What changed in this filing

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Item 1. Financial Statements

2025-08-05 compared with 2025-05-12 · 152 added, 106 removed, 453 unchanged (36% of the section changed)

3 unchanged sentences

(Dollars in millions, except per share amounts)

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Current assets:

45 unchanged sentences

shares in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Revenues $ 826.2 $ 762.1 $ 1,602.2 $ 1,479.5

9 unchanged sentences

Transaction and integration costs 18.1 19.3 42.8 36.7

Net loss on disposals, consolidations and deconsolidations 6.4 1.5

Net (gain) loss on disposals, consolidations and deconsolidations ( 3.0 ) 5.3 3.4 6.8

Equity in earnings of unconsolidated affiliates ( 5.5 ) ( 4.4 ) ( 11.1 ) ( 7.1 )

Litigation settlements — 0.5 2.2 ( 1.3 )

Loss on debt extinguishment — 5.1 — 5.1

Other income, net ( 2.1 ) ( 6.5 ) ( 2.1 ) ( 8.5 )

714.5 677.3 1,428.6 1,318.7

Operating income 111.7 84.8 173.6 160.8

Interest expense, net ( 67.9 ) ( 51.5 ) ( 130.1 ) ( 98.8 )

(Loss) income before income taxes ( 0.3 ) 28.7

Income tax expense — ( 4.4 )

Net (loss) income ( 0.3 ) 24.3

Income before income taxes 43.8 33.3 43.5 62.0

Income tax benefit (expense) 1.1 ( 4.9 ) 1.1 ( 9.3 )

Net income 44.9 28.4 44.6 52.7

Net income attributable to non-controlling interests ( 47.4 ) ( 43.9 ) ( 84.8 ) ( 80.6 )

12 unchanged sentences

(Unaudited, dollars in millions)

Three Months Ended March 31,

Net (loss) income $ ( 0.3 ) $ 24.3

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Net income $ 44.9 $ 28.4 $ 44.6 $ 52.7

Other comprehensive (loss) income, net of tax:

1 unchanged sentence

( 1.5 ) ( 14.9 ) ( 18.1 ) ( 20.4 )

Comprehensive (loss) income ( 16.9 ) 18.8

Comprehensive income 43.4 13.5 26.5 32.3

Comprehensive income attributable to non-controlling interests ( 47.4 ) ( 43.9 ) ( 84.8 ) ( 80.6 )

16 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 — — — — ( 2.5 ) 43.2 40.7

Equity-based compensation 17 — 6.8 — — — 6.8

Other comprehensive loss — — — ( 1.5 ) — — ( 1.5 )

Acquisition and disposal of shares of non-controlling interests, net — — 5.1 — — ( 6.0 ) ( 0.9 )

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 44.6 ) ( 44.6 )

Balance as of June 30, 2025 128,210 $ 1.3 $ 2,537.8 $ ( 13.3 ) $ ( 777.5 ) $ 1,408.2 $ 3,156.5

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 — — — — ( 15.5 ) 35.5 20.0

Equity-based compensation 22 — 15.1 — — — 15.1

Other comprehensive income — — — ( 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

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Unaudited, dollars in millions)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net (loss) income $ ( 0.3 ) $ 24.3

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

Net income $ 44.6 $ 52.7

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

Depreciation and amortization 76.6 68.5

3 unchanged sentences

Net loss on disposals, consolidations and deconsolidations 3.4 6.8

Loss on debt extinguishment — 5.1

Deferred income taxes ( 1.8 ) 7.6

9 unchanged sentences

Purchases of equity investments ( 3.8 ) ( 1.7 )

Proceeds from sales of equity investments — 4.0

Other investing activities ( 19.3 ) ( 18.5 )

3 unchanged sentences

Borrowings of long-term debt 382.2 1,295.4

Payments of debt issuance costs — ( 14.9 )

Distributions to non-controlling interest holders ( 116.3 ) ( 80.7 )

15 unchanged sentences

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

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.

As of June 30, 2025, the Company owned or operated a portfolio of 162 surgical facilities, comprised of 143 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.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Patient service revenues 97.3 % 98.1 % 97.5 % 98.3 %

15 unchanged sentences

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.

The estimated contractual adjustments are recognized at the time of services being performed, with ASCs typically based on contractual agreements and surgical hospitals typically based on historical experience of cash collections and write-offs.

Changes in estimated contractual adjustments are recorded in the period of change, with final adjustments, if any, typically at the time of payment.

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

8 unchanged sentences

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 March 31,

Three Months Ended June 30,

Amount % Amount %

7 unchanged sentences

Total revenues $ 826.2 $ 762.1

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30,

Amount % Amount %

Patient service revenues:

Private insurance $ 822.6 52.6 % $ 759.0 52.2 %

Government 664.7 42.5 % 613.7 42.2 %

Self-pay 41.5 2.7 % 40.5 2.8 %

33.8 2.2 % 40.2 2.8 %

Total patient service revenues 1,562.6 100.0 % 1,453.4 100.0 %

Other service revenues 39.6 26.1

Total revenues $ 1,602.2 $ 1,479.5

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

1 unchanged sentence

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.

Changes in estimated contractual adjustments are recorded in the period of change, with final adjustments, if any, typically at the time of payment.

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

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.

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.

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

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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.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

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.

Goodwill represents the excess of the fair value of the consideration provided in an acquisition plus the fair value of any non-controlling interests over the fair value of net assets acquired and is not amortized.

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 three months ended March 31, 2025 is included in Note 2.

A summary of the Company's acquisitions, disposals and deconsolidations for the six months ended June 30, 2025 is included in Note 2.

"Acquisitions, Disposals and Deconsolidations."

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):

A summary of activity related to goodwill for the six months ended June 30, 2025 is as follows (in millions):

Balance as of December 31, 2024 $ 5,068.0

1 unchanged sentence

Disposals ( 45.5 )

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.

Balance as of June 30, 2025 $ 5,098.6

A detailed evaluation of potential impairment indicators was performed as of June 30, 2025, which specifically considered recent changes in interest rates, inflation risk and market volatility.

On the basis of available evidence as of June 30, 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.

8 unchanged sentences

Each partnership and limited liability company through which the Company owns and operates its surgical facilities is governed by a partnership or operating agreement, respectively.

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 March 31, 2025.

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’ ownership, as applicable, 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 June 30, 2025.

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

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended March 31,

Six Months Ended June 30,

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.

2 unchanged sentences

2025 December 31,

2024 March 31,

2024 June 30,

2025 December 31,

7 unchanged sentences

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

As of 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.

As of June 30, 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 June 30, 2025 and December 31, 2024, were $ 78.5 million and $ 87.0 million, respectively, and the total liabilities of the consolidated VIEs were $ 40.6 million and $ 55.0 million, respectively.

Recent Accounting Pronouncements

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.

The ASU is effective for annual periods beginning after December 15, 2024 and interim periods beginning after December 15, 2025.

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

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

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

Acquisitions, Disposals and Deconsolidations

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 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.

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

Acquisitions, Disposals and Deconsolidations

During the six months ended June 30, 2025:

• The Company acquired a controlling interest in four surgical facilities and two physician practices for aggregate cash consideration of $ 48.0 million, net of cash acquired, and non-cash consideration of $ 2.3 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 $ 28.0 million and goodwill of $ 73.7 million.

• The Company acquired a non-controlling interest in one surgical facility for aggregate cash consideration of $ 3.8 million.

The non-controlling interest was accounted for as an equity method investment and recorded as a component of investments in and advances to affiliates in the condensed consolidated balance sheets.

During the six months ended June 30, 2024:

• The Company acquired a controlling interest in six surgical facilities and several physician practices for aggregate cash consideration of $ 264.6 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 $ 290.7 million, goodwill of $ 483.0 million and investments and advances to affiliates of $ 44.6 million related to an acquired surgical facility accounted for as an equity method investment.

Disposals and Deconsolidations

During the three months ended March 31, 2025:

During the six months ended June 30, 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 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 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.

This transaction resulted in a pre-tax net loss 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 six months ended June 30, 2025.

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 and liabilities of the entity immediately prior to the transaction.

• The Company sold its controlling interests in two surgical facilities for aggregate net cash proceeds of $ 42.4 million.

In connection with the transactions, the Company recognized a pre-tax net gain of $ 6.0 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations for the six months ended June 30, 2025.

During the six months ended June 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 six months ended June 30, 2024.

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

As a result of the transaction, the Company lost control of the previously controlled surgical facility but retains 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 three months ended March 31, 2024.

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.

This transaction resulted in a pre-tax 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 six months ended June 30, 2024.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Senior secured term loan (1)

8 unchanged sentences

Total long-term debt $ 3,465.2 $ 3,268.9

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

(1) Includes unamortized fair value discount of $ 1.4 million as of June 30, 2025 and December 31, 2024.

Revolving Credit Facility

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).

As of June 30, 2025, the Company's availability on its $ 703.8 million senior secured revolving credit facility (the "Revolver") was $ 394.9 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.

1 unchanged sentence

The Company's finance leases are primarily for medical equipment and information technology and telecommunications assets.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 March 31, 2025 December 31, 2024

Classification in Condensed Consolidated Balance Sheets June 30, 2025 December 31, 2024

Operating lease assets Right-of-use operating lease assets $ 271.7 $ 295.7

10 unchanged sentences

Total lease liabilities $ 1,205.2 $ 1,131.8

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended March 31,

Six Months Ended June 30,

Operating lease costs $ 33.4 $ 32.3

6 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

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

5 unchanged sentences

Finance leases 16.4 21.2

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Derivatives and Hedging Activities

3 unchanged sentences

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

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

10 unchanged sentences

$ 1,382.5 $ 2,737.8

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.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

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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 $ 5.6 million will be reclassified as a increase to interest expense.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Assets Liabilities Assets Liabilities

7 unchanged sentences

(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.

(2) Amounts were included in other long-term liabilities on the condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024.

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

Three Months Ended June 30, Six Months Ended June 30,

Location 2025 2024 2025 2024

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) Interest expense, net $ ( 11.0 ) $ ( 14.7 )

(Loss) gain recognized in OCI (effective portion) $ ( 2.8 ) $ ( 0.1 ) $ ( 8.4 ) $ 9.1

Loss (gain) reclassified from accumulated OCI into income (effective portion) Interest expense, net $ 1.3 $ ( 14.8 ) $ ( 9.7 ) $ ( 29.5 )

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Earnings Per Share

2 unchanged sentences

shares in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Net loss attributable to Surgery Partners, Inc.

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

For the six months ended June 30, 2025, the Company calculated its effective tax rate under a discrete-period approach based solely on its income from operations for the six months ended June 30, 2025.

The Company's effective tax rate was ( 2.5 )% for the six months ended June 30, 2025.

For the six months ended June 30, 2025, the effective tax rate differed from the U.S.

For the six months ended June 30, 2024, the Company estimated its effective tax rate under the annual effective tax rate approach.

The Company’s effective tax rate was 15.0 % for the six months ended June 30, 2024.

For the six months ended June 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 $ 0.6 million related to the vesting of restricted stock awards.

As of June 30, 2025 and December 31, 2024, the Company was in a cumulative three-year pre-tax loss position, which was considered significant negative evidence that could not be overcome by objective and verifiable positive evidence.

Based on the weight of available evidence, the Company concluded that it was more likely than not that a portion of its net deferred tax assets will not be realized.

Therefore, in accordance with ASC 740-10-30, the Company recorded a full valuation allowance, net of future reversing deferred tax liabilities, on its deferred tax assets to reflect the net realizable value as of the balance sheet dates.

SURGERY PARTNERS, INC.

2 unchanged sentences

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

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

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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 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.

Total professional, general and workers' compensation claim liabilities as of June 30, 2025 and December 31, 2024 were $ 23.8 million and $ 19.2 million, respectively.

Expected insurance recoveries of $ 9.6 million as of both June 30, 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

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.

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

We have one reportable segment:

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

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 defines its segments 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 and six months ended June 30, 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 recast segment disclosures previously reported to conform to current year presentation.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Surgical Facilities Revenues $ 826.2 $ 762.1 $ 1,602.2 $ 1,479.5

Salaries and benefits

235.2 223.2 473.8 438.4

215.0 199.7 430.8 388.5

Professional and medical fees

102.1 92.4 197.4 175.0

Lease expense 22.9 22.2 43.7 43.6

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

Other segment items (1)

93.1 81.4 166.6 165.5

668.3 618.9 1,312.3 1,211.0

Adjusted Surgical Facilities EBITDA $ 157.9 $ 143.2 $ 289.9 $ 268.5

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Net income attributable to non-controlling interests ( 47.4 ) ( 43.9 ) ( 84.8 ) ( 80.6 )

Corporate and other unallocated expenses (1)

Unallocated amounts:

General and administrative expenses 36.1 40.3 72.1 73.5

Transaction and integration costs 18.1 19.3 42.8 36.7

Other corporate expenses ( 0.9 ) 7.9 9.6 9.6

Depreciation and amortization 40.3 34.8 76.6 68.5

Interest expense, net 67.9 51.5 130.1 98.8

(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,

Income before income taxes $ 43.8 $ 33.3 $ 43.5 $ 62.0

(1) Other segment items includes equity in earnings of unconsolidated affiliates, net income attributable to non-controlling interests and other expenses, net.

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Depreciation and amortization:

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Total depreciation and amortization expense $ 40.3 $ 34.8 $ 76.6 $ 68.5

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Surgical Facilities

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Total assets $ 7,954.8 $ 7,890.0

Three Months Ended March 31,

Six Months Ended June 30,

Cash purchases of property and equipment:

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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