Surgery Partners, Inc.

Greetings. Welcome to the Surgery Partners, Inc. first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I'll now turn the conference over to your host, Dave Doherty, CFO. You may begin. Good morning.

Good morning. And welcome to Surgery Partners' first quarter 2022 earnings call. This is Dave Doherty, Chief Financial Officer. Joining me today are Wayne Devite, Surgery Partners Executive Chairman, and Eric Evans, Surgery Partners Chief Executive Officer. As a reminder, during this call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we file with the SEC. The company does not undertake any duty to update such forward-looking statements. Additionally, during today's call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these measures can be found in our earnings release, which is posted on our website at surgerypartners.com. And in our most recent quarterly report, on Form 10-Q when filed. With that, I'll turn the call over to Wayne. Wayne?

Thank you, Dave. Good morning, and thank you all for joining us today. Before we begin the call, I would like to acknowledge and thank our colleagues and frontline caregivers for their relentless focus in supporting our patients and communities. We are humbled by their efforts and commitment in living surgery partners' core values. On behalf of the Board of Directors and the Executive Management Team, thank you for everything you do. Turning to our first quarter results, we are pleased to report first quarter 2022 adjusted EBITDA of $77.1 million, a 6% increase as compared to the prior year period, and a 22% increase when excluding CARES grants. In the quarter, we performed just over 142,000 surgical cases, nearly 14% more than 2021, resulting in net revenue of approximately $600 million or 16.4% higher than the comparable prior year quarter. We're especially encouraged by these results as the first quarter experienced several macro challenges, including the impact of the Omicron variant and broader inflationary pressures. As we've previously stated, we are not immune to such challenges, but our business model continues to demonstrate its durability and resiliency. As an example, we saw case volumes impacted in January and early February as a result of the Omicron variant. However, the impact was muted as it affected fewer of our communities, was shorter in cycle and much of our affected surgical case volume was rescheduled within a short period of time. This is most evident when you look at our year-over-year case volume growth. We ended the quarter with strong momentum and are optimistic that we can continue to navigate any future waves. We are also very closely monitoring and managing inflation risk, whether in labor or supply costs. Our working environment and tenacious focus on supply chain management have insulated us from the significant effects of these pressures. As a reminder, our business model is a preferred workplace setting with flexible workday hours, generally no weekends, and a culture built on attaining the highest clinical quality and operating performance. We believe this is a competitive advantage and that consistent with our experience prior to and before the pandemic, our first quarter results again demonstrate and reinforce how our business model is uniquely positioned both now and for future growth. Dave will share more details regarding our financial results, but a few highlights. Same facility revenues increased by 8.2% compared to the prior year quarter, with 6.3% case growth and 1.7% higher net revenue per case. These statistics are days adjusted for the number of business days in each quarter and represent both volume and specialty mix returning to a more normalized level. New physician recruiting efforts yielded almost 150 new recruits to our facilities in the first quarter, with recruits spanning all of our core high-growth specialties. More importantly, our recruiting cohorts continue to demonstrate strong year-over-year growth, with first quarter recruits from our 2020 and 2021 cohorts generating over 35% and 20% more revenue, respectively, in the current year quarter as compared to the prior year comparable period. And finally, the transition of procedures out of traditional acute care inpatient settings continues to accelerate. Joint replacements in our ASCs were up 52% as compared to the prior year quarter and over 730% since 2018 when we started to anticipate the shift in site of care. This momentum gives us confidence in our plans for expansion and other key specialties like cardiac procedures. We continue to believe that our strong financial results reflect the numerous macro tailwinds associated with the benefit of performing procedures in a high quality, lower cost, patient and physician centric setting. With a total addressable market of over $150 billion, Our company was built for this moment in time. Moving to capital deployment, our M&A pipeline continues to be robust. In the first quarter, we deployed approximately $35 million on two ASCs focused on our high-growth musculoskeletal specialties. Our business development team consistently manages an active pipeline that remains strong, with more than $200 million in potential transactions currently under LOI. I would like to briefly touch on a new partnership we announced this morning with Value Health. This partnership will combine the strength of our exceptional short-stay surgical facility management services with Value Health's proven value-based care reimbursement model. In conjunction with this new partnership, Surgery Partners has the opportunity to acquire interest in select Value Health markets where we have clear operational growth and strategic synergies, and Value Health has the opportunity to expand their value-based care business across our national portfolio for the benefit of our physicians, patients, and payers. Additionally, we have the exclusive right to acquire in-development de novo investments that are primarily focused on orthopedic surgeries. This new relationship will allow us to further accelerate our organic growth engine while providing an attractive pipeline of acquisition opportunities in our targeted markets and specialties. Eric will speak further to this partnership and how we expect to benefit both immediately and going forward. Our balance sheet remains strong and we believe this new partnership coupled with our existing acquisition pipeline further enhances our long-term growth trajectory. Off the strength of our first quarter results, we are raising our outlook guidance for 2022 adjusted EBITDA to a range of $375 million to $385 million. This outlook is inclusive of the potential headwinds that we see associated with the pandemic, including labor and supply cost pressures. With that, let me turn the call over to Eric. Eric?