Surgery Partners NASDAQ: SGRY executives said first-quarter results were broadly in line with internal expectations, as the outpatient surgery operator saw improving stability across its portfolio and early signs of recovery in areas that were pressured late in 2025.
On the company’s first quarter 2026 earnings call, Chief Executive Officer Eric Evans said Surgery Partners entered 2026 with “a select number of clearly identified and addressable headwinds,” particularly in a small subset of surgical hospital markets. Management’s focus has been on restoring operating consistency, supporting physician transitions, and positioning the business for sustainable growth.
Quarterly performance and growth drivers
Evans reported first-quarter net revenue of approximately $811 million, same-facility revenue growth of 4.4%, and adjusted EBITDA of about $102 million. Same-facility case growth was 0.6%, which Evans described as modest and below the company’s long-term algorithm, primarily due to temporary weather-related disruption early in the quarter that affected “several higher volume but lower acuity markets.”
Chief Financial Officer Dave Doherty estimated the weather impact reduced case growth by roughly 40 basis points. Evans added that the disruption skewed toward lower-acuity procedures such as GI and ophthalmology and did not materially affect higher-acuity parts of the portfolio.
Management emphasized the company’s focus on higher-acuity procedures and said same-facility net revenue is the preferred metric for assessing growth because it reflects case volume, acuity shifts, and rate improvements. Evans highlighted strength in musculoskeletal procedures, noting total joints performed in Surgery Partners’ ambulatory surgery centers increased 14.6% year over year.
Evans also pointed to ongoing physician recruiting as a key growth driver. The company recruited approximately 140 physicians during the quarter, concentrated in orthopedics, ophthalmology, gastroenterology, and other priority specialties. Evans said recruiting typically is “back-end loaded” during the year, but called first-quarter additions in line with expectations and noted the recruited physicians were “by doctor higher net revenue in total than last year’s recruiting class.”
De novo development also remained a focus. Evans said the company opened one de novo facility in the first quarter, bringing total de novo openings to nine over the trailing 12 months. He later added that Surgery Partners expects five de novos to open later in 2026, with seven more in the pipeline, and described these projects as heavily weighted toward musculoskeletal services.
Margins, costs, and payer mix
Surgery Partners posted an adjusted EBITDA margin of 12.6%, which Evans said is consistent with the seasonally lower first quarter. Doherty said supply expense was approximately 27.2% of net revenue and salaries, wages, and benefits were about 30.5% of revenue, both improving modestly year over year. Professional and medical fees and G&A were broadly in line with the prior year.
Other operating expenses were 7.3% of revenue, which Doherty said was higher year over year, reflecting provider taxes. Evans said the company partially offset “one-time pressures related to reestablishing incentive compensation, increased provider taxes, and tariff pressures.” Doherty cautioned that reestablishing bonus compensation is expected to begin showing up in the second quarter and more significantly in the third quarter, putting some pressure on the salaries and benefits line as it returns “more [to] a return to normal.”
On payer mix, Evans said Surgery Partners experienced “modest payer mix pressure” in the first quarter, but the trend is moderating compared with the second half of 2025. In response to a question from Barclays, Evans said commercial mix was “about 50%” in the quarter and indicated the company remains focused on recovering and growing commercial market share while also reducing expenses to improve Medicare case profitability.
Evans also provided an update on three surgical hospital markets discussed on the company’s fourth-quarter call, saying pressures have moderated and that new leadership teams are in place. He said the markets were “in line with where we expected them to be” and emphasized work on commercial competitiveness and managing the timing of physician transitions.
Cash flow, leverage, and provider tax impacts
Operating cash flow in the quarter was approximately $12 million, up from $6 million in the prior-year period, which Doherty attributed to improved underlying performance, typical first-quarter seasonality, and working capital timing. Day sales outstanding were about 66 days, consistent with both the fourth quarter of 2025 and the first quarter of 2025. Doherty said improving DSO is the “single largest lever” to unlock incremental cash flow at the facility level and said the company expects progress over the course of the year.
Interest expense increased about $7 million year over year, reflecting higher rates after the company’s interest rate swap expired. Doherty said the headwind was partly offset by credit facility base-rate reductions executed in 2025 and improved working capital performance. He also said the swap-related interest pressure would not persist in the second quarter.
Capital expenditures included $9 million of maintenance spending, largely tied to equipment refreshes, IT, and routine facility investments. Doherty said Surgery Partners also made $58 million of distributions to physician partners, consistent with historical patterns.
Net leverage under the company’s credit agreement was approximately 4.3 times, consistent with the fourth quarter, while GAAP net debt to adjusted EBITDA was approximately 5.1 times. Doherty said management expects to drive gradual deleveraging over time, supported by earnings growth and portfolio optimization.
On provider taxes and related items, Doherty said the combined pressure from a Medicaid rate reduction in one state and provider taxes introduced in two new states is estimated at around $8 million for the full year, with the impact somewhat front-loaded. In a later exchange, management said provider tax expense within other operating expenses was about $11 million at a gross level in the quarter, noting that a large majority of the year-over-year increase in other operating expenses was tied to provider taxes.
M&A, portfolio optimization, and guidance
Surgery Partners deployed approximately $4 million of capital on acquisitions in the first quarter. Doherty said the company estimates those acquisitions will contribute about $7 million of revenue in 2026 based on internal development reporting. Evans said the company continues to target deploying about $200 million annually but reiterated that M&A is not included in 2026 guidance because timing can be unpredictable. He characterized any acquisitions as “pure upside to guidance.”
Evans also said the company is advancing its portfolio optimization initiative, focused on a small number of larger surgical hospital markets with broader services than the company’s core short-stay strategy. He said the company is in “advanced discussions” on one key opportunity and continues to target an announcement in mid-2026, while stressing discipline on valuation and shareholder accretion. Evans added the company intends to hold an investor day later in 2026, tied to having a meaningful portfolio optimization update.
Doherty reiterated full-year 2026 guidance for revenue of $3.35 billion to $3.45 billion and adjusted EBITDA of at least $530 million. For the second quarter, the company expects revenue to represent 24% to 24.5% of the annual target and adjusted EBITDA to be 23% to 23.5%. Evans said the second-quarter outlook reflects “prudent guidance” early in the year and reiterated confidence in the full-year forecast.
The call also marked the first earnings call appearance for Chief Operating Officer Justin Oppenheimer, who joined the company in January. Oppenheimer said he has spent significant time in Surgery Partners’ markets and described a strong culture and an execution focus, citing organic growth and operational excellence as central themes.
About Surgery Partners NASDAQ: SGRY
Surgery Partners, Inc operates as a healthcare services provider specializing in the management and ownership of ambulatory surgery centers, surgical hospitals and multispecialty rehabilitation hospitals across the United States. Through its network of facilities, the company coordinates and delivers a broad range of outpatient surgical procedures in specialties such as orthopedics, ophthalmology, otolaryngology, gastroenterology, pain management and general surgery. Its integrated platform offers ancillary services including on-site imaging, laboratory testing, infusion therapy and physical, occupational and speech rehabilitation.
Since its establishment in 2010 and subsequent public listing in 2015, Surgery Partners has focused on strategic partnerships with physicians and health systems to expand access to cost-effective outpatient care.
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