SGRY

Surgery Partners is a growing outpatient-surgery operator (176 surgical facilities, mostly leased ASCs) riding the secular shift of procedures into lower-cost outpatient settings. The top line is durable and compounding: revenue has climbed every year from $2.23B (FY2021) to $3.31B (FY2025), up 6.2% in the latest year, and operating income of $390M (+11.7%) gives an 11.8% operating margin. The business itself works — it generates $274M of operating cash flow against only $78.7M of capex, so it is comfortably free-cash-flow positive (~$195M).

The problem sits below the operating line. The company has posted a GAAP net loss every year for five straight years (-$77.9M in FY2025), and the cause is leverage: long-term debt grew 9.7% to $3.74B against just $1.71B of equity (~2.2x) and a thin $240M cash balance. With ~$566M of EBITDA (operating income $390M + $176M D&A), net debt-to-EBITDA runs near 6x — a heavy load. The MD&A confirms the August 2025 Second Amendment created a new $1.4B term loan at SOFR+2.50% (6.22% as of year-end) maturing 2030, plus a $425M senior-unsecured note tap due 2032, so near-term maturities are termed out — but interest expense at those rates is precisely what converts a $390M operating profit into a net loss. The accumulated deficit deepened to -$815M and ROE is -4.5%.