Surgery Partners, Inc. · NASDAQ:SGRY
Surgery Partners — Debt Investor Presentation (May 2017)
44 slides from Surgery Partners's debt investor presentation, May 23, 2017
Slide 1: Bridge Presentation May 2017
Exhibit 99.1 Bridge Presentation May 2017
Slide 2: Legal Disclaimer
Legal Disclaimer This document has been prepared solely for use of the recipient. You agree to hold the Information contained herein in strict confidence and may not reproduce, distribute or disclose this Information, in whole or in part. Forward-Looking Statements This presentation contains _forwar
Slide 3: Legal Disclaimer
Legal Disclaimer Important Notice Regarding Information Contained in this Presentation. This Bridge Presentation (this Presentation ) is intended to facilitate discussions with representatives of certain institutions regarding a potential syndicated financing for Surgery Partners, Inc. and its subsi
Slide 4: Legal Disclaimer (cont'd)
Legal Disclaimer II. Information (cont d) In addition, the Evaluation Material is summary in nature, is subject to change or amendment and is not intended to provide the entire basis for credit or any other evaluation. The information and data contained herein are not a substitute for the Recipient’
Slide 5: Presenters
Presenters Mike Doyle Chief Executive Officer Chief Executive Officer and Director since 2009 Previously served as President and Chief Operating Officer since 2004 when Surgery Partners was formed More than 20 years of healthcare experience with both an extensive management background Mike began his
Slide 6: Agenda
Agenda Transaction Overview Surgery Partners Acquisition Overview New Surgery Partners Key Credit Highlights Financial Overview Q&A Appendix 6
Slide 7: Transaction Overview
Transaction Overview : 7 ak SURGERY PARTNERS
Slide 8: Executive Summary
Executive Summary On May 9, 2017 Surgery Partners, Inc. ( Surgery Partners ) entered into a definitive agreement to acquire National Surgical Healthcare ( NSH ) from Irving Place Capital for $760 million enterprise value, subject to adjustments(1) Surgery Partners is a leading operator of surgical f
Slide 9: Sources, Uses and Pro Forma Capitalization
Sources, Uses and Pro Forma Capitalization ($ millions) Sources and Uses Sources of Funds Uses of Funds New Revolver $- NSH Purchase Price $760.0 New Term Loan 1,290.0 Corporate Share of NSH Cash 22.9 New Senior Unsecured Notes 335.0 Corporate Share of NSH Debt (37.9) Preferred Equity 295.0 Net Work
Slide 10: Transaction Timeline
Transaction Timeline May 2017 SMTWTFS12345 6 78910 111213 141516 171819 20 2122232422627282930 31 Denotes holiday Event Date Bridge Lender Call May 23rd Bridge Commitments Due May 25th at 4:00PM ET Bridge Commitment Letters May 26th at 10:00AM ET Signatures Due 10
Slide 11: Senior Unsecured Bridge Facility
Senior Unsecured Bridge Facility Senior Unsecured Bridge Facility Borrower Surgery Center Holdings, Inc. Guarantors Each of the Borrower s existing and subsequently acquired or organized direct and indirect wholly-owned domestic restricted subsidiaries with certain exceptions IssueSenior Unsecured B
Slide 12: Senior Secured Credit Facilities
Senior Secured Credit Facilities Revolving Credit Facility Term Loan Borrower Surgery Center Holdings, Inc. Guarantors Unconditionally guaranteed by SP Holdco I, Inc. and each existing and subsequently acquired or organized wholly-owned domestic restricted subsidiary with certain exceptions Security
Slide 13: Surgery Partners
Surgery Partners 13 ak SURGERY PARTNERS
Slide 14: Surgery Partners at a Glance
Surgery Partners at a Glance Healthcare Facilities National Network 99 ASCs 5 Surgical Hospitals 56 Physician Practices Surgical Facilities Physician practices 7 Urgent Care Facilities 14
Slide 15: Surgery Partners at a Glance
Surgery Partners at a Glance Ancillary Services Anesthesia Services Diagnostics Specialty Pharmacy Optical Services Company Highlights A network of outpatient care focused services over 600,000 annual patients 4,000 affiliated physicians 6,000 talented employees Facilities in 29 states Patient prefe
Slide 16: Value Prop: Advantaged Delivery Model
Surgery Partners Value Prop: Advantaged Delivery Model Solving for cost containment in the surgical continuum of care Points of Patient Entry Components of Healthcare Diagnosis / Outcome Ancillary Services in Surgical Continuum of Care Physician Practice Acute Care Provided Before, During, or After
Slide 17: Acquisition Overview
Acquisition Overview > ak SURGERY PARTNERS
Slide 18: Strategic Combination Expands on Outpatient Capabilities in Healthcare Delivery
Strategic Combination Expands on Outpatient Capabilities in Healthcare Delivery Surgery Partners has agreed to acquire National Surgical Healthcare in a transaction valued at $760 million 125 surgical facilities across 32 states Largest standalone, independent surgical services company in the United
Slide 19: Partnering with a World-Class Shareholder
Partnering with a World-Class Shareholder with Long-Standing Track Record of Success Bain Capital has agreed to acquire the outstanding Common Stock held by H.I.G. Capital and partner with Surgery Partners as the Company s largest shareholder Select Healthcare Investments Established in 1984, Bain C
Slide 20: National Surgical Healthcare at a Glance
National Surgical Healthcare at a Glance Highly Complementary and Strategic Asset 21 Surgical Facilities in 15 Markets 75% Musculoskeletal Procedure Mix >1,000 Affiliated Physicians Highly Contracted with Limited (~3%) Out of Network Exposure Surgical Hospital Ambulatory Surgery Center Formerly Larg
Slide 21: The New Surgery Partners
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Slide 22: Introducing The New Surgery Partners
Introducing The New Surgery Partners National Network of Healthcare Facilities 107 ASCs Surgical Hospitals Physician Practices [Graphic Appears Here] Facilities in 32 States >5,000 Affiliated Physicians Existing Surgical Facilities NSH Facilities Ancillary Services Infrastructure Physician Practices
Slide 23: Creating the Premier National Musculoskeletal Platform
Creating the Premier National Musculoskeletal Platform in the U.S. 2x $7 billion 100 million increase in hip annual Medicare Adults in the U.S. revision procedures spend on total with chronic pain projected by 2026 joint procedures Leading national musculoskeletal surgical facilities operator Reduce
Slide 24: Key Credit Highlights
Key Credit Highlights ak SURGERY PARTNERS
Slide 25: Key Credit Highlights
Key Credit Highlights Attractive Industry Multiple forces driving favorable outpatient dynamics including trend to value-based models, that is Large and physician preference and alignment and expanding set of feasible procedures in outpatient setting Growing Growing market, but significant headroom
Slide 26: Attractive Industry: Rapidly Evolving Healthcare Market
Attractive Industry: Rapidly Evolving Healthcare Market Key trends in the increasingly dynamic US healthcare market have produced an attractive backdrop for companies focused on high quality, outpatient care Value proposition of the low cost / high quality outpatient setting increasingly resonates w
Slide 27: Attractive Industry: ASC Market Dynamics
Attractive Industry: ASC Market Dynamics Favorable Macro Trends Improved Patient Outcomes Versus Acute Care Hospitals Reduced Costs for Payors and Patients Compelling Value Proposition for Physicians Source: CMS and third party equity research. 27
Slide 28: ASC Consolidation Opportunity and Reimbursement Structures
Continued focused on transparency driving consumerism Aging demographic outlook Surgical technique improving technology innovations Superior clinical outcomes Greater convenience for patients Lower occurrence of adverse events Typically ASC s exhibit ~45% cost savings relative to acute care setting
Slide 29: Attractive Industry: Win-Win-Win Value Proposition
Attractive Industry: Win-Win-Win Value Proposition A Physician-Centric Value Proposition Designed to Drive High Quality Patient Care in a Low Cost Setting Convenient, comfortable and cost-efficient settings Patients Superior clinical outcomes and increasing patient satisfaction while reducing costs
Slide 30: Value Prop: Market Leader Aligned to Industry Tailwinds
Surgery Partners Value Prop: Market Leader Aligned to Industry Tailwinds Leader in Outpatient Surgical Services Market, Better Able to Meet Growing Patient, Physician and Payor Preferences Key Trends In Healthcare Market Our Differentiated Solution High Quality / Low Cost Outpatient Services Indepen
Slide 31: Diversified Payors and Procedures
Attractive Business Mix: Diversified Payors and Procedures Delivers Stability, Growth, and Strong Margins Payor Mix Net Revenue by Payor Other 12% Commercial 50% Other Government 9% 38% ENT 4% Limited exposure to bad debt Limited out-of-network exposure Diversified payor base resulting from local co
Slide 32: Growth Opportunities: Multiple Drivers
Growth Opportunities: Multiple Drivers Pro Forma Growth Drivers Patient-focused model with consumer focused healthcare approach Ancillary service execution across expanded portfolio Organic Dedicated recruitment team and specialty programs New service lines Market and payor-specific strategies Captu
Slide 33: Growth Opportunities: Track Record of Transformational M&A
Growth Opportunities: Track Record of Transformational M&A 2016 Future Year: 2011 2014 2016 Facilities: 49 102 125 Revenue: $260mm $871mm $1,700mm Establishment of strong business Business diversification and Complementary expansion of foundation and services platform services expansion focused on m
Slide 34: Attractive Financial Profile: Impressive Same Facility Growth
Attractive Financial Profile: Impressive Same Facility Growth Differentiated Operating Model Drives Industry Leading Growth Traditional Growth Focused Recruitment Team Dedicated M&A Department Centralized Managed Care Contracting Comprehensive Supply Chain Strategy Facility Optimization Resources (1
Slide 35: Management Team: Deep Industry Expertise
Management Team: Deep Industry Expertise and Successful Track Record Precedent Strategic M&AExperienced Management Team Track Record of Successful Integration of Transformational M&A Differentiated Organic Growth Strategy Operational Expertise Across Surgical Specialties and Related Services Long Hi
Slide 36: Financial Overview
Financial Overview : se ak SURGERY PARTNERS
Slide 37: Key Financial Highlights
Key Financial Highlights Differentiated operating model: Unique focus on ancillary services Strong financial performance: Industry leading same-facility growth Successful execution of physician engagement strategy including physician recruitment and employment Revenue and EBITDA growth driven by sam
Slide 38: History of Strong Performance
History of Strong Performance ($ millions) (1) $1,164.5 $535.7 $1,145.4 $520.5 $502.6 Revenue $959.9 2015 2016 LTM 3/31/17 2015 2016 LTM 3/31/17 $179.3 $180.9 $76.6 $77.0 $78.3 Adjusted $158.1 EBITDA 2015 2016 LTM 3/31/17 2015 2016 LTM 3/31/17 (1) NSH financials exclude Casper, WY operations. NSH LT
Slide 39: Strong Free Cash Flow Profile
Strong Free Cash Flow Profile [Graphic Appears Here] 2.3% 2.4% 2.1% 2.1% 2.0% 1.9% Maintenance Capital Expenditures(2) (% of Revenue) 2015A 2016A LTM 2015A 2016A LTM 3/31/17 3/31/17 87.2% 85.0% 84.3% 86.3% 86.4% 86.8% Free Cash Flow Conversion(3) 2015A 2016A LTM 2015A 2016A LTM 3/31/17 3/31/17 Low h
Slide 40: Combined Adjusted Credit Agreement EBITDA
Combined Adjusted Credit Agreement EBITDA ($ millions) LTM 3/31/17 Surgery Partners Adjusted EBITDA $180.9 Credit Agreement Adjustments 28.3 Surgery Partners Adjusted Credit Agreement EBITD $209.2 NSH Adjusted EBITDA $78.3 Pro Forma Adjustments 3.7 NSH Pro Forma Adjusted EBITDA $82.1 Identified Cost
Slide 41: Q&A
Q&A sk SURGERY PARTNERS
Slide 42: Appendix
Appendix 2 ak SURGERY PARTNERS
Slide 43: Surgery Partners EBITDA Reconciliation
Surgery Partners EBITDA Reconciliation ($ millions) 20152016 LTM 3/31/17 EBITDA Adjustments EBITDA $ 107.9 $160.4 $173.6 1.Impact of acquired anesthesia entities, physician Plus: practices and surgical facilities as if each acquisition had Management Fee 2.3 occurred on January 1, 2015, January 1, 2
Slide 44: NSH EBITDA Reconciliation
NSH EBITDA Reconciliation ($millions) 2015 2016 LTM 3/31/17 EBITDA $127.8 $76.5 $ 77.5 Plus: 1. (Gain)/Loss On Acquisitions Or Sales Of Assets (59.3) -2. Non-recurring Expenses 2.9 3.4 3.7 3. Acquisitions 11.1 - 4. Other (6.0) (2.8) (2.8) Adjusted EBITDA $76.6 $77.0 $78.3 5. Pro Forma Adjustments 5.
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