News Release Details
Surgery Partners, Inc. Announces Second Quarter 2019 Results
August 7, 2019
- Revenues increased 2.0% over the prior year period to
$445.4 million ; Adjusted Revenues increased 1.8% to$452.8 million - Same-facility revenues increased 7.9% over prior year period
- Net loss attributable to common stockholders of
$28.6 million - Adjusted net loss attributable to common stockholders of
$14.1 million - Adjusted EBITDA increased 10.5% over prior year period to
$61.2 million - Diluted net loss per share of
$0.59 - Diluted adjusted net loss per share of
$0.29 - The Company reiterates its double-digit Adjusted EBITDA growth for full-year 2019
“We continue to believe in the strength of our short-stay surgical facility strategy and the value we offer to patients, providers and payers. We are encouraged that CMS has continued to recognize this value with the proposed calendar 2020 fee schedule updates for Medicare’s hospital outpatient prospective payment system and ambulatory surgery centers. These proposed updates will allow us, for the first time, to conduct Total Knee Arthroplasty (TKA) procedures for
Second Quarter 2019 Results
Adjusted Revenues for the second quarter of 2019 increased 1.8% to $452.8 million from $444.8 million for the second quarter of 2018. Same-facility revenues for the second quarter of 2019 increased 7.9% from the same period last year, with a 5.9% increase in revenue per case and a 2.0% increase in same-facility cases (there were the same number of business days in both periods). For the second quarter of 2019, the Company’s net loss attributable to common stockholders was $28.6 million compared to
Year to Date 2019 Results
Revenues year-to-date 2019 increased 1.7% over the prior year period to
Liquidity
Surgery Partners had cash and cash equivalents of $117.4 million and $115.9 million of borrowing capacity under its revolving credit facility at
Guidance
The Company continues to project that it will be able to grow revenues at a low single-digit percentage rate in 2019; when the 2018 baseline is adjusted for divested revenues, 2019 revenue growth is projected to be high single digits. The Company also continues to project that it will be able to grow Adjusted EBITDA at a double-digit percentage rate in 2019. The Company’s outlook does not incorporate the impact of unidentified acquisitions and also does not include the impact of de novo activity. Consistent with historical seasonality and the projected timing of strategic initiatives, the Company projects that roughly one-third of its full-year 2019 Adjusted EBITDA will occur in the fourth quarter.
Conference Call Information
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.
About Surgery Partners
Headquartered in
Forward-Looking Statements
This press release contains forward-looking statements, including those regarding growth, our anticipated operating results for 2019 and other similar statements. These statements can be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “continues,” “estimates,” “predicts,” “projects,” “forecasts,” “may,” “could,” and similar expressions. All forward looking statements are based on current expectations and beliefs as of the date of this release and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements, including but not limited to, our ability to execute on our operational and strategic initiatives, the timing and impact of our portfolio optimization efforts, our ability to continue to improve same-facility volume and revenue growth on the timeline anticipated, if at all, our ability to successfully integrate acquisitions, the anticipated impact and timing of our ongoing efficiency efforts, including insurance consolidations and completed headcount actions, as well as our ongoing procurement and revenue cycle efforts, the impact of adverse weather conditions and other events outside of our control, whether or not a settlement is reached with the government relating to the previously disclosed investigation, the terms of any such settlement and the ongoing cost of complying with the terms of any such settlement, as well as the risks identified and discussed from time to time in the Company’s reports filed with the
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,
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 revenue, 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.
Selected Consolidated Financial Data
(Dollars in millions, except per share amounts, shares in thousands)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||
Revenues | $ | 445.4 | $ | 436.6 | $ | 862.2 | $ | 847.9 | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||
Salaries and benefits | 132.7 | 134.1 | 261.9 | 263.8 | |||||||||||||||||||||||||||
Supplies | 123.4 | 121.2 | 238.4 | 235.6 | |||||||||||||||||||||||||||
Professional and medical fees | 36.4 | 36.7 | 71.5 | 72.4 | |||||||||||||||||||||||||||
Lease expense | 21.0 | 21.8 | 41.6 | 43.2 | |||||||||||||||||||||||||||
Other operating expenses | 26.9 | 26.3 | 53.1 | 52.4 | |||||||||||||||||||||||||||
Cost of revenues | 340.4 | 340.1 | 666.5 | 667.4 | |||||||||||||||||||||||||||
General and administrative expenses | 23.3 | 26.1 | 45.0 | 50.3 | |||||||||||||||||||||||||||
Depreciation and amortization | 19.1 | 16.7 | 37.9 | 32.4 | |||||||||||||||||||||||||||
Income from equity investments | (2.2 | ) | (2.5 | ) | (4.2 | ) | (4.4 | ) | |||||||||||||||||||||||
(Gain) loss on disposals and deconsolidations, net | (8.2 | ) | 3.2 | (7.6 | ) | 3.2 | |||||||||||||||||||||||||
Transaction and integration costs | 6.2 | 11.7 | 8.2 | 16.7 | |||||||||||||||||||||||||||
Loss on debt extinguishment | 11.7 | — | 11.7 | ||||||||||||||||||||||||||||
Other income | (0.4 | ) | (2.2 | ) | (0.4 | ) | (2.4 | ) | |||||||||||||||||||||||
Total operating expenses | 389.9 | 393.1 | 757.1 | 763.2 | |||||||||||||||||||||||||||
Operating income | 55.5 | 43.5 | 105.1 | 84.7 | |||||||||||||||||||||||||||
Tax receivable agreement expense | — | — | (2.4 | ) | — | ||||||||||||||||||||||||||
Interest expense, net | (46.4 | ) | (35.9 | ) | (88.4 | ) | (70.2 | ) | |||||||||||||||||||||||
Income before income taxes | 9.1 | 7.6 | 14.3 | 14.5 | |||||||||||||||||||||||||||
Income tax expense | 1.0 | 3.3 | 2.7 | 5.1 | |||||||||||||||||||||||||||
Net income | 8.1 | 4.3 | 11.6 | 9.4 | |||||||||||||||||||||||||||
Less: Net income attributable to non-controlling interests | (27.9 | ) | (23.8 | ) | (51.5 | ) | (46.4 | ) | |||||||||||||||||||||||
Net loss attributable to Surgery Partners, Inc. | (19.8 | ) | (19.5 | ) | (39.9 | ) | (37.0 | ) | |||||||||||||||||||||||
Less: Amounts attributable to participating securities | (8.8 | ) | (7.9 | ) | (17.3 | ) | (15.7 | ) | |||||||||||||||||||||||
Net loss attributable to common stockholders | $ | (28.6 | ) | $ | (27.4 | ) | $ | (57.2 | ) | $ | (52.7 | ) | |||||||||||||||||||
Net loss per share attributable to common stockholders | |||||||||||||||||||||||||||||||
Basic | $ | (0.59 | ) | $ | (0.57 | ) | $ | (1.19 | ) | $ | (1.10 | ) | |||||||||||||||||||
Diluted (1) | $ | (0.59 | ) | $ | (0.57 | ) | $ | (1.19 | ) | $ | (1.10 | ) | |||||||||||||||||||
Weighted average common shares outstanding | |||||||||||||||||||||||||||||||
Basic | 48,291 | 48,016 | 48,241 | 48,012 | |||||||||||||||||||||||||||
Diluted (1) | 48,291 | 48,016 | 48,241 | 48,012 |
(1) The impact of potentially dilutive securities for all periods presented was not considered because the effect would be anti-dilutive in those periods.
Selected Financial and Operating Data
(Dollars in millions, except per case and per share amounts)
June 30, 2019 |
December 31, 2018 |
||||||||||
Balance Sheet Data (at period end): | |||||||||||
Cash and cash equivalents | $ | 117.4 | $ | 184.3 | |||||||
Total current assets | 529.0 | 588.3 | |||||||||
Total assets | 4,890.9 | 4,676.3 | |||||||||
Current maturities of long-term debt | 57.3 | 55.6 | |||||||||
Total current liabilities | 368.8 | 349.3 | |||||||||
Long-term debt, less current maturities | 2,397.4 | 2,270.9 | |||||||||
Total liabilities | 3,153.3 | 2,891.5 | |||||||||
Non-controlling interests—redeemable | 316.0 | 326.6 | |||||||||
Redeemable preferred stock | 376.6 | 359.3 | |||||||||
Total Surgery Partners, Inc. stockholders' equity | 358.7 | 404.6 | |||||||||
Non-controlling interests—non-redeemable | 686.3 | 694.3 | |||||||||
Total stockholders' equity | 1,045.0 | 1,098.9 | |||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||||||||||
Operating activities | $ | 26.7 | $ | 39.6 | $ | 47.2 | $ | 69.6 | ||||||||||||||||||||||||
Investing activities | (24.5 | ) | (18.4 | ) | (42.9 | ) | (54.8 | ) | ||||||||||||||||||||||||
Capital expenditures | (20.0 | ) | (6.0 | ) | (31.8 | ) | (15.9 | ) | ||||||||||||||||||||||||
Payments for acquisitions, net of cash acquired | (5.6 | ) | (22.3 | ) | (13.2 | ) | (47.9 | ) | ||||||||||||||||||||||||
Financing activities | (27.3 | ) | (37.9 | ) | (71.2 | ) | (93.6 | ) | ||||||||||||||||||||||||
Distributions to non-controlling interests | (27.1 | ) | (24.9 | ) | (60.9 | ) | (55.8 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||
Other Data: | ||||||||||||||||||||||||||||||||
Number of surgical facilities as of the end of period | 128 | 124 | 128 | 124 | ||||||||||||||||||||||||||||
Number of consolidated surgical facilities as of the end of period | 107 | 106 | 107 | 106 | ||||||||||||||||||||||||||||
Cases | 133,193 | 131,646 | 257,705 | 256,504 | ||||||||||||||||||||||||||||
Revenue per case | $ | 3,344 | $ | 3,316 | $ | 3,346 | $ | 3,306 | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 61.2 | $ | 55.4 | $ | 112.0 | $ | 102.5 | ||||||||||||||||||||||||
Adjusted EBITDA margin (2) | 13.5 | % | 12.5 | % | 12.8 | % | 11.9 | % | ||||||||||||||||||||||||
Adjusted net loss per share attributable to common stockholders - Basic | $ | (0.29 | ) | $ | (0.18 | ) | $ | (0.71 | ) | $ | (0.44 | ) | ||||||||||||||||||||
Adjusted net loss per share attributable to common stockholders - Diluted | $ | (0.29 | ) | $ | (0.18 | ) | $ | (0.71 | ) | $ | (0.44 | ) |
(2) Defined as Adjusted EBITDA as a % of Adjusted Revenues. A reconciliation of these non-GAAP financial measures appears below.
Supplemental Information
(Dollars in millions, except per case amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
Same-facility Information (3): | ||||||||||||||
Cases | 141,421 | 138,710 | 274,289 | 269,815 | ||||||||||
Case growth | 2.0 | % | N/A | 1.7 | % | N/A | ||||||||
Revenue per case | $ | 3,166 | $ | 2,991 | $ | 3,162 | $ | 3,020 | ||||||
Revenue per case growth | 5.9 | % | N/A | 4.7 | % | N/A | ||||||||
Number of work days in the period | 64 | 64 | 127 | 128 | ||||||||||
Case growth (days adjusted) | 2.0 | % | N/A | 2.5 | % | N/A | ||||||||
Revenue growth (days adjusted) | 7.9 | % | N/A | 7.3 | % | N/A |
(3) Same-facility information includes cases and revenues from our consolidated and non-consolidated surgical facilities (excluding facilities acquired in new markets or divested during the current and prior periods).
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||
Segment Revenues: | ||||||||||||||||||||||||||||||||
Surgical facility services | $ | 424.0 | $ | 413.0 | $ | 819.8 | $ | 801.3 | ||||||||||||||||||||||||
Ancillary services | 20.4 | 20.8 | 40.3 | 40.8 | ||||||||||||||||||||||||||||
Optical services | 1.0 | 2.8 | 2.1 | 5.8 | ||||||||||||||||||||||||||||
Total revenues | $ | 445.4 | $ | 436.6 | $ | 862.2 | $ | 847.9 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||
Adjusted EBITDA: | ||||||||||||||||||||||||||||||||
Surgical facility services | $ | 78.4 | $ | 75.5 | $ | 146.8 | $ | 142.0 | ||||||||||||||||||||||||
Ancillary services | 1.4 | 1.0 | 2.6 | 2.1 | ||||||||||||||||||||||||||||
Optical services | 0.4 | 0.7 | 0.9 | 1.5 | ||||||||||||||||||||||||||||
All other | (19.0 | ) | (21.8 | ) | (38.3 | ) | (43.1 | ) | ||||||||||||||||||||||||
Total adjusted EBITDA | $ | 61.2 | $ | 55.4 | $ | 112.0 | $ | 102.5 | ||||||||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures
(Dollars in millions)
The following table reconciles Adjusted Revenues to revenues in the selected consolidated financial information, the most directly comparable GAAP measure:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||
Adjusted Revenues (4): | ||||||||||||||||||||||||||||||||
Revenues | $ | 445.4 | $ | 436.6 | $ | 862.2 | $ | 847.9 | ||||||||||||||||||||||||
Add: provision for doubtful accounts | 7.4 | 8.2 | 15.5 | 14.2 | ||||||||||||||||||||||||||||
Total Adjusted Revenues | $ | 452.8 | $ | 444.8 | $ | 877.7 | $ | 862.1 |
(4) In accordance with a new accounting standard that was effective prospectively beginning
The following table reconciles Adjusted EBITDA to income before income taxes in the reported condensed consolidated financial information, the most directly comparable GAAP financial measure:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||
Adjusted EBITDA (5) | $ | 61.2 | $ | 55.4 | $ | 112.0 | $ | 102.5 | ||||||||||||||||||||||||
Net income attributable to non-controlling interests | 27.9 | 23.8 | 51.5 | 46.4 | ||||||||||||||||||||||||||||
Depreciation and amortization | (19.1 | ) | (16.7 | ) | (37.9 | ) | (32.4 | ) | ||||||||||||||||||||||||
Interest expense, net | (46.4 | ) | (35.9 | ) | (88.4 | ) | (70.2 | ) | ||||||||||||||||||||||||
Equity-based compensation expense | (3.0 | ) | (2.8 | ) | (4.9 | ) | (4.8 | ) | ||||||||||||||||||||||||
Contingent acquisition compensation expense | — | (0.5 | ) | — | (1.0 | ) | ||||||||||||||||||||||||||
Transaction, integration and acquisition costs (6) | (8.0 | ) | (12.5 | ) | (11.5 | ) | (18.0 | ) | ||||||||||||||||||||||||
Reserve adjustments (7) | — | — | — | (4.8 | ) | |||||||||||||||||||||||||||
Loss on debt extinguishment | (11.7 | ) | — | (11.7 | ) | — | ||||||||||||||||||||||||||
Gain (loss) on disposals and deconsolidations, net | 8.2 | (3.2 | ) | 7.6 | (3.2 | ) | ||||||||||||||||||||||||||
Tax receivable agreement expense | — | — | (2.4 | ) | — | |||||||||||||||||||||||||||
Income before income taxes | $ | 9.1 | $ | 7.6 | $ | 14.3 | $ | 14.5 |
(5) We use Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used by 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 we consolidate for financial reporting purposes. We believe 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 our portion of Adjusted EBITDA generated by our 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 our financial performance. We believe 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.
(6) For the three months ended June 30, 2019 and 2018, this amount includes transaction and integration costs of
(7) This amount represents adjustments to revenue in order to apply consistent policies to businesses acquired by
Reconciliation of Non-GAAP Financial Measures
(Dollars in millions, except per share amounts, shares in thousands)
From time to time, the Company incurs certain non-recurring gains or losses that are normally non-operational 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 adjusted net loss attributable to common stockholders and adjusted net loss per share attributable to common stockholders as supplements to the comparable GAAP measures. Adjusted net loss attributable to common stockholders and adjusted net loss per share attributable to common stockholders should not be considered measures of financial performance under GAAP, and the items excluded from such measures are significant components in understanding and assessing financial performance. These measures should not be considered in isolation or as an alternative to the comparable GAAP measures as presented in the consolidated financial statements.
The following table reconciles net income as reflected in the consolidated statements of operations to adjusted net loss used to calculate adjusted net loss per share attributable to common stockholders:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||
Consolidated Statements of Operations Data: | |||||||||||||||||||||||||||||||
Net Income | $ | 8.1 | $ | 4.3 | $ | 11.6 | $ | 9.4 | |||||||||||||||||||||||
Plus (minus): | |||||||||||||||||||||||||||||||
Net income attributable to non-controlling interests | (27.9 | ) | (23.8 | ) | (51.5 | ) | (46.4 | ) | |||||||||||||||||||||||
Amounts attributable to participating securities | (8.8 | ) | (7.9 | ) | (17.3 | ) | (15.7 | ) | |||||||||||||||||||||||
Equity-based compensation expense | 3.0 | 2.8 | 4.9 | 4.8 | |||||||||||||||||||||||||||
Contingent acquisition compensation expense | — | 0.5 | — | 1.0 | |||||||||||||||||||||||||||
Transaction, integration and acquisition costs | 8.0 | 12.5 | 11.5 | 18.0 | |||||||||||||||||||||||||||
Reserve adjustments | — | — | — | 4.8 | |||||||||||||||||||||||||||
(Gain) loss on disposals and deconsolidations, net | (8.2 | ) | 3.2 | (7.6 | ) | 3.2 | |||||||||||||||||||||||||
Loss on debt extinguishment | 11.7 | — | 11.7 | — | |||||||||||||||||||||||||||
Tax receivable agreement expense | — | — | 2.4 | — | |||||||||||||||||||||||||||
Adjusted net loss attributable to common stockholders | $ | (14.1 | ) | $ | (8.4 | ) | $ | (34.3 | ) | $ | (20.9 | ) | |||||||||||||||||||
Adjusted net loss per share attributable to common stockholders | |||||||||||||||||||||||||||||||
Basic | $ | (0.29 | ) | $ | (0.18 | ) | $ | (0.71 | ) | $ | (0.44 | ) | |||||||||||||||||||
Diluted (8) | $ | (0.29 | ) | $ | (0.18 | ) | $ | (0.71 | ) | $ | (0.44 | ) | |||||||||||||||||||
Weighted average common shares outstanding | |||||||||||||||||||||||||||||||
Basic | 48,291 | 48,016 | 48,241 | 48,012 | |||||||||||||||||||||||||||
Diluted (8) | 48,291 | 48,016 | 48,241 | 48,012 |
(8) The impact of potentially dilutive securities for all periods presented was not considered because the effect would be anti-dilutive in those periods.
Contact
(615) 234-8940
IR@surgerypartners.com
Source: Surgery Partners, Inc.