Surgery Partners, Inc. · NASDAQ:SGRY

Surgery Partners — 41st Annual J.P. Morgan HealthCare Conference (January 2023)

34 slides from Surgery Partners's conference presentation, January 2023

  1. Slide 1: 41st Annual J.P. Morgan HealthCare Conference

    41st Annual J.P. Morgan HealthCare Conference

  2. Slide 2: Legal Disclaimer

    Legal Disclaimer Forward-Looking Statements Statements contained in this presentation, including the question and answer portion of the presentation, other than statements of historical fact, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as

  3. Slide 3: Table of Contents

    Table of Contents 1 Introduction 2 Investment Highlights 3 Financial Highlights © 2022 Surgery Partners – Confidential & Proprietary Information 3

  4. Slide 4: Surgery Partners Introduction

    Surgery Partners Introduction © 2022 Surgery Partners – Confidential & Proprietary Information

  5. Slide 5: We are a Leading Pure-Play Surgery Center Operator

    We are a Leading Pure-Play Surgery Center Operator… Key Metrics(1) ~$2.4 billion $374 million Q3 2022 TTM Q3 2022 TTM 32 Adjusted EBITDA(2) States Revenue 126 Ambulatory Surgery Centers 19 Short-Stay Surgical Hospitals 4,800+ Affiliated Physicians 600,000+ Annual Patients © 2022 Surgery Partners – C

  6. Slide 6: With a Strong, Consistent Execution Track Record

    …With a Strong, Consistent Execution Track Record… Adjusted EBITDA ($M) $380(3) $340(2) $259 $257 $235 $164 2017A 2018A 2019A 2020A 2021A 2022P % YoY Growth (2) (3) (8.3%) +42.9% +10.1% (0.8%) +22.2% (2) +20.9% % Adjusted EBITDA Margin (2) 12.3% 13.3% 13.9% 13.8% 14.1% 15.0% (3) (1) Adjusted EBITDA

  7. Slide 7: And a Foundation Which Drives High Visibility into Long-Term Sustainable Growth

    …And a Foundation Which Drives High Visibility into Long-Term Sustainable Growth Preferred Patient Experience Enhanced Physician Engagement 95% 94% 94 55% 3.8% 6.6% Overall Patient Surgical hospitals Net Promoter Growth in net revenue Same facility Same facility Satisfaction Score with a 4 / 5-star

  8. Slide 8: Surgery Partners Investment Highlights

    Surgery Partners Investment Highlights © 2022 Surgery Partners – Confidential & Proprietary Information

  9. Slide 9: Surgery Partners Investment Highlights

    Surgery Partners Investment Highlights Large Market Opportunity Supported by Multiple Macro Growth Drivers and Aligned 1 with the Mega Trends: High Quality, Low-Cost Care in Specialized Settings 2 An Industry Leader Focused on Higher Growth, Higher Acuity Specialties 3 Exceptional Clinical Quality C

  10. Slide 10: Significant Market Opportunity: >$90B Outpatient Surgical Market

    Significant Market Opportunity: >$90B Outpatient Surgical 1 Market and ~$60B of Cases Migrating to Outpatient… Annual Revenue (US)(1) Annual Volume Growth(1) $500B+ ~$60B incremental shift of $230B surgery -2% inpatient surgical cases to Inpatient the outpatient setting $470B+ $55B+ surgery 2% HOPD

  11. Slide 11: Well-Positioned to Capitalize On Key Industry Trends

    …With Surgery Partners Well-Positioned to Capitalize On 1 Key Industry Trends Key Trends Our Positioning • MSK remains highest growth, most financially • 114% 3-year CAGR in total joints in ASCs attractive specialty Right • ~80% facilities perform MSK procedures and 60% Specialties • Cardiology in v

  12. Slide 12: Diversified Case Mix, Focused on High Value-Areas

    2 Diversified Case Mix, Focused on High Value-Areas… Case Mix(1) 2019 – YTD Sept 2022 CAGR by Specialty Case(4) All Other Specialties(2) 26.3% Cardio Musculoskeletal(3) 16% 7.5% Gastrointestinal 36% 25% 6.4% Orthopedic Ophthal- mology 5.0% General Surgery 23% 3.9% Ophthalmology Gastrointestinal Musc

  13. Slide 13: Targeted Investments To Win in Highest-Growth Areas

    …With Targeted Investments To Win in Highest-Growth, 2 Most Attractive Areas… $3 billion 12%+ Musculoskeletal Annual savings by shifting Sept 2022 YTD orthopedic 50% of joint cases to ASCs(1) case growth 8 ~80% Robots added in 2022, Facilities perform MSK bringing total to 52 procedures 5 60%+ New C

  14. Slide 14: Leveraging Our Capital Efficient Flywheel

    2 …While Leveraging Our Capital Efficient Flywheel 1. Demographic and site of service 7. Supply chain initiatives trends leading to future growth 6. Payer strategies 2. Physician recruitment 5. Acquisitions and 3. Add orthopedics and Partnerships cardiology as a new service line 4. Expansion of orth

  15. Slide 15: Strong Case Volume and Revenue Growth

    2 Strong Case Volume and Revenue Growth… ~4x case growth over 10 years Case Volume by Specialty 209,517 ü Net Revenue 144,720 CAGR of 134,593 ~26% from 2012 to TTM 94,844 Sept 2022 78,136 52,838 ü Case mix aligned with 15,051 14,090 higher acuity Other (1) GI Ophthalmology MSK 2012 TTM Sept 2022 Sur

  16. Slide 16: With the Highest Contribution Margin

    2 …With the Highest Contribution Margin MSK and Cardiology are most profitable cases on a per minute basis ASC Direct Contribution $ Margin Per Minute of Operating Room Time(1) $67 $53 $50 $39 $34 $34 $28 $28 $27 $28 $26 $25 $17 $16 $11 NEUR CAR PMT ORTH ENT OPTH UROL GI OBGYN POD HAND DERM ORAL PLA

  17. Slide 17: Orthopedic Playbook Provides Line of Sight to Success

    Orthopedic Playbook Provides Line of Sight to Success in 2 Future Specialties Orthopedic Case Volume 100k+ Orthopedic Procedures Annually 100k+ 92,269 950+ Orthopedic Physicians 61,132 114% ASC Total Joint 3-Year CAGR ~70 New ASC orthopedic physician recruits YTD September 2022 2017A 2021A Q3 2022 T

  18. Slide 18: We Hold Ourselves to the Highest Standards

    3 We Hold Ourselves to the Highest Standards… Average Deficiencies per Survey(1) Average Deficiencies per Survey(2) ASCs Surgical Hospitals 25% Fewer 48% Fewer Deficiencies Deficiencies 10.0 40.0 8.4 33.7 30.0 6.3 5.0 20.0 17.6 10.0 0.0 0.0 Surgery Partners All Other Surgery Partners All Other © 202

  19. Slide 19: Best-in-Class Patient Satisfaction Scores

    3 …Resulting in Best-in-Class Patient Satisfaction Scores Net Promoter Score 97 Patient 94 Facility Experience 79 77 95 94 Overall 96 Process People 47 Patient Experience 30 25 95 Personal © 2022 Surgery Partners – Confidential & Proprietary Information Note: Surgery Partners’ scores based on patien

  20. Slide 20: We Align Ourselves with our Physician Partners

    3 We Align Ourselves with our Physician Partners… Multi-Facility Management Three-Way JVs Facility Facility Facilities Two-Way JVs Services Health Payors Systems OR ~95% Physician Partner Retention © 2022 Surgery Partners – Confidential & Proprietary Information 20

  21. Slide 21: Using a Uniquely Integrated, Highly Scalable Platform

    3 …Using a Uniquely Integrated, Highly Scalable Platform… 94% of surgical facilities/ clinical practices migrated to end-state Patient Accounting platforms, representing 94% of Platform revenue 95% of surgical facilities/clinical Revenue practices migrated to common Robotic Cycle claims clearinghous

  22. Slide 22: Turnkey Technology Stack Delivering Organic Synergies

    …And a Turnkey Technology Stack With Proven Track 3 Record of Delivering Organic Synergies Managed Care Supply Chain • Enhanced centralized • Enhanced centralized team with seasoned team with seasoned executives executives • Continuing to enhance • Migrated to one our health plan value company-wide

  23. Slide 23: We Operate in a Highly Fragmented Market

    4 We Operate in a Highly Fragmented Market… Number of ASCs in the U.S.(1) Number of POHs in U.S.(1) Medicare-Certified ASCs (March 2022) Total = 6,148 ASCs(2) 3,504 2,644 100% Corporation Owned (3%) Physician-Hospital- Hospital Owned (2%) Corporation Owned (7%) ~ 240 80% Physician-Hospital 60% Owned

  24. Slide 24: Focused on Short-Stay Surgical Facilities, Re-Accelerating Capital Deployment

    …And are Focused on Short-Stay Surgical Facilities Where 4 We are Re-Accelerating the Pace of Capital Deployment… Closed or Sold Acquisitions Transaction Highlights • Refocused portfolio on growth- oriented short-stay surgical assets • ~$625M capital deployed in 40 transactions, with an average mult

  25. Slide 25: With Accelerating M&A Momentum through 2022

    4 …With Accelerating M&A Momentum through 2022 $246M Acquired interest in Entered innovative Capital Deployed 7 De Novos partnership (1) with Avg. multiple <8.0x for $34M(1) ValueHealth Strong Execution in 2022 … …With Highly Visible Near-Term Pipeline Purchase Price Type Purchase Price Type ASC/Pra

  26. Slide 26: We Have a Purpose-Built, Veteran Management Team

    5 We Have a Purpose-Built, Veteran Management Team Wayne DeVeydt Eric Evans Dave Doherty Executive Chairman of the Board Chief Executive Officer EVP & Chief Financial Officer 28 Years Healthcare Experience 18 Years Healthcare Experience 21 Years Healthcare Experience 5 Years with Surgery Partners 4

  27. Slide 27: Capital Structure Strengthened to Support Growth

    6 Capital Structure Strengthened to Support Growth Credit Agreement Leverage Ratio 7.7x 7.2x 7.0x 6.0x Track record of reducing 5.6x leverage while growing the business ~4.2x Nov. 2022 ~$885M equity offering meaningfully reduced the leverage ratio Target leverage in mid-3x range by the end of 2025 2

  28. Slide 28: Surgery Partners Financial Highlights

    Surgery Partners Financial Highlights © 2022 Surgery Partners – Confidential & Proprietary Information

  29. Slide 29: Strong, Consistent History of Robust Growth

    Strong, Consistent History of Robust Growth Net Revenue ($M) Adjusted EBITDA ($M) $2,525(1) $380(1) $2,225 $340(2) $1,831 $1,860 $1,772 $259 $257 $235 $1,342 $164 2017A 2018A 2019A 2020A 2021A 2022P 2017A 2018A 2019A 2020A 2021A 2022P % YoY Growth % YoY Growth +17.2% +32.0% +3.4% +1.6% +19.6% +13.5%

  30. Slide 30: Highly Visible Near and Long-Term Growth Drivers

    Highly Visible Near and Long-Term Growth Drivers Top-line Growth Margin Expansion Capital Investment Volume / Procurement Acquisitions Rate Health System/ Recruiting / Service Revenue Cycle Health Plan Line Expansion Partnerships Org / Workflow Managed Care De Novos Efficiencies Mid-teens long-term

  31. Slide 31: Sustainable Long-term Double-Digit AEBITDA Growth

    Reaping the Benefits: Sustainable Long-term Double-Digit AEBITDA Growth ~$650 $380(1) $259 $164 2017A 2019A 2022P 2024P 2026P Management is committed to driving double digit growth in 2023 and beyond through execution of organic strategic initiative and continued capital deployment (1) 2022P Adjuste

  32. Slide 32: Surgery Partners Investment Highlights

    Surgery Partners Investment Highlights $150B+ Total 6.5%+ Industry-leading Superior Clinical Quality 1 Addressable Market 2 Same Facility Growth 3 and Customer Experience $60B of Inpatient Cases 80% Facilities Performing 94% of Surgical Hospitals Migrating to Outpatient of MSK Rated 4 / 5 Stars by C

  33. Slide 33: Appendix

    Appendix © 2022 Surgery Partners – Confidential & Proprietary Information

  34. Slide 34: Reconciliation to Adjusted EBITDA

    Reconciliation to Adjusted EBITDA The following table reconciles Adjusted EBITDA to Income before income taxes, the most directly comparable GAAP financial measure (unaudited): TTM Year Ended December 31, 9/30/2022 2021 2020 2019 2018 2017 (1) Consolidated Statement of Operations Data (Loss) income

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