Surgery Partners, Inc. (NASDAQ: SGRY) reported Q3 EPS of ($0.28), $0.04 worse than the analyst estimate of ($0.24). Revenue for the quarter came in at $458.3 million versus the consensus estimate of $453.13 million.

• Revenues increased 4.5% over the prior year period to $452.0 million
  • None of the Company’s reported revenue metrics incorporate any add-back or adjustment for the impact of Hurricane Dorian in early September, which we estimate reduced reported revenues by over $3 million
  • Adjusted Revenues increased 3.2% to $458.3 million, prior to any adjustment for Hurricane Dorian
  • Days adjusted Same-facility Revenues increased 7.6% over prior year period, prior to any adjustment for Hurricane Dorian
• Net loss attributable to common stockholders of $24.8 million
  • Adjusted EBITDA increased 5.4% over prior year period to $62.2 million
  • Adjusted EBITDA does not incorporate any add-back or adjustment for Hurricane Dorian in early September, which we estimate reduced reported results by approximately $1.2 to $1.5 million
• The Company reiterates its double-digit Adjusted EBITDA growth for full-year 2019

Wayne DeVeydt, Chief Executive Officer of Surgery Partners, stated, “Our strong third quarter results reflect continued strong top-line growth and margin expansion that positions us well to achieve our full year target of double-digit Adjusted EBITDA growth. For the fifth quarter in a row we grew days adjusted same-facility revenues, either achieving the high end or exceeding our long-term growth target of 4-6% in each of these five quarters. Our nearly 8% same-facility revenue growth in the third quarter is particularly impressive when we consider that Hurricane Dorian closed many of our surgical facilities along the southeastern coast for anywhere from one to four days.”

“We are also very pleased with the continued favorable actions taken by CMS to benefit ASCs, including the announcement Friday that Medicare total knee replacement and certain cardiac procedures would move to ASCs in 2020, that Medicare total hip replacement procedures would be removed from the inpatient only list, and that ASCs would receive a 2.6% aggregate Medicare rate increase next year. Surgery Partners is on the right side of history as it relates to quality, cost-effective healthcare delivery, and government regulation continues to reflect this.”

Tom Cowhey, Chief Financial Officer of Surgery Partners commented, “We continue to be impressed with the underlying strength of our operations and the impact of our strategic initiatives as we continue to grow the top line and enhance Adjusted EBITDA. Our third quarter Adjusted EBITDA growth, combined with improving operating cash flows and prudent investments, have started us on a path to achieve our deleveraging goals.”

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.

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