Surgery Partners Inc.
SGRYBusiness Overview
source: coverage-next-full ticker: SGRY step: "01" title: Business Overview — Surgery Partners, Inc. created: 2026-05-29
SGRY — Business Overview
Company Summary
Surgery Partners, Inc. is one of the largest operators of ambulatory surgery centers (ASCs) and surgical hospitals in the United States. Founded in 2004 and headquartered in Brentwood, Tennessee, the company went public in September 2015. Surgery Partners operates on a joint venture model, partnering with physicians and health systems to develop and manage outpatient surgical facilities.
As of FY2025, the company operated approximately 180+ facilities across ~30 states, with roughly 16,000 employees. FY2025 revenue was $3.314B, making Surgery Partners the second-largest publicly traded ASC operator in the US.
Business Model
Surgery Partners derives revenue primarily from facility fees — charges for the use of its surgical facilities, surgical suites, equipment, nursing staff, and post-operative recovery. The company does not employ surgeons; rather, physicians are equity partners in individual ASCs through a joint venture (JV) structure:
- Surgery Partners typically holds a majority or controlling interest (often 51–75%) in each JV facility
- Surgeon-partners hold the remaining equity, typically 25–49% (classified as noncontrolling interest on the balance sheet)
- This alignment model incentivizes physicians to drive volume and maintain quality, while Surgery Partners provides capital, management, supply chain, and payer contracting expertise
Revenue is recognized at the individual facility level; intercompany fees between SGRY corporate and the JVs are eliminated in consolidation.
Business Segments
Surgery Partners reports under one operating segment (Surgical Facility Services) but provides detail across facility types:
Ambulatory Surgery Centers (ASCs)
- Primary asset type; outpatient procedures, patients admitted and discharged same-day
- Lower overhead vs. hospital outpatient departments (HOPDs); typically no overnight beds, smaller footprint
- Specialty mix: orthopedics (including total joints), ophthalmology (cataract), pain management (spine/injections), GI (endoscopy), and general surgery
- ~170+ ASC locations as of FY2025
Surgical Hospitals
- Inpatient or short-stay surgical hospitals; licensed as hospitals, can handle more complex cases
- Fewer locations (~10+), but higher revenue per case vs. ASCs
- Often co-located with or adjacent to affiliated ASC campuses
Ancillary Services
- Optical services (dispensing eyewear/lenses post-cataract surgery)
- Pharmacy and implant/device procurement (supply chain leverage across the network)
- Historically included physician practices (divested in recent years as a non-core activity)
Geographic Footprint
Surgery Partners operates in approximately 30 states, with concentrations in:
- Southeast / Mid-Atlantic: Tennessee, Florida, Georgia, North Carolina, Virginia
- Midwest: Indiana, Ohio, Michigan
- Southwest: Texas, Arizona, Nevada
- West: California, Oregon, Washington
No single state accounts for a majority of revenue. Geographic diversification reduces exposure to any single state's Medicaid/payor mix or regulatory environment.
Revenue Composition
Revenue is primarily facility fees (estimated 90%+ of total), with smaller contributions from:
- Optical products/services at ophthalmology facilities
- Pharmacy and supplies distributed to JV facilities
Payer mix (approximate, FY2025):
- Commercial insurers: ~50–55% of net revenue (highest reimbursement rates)
- Medicare: ~30–35% of net revenue
- Medicaid/Self-pay/Other: ~10–15%
The shift toward Medicare Advantage (MA) penetration is a watched variable — MA plans typically reimburse at or near traditional Medicare rates for ASC services but add administrative friction.
Strategic Position
Surgery Partners has positioned itself as a consolidator in the highly fragmented ASC industry, where the majority of the ~6,000 ASCs in the US are independently owned or physician-owned. The company grows through three channels:
- Acquisitions: Buying independent ASCs or divesting non-core facilities
- De novo development: Building new ASC facilities, often in partnership with a health system or physician group
- Organic volume growth: Same-facility revenue growth through procedure volume, case mix enrichment, and operational efficiency
Recent Corporate Events
- Bain Capital Take-Private Proposal (2025): Bain Capital (39% shareholder) proposed taking SGRY private at $25.75/share in mid-2025. The Special Committee engaged advisors and rejected the offer in December 2025 as undervaluing the company. This overhang weighed on the stock throughout H2 2025.
- Portfolio Optimization (2025–2026): Post-rejection, management shifted to selective facility divestitures and balance sheet discipline, prioritizing free cash flow conversion and leverage reduction.
- Leadership: Wayne DeVeydt has served as CEO since July 2019, providing operational continuity through the post-COVID recovery, Bain Capital conflict, and strategic repositioning.
Financial Snapshot
source: coverage-next-full ticker: SGRY step: "04" title: Financial Snapshot — 3-Year P&L Summary created: 2026-05-29
SGRY — Financial Snapshot
Income Statement Summary (FY2023–FY2025)
| Metric ($M) | FY2023 | FY2024 | FY2025 | 3Y CAGR |
|---|---|---|---|---|
| Revenue | $2,739 | $3,112 | $3,314 | +10.0% |
| Cost of Revenues | ~$2,157 | ~$2,600 | ~$2,746 | — |
| Gross Profit | ~$582 | ~$512 | ~$568 | — |
| Gross Margin | ~21.3% | ~16.5% | ~17.1% | — |
| Operating Income | $328.0 | $348.8 | $389.5 | +9.0% |
| Operating Margin | 12.0% | 11.2% | 11.7% | — |
| Adjusted EBITDA | $446 | $501 | $526 | +8.6% |
| Adj. EBITDA Margin | 16.3% | 16.1% | 15.9% | — |
| D&A | $118.1 | $152.6 | $176.0 | — |
| Interest Expense (est.) | ~$185 | ~$230 | ~$265 | — |
| Net Income (GAAP) | -$11.9 | -$168.1 | -$77.9 | — |
| EPS (Diluted, GAAP) | -$0.09 | -$1.33 | -$0.61 | — |
| Adj. EPS (est.) | ~$0.25 | ~$0.40 | ~$0.55 | — |
Note on Gross Margin: SGRY's reported gross margin is compressed because cost of revenues includes physician/surgeon payments and all facility-level operating costs. The metric is less comparable to traditional healthcare gross margins; EBITDA margin is the primary street metric.
Note on FY2024 Net Loss: The $168M net loss in FY2024 includes non-cash charges related to goodwill impairment and debt refinancing costs associated with the acquisition of NovaBay / ASC portfolio expansion and related debt issuance. The FY2024 balance sheet shows debt rose from $2.804B to $3.405B.
Key Profitability Metrics
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Revenue Growth | +7.9% | +13.6% | +6.5% |
| Same-Facility Revenue Growth | ~5.3% | ~5.8% | ~4.5% |
| Adj. EBITDA Growth | -3.0% | +12.3% | +5.0% |
| Adj. EBITDA Margin | 16.3% | 16.1% | 15.9% |
| Operating Cash Flow | $293.8M | $300.1M | $274.3M |
| Free Cash Flow | $205.0M | $209.7M | $195.6M |
| FCF Margin | 7.5% | 6.7% | 5.9% |
Cash Flow Statement Summary
| Metric ($M) | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Operating Cash Flow | $293.8 | $300.1 | $274.3 |
| Capital Expenditures | -$88.8 | -$90.4 | -$78.7 |
| Free Cash Flow | $205.0 | $209.7 | $195.6 |
| Acquisitions | -$80.0 | -$378.8 | -$162.1 |
| Net Debt Issued/(Repaid) | +$19.5 | +$450.4 | +$162.8 |
| SBC | $17.7 | $33.3 | $14.8 |
FCF Note: FCF declined slightly in FY2025 vs. FY2024 despite EBITDA growth, reflecting higher interest expense on expanded debt load and some working capital headwinds. Management has guided to improving FCF conversion in FY2026 through lower CapEx (post-acquisition integration) and reduced deal costs.
Balance Sheet Summary
| Metric ($M) | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Cash & Equivalents | $195.9 | $269.5 | $239.9 |
| Total Current Assets | $895 | $1,119 | $1,151 |
| Goodwill | $4,326 | $5,068 | $5,195 |
| Total Assets | $6,877 | $7,890 | $8,120 |
| Total Current Liabilities | $523 | $624.4 | $615.5 |
| Long-Term Debt | $2,804 | $3,405 | $3,735 |
| Total Equity (incl. NCI) | $3,362 | $3,635 | $3,527 |
| Parent Stockholders' Equity | ~$1,700 | ~$1,800 | ~$1,700 |
Goodwill Note: $5.195B in goodwill (FY2025) represents ~64% of total assets. Goodwill is not amortized under GAAP but must be tested annually for impairment. Any significant impairment charge would flow through the P&L and further depress reported net income.
Leverage Profile
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Gross Debt | $2,804M | $3,405M | $3,735M |
| Net Debt | ~$2,608M | ~$3,136M | ~$3,495M |
| Adj. EBITDA | $446M | $501M | $526M |
| Net Leverage (x) | ~5.8x | ~6.3x | ~6.6x |
| Interest Coverage (EBITDA/Int.) | ~2.4x | ~2.2x | ~2.0x |
Leverage is the primary credit/equity risk. At 6.6x net debt/EBITDA, SGRY operates with limited margin for error. The debt maturity schedule, refinancing risk, and ability to service interest out of operating cash flow are key investor watch items.
Debt Structure (FY2025, Estimated)
| Facility | Balance (est.) | Maturity |
|---|---|---|
| Term Loan B | ~$1,900M | 2028–2030 |
| Senior Secured Notes | ~$900M | 2027–2031 |
| Revolving Credit Facility | ~$200–400M | 2027–2028 |
| Other | ~$300M | Various |
Note: SGRY refinanced portions of its debt during 2024 to extend maturities; specific terms from FY2025 10-K.
Per-Share Metrics
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| EPS (Diluted, GAAP) | -$0.09 | -$1.33 | -$0.61 |
| Adj. EPS (est.) | ~$0.25 | ~$0.40 | ~$0.55 |
| Book Value Per Share (Parent) | ~$13.50 | ~$14.20 | ~$13.15 |
| FCF Per Share | ~$1.62 | ~$1.65 | ~$1.51 |
Profitability Outlook
Management's FY2026 guidance (reaffirmed Q1 2026):
- Revenue: $3.35B–$3.45B (+1–4% YoY)
- Adj. EBITDA: ≥$530M (+0.8%+ YoY)
- Implied Adj. EBITDA margin: ~15.4–15.8% (slight compression at midpoint)
Consensus FY2026 estimates (May 2026): Revenue $3.48B; EPS $0.46
Deeper Financial Analysis
The fundamental tier adds 9 additional research dimensions for $SGRY.