Adjusted
EBITDA as a % of revenues |
14.1 |
% |
|
15.8 |
% |
|
13.7 |
% |
|
15.4 |
% |
SURGERY PARTNERS, INC.
Reconciliation of Non-GAAP Financial
Measures(Unaudited, Amounts in
thousands)
From time to time, the Company incurs certain gains or losses
that are normally nonoperational in nature and that it does not
consider relevant in assessing its ongoing operating performance.
When significant, Surgery Partners’ management and Board of
Directors typically exclude these gains or losses when evaluating
the Company’s operating performance and in certain instances when
evaluating performance for incentive compensation purposes.
Additionally, the Company believes that certain investors and
equity analysts exclude these or similar items when evaluating the
Company’s current or future operating performance and in making
informed investment decisions regarding the Company. Accordingly,
the Company provides Normalized Revenue, EBITDA, Adjusted EBITDA
and Normalized Adjusted EBITDA as a supplement to its comparable
GAAP measure of revenues and net income before income tax,
respectively. Normalized Revenue, EBITDA, Adjusted EBITDA and
Normalized Adjusted EBITDA should not be considered a measure of
financial performance under GAAP, and the items excluded from
revenues and net income before income tax are significant
components in understanding and assessing financial performance.
Normalized Revenue, EBITDA, Adjusted EBITDA and Normalized Adjusted
EBITDA should not be considered in isolation or as an alternative
to revenues and net income before income tax as presented in the
consolidated financial statements.
The following table reconciles normalized
revenues to revenues, the most directly comparable U.S. GAAP
financial measure (in thousands and unaudited):
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Condensed
Consolidated Statements of Operations Data (in
thousands): |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
306,337 |
|
|
$ |
282,682 |
|
|
$ |
880,873 |
|
|
$ |
839,437 |
|
Hurricane
estimated impact |
|
8,000 |
|
|
— |
|
|
8,000 |
|
|
— |
|
Reserve
adjustment |
|
15,572 |
|
|
— |
|
|
15,572 |
|
|
— |
|
Normalized
Revenues |
|
$ |
329,909 |
|
|
$ |
282,682 |
|
|
$ |
904,445 |
|
|
$ |
839,437 |
|
The following table reconciles EBITDA, Adjusted
EBITDA and Normalized Adjusted EBITDA to income before income
taxes, the most directly comparable U.S. GAAP financial measure (in
thousands and unaudited):
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Condensed
Consolidated Statements of Operations Data (in
thousands): |
|
|
|
|
|
|
|
|
(Loss) Income
before income taxes |
|
$ |
(21,924 |
) |
|
$ |
12,640 |
|
|
$ |
6,754 |
|
|
$ |
49,479 |
|
(Minus): |
|
|
|
|
|
|
|
|
Net
income attributable to non-controlling interests |
|
15,305 |
|
|
16,672 |
|
|
48,579 |
|
|
54,392 |
|
Plus (minus): |
|
|
|
|
|
|
|
|
Interest
expense, net |
|
34,359 |
|
|
26,475 |
|
|
85,141 |
|
|
74,863 |
|
Depreciation and amortization |
|
13,316 |
|
|
9,713 |
|
|
35,841 |
|
|
28,984 |
|
EBITDA |
|
10,446 |
|
|
32,156 |
|
|
79,157 |
|
|
98,934 |
|
Plus: |
|
|
|
|
|
|
|
|
Non-cash
stock compensation expense |
|
3,311 |
|
|
691 |
|
|
5,380 |
|
|
1,326 |
|
Contingent acquisition compensation expense |
|
1,815 |
|
|
1,530 |
|
|
5,662 |
|
|
3,060 |
|
Merger
transaction, integration and practice acquisition costs (2) |
|
6,406 |
|
|
2,471 |
|
|
11,134 |
|
|
8,579 |
|
Gain on
litigation settlement |
|
— |
|
|
— |
|
|
(3,794 |
) |
|
— |
|
Tax
receivable agreement expense |
|
— |
|
|
3,733 |
|
|
— |
|
|
3,733 |
|
Tax
receivable agreement gain |
|
(16,392 |
) |
|
— |
|
|
(16,392 |
) |
|
— |
|
Loss on
disposal or impairment of long-lived assets, net |
|
447 |
|
|
572 |
|
|
2,048 |
|
|
1,697 |
|
Loss on
debt refinancing |
|
18,211 |
|
|
3,595 |
|
|
18,211 |
|
|
11,876 |
|
Gain on
acquisition escrow release |
|
$ |
(1,000 |
) |
|
$ |
— |
|
|
$ |
(1,000 |
) |
|
$ |
— |
|
Adjusted EBITDA
(1) |
|
$ |
23,244 |
|
|
$ |
44,748 |
|
|
$ |
100,406 |
|
|
$ |
129,205 |
|
Hurricane
estimated impact |
|
5,000 |
|
|
— |
|
|
5,000 |
|
|
— |
|
Reserve
adjustment |
|
14,868 |
|
|
— |
|
|
14,868 |
|
|
— |
|
Normalized
Adjusted EBITDA |
|
$ |
43,112 |
|
|
$ |
44,748 |
|
|
$ |
120,274 |
|
|
$ |
129,205 |
|
(1) The above table reconciles Adjusted EBITDA to income before
income taxes as reflected in the unaudited condensed consolidated
statements of operations.
When the Company uses the term “Adjusted EBITDA,” it is
referring to income before income taxes minus (a) net income
attributable to non-controlling interests plus
(b) depreciation and amortization, (c) interest expense, net,
(d) non-cash stock compensation expense, (e) contingent acquisition
compensation expense, (f) merger transaction, integration and
practice acquisition costs, (g) gain on litigation settlement, (h)
loss on disposal or impairment of long-lived assets, (i) loss on
debt refinancing and (j) gain on acquisition escrow release.
The Company uses Adjusted EBITDA as a measure of financial
performance. Adjusted EBITDA is a key measure used by the Company’s
management to assess operating performance, make business decisions
and allocate resources. Non-controlling interests represent the
interests of third parties, such as physicians, and in some cases,
healthcare systems that own an interest in surgical facilities that
the Company consolidates for financial reporting purposes. The
Company believes that it is helpful to investors to present
Adjusted EBITDA as defined above because it excludes the portion of
net income attributable to these third-party interests and
clarifies for investors the Company's portion of Adjusted EBITDA
generated by its surgical facilities and other operations.
Adjusted EBITDA is not a measurement of
financial performance under GAAP, and should not be considered in
isolation or as a substitute for net income, operating income or
any other measure calculated in accordance with generally accepted
accounting principles. The items excluded from Adjusted EBITDA are
significant components in understanding and evaluating the
Company's financial performance. The Company believes such
adjustments are appropriate, as the magnitude and frequency of such
items can vary significantly and are not related to the assessment
of normal operating performance. Our calculation of Adjusted EBITDA
may not be comparable to similarly titled measures reported by
other companies.
(2) This amount includes merger transaction and integration
costs of $5.3 million and $1.9 million for the three months ended
September 30, 2017 and 2016, respectively, and practice
acquisition costs of $1.1 million and $571,000 for the three months
ended September 30, 2017 and 2016, respectively.
This amount includes merger transaction and integration costs of
$8.6 million and $6.4 million for the nine months ended
September 30, 2017 and 2016, respectively, and practice
acquisition costs of $2.5 million and $2.2 million for the nine
months ended September 30, 2017 and 2016, respectively.
Investors:
Teresa Sparks, CFOSurgery Partners, Inc.(615)
234-8940IR@surgerypartners.com
Surgery Partners (NASDAQ:SGRY)
Historical Stock Chart
Von Mär 2024 bis Apr 2024
Surgery Partners (NASDAQ:SGRY)
Historical Stock Chart
Von Apr 2023 bis Apr 2024