What changed in this filing

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Item 9A. Controls and Procedures

2025-03-07 compared with 2024-02-26 · 389 added, 438 removed, 920 unchanged (47% of the section changed)

12 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

We acquired a controlling interest in Midwest Orthopedic Specialty Hospital, LLC effective April 30, 2024.

We excluded this facility from our assessment of and conclusion on the effectiveness of our internal control over financial reporting.

For the year ended December 31, 2024, this facility contributed $60.8 million or 2.0% of our total revenues, and $303.7 million or 3.8% of our total assets.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024.

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Based on that evaluation, management, including the Chief Executive Officer and Chief Financial Officer, determined that our internal control over financial reporting was effective as of December 31, 2024.

Deloitte & Touche LLP , the Company's independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2023.

Ernst & Young LLP, the Company's independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2024.

Their attestation report is included below in this Item 9A.

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Opinion on Internal Control Over Financial Reporting

We have audited the internal control over financial reporting of Surgery Partners, Inc.

and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 26, 2024, expressed an unqualified opinion on those financial statements.

We have audited Surgery Partners, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Surgery Partners, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting , management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Midwest Orthopedic Specialty Hospital, LLC, which is included in the 2024 consolidated financial statements of the Company and constituted approximately 3.8% of total assets as of December 31, 2024 and 2.0% of revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Midwest Orthopedic Specialty Hospital, LLC.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the year then ended December 31, 2024, and the related notes and our report dated March 6, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Nashville, TN

February 26, 2024

/s/ Ernst & Young LLP

Nashville, Tennessee

March 6, 2025

Other Information

23 unchanged sentences

4.1 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated herein by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K filed March 1, 2023).

4.2 Indenture, dated June 30, 2017, among SP Finco, LLC and Wilmington Trust, National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed July 6, 2017).

4.3 First Supplemental Indenture, by and among Surgery Center Holdings, Inc., Wilmington Trust, National Association, as Trustee, and certain other parties thereto, dated August 31, 2017 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed September 1, 2017).

4.4 Indenture by and among Surgery Center Holdings, Inc., the guarantors from time to time party thereto and Wilmington Trust, National Association, dated April 11, 2019 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed April 12, 2019).

4.5 Second Supplemental Indenture, dated July 30, 2020, among Surgery Center Holdings, Inc., the guarantors party thereto and Wilmington Trust, National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed July 31, 2020).

4.2 I ndenture, dated April 10, 2024, among Surg e ry Ce nter Holdings, Inc., the Guarantors from time to time party thereto and Wilmington Trust, National Association, as Tru stee (inc orporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed April 10, 202 4).

4.3 F orm of 7.250% Notes due 2032 (inc orporated herein by reference to Exhibit 4.2 to the Com pany's Current Report on Form 8-K filed April 10, 2024 ).

10.1 Office Lease Agreement dated November 17, 2015 between Highwoods Realty Limited Partnership and Surgery Partners, Inc.

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(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 22, 2022).

10.6 Credit Agreement, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., Jefferies Finance LLC and the other guarantors and lenders party thereto, dated August 31, 2017 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 1, 2017).*

10.7 Incremental Term Loan Amendment, dated as of October 23, 2018 with Jefferies, SP Holdco I, Inc., Surgery Center Holdings, Inc.

and certain other parties thereto (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed March 15, 2019).

10.8 Amendment to the Credit Agreement, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., Jefferies Finance LLC and the other guarantors and lenders party thereto, dated March 25, 2019 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 25, 2019).

10.9 Third Amendment to the Credit Agreement, dated as of April 16, 2020, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., Jefferies Finance LLC and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 22, 2020).

10.10 Second Incremental Term Loan Amendment, dated as of April 22, 2020, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., Jefferies Finance LLC and the other guarantors and lenders party thereto (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed April 22, 2020).

10.11 Fifth Amendment to Credit Agreement, dated as of January 27, 2021, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc.

Jefferies Finance LLC and the other guarantors and lenders party thereto (incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed March 10, 2021).

10.12 Sixth Amendment to the Credit Agreement, dated as of May 3, 2021, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., the other Guarantors party thereto, Jefferies Finance LLC and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 5, 2021).

10.13 Seventh Amendment to the Credit Agreement, dated as of November 19, 2021, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., the other Guarantors party thereto, Jefferies Finance LLC and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 22, 2021).

10.14 Eighth Amendment to the Credit Agreement, dated as of August 18, 2022, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., the other Guarantors party thereto, Jefferies Finance LLC and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed November 8, 2022).

10.15 Ninth Amendment to the Credit Agreement, dated as of January 13, 2023, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., the other Guarantors party thereto, Jefferies Finance LLC and the other lenders party thereto.

10.16 Tenth Amendment to the Credit Agreement, dated as of June 8, 2023, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., the other Guarantors party thereto, Jefferies Finance LLC and the other lenders party thereto (incorporated herein by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q filed August 1, 2023).

Tax Receivable Agreement, dated as of September 30, 2015, among Surgery Partners, Inc., H.I.G.

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Form of TRA Waiver and Assignment Agreement (incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K filed March 16, 2018).

10.20 (a) Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.14 to Amendment No.

Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.14 to Amendment No.

1 to the Company's Registration Statement on Form S-1, filed September 14, 2015).

10.21 (a) Surgery Partners, Inc.

Surgery Partners, Inc.

2015 Omnibus Incentive Plan, as amended and restated effective January 1, 2020 (incorporated herein by reference as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed August 5, 2020).

10.22 (a) First Amendment to the Surgery Partners, Inc.

First Amendment to the Surgery Partners, Inc.

2015 Omnibus Incentive Plan, as amended and restated effective January 1, 2020 (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed August 4, 2021).

10.23 (a) Surgery Partners, Inc.

Surgery Partners, Inc.

Cash Incentive Plan, as amended and restated effective January 1, 2020 (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed August 5, 2020).

10.24 (a) Symbion, Inc.

Symbion, Inc.

Supplemental Executive Retirement Plan, Effective May 1, 2005 (incorporated herein by reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1, Amended, filed September 21, 2015).

10.25 (a) Form of Non-Statutory Stock Option Agreement under the 2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed November 13, 2015).

10.26 (a) Form of Non-Employee Director Non-Statutory Stock Option Agreement under the Surgery Partners, Inc.

Form of Non-Statutory Stock Option Agreement under the 2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed November 13, 2015).

Form of Non-Employee Director Non-Statutory Stock Option Agreement under the Surgery Partners, Inc.

2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q filed November 13, 2015).

10.27 (a) Form of Restricted Stock Agreement under the Surgery Partners, Inc.

Form of Restricted Stock Agreement under the Surgery Partners, Inc.

2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q filed November 13, 2015).

10.28 (a) Form of Restricted Stock Award Agreement under the 2015 Surgery Partners, Inc.

Form of Restricted Stock Award Agreement under the 2015 Surgery Partners, Inc.

Omnibus Incentive Plan (incorporated herein by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed March 15, 2016).

10.29 (a) Form of Performance Stock Unit Award Agreement under the Surgery Partners, Inc.

Form of Performance Stock Unit Award Agreement under the Surgery Partners, Inc.

2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 5, 2016).

10.30 (a) Form of Non-Employee Director Restricted Stock Award Agreement under the Surgery Partners, Inc.

Form of Non-Employee Director Restricted Stock Award Agreement under the Surgery Partners, Inc.

2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 3, 2017).

10.31 (a) Form of Stock-Settled Stock Appreciation Right Agreement under the Surgery Partners, Inc.

Form of Stock-Settled Stock Appreciation Right Agreement under the Surgery Partners, Inc.

2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed December 20, 2018).

10.32 (a) Amended and Restated Employment Agreement, dated March 11, 2022, by and between Surgery Partners, Inc.

S urgery Partners, Inc.

Employee Stock Purchase Plan (inc orporated herein by re ference to Appendix A of the Company's Proxy Statement filed on April 25, 2024).

S P Management Services, Inc.

Nonqualif ied Deferred Compensation Plan (incorporated h erein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed August 6, 2 024 ).

Amended and Restated Employment Agreement, dated March 11, 2022, by and between Surgery Partners, Inc.

and Jennifer Baldock (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed May 3, 2022).

10.33 (a) Employment Agreement, dated January 4, 2018, between Surgery Partners, Inc., Surgery Partners, LLC and Wayne DeVeydt (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 8, 2018).

10.34 (a) Amendment No.

Employment Agreement, dated January 4, 2018, between Surgery Partners, Inc., Surgery Partners, LLC and Wayne DeVeydt (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 8, 2018).

Amendment No.

1 to Employment Agreement by and between Surgery Partners, Inc., Surgery Partners, LLC and Wayne DeVeydt, dated January 13, 2020 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 13, 2020).

10.35 (a) Employment Agreement, dated February 11, 2019, by and between Surgery Partners, Inc., Surgery Partners, LLC and J.

Employment Agreement, dated February 11, 2019, by and between Surgery Partners, Inc., Surgery Partners, LLC and J.

Eric Evans (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 12, 2019).

10.36 (a) Amendment No.

Amendment No.

1 to Employment Agreement by and between Surgery Partners, Inc., Surgery Partners, LLC and J.

Eric Evans, dated January 13, 2020 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 13, 2020).

10.37 (a) Amended and Restated Employment Agreement, dated March 8, 2022, by and between Surgery Partners, Inc.

Amended and Restated Employment Agreement, dated March 8, 2022, by and between Surgery Partners, Inc.

and Anthony W.

Taparo (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed May 3, 2022).

10.38 (a) Amended and Restated Employment Agreement, dated March 8, 2022, by and between Surgery Partners, Inc.

Amended and Restated Employment Agreement, dated March 8, 2022, by and between Surgery Partners, Inc.

and Bradley R.

Owens (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed May 3, 2022).

10.39 (a) Employment Agreement, dated January 7, 2022, by and between Surgery Partners, Inc.

R etirement Agreement, dated August 5, 2024, by and b etween Surgery Partners, Inc.

and Brad ley R.

Owens (inc orporated herein by reference to Exhibit 10.3 to the Company 's Current Report on Form 8-K f iled August 6, 2024 ).

Employment Agreement, dated January 7, 2022, by and between Surgery Partners, Inc.

Doherty (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 10, 2022).

10.40 (a) Employment Agreement, dated November 23, 2021, by and between Surgery Partners, Inc.

Employment Agreement, dated November 23, 2021, by and between Surgery Partners, Inc.

and Marissa Brittenham (incorporated herein by reference to Exhibit 10.40 to the Company’s Annual Report on Form 10-K filed on March 1, 2022).

10.41 (a) Retirement and Consulting Agreement, dated February 25, 2022, by and between Surgery Partners, Inc.

Retirement and Consulting Agreement, dated February 25, 2022, by and between Surgery Partners, Inc.

and George M.

Goodwin (incorporated herein by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K filed on March 1, 2022).

10.42 (a) Employment Agreement, dated July 25, 2022, by and between Surgery Partners, Inc.

and Harrison Bane (inc orporated herein by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-K filed on March 1, 2023) .

Employment Agreement, dated July 25, 2022, by and between Surgery Partners, Inc.

and Harrison Bane (incorporated herein by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-K filed on March 1, 2023).

10.35 Credit Agreement, dated as of December 19, 2023, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., Jefferies Finance LLC and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 20,2023).

10.36 F irst Amendment to the Credit Agreement, dated as of June 20, 202 4, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., the Subsidiary Guarantors .

Jef fer ies Financ e LLC, and the other lender s party ther eto (inc orporated herein by re ference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 20 , 2024).

19 Insider Trading Policy.

21.1 List of Subsidiaries of the Registrant.

23.1 Consent of Independent Registered Public Accounting Firm (Deloitte).

23.2 C onsent of Indep endent Registered Public Accounting Firm (Erns t & Youn g LLP).

31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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97 Surgery Partners, Inc.

Executive Compensation Recovery Policy

Executive Compensation Recovery Policy (incor po rated herein by reference to Exhibit 97 to the Comp any's A nnual Report on Form 10-K filed on February 26, 2024 ) .

101.INS Inline XBRL Taxonomy Extension Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

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Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets - December 31, 2024 and 2023

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Surgery Partners, Inc.

and subsidiaries (the "Company") as of December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have audited the accompanying consolidated balance sheet of Surgery Partners, Inc.

(the Company) as of December 31, 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with U.S.

generally accepted accounting principles.

We also audited the disclosure of significant expenses and other segment items in Note 14 that have been disclosed for 2023 and 2022 due to the adoption of ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, and the recast of the segment disclosures in Note 14 to reflect one reportable segment.

In our opinion, such disclosures are appropriate.

However, we were not engaged to audit, review, or apply any procedures to the 2023 and 2022 consolidated financial statements of the Company other than with respect to these disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2023 and 2022 consolidated financial statements taken as a whole.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 6, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounts Receivable — Refer to Note 1 to the financial statements

Critical Audit Matter Description

Accounts receivable are recorded net of estimated price concessions at both surgical hospitals and ambulatory surgical centers.

At surgical hospitals, the estimation process is based on historical trends of cash collections and contractual write-offs.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Revenue Recognition – Contractual Allowances and Implicit Price Concessions

Description of the Matter For the year ended December 31, 2024, the Company’s revenue was $3.1 billion.

As more fully described in Note 1 to the consolidated financial statements, the transaction price for revenues is determined based on gross charges for services provided, net of estimated contractual allowances and implicit price concessions (“price concessions”).

Contractual allowances are recorded at the time of payment for surgical hospitals.

The estimation process is based on historical trends of cash collections and contractual write-offs.

The inputs used to determine the estimated price concessions are based on objective data.

Management’s determination of the estimate is complex and involves their assessment of the appropriateness and relevancy of the inputs and methodology to record accounts receivable at the net realizable value.

We identified surgical hospitals' accounts receivable as a critical audit matter because of the significant estimates management makes to determine the price concession in estimating net accounts receivable at an amount equal to the actual consideration management expects to collect.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the methodology and application of the Company’s estimated price concessions for the surgical hospitals.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to Company’s estimated price concessions for the surgical hospitals included the following, among others:

• We tested the effectiveness of controls over accounts receivable, including management’s controls over the review of the price concessions and the verification of the accuracy and completeness of the data used in the assessment.

• We evaluated management’s methodology and related assumptions, including cash collections, used in recording price concessions, by comparing actual results to management’s historical estimates.

Management’s determination of the estimate is complex and involves their assessment of the appropriateness and relevancy of the inputs and methodology to record the estimate.

Auditing management’s estimate of surgical hospitals' price concessions was highly judgmental due to the significant data inputs and estimation uncertainty present in determining related amounts.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the price concessions process for surgical hospitals, including controls over the review of estimated price concessions and the verification of the accuracy and completeness of the data used in the assessment.

To test the adequacy of the estimated price concessions for surgical hospitals, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used in management’s model to determine the recorded estimate.

We tested the underlying data related to the recognition of patient level charges and the subsequent activities, including cash collections and contractual write-offs.

• We developed independent estimates of the price concessions using historical collections by payor and location and compared the independent estimates to the price concession estimate developed by management to evaluate accounts receivable.

• We considered industry, economic, and company factors to determine the appropriateness of the net realizable value of accounts receivable.

We developed independent estimates of price concessions using historical collections by payor and location and compared the independent estimates to the price concession estimate developed by management.

We assessed the historical accuracy of management’s estimated price concessions as a source of potential corroborative or contrary evidence.

We also considered industry, economic, and company factors to determine the appropriateness of the price concessions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2024.

Nashville, Tennessee

March 6, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Surgery Partners, Inc.

Opinion on the Financial Statements

We have audited, before the effects of the retrospective adjustments to the disclosure of significant expenses and other segment items in Note 14 to the consolidated financial statements that have been disclosed for 2023 and 2022 due to the adoption of ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures , and the recast of the segment disclosures in Note 14 to reflect one reportable segment, the consolidated balance sheet of Surgery Partners, Inc.

and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the "financial statements") (the 2023 and 2022 financial statements before the effects of the retrospective adjustments to the disclosure of significant expenses and other segment items and the recast of the segment disclosures to reflect one reportable segment in Note 14 to the financial statements are not presented herein).

In our opinion, the 2023 and 2022 financial statements, before the effects of the retrospective adjustments to the disclosure of significant expenses and other segment items and the recast of the segment disclosures to reflect one reportable segment in Note 14 to the financial statements, present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the years ended December 31, 2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the disclosure of significant expenses and other segment items or the recast of the segment disclosures to reflect one reportable segment in Note 14 to the financial statements, and accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied.

Those retrospective adjustments were audited by the successor auditor.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

1 unchanged sentence

February 26, 2024

We have served as the Company's auditor since 2018.

We began serving as the Company’s auditor in 2018.

In 2024 we became the predecessor auditor.

SURGERY PARTNERS, INC.

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Property and equipment, net

1,088.3 968.7

Intangible assets, net 45.7 54.8

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Right-of-use operating lease liabilities 292.1 248.9

Long-term deferred tax liabilities

Other long-term liabilities 30.2 41.1

33 unchanged sentences

Transaction and integration costs 100.1 61.7 47.5

Grant funds ( 1.1 ) ( 2.4 ) ( 37.9 )

Net loss on disposals, consolidations and deconsolidations 40.6 14.4 11.1

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Income before income taxes 147.1 135.0 110.3

Income tax benefit (expense) 0.3 ( 23.3 ) ( 10.5 )

Income tax (expense) benefit ( 134.6 ) 0.3 ( 23.3 )

Net income 12.5 135.3 87.0

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$ ( 168.1 ) $ ( 11.9 ) $ ( 54.6 )

Amounts attributable to participating securities — — ( 10.3 )

Net loss attributable to common stockholders $ ( 11.9 ) $ ( 54.6 ) $ ( 81.2 )

Net loss per share attributable to common stockholders:

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126,122 125,613 91,952

(1) The impact of potentially dilutive securities for all periods were not considered because the effect would be anti-dilutive.

(1) The impact of potentially dilutive securities for all periods was not considered because the effect would be anti-dilutive.

See notes to consolidated financial statements.

8 unchanged sentences

( 52.7 ) ( 18.7 ) 107.7

Comprehensive income 116.6 194.7 100.2

Comprehensive (loss) income

( 40.2 ) 116.6 194.7

Comprehensive income attributable to non-controlling interests ( 180.6 ) ( 147.2 ) ( 141.6 )

13 unchanged sentences

Equity-based compensation 590 — 22.5 — — — 22.5

Preferred dividends — — ( 10.3 ) — — — ( 10.3 )

Preferred share conversion 22,609 0.2 439.5 — — — 439.7

Equity offering 36,038 0.4 857.3 — — — 857.7

4 unchanged sentences

Net (loss) income

— — — — ( 11.9 ) 109.4 97.5

Equity-based compensation 633 — 18.5 — — — 18.5

Equity offering 36,038 0.4 857.3 — — — 857.7

Other comprehensive income — — — 107.7 — — 107.7

Other comprehensive loss — — — ( 18.7 ) — — ( 18.7 )

Acquisition and disposal of shares of non-controlling interests, net — — 1.1 — — 98.2 99.3

2 unchanged sentences

Net (loss) income

— — — — ( 168.1 ) 143.8 ( 24.3 )

Equity-based compensation 515 — 33.5 — — — 33.5

Other comprehensive loss

— — — ( 52.7 ) — — ( 52.7 )

Acquisition and disposal of shares of non-controlling interests, net — — ( 10.2 ) — — 342.6 332.4

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(Unaudited, dollars in millions)

Year Ended December 31,

15 unchanged sentences

Medicare accelerated payments and deferred governmental grants — ( 1.2 ) ( 58.4 )

DOJ settlement payments — — ( 32.2 )

Other operating assets and liabilities ( 46.8 ) ( 15.1 ) ( 67.0 )

17 unchanged sentences

Proceeds (payments) related to ownership transactions with non-controlling interest holders

Payments of preferred dividends — — ( 5.1 )

9.6 8.2 ( 3.4 )

Other financing activities ( 12.6 ) ( 12.5 ) ( 9.9 )

Net cash (used in) provided by financing activities ( 155.2 ) 42.1 316.3

Net (decrease) increase in cash and cash equivalents ( 87.0 ) ( 107.0 ) 71.7

Net cash provided by (used in) financing activities 262.0 ( 155.2 ) 42.1

Net increase (decrease) in cash and cash equivalents 73.6 ( 87.0 ) ( 107.0 )

Cash and cash equivalents at beginning of period 195.9 282.9 389.9

10 unchanged sentences

The surgical facilities, which include ambulatory surgery centers ("ASCs") and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including, among others, orthopedics and pain management, gastroenterology, ophthalmology, and general surgery.

The Company's surgical hospitals also provide services such as diagnostic imaging, laboratory, oncology, pharmacy, physical therapy and wound care.

Although some of the Company's surgical hospitals may include emergency departments, they are generally not equipped to handle a broad spectrum of patient needs, including critical and traumatic injuries.

Ancillary services are comprised of multi-specialty physician practices, urgent care facilities and anesthesia services.

6 unchanged sentences

The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes.

Examples include, but are not limited to, estimates of accounts receivable allowances, professional and general liabilities and the estimate of deferred tax assets or liabilities.

Examples include, but are not limited to, estimates of revenue, accounts receivable allowances, professional and general liabilities and the estimate of deferred tax assets or liabilities.

Actual results could differ from those estimates.

10 unchanged sentences

Patient service revenues

Surgical facilities revenues 96.0 % 95.8 % 95.7 %

Ancillary services revenues 2.4 % 2.7 % 3.0 %

Total patient service revenues 98.4 % 98.5 % 98.7 %

98.1 % 98.4 % 98.5 %

Other service revenues 1.9 % 1.6 % 1.5 %

6 unchanged sentences

Ancillary service revenues include fees for patient visits to the Company's physician practices, pharmacy services and diagnostic tests ordered by physicians.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Patient service revenues are recognized as performance obligations are satisfied.

1 unchanged sentence

Typically, the Company recognizes revenue at a point in time in which services are rendered and the Company has no obligation to provide further patient services.

As the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service.

The Company determines the transaction price based on gross charges for services provided, net of estimated contractual adjustments and discounts from third-party payors.

The Company estimates its contractual adjustments and discounts based on contractual agreements, its discount policies and historical experience.

Because the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company determines the transaction price based on gross charges for services provided, net of estimated contractual adjustments and implicit price concessions.

The Company estimates its contractual adjustments and implicit price concessions based on contractual agreements, its discount policies and historical experience of cash collections and historical write-offs.

Contractual allowances are recorded at the time of payment and the time of billing for surgical hospitals and ASCs, respectively.

Changes in estimated contractual adjustments and discounts are recorded in the period of change.

Currently, several states utilize supplemental Medicaid reimbursement programs for the purpose of providing reimbursement to providers to increase base rates to the levels that Medicare would have paid for the same service or for payments that offsets a portion of the cost of providing care to Medicaid and indigent patients.

Several states utilize supplemental Medicaid reimbursement programs for the purpose of providing reimbursement to providers to increase base rates to the levels that Medicare would have paid for the same service or for payments that offset a portion of the cost of providing care to Medicaid and indigent patients.

These programs are designed with input from the Centers for Medicare & Medicaid Services (“CMS”) and are funded with a combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers.

We account for payments under these supplemental programs as variable consideration and estimate the amount using the most likely amount method.

The Company recognizes this variable consideration only when it is deemed probable that a significant reversal of the cumulative revenue recognized will not occur when uncertainties associated with the variable consideration are resolved.

The Company reassess its variable consideration related to these supplemental reimbursement programs when new information becomes available, such as when there are program changes or receipt of final payments.

Reimbursement under these programs, including the recognition of variable consideration, is reflected in patient service revenues.

Taxes or other program-related costs are reflected in other operating expenses.

During the year ended December 31, 2023, the State of Idaho revised its calculation of the Upper Payer Limit ("UPL") Gap.

In connection with this revision, during the year ended December 31, 2023, the Company recognized revenue and the corresponding provider tax of $ 17.2 million and $ 3.1 million, respectively, based on notification received from the State of Idaho related to the cost report year ended December 31, 2021, which reflected the revision in calculation of the UPL Gap.

Since the UPL program is an ongoing program in the State of Idaho and the revised calculation has been approved by CMS for the current and future periods, during the year ended December 31, 2023, the Company recognized variable consideration and the corresponding provider tax of $ 34.4 million and $ 10.4 million, respectively, for the cost report years ended December 31, 2023 and 2022.

As of December 31, 2023, the Company has recorded amounts due from third-party payors related to these supplemental reimbursement programs of $ 17.2 million, included in other current assets and $ 17.2 million, included in other long-term assets in the accompanying consolidated balance sheets.

As of December 31, 2023, the Company has recorded amounts due to third-party payors related to these supplemental reimbursement programs of $ 5.2 million, included in other current liabilities and $ 5.2 million included in other long-term liabilities.

There were no amounts recorded as of December 31, 2022, related to these supplemental reimbursement programs.

Other service revenues.

15 unchanged sentences

Total revenues $ 3,114.3 $ 2,743.3 $ 2,539.3

(1) Other is comprised of anesthesia service agreements, automobile liability, letters of protection and other payor types.

(1) Other is comprised of automobile liability, letters of protection and other payor types.

(2) Includes amounts attributable to related parties of $ 17.4 million, $ 18.4 million and $ 15.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accounts Receivable

Accounts receivable from third-party payors are recorded net of estimated implicit price concessions, which are estimated based on the historical trend of the Company's surgical hospitals’ cash collections and contractual write-offs, and for the Company's surgical facilities in general, established fee schedules, relationships with payors and procedure statistics.

Accounts receivable from third-party payors are recorded net of contractual allowances and implicit price concessions, which are estimated based on established fee schedules, relationships with payors, procedure statistics and other objective information including the historical trend of cash collections and contractual write-offs.

Contractual allowances are recorded at the time of payment and the time of billing for surgical hospitals and ASCs, respectively.

While changes in estimated reimbursement from third-party payors remain a possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on its financial condition or results of operations.

8 unchanged sentences

The Company does not require collateral from self-pay patients.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's collection policies and procedures are based on the type of payor, size of claim and estimated collection percentage for each patient account.

25 unchanged sentences

Certain transactions with non-controlling interests are classified within financing activities in the consolidated statements of cash flows.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The consolidated financial statements of the Company include all assets, liabilities, revenues and expenses of surgical facilities in which the Company has sufficient ownership and rights to allow the Company to consolidate the surgical facilities.

Similar to its investments in non-consolidated affiliates, the Company regularly engages in the purchase and sale of ownership interests with respect to its consolidated subsidiaries that do not result in a change of control.

The fair value of non-controlling interests upon acquisition are determined based on certain assumptions, including Level 3 unobservable inputs.

Estimates and assumptions include the projected timing and amount of future cash flows as well as discount rates reflecting inherent risk due to lack of control and marketability, among others.

Non-Controlling Interests — Redeemable.

1 unchanged sentence

In certain circumstances, the applicable partnership or operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physician limited partners’ or physician minority members’, as applicable, ownership if certain adverse regulatory events occur, such as it becoming illegal for the physician(s) to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility.

The Company believes the likelihood of an event occurring that would trigger such purchases was remote as of December 31, 2023.

Management believes the likelihood of an event occurring that would trigger such purchases was remote as of December 31, 2024.

The non-controlling interests — redeemable are reported outside of stockholders' equity in the consolidated balance sheets.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of activity related to redeemable non-controlling interests for the years ended December 31, 2024 and 2023 is as follows (in millions):

12 unchanged sentences

Equity method investments are initially recorded at cost, unless there is a deconsolidation where the investments are a result of the Company no longer having control of a previously controlled entity but still retaining a non-controlling interest.

The Company had two such deconsolidations during the year ended December 31, 2022 but none during the year ended December 31, 2023.

These investments are included as investments in and advances to affiliates in the accompanying consolidated balance sheets.

1 unchanged sentence

The Company monitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the investees and records reductions in carrying values when necessary.

Medicare Accelerated Payments and Deferred Governmental Grants

The Company received grant funds distributed under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and other governmental assistance programs.

The recognition of amounts received is conditioned upon attestation with terms and conditions that funds were used for COVID-19 related healthcare expenses or lost revenues.

During the years ended December 31, 2023, 2022 and 2021, the Company recognized grant funds as a reduction in operating expenses in the amount of $ 1.1 million, $ 2.4 million and $ 37.9 million, respectively.

There were no remaining unrecognized grant funds as of December 31, 2023.

As of December 31, 2022, approximately $ 3 million of unrecognized grant funds received were reflected as a component of other current liabilities within the consolidated balance sheets.

In addition, the Company previously received accelerated payments under the Medicare Accelerated and Advance Payment Program.

The payments received were deferred and included in the consolidated balance sheets.

There were no remaining deferred accelerated payments as of December 31, 2023, and remaining deferred accelerated payments were minimal as of December 31, 2022.

During each of the years ended December 31, 2022 and 2021, approximately $ 60 million was repaid in accordance with the terms of the program.

These repayments are included as a component of the change in Medicare accelerated payments and deferred government grants in the consolidated statements of cash flows.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value of Financial Instruments

5 unchanged sentences

Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, depending on the nature of the item being valued.

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate their fair values under Level 3 calculations.

A summary of the carrying amounts and estimated fair values of the Company's long-term debt follows (in millions):

7 unchanged sentences

$ — $ 320.0 $ — $ 321.2

7.250 % senior unsecured notes due 2032

$ 800.0 $ — $ 815.0 $ —

The fair values in the table above were based on Level 2 inputs using quoted prices for identical liabilities in inactive markets.

The carrying amounts related to the Company's other long-term debt obligations, including finance lease obligations, approximate their fair values based on Level 3 inputs.

The carrying amounts related to the Company's other long-term debt obligations, including finance lease obligations, approximate their fair values.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Variable Interest Entities

2 unchanged sentences

Additionally, the Company would absorb the majority of the expected losses from any of these entities should such expected losses occur.

As of December 31, 2023, the Company's consolidated VIEs consisted of seven surgical facilities and five physician practices.

As of December 31, 2024, the Company's consolidated VIEs consisted of nine surgical facilities and 26 physician practices.

The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying consolidated balance sheets as of December 31, 2024 and 2023, were $ 87.0 million and $ 65.3 million, respectively, and the total liabilities of the consolidated VIEs were $ 55.0 million and $ 41.2 million, respectively.

9 unchanged sentences

The ASU is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024.

The amendments in this ASU must be applied retrospectively to all periods presented and early adoption is permitted.

The Company is evaluating the impact of this ASU on its consolidated financial statements.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company adopted the amendments in this ASU during the year ended December 31, 2024 on a retrospective basis.

The adoption of this ASU did not have a material impact on the consolidated financial statements and accompanying notes.

For comparative purposes, the Company has reclassified segment disclosures previously reported to conform to current year presentation.

See note 14 for additional information related to the Company's reportable segments.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures , which establishes new requirements for the categorization and disaggregation of information in the rate reconciliation as well as for disaggregation of income taxes paid.

1 unchanged sentence

The amendments in this ASU may be applied prospectively or retrospectively to all periods presented and early adoption is permitted.

The Company is evaluating the impact of this ASU on its consolidated financial statements.

The Company is planning to adopt in 2025 and there will be no material effect on Note 9.

"Income Taxes."

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregated disclosure of certain income statement line items that contain specified expense categories, such as purchases of inventory, employee compensation, depreciation, amortization, and depletion.

This ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The amendments may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact this ASU will have on our disclosures.

Acquisitions, Disposals and Deconsolidations

The Company accounts for all transactions that represent business combinations using the acquisition method of accounting, where the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquired entity are recognized and measured at their fair values on the date the Company obtains control in the acquiree.

The fair values assigned to certain assets acquired and liabilities assumed that are not finalized for reporting periods following the acquisition date are estimated on a preliminary basis and are subject to adjustment as new facts and circumstances emerge that were present at the date of acquisition.

Such adjustments are recorded as soon as practical and within the measurement period (defined as the date through which all information required to identify and measure the consideration transferred, assets acquired, liabilities assumed and any non-controlling interests has been obtained, limited to one year from the acquisition date).

Goodwill is determined as the excess of the fair value of the consideration conveyed plus the fair value of any non-controlling interests in the acquisition over the fair value of the net assets acquired.

During the year ended December 31, 2024:

• The Company acquired a controlling interest in five surgical facilities, four physician practices and an in-development denovo surgical facility for aggregate cash consideration of $ 55.5 million, net of cash acquired, and non-cash consideration of $ 1.3 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities.

• The Company acquired a controlling interest in eight surgical facilities and several physician practices for aggregate cash consideration of $ 378.8 million, net of cash acquired, and non-cash consideration of $ 1.1 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities.

In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $ 478.9 million, goodwill of $ 767.7 million and investments and advances to affiliates of $ 44.6 million related to an acquired surgical facility accounted for as an equity method investment.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2023:

• The Company acquired a controlling interest in five surgical facilities, four physician practices and an in-development de novo surgical facility for aggregate cash consideration of $ 55.5 million, net of cash acquired, and non-cash consideration of $ 1.3 million, which consisted of non-controlling interest in one of the Company's existing surgical facilities.

In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $ 38.7 million and goodwill of $ 84.7 million.

8 unchanged sentences

In connection with the consolidation of these facilities, the Company preliminarily recognized non-controlling interests of $ 84.5 million and goodwill of $ 142.5 million.

• The Company acquired a non-controlling interest in five surgical facilities and two in-development de novo surgical facilities for aggregate cash consideration of $ 50.3 million.

The non-controlling interests were accounted for as equity method investments and recorded as a component of investments in and advances to affiliates in the accompanying consolidated balance sheets.

• The Company acquired non-controlling interests in five surgical facilities and two in-development de novo surgical facilities for aggregate cash consideration of $ 50.3 million.

The non-controlling interests were accounted for as equity method investments and recorded as a component of investments in and advances to affiliates in the consolidated balance sheets.

The Company also paid cash consideration of $ 21.0 million to acquire management rights from the prior management service provider related to four of the aforementioned surgical facilities.

Management rights agreements are accounted for and recorded as a component of intangible assets, net in the accompanying consolidated balance sheets.

Management rights agreements are accounted for and recorded as a component of intangibles assets, net in the accompanying consolidated balance sheets.

The cash paid to acquire the management rights is presented as a component of other investing activities on the consolidated statements of cash flows.

5 unchanged sentences

The non-controlling interests were accounted for as equity method investments and recorded as a component of investments in and advances to affiliates in the accompanying consolidated balance sheets.

Disposals and Deconsolidations

During the year ended December 31, 2024:

• The Company acquired controlling interests in eight surgical facilities, two of which were merged into existing facilities, and two physician practices for aggregate cash consideration of $ 285.8 million, net of cash acquired.

In connection with the acquisitions, the Company preliminarily recognized non-controlling interests of $ 185.9 million and goodwill of $ 446.1 million.

• The Company sold or otherwise disposed of its non-controlling interests in three surgical facilities, which were previously accounted for as an equity method investment, for cash proceeds of $ 2.6 million.

In connection with these transactions, the Company recognized a pre-tax loss of $ 9.5 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying consolidated statements of operations for the year ended December 31, 2024.

• The Company sold a portion of its interests in one surgical facility for net cash proceeds of $ 2.5 million.

As a result of the transaction, the Company no longer controlled the previously controlled surgical facility but retained a non-controlling interest, resulting in the deconsolidation of the previously consolidated entity.

This transaction resulted in a pretax net gain on deconsolidation of $ 2.7 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying consolidated statements of operations for the year ended December 31, 2024.

The net gain was determined based on the difference between the net cash proceeds plus the fair value of the Company’s retained interests in the entity and the carrying values of both the tangible and intangible assets of the entity immediately prior to the transaction.

• The Company sold or otherwise disposed of its controlling interests in nine surgical facilities and a physician practice for aggregate net cash proceeds of $ 5.4 million, a portion of which is deferred pursuant to the purchase agreements for such transactions.

In connection with the transactions, the Company recognized a pre-tax net loss of $ 14.6 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying consolidated statements of operations for the year ended December 31, 2024.

• The Company recognized a pre-tax loss of $ 10.0 million related to an equity investment previously held at cost, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying consolidated statements of operations for the year ended December 31, 2024.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Disposals and Deconsolidations

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2023:

14 unchanged sentences

The net loss was determined based on the difference between the fair value of the Company's retained interests in the entities and the carrying values of both the tangible and intangible assets of the entities immediately prior to the transactions.

During the year ended December 31, 2021:

• The Company sold its interests in three surgery centers, one physician practice and certain other assets for combined net cash proceeds of $ 6.0 million.

In connection with the sales, the Company recognized a net pre-tax gain of $ 4.0 million included in net loss on disposals, consolidations and deconsolidations in the consolidated statements of operations for the year ended December 31, 2021.

Property and Equipment

6 unchanged sentences

Such assets are amortized on a straight-line basis over the lesser of the lease term or the remaining useful life of the leased asset.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A summary of property and equipment follows (in millions):

9 unchanged sentences

Property and equipment, net $ 1,088.3 $ 968.7

The increase in right-of-use finance lease assets includes the impact of the modification of certain existing facility real estate leases that were previously classified as operating leases.

"Leases" for further discussion.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Depreciation expense was $ 144.8 million, $ 112.8 million and $ 112.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

2 unchanged sentences

The Company tests its goodwill for impairment in the fourth quarter of each year, or more frequently if certain indicators arise.

The Company tests for goodwill impairment at the reporting unit level, which is defined as one level below an operating segment.

During 2023, the Company identified two reporting units, which include the following:

1) Surgical Facilities and 2) Ancillary Services.

The Company compares the carrying value of the net assets of the reporting unit to the estimated fair value of the reporting unit.

The Company tests for goodwill impairment at the reporting unit level.

During 2024, the Company identified two reporting units, American Group and National Group.

The Company compares the carrying value of the net assets of the reporting units to the estimated fair values.

To determine the fair value of the reporting units, the Company obtained valuations at the reporting unit level prepared by third-party valuation specialists which typically utilizes a combination of the income and market approaches.

As of October 1, 2023, prior to its annual impairment testing, all of the Company's goodwill was allocated to the Surgical Facilities reporting unit.

As of the October 1, 2023 valuation, the fair value for the Surgical Facilities reporting unit was substantially in excess of its carrying value.

Based on the Company's annual goodwill impairment assessment performed as of the October 1, 2024, it was determined that the estimated fair values of the reporting units were substantially in excess of their carrying values.

A detailed evaluation of potential impairment indicators was performed, which specifically considered changes in interest rates, inflation risk and market volatility.

10 unchanged sentences

"Acquisitions and Dispositions."

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Intangible Assets

The Company has indefinite-lived intangible assets related to the certificates of need held in jurisdictions where certain of its surgical facilities are located, Medicare licenses and certain management rights agreements.

The Company has indefinite-lived intangible assets related to the certificates of need held in jurisdictions where certain of its surgical facilities are located and Medicare licenses.

The Company tests these intangible assets for impairment in the fourth quarter of each year, or more frequently if certain indicators arise.

2 unchanged sentences

Non-compete agreements and management rights agreements are amortized into depreciation and amortization expense in the consolidated statements of operations over the service lives of the agreements, typically ranging from two to five years for non-compete agreements and 15 years for the management rights agreements.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the components of intangible assets follows (in millions):

17 unchanged sentences

10.000 % senior unsecured notes due 2027

7.250 % senior unsecured notes due 2032

Notes payable and other secured loans 224.4 205.2

5 unchanged sentences

(1) Includes unamortized fair value discount of $ 1.4 million and $ 1.6 million as of December 31, 2024 and 2023, respectively.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

New Credit Facilities

On December 19, 2023, the Company entered into a credit agreement (the “Credit Agreement”), which provided for a $ 1.4 billion senior secured term loan (the "Term Loan") and a $ 703.8 million revolving credit facility (the "Revolver" and, together with the Term Loan, the "New Credit Facilities").

Credit Facilities

Subject to certain conditions and requirements set forth in the Credit Agreement, the Company may request one or more additional incremental term loan facilities or one or more increases in the commitments under the Revolver.

In connection with entering the New Credit Facilities, the Company terminated the then-existing senior secured credit facilities, originally dated as of August 31, 2017 and, as amended thereafter (the "2017 Credit Agreement").

Proceeds from the 2023 Term Loan were used to repay in full the amounts previously outstanding under the 2017 Credit Agreement and pay fees and expenses in connection with the New Credit Facilities.

In connection with entering the Credit Facilities, the Company terminated the then-existing senior secured credit facilities, originally dated as of August 31, 2017 and, as amended thereafter (the "2017 Credit Agreement").

Proceeds from the 2023 Term Loan were used to

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

repay in full the amounts previously outstanding under the 2017 Credit Agreement and pay fees and expenses in connection with the Credit Facilities.

The Term Loan matures on December 19, 2030.

The Term Loan bears interest at a rate per annum equal to (x) the forward-looking term rate based on Secured Overnight Financing Rate (“Term SOFR”) plus 3.50 % per annum or (y) an alternate base rate (which will be the highest of (i) the prime rate plus, (ii) 0.50 % per annum above the federal funds effective rate and (iii) Term SOFR plus 1.00 % per annum, subject to a 1.00 % floor) (the “Base Rate”) plus 2.50 % per annum.

The Term Loan amortizes in equal quarterly installments of 0.25 % of the aggregate original principal amount outstanding on the Term Loan, which will commence on or around the last business day of the fiscal quarter ending June 30, 2024.

Prior to the Amendment, as defined below, the Term Loan bore interest at a rate per annum equal to (x) the forward-looking term rate based on Secured Overnight Financing Rate (“Term SOFR”) plus 3.50 % per annum or (y) an alternate base rate (which will be the highest of (i) the prime rate plus, (ii) 0.50 % per annum above the federal funds effective rate and (iii) Term SOFR plus 1.00 % per annum, subject to a 1.00 % floor) (the “Base Rate”) plus 2.50 % per annum.

The Term Loan amortizes in equal quarterly installments of 0.25 % of the aggregate original principal amount outstanding on the Term Loan, which commenced on the last business day of the fiscal quarter ending June 30, 2024.

Subject to the right of reinvestment and certain other exceptions, the Term Loan requires mandatory prepayments upon the occurrence of certain events as defined in the Credit Agreement.

Commencing in the year ended December 31, 2024, the Term Loan is also subject to an annual mandatory prepayment in an amount equal to a percentage of excess cash flow as determined based on the first lien net leverage ratio as of the last day of the applicable fiscal year.

Term Loan is also subject to an annual mandatory prepayment in an amount equal to a percentage of excess cash flow as determined based on the first lien net leverage ratio as of the last day of the applicable fiscal year.

The Revolver matures on December 19, 2028.

5 unchanged sentences

Such financial maintenance covenant is subject to an equity cure.

The New Credit Facilities are guaranteed, on a joint and several basis, by SP Holdco I, Inc.

The Credit Facilities are guaranteed, on a joint and several basis, by SP Holdco I, Inc.

and each of Surgery Center Holdings, Inc.'s current and future wholly-owned domestic restricted subsidiaries (subject to certain exceptions) (the "Subsidiary Guarantors") and are secured by a first priority security interest in substantially all of Surgery Center Holdings, Inc.'s, SP Holdco I, Inc.'s and the Subsidiary Guarantors’ assets (subject to certain exceptions).

The New Credit Facilities includes customary negative covenants restricting or limiting the ability of the Company and its restricted subsidiaries, to, among other things, sell assets, alter its business, engage in mergers, acquisitions and other business combinations, declare dividends or redeem or repurchase equity interests, incur additional indebtedness or guarantees, make loans and investments, incur liens, enter into transactions with affiliates, prepay certain junior debt, and modify or waive certain material agreements and organizational documents, in each case, subject to customary and other agreed upon exceptions.

The New Credit Facilities also contain customary affirmative covenants and events of default.

The Credit Facilities includes customary negative covenants restricting or limiting the ability of the Company and its restricted subsidiaries, to, among other things, sell assets, alter its business, engage in mergers, acquisitions and other business combinations, declare dividends or redeem or repurchase equity interests, incur additional indebtedness or guarantees, make loans and investments, incur liens, enter into transactions with affiliates, prepay certain junior debt, and modify or waive certain material agreements and organizational documents, in each case, subject to customary and other agreed upon exceptions.

The Credit Facilities also contain customary affirmative covenants and events of default.

As of December 31, 2024, the Company was in compliance with the covenants contained in the Credit Agreement.

In connection with the aforementioned financing transactions, the Company recorded debt issuance costs and discount of $ 34.5 million, and a debt extinguishment loss of $ 15.5 million, included in loss on debt extinguishment in the accompanying consolidated statement of operations for the year ended December 31, 2023.

The loss includes the partial write-off of unamortized debt issuance costs and discounts related to the prior existing term loans, and a portion of debt issuance costs incurred with entering the New Credit Facilities.]

Prior to the New Credit Facilities, the 2017 Credit Agreement provided for a $ 1.545 billion senior secured term loan (the "2017 Term Loan") and a $ 350.0 million senior secured revolving credit facility.

Prior to the Credit Facilities, the 2017 Credit Agreement provided for a $ 1.545 billion senior secured term loan (the "2017 Term Loan") and a $ 350.0 million senior secured revolving credit facility.

During 2022, the Company made a voluntary prepayment of $ 150.0 million without premium or penalty.

In connection with prepayment, the Company wrote-off a portion of unamortized debt issuance costs and discounts, resulting in a debt extinguishment loss of $ 1.0 million, included in loss on debt extinguishment in the accompanying consolidated statements of operations.

During 2021, in connection with certain amendments to the 2017 Credit Agreement, the Company recorded a debt extinguishment loss of $ 9.1 million, included in loss on debt extinguishment in the accompanying consolidated statements of operations for the year ended December 31, 2021, related to the partial write-off of unamortized debt issuance costs and discounts and a portion of debt issuance costs incurred with the amendments.

First Amendment to Credit Agreement

On June 20, 2024, the Company entered into a first amendment (the "Amendment") to its Credit Agreement, which replaced or refinanced in full all the existing term loans outstanding under the Credit Agreement (as in effect immediately prior to the Amendment) (the "2024 Refinancing Term Loans").

The 2024 Refinancing Term Loans mature on December 19, 2030.

The 2024 Refinancing Term Loans bear interest at a rate per annum equal to (x) the forward-looking term rate based on Secured Overnight Financing Rate (“Term SOFR”) plus 2.75 % per annum or (y) an alternate base rate (which will be the highest of (i) the prime rate plus 0.5 % per annum above the federal funds effective rate and (ii) Term SOFR plus 1.00 % per annum (which shall not be less than 1.00 %)) plus 1.75 % per annum.

The 2024 Refinancing Term Loans amortize in equal quarterly installments of 0.25 % of the aggregate original principal amount of the 2024 Refinancing Term Loans.

Voluntary prepayments of the 2024 Refinancing Term Loans are permitted, in whole or in part, with prior notice, without premium or penalty (except a 1.00 % call premium in the case of certain repricing events occurring prior to the sixth month anniversary of the effective date of the Amendment).

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

6.750 % Senior Unsecured Notes due 2025

Effective June 30, 2017, the Company issued $ 370.0 million in gross proceeds of senior unsecured notes due July 1, 2025 (the "2025 Unsecured Notes").

The 2025 Unsecured Notes bear interest at the rate of 6.750 % per year, payable semi-annually on January 1 and July 1 of each year.

The 2025 Unsecured Notes are a senior unsecured obligation of Surgery Center Holdings, Inc.

and are guaranteed on a senior unsecured basis by each of Surgery Center Holdings, Inc.'s existing and future domestic wholly-owned restricted subsidiaries that guarantees the New Credit Facilities (subject to certain exceptions).

The Company may redeem the 2025 Unsecured Notes, in whole or in part, at any time, at 100.0 % of the principal amount to be redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the date of redemption.

In December 2022, the Company redeemed $ 185.0 million of the 2025 Unsecured Notes (the "2025 Notes Redemption").

The redemption price was equal to 100.0 % of the principal amount redeemed plus accrued and unpaid interest of $ 6.2 million.

If Surgery Center Holdings, Inc.

experiences a change in control under certain circumstances, it must offer to purchase the 2025 Unsecured Notes at a purchase price equal to 101.0 % of the principal amount, plus accrued and unpaid interest, if any, up to, but excluding, the date of repurchase.

The 2025 Unsecured Notes contain customary affirmative and negative covenants, which, among other things, limit the Company’s ability to incur additional debt, pay dividends, create or assume liens, effect transactions with its affiliates, guarantee payment of certain debt securities, sell assets, merge, consolidate, enter into acquisitions and effect sale and leaseback transactions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In connection with the Amendment, the Company recorded debt issuance costs and discount of $ 2.4 million, and a debt extinguishment loss of $ 2.3 million, which is included in loss on debt extinguishment in the accompanying consolidated statements of operations for the year ended December 31, 2024.

The loss on debt extinguishment includes the partial write-off of unamortized debt issuance costs and discounts.

7.250 % Senior Unsecured Notes Due 2032

Effective April 11, 2019 and July 30, 2020, the Company issued $ 430.0 million and $ 115.0 million, respectively, in an aggregate principal amount of senior unsecured notes due April 15, 2027 (the "2027 Unsecured Notes").

The 2027 Unsecured Notes bear interest at the rate of 10.000 % per annum, payable semi-annually on April 15 and October 15 of each year.

The 2027 Unsecured Notes are a senior unsecured obligation of Surgery Center Holdings, Inc.

The Company may redeem the 2027 Unsecured Notes, in whole or in part, at the redemption prices set forth below (expressed as a percentage of the principal amount of notes to be redeemed), plus accrued and unpaid interest, if any, up to, but excluding, the date of redemption:

April 15, 2023 to April 14, 2024 102.500 %

April 15, 2024 and thereafter 100.000 %

In December 2022, the Company redeemed $ 225.0 million of the 2027 Unsecured Notes.

The redemption price was equal to 105.0 % of the principal amount redeemed plus accrued and unpaid interest of $ 4.7 million.

In connection with the redemption, the Company recorded a debt extinguishment loss of $ 13.9 million, included in loss on debt extinguishment in the consolidated statements of operations for the year ended December 31, 2022.

The loss includes the redemption premium paid and the write-off a portion of unamortized debt issuance costs.

If Surgery Center Holdings, Inc.

experiences a change of control under certain circumstances, it must offer to purchase the 2027 Unsecured Notes at a purchase price equal to 101.0 % of the aggregate principal amount of notes, plus accrued and unpaid interest, if any, up to, but excluding, the date of repurchase.

The 2027 Unsecured Notes contain customary affirmative and negative covenants, which, among other things, limit the Company’s ability to incur additional debt, pay dividends, create or assume liens, effect transactions with its affiliates, guarantee payment of certain debt securities, sell assets, merge, consolidate, enter into acquisitions and effect sale and leaseback transactions.

On April 10, 2024, the Company completed the issuance and sale of $ 800.0 million in aggregate principal amount of senior unsecured notes due 2032 (the "2032 Notes").

The 2032 Notes were issued pursuant to an Indenture dated April 10, 2024 by and among Surgery Center Holdings, Inc., certain subsidiaries of Surgery Center Holdings, Inc., as guarantors, and Wilmington Trust, National Association, as trustee.

The 2032 Notes bear interest at an annual rate of 7.250 % per year, payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2024.

Proceeds from the sale of the 2032 Notes were used (i) to redeem all of the outstanding 6.750 % senior unsecured notes due 2025 (the "2025 Notes") and the 10.000 % senior unsecured notes due 2027 (the "2027 Notes," together with the 2025 Notes, the "Existing Notes"), (ii) to pay accrued interest on the Existing Notes through, but not including, April 25, 2024, (iii) to pay related fees and expenses in connection with the offering of the 2032 Notes and redemption of the Existing Notes and (iv) for general corporate purposes, including to fund future acquisitions.

In connection with this financing transaction, the Company recorded debt issuance costs and discount of $ 12.5 million, and a debt extinguishment loss of $ 2.8 million, which is included in loss on debt extinguishment in the accompanying consolidated statements of operations for the year ended December 31, 2024.

Certain of the Company’s subsidiaries have outstanding indebtedness under notes payable and other secured loans, which is collateralized by the real estate and equipment owned by the surgical facilities to which the loans were made, and right-of-use finance lease obligations for which the Company is liable to various vendors for several property and equipment leases classified as finance leases.

The various bank indebtedness agreements contain covenants to maintain certain financial ratios and also restrict encumbrance of assets, creation of indebtedness, investing activities and payment of distributions.

At December 31, 2023, the Company was in compliance with its covenants contained in the credit agreements.

The increase in finance lease obligations is primarily a result of the modification of certain existing facility real estate leases that were previously classified as operating leases.

"Leases" for further discussion.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A summary of maturities for the Company's long-term debt, excluding unamortized debt issuance costs and the unamortized fair value discount discussed above, for the next five years and thereafter as of December 31, 2024 follows (in millions):

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The useful life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

The majority of the Company's medical equipment leases have a bargain purchase option that is reasonably certain of exercise, so these assets are depreciated over their useful life.

The majority of the

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company's medical equipment leases have a bargain purchase option that is reasonably certain of exercise, so these assets are depreciated over their useful life.

The Company's lease agreements do not contain any material residual value guarantees, restrictions or covenants.

2 unchanged sentences

These variable components of lease payments are expensed as incurred and are not included in the determination of the right-of-use asset or lease liability.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets at December 31, 2023 and 2022 (in millions):

Classification in Consolidated Balance Sheets December 31, 2023 December 31, 2022

The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets (in millions):

Classification in Consolidated Balance Sheets

December 31, 2024 December 31, 2023

Operating lease assets Right-of-use operating lease assets $ 295.7 $ 255.3

10 unchanged sentences

Total lease liabilities $ 1,131.8 $ 980.1

During the year ended December 31, 2023, the Company extended certain existing facility real estate leases, resulting in the reclassification of the leases from operating to finance.

During the year ended December 31, 2024, the Company extended or otherwise modified the renewal terms of certain existing facility real estate leases, resulting in the reclassification of the leases from operating to finance.

The modifications resulted in an increase to finance lease liabilities and assets of $ 63.9 million and $ 61.6 million, respectively, including the reclassification of existing operating lease liabilities and assets of $ 42.3 million and $ 41.3 million, respectively.

4 unchanged sentences

Weight average discount rate 7.9 % 8.1 % 8.2 % 8.2 %

The following table presents the components of the Company's lease expense and their classification in the consolidated statement of operations for the years ended December 31, 2023 and 2022 (in millions):

December 31, 2023 December 31, 2022

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the components of the Company's lease expense and their classification in the consolidated statements of operations (in millions):

Year Ended December 31,

Operating lease costs $ 65.8 $ 65.7

9 unchanged sentences

Payments are allocated to principal adjustments of the finance lease liability and interest expense.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents supplemental cash flow information for the years ended December 31, 2023 and 2022 (dollars in millions):

December 31, 2023 December 31, 2022

The following table presents supplemental cash flow information (in millions):

Year Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

8 unchanged sentences

$ 65.2 $ 92.0

2024 54.6 75.6

2025 50.6 72.8

2026 42.6 69.1

2027 33.1 65.2

Thereafter 221.6 1,299.0

7 unchanged sentences

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The key terms of interest rate swaps and interest rate caps outstanding are presented below:

6 unchanged sentences

Interest rate cap September 30, 2021 8.2 Active 8.7 Active March 31, 2025

Pay-fixed swap November 30, 2018 — Matured 165.0 Active November 30, 2023

Pay-fixed swap November 30, 2018 — Matured 120.0 Active November 30, 2023

Pay-fixed swap June 28, 2019 — Matured 150.0 Active November 30, 2023

Receive-fixed swap April 30, 2021 — Matured ( 165.0 ) Active November 30, 2023

Receive-fixed swap April 30, 2021 — Matured ( 120.0 ) Active November 30, 2023

Receive-fixed swap April 30, 2021 — Matured ( 150.0 ) Active November 30, 2023

Deferred premium cap March 31, 2025 396.0 Active — N/A December 31, 2028

Deferred premium cap March 31, 2025 198.0 Active — N/A December 31, 2028

Deferred premium cap March 31, 2025 396.0 Active — N/A December 31, 2028

Deferred premium cap March 31, 2025 198.0 Active — N/A December 31, 2028

$ 2,737.8 $ 1,360.1

As of December 31, 2024, the Company had three interest rate swaps with a total net notional amount of $ 1.2 billion.

The interest rate swaps are pay-fixed, receive 1-Month SOFR (subject to a minimum of 0.75 %) designated in cash flow hedging relationships with a termination date of March 31, 2025.

The six matured interest rate swaps were undesignated and consisted of three pay-fixed, received 1-Month SOFR (subject to a minimum of 1.00 %) interest rate swaps and three pay 1-Month SOFR (subject to a minimum of 1.00 %), receive-fixed interest rate swaps.

The interest rate swaps matured effective November 30, 2023.

The pay-floating, receive-fixed swaps were designed to economically offset the undesignated pay-fixed, receive-floating swaps.

The Company's interest rate derivative agreements were indexed to LIBOR prior to permanent cessation on June 30, 2023 and automatically transitioned to SOFR in accordance with their respective fallback provisions.

The interest rate swaps are pay-fixed, receive 1-Month SOFR (subject to a minimum of 0.75 %) designated in cash flow hedging relationships and have a termination date of March 31, 2025.

As of December 31, 2024, the Company had two interest rate caps designated in cash flow hedging relationships with a total notional amount of $ 151.8 million.

The interest rate caps each have a termination date of March 31, 2025.

In connection with the voluntary prepayment on the 2017 Term Loan in 2022 (see Note 5.

"Long-Term Debt), the Company de-designated a portion of one of its interest rate caps.

The amount of unrealized gains recorded in other comprehensive income ("OCI") related to the de-designated notional amount at the time of the de-designation was $ 7.5 million.

This amount was reclassified from accumulated OCI into income and is included as a component of other income in the consolidated statement of operations for the year ended December 31, 2022.

No cash was exchanged between the Company and the counterparties due to the de-designation, therefore the non-cash transactions had no impact on the consolidated statements of cash flows.

During the year ended December 31, 2023, the Company partially terminated the previously de-designated portion of one of its interest rate caps.

During the year ended December 31, 2023, the Company partially terminated a previously undesignated portion of one of its interest rate caps.

In connection with the termination, the Company received $ 8.6 million, which is included as a component of operating activities in the consolidated statements of cash flows for the year ended December 31, 2023.

On April 9, 2024, the Company entered into five deferred premium interest rate cap agreements, each with an effective date of March 31, 2025.

The deferred premium interest rate caps are designated in cash flow hedging relationships with a total notional amount of $ 1.4 billion.

The deferred premium interest rate caps each have a termination date of December 31, 2028.

These financial instruments are designed to limit the Company's interest rate exposure on its term loan concurrent with the expected maturity of positions held as of December 31, 2024.

As of December 31, 2024, the Company's deferred premium interest rate caps had a total notional amount of $ 1.4 billion.

The pay-fixed, receive floating interest rate swaps did not meet the requirements to be considered derivatives in their entirety as a result of the financing component.

Accordingly, the swaps are considered hybrid instruments, consisting of a financing element treated as a debt instrument and an embedded at-market derivative that was designated as a cash flow hedge.

Within the Company’s consolidated balance sheets, the financing elements treated as debt instruments described above are carried at amortized cost and the embedded at-market derivatives and the undesignated swaps are recorded at fair value.

The cash flows related to the portion treated as debt are classified as financing activities in the consolidated statements of cash flows while the portion treated as an at-market derivative are classified as operating activities.

Cash settlements related to the undesignated swaps will offset and are classified as operating activities in the consolidated cash flows.

Within the Company’s consolidated balance sheets, the interest rate caps, including the undesignated portion, are recorded at fair value.

The cash flows related to the interest rate caps, including the undesignated portion, are classified as operating activities in the consolidated statements of cash flows.

Within the Company’s consolidated balance sheets, the interest rate caps are recorded at fair value.

The cash flows related to the interest rate caps are classified as operating activities in the consolidated statements of cash flows.

The Company's interest rate swap agreements, excluding the portion treated as debt, are recognized at fair value in the consolidated balance sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy.

The fair value of the interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps.

The fair value of the interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps.

The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

The interest rate caps are classified using Level 2 inputs within the fair value hierarchy.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated OCI and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings, as documented at hedge inception in accordance with the Company’s accounting policy election.

Amounts reported in

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

accumulated OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income ("OCI") and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings, as documented at hedge inception in accordance with the Company’s accounting policy election.

Amounts reported in accumulated OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

Over the next 12 months, the Company estimates that an additional $ 6.7 million will be reclassified as a decrease to interest expense.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the fair values of our derivatives and their location on the consolidated balance sheets (in millions):

December 31, 2024 December 31, 2023

Location Assets Liabilities Assets Liabilities

Derivatives not designated as hedging instruments

Interest rate caps Other long-term assets $ — $ — $ 9.0 $ —

Interest rate swaps Other long-term assets — — 8.5 —

Interest rate swaps Other long-term liabilities — — — 8.5

Assets Liabilities Assets Liabilities

Derivatives in cash flow hedging relationships

Interest rate caps Other long-term assets 6.0 — 10.4 —

Interest rate swaps Other long-term assets 51.4 — 85.5 —

Interest rate swaps Other long-term liabilities (1)

Interest rate caps (1)

$ 1.1 $ — $ 6.0 $ —

Interest rate swaps (1)

Interest rate caps (2)

Interest rate swaps (3) (4)

Total $ 10.8 $ 9.6 $ 57.4 $ 17.8

(1) The balance is related to the financing component of the pay-fixed, receive floating interest rate swaps.

The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and consolidated statement of operations (in millions):

(1) Amounts were included in other current assets and other long-term assets on the consolidated balance sheets as of December 31, 2024 and December 31, 2023, respectively.

(2) Amounts were included in other long-term liabilities on the consolidated balance sheets as of December 31, 2024.

(3) Amounts were included in other current liabilities and other long-term liabilities on the consolidated balance sheets as of December 31, 2024 and December 31, 2023, respectively.

(4) Amounts related to the financing component of the pay-fixed interest rate swaps.

The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and consolidated statements of operations (in millions):

Year Ended December 31,

1 unchanged sentence

Derivatives not designated as hedging instruments

(Gain) loss recognized in income Other income, net $ 0.6 $ ( 0.4 ) $ ( 0.1 )

Loss recognized in income Other income, net $ — $ 0.6 $ ( 0.4 )

Gain reclassified from accumulated OCI into income (1)

2 unchanged sentences

Gain (loss) recognized in OCI (effective portion) $ 4.3 $ 16.0 $ 104.9

(Gain) loss reclassified from accumulated OCI into income (effective portion) (2)

Gain reclassified from accumulated OCI into income (effective portion) (2)

Interest expense, net $ ( 57.0 ) $ ( 34.7 ) $ 10.3

(1) Gain reclassified from accumulated OCI upon de-desigation of a portion of one of the Company's interest rate caps.

(2) Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 19.6 million, $ 21.4 million and $ 14.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

(1) Gain reclassified from accumulated OCI upon de-designation of a portion of one of the Company's interest rate caps.

(2) Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 19.6 million and $ 21.4 million for the years ended December 31, 2023 and 2022, respectively.

There were no corresponding amounts for the year ended December 31, 2024.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings Per Share

Basic and diluted earnings per share are calculated based on the weighted-average number of shares outstanding in each period and dilutive stock options, unvested shares and warrants, to the extent such securities exist and have a dilutive effect on earnings per share.

The Company computes basic and diluted earnings per share using the two-class method.

The two-class method of computing earnings per share is an earnings allocation method that determines earnings per share for common shares and participating securities according to their participation rights in dividends and undistributed earnings.

A reconciliation of the numerator and denominator of basic and diluted earnings per share follows (dollars in millions, except per share amounts;

Basic and diluted earnings (loss) per share is calculated based on the weighted-average number of shares outstanding in each period and dilutive stock options, unvested shares and warrants, to the extent such securities exist and have a dilutive effect on earnings (loss) per share.

A reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share follows (dollars in millions, except per share amounts;

shares in thousands):

3 unchanged sentences

$ ( 168.1 ) $ ( 11.9 ) $ ( 54.6 )

Amounts allocated to participating securities (1)

Net loss attributable to common stockholders $ ( 11.9 ) $ ( 54.6 ) $ ( 81.2 )

Weighted average common shares outstanding:

7 unchanged sentences

Restricted shares 372 263 679

(1) Includes dividends accrued for the Series A Preferred Stock.

The Series A Preferred Stock does not participate in undistributed losses and was converted to common stock during the second quarter of 2021.

There were no participating securities for the years ended December 31, 2023 and 2022.

(2) The impact of potentially dilutive securities for all periods were not considered because the effect would be anti-dilutive.

(1) The impact of potentially dilutive securities for all periods was not considered because the effect would be anti-dilutive.

Public Offerings

4 unchanged sentences

On December 22, 2022, the Company completed the private placement pursuant to which the Company sold 9,183,673 shares of common stock, resulting in additional gross proceeds of $ 225.0 million.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On January 27, 2021, the Company entered into an underwriting agreement relating to a public offering of 7,500,000 shares (the “January 2021 Firm Shares”) of the Company’s common stock, $ 0.01 par value per share, at a price to the public of $ 30.25 per share.

In addition, the Company granted the underwriters an option to purchase up to an additional 1,125,000 shares of common stock at the same price per share as the January 2021 Firm Shares.

On February 1, 2021, the Company completed the public offering pursuant to which the Company sold 8,625,000 shares of common stock (including the January 2021 Firm Shares and the option shares), resulting in gross proceeds of $ 260.9 million.

In connection with the offering, the Company incurred underwriting discounts, commissions and other related costs of $ 12.7 million, which were recognized as a direct reduction of proceeds received.

On November 8, 2021, the Company entered into an underwriting agreement relating to a public offering of 6,000,000 shares (the “November 2021 Firm Shares”) of the Company’s common stock, $ 0.01 par value per share, at a price to the public of $ 46.50 per share.

In addition, the Company granted the underwriters an option to purchase up to an additional 900,000 shares of common stock at the same price per share as the November 2021 Firm Shares.

On November 12, 2021, the Company completed the public offering pursuant to which the Company sold 6,900,000 shares of common stock (including the November 2021 Firm Shares and the option shares), resulting in gross proceeds of $ 320.9 million.

In connection with the offering, the Company incurred underwriting discounts, commissions and other related costs of $ 14.9 million, which were recognized as a direct reduction of proceeds received.

Share Repurchase Authorization

3 unchanged sentences

The authorization does not obligate the Company to repurchase any shares, and the Company does not intend to make further repurchases.

The Company uses the asset and liability method to account for income taxes.

Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Any change in tax rates that could impact deferred tax assets or liabilities are recognized in the same period the change occurs.

If a net operating loss ("NOL") and/or interest limitation ("163(j)") carryforward exists, the Company makes a determination as to whether that NOL and/or 163(j) carryforward will be utilized in the future.

A valuation allowance is established for certain NOL and 163(j) carryforwards when their recoverability is deemed to be uncertain.

The carrying value of the net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions.

If these estimates and related assumptions change in the future, the Company may be required to adjust its deferred tax valuation allowances.

The Company, or one or more of its subsidiaries, files income tax returns in the U.S.

federal jurisdiction and various state jurisdictions.

With few exceptions, the Company is no longer subject to U.S.

federal income tax examinations for years prior to 2020 or state income tax examinations for years prior to 2019.

The Company and certain of its subsidiaries file a consolidated federal income tax return.

The partnerships, limited liability companies, and certain non-consolidated physician practice corporations also file separate income tax returns.

The Company's allocable portion of each partnership's and limited liability company's income or loss is included in taxable income of the Company.

The remaining income or loss of each partnership and limited liability company is allocated to the other owners.

The Company made income tax payments of $ 1.4 million, $ 1.8 million and $ 1.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income tax expense (benefit) is comprised of the following (in millions):

5 unchanged sentences

State 16.9 ( 0.2 ) 4.3

Total income tax (benefit) expense $ ( 0.3 ) $ 23.3 $ 10.5

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Total income tax expense (benefit)

$ 134.6 $ ( 0.3 ) $ 23.3

A reconciliation of the provision for income taxes as reported in the consolidated statements of operations and the amount of income tax expense (benefit) computed by multiplying consolidated income (loss) in each year by the U.S.

2 unchanged sentences

2024 2023 2022

Tax expense at U.S.federal statutory rate $ 28.4 $ 23.2 $ 17.1

Tax expense at U.S.

federal statutory rate

$ 30.8 $ 28.4 $ 23.2

State income tax, net of U.S.

7 unchanged sentences

Tax receivable agreement liability

Adjustments to unrealized attributes — — 2.3

Other ( 0.2 ) ( 0.4 ) 0.2

Total income tax (benefit) expense $ ( 0.3 ) $ 23.3 $ 10.5

The components of temporary differences and the approximate tax effects that give rise to the Company’s net deferred tax asset are as follows (in millions):

Total income tax expense (benefit)

$ 134.6 $ ( 0.3 ) $ 23.3

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of temporary differences and the approximate tax effects that give rise to the Company’s net deferred tax balance are as follows (in millions):

Deferred tax assets:

7 unchanged sentences

Interest rate derivative liability 2.5 4.7

TRA liability — 0.1

Right of use 47.2 52.5

Right of use liability

Software development costs 2.1 1.7

6 unchanged sentences

Basis differences of partnerships and joint ventures ( 106.7 ) ( 84.2 )

Right of use ( 35.6 ) ( 44.4 )

Right of use asset

( 36.8 ) ( 35.6 )

Deferred financing costs

Amortization of intangible assets ( 3.1 ) ( 3.0 )

2 unchanged sentences

Total deferred tax liabilities ( 158.1 ) ( 142.4 )

Net deferred tax assets $ 89.5 $ 91.5

Net deferred tax (liabilities) assets

$ ( 39.2 ) $ 89.5

The Company had federal NOL carryforwards of $ 529.0 million as of December 31, 2024, of which $ 434.3 million expire between 2030 and 2037.

The remaining federal NOL carryforwards, which were generated after 2017, do not expire.

The Company had state NOL

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

carryforwards of $ 588.7 million as of December 31, 2023, which expire between 2024 and 2042.

The Company had Section 163(j) interest limitation carryforwards of $ 652.8 million as of December 31, 2023, which do not expire.

The Company had state NOL carryforwards of $ 630.7 million as of December 31, 2024, which expire between 2025 and 2043.

The Company had federal Section 163(j) interest limitation carryforwards of $ 792.1 million as of December 31, 2024, which do not expire.

The Company recorded a valuation allowance against deferred tax assets at December 31, 2024 and 2023 totaling $ 284.7 million and $ 150.1 million, respectively, which represents an increase of $ 134.6 million.

The valuation allowance continues to be provided for certain deferred tax assets for which the Company believes it is more likely than not that the tax benefits will not be realized, which are primarily Section 163(j) interest carryforwards and certain state NOL carryforwards.

The current year change in the Company’s valuation allowance is comprised of an increase of $ 27.1 million recorded to income tax expense and an increase of $ 8.3 million attributable to changes in deferred taxes on the Company’s interest rate derivatives, which was recorded to other comprehensive income.

The Company has evaluated the realizability of its deferred tax assets based on sources of positive and negative evidence, and determined that it is more likely than not that its federal NOL carryforwards, as well as certain state NOL carryforwards, will be realized.

The determination was made based upon projections of future book and taxable income.

If the Company's expectations for future operating results on a consolidated basis or at the state jurisdiction level vary from actual results due to changes in health care regulations, general economic conditions, or other factors, the Company may need to adjust the valuation allowance, for all or a portion of its deferred tax assets.

The Company's income tax expense and/or other comprehensive income in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in its valuation allowance in the period when the change in circumstances occurs.

These changes could have a significant impact on the Company's future earnings.

As of December 31, 2024, the Company was in a cumulative three-year pre-tax loss position and primarily due to this negative factor increased its valuation allowance during the year ended December 31, 2024.

The Company, or one or more of its subsidiaries, files income tax returns in the U.S.

federal jurisdiction and various state jurisdictions.

With few exceptions, the Company is no longer subject to U.S.

federal income tax examinations for years prior to 2021 or state income tax examinations for years prior to 2020.

The Company made income tax payments of $ 1.6 million, $ 1.4 million and $ 1.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

In each of these periods the income tax payments related to states in which the Company does not have a NOL to offset taxable income.

During the years ended December 31, 2024, 2023 and 2022, the Company made no federal income tax payments due to utilization of its NOL carryforwards.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the beginning and ending liability for gross unrecognized tax benefits for the years ended December 31, 2024 and 2023 is as follows (in millions):

Unrecognized tax benefits at beginning of year $ — $ 0.1

Additions for tax provisions of the current year

Additions for acquired positions

Additions for tax positions of prior years

Reductions for tax positions of prior years — ( 0.1 )

Reductions for statute of limitations expirations

Unrecognized tax benefits at end of year $ — $ —

The Company recognizes interest and penalties related to uncertain tax positions in its provision for income taxes in the consolidated statements of operations.

For the years ended December 31, 2023 and 2022, the Company had accrued interest and penalties related to uncertain tax positions of approximately zero and $ 0.1 million, respectively.

The total amount of accrued liabilities related to uncertain tax positions that would affect the Company's effective tax rate, if recognized, is zero and $ 0.1 million as of December 31, 2023 and 2022, respectively.

The reserves are included in long-term taxes payable in the consolidated balance sheet as of December 31, 2023.

For the years ended December 31, 2024 and 2023, the Company had no accrued interest and penalties related to uncertain tax positions.

Equity-Based Compensation

Transactions in which the Company receives employee and non-employee services in exchange for the Company’s equity instruments or liabilities that are based on the fair value of the Company’s equity securities or may be settled by the issuance of these securities are accounted for using a fair value method.

The Company’s policy is to recognize compensation expense using the straight line method over the relevant vesting period for units that vest based on time.

Equity-based awards are granted pursuant to the Surgery Partners, Inc.

2 unchanged sentences

As of December 31, 2024, 11,815,700 shares were authorized to be granted under the 2015 Omnibus Incentive Plan and 3,553,509 were available for future equity grants.

The terms of equity-based awards, including vesting conditions, are determined by the Compensation Committee and set forth in the applicable award agreements at the time of issuance.

In general, vesting is contingent upon either a service, performance or market condition (or a combination thereof).

Accelerated vesting for earned shares may occur upon certain terminating events, including a change in control of the Company.

The Company measures the fair value of equity-based awards on the date of grant, with associated compensation costs recognized over the requisite service period, net of forfeitures as they occur.

The Company’s policy is to recognize compensation expense using the straight line method over the relevant vesting period for units that vest based on time.

Restricted and Performance Share-Based Awards

During the years ended December 31, 2023 and 2022, the Company granted 505,787 and 257,291 restricted stock awards ("RSAs") to certain officers, employees and non-employee directors in accordance with the 2015 Omnibus Incentive Plan, respectively.

Vesting and payment of these RSAs are generally subject to continuing service of the employee or non-employee director over the ratable vesting periods beginning one year from the date of grant to three or five years after the date of grant.

The fair values of these RSAs were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.

During the years ended December 31, 2023 and 2022, the Company granted 334,275 and 203,549 performance-based restricted stock units ("PSUs") subject to the achievement of a combination of performance conditions, respectively.

In addition to the achievement of the performance conditions, these PSUs are generally subject to the continuing service of the employee over the ratable vesting period from the earned date continuing for two years .

For these PSUs, the number of shares payable at the end of the performance periods ranges from 0 % to 300 % of the targeted units based on the Company’s actual performance and/or market conditions results as compared to the targets.

These PSUs are not considered outstanding until earned.

During the years ended December 31, 2024 and 2023, the Company granted restricted stock awards ("RSAs") of 410,057 and 505,787 , respectively, to certain officers, employees and non-employee directors in accordance with the 2015 Omnibus Incentive Plan.

In general, RSAs vest ratably over a one to three -year service period, contingent upon continued employment or service to the Company.

During the years ended December 31, 2024 and 2023, the Company granted performance-based restricted stock units ("PSUs") of 399,745 and 334,275 , respectively, which were subject to the achievement of various performance conditions.

The performance period for these PSUs is generally one year from the date of grant, with ratable vesting continuing for two years from the earned date or three years after the the date of grant with a one-time cliff vesting.

In addition to the achievement of the performance conditions, these PSUs are generally subject to the continuing service of the employee over the vesting periods.

For certain PSUs awarded to officers of the Company, the number of shares payable at the end of the performance periods ranges from 0 % to 300 % of the targeted units based on the Company’s actual performance results and/or market conditions as compared to the targets.

During the years ended December 31, 2024 and 2023, 123,742 and 74,123 of the PSUs previously granted were deemed to have been earned, respectively.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted and Performance Share-Based Activity

16 unchanged sentences

No stock options were granted during the years ended December 31, 2024, 2023 and 2022.

Options to purchase shares are granted with an exercise price equal to the fair market value of the Company’s common stock on the day of grant, based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.

The estimated fair value of options is amortized to expense on a straight-line basis over the options’ vesting period.

Option Valuation

In applying the Monte Carlo simulation model to value the stock options, the Company used the following assumptions:

▪ Risk-free interest rate .

The risk-free interest rate is used as a component of the fair value of stock options to take into account the time value of money.

For the risk-free interest rate, the Company uses the implied yield on U.S.

Treasury zero-coupon issues with a remaining term equal to the expected life, in years, of the options granted.

▪ Expected volatility .

Volatility, for the purpose of share-based compensation, is a measurement of the amount that a share price has fluctuated.

Expected volatility involves reviewing historical volatility and determining what, if any, change the share price will have in the future.

The Company used historical stock price information of certain peer group companies for a period of time equal to the expected option life period to determine estimated volatility.

▪ Expected life, in years .

A clear distinction is made between the expected life of an option and the contractual term of the option.

The expected life of an option is considered the amount of time, in years, that an option is expected to be outstanding before it is exercised.

Whereas, the contractual term of the stock option is the term an option is valid before it expires.

▪ Expected dividend yield .

Since issuing dividends will affect the fair value of a stock option, GAAP requires companies to estimate future dividend yields or payments.

The Company has not historically issued dividends and does not intend to issue dividends in the future.

As a result, the Company does not apply a dividend yield component to its valuation.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Options to purchase shares are granted with an exercise price equal to the fair market value of the Company’s common stock on the grant date.

All of the outstanding stock options were exercisable as of December 31, 2024.

Stock Option Activity

2 unchanged sentences

Outstanding at December 31, 2021

2,384,860 $ 12.82 7.0

Exercised ( 301,998 ) 13.42 6.2

1 unchanged sentence

Outstanding at December 31, 2022

1,948,360 $ 12.69 5.9

Exercised ( 103,141 ) 12.92 4.0

1 unchanged sentence

Outstanding at December 31, 2023

1,845,219 $ 12.68 5.0

Exercised ( 29,859 ) 12.38 4.2

2 unchanged sentences

1,815,360 $ 12.68 4.0

(1) All of the outstanding stock options were exercisable as of December 31, 2023.

Stock Appreciation Rights

4 unchanged sentences

Fifty percent ( 50 %) of the SAR Awards vested in five equal annual installments on each of the first five anniversaries of the date of grant, generally subject to continued employment on each vesting date.

Twenty-five percent ( 25 %) of the award vested based on satisfaction of the time condition and the achievement by the Company of an average closing price of a share of Common Stock on the Nasdaq Stock Market of $ 25.00 over a period of sixty ( 60 ) consecutive trading days, and twenty-five percent ( 25 %) of the award vested based on satisfaction of the time condition and the achievement by the Company of an average closing price of a share of Common Stock on the Nasdaq Stock Market of $ 35.00 over a period of sixty ( 60 ) consecutive trading days, in each case, generally subject to continued employment on each vesting date.

Forfeitures are recognized as incurred.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

trading days, in each case, generally subject to continued employment on each vesting date.

All of the outstanding SAR Awards were exercisable as of December 31, 2024.

Other information pertaining to equity-based compensation

At December 31, 2023, unrecognized compensation cost related to unvested shares, stock options and SAR Awards was approximately $ 25.7 million.

Unrecognized compensation cost will be expensed annually based on the number of shares, stock options and SAR Awards that vest during the year.

At December 31, 2024, unrecognized compensation cost related to unvested shares was approximately $ 27.8 million.

Unrecognized compensation cost will be expensed annually based on the number of shares that vest during the year.

The Company records equity-based compensation expense to recognize the fair value of the restricted shares, stock options and SAR Awards granted over the relevant vesting period.

8 unchanged sentences

The Company's contributions were $ 15.3 million, $ 12.6 million and $ 11.1 million for the years ended December 31, 2024, 2023, and 2022, respectively.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other Current Liabilities

A summary of other current liabilities is as follows (in millions):

A summary of other current liabilities was as follows (in millions):

2024 December 31, 2023

Right-of-use operating lease liabilities $ 41.0 $ 37.6

Amounts due to patients and payors 23.9 31.9

Cost report liabilities 21.3 23.9

Acquisition escrow 10.2 28.8

Amounts due to patients and payors 31.8 23.9

Interest payable 13.4 17.8

Interest rate swaps 3.5 —

Accrued expenses and other 142.9 100.9

10 unchanged sentences

In May 2023, we experienced a cybersecurity incident that temporarily disrupted certain facilities in our Idaho market.

We estimate that this incident had an adverse pre-tax impact of approximately $ 8 million as of December 31, 2023.

We estimate that this incident had an adverse pre-tax impact of approximately $ 8 million during the year ended December 31, 2023.

This estimate includes lost revenue from the associated business interruption and other related expenses.

We have filed a claim with the insurance carrier related to this incident.

No insurance recoveries were recognized as of December 31, 2023.

Insurance recoveries of $ 6.5 million were recognized during the year ended December 31, 2024 with no comparable activity in the prior year.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Laws and Regulations

4 unchanged sentences

From time to time, governmental regulatory agencies will conduct inquiries of the Company's practices, including, but not limited to, the Company's compliance with federal and state fraud and abuse laws, billing practices and relationships with physicians.

Government Settlement

On April 14, 2020, Logan Laboratories, LLC ("Logan Labs"), a toxicology laboratory based in Tampa, Florida, that provides urine testing services and Tampa Pain Relief Centers, Inc.

("Tampa Pain" and, together with Logan Labs, the "Companies"), a pain management medical practice based in Tampa, Florida, both indirect wholly-owned subsidiaries of the Company, entered into a settlement agreement (the "Settlement Agreement") with the United States of America, acting through the United States Department of Justice (“DOJ”) and on behalf of the Office of Inspector General of the Department of Health and Human Services ("OIG"), the Defense Health Agency, acting on behalf of the TRICARE Program, the Office of Personnel Management, as the administrator of the Federal Employees Health Benefits Program, the Office of Workers Compensation Programs of the United States Department of Labor, which administers federal workers compensation claims for federal employees, including the United States Postal Service, and the United States Department of Veterans Affairs and certain other parties to resolve the pending DOJ investigation.

Under the terms of the Settlement Agreement, the Companies paid $ 30.7 million plus accrued interest on April 1, 2021, representing the final payment related to the resolution of the DOJ investigation.

Stockholder Litigation

2 unchanged sentences

Capital, L.L.C., et al., C.A.

The plaintiff in the Delaware Action asserted claims

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

against (i) certain current and former members of the Company’s Board of Directors (together, the "Directors");

The plaintiff in the Delaware Action asserted claims against (i) certain current and former members of the Company’s Board of Directors (together, the "Directors");

Capital, LLC and certain of its affiliates (collectively, "H.I.G.");

20 unchanged sentences

In the event of an uninsured or underinsured loss, the value of an investment in the partnership interests or limited liability company membership units and the amount of distributions could be adversely affected.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Segment Reporting

The Company currently operates in two major lines of business that are also the Company's reportable operating segments - the operation of surgical facilities and the operation of ancillary services.

The Surgical Facility Services segment includes the operation of ASCs, surgical hospitals and anesthesia services.

The Ancillary Services segment consists of multi-specialty physician practices.

Segment information is prepared on the same basis that our CEO, who is our Chief Operating Decision Maker ("CODM"), manages our segments, evaluates financial results, and makes key operating decisions.

We have one reportable segment:

Surgical Facilities.

The Surgical Facilities reportable segment is comprised of two operating segments, which we have aggregated to a single reportable segment in consideration of the aggregation criteria set forth in ASC 280.

The Surgical Facilities reportable segment includes the operation of ASCs, surgical hospitals, anesthesia services, and multi-specialty physician practices, which earns revenues primarily from contracts with patients in which the performance obligations are to provide health care services.

The "All other" line item primarily consists of amounts attributable to the Company's corporate general and administrative functions.

The following tables present financial information for each reportable segment (in millions):

The Company defines its segment on the basis of the way in which its internally reported financial information is regularly reviewed by the CODM to assess performance and allocate resources.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2024, the operating segment previously defined as "Ancillary services" was included with Surgical Facilities based on changes in the operational management of our multi-specialty physician practices.

Accordingly, the Company has reclassified segment disclosures previously reported to conform to current year presentation.

The Company’s CODM uses Adjusted EBITDA to assess performance and allocate resources.

The CODM considers budget-to-actual and actual versus prior period variances on a periodic basis as a means of assessing performance.

The following segment information, including significant segment expenses, is presented in millions:

Year Ended December 31,

2024 2023 2022

Surgical Facility Services $ 2,675.8 $ 2,470.4 $ 2,157.8

Ancillary Services 67.5 68.9 67.3

Total $ 2,743.3 $ 2,539.3 $ 2,225.1

Adjusted EBITDA:

Surgical Facility Services $ 544.0 $ 473.6 $ 422.0

Ancillary Services ( 3.9 ) ( 2.3 ) 1.7

All other ( 102.0 ) ( 91.1 ) ( 84.1 )

Total $ 438.1 $ 380.2 $ 339.6

Reconciliation of Adjusted EBITDA:

Income (loss) before income taxes $ 135.0 $ 110.3 $ 81.2

Surgical Facilities Revenues $ 3,114.3 $ 2,743.3 $ 2,539.3

Salaries and benefits

907.5 793.8 746.4

812.9 745.0 709.7

Professional and medical fees

357.1 296.8 269.2

Lease expense 89.5 84.9 82.4

Equity in earnings of unconsolidated affiliates ( 19.5 ) ( 14.2 ) ( 12.5 )

Net income attributable to non-controlling interests 180.6 147.2 141.6

Interest expense, net 193.0 234.9 221.0

Depreciation and amortization 118.1 114.8 98.8

Equity-based compensation expense 17.7 18.4 17.4

Transaction, integration and acquisition costs (1)

Other segment expense, net 176.2 155.5 140.6

2,504.3 2,209.0 2,077.4

Net loss on disposals, consolidations and deconsolidations 14.4 11.1 2.2

Litigation settlements and regulatory change impact (2)

Adjusted Surgical Facilities EBITDA $ 610.0 $ 534.3 $ 461.9

Reconciliation:

Net income attributable to non-controlling interests ( 180.6 ) ( 147.2 ) ( 141.6 )

Corporate and other unallocated expenses (1)

289.2 235.4 143.5

Loss on debt extinguishment 15.5 14.9 9.1

Undesignated derivative activity (3)

Depreciation and amortization 152.6 118.1 114.8

Interest expense, net 201.7 193.0 234.9

Income before income taxes $ 147.1 $ 135.0 $ 110.3

(1) Corporate and other unallocated expenses represent corporate overhead expenses that have not been allocated to any segment for reporting purposes including general and administrative expenses, transaction and integration costs, net loss on disposals, consolidations and deconsolidations, litigation settlements, and loss on debt extinguishment.

Year Ended December 31,

2024 2023 2022

Depreciation and amortization:

Surgical Facilities $ 138.9 $ 110.8 $ 105.4

All other 13.7 7.3 9.4

Total depreciation and amortization expense $ 152.6 $ 118.1 $ 114.8

2024 December 31, 2023

Surgical Facilities

$ 7,466.3 $ 6,383.7

Adjusted EBITDA $ 438.1 $ 380.2 $ 339.6

(1) This amount includes transaction and integration costs of $ 61.7 million, $ 47.5 million and $ 39.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $ 3.2 million, $ 1.1 million and $ 6.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

(2) This amount includes a litigation settlements loss of $ 10.6 million and a net gain of $ 29.3 million for the years ended December 31, 2023 and 2022, respectively, with no comparable costs in 2021.

This amount also includes other litigation costs of $ 2.5 million, $ 4.6 million and $ 5.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Additionally, the year ended December 31, 2023, includes $ 4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection.

(3) This amount includes the reclassification of $ 7.5 million of unrealized gains out of accumulated OCI into income related to the de-designation of a portion of one of the Company's interest rate caps for the year ended December 31, 2022.

This amount further includes fair value changes of undesignated derivatives for the years ended December 31, 2023 and 2022, with no comparable activity in 2021.

(4) This amount includes estimates for the net impact of the May 2023 cyber event and losses from a divested business for the year ended December 31, 2023.

Amounts presented for the years ended December 31, 2022 and 2021 reflect losses incurred, net of insurance proceeds received, related to certain surgical facilities that were closed following Hurricane Ian and Hurricane Ida, respectively.

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Surgical Facility Services $ 6,347.4 $ 6,001.1

Ancillary Services 36.3 41.7

All other 423.7 493.0

Total assets $ 7,890.0 $ 6,876.7

SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31,

1 unchanged sentence

Cash purchases of property and equipment:

Surgical Facility Services $ 87.9 $ 74.3 $ 55.0

Ancillary Services 0.8 1.1 0.5

Surgical Facilities

$ 86.6 $ 88.7 $ 75.4

All other 3.8 0.1 5.2

1 unchanged sentence

Subsequent Events

During January 2024, the Company purchased a controlling interest in two ASCs and nine physician practices for $ 58.6 million.

The Company funded the cash purchase price with available resources.

As of the date of this filing, the Company has not completed its preliminary estimation of the fair values assigned to the assets acquired and liabilities assumed.

On January 28, 2025, the Company issued a press release confirming the receipt of an unsolicited and non-binding proposal on January 27, 2025, from Bain Capital Private Equity, LP ("Bain Capital"), to acquire all of the outstanding shares of common stock of the Company not already owned by Bain Capital for a cash consideration of $ 25.75 per share.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

2 unchanged sentences

(Principal Executive Officer)

February 26, 2024

March 6, 2025

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

1 unchanged sentence

Chief Executive Officer, Director

(Principal Executive Officer) February 26, 2024

(Principal Executive Officer) March 6, 2025

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer) February 26, 2024

Chairman of the Board February 26, 2024

Director February 26, 2024

(Principal Financial and Accounting Officer) March 6, 2025

Chairman of the Board March 6, 2025

Director March 6, 2025

Devin O'Reilly

Director February 26, 2024

Director March 6, 2025

/s/ Teresa DeLuca

Teresa DeLuca

Director February 26, 2024

Director March 6, 2025

/s/ Brent Turner

Director February 26, 2024

Director March 6, 2025

/s/ Andrew Kaplan

Andrew Kaplan

Director February 26, 2024

Director March 6, 2025

/s/ Clifford G.

Director February 26, 2024

Director March 6, 2025

/s/ Patricia A.

1 unchanged sentence

Maryland, Dr.PH

Director March 6, 2025

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures