Surgery Partners, Inc. (SGRY)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 revenue was $821.5M (+6.6% YoY); Adjusted EBITDA was $136.4M (+6.1% YoY); Adjusted EPS was $0.13, below Wall Street consensus of $0.16, while revenue modestly beat consensus ($821.0M) . EPS consensus values retrieved from S&P Global*.
• Full-year 2025 guidance was lowered: revenue to $3.275–$3.30B (from $3.30–$3.45B) and Adjusted EBITDA to $535–$540M (from $555–$565M), citing softer volume/payer mix and delayed capital deployment (M&A and de novo ramps) .
• Management flagged commercial payer mix softness (commercial down 160 bps YoY in Q3) and Q4 prudence; same-facility revenue growth now expected nearer the midpoint of 4–6% long-term algorithm .
• Stock-reaction catalysts: guidance cut, commentary on payer mix softness, and portfolio optimization timing (investor day shifted to spring 2026), balanced by continued strength in orthopedics (total joints +16% in Q3; +23% YTD in ASCs) and procurement/revenue-cycle efficiency gains .

What Went Well and What Went Wrong

What Went Well

• Orthopedics momentum: “Growth in total joint surgeries in our ASC facilities continues to be robust, with these cases growing 16% in the third quarter and 23% on a year-to-date basis…” .
• Capacity and capability investments: 74 surgical robots deployed; >500 new physicians recruited YTD, supporting higher-acuity mix and long-term ramp .
• Cost and cash discipline: supply costs as % of revenue down 70 bps YoY; operating cash flow $83.6M in Q3; liquidity >$600M (cash $203.4M + revolver $405.9M) .

What Went Wrong

• Payer mix shift: commercial payer revenue mix 50.6%, down 160 bps YoY; government (primarily Medicare) up 120 bps; pressured margin accretion and Q4 outlook .
• Softer same-facility volumes vs internal plan: trends “broad-based” prompting cautious Q4 stance despite still-positive volume and rate growth expectations .
• Reduced FY guidance driven by slower M&A/deployment and lost earnings from divested ASCs; de novo ramp slower due to construction and regulatory delays .

Financial Results

Quarterly Financials (USD)

Q3 2025 vs Prior Periods and Estimates

Values retrieved from S&P Global*.

Operating KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO on execution and positioning: “We are proud to report another quarter of solid execution… The continued strength in orthopedic procedures underpinning our topline growth… we remain committed to operational excellence and disciplined capital deployment…” .
• CEO on guidance tone change: “Based on the trends we observed in the third quarter, we now anticipate that same facility revenue growth for the full year will… align with the midpoint of our long-term target range of 4%–6%.” .
• CFO on cost control: “Supply costs were 25.4% of net revenue, down 70 basis points from last year, reflecting ongoing procurement and efficiency initiatives.” .
• CFO on financing: “We completed a repricing… reducing our rates to SOFR plus 250 basis points… current floating rate is 4.0%, and interest payments for the quarter increased by $9 million YoY…” .

Q&A Highlights

• Payer mix and volume softness: Management described a “broad-based” softer commercial mix/volume trend vs internal expectations, warranting prudence for Q4, but not viewed as systemic at this time .
• Guidance reduction drivers: ~60% of the ~$20M EBITDA guide cut tied to capital timing (slower M&A and divestiture redeployment); ~40% linked to Q4 volume/mix pressure (200–300 bps impact) .
• De novo cadence: Double-digit development pipeline; timing issues from construction and licensing delays; long-term accretive with strong orthopedics focus .
• Portfolio optimization: Evaluating larger hospital assets for sale/partnership to accelerate deleveraging and cash conversion; investor day delayed to present fuller update .
• Free cash flow: No formal guidance; operating cash flow improving; distributions to physician partners are the most variable element .

Estimates Context

• Q3 2025 results vs S&P Global consensus: revenue beat by ~$0.5M ($821.5M vs ~$821.0M*), while Adjusted EPS missed ($0.13 vs ~$0.1605*). Management’s lowered FY guidance implies potential downward revisions to Q4 and FY estimates, particularly for Adjusted EBITDA and EPS given caution on commercial mix/volume . Values retrieved from S&P Global*.
• Q4 2025 consensus ahead of print: Revenue ~$872.4M* and Primary EPS ~$0.302*; management’s tone suggests downside risk to EPS if commercial mix/volume trends persist and capital deployment remains slower . Values retrieved from S&P Global*.

Key Takeaways for Investors

• Q3 print was operationally solid (revenue/Adjusted EBITDA growth), but the EPS miss and lowered FY guide shift the near-term narrative to caution on commercial mix/volume and capital timing .
• Expect sell-side to trim Q4/FY EPS and EBITDA; watch for estimate convergence toward management’s new ranges and mix assumptions .
• Structural positives intact: orthopedics growth, robotics penetration, physician recruiting, procurement and revenue-cycle efficiency support mid-teens Adjusted EBITDA margins .
• Portfolio optimization could be a medium-term catalyst for deleveraging and free cash flow conversion; investor day moved to spring 2026 to align with transaction timing .
• Financing tailwinds developing: repriced debt to SOFR+250 bps; interest expense normalization in 2026 should aid cash flows .
• Near-term trading: stock likely sensitive to monthly volume/mix updates and any M&A/de novo redeployment progress; monitor Q4 seasonality in commercial volumes vs management’s prudence .
• Medium-term thesis: fragmented ASC market, de novo optionality, and partner models underpin a double-digit growth algorithm once mix normalizes and capital deployment re-accelerates .

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Values retrieved from S&P Global* for all consensus and estimate figures.