Surgery Partners, Inc.

Greetings and welcome to Surgery Partners Inc. Second Quarter 2022 Earnings Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during your conference, please press star and zero on your telephone keypad. As a reminder, the conference is being recorded. I would now like to turn the conference over to CFO Dave Doherty. Please go ahead, sir.

Good morning, and welcome to Surgery Partners' second quarter 2022 earnings call. This is Dave Doherty, Chief Financial Officer. Joining me today are Wayne Devite, Surgery Partners Executive Chairman, 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. The reconciliation of these measures can be found in our earnings, 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 on providing the highest clinical care and quality to our patients and communities. You are at the core of our values as an organization, and on behalf of the board of directors and the executive management team, thank you for everything you do. Turning to our second quarter results, we are pleased to report second quarter 2022 adjusted EBITDA of 86.1 million, a 13% increase as compared to the prior year quarter, and nearly 18% growth when excluding CARES Act grants. In the quarter, We performed just over 149,000 surgical cases, nearly 7% more than 2021, resulting in a 13% increase in net revenue. We are especially encouraged by these results as we have continued navigating the macroeconomic challenges, including the broader inflationary pressures and continuation of COVID-19 variants. As we have pre-stated, we are not immune to such challenges, but our business model continues to demonstrate its durability and resiliency. We ended the quarter with strong momentum and are optimistic that we can continue to navigate these areas through the balance of the year. We closely monitor and manage inflationary risk, whether in labor or supply costs. Year to date, the team has successfully managed these costs in line with our expectations at the pre-pandemic levels relative to net revenue. As previously stated, we believe we have a competitive advantage and consistent with our experience last quarter, Our second 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 facilities increased almost 7% compared to the prior year quarter, with nearly 2% case growth and 5% higher net revenue per case. New physician recruiting efforts yielded 100 new recruit star facilities in the second quarter, bringing our overall new recruits in the first half of the year to over 250, with recruits spanning all of our core high-growth specialties. Previously, we've shared with you the increasing contribution our newly recruited physicians bring to facilities. Our most recent 2022 cohorts are no exception to this trend, bringing more cases with a higher overall net revenue per case than our 2021 cohorts did in the same period last year. And finally, The transition of procedures out of traditional acute care inpatient settings continues to accelerate. Joint replacements in our ASCs were up 32% from last year, and our cardiac procedures have increased nearly 9%. Over the past three years, our total joint program had a compounded aggregate growth rate of approximately 90%, while our cardiac program rate of growth is over 27%. We will continue to focus on this significant shift in site of care in our recruiting efforts, acquisition, and de novo investments. We believe 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 is well positioned to capture its fair share of that market. Moving to capital deployment, our M&A team continues its disciplined approach to sourcing and executing on strategically important acquisitions at attractive multiples. Our team is currently managing a robust pipeline of potential targets. In the second quarter, we acquired minority ownership positions in five ASCs through our relationship with Value Health and acquired a majority interest in a vascular-focused ASC. Combined, we deployed approximately 90 million for these six ASCs. In addition, as we discussed on our last call, we acquired four in-process de novos from Value Health for approximately $14 million. Eric will speak further to the continued execution on acquisition opportunities related to our Value Health partnership we announced on our last quarter's call. Our balance sheet remains strong, with limited exposure to interest rate changes and no material debt maturities until 2026. We believe our existing acquisition pipeline, coupled with a renewed focus on de novo development, further enhances our long-term trajectory. Based on our solid performance during the first half of the year and our outlook for the back half of the year, we are reaffirming our full year guidance for 2022 adjusted EBITDA to a range of $375 million to $385 million and revenue in the range of $2.5 to $2.6 billion. With that, let me turn the call over to Eric. Eric? Thank you, Wayne, and good morning.