10-Q: Surgery Partners Q1 2026: Revenue Up, Net Loss Widens Slightly

Surgery Partners reported a 4.5% increase in Q1 2026 revenue to $810.9 million, driven by same-facility growth, though net loss attributable to the company widened to $35.9 million.

Summary

• Surgery Partners reported total revenues of $810.9 million for the first quarter of 2026, a 4.5% increase from $776.0 million in the first quarter of 2025.
• This revenue growth was primarily driven by same-facility revenue growth of 4.4%, with a 3.8% increase in revenue per case and a 0.6% increase in same-facility cases.
• The company reported a net loss attributable to Surgery Partners, Inc. of $35.9 million for Q1 2026, compared to a net loss of $37.7 million for Q1 2025.
• Adjusted EBITDA decreased by 1.5% to $102.3 million in Q1 2026 from $103.9 million in Q1 2025.
• As of March 31, 2026, the company had $182.3 million in cash and cash equivalents and $666.1 million in borrowing capacity under its revolving credit facility.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing as slightly negative due to the widening net loss and decrease in Adjusted EBITDA, despite revenue growth. The increased interest expenses and cost of revenues are key concerns.

Positives

• Total revenues increased by 4.5% to $810.9 million in Q1 2026 compared to $776.0 million in Q1 2025.
• Same-facility revenue growth was 4.4%, indicating improved performance at existing locations.
• Revenue per case increased by 3.8%, suggesting better pricing or case mix.
• Same-facility case volumes saw a modest increase of 0.6%.
• The company maintained a strong liquidity position with $182.3 million in cash and cash equivalents and $666.1 million available under its revolving credit facility.

Negatives

• Net loss attributable to Surgery Partners, Inc. was $35.9 million in Q1 2026, a slight increase from $37.7 million in Q1 2025.
• Adjusted EBITDA decreased by 1.5% to $102.3 million in Q1 2026 compared to $103.9 million in Q1 2025.
• Cost of revenues increased as a percentage of total revenues to 80.2% in Q1 2026 from 79.1% in Q1 2025.
• Interest expense, net increased to $69.1 million in Q1 2026 from $62.2 million in Q1 2025, partly due to the maturity of interest rate swaps and new debt.
• The effective tax rate was 36.4% in Q1 2026, significantly higher than the U.S. federal statutory rate of 21%, due to various factors including valuation allowance and non-controlling interests.

Risks

• Reductions in payments from government health care programs and private insurance payors.
• Failure to maintain or develop beneficial relationships with physicians.
• Impact of payor controls designed to reduce surgical procedures.
• Challenges in integrating acquired businesses and surgical facilities.
• Supply chain issues, including shortages or quality control problems with medical products.
• Competition for physicians, nurses, strategic relationships, and managed care contracts.
• Inability to attract and retain qualified healthcare professionals.
• Impact of current and future legislation and healthcare public policy changes.
• Outcome of legal and regulatory proceedings.
• Impact of cybersecurity attacks or intrusions.
• Changes in regulatory, economic, and other conditions in states where facilities are located.
• The social and economic impact of a pandemic, epidemic, or outbreak of a contagious disease.

Future Outlook

The company continues to focus on improving same-facility performance, selectively acquiring established facilities, developing new facilities, and pursuing other portfolio management initiatives. Management believes that current cash flows from operations, available cash, capacity on its Revolver, and anticipated continued access to capital markets will be adequate to meet short-term and long-term liquidity needs.

Management Comments

• "We continue to focus on improving our same-facility performance, selectively acquiring established facilities, developing new facilities and pursuing other portfolio management initiatives."
• "We had cash and cash equivalents of $182.3 million and $666.1 million of borrowing capacity under the Revolver as of March 31, 2026."
• "The increase in revenues was attributable to same-facility revenue growth in 2026."
• "The increase in days adjusted same-facility revenues was attributable to a 0.6% increase in same-facility case volumes and a 3.8% increase in same-facility revenue per case."

Industry Context

StockSavvy.ai notes that Surgery Partners' Q1 2026 results reflect ongoing trends in the healthcare services sector, including a focus on same-facility growth and strategic acquisitions. The slight increase in net loss despite revenue growth highlights the pressure on operating margins and the impact of increased interest expenses, common challenges for companies in this capital-intensive industry.

Comparison to Industry Standards

• The revenue growth of 4.4% in same-facility revenue per case is a positive indicator, suggesting effective pricing strategies or a shift towards higher-margin procedures, which aligns with industry efforts to optimize service mix.
• The increase in cost of revenues as a percentage of total revenues (80.2% vs. 79.1%) is a concern, as it indicates rising operational costs that are outpacing revenue growth, a trend that many healthcare providers are grappling with due to inflation and supply chain pressures.
• The net loss attributable to the company, while slightly improved year-over-year, remains a key area for investor focus. Many healthcare companies are navigating a complex environment with rising interest rates and regulatory changes, impacting profitability.
• Adjusted EBITDA, a common metric in the healthcare sector for assessing operational profitability, saw a slight decline, which may be viewed unfavorably compared to peers focused on growth and margin expansion.

Legal Proceedings

• The company is subject to claims and suits in the ordinary course of business, including claims for patient treatment, employment practices, and personal injuries. Management believes no current proceedings are likely to have a material adverse effect on the business, financial condition, or results of operations.

Stakeholder Impact

• Shareholders: The slight increase in net loss and decrease in Adjusted EBITDA may negatively impact shareholder sentiment and stock performance.
• Creditors: The company's debt levels remain significant, and continued focus on liquidity and debt management is crucial.
• Employees: The company's ability to attract and retain qualified healthcare professionals is a stated risk factor.
• Suppliers: Rising costs in the cost of revenues could indicate increased prices from suppliers or supply chain pressures.

Next Steps

• Continue to focus on improving same-facility performance.
• Selectively acquire established facilities.
• Develop new facilities.
• Pursue other portfolio management initiatives.

Key Dates

Recommendation

The company shows revenue growth driven by same-facility performance, which is positive. However, the widening net loss, decreased Adjusted EBITDA, and increased interest expenses present significant headwinds. While liquidity is adequate, the current financial performance warrants a cautious 'hold' rating until a clear path to profitability and margin improvement is demonstrated.

Keywords

Surgery Partners, 10-Q, Quarterly Report, Healthcare, Ambulatory Surgery Centers, Surgical Facilities, Revenue, Net Loss, Adjusted EBITDA, Financial Statements