Free Cash Flow Details
Q: What drove Q3 free cash flow?
A: Management explained that $65 million in operating cash flow was impacted by variable transaction costs and working capital timing, with expectations of improvement in later quarters.

Free Cash Flow Clarification
Q: Is the $140–$160M free cash target achievable?
A: They clarified that heightened M&A costs and changing transaction timing have made traditional free cash targets less reflective, shifting focus away from the static $140–$160M figure.

Free Cash Flow Threshold
Q: What free cash level supports self-funded growth?
A: The team remains confident in their liquidity and balance sheet strength, though they did not commit to a fixed threshold beyond $200 million.

M&A Pipeline
Q: What is the status of the M&A pipeline?
A: Management highlighted an opportunistic approach with robust capital deployment for high-acuity growth, underscoring a strong and active M&A pipeline.

Buy-Up Opportunity
Q: Any changes in physician buy-up behavior?
A: They noted that buy-up opportunities remain opportunistic and are balanced with physician commitment, thus not significantly altering their revenue modeling.

De Novo Strategy
Q: What progress is seen in de novo launches?
A: The company has opened 17 de novo facilities and expects to maintain a pipeline of about 10 per year, favoring minority interest investments for attractive economics.

Hospital Strategy
Q: How do surgical hospitals fit into the strategy?
A: Management differentiates surgical hospitals as elective-focused assets forming the ecosystem that underpins broader ASC growth and enhanced physician partnerships.

Cardio Procedures
Q: What are expectations for cardio procedure growth?
A: They are optimistic about increasing cardio procedures like EP and rhythm management, with 70% of facilities already equipped to support these services.

Volume vs Pricing Impact
Q: How do volume and pricing influence earnings?
A: Management noted that 4.2% same-facility revenue growth reflects a blend of volume improvements and modest rate pressures driven by calendar effects.

Medicaid/Self-Pay Impact
Q: Are Medicaid/self-pay pressures affecting volumes?
A: They reported negligible impact from Medicaid and self-pay dynamics, as their elective procedure model continues to drive consistent growth.

Supply Chain Impact
Q: Did supply shortages affect operations?
A: Management quickly addressed supply chain issues, such as IV bag shortages, ensuring no case cancellations and minimal operational disruption.

Hurricane Collection Impact
Q: How did hurricanes affect collections?
A: A recent hurricane caused a marginal delay in collections and billing timing in affected areas, with expectations for normalization in upcoming quarters.

Same-Store Growth Outlook
Q: What are the same-store growth expectations?
A: The company reported nearly 9% year-to-date same-facility growth and expects continued performance above their long-term targets.

G&A Expense
Q: Why did G&A expenses drop sharply?
A: The sequential drop of nearly 30% in G&A was due to normalization after a prior stock-based compensation adjustment, aligning expenses with expectations.

D&A Expense Increase
Q: What drove the $15M D&A increase?
A: The rise is mainly attributed to new asset integrations, including contributions from a $220M acquisition over the past years.

Medicare ASC Rule
Q: How have Medicare ASC rule changes affected the business?
A: Management expressed satisfaction with the Medicare update, noting limited procedural list changes and ample growth opportunities within the current framework.

Exchange Exposure
Q: What is the company’s exposure to health exchanges?
A: They confirmed minimal exposure to exchanges, maintaining focus on elective procedures within primarily Medicare and commercial segments.

Physician Recruitment Maturation
Q: How quickly do new physicians mature on the platform?
A: Management highlighted that new recruits tend to double their revenue contribution in the second year, reflecting fast and compounding growth across cohorts.

Physician Recruitment Outlook
Q: What is the long-term trend in physician recruitment?
A: The long-term outlook remains stable as independent physicians increasingly prefer this model for efficiency and scheduling benefits, supporting sustained recruitment momentum.