What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-12 · 69 added, 153 removed, 145 unchanged (60% of the section changed)

37 unchanged sentences

Executive Overview

As of September 30, 2024, we owned or operated, primarily in partnership with physicians, a portfolio of 166 surgical facilities comprised of 147 ASCs and 19 surgical hospitals across 33 states.

As of March 31, 2025, we owned or operated, primarily in partnership with physicians, a portfolio of 164 surgical facilities comprised of 145 ASCs and 19 surgical hospitals across 30 states.

We owned a majority interest in 83 of the surgical facilities and consolidated 118 of these facilities for financial reporting purposes.

Total revenues for the third quarter of 2024 increased 14.3% to $770.4 million from $674.1 million for the third quarter of 2023.

The increase in revenues was attributable to same-facility revenue growth and the net impact from acquisitions and divestitures completed during the twelve months ended September 30, 2024.

Days adjusted same-facility revenues for the third quarter of 2024 increased 4.2% from the third quarter of 2023, with an 0.5% increase in revenue per case and a 3.7% increase in same-facility cases.

Additionally, for the third quarter of 2024, Adjusted EBITDA increased 21.9% to $128.6 million compared to $105.5 million for the same period in 2023.

Total revenues for the first quarter of 2025 increased 8.2% to $776.0 million from $717.4 million for the first quarter of 2024.

The increase in revenues was attributable to same-facility revenue growth and the net impact from acquisitions and divestitures completed during the last twelve months ended March 31, 2025.

Days adjusted same-facility revenues for the first quarter of 2025 increased 5.2% from the first quarter of 2024, with a 1.2% decrease in revenue per case and a 6.5% increase in same-facility cases.

Additionally, for the first quarter of 2025, net loss attributable to Surgery Partners, Inc.

was $37.7 million compared to $12.4 million for 2024.

For the first quarter of 2025, Adjusted EBITDA increased 6.6% to $103.9 million compared to $97.5 million for the same period in 2024.

The increase in Adjusted EBITDA was primarily attributable to revenue growth, continued cost management initiatives and acquisitions completed since the prior year period.

For the third quarter of 2024, net loss attributable to Surgery Partners, Inc.

was $31.7 million compared to $4.9 million for the same period in 2023.

A reconciliation of non-GAAP financial measures appears below under the heading "Certain Non-GAAP Measures."

We continue to focus on improving our same-facility performance, selectively acquiring established facilities, developing new facilities and other portfolio management initiatives.

During the third quarter of 2024, we acquired a controlling interest in several physician practices for aggregate cash consideration of $26.6 million, net of cash acquired.

We had cash and cash equivalents of $221.8 million and $595.8 million of borrowing capacity under the Revolver as of September 30, 2024.

We continue to focus on improving our same-facility performance, selectively acquiring established facilities, developing new facilities and pursuing other portfolio management initiatives.

During the first quarter of 2025, we acquired a controlling interest in four surgical facilities and one physician practice for aggregate cash consideration of $44.0 million, net of cash acquired.

We had cash and cash equivalents of $229.3 million and $388.9 million of borrowing capacity under the Revolver as of March 31, 2025.

Our revenues consist of patient service revenues and other service revenues.

Patient service revenues consist of revenue from our Surgical Facility Services and Ancillary Services segments.

Patient service revenues consist of revenue from our Surgical Facilities reportable segment.

Specifically, patient service revenues include fees for surgical or diagnostic procedures performed at surgical facilities that we consolidate for financial reporting purposes, as well as for patient visits to our physician practices, anesthesia services, pharmacy services and diagnostic screens ordered by our physicians.

1 unchanged sentence

The following table summarizes 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:

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 %

Patient service revenues

97.8 % 98.3 %

Other service revenues 2.2 % 1.7 %

1 unchanged sentence

The following table sets forth by type of payor the percentage of our patient service revenues generated at the surgical facilities that we consolidate for financial reporting purposes:

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

2024 2023 2024 2023

Three Months Ended March 31,

Private insurance payors 53.6 % 51.2 %

2 unchanged sentences

Other payors (1)

2.9 % 4.0 % 2.9 % 3.3 %

Total 100.0 % 100.0 %

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

(1) Comprised of automobile liability, letters of protection and other payor types.

Surgical Case Mix

2 unchanged sentences

The following table sets forth the percentage of cases in each specialty performed at the surgical facilities that we consolidate for financial reporting purposes for the periods indicated:

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

2024 2023 2024 2023

Three Months Ended March 31,

Orthopedics and pain management 40.5 % 40.0 %

8 unchanged sentences

Results of Operations

Comparison of Operating Results for the Three Months Ended September 30, 2024 to the Three Months Ended September 30, 2023

The following tables summarize certain results from the statements of operations for the periods indicated (in millions):

Three Months Ended September 30,

Comparison of Operating Results for the Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024

The following tables summarize certain results from the condensed consolidated statements of operations for the periods indicated (in millions):

Three Months Ended March 31,

Revenues $ 776.0 $ 717.4

10 unchanged sentences

Interest expense, net (62.2) (47.3)

Income before income taxes 10.9 32.8

(Loss) income before income taxes (0.3) 28.7

Income tax expense — (4.4)

Net income 6.4 29.7

Net (loss) income (0.3) 24.3

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

2 unchanged sentences

The following table sets forth patient service revenues (in millions):

Three Months Ended September 30,

Three Months Ended March 31,

Patient service revenues $ 758.4 $ 705.3

1 unchanged sentence

Total revenues $ 776.0 $ 717.4

Patient service revenues increased 13.7% to $753.2 million for the three months ended September 30, 2024 compared to $662.3 million for the three months ended September 30, 2023.

The increase was primarily driven by a 4.2% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed during the twelve months ended September 30, 2024.

The increase in days adjusted same-facility revenues was attributable to a 3.7% increase in same-facility case volumes and a 0.5% increase in same-facility revenue per case.

Patient service revenues increased 7.5% to $758.4 million for the three months ended March 31, 2025 compared to $705.3 million for the three months ended March 31, 2024.

The increase was primarily driven by a 5.2% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed during the twelve months ended March 31, 2025.

The increase in days adjusted same-facility revenues was attributable to a 6.5% increase in same-facility case volumes and a 1.2% decrease in same-facility revenue per case.

Cost of Revenues.

Cost of revenues was $592.9 million for the three months ended September 30, 2024 compared to $508.3 million for the three months ended September 30, 2023.

The increase was primarily driven by an increase in case volume and the performance of high acuity procedures as well as acquisitions completed during the twelve months ended September 30, 2024.

As a percentage of revenues, cost of revenues was 77.0% and 75.4% for the three months ended September 30, 2024 and 2023, respectively.

Cost of revenues was $614.1 million for the three months ended March 31, 2025 compared to $562.1 million for the three months ended March 31, 2024.

The increase was primarily driven by an increase in case volume and the performance of high acuity procedures as well as acquisitions completed during the twelve months ended March 31, 2025.

As a percentage of revenues, cost of revenues was 79.1% and 78.4% for the three months ended March 31, 2025 and 2024, respectively.

General and Administrative Expenses.

General and administrative expenses were $29.2 million and $36.8 million for the three months ended September 30, 2024 and 2023, respectively.

As a percentage of revenues, general and administrative expenses were 3.8% and 5.5% for the three months ended September 30, 2024 and 2023, respectively.

General and administrative expenses were $36.0 million and $33.2 million for the three months ended March 31, 2025 and 2024, respectively.

As a percentage of revenues, general and administrative expenses were 4.6% for the three months ended March 31, 2025 and 2024.

Depreciation and Amortization.

Depreciation and amortization expenses were $50.2 million and $28.9 million for the three months ended September 30, 2024 and 2023, respectively.

As a percentage of revenues, depreciation and amortization expenses were 6.5% and 4.3% for the three months ended September 30, 2024 and 2023, respectively.

Depreciation and amortization expenses were $36.3 million and $33.7 million for the three months ended March 31, 2025 and 2024, respectively.

As a percentage of revenues, depreciation and amortization expenses were 4.7% for the three months ended March 31, 2025 and 2024.

Transaction and Integration Costs.

The Company incurred $29.4 million of transaction and integration costs for the three months ended September 30, 2024 compared to $12.8 million for the three months ended September 30, 2023.

The Company incurred $24.7 million of transaction and integration costs for the three months ended March 31, 2025 compared to $17.4 million for the three months ended March 31, 2024.

The costs for both periods primarily related to ongoing development initiatives and the integration of acquisitions.

The increase was primarily driven by an increase in severance, IT implementation, and revenue cycle standardization costs.

Net Loss on Disposals, Consolidations and Deconsolidations.

The net loss on disposals, consolidations and deconsolidations for the three months ended September 30, 2024 and 2023 includes activity discussed in Note 2.

The net loss on disposals, consolidations and deconsolidations for the three months ended March 31, 2025 and 2024 includes activity discussed in Note 2.

"Acquisitions, Disposals and Deconsolidations" of the accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

Interest Expense, Net.

Interest expense, net was $50.0 million for the three months ended September 30, 2024 compared to $49.8 million for the three months ended September 30, 2023.

As a percentage of revenues, interest expense, net was 6.5% and 7.4% for the three months ended September 30, 2024 and 2023, respectively.

Interest expense, net was $62.2 million for the three months ended March 31, 2025 compared to $47.3 million for the three months ended March 31, 2024.

As a percentage of revenues, interest expense, net was 8.0% and 6.6% for the three months ended March 31, 2025 and 2024, respectively.

The increase was primarily driven by financing activities in 2024 related to the senior unsecured notes and increased borrowings on the Revolver.

Income Tax Expense .

Income tax expense was $4.5 million and $3.1 million for the three months ended September 30, 2024 and 2023, respectively.

The effective tax rate was 41.3% and 9.5% for the three months ended September 30, 2024 and 2023, respectively.

"Organization and Summary of Accounting Policies" under the heading Income Taxes for additional information related to the Company's effective tax rates for the three months ended September 30, 2024 and September 30, 2023, including why these rates differed from the U.S.

federal statutory rate of 21%.

Net Income Attributable to Non-Controlling Interests.

As a percentage of revenues, net income attributable to non-controlling interests was 4.9% and 5.1% for the three months ended September 30, 2024 and 2023, respectively.

Comparison of Operating Results for the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

The following tables summarize certain results from the statements of operations for the periods indicated (dollars in millions):

Nine Months Ended September 30,

Revenues $ 2,249.9 $ 2,007.9

Operating expenses:

Cost of revenues 1,737.9 1,554.0

General and administrative expenses 102.7 100.0

Depreciation and amortization 118.7 87.0

Transaction and integration costs 66.1 37.3

Net loss on disposals, consolidations and deconsolidations 21.5 7.5

Equity in earnings of unconsolidated affiliates (12.3) (9.4)

Litigation settlements (0.8) 8.1

Loss on debt extinguishment 5.1 —

Other income, net (10.7) (3.2)

2,028.2 1,781.3

Operating income 221.7 226.6

Interest expense, net (148.8) (144.3)

Income before income taxes 72.9 82.3

Income tax (expense) benefit (13.8) 6.3

Net income 59.1 88.6

Net income attributable to non-controlling interests (118.7) (99.5)

Net loss attributable to Surgery Partners, Inc.

$ (59.6) $ (10.9)

The following table sets forth patient service revenues (in millions):

Nine Months Ended September 30,

Patient service revenues $ 2,206.6 $ 1,976.7

Other service revenues 43.3 31.2

Total revenues $ 2,249.9 $ 2,007.9

Patient service revenues increased 11.6% to $2.2 billion for the nine months ended September 30, 2024 compared to $2.0 billion for the nine months ended September 30, 2023.

The increase was primarily driven by an 8.7% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed in 2024.

The increase in days adjusted same-facility revenues was attributable to a 3.4% increase in same-facility case volumes and a 5.2% increase in same-facility revenue per case.

Cost of Revenues.

Cost of revenues was $1.7 billion for the nine months ended September 30, 2024 compared to $1.6 billion for the nine months ended September 30, 2023.

The increase was primarily driven by an increase in case volume and the performance of high acuity procedures as well as acquisitions completed in 2024.

As a percentage of revenues, cost of revenues was 77.2% and 77.4% for the nine months ended September 30, 2024 and 2023, respectively.

General and Administrative Expenses.

General and administrative expenses were $102.7 million and $100.0 million for the nine months ended September 30, 2024 and 2023, respectively.

As a percentage of revenues, general and administrative expenses were 4.6% and 5.0% for the nine months ended September 30, 2024 and 2023, respectively.

Depreciation and Amortization.

Depreciation and amortization expenses were $118.7 million and $87.0 million for the nine months ended September 30, 2024 and 2023, respectively.

As a percentage of revenues, depreciation and amortization expenses were 5.3% and 4.3% for the nine months ended September 30, 2024 and 2023, respectively.

Transaction and Integration Costs.

The Company incurred $66.1 million of transaction and integration costs for the nine months ended September 30, 2024 compared to $37.3 million for the nine months ended September 30, 2023.

The costs for both periods primarily related to ongoing development initiatives and the integration of acquisitions.

Net Loss on Disposals, Consolidations and Deconsolidations.

The net loss on disposals, consolidations and deconsolidations for the nine months ended September 30, 2024 and 2023 includes activity discussed in Note 2.

"Acquisitions, Disposals and Deconsolidations" of the accompanying notes to the condensed consolidated financial statements.

The remaining net loss in both periods was primarily attributable to sales and disposals of other assets.

Interest Expense, Net.

Interest expense, net was $148.8 million for the nine months ended September 30, 2024 compared to $144.3 million for the nine months ended September 30, 2023.

As a percentage of revenues, interest expense, net was 6.6% and 7.2% for the nine months ended September 30, 2024 and 2023, respectively.

Income Tax (Expense) Benefit .

Income tax expense was $13.8 million for the nine months ended September 30, 2024 compared to income tax benefit of $6.3 million for the nine months ended September 30, 2023.

The effective tax rate was 18.9% and (7.7)% for the nine months ended September 30, 2024 and 2023, respectively.

"Organization and Summary of Accounting Policies" under the heading Income Taxes for additional information related to the Company's effective tax rates for the nine months ended September 30, 2024 and 2023, including why these rates differed from the U.S.

Income tax expense was $0.0 million and $4.4 million for the three months ended March 31, 2025 and 2024, respectively.

The effective tax rate was 0% and 15.3% for the three months ended March 31, 2025 and 2024, respectively.

"Organization and Summary of Accounting Policies" under the heading Income Taxes for additional information related to the Company's effective tax rates for the three months ended March 31, 2025 and March 31, 2024, including why these rates differed from the U.S.

federal statutory rate of 21%.

Net Income Attributable to Non-Controlling Interests.

As a percentage of revenues, net income attributable to non-controlling interests was 5.3% and 5.0% for the nine months ended September 30, 2024 and 2023, respectively.

As a percentage of revenues, net income attributable to non-controlling interests was 4.8% and 5.1% for the three months ended March 31, 2025 and 2024, respectively.

Liquidity and Capital Resources

Cash and cash equivalents were $221.8 million at September 30, 2024 compared to $195.9 million at December 31, 2023.

Cash and cash equivalents were $229.3 million at March 31, 2025 compared to $269.5 million at December 31, 2024.

The primary source of our operating cash flows is the collection of accounts receivable from private insurance companies, federal and state agencies (under the Medicare and Medicaid programs) and individuals.

Our cash flows provided by operating activities was $188.7 million for the nine months ended September 30, 2024 compared to $231.2 million for the nine months ended September 30, 2023.

The $42.5 million decrease was primarily driven by increased transaction-related costs, the timing of routine transactions involving working capital and the impact of Hurricane Helene on collections.

Net cash used in investing activities for the nine months ended September 30, 2024 was $376.8 million compared to $167.5 million for the nine months ended September 30, 2023.

The $209.3 million increase was primarily driven by an aggregate net increase of $193.9 million in payments for acquisitions (net of cash acquired) and purchases of equity method investments and a $24.3 million decrease in proceeds from sales of facilities.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $214.0 million compared to net cash used of $110.6 million for the nine months ended September 30, 2023.

The increase of $324.6 million was primarily driven by net proceeds received from the issuance and sale of $800.0 million in senior unsecured notes, partially offset by the redemption of all the Existing Notes (as discussed in the following section).

The remaining increase was due to net borrowings on the Revolver used to fund acquisitions completed during the nine months ended September 30, 2024.

On April 10, 2024, we 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 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 sale of the 2032 Notes were used (i) to redeem all of the outstanding 2025 Notes and 2027 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.

On June 20, 2024, the Company entered into the Amendment to the Credit Agreement, to provide for the 2024 Refinancing Term Loans in an aggregate principal amount of $1.4 billion.

The 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 shall bear interest at a rate per annum equal to (x) the forward-looking term rate based on 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).

Our cash flows provided by operating activities was $6.0 million for the three months ended March 31, 2025 compared to $40.7 million for the three months ended March 31, 2024.

The $34.7 million decrease was primarily driven by a decrease in net income and changes in other operating assets and liabilities.

Net cash used in investing activities for the three months ended March 31, 2025 was $76.4 million compared to $83.1 million for the three months ended March 31, 2024.

The $6.7 million decrease was primarily driven by an aggregate net decrease of $8.8 million in payments for acquisitions (net of cash acquired) and purchases of equity method investments and a $3.3 million increase in proceeds from sales of facilities.

Net cash provided by financing activities for the three months ended March 31, 2025 was $30.2 million compared to $31.7 million for the three months ended March 31, 2024.

The decrease of $1.5 million was primarily driven by distributions to non-controlling interest holders substantially offset by increased borrowing on long-term debt.

Capital Resources

Net working capital was approximately $460.6 million at September 30, 2024 compared to $372.0 million at December 31, 2023.

Net working capital was approximately $505.2 million at March 31, 2025 compared to $495.0 million at December 31, 2024.

In addition to cash flows from operations and available cash, other sources of capital include amounts available on our Revolver as well as anticipated continued access to the capital markets.

Material Cash Requirements

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the nine months ended September 30, 2024 from those disclosed under “Material Cash Requirements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K.

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the three months ended March 31, 2025 from those disclosed under “Material Cash Requirements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K.

Broad economic factors, including recent changes in interest rates, inflation and supply chain risks and market volatility, could negatively affect our payor mix, increase the relative proportion of lower margin services we provide and reduce patient volumes, as well as diminish our ability to collect outstanding receivables.

4 unchanged sentences

Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with GAAP.

The items excluded from this non-GAAP metric are significant components in understanding and evaluating our financial performance.

The items excluded from this non-

GAAP metric are significant components in understanding and evaluating our financial performance.

We believe such adjustments are appropriate, as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance.

2 unchanged sentences

Adjusted EBITDA is a key measure used by our management to assess operating performance, make business decisions and allocate resources.

The following table reconciles Adjusted EBITDA to income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited):

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

2024 2023 2024 2023

The following table reconciles Adjusted EBITDA to (loss) income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited):

Three Months Ended March 31,

Condensed Consolidated Statements of Operations Data:

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

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

Plus (minus):

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

Depreciation and amortization 50.2 28.9 118.7 87.0

Interest expense, net 62.2 47.3

Depreciation and amortization 36.3 33.7

Equity-based compensation expense 7.6 4.9

Transaction, integration and acquisition costs (1)

31.5 13.0 71.2 38.8

Transaction and integration costs (1)

De novo start-up costs 1.7 1.5

Net loss on disposals, consolidations and deconsolidations 6.4 1.5

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

0.7 1.2 (3.7) 7.7

Litigation settlements and other litigation costs (2)

Adjusted EBITDA $ 103.9 $ 97.5

(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 aforementioned cyber event and losses from a divested business.

(1) For the three months ended March 31, 2025, this amount includes due diligence, transaction and integration costs related to acquisitions (both completed and in the pipeline) and divested facilities (collectively “M&A costs”) of $16.8 million and other costs, including severance, IT implementation, revenue cycle standardization of $7.9 million.

For the three months ended March 31, 2024, this amount includes due diligence, transaction and integration costs related to acquisitions (both completed and in the pipeline) and divested facilities (collectively “M&A costs”) of $16.1 million and other costs, including severance, IT implementation, revenue cycle standardization of $1.3 million.

(2) This amount includes a litigation settlement loss of $2.2 million and a litigation settlement gain of $1.8 million for the three months ended March 31, 2025 and 2024, respectively.

This amount also includes other litigation costs of $0.5 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively.

We use Credit Agreement EBITDA as a measure of liquidity and to determine our compliance under certain covenants pursuant to our Credit Agreement, as amended.

7 unchanged sentences

The following table reconciles Credit Agreement EBITDA to cash flows from operating activities, the most directly comparable GAAP financial measure (in millions and unaudited):

Twelve Months Ended September 30, 2024

Twelve Months Ended March 31, 2025

Cash flows from operating activities $ 265.4

8 unchanged sentences

Interest expense, net 216.6

Transaction, integration and acquisition costs 97.3

Transaction and integration costs 107.4

De novo start-up costs 8.1

Litigation settlements and other litigation costs 7.0

1 unchanged sentence

Credit Agreement EBITDA $ 588.7

(1) This amount includes estimates for the impact of hurricanes, a cyber event and losses from divested business that occurred in 2023.

(2) Represents impact of acquisitions as if each acquisition had occurred on October 1, 2023.

(1) Represents impact of acquisitions as if each acquisition had occurred on April 1, 2024.

Further this includes revenue and cost synergies from other business initiatives and de novo facilities and an adjustment for the effects of adopting the new lease accounting standard, as defined in the credit agreement governing the Credit Agreement, as amended.

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 2. Management’s Discussion and Analysis