What changed in this filing

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Item 1. Financial Statements

2025-05-12 compared with 2024-11-12 · 169 added, 289 removed, 390 unchanged (54% of the section changed)

3 unchanged sentences

(Dollars in millions, except per share amounts)

September 30,

2024 December 31,

March 31, 2025 December 31, 2024

Current assets:

8 unchanged sentences

Goodwill and other intangible assets, net

5,171.4 5,113.7

Investments in and advances to affiliates 218.6 215.4

Right-of-use operating lease assets 277.7 295.7

Long-term deferred tax assets 79.2 89.5

Other long-term assets 55.8 57.5

9 unchanged sentences

Right-of-use operating lease liabilities 272.9 292.1

Long-term deferred tax liabilities

Other long-term liabilities 34.6 30.2

8 unchanged sentences

Additional paid-in capital 2,525.9 2,520.9

Accumulated other comprehensive income 10.5 57.5

Accumulated other comprehensive (loss) income ( 11.8 ) 4.8

Retained deficit ( 775.0 ) ( 737.3 )

9 unchanged sentences

shares in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Revenues $ 776.0 $ 717.4

12 unchanged sentences

Litigation settlements 2.2 ( 1.8 )

Loss on debt extinguishment — — 5.1 —

Other income, net — ( 2.0 )

709.5 591.5 2,028.2 1,781.3

Operating income 61.9 76.0

Interest expense, net ( 62.2 ) ( 47.3 )

Income before income taxes 10.9 32.8 72.9 82.3

Income tax (expense) benefit ( 4.5 ) ( 3.1 ) ( 13.8 ) 6.3

Net income 6.4 29.7 59.1 88.6

(Loss) income before income taxes ( 0.3 ) 28.7

Income tax expense — ( 4.4 )

Net (loss) income ( 0.3 ) 24.3

Net income attributable to non-controlling interests ( 37.4 ) ( 36.7 )

12 unchanged sentences

(Unaudited, dollars in millions)

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Net income $ 6.4 $ 29.7 $ 59.1 $ 88.6

Three Months Ended March 31,

Net (loss) income $ ( 0.3 ) $ 24.3

Other comprehensive (loss) income, net of tax:

20 unchanged sentences

Balance as of March 31, 2025 128,193 $ 1.3 $ 2,525.9 $ ( 11.8 ) $ ( 775.0 ) $ 1,415.6 $ 3,156.0

Net (loss) income — — — — ( 15.5 ) 35.5 20.0

Equity-based compensation 22 — 15.1 — — — 15.1

Other comprehensive loss — — — ( 14.9 ) — — ( 14.9 )

Acquisition and disposal of shares of non-controlling interests, net — — 0.4 — — 147.4 147.8

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 29.6 ) ( 29.6 )

Balance as of June 30, 2024 127,124 $ 1.3 $ 2,511.1 $ 37.1 $ ( 597.1 ) $ 1,223.9 $ 3,176.3

Net (loss) income — — — — ( 31.7 ) 34.7 3.0

Equity-based compensation 4 — 7.0 — — — 7.0

Other comprehensive loss — — — ( 26.6 ) — — ( 26.6 )

Acquisition and disposal of shares of non-controlling interests, net — — ( 4.6 ) — — ( 11.7 ) ( 16.3 )

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 31.5 ) ( 31.5 )

Balance as of September 30, 2024 127,128 $ 1.3 $ 2,513.5 $ 10.5 $ ( 628.8 ) $ 1,215.4 $ 3,111.9

See notes to unaudited condensed consolidated financial statements.

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited, dollars in millions, shares in thousands)

Common Stock Additional

Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Deficit Non-Controlling Interests—

Non-Redeemable Total

Shares Amount

Balance as of December 31, 2023 126,594 $ 1.3 $ 2,497.6 $ 57.5 $ ( 569.2 ) $ 1,047.3 $ 3,034.5

5 unchanged sentences

Balance as of March 31, 2024 127,102 $ 1.3 $ 2,495.6 $ 52.0 $ ( 581.6 ) $ 1,070.6 $ 3,037.9

Net income — — — — 19.0 27.6 46.6

Equity-based compensation 13 — 4.5 — — — 4.5

Other comprehensive income — — — 13.9 — — 13.9

Acquisition and disposal of shares of non-controlling interests, net — — 18.8 — — ( 19.7 ) ( 0.9 )

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 23.8 ) ( 23.8 )

Balance as of June 30, 2023 126,493 $ 1.3 $ 2,501.4 $ 78.8 $ ( 563.3 ) $ 964.6 $ 2,982.8

Net (loss) income — — — — ( 4.9 ) 28.0 23.1

Equity-based compensation ( 4 ) — 4.5 — — — 4.5

Other comprehensive loss — — — ( 1.8 ) — — ( 1.8 )

Acquisition and disposal of shares of non-controlling interests, net — — ( 11.4 ) — — 13.1 1.7

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 23.8 ) ( 23.8 )

Balance as of September 30, 2023 126,489 $ 1.3 $ 2,494.5 $ 77.0 $ ( 568.2 ) $ 981.9 $ 2,986.5

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Unaudited, dollars in millions)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income $ 59.1 $ 88.6

Adjustments to reconcile net income to net cash provided by operating activities:

Net (loss) income $ ( 0.3 ) $ 24.3

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 36.3 33.7

3 unchanged sentences

Net loss on disposals, consolidations and deconsolidations 6.4 1.5

Loss on debt extinguishment 5.1 —

Deferred income taxes ( 0.3 ) 2.5

2 unchanged sentences

Accounts receivable 4.8 5.4

Medicare accelerated payments and deferred governmental grants — ( 1.2 )

Other operating assets and liabilities ( 61.7 ) ( 43.1 )

5 unchanged sentences

Purchases of equity investments ( 3.8 ) ( 2.0 )

Proceeds from sales of equity investments 4.0 1.0

Other investing activities ( 10.7 ) ( 7.0 )

3 unchanged sentences

Borrowings of long-term debt 213.6 192.5

Payments of debt issuance costs ( 15.1 ) ( 1.5 )

Distributions to non-controlling interest holders ( 62.3 ) ( 40.5 )

1 unchanged sentence

Other financing activities ( 3.5 ) ( 1.5 )

Net cash provided by (used in) financing activities 214.0 ( 110.6 )

Net increase (decrease) in cash and cash equivalents 25.9 ( 46.9 )

Net cash provided by financing activities 30.2 31.7

Net decrease in cash and cash equivalents ( 40.2 ) ( 10.7 )

Cash and cash equivalents at beginning of period 269.5 195.9

5 unchanged sentences

Surgery Partners, Inc., a Delaware corporation, acting through its subsidiaries, owns and operates a national network of surgical facilities and ancillary services.

The surgical facilities, which include ambulatory surgery centers ("ASCs") and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including 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.

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.

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.

1 unchanged sentence

and its subsidiaries are referred to herein as "Surgery Partners," "we," "us," "our" or the "Company."

As of September 30, 2024, the Company owned or operated a portfolio of 166 surgical facilities, comprised of 147 ASCs and 19 surgical hospitals in 33 states.

As of March 31, 2025, the Company owned or operated a portfolio of 164 surgical facilities, comprised of 145 ASCs and 19 surgical hospitals in 30 states.

The Company owns these facilities in partnership with physicians and, in some cases, health care systems in the markets and communities it serves.

19 unchanged sentences

The Company continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a summary of revenues by service type as a percentage of total revenues:

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Patient service revenues 97.8 % 98.3 %

Surgical Facility Services 93.3 % 95.8 % 94.1 % 95.9 %

Ancillary Services 4.4 % 2.4 % 4.0 % 2.5 %

Total patient service revenues 97.7 % 98.2 % 98.1 % 98.4 %

Other service revenues 2.2 % 1.7 %

Total revenues 100.0 % 100.0 %

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Patient service revenues.

8 unchanged sentences

Because 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.

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.

8 unchanged sentences

The fees derived from these management arrangements are based on a predetermined percentage of the revenues of each facility or practice and are recognized in the period in which management services are rendered and billed.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in millions):

Three Months Ended September 30,

Amount % Amount %

Patient service revenues:

Private insurance $ 393.2 52.2 % $ 347.1 52.4 %

Government 318.3 42.3 % 271.6 41.0 %

Self-pay 19.7 2.6 % 16.9 2.6 %

22.0 2.9 % 26.7 4.0 %

Total patient service revenues 753.2 100.0 % 662.3 100.0 %

Other service revenues 17.2 11.8

Total revenues $ 770.4 $ 674.1

Nine Months Ended September 30,

Three Months Ended March 31,

Amount % Amount %

9 unchanged sentences

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.

Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), private insurance organizations, employers and patients.

Management recognizes that revenues and receivables from government agencies are significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies.

Management recognizes that revenues and receivables from government agencies are

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies.

Concentration of credit risk with respect to other payors is limited because of the large number of such payors.

8 unchanged sentences

Collection efforts include direct contact with third-party payors or patients, written correspondence and the use of legal or collection agency assistance, as required.

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

We use 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

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

If a carryforward exists, the Company makes a determination as to whether the carryforward will be utilized in the future.

A valuation allowance is established for certain 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 our 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, we may need to adjust the valuation allowance, for all or a portion of our deferred tax assets.

Our income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in our valuation allowance in the period when the change in circumstances occurs.

These changes could have a significant impact on our future earnings.

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's effective tax rate was 18.9 % for the nine months ended September 30, 2024 compared to ( 7.7 )% for the nine months ended September 30, 2023.

For the nine months ended September 30, 2024, the effective tax rate differed from the U.S.

federal statutory rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, state tax expense, and a discrete tax expense of $ 1.5 million related to the valuation allowance impact of the Company’s impairment to an equity method investment.

For the nine months ended September 30, 2023, the effective tax rate differed from the U.S.

federal statutory rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and discrete tax benefits of (i) $ 1.6 million related to the vesting of restricted stock awards and (ii) $ 15.8 million related to entity divestitures.

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.

We assess the likelihood that deferred tax assets will be recovered from sources of future taxable income.

To the extent we believe that recovery is not probable, a valuation allowance is established.

To the extent we establish a valuation allowance or subsequently increase or decrease this allowance, we must include an adjustment as part of the income tax provision in our results of operations.

The first step in determining the deferred tax asset valuation allowance is identifying reporting jurisdictions where we have a history of tax and operating losses or are projected to have losses in future periods as a result of changes in operational performance.

We then determine if a valuation allowance should be established against the deferred tax assets for that reporting jurisdiction.

The second step is to determine the amount of the valuation allowance.

We will generally establish a valuation allowance equal to the net deferred tax asset (deferred tax assets less deferred tax liabilities) related to the jurisdiction identified in step one of the analysis.

In certain cases, we may not reduce the valuation allowance by the amount of the deferred tax liabilities depending on the nature and timing of future taxable income attributable to deferred tax liabilities.

In assessing tax contingencies, we apply the provisions of ASC 740, “Income Taxes”.

We apply the recognition threshold and measurement of a tax position taken or expected to be taken in a tax return and follow the guidance on various matters such as derecognition, interest, penalties and disclosure.

We classify interest and penalties as a component of income tax expense.

During each reporting period, we assess the facts and circumstances related to recorded tax contingencies, such as lapsing of applicable statutes of limitations, conclusion of tax audits, additional exposure based on current calculations, identification of new issues, release of administrative guidance, or rendering of a court decision affecting a particular tax issue.

If tax contingencies are no longer deemed probable based upon new facts and circumstances, the contingency is reflected as a reduction of the provision for income taxes in the current period.

For the three months ended March 31, 2025, the Company estimated its effective tax rate under a discrete-period calculation based solely on its income from operations for the three months ended March 31, 2025.

The Company's effective tax rate was 0 % for the three months ended March 31, 2025.

For the three months ended March 31, 2025, the effective tax rate differed from the U.S.

federal statutory rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and a permanent difference between the book and tax deductions related to the Company’s stock compensation expense.

For the three months ended March 31, 2024, the Company estimated its effective tax rate under the annual effective tax rate approach.

The Company’s effective tax rate was 15.3 % for the three months ended March 31, 2024.

For the three months ended March 31, 2024, the effective tax rate differed from the U.S.

federal statutory rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, state tax expense, and a discrete tax expense of $ 0.7 million related to the vesting of restricted stock awards.

Based upon the application of interim accounting guidance, the tax rate as a percentage of net income after income attributable to non-controlling interests will vary based upon the relative net income from period to period.

1 unchanged sentence

Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries.

A summary of the Company's acquisitions, disposals and deconsolidations for the nine months ended September 30, 2024 is included in Note 2.

A summary of the Company's acquisitions, disposals and deconsolidations for the three months ended March 31, 2025 is included in Note 2.

"Acquisitions, Disposals and Deconsolidations."

A summary of activity related to goodwill for the nine months ended September 30, 2024 is as follows (in millions):

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of activity related to goodwill for the three months ended March 31, 2025 is as follows (in millions):

Balance as of December 31, 2024 $ 5,068.0

1 unchanged sentence

Disposals ( 11.4 )

Balance as of September 30, 2024 $ 4,815.4

A detailed evaluation of potential impairment indicators was performed as of September 30, 2024, which specifically considered recent changes in interest rates, inflation risk and market volatility.

On the basis of available evidence as of September 30, 2024, no indicators of impairment were identified.

Balance as of March 31, 2025 $ 5,126.2

A detailed evaluation of potential impairment indicators was performed as of March 31, 2025, which specifically considered recent changes in interest rates, inflation risk and market volatility.

On the basis of available evidence as of March 31, 2025, no indicators of impairment were identified.

Future estimates of fair value could be adversely affected if the actual outcome of one or more of the Company's assumptions changes materially in the future, including a material decline in the Company’s stock price and the fair value of its long-term debt, lower than expected surgical case volumes, higher market interest rates or increased operating costs.

6 unchanged sentences

The Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Management believes the likelihood of an event occurring that would trigger such purchases was remote as of September 30, 2024.

Management believes the likelihood of an event occurring that would trigger such purchases was remote as of March 31, 2025.

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

A summary of activity related to redeemable non-controlling interests is as follows (in millions):

Nine Months Ended September 30,

Three Months Ended March 31,

Balance at beginning of period $ 438.8 $ 327.4

9 unchanged sentences

These may include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 condensed 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):

Carrying Amount Fair Value

September 30,

2025 December 31,

2023 September 30,

2024 March 31,

2025 December 31,

2 unchanged sentences

$ 800.0 $ 800.0 $ 790.0 $ 815.0

10.000 % senior unsecured notes due 2027

$ — $ 320.0 $ — $ 321.2

7.250 % senior unsecured notes due 2032

$ 800.0 $ — $ 835.0 $ —

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.

Variable Interest Entities

1 unchanged sentence

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

As of September 30, 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 condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, were $ 86.2 million and $ 65.3 million, respectively, and the total liabilities of the consolidated VIEs were $ 57.9 million and $ 41.2 million, respectively.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2025, the Company's consolidated VIEs consisted of nine surgical facilities and 28 physician practices.

The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, were $ 76.7 million and $ 87.0 million, respectively, and the total liabilities of the consolidated VIEs were $ 42.8 million and $ 55.0 million, respectively.

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures , which requires enhanced disclosures of significant segment expenses.

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 condensed consolidated financial statements.

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 condensed consolidated financial statements.

The Company is planning to adopt during the year ended December 31, 2025.

Acquisitions, Disposals and Deconsolidations

During the nine months ended September 30, 2024:

• The Company acquired a controlling interest in six surgical facilities and several physician practices for aggregate cash consideration of $ 291.2 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 $ 293.2 million, goodwill of $ 506.7 million and investments and advances to affiliates of $ 44.6 million related to an acquired surgical facility accounted for as an equity method investment.

During the nine months ended September 30, 2023:

• The Company acquired a controlling interest in two surgical facilities and one physician practice for aggregate cash consideration of $ 23.1 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.

During the three months ended March 31, 2025:

• The Company acquired a controlling interest in four surgical facilities and one physician practice for aggregate cash consideration of $ 44.0 million, net of cash acquired.

In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $ 28.0 million and goodwill of $ 70.2 million.

• The Company acquired a controlling interest in two surgical facilities and one in-development de novo surgical facility, which were previously accounted for as equity method investments, for aggregate cash consideration of $ 26.9 million, net of cash acquired.

The Company also amended the operating agreement of a previously non-controlled surgical facility resulting in the Company obtaining a controlling interest in the facility.

These transactions resulted in the consolidation of the previously non-consolidated entities.

The previously held non-controlling interests were remeasured and recorded at fair value as of the dates of the transactions.

The fair value measurement utilizes Level 3 inputs, which includes unobservable data.

The acquisition date fair value of the previously held non-controlling interests was $ 27.3 million.

As a result of increasing its ownership interest, the Company recognized a net loss of $ 7.1 million included in net loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the nine months ended September 30, 2023.

The net loss was determined based on the difference between the fair value of the Company's previously held non-controlling interests in the entities and the carrying values immediately prior to the transactions.

In connection with the consolidation of these facilities, the Company preliminarily recognized non-controlling interests of $ 55.1 million and goodwill of $ 106.3 million.

• The Company acquired non-controlling interests in five surgical facilities and two in-development de novo surgical facilities for aggregate cash consideration of $ 50.2 million.

• The Company acquired non-controlling interests in one surgical facility and for aggregate cash consideration of $ 3.8 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 condensed 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 intangibles assets, net in the accompanying condensed consolidated balance sheets.

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

Disposals and Deconsolidations

During the nine months ended September 30, 2024:

• The Company disposed of its non-controlling interests in one surgical facility, which was previously accounted for as an equity method investment, for cash proceeds of $ 2.0 million.

In connection with this transaction, the Company recognized a pre-tax loss of $ 3.7 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2024.

During the three months ended March 31, 2024:

• The Company acquired a controlling interest in two surgical facilities and several physician practices for aggregate cash consideration of $ 66.0 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.

As of March 31, 2024, $ 11.4 million of the cash consideration was deferred and included as a component of current liabilities in the condensed consolidated balance sheets.

In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $ 21.2 million and goodwill of $ 77.2 million.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Disposals and Deconsolidations

During the three months ended March 31, 2025:

• The Company sold a portion of its interests in one surgical facility for net cash proceeds of $ 0.5 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 condensed consolidated statements of operations for the nine months ended September 30, 2024.

This transaction resulted in a pretax net loss on deconsolidation of $ 3.0 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2025.

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 its interests in one surgical facility for a nominal amount of cash proceeds.

In connection with the sale, the Company recognized a pre-tax loss of $ 3.4 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 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 condensed consolidated statements of operations for the nine months ended September 30, 2024.

During the nine months ended September 30, 2023:

• The Company sold its interests in six surgical facilities for aggregate net cash proceeds of $ 30.4 million, a portion of which was held in escrow pursuant to the purchase agreements for such transactions.

In connection with these transactions, the Company recognized a pre-tax gain of $ 26.9 million included in net loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the nine months ended September 30, 2023.

• The Company disposed of its non-controlling interests in a surgical facility and an in-development de novo surgical facility, which were previously accounted for as equity method investments, for cash proceeds of $ 1.5 million.

In connection with these transactions, the Company recognized a pre-tax loss of $ 13.7 million included in net loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the nine months ended September 30, 2023.

• The Company sold or otherwise disposed of its controlling interests in two surgical facilities for aggregate net cash proceeds of $ 4.3 million.

In connection with the transactions, the Company recognized a pre-tax net gain of $ 0.5 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2025.

During the three months ended March 31, 2024:

• The Company sold a portion of its interests in a surgical facility for net cash proceeds of $ 1.5 million.

As a result of the transaction, the Company lost control of the previously controlled surgical facility but retains a non-controlling interest, resulting in the deconsolidation of the previously consolidated entity.

The net loss 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.

Long-Term Debt

A summary of long-term debt follows (in millions):

September 30,

2024 December 31,

March 31, 2025 December 31, 2024

Senior secured term loan (1)

2 unchanged sentences

7.250 % senior unsecured notes due 2032

10.000 % senior unsecured notes due 2027

7.250 % senior unsecured notes due 2032

Notes payable and other secured loans 227.5 224.4

4 unchanged sentences

Total long-term debt $ 3,446.9 $ 3,268.9

(1) Includes unamortized fair value discount of $ 1.5 million and $ 1.6 million as of September 30, 2024 and December 31, 2023, respectively.

(1) Includes unamortized fair value discount of $ 1.4 million as of March 31, 2025 and December 31, 2024.

Revolving Credit Facility

As of September 30, 2024, the Company's availability on its $ 703.8 million senior secured revolving credit facility (the "Revolver") was $ 595.8 million (including letters of credit of $ 10.0 million).

The increase in outstanding borrowings on the Revolver compared to December 31, 2023 was primarily due to the timing of acquisitions completed during 2024.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7.250 % Senior Unsecured Notes Due 2032

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 condensed consolidated statements of operations for the nine months ended September 30, 2024.

First Amendment to Credit Agreement

On June 20, 2024, the Company entered into a first amendment (the "Amendment") to its credit agreement, dated as of December 19, 2023, by and among Surgery Center Holdings, Inc., the Borrower, Jefferies Finance LLC, as administrative agent and collateral agent, and the other financial institutions party thereto from time to time (the "Credit Agreement") to provide for a new tranche of term loans under the Credit Agreement in an aggregate principal amount of $ 1,400 million (the “2024 Refinancing Term Loans”), which 2024 Refinancing Term Loans replace or refinance in full all of the existing term loans outstanding under the Credit Agreement (as in effect immediately prior to the Amendment), all as further set forth in the Amendment.

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).

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 condensed consolidated statements of operations for the nine months ended September 30, 2024.

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

As of March 31, 2025, the Company's availability on its $ 703.8 million senior secured revolving credit facility (the "Revolver") was $ 388.9 million (including letters of credit of $ 10.9 million).

The increase in outstanding borrowings on the Revolver compared to December 31, 2024 was primarily due to the timing of acquisitions.

The Company's operating leases are primarily for real estate, including medical office buildings, and corporate and other administrative offices.

3 unchanged sentences

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

Classification in Condensed Consolidated Balance Sheets September 30, 2024 December 31, 2023

Classification in Condensed Consolidated Balance Sheets March 31, 2025 December 31, 2024

Operating lease assets Right-of-use operating lease assets $ 277.7 $ 295.7

11 unchanged sentences

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

Nine Months Ended September 30,

Three Months Ended March 31,

Operating lease costs $ 16.5 $ 15.9

6 unchanged sentences

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

Nine Months Ended September 30,

Three Months Ended March 31,

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

5 unchanged sentences

Finance leases 60.0 12.1

Derivatives and Hedging Activities

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

To accomplish this objective, the Company primarily uses interest rate swaps and interest rate caps as part of its

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

interest rate risk management strategy.

Derivatives and Hedging Activities

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

To accomplish this objective, the Company primarily uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy.

During 2025 and 2024, such derivatives have been used to hedge the variable cash flows associated with existing variable-rate debt.

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Description Effective Date Notional Amount (in millions) Status Notional Amount (in millions) Status Maturity Date

Pay-fixed swap May 7, 2021 $ 435.0 Active $ 435.0 Active March 31, 2025

Pay-fixed swap May 7, 2021 330.0 Active 330.0 Active March 31, 2025

Pay-fixed swap May 7, 2021 435.0 Active 435.0 Active March 31, 2025

Interest rate cap September 30, 2021 145.6 Active 151.4 Active March 31, 2025

Interest rate cap September 30, 2021 8.3 Active 8.7 Active March 31, 2025

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

Pay-fixed swap May 7, 2021 $ — Matured $ 435.0 Active March 31, 2025

Pay-fixed swap May 7, 2021 — Matured 330.0 Active March 31, 2025

Pay-fixed swap May 7, 2021 — Matured 435.0 Active March 31, 2025

Interest rate cap September 30, 2021 — Matured 143.6 Active March 31, 2025

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

Deferred premium cap March 31, 2025 396.0 Active 396.0 Active December 31, 2028

Deferred premium cap March 31, 2025 198.0 Active 198.0 Active December 31, 2028

Deferred premium cap March 31, 2025 396.0 Active 396.0 Active December 31, 2028

Deferred premium cap March 31, 2025 198.0 Active 198.0 Active December 31, 2028

$ 1,386.0 $ 2,737.8

As of September 30, 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 Secured Overnight Financing Rate ("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 September 30, 2024, the Company had two interest rate caps designated in cash flow hedging relationships with a total notional amount of $ 153.9 million.

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

During the nine months ended September 30, 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 condensed consolidated statements of cash flows for the nine months ended September 30, 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 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 September 30, 2024.

As of September 30, 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 condensed consolidated balance sheets, the financing elements treated as debt instruments described above are carried at amortized cost and the embedded at-market derivatives are recorded at fair value.

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

During the three months ended March 31, 2025, the Company had three interest rate swaps designated in cash flow hedging relationships, which matured on March 31, 2025.

Prior to maturity, the interest rate swaps had a total notional amount of $ 1.2 billion and were pay-fixed, received 1-Month SOFR (subject to a minimum of 0.75 %).

During the three months ended March 31, 2025, the Company had two interest rate caps designated in cash flow hedging relationships, which matured on March 31, 2025.

Prior to maturity, the interest caps had a total notional amount of $ 151.8 million.

Effective March 31, 2025, the Company had five deferred premium interest rate cap agreements.

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

These financial instruments are designed to limit the Company's interest rate exposure on its term loan concurrent with the positions that matured on March 31, 2025.

Prior to maturity, 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 were 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 condensed consolidated balance sheets, the financing elements treated as debt instruments were carried at amortized cost and the embedded at-market derivatives were recorded at fair value.

The fair value was determined 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 cash flows related to the portion treated as debt are classified as financing activities in the condensed consolidated statements of cash flows while the portions that were treated as an at-market derivative are classified as operating activities.

Within the Company’s condensed 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 condensed 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 condensed 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 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.

3 unchanged sentences

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 $ 19.0 million will be reclassified as a decrease to interest expense.

Over the next 12 months, the Company estimates that an additional $ 5.6 million will be reclassified as a increase to interest expense.

SURGERY PARTNERS, INC.

1 unchanged sentence

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Assets Liabilities Assets Liabilities

3 unchanged sentences

Interest rate swaps (1)

19.5 — 51.4 —

Interest rate caps (2)

1 unchanged sentence

Total $ — $ 11.8 $ 10.8 $ 9.6

(1) Amounts were included in other current assets and other long-term assets on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.

(2) Amounts were included in other current liabilities and other long-term liabilities on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.

(1) Amounts were included in other current assets on the condensed consolidated balance sheets as of December 31, 2024.

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

(3) Amounts were included in other current liabilities on the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024.

(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 condensed consolidated statements of operations (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Location 2025 2024

Derivatives not designated as hedging instruments

Loss recognized in income Other income, net $ — $ — $ — $ 0.6

Derivatives in cash flow hedging relationships

Gain (loss) recognized in OCI (effective portion) $ ( 5.6 ) $ 9.2

Gain reclassified from accumulated OCI into income (effective portion) (1)

Interest expense, net $ ( 14.8 ) $ ( 9.2 ) $ ( 44.3 ) $ ( 23.3 )

(1) Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 5.3 million and $ 16.0 million for the three and nine months ended September 30, 2023, respectively.

There were no corresponding amounts for the three and nine months ended September 30, 2024.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Gain reclassified from accumulated OCI into income (effective portion) Interest expense, net $ ( 11.0 ) $ ( 14.7 )

Earnings Per Share

2 unchanged sentences

shares in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Net loss attributable to Surgery Partners, Inc.

10 unchanged sentences

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

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other Current Liabilities

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

September 30,

2024 December 31, 2023

March 31, 2025 December 31, 2024

Right-of-use operating lease liabilities $ 39.6 $ 41.0

12 unchanged sentences

The Company is not aware of any such proceedings that are reasonably possible to have a material adverse effect on the Company's business, financial position, results of operations or liquidity.

Total professional, general and workers' compensation claim liabilities as of September 30, 2024 and December 31, 2023 were $ 18.1 million and $ 18.2 million, respectively.

Expected insurance recoveries of $ 10.2 million as of both September 30, 2024 and December 31, 2023 are included as a component of other current assets and other long-term assets in the condensed consolidated balance sheets.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Total professional, general and workers' compensation claim liabilities as of March 31, 2025 and December 31, 2024 were $ 19.7 million and $ 19.2 million, respectively.

Expected insurance recoveries of $ 9.6 million as of both March 31, 2025 and December 31, 2024 are included as a component of other current assets and other long-term assets in the condensed consolidated balance sheets.

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):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Surgical Facility Services $ 735.4 $ 657.3 $ 2,158.5 $ 1,956.5

Ancillary Services 35.0 16.8 91.4 51.4

Total $ 770.4 $ 674.1 $ 2,249.9 $ 2,007.9

Adjusted EBITDA:

Surgical Facility Services $ 149.6 $ 138.6 $ 419.3 $ 384.1

Ancillary Services 0.7 ( 1.2 ) ( 0.6 ) ( 2.7 )

All other ( 21.7 ) ( 31.9 ) ( 74.3 ) ( 85.6 )

Total $ 128.6 $ 105.5 $ 344.4 $ 295.8

Reconciliation of Adjusted EBITDA:

Income before income taxes $ 10.9 $ 32.8 $ 72.9 $ 82.3

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.

During the three months ended March 31, 2025, 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:

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31,

Surgical Facilities Revenues $ 776.0 $ 717.4

Salaries and benefits

Professional and medical fees

Lease expense 20.8 21.4

Equity in earnings of unconsolidated affiliates ( 5.6 ) ( 2.7 )

Net income attributable to non-controlling interests 37.4 36.7

Other segment expense, net 41.7 50.1

Adjusted Surgical Facilities EBITDA $ 132.0 $ 125.3

Reconciliation:

Net income attributable to non-controlling interests ( 37.4 ) ( 36.7 )

Corporate and other unallocated expenses (1)

Depreciation and amortization 36.3 33.7

Interest expense, net 62.2 47.3

(Loss) income before income taxes $ ( 0.3 ) $ 28.7

(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.

Three Months Ended March 31,

Depreciation and amortization:

Equity-based compensation expense 7.1 4.4 27.1 13.2

Transaction, integration and acquisition costs (1)

31.5 13.0 71.2 38.8

Net loss on disposals, consolidations and deconsolidations 14.7 5.8 21.5 7.5

Litigation settlements and regulatory change impact (2)

1.6 4.2 1.5 13.9

Loss on debt extinguishment — — 5.1 —

Undesignated derivative activity — — — 0.6

Surgical Facilities $ 33.8 $ 31.5

All other 2.5 2.2

Total depreciation and amortization expense $ 36.3 $ 33.7

March 31, 2025 December 31, 2024

Surgical Facilities

$ 7,532.3 $ 7,466.3

Adjusted EBITDA $ 128.6 $ 105.5 $ 344.4 $ 295.8

(1) This amount includes transaction and integration costs of $ 29.4 million and $ 12.8 million for the three months ended September 30, 2024 and 2023, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $ 2.1 million and $ 0.2 million for the three months ended September 30, 2024 and 2023, respectively.

This amount includes transaction and integration costs of $ 66.1 million and $ 37.3 million for the nine months ended September 30, 2024 and 2023, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $ 5.1 million and $ 1.5 million for the nine months ended September 30, 2024 and 2023, respectively.

(2) This amount includes a litigation settlement loss of $ 0.5 million and $ 3.6 million for the three months ended September 30, 2024 and 2023, respectively.

This amount also includes other litigation costs of $ 1.1 million and $ 0.6 million for the three months ended September 30, 2024 and 2023, respectively.

This amount includes a litigation settlements gain of $ 0.8 million and a loss of $ 8.1 million for the nine months ended September 30, 2024 and 2023, respectively.

This amount also includes other litigation costs of $ 2.3 million and $ 1.4 million for the nine months ended September 30, 2024 and 2023, respectively.

Additionally, the nine months ended September 30, 2023 includes $ 4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection.

(3) For the three months ended September 30, 2024, this amount includes hurricane-related impacts.

For the three months ended September 30, 2023, this amount includes estimates for the net impact of a cyber event.

For the nine months ended September 30, 2024, this amount includes hurricane-related impacts in the third quarter of 2024, net of insurance proceeds related to cyber event losses predominantly incurred in 2023.

For the nine months ended September 30, 2023, this amount includes estimates for the net impact of the same cyber event and losses from a divested business.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30,

2024 December 31, 2023

Surgical Facility Services $ 6,935.7 $ 6,347.4

Ancillary Services 85.1 36.3

All other 416.9 423.7

Total assets $ 7,949.2 $ 7,890.0

Nine Months Ended September 30,

Three Months Ended March 31,

Cash purchases of property and equipment:

Surgical Facility Services $ 62.5 $ 68.4

Ancillary Services 1.9 0.6

Surgical Facilities

$ 21.8 $ 16.3

All other 0.9 4.7

Total cash purchases of property and equipment $ 22.7 $ 21.0

Subsequent Events

On November 8, 2024, the Company purchased a controlling interest in two ASCs for $87.0 million.

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.

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-Q

Item 1. Financial Statements