8-K: Surgery Partners Reports Q3 2025, Revises Full-Year Guidance

Surgery Partners, Inc. announced its third quarter 2025 results, reporting revenue and Adjusted EBITDA growth but revising full-year guidance downwards due to softer volume and payor mix trends.

Summary

• Revenue for the third quarter of 2025 increased 6.6% to $821.5 million compared to $770.4 million in Q3 2024.
• Same-facility revenues for Q3 2025 increased 6.3%, driven by a 2.8% increase in revenue per case and a 3.4% increase in same-facility cases.
• Net loss attributable to Surgery Partners, Inc. was $22.7 million for the third quarter of 2025.
• Adjusted EBITDA increased 6.1% to $136.4 million for the third quarter of 2025, up from $128.6 million in Q3 2024.
• Year-to-date 2025 revenues increased 7.7% to $2,423.7 million, and Adjusted EBITDA was $369.3 million.
• Full year 2025 revenue guidance was revised to a range of $3.275 billion to $3.30 billion.
• Full year 2025 Adjusted EBITDA guidance was revised to a range of $535 million to $540 million.
• Cash and cash equivalents stood at $203.4 million as of September 30, 2025, with $405.9 million of borrowing capacity under its revolving credit facility.
• Cash flows from operating activities for Q3 2025 were $83.6 million, an increase from $65.2 million in Q3 2024.
• Year-to-date operating cash flows decreased to $170.9 million from $188.7 million in the prior year period, primarily due to higher cash interest payments and timing of changes in working capital.
• The ratio of total net debt to EBITDA was approximately 4.2x at the end of Q3 2025.

Sentiment

Score: 4

Explanation: While Q3 showed solid growth in revenue and Adjusted EBITDA, the downward revision of full-year guidance due to softer trends and delayed capital deployment indicates a slightly negative shift in outlook, tempering the positive operational results.

Positives

• Revenue increased 6.6% for the third quarter of 2025 to $821.5 million.
• Same-facility revenues increased 6.3% for the third quarter of 2025.
• Surgical cases increased 2.1% for the third quarter of 2025, with same-facility cases up 3.4%.
• Adjusted EBITDA increased 6.1% to $136.4 million for the third quarter of 2025.
• Cash flows from operating activities for Q3 2025 increased to $83.6 million from $65.2 million in Q3 2024.
• Continued strength in orthopedic procedures is underpinning topline growth.
• Management is encouraged by the multiple levers available to unlock value and drive sustained success, including M&A pipeline and portfolio optimization opportunities.

Negatives

• Net loss attributable to Surgery Partners, Inc. was $22.7 million for the third quarter of 2025.
• Full year 2025 revenue guidance was revised downwards to $3.275 billion to $3.30 billion.
• Full year 2025 Adjusted EBITDA guidance was revised downwards to $535 million to $540 million.
• Volume and payor mix trends were softer than anticipated.
• Delayed cadence of capital deployment activities contributed to the revised full-year guidance.
• Year-to-date operating cash flows decreased to $170.9 million from $188.7 million in the prior year period, primarily due to higher cash interest payments and timing of changes in working capital.
• Interest expense, net, increased significantly to $74.9 million in Q3 2025 from $50.0 million in Q3 2024.

Risks

• Reductions in payments from government health care programs and private insurance payors.
• Ability to contract with private insurance payors.
• Changes in payor mix or surgical case mix.
• Failure to maintain or develop relationships with physicians on beneficial or favorable terms.
• Impact of payor controls designed to reduce the number of surgical procedures.
• Efforts to integrate operations of acquired or developed businesses and surgical facilities, attract new physician partners, or acquire additional surgical facilities.
• Supply chain issues, including shortages or quality control issues with surgery-related products, equipment and medical supplies.
• Competition for physicians, nurses, strategic relationships, acquisitions and managed care contracts.
• Ability to attract and retain qualified health care professionals.
• Ability to enforce non-compete restrictions against physicians.
• Ability to manage material liabilities incurred as a result of acquiring or operating surgical facilities.
• Impact of future legislation and other health care regulatory reform actions.
• Ability to comply with current health care laws and regulations.
• Outcome of legal and regulatory proceedings.
• Impact of cybersecurity attacks or intrusions.
• Changes in the regulatory, economic and other conditions of the states where surgical facilities are located.
• Indebtedness.
• Social and economic impact of a pandemic, epidemic or outbreak of a contagious disease.

Future Outlook

The company revised its full-year 2025 revenue guidance to a range of $3.275 billion to $3.30 billion and Adjusted EBITDA guidance to $535 million to $540 million, reflecting a prudent approach to the fourth quarter due to softer volume and payor mix trends and delayed capital deployment. Management remains confident in the strength of its platform, long-term growth algorithm, and ability to deliver long-term shareholder value, while also continuing to evaluate M&A pipeline and portfolio optimization opportunities.

Management Comments

• "We are proud to report another quarter of solid execution, with revenue and Adjusted EBITDA growth reflecting continued progress in line with our long-term growth algorithm." Eric Evans, CEO.
• "The continued strength in orthopedic procedures underpinning our topline growth reinforces our leading positioning within the industry, and we remain committed to operational excellence and disciplined capital deployment to maximize performance of our portfolio." Eric Evans, CEO.
• "We also continue to evaluate our M&A pipeline and portfolio optimization opportunities and remain encouraged by the multiple levers available to unlock value and drive sustained success." Eric Evans, CEO.
• "Our third quarter performance demonstrates the resilience of our business model and the discipline of our team." Dave Doherty, CFO.
• "Considering that volume and payor mix trends were softer than anticipated, coupled with this year's delayed cadence of capital deployment activities, we have revised our full-year guidance to reflect a prudent approach to the fourth quarter." Dave Doherty, CFO.
• "We remain confident in the strength of our platform, our long-term growth algorithm, and our ability to deliver long-term shareholder value." Dave Doherty, CFO.

Industry Context

The company's performance highlights the ongoing trend of shifting surgical procedures to outpatient settings, particularly for orthopedics, which continues to be a strong driver for its topline growth. This reinforces Surgery Partners' leading position within the short-stay surgical facility industry, indicating that its differentiated outpatient delivery model aligns with broader healthcare industry shifts towards cost-effective and high-quality surgical solutions.

Comparison to Industry Standards

• NA

Legal Proceedings

• Litigation settlement loss of $5.1 million for the three months ended September 30, 2025.
• Other litigation costs of $0.3 million for the three months ended September 30, 2025.
• Litigation settlement loss of $7.3 million for the nine months ended September 30, 2025.
• Other litigation costs of $1.3 million for the nine months ended September 30, 2025.

Stakeholder Impact

• Shareholders: Potential impact from revised guidance and net loss, balanced by continued revenue and Adjusted EBITDA growth. The downward revision may lead to short-term negative sentiment.
• Employees: Continued focus on operational excellence and growth may provide stability, but no direct impact on employment or compensation is mentioned.
• Customers (Patients): The company continues to focus on providing high quality, cost-effective solutions for surgical and related ancillary care.
• Physicians: Ongoing efforts to maintain and develop relationships with physicians and attract new partners are crucial for the business model.
• Creditors: The company's leverage ratio of approximately 4.2x net debt to EBITDA and increased interest expense are relevant for creditors, though liquidity appears adequate with $405.9 million in revolving credit capacity.

Next Steps

• Hold a conference call on November 10, 2025, at 8:30 a.m. (Eastern Time) to discuss the results.
• Continue to evaluate the M&A pipeline and portfolio optimization opportunities.
• Remain committed to operational excellence and disciplined capital deployment.

Key Dates

Recommendation

The company demonstrates solid operational growth in Q3 2025, with increased revenue and Adjusted EBITDA, driven by strength in orthopedic procedures. However, the downward revision of full-year guidance due to softer volume/payor mix trends and delayed capital deployment introduces a degree of uncertainty. The reported net loss and increased interest expense are notable concerns. Given these mixed signals—positive operational performance tempered by a more cautious outlook and revised guidance—a 'hold' recommendation is appropriate. Investors should monitor the company's ability to execute on its revised guidance, accelerate capital deployment, and manage its debt load in the coming quarters.

Keywords

Healthcare services, surgical facilities, ambulatory surgery centers, ASCs, orthopedic procedures, Adjusted EBITDA, revenue growth, Q3 2025 earnings, financial guidance, debt, liquidity, M&A