Surgery Partners Q3 revenue falls to $815M
Eligible shares would receive $25.00 in cash if the proposed merger closes, subject to stockholder and regulatory approvals.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Rhea-AI Filing Summary
Surgery Partners, Inc. (SGRY) reported third-quarter 2026 revenue of $815.3 million, compared with $821.5 million a year earlier, while days-adjusted same-facility revenue increased 6.0%. Quarterly net loss attributable to the company was $21.1 million, versus $22.7 million; Adjusted EBITDA was $132.7 million, versus $136.4 million. For the first nine months, revenue was $2,475.1 million and attributable net loss was $72.0 million, compared with $2,423.7 million and $62.9 million.
On September 14, 2026, Surgery Partners completed the sale of its Idaho hospital interests to Intermountain Health for approximately $796.6 million in aggregate consideration. The sale produced an approximately $12.5 million pretax gain, net of $23.4 million in transaction fees, and the company used part of the proceeds to pay down debt. During 2026, it prepaid $285.0 million on its term loan, which is no longer subject to quarterly payments before maturity. Cash was $354.5 million and long-term debt was $2,998.7 million as of September 30, 2026.
Under an agreement amended November 8, 2026, Spyglass Merger Subsidiary, Inc. would merge into Surgery Partners, leaving it a wholly owned subsidiary of Spyglass Topco, LLC if the deal closes. Eligible outstanding shares would convert to $25.00 in cash, without interest, subject to stockholder approval and required regulatory approvals. If approval is obtained but the merger has not occurred by March 1, 2027, eligible holders would receive monthly ticking-fee payments; the maximum is $1.61 per share based on an October 23, 2027 outside date.
3 points · 0 major0 major · 2 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointA $285.0 million term-loan prepayment removed quarterly payments before maturity. 8.4% of market cap
- Minor pointThe Idaho sale recorded an approximately $12.5 million pretax gain.
- Minor pointQuarterly attributable loss narrowed to $21.1 million from $22.7 million.
Negative
- Moderate pointNine-month attributable loss widened to $72.0 million from $62.9 million.
- Moderate pointQuarterly consolidated net income fell to $14.1 million from $25.3 million.
Filing Explained
In specified termination circumstances, the company could owe a roughly 149.1 million dollar fee, plus expense reimbursement capped at 8.25 million dollars.
The amended merger remains subject to stockholder and regulatory approvals; if it closes, rollover holders would contribute their shares for equity in Parent, not receive the cash merger consideration or ticking-fee payments, and retain the same ownership percentage in the surviving company.
In certain termination circumstances, the company may owe Parent an approximately
Key Figures
Revenue: $815.3 million
Adjusted EBITDA: $132.7 million
Net loss attributable to Surgery Partners: $21.1 million loss
+5 more
8 metrics
Revenue
$815.3 million
Three months ended September 30, 2026; $821.5 million in 2025
Adjusted EBITDA
$132.7 million
Three months ended September 30, 2026; $136.4 million in 2025
Net loss attributable to Surgery Partners
$21.1 million loss
Three months ended September 30, 2026; $22.7 million loss in 2025
Net loss attributable to Surgery Partners
$72.0 million loss
Nine months ended September 30, 2026; $62.9 million loss in 2025
Idaho sale aggregate consideration
Approximately $796.6 million
Sale completed September 14, 2026
Term-loan prepayment
$285.0 million
During 2026
Cash and cash equivalents
$354.5 million
As of September 30, 2026
Per-share merger consideration
$25.00 per share
Cash consideration for eligible shares if the merger closes
Key Terms
Adjusted EBITDA, days adjusted same-facility revenues, non-controlling interests, Ticking Fee, +1 more
5 terms
Adjusted EBITDA financial
"Adjusted EBITDA decreased 2.7%"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
days adjusted same-facility revenues financial
"days adjusted same-facility revenues for the third quarter"
non-controlling interests financial
"Net income attributable to non-controlling interests"
An ownership stake in a subsidiary held by outside shareholders rather than the parent company, representing the portion of that subsidiary’s assets and profits the parent does not control. For investors, it shows what part of consolidated earnings and equity belongs to others — like a roommate who owns part of a house — which affects how much value and profit per share are truly attributable to the parent company’s shareholders.
Ticking Fee financial
"additional monthly cash payments (the “Ticking Fee”)"
A ticking fee is a charge that accrues over time when one party has committed to a deal but the transaction has not yet closed; it compensates the other side for the cost and risk of the delay. For investors, it matters because it raises the effective cost of a transaction and signals how long completion may take—like paying a small ongoing rent while waiting for a house sale to finish, which can affect returns and deal judgment.
cash flow hedging relationship financial
"designated in a cash flow hedging relationship"
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How does the SGRY merger ticking fee work?
If the required stockholder approval is obtained but the merger has not occurred by March 1, 2027, eligible stockholders would receive additional monthly cash payments in equal installments in arrears, at 10% per annum on the $25.00 per-share merger consideration. The maximum fee is $1.61 per share, based on an October 23, 2027 outside date.
How much consideration did SGRY receive for the Idaho hospital sale?
Surgery Partners received approximately $796.6 million in aggregate consideration for the Idaho hospital interests and termination of its management agreement with Mountain View Hospital. The transaction produced an approximately $12.5 million pretax gain, net of $23.4 million in transaction fees, and the company used part of the proceeds to pay down debt.
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
Form 10-Q
_____________________________________
(Mark One)
For the quarterly period ended September 30, 2026
or
Commission file number: 001-37576
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| | ||||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||
(615 ) 234-5900
(Registrant’s telephone number, including area code)
_____________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ☐ | ||||||||
Non-accelerated filer ☐ | Smaller reporting company | |||||||
Emerging growth company | ||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 2, 2026, there were 130,881,223 shares of the registrant’s common stock outstanding.
SURGERY PARTNERS, INC.
FORM 10-Q
TABLE OF CONTENTS
| Page | ||||||||
PART I - FINANCIAL INFORMATION | ||||||||
Item 1. | Financial Statements | 1 | ||||||
Condensed Consolidated Balance Sheets (Unaudited) | 1 | |||||||
Condensed Consolidated Statements of Operations (Unaudited) | 2 | |||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | 3 | |||||||
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | 4 | |||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | 6 | |||||||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 7 | |||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 20 | ||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 27 | ||||||
Item 4. | Controls and Procedures | 28 | ||||||
PART II - OTHER INFORMATION | ||||||||
Item 1. | Legal Proceedings | 29 | ||||||
Item 1A. | Risk Factors | 29 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 31 | ||||||
Item 3. | Defaults Upon Senior Securities | 31 | ||||||
Item 4. | Mine Safety Disclosures | 31 | ||||||
Item 5. | Other Information | 31 | ||||||
Item 6. | Exhibits | 32 | ||||||
Signatures | 33 | |||||||
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SURGERY PARTNERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)
| (Unaudited) | ||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Accounts receivable | ||||||||||||||
| Inventories | ||||||||||||||
| Prepaid expenses | ||||||||||||||
| Other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
Property and equipment, net of accumulated depreciation of $ | ||||||||||||||
Goodwill and other intangible assets, net | ||||||||||||||
| Investments in and advances to affiliates | ||||||||||||||
| Right-of-use operating lease assets | ||||||||||||||
| Other long-term assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued payroll and benefits | ||||||||||||||
| Other current liabilities | ||||||||||||||
| Current maturities of long-term debt | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt, less current maturities | ||||||||||||||
| Right-of-use operating lease liabilities | ||||||||||||||
Long-term deferred tax liabilities | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Non-controlling interests—redeemable | ||||||||||||||
| Stockholders' equity: | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
Accumulated other comprehensive income (loss) | ( | ( | ||||||||||||
| Retained deficit | ( | ( | ||||||||||||
| Total Surgery Partners, Inc. stockholders' equity | ||||||||||||||
| Non-controlling interests—non-redeemable | ||||||||||||||
| Total stockholders' equity | ||||||||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||||||||
See notes to unaudited condensed consolidated financial statements.
1
Table of Contents
SURGERY PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, dollars in millions, except per share amounts; shares in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Salaries and benefits | |||||||||||||||||||||||
| Supplies | |||||||||||||||||||||||
| Professional and medical fees | |||||||||||||||||||||||
| Lease expense | |||||||||||||||||||||||
| Other operating expenses | |||||||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Transaction and integration costs | |||||||||||||||||||||||
| Net (gain) loss on disposals, consolidations and deconsolidations | |||||||||||||||||||||||
| Equity in earnings of unconsolidated affiliates | ( | ( | ( | ( | |||||||||||||||||||
| Litigation settlements | |||||||||||||||||||||||
| Loss on debt extinguishment | |||||||||||||||||||||||
| Other income, net | ( | ( | ( | ( | |||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
Income (loss) before income taxes | |||||||||||||||||||||||
Income tax (expense) benefit | ( | ( | ( | ( | |||||||||||||||||||
Net income (loss) | |||||||||||||||||||||||
| Less: Net income attributable to non-controlling interests | ( | ( | ( | ( | |||||||||||||||||||
Net income (loss) attributable to Surgery Partners, Inc. | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net income (loss) per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Diluted (1) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
Diluted (1) | |||||||||||||||||||||||
(1)The impact of potentially dilutive securities for all periods was not considered because the effect would be anti-dilutive.
See notes to unaudited condensed consolidated financial statements.
2
Table of Contents
SURGERY PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, dollars in millions)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
Net income (loss) | $ | $ | $ | $ | ||||||||||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||
Derivative activity, net of tax of $ | ( | ( | ||||||||||||||||||||||||
Comprehensive income (loss) | ||||||||||||||||||||||||||
| Less: Comprehensive income attributable to non-controlling interests | ( | ( | ( | ( | ||||||||||||||||||||||
Comprehensive income (loss) attributable to Surgery Partners, Inc. | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
3
Table of Contents
SURGERY PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, dollars in millions, shares in thousands)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Deficit | Non-Controlling Interests— Non-Redeemable | Total | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Acquisition and disposal of shares of non-controlling interests, net | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests—non-redeemable holders | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Acquisition and disposal of shares of non-controlling interests, net | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests—non-redeemable holders | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
| Equity-based compensation | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Acquisition and disposal of shares of non-controlling interests, net | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests—non-redeemable holders | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2026 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
4
Table of Contents
SURGERY PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, dollars in millions, shares in thousands)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Deficit | Non-Controlling Interests— Non-Redeemable | Total | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Acquisition and disposal of shares of non-controlling interests, net | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests—non-redeemable holders | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Acquisition and disposal of shares of non-controlling interests, net | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests—non-redeemable holders | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Acquisition and disposal of shares of non-controlling interests, net | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests—non-redeemable holders | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
5
Table of Contents
SURGERY PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in millions)
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
Net income (loss) | $ | $ | ||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Non-cash lease expense | ||||||||||||||
| Non-cash interest expense, net | ||||||||||||||
| Equity-based compensation expense | ||||||||||||||
| Net loss on disposals, consolidations and deconsolidations | ||||||||||||||
| Loss on debt extinguishment | ||||||||||||||
| Deferred income taxes | ( | |||||||||||||
| Equity in earnings of unconsolidated affiliates, net of distributions received | ||||||||||||||
| Changes in operating assets and liabilities, net of acquisitions and divestitures: | ||||||||||||||
| Accounts receivable | ( | ( | ||||||||||||
| Other operating assets and liabilities | ( | ( | ||||||||||||
Net cash provided by (used in) operating activities | ||||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Purchases of property and equipment | ( | ( | ||||||||||||
| Payments for acquisitions, net of cash acquired | ( | ( | ||||||||||||
| Proceeds from disposals of facilities and other assets | ||||||||||||||
| Purchases of equity investments | ( | |||||||||||||
| Proceeds from sales of equity investments | ||||||||||||||
| Other investing activities | ( | |||||||||||||
Net cash provided by (used in) investing activities | ( | |||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Principal payments on long-term debt | ( | ( | ||||||||||||
| Borrowings of long-term debt | ||||||||||||||
| Payments of debt issuance costs | ( | ( | ||||||||||||
| Distributions to non-controlling interest holders | ( | ( | ||||||||||||
| Proceeds (payments) related to ownership transactions with non-controlling interest holders | ( | |||||||||||||
| Other financing activities | ( | |||||||||||||
Net cash provided by (used in) financing activities | ( | ( | ||||||||||||
Net increase (decrease) in cash and cash equivalents | ( | |||||||||||||
| Cash and cash equivalents at beginning of period | ||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||||||||
See notes to unaudited condensed consolidated financial statements.
6
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Summary of Accounting Policies
Organization
Surgery Partners, Inc., a Delaware corporation, acting through its subsidiaries, owns and operates a national network of surgical facilities and ancillary services. The surgical facilities, which include ambulatory surgery centers ("ASCs") and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including, among others, orthopedics and pain management, gastroenterology, ophthalmology, and general surgery. Although some of the Company's surgical hospitals may include emergency departments, they are generally not equipped to handle a broad spectrum of patient needs, including critical and traumatic injuries. Ancillary services are comprised of multi-specialty physician practices, urgent care facilities and anesthesia services. Unless the context otherwise indicates, Surgery Partners, Inc. and its subsidiaries are referred to herein as "Surgery Partners," "we," "us," "our" or the "Company."
As of September 30, 2026, the Company owned or operated a portfolio of 173 surgical facilities, comprised of 156 ASCs and 17 surgical hospitals in 30 states. The Company owns these facilities in partnership with physicians and, in some cases, health care systems in the markets and communities it serves. The Company owned a majority interest in 83 of these surgical facilities and consolidated 115 surgical facilities for financial reporting purposes.
Basis of Presentation
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes. Examples include, but are not limited to, estimates of accounts receivable allowances, professional and general liabilities and the estimate of deferred tax assets or liabilities. Actual results could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications were specific to the Company’s payor mix disclosures and had no effect on the reported results of operations.
Revenues
The Company's revenues generally relate to contracts with patients in which the performance obligations are to provide health care services. The Company recognizes revenues in the period in which its obligations to provide health care services are satisfied and reports the amount that reflects the consideration the Company expects to be entitled to receive. The contractual relationships with patients, in most cases, also involve a third-party payor (e.g., private insurance organizations, including plans offered through the health insurance exchanges, as well as government programs, including Medicare and Medicaid) and the transaction prices for the services provided are dependent upon the terms provided by or negotiated with the third-party payors. The payment arrangements with third-party payors for the services provided to the related patients typically specify payments at amounts less than the Company's standard charges. The Company continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.
7
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents a summary of revenues by service type as a percentage of total revenues:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Patient service revenues | % | % | % | % | ||||||||||||||||||||||
| Other service revenues | % | % | % | % | ||||||||||||||||||||||
| Total revenues | % | % | % | % | ||||||||||||||||||||||
Patient service revenues. This revenue is related to charging facility fees in exchange for providing patient care. The fee charged for health care procedures performed in surgical facilities varies depending on the type of service provided, but usually includes all charges for usage of an operating room, a recovery room, special equipment, medical supplies, nursing staff and medications. The fee does not normally include professional fees charged by the patient’s surgeon, anesthesiologist or other attending physician, which are billed directly by such physicians to the patient or third-party payor. However, in several surgical facilities, the Company charges for anesthesia services. Ancillary service revenues included in patient service revenues include fees for patient visits to the Company's physician practices, pharmacy services and diagnostic tests ordered by physicians.
Patient service revenues are recognized as performance obligations are satisfied. Performance obligations are based on the nature of services provided. Typically, the Company recognizes revenue at a point in time in which services are rendered and the Company has no obligation to provide further patient services. Because the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service.
The Company determines the transaction price based on gross charges for services provided, net of estimated contractual adjustments and implicit price concessions. The Company estimates its contractual adjustments and implicit price concessions based on contractual agreements, its discount policies and historical experience of cash collections and historical write-offs. The estimated contractual adjustments and implicit price concessions are recognized at the time of services being performed, with ASCs generally based on contractual agreements and surgical hospitals generally based on historical experience of cash collections and write-offs. Changes in estimated contractual adjustments and implicit price concessions are recorded in the period of change, with final adjustments, if any, typically at the time of payment.
Several states utilize supplemental Medicaid reimbursement programs for the purpose of providing reimbursement to providers to increase base rates to the levels that Medicare would have paid for the same service or for payments that offset a portion of the cost of providing care to Medicaid and indigent patients. These programs are designed with input from the Centers for Medicare & Medicaid Services (“CMS”) and are funded with a combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers. We account for payments under these supplemental programs as variable consideration and estimate the amount using the most likely amount method. Reimbursement under these programs, including the recognition of variable consideration, is reflected in patient service revenues. Taxes or other program-related costs are reflected in other operating expenses.
The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in millions):
| Three Months Ended September 30, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||||||||
| Patient service revenues: | ||||||||||||||||||||||||||
| Private insurance | $ | % | $ | % | ||||||||||||||||||||||
| Government | % | % | ||||||||||||||||||||||||
| Self-pay | % | % | ||||||||||||||||||||||||
Other (1) | % | % | ||||||||||||||||||||||||
| Total patient service revenues | % | % | ||||||||||||||||||||||||
| Other service revenues | ||||||||||||||||||||||||||
| Total revenues | $ | $ | ||||||||||||||||||||||||
8
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||||||||
| Patient service revenues: | ||||||||||||||||||||||||||
| Private insurance | $ | % | $ | % | ||||||||||||||||||||||
| Government | % | % | ||||||||||||||||||||||||
| Self-pay | % | % | ||||||||||||||||||||||||
Other (1) | % | % | ||||||||||||||||||||||||
| Total patient service revenues | % | % | ||||||||||||||||||||||||
| Other service revenues | ||||||||||||||||||||||||||
| Total revenues | $ | $ | ||||||||||||||||||||||||
(1)Other is comprised of automobile liability, letters of protection and other payor types.
Accounts Receivable
Accounts receivable from third-party payors are recorded net of contractual allowances and implicit price concessions, which are estimated based on established fee schedules, relationships with payors, procedure statistics and other objective information including the historical trend of cash collections and contractual write-offs. The Company estimates its contractual adjustments and implicit price concessions based on contractual agreements, its discount policies and historical experience of cash collections and historical write-offs. The estimated contractual adjustments and implicit price concessions are recognized at the time of services being performed, with ASCs generally based on contractual agreements and surgical hospitals generally based on historical experience of cash collections and write-offs. Changes in estimated contractual adjustments and implicit price concessions are recorded in the period of change, with final adjustments, if any, typically at the time of payment. While changes in estimated reimbursement from third-party payors remain a possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on its financial condition or results of operations.
Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), private insurance organizations, employers and patients. Management recognizes that revenues and receivables from government agencies are significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies. Concentration of credit risk with respect to other payors is limited because of the large number of such payors.
The Company recognizes that final reimbursement of accounts receivable is subject to final approval by each third-party payor. However, because the Company has contracts with its third-party payors and also verifies insurance coverage of the patient before medical services are rendered, the amounts that are pending approval from third-party payors are not considered significant. Amounts are classified outside of self-pay if the Company has an agreement with the third-party payor or has verified a patient’s coverage prior to services rendered. The Company's policy is to collect co-payments and deductibles prior to providing medical services. Patient services of the Company are primarily non-emergency, which allows the surgical facilities to control the procedures for which third-party reimbursement is sought and obtained. The Company does not require collateral from self-pay patients.
The Company's collection policies and procedures are based on the type of payor, size of claim and estimated collection percentage for each patient account. The Company analyzes accounts receivable at each of its surgical facilities to ensure the proper collection and aged category. Collection efforts include direct contact with third-party payors or patients, written correspondence and the use of legal or collection agency assistance, as required.
Business Combinations, Transaction and Integration Costs
The Company accounts for business combinations in accordance with ASC 805. Direct transaction costs and post-acquisition integration costs are expensed as incurred. Transaction and integration costs include due diligence, transaction and integration costs related to acquisitions (both completed and in the pipeline), and other costs, including severance, IT implementation and revenue cycle standardization. These costs are reported in transaction and integration costs in the condensed consolidated statements of operations.
Income Taxes
We use the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We assess the likelihood that deferred tax assets will be recovered from sources of future taxable income. To the extent we believe that recovery is not probable, a valuation allowance is established. To the extent we establish a valuation allowance or subsequently increase or decrease this allowance, we must include an adjustment as part of the income tax provision in our results of operations.
9
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The first step in determining the deferred tax asset valuation allowance is identifying reporting jurisdictions where we have a history of tax and operating losses or are projected to have losses in future periods as a result of changes in operational performance. We then determine if a valuation allowance should be established against the deferred tax assets for that reporting jurisdiction. The second step is to determine the amount of the valuation allowance. We will generally establish a valuation allowance equal to the net deferred tax asset (deferred tax assets less deferred tax liabilities) related to the jurisdiction identified in step one of the analysis. In certain cases, we may not reduce the valuation allowance by the amount of the deferred tax liabilities depending on the nature and timing of future taxable income attributable to deferred tax liabilities.
In assessing tax contingencies, we apply the provisions of ASC 740, “Income Taxes”. We apply the recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. We classify interest and penalties as a component of income tax expense. During each reporting period, we assess the facts and circumstances related to recorded tax contingencies, such as lapsing of applicable statutes of limitations, conclusion of tax audits, additional exposure based on current calculations, identification of new issues, release of administrative guidance, or rendering of a court decision affecting a particular tax issue. If tax contingencies are no longer deemed probable based upon new facts and circumstances, the contingency is reflected as a reduction of the provision for income taxes in the current period.
Goodwill
Goodwill represents the excess of the fair value of the consideration provided in an acquisition plus the fair value of any non-controlling interests over the fair value of net assets acquired and is not amortized. Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries. A summary of the Company's acquisitions, disposals and deconsolidations for the nine months ended September 30, 2026 is included in Note 2. "Acquisitions, Disposals and Deconsolidations."
On July 6, 2026, the Company revised its internal organizational structure, resulting in a change to its reporting units for purposes of goodwill impairment testing. The Company's former National and American reporting units were reorganized into the North, South, and West reporting units. In connection with this change, goodwill was reassigned to the revised reporting units during July 2026 using a relative fair value allocation approach. The Company performed goodwill impairment assessments immediately before and after the reassignment and concluded that no impairment existed. The reassignment did not affect the total carrying amount of goodwill.
A summary of activity related to goodwill for the nine months ended September 30, 2026 is as follows (in millions):
| Balance as of December 31, 2025 | $ | |||||||
| Acquisitions, including post acquisition adjustments | ||||||||
| Disposals | ( | |||||||
| Balance as of September 30, 2026 | $ | |||||||
A detailed evaluation of potential impairment indicators was performed as of September 30, 2026, which specifically considered recent changes in interest rates, inflation risk and market volatility. On the basis of available evidence as of September 30, 2026, no indicators of impairment were identified. Future estimates of fair value could be adversely affected if the actual outcome of one or more of the Company's assumptions changes materially in the future, including a material decline in the Company’s stock price and the fair value of its long-term debt, lower than expected surgical case volumes, higher market interest rates or increased operating costs. Such changes impacting the calculation of fair value could result in a material impairment charge in the future.
Derivative Instruments and Hedging Activities
The Company records all derivatives on the balance sheet at fair value and any financing elements treated as debt instruments are recorded at amortized cost. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
The Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.
10
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Non-Controlling Interests—Redeemable
Each partnership and limited liability company through which the Company owns and operates its surgical facilities is governed by a partnership or operating agreement, respectively. In certain circumstances, the applicable partnership or operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physician limited partners’ or physician minority members’, as applicable, ownership if certain adverse regulatory events occur, such as it becoming illegal for the physician(s) to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility. Management believes the likelihood of an event occurring that would trigger such purchases was remote as of September 30, 2026. The non-controlling interests—redeemable are reported outside of stockholders' equity in the condensed consolidated balance sheets.
A summary of activity related to redeemable non-controlling interests is as follows (in millions):
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Balance at beginning of period | $ | $ | ||||||||||||
| Net income attributable to non-controlling interests—redeemable | ( | |||||||||||||
| Acquisition and disposal of shares of non-controlling interests, net—redeemable | ( | ( | ||||||||||||
| Distributions to non-controlling interest —redeemable holders | ( | ( | ||||||||||||
| Balance at end of period | $ | $ | ||||||||||||
Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. The Company uses fair value measurements based on inputs classified into the following hierarchy:
•Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These may include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, depending on the nature of the item being valued.
A summary of the carrying amounts and estimated fair values of the Company's long-term debt follows (in millions):
| Carrying Amount | Fair Value | |||||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Senior secured term loan | $ | $ | $ | $ | ||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
The fair values in the table above were based on Level 2 inputs using quoted prices for identical liabilities in inactive markets. The carrying amounts related to the Company's other long-term debt obligations, including finance lease obligations, approximate their fair values.
Variable Interest Entities
The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025, were $76.1 million and $75.1 million, respectively, and the total liabilities of the consolidated VIEs were $28.1 million and $40.4 million, respectively.
11
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Acquisitions, Disposals and Deconsolidations
Acquisitions
During the nine months ended September 30, 2026:
•The Company acquired a controlling interest in one surgical facility and six physician practices for aggregate cash consideration of $8.5 million, net of cash acquired. In connection with this acquisition, the Company recognized non-controlling interests of $6.3 million and goodwill of $10.0 million.
During the nine months ended September 30, 2025:
•The Company acquired a controlling interest in four surgical facilities and five physician practices for aggregate cash consideration of $52.6 million, net of cash acquired, and non-cash consideration of $2.3 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities. In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $28.6 million and goodwill of $78.6 million.
•The Company acquired a non-controlling interest in three surgical facilities for aggregate cash consideration of $13.4 million. These non-controlling interests were accounted for as equity method investments and recorded as a component of investments in and advances to affiliates in the condensed consolidated balance sheets.
Disposals and Deconsolidations
During the nine months ended September 30, 2026:
•On September 14, 2026, the Company completed the previously announced sale of its ownership interests in Mountain View Hospital, LLC (“MVH”), Idaho Falls Community Hospital, LLC (“IFCH”) and associated subsidiaries to Intermountain Health (the “Idaho Transaction”). The disposed business consisted of the hospital operations of MVH and IFCH, including substantially all assets and certain liabilities associated with such operations. The Company received aggregate consideration of approximately $796.6 million, consisting of consideration for the ownership interests sold to Intermountain Health and termination of the Company's management agreement with MVH. The carrying amounts of assets and liabilities of the disposed business as of the closing date were approximately $1,195.5 million and $463.4 million, respectively.
The following table sets forth operating results associated with the disposed business through the closing date of the transaction (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | |||||||||||||||||||
| Income before income taxes attributable to Surgery Partners, Inc. | |||||||||||||||||||||||
The Transaction resulted in a pre-tax gain of approximately $12.5 million, which is included in net (gain) loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations. The pre-tax gain was recorded net of transaction fees of $23.4 million. Total consideration was subject to further adjustments for closing cash and indebtedness, transaction expenses, as well as customary post-closing adjustments. The Company used a portion of the proceeds to pay down debt.
•The Company disposed of its non-controlling interests in one surgical facility, which was previously accounted for as an equity method investment, for cash proceeds of $0.9 million. In connection with this transaction, the Company recognized a pre-tax loss of $4.0 million, which is included in net (gain) loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations.
During the nine months ended September 30, 2025:
•The Company sold a portion of its interests in one surgical facility for net cash proceeds of $0.5 million. As a result of the transaction, the Company no longer controlled the previously controlled surgical facility but retained a non-controlling interest, resulting in the deconsolidation of the previously consolidated entity. This transaction resulted in a pre-tax net loss on deconsolidation of $2.7 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2025. The net loss was determined based on the difference between the net cash proceeds plus the fair value of the Company’s retained interests in the entity and the carrying values of both the tangible and intangible assets and liabilities of the entity immediately prior to the transaction.
12
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
•The Company sold its controlling interests in two surgical facilities for aggregate net cash proceeds of $42.4 million. In connection with the transactions, the Company recognized a pre-tax net gain of $6.0 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2025.
3. Long-Term Debt
A summary of long-term debt follows (in millions):
| September 30, 2026 | December 31, 2025 | |||||||||||||
Senior secured term loan (1) | $ | $ | ||||||||||||
| Senior secured revolving credit facility | ||||||||||||||
| Notes payable and other secured loans | ||||||||||||||
| Finance lease obligations | ||||||||||||||
| Less: unamortized debt issuance costs and discounts | ( | ( | ||||||||||||
| Total debt | ||||||||||||||
| Less: current maturities | ||||||||||||||
| Total long-term debt | $ | $ | ||||||||||||
(1)Includes unamortized fair value discount of $0.8 million and $1.2 million as of September 30, 2026 and December 31, 2025, respectively.
Senior Secured Term Loan
During 2026, the Company made a voluntary prepayment of $285.0 million on its senior secured term loan (the "Term Loan") without premium or penalty. As a result of the prepayment, the Term Loan is no longer subject to quarterly payments prior to maturity. In connection with prepayment, the Company wrote-off a portion of unamortized debt issuance costs and discounts, resulting in a loss on debt extinguishment of $3.7 million, included in loss on debt extinguishment in the accompanying condensed consolidated statements of operations.
Revolving Credit Facility
As of September 30, 2026, the Company's availability on its $703.8 million senior secured revolving credit facility (the "Revolver") was $692.8 million (including letters of credit of $11.0 million).
4. Leases
13
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the condensed consolidated balance sheets (in millions):
| Classification in Condensed Consolidated Balance Sheets | September 30, 2026 | December 31, 2025 | ||||||||||||||||||
| Assets: | ||||||||||||||||||||
| Operating lease assets | Right-of-use operating lease assets | $ | $ | |||||||||||||||||
| Finance lease assets | ||||||||||||||||||||
| Total leased assets | $ | $ | ||||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Operating lease liabilities: | ||||||||||||||||||||
| Current | $ | $ | ||||||||||||||||||
| Long-term | Right-of-use operating lease liabilities | |||||||||||||||||||
| Total operating lease liabilities | ||||||||||||||||||||
| Finance lease liabilities: | ||||||||||||||||||||
| Current | ||||||||||||||||||||
| Long-term | ||||||||||||||||||||
| Total finance lease liabilities | ||||||||||||||||||||
| Total lease liabilities | $ | $ | ||||||||||||||||||
The following table presents the components of the Company's lease expense and their classification in the condensed consolidated statements of operations (in millions):
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Operating lease costs | $ | $ | ||||||||||||
| Finance lease costs: | ||||||||||||||
| Amortization of leased assets | ||||||||||||||
| Interest on lease liabilities | ||||||||||||||
| Total finance lease costs | ||||||||||||||
| Variable and short-term lease costs | ||||||||||||||
| Total lease costs | $ | $ | ||||||||||||
The following table presents supplemental cash flow information (in millions):
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
| Operating cash outflows from operating leases | $ | $ | ||||||||||||
| Operating cash outflows from finance leases | ||||||||||||||
| Financing cash outflows from finance leases | ||||||||||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||||||||
| Operating leases | ||||||||||||||
| Finance leases | ||||||||||||||
14
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Derivatives and Hedging Activities
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate caps as part of its interest rate risk management strategy. During 2026 and 2025, such derivatives have been used to hedge the variable cash flows associated with existing variable-rate debt.
The key terms of interest rate caps outstanding are presented below:
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Description | Effective Date | Notional Amount (in millions) | Status | Notional Amount (in millions) | Status | Maturity Date | ||||||||||||||||||||||||||||||||
| Deferred premium cap | March 31, 2025 | $ | Active | $ | Active | December 31, 2028 | ||||||||||||||||||||||||||||||||
| Deferred premium cap | March 31, 2025 | Active | Active | December 31, 2028 | ||||||||||||||||||||||||||||||||||
| Deferred premium cap | March 31, 2025 | Active | Active | December 31, 2028 | ||||||||||||||||||||||||||||||||||
| Deferred premium cap | March 31, 2025 | Active | Active | December 31, 2028 | ||||||||||||||||||||||||||||||||||
| Deferred premium cap | March 31, 2025 | Active | Active | December 31, 2028 | ||||||||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||||||||||
As of September 30, 2026, the Company had five interest rate caps with a total notional amount of $1,365.0 million, of which, $1,080.9 million is designated in a cash flow hedging relationship and $284.1 million is undesignated. The interest rate caps each have a termination date of December 31, 2028. In connection with the voluntary prepayment on the Term Loan in 2026 (see Note 3. "Long-Term Debt"), the Company de-designated a portion of one of its interest rate caps. The amount of unrealized losses recorded in other comprehensive income ("OCI") related to the de-designated notional amount at the time of the de-designation was $0.3 million. This amount was reclassified from accumulated OCI into income and is included as a component of other income in the condensed consolidated statements of operations for the three and nine months ended September 30, 2026. No cash was exchanged between the Company and the counterparties due to the de-designation, therefore the non-cash transactions had no impact on the condensed consolidated statements of cash flows.
Within the Company’s condensed consolidated balance sheets, the interest rate caps are recorded at fair value. The cash flows related to the interest rate caps are classified as operating activities in the condensed consolidated statements of cash flows. The fair value of the interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The interest rate caps are classified using Level 2 inputs within the fair value hierarchy.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated OCI and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings, as documented at hedge inception in accordance with the Company’s accounting policy election. Amounts reported in accumulated OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Over the next 12 months, the Company estimates that an additional $4.3 million will be reclassified as an increase to interest expense.
The following table presents the fair values of our derivatives and their location on the condensed consolidated balance sheets (in millions):
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||
| Derivatives not designated as hedging instruments | ||||||||||||||||||||||||||
Interest rate caps (1) | $ | $ | $ | $ | ||||||||||||||||||||||
| Derivatives in cash flow hedging relationships | ||||||||||||||||||||||||||
Interest rate caps (1) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
(1)Amounts were included in other long-term liabilities on the condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025.
15
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and condensed consolidated statements of operations (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
| Location | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||||||||
| (Gain) loss recognized in income | Other income, net | $ | $ | $ | $ | ||||||||||||||||||||||||
(Gain) loss reclassified from accumulated OCI into income (1) | Other income, net | ||||||||||||||||||||||||||||
| Derivatives in cash flow hedging relationships | |||||||||||||||||||||||||||||
Gain (loss) recognized in OCI (effective portion) | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||
Gain (loss) reclassified from accumulated OCI into income (effective portion) | Interest expense, net | ( | |||||||||||||||||||||||||||
(1)Loss reclassified from accumulated OCI upon de-designation of a portion of one of the Company's interest rate caps.
6. Earnings Per Share
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||
Net income (loss) attributable to Surgery Partners, Inc. | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
Diluted (1) | ||||||||||||||||||||||||||
| Net income (loss) per share attributable to common stockholders: | ||||||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Diluted (1) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Dilutive securities outstanding not included in the computation of diluted loss per share as their effect is antidilutive: | ||||||||||||||||||||||||||
| Stock options | ||||||||||||||||||||||||||
| Restricted shares | ||||||||||||||||||||||||||
(1)The impact of potentially dilutive securities for all periods was not considered because the effect would be anti-dilutive.
7. Income Taxes
For the nine months ended September 30, 2026, the Company estimated an annual effective tax rate of 4.0 %. The Company's effective tax rate was 10.7 % for the nine months ended September 30, 2026. For the nine months ended September 30, 2026, the effective tax rate differed from the U.S. federal statutory rate of 21% primarily due to earnings attributable to non-controlling interests, a decrease in the Company’s valuation allowance attributable to federal and state net operating loss carry-forwards, and a permanent difference between the book and tax gain on the divestiture of partnership interests.
For the nine months ended September 30, 2025, the Company estimated its effective tax rate under a discrete-period approach based solely on its income from operations for the nine months ended September 30, 2025. The Company’s effective tax rate was 5.9 % for the nine months ended September 30, 2025. For the nine months ended September 30, 2025, the effective tax rate differed from the U.S. federal statutory rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation
16
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
allowance attributable to interest expense limitations, and a permanent difference between the book and tax gain on the divestiture of partnership interests.
As of September 30, 2026 and December 31, 2025, the Company was in a cumulative three-year pre-tax loss position, which was considered significant negative evidence that could not be overcome by objective and verifiable positive evidence. Based on the weight of available evidence, the Company concluded that it was more likely than not that a portion of its net deferred tax assets will not be realized. Therefore, in accordance with ASC 740-10-30, the Company recorded a full valuation allowance, net of future reversing deferred tax liabilities, on its deferred tax assets to reflect the net realizable value as of the balance sheet dates.
8. Other Current Liabilities
A summary of other current liabilities was as follows (in millions):
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Right-of-use operating lease liabilities | $ | $ | ||||||||||||
| Amounts due to patients and payors | ||||||||||||||
| Interest payable | ||||||||||||||
| Accrued expenses and other | ||||||||||||||
| Total | $ | $ | ||||||||||||
9. Commitments and Contingencies
Professional, General and Workers' Compensation and Cyber Liability Risks
10. Segment Reporting
Segment information is prepared on the same basis that our Chief Executive Officer, who is our Chief Operating Decision Maker ("CODM"), manages our segments, evaluates financial results, and makes key operating decisions. We have one reportable segment: Surgical Facilities.
Effective July 6, 2026, the Company reorganized its operating structure and the operations in its two operating segments (which previously made up one reportable segment) were reorganized into three operating segments: North, South, and West. These three operating segments have been aggregated to a single reportable segment in consideration of the aggregation criteria set forth in ASC 280. Therefore, the Surgical Facilities reportable segment as a whole did not change upon reorganization.
The Surgical Facilities reportable segment includes the operation of ASCs, surgical hospitals, anesthesia services, and multi-specialty physician practices, which earns revenues primarily from contracts with patients in which the performance obligations are to provide health care services. The "All other" line item primarily consists of amounts attributable to the Company's corporate general and administrative functions. The Company defines its segments on the basis of the way in which its internally reported financial information is regularly reviewed by the CODM to assess performance and allocate resources.
The Company’s CODM uses Adjusted EBITDA to assess performance and allocate resources. The CODM considers budget-to-actual and actual versus prior period variances on a periodic basis as a means of assessing performance. The following segment information, including significant segment expenses, is presented in millions:
17
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Surgical Facilities Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||
Salaries and benefits | ||||||||||||||||||||||||||
Supplies | ||||||||||||||||||||||||||
Professional and medical fees | ||||||||||||||||||||||||||
| Lease expense | ||||||||||||||||||||||||||
Other segment items (1) | ||||||||||||||||||||||||||
| Adjusted Surgical Facilities EBITDA | $ | $ | $ | $ | ||||||||||||||||||||||
Reconciliation: | ||||||||||||||||||||||||||
| Add back: Net income attributable to non-controlling interests | ( | ( | ( | ( | ||||||||||||||||||||||
| Unallocated amounts: | ||||||||||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||||||||||
| Transaction and integration costs | ||||||||||||||||||||||||||
| Other corporate expenses | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | $ | ||||||||||||||||||||||
(1)Other segment items includes equity in earnings of unconsolidated affiliates, net income attributable to non-controlling interests and other expenses, net.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Depreciation and amortization: | ||||||||||||||||||||||||||
| Surgical Facilities | $ | $ | $ | $ | ||||||||||||||||||||||
| All other | ||||||||||||||||||||||||||
| Total depreciation and amortization expense | $ | $ | $ | $ | ||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Assets: | ||||||||||||||
Surgical Facilities | $ | $ | ||||||||||||
| All other | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Cash purchases of property and equipment: | ||||||||||||||
Surgical Facilities | $ | $ | ||||||||||||
| All other | ||||||||||||||
| Total cash purchases of property and equipment | $ | $ | ||||||||||||
18
Table of Contents
SURGERY PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. Subsequent Events
On October 23, 2026, the Company entered into an Agreement and Plan of Merger (the “Original Merger Agreement”) with Spyglass Topco, LLC (“Parent”), a Delaware limited liability company, Spyglass Merger Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Subsidiary”), and, solely for the limited purposes set forth therein, Bon Secours Mercy Health, Inc., a Maryland nonstock, nonprofit corporation, which was further amended on November 8, 2026 by that certain Amendment No. 1 to Agreement and Plan of Merger (the “Merger Agreement Amendment,” and together with the Original Merger Agreement, the “Amended Merger Agreement”). Pursuant to the Amended Merger Agreement, and on the terms and subject to the conditions therein, Merger Subsidiary will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent (the “Surviving Company”). If the Merger is consummated, the Company’s common stock will be delisted from the Nasdaq Global Select Market and deregistered under the Securities Exchange Act of 1934, as amended.
On the terms and subject to the conditions of the Amended Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of Company common stock as of immediately prior to the Effective Time (other than certain excluded shares, including the Rollover Shares (as defined below)) will be converted into the right to receive $25.00 in cash, without interest (the “Per Share Consideration”). The Merger Agreement Amendment further provides in the event the requisite Company stockholder approval has been obtained but the Merger has not occurred by March 1, 2027, the Company’s stockholders (other than certain excluded shares, including shares held by rollover stockholders) will receive additional monthly cash payments (the "Ticking Fee"), which payments will be paid in equal monthly installments in arrears at a rate equal to 10 % per annum on the $25.00 per share merger consideration. Based on the outside date of October 23, 2027, the maximum Ticking Fee that may be paid per share of the Company common stock is $1.61 .
Concurrently with the execution and delivery of the Original Merger Agreement, the Company and Parent entered into a Voting and Support Agreement (the “Support Agreement”) with certain stockholders party thereto. Under the Support Agreement, the subject stockholders have agreed, among other things, to vote their shares of Company common stock in favor of the adoption of the Amended Merger Agreement. In addition, under the Support Agreement, immediately prior to the closing of the Merger, the rollover stockholders will contribute to Parent, directly or indirectly, all of their shares of Company common stock (the “Rollover Shares”) in exchange for equity interests in Parent. The Rollover Shares will not be entitled to receive the Per Share Consideration or Ticking Fees and will, by virtue of the Merger, be converted into shares of common stock of the Surviving Corporation such that the Rollover Shares represent the same percentage of the Surviving Corporation immediately following the Effective Time as the rollover stockholders owned of the Company immediately prior to the Effective Time.
Completion of the Merger is subject to the satisfaction or waiver of certain customary closing conditions, including the adoption of the Amended Merger Agreement by the Company’s stockholders and receipt of required regulatory approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Amended Merger Agreement also contains customary termination provisions and provides for an approximately $149.1 million termination fee payable by the Company to Parent under certain circumstances. In certain circumstances, the Company may be required to reimburse Parent for certain reasonable and documented out-of-pocket expenses incurred in connection with the Merger, up to an aggregate cap of $8.25 million.
19
Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report and our 2025 Annual Report on Form 10-K. Unless the context otherwise indicates, the terms "Surgery Partners," "we," "us," "our" or the "Company," as used herein, refer to Surgery Partners, Inc. and its subsidiaries, and the term "affiliates" means direct and indirect subsidiaries of Surgery Partners, Inc. and partnerships and joint ventures in which such subsidiaries are partners. The terms "facilities" or "hospitals" refer to entities owned and operated by affiliates of Surgery Partners, Inc. and the term "employees" refers to employees of affiliates of Surgery Partners, Inc.
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements, which are based on our current expectations, estimates and assumptions about future events. All statements other than statements of current or historical fact contained in this report are forward-looking statements. These statements include, but are not limited to, statements regarding our future financial position, business strategy, budgets, effective tax rate, projected costs and plans and objectives of management for future operations. The words "projections," "believe," "continue," "drive," "estimate," "expect," "intend," "may," "plan," "will," "could," "would" and similar expressions are generally intended to identify forward-looking statements.
Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors. Important factors that could cause actual outcomes or results to differ materially from the forward-looking statements include, but are not limited to, (a) the ability of the parties to consummate the proposed Merger in a timely manner or at all, and the satisfaction or waiver of conditions to the consummation of the Merger, including with respect to the approval of the Company’s stockholders and required regulatory approval; (b) the possibility that the Company may not receive the requisite stockholder approval for the proposed Merger; (c) the occurrence of any event, change or other circumstance or condition that could cause the parties to abandon the Merger or give rise to the termination of the Amended Merger Agreement; (d) the effect of the pendency of our Merger on the market price of, or trading in, our securities and on the Company’s business relationships, operating results and business generally, including the ability to retain key personnel; (e) significant transaction costs associated with the proposed Merger, as well as liabilities that are not known, probable or estimable at this time or other unexpected costs, charges, expenses, factors or events; (f) the possibility that the anticipated benefits from the previously announced sale of the Company's ownership interests in Mountain View Hospital, LLC, Idaho Falls Community Hospital, LLC and associated subsidiaries to Intermountain Health (the “Idaho Transaction”) are not realized as expected, the potential adverse effect on the Company's business relationships, operating results, and business generally, including the ability to retain key personnel; (g) potential litigation relating to the proposed merger or the Idaho Transaction that could be instituted against the Company or its affiliates, officers, or directors, and the effects of any outcomes related thereto; (h) reductions in payments from government health care programs and private insurance payors, such as health maintenance organizations, preferred provider organizations, and other managed care organizations and employers; (i) our ability to contract with private insurance payors; (j) changes in our payor mix or surgical case mix; (k) failure to maintain or develop relationships with physicians on beneficial or favorable terms, or at all; (l) the impact of payor controls designed to reduce the number of surgical procedures; (m) our efforts to integrate operations of acquired or developed businesses and surgical facilities, attract new physician partners, or acquire additional surgical facilities; (n) supply chain issues, including shortages or quality control issues with surgery-related products, equipment and medical supplies; (o) competition for physicians, nurses, strategic relationships, acquisitions and managed care contracts; (p) our ability to attract and retain qualified health care professionals; (q) our ability to enforce non-compete restrictions against our physicians; (r) our ability to manage material liabilities whether known or unknown incurred as a result of acquiring or operating surgical facilities; (s) the impact of future legislation and other health care regulatory reform actions, and the effect of that legislation and other regulatory actions on our business; (t) our ability to comply with current health care laws and regulations; (u) the outcome of legal and regulatory proceedings that have been or may be brought against us; (v) the impact of cybersecurity attacks or intrusions, changes in the regulatory, economic and other conditions of the states where our surgical facilities are located; (w) our indebtedness; (x) the social and economic impact of a pandemic, epidemic or outbreak of a contagious disease on our business, as well as the Company’s response to any of the aforementioned factors and the risks and uncertainties identified and discussed from time to time in the Company’s reports filed with the Securities and Exchange Commission (the "SEC"), including in Item 1A under the heading "Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and other reports filed with the SEC. Except as required by law, the Company undertakes no obligation to revise or update publicly any forward-looking statements to reflect events or circumstances after the date of this report, or to reflect the occurrence of unanticipated events or circumstances. The foregoing list of factors is not exhaustive, and new risks may emerge from time to time.
Executive Overview
As of September 30, 2026, we owned or operated, primarily in partnership with physicians, a portfolio of 173 surgical facilities comprised of 156 ASCs and 17 surgical hospitals across 30 states. We owned a majority interest in 83 of the surgical facilities and consolidated 115 of these facilities for financial reporting purposes.
Total revenues for the third quarter of 2026 decreased (0.8)% to $815.3 million from $821.5 million in the third quarter of 2025. The decrease in revenues was attributable to the Idaho Transaction partially offset by same-facility revenue growth in 2026. Days adjusted same-facility revenues for the third quarter of 2026 increased 6.0% from the third quarter of 2025, with a 5.8% increase in revenue per case and a 0.2% increase in same-facility cases. Additionally, for the third quarter of 2026, net loss attributable to Surgery Partners, Inc. was $21.1 million compared to $22.7 million for the third quarter of 2025. For the third quarter of 2026, Adjusted EBITDA decreased 2.7% to
20
Table of Contents
$132.7 million compared to $136.4 million for the same period in 2025. A reconciliation of non-GAAP financial measures appears below under the heading "Certain Non-GAAP Measures."
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 $354.5 million and $692.8 million of borrowing capacity under the Revolver as of September 30, 2026.
On October 23, 2026, the Company entered into an Agreement and Plan of Merger with Spyglass Topco, LLC, Merger Subsidiary, and, solely for the limited purposes set forth therein, Bon Secours Mercy Health, Inc., which was further amended on November 8, 2026 by the Merger Agreement Amendment. Pursuant to the Amended Merger Agreement and subject to the conditions therein, Merger Subsidiary will merge with and into the Company, with the Company surviving the Merger as a wholly-owned subsidiary of Parent and subject to the conditions therein, Merger Subsidiary will merge with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent. If the Merger is consummated, the Company’s common stock will be delisted from the Nasdaq Global Select Market and deregistered under the Securities Exchange Act of 1934, as amended.
On the terms and subject to the conditions of the Amended Merger Agreement, at the Effective Time of the Merger, each issued and outstanding share of Company common stock as of immediately prior to the Effective Time (other than certain excluded shares, including the Rollover Shares) will be converted into the Per Share Consideration of $25.00 in cash, without interest. The Merger Agreement Amendment further provides in the event the requisite Company stockholder approval has been obtained but the Merger has not occurred by March 1, 2027, the Company’s stockholders (other than certain excluded shares, including shares held by rollover stockholders) will receive additional monthly Ticking Fee cash payments, which payments will be paid in equal monthly installments in arrears at a rate equal to 10% per annum on the $25.00 per share merger consideration. Based on the outside date of October 23, 2027, the maximum Ticking Fee that may be paid per share of the Company common stock is $1.61.
Concurrently with the execution and delivery of the Original Merger Agreement, the Company and Parent entered into a Voting and Support Agreement (the “Support Agreement”) with certain stockholders party thereto. Under the Support Agreement, the subject stockholders have agreed, among other things, to vote their shares of Company common stock in favor of the adoption of the Amended Merger Agreement. In addition, under the Support Agreement, immediately prior to the closing of the Merger, the rollover stockholders will contribute to Parent, directly or indirectly, all of their Rollover Shares in exchange for equity interests in Parent. The Rollover Shares will not be entitled to receive the Per Share Consideration or Ticking Fees and will, by virtue of the Merger, be converted into shares of common stock of the Surviving Corporation such that the Rollover Shares represent the same percentage of the Surviving Corporation immediately following the Effective Time as the rollover stockholders owned of the Company immediately prior to the Effective Time.
Completion of the Merger is subject to the satisfaction or waiver of certain customary closing conditions, including the adoption by the Company’s stockholders and receipt of required regulatory approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Amended Merger Agreement also contains customary termination provisions and provides for an approximately $149.1 million termination fee payable by the Company to Parent under certain circumstances. In certain circumstances, the Company may be required to reimburse Parent for certain reasonable and documented out-of-pocket expenses incurred in connection with the Merger, up to an aggregate cap of $8.25 million.
The Company has incurred and expects to incur additional transaction-related costs, including financial advisory, legal, accounting and other professional fees, in connection with the proposed Merger. The amount of future transaction-related costs cannot currently be reasonably estimated.
Revenues
Our revenues consist of patient service revenues and other service revenues. Patient service revenues consist of revenue from our Surgical Facilities reportable segment. Specifically, patient service revenues include fees for surgical or diagnostic procedures performed at surgical facilities that we consolidate for financial reporting purposes, as well as for patient visits to our physician practices, anesthesia services, pharmacy services and diagnostic screens ordered by our physicians. Other service revenues include management and administrative service fees derived from our non-consolidated facilities that we account for under the equity method, management of surgical facilities and physician practices in which we do not own an interest, management services we provide to physician practices for which we are not required to provide capital or additional assets and other non-patient services.
The following table summarizes revenues by service type as a percentage of total revenues:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Patient service revenues: | ||||||||||||||||||||||||||
Patient service revenues | 97.9 | % | 97.2 | % | 97.6 | % | 97.4 | % | ||||||||||||||||||
| Other service revenues | 2.1 | % | 2.8 | % | 2.4 | % | 2.6 | % | ||||||||||||||||||
| Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
21
Table of Contents
Payor Mix
The following table sets forth by type of payor the percentage of our patient service revenues generated at the surgical facilities that we consolidate for financial reporting purposes:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Private insurance payors | 47.6 | % | 50.6 | % | 48.8 | % | 51.6 | % | ||||||||||||||||||
| Government payors | 47.7 | % | 43.5 | % | 46.3 | % | 43.2 | % | ||||||||||||||||||
| Self-pay payors | 1.9 | % | 3.2 | % | 2.4 | % | 2.9 | % | ||||||||||||||||||
Other payors (1) | 2.8 | % | 2.7 | % | 2.5 | % | 2.3 | % | ||||||||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
(1)Comprised of automobile liability, letters of protection and other payor types.
Surgical Case Mix
We primarily operate multi-specialty surgical facilities where physicians perform a variety of procedures in various specialties. We believe this diversification helps to protect us from adverse pricing and utilization trends in any individual procedure type and results in greater consistency in our case volume.
The following table sets forth the percentage of cases in each specialty performed at the surgical facilities that we consolidate for financial reporting purposes for the periods indicated:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Orthopedics and pain management | 39.9 | % | 40.7 | % | 40.4 | % | 40.3 | % | ||||||||||||||||||
| Ophthalmology | 21.6 | % | 21.9 | % | 21.0 | % | 22.0 | % | ||||||||||||||||||
| Gastrointestinal | 23.0 | % | 24.6 | % | 23.4 | % | 24.6 | % | ||||||||||||||||||
| General surgery | 1.9 | % | 1.7 | % | 1.9 | % | 1.9 | % | ||||||||||||||||||
| Other | 13.6 | % | 11.1 | % | 13.3 | % | 11.2 | % | ||||||||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
Critical Accounting Policies
A summary of significant accounting policies is disclosed in our 2025 Annual Report on Form 10-K under the caption “Critical Accounting Policies” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes in the nature of our critical accounting policies or the application of those policies since December 31, 2025.
22
Table of Contents
Results of Operations
Comparison of Operating Results for the Three Months Ended September 30, 2026 to the Three Months Ended September 30, 2025
The following tables summarize certain results from the condensed consolidated statements of operations for the periods indicated (in millions):
| Three Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Revenues | $ | 815.3 | $ | 821.5 | ||||||||||
| Operating expenses: | ||||||||||||||
| Cost of revenues | 630.3 | 626.2 | ||||||||||||
| General and administrative expenses | 40.6 | 22.4 | ||||||||||||
| Depreciation and amortization | 39.6 | 39.5 | ||||||||||||
| Transaction and integration costs | 22.6 | 12.6 | ||||||||||||
| Net (gain) loss on disposals, consolidations and deconsolidations | 2.9 | 15.6 | ||||||||||||
| Equity in earnings of unconsolidated affiliates | (6.4) | (5.2) | ||||||||||||
| Litigation settlements | 0.4 | 5.1 | ||||||||||||
| Loss on debt extinguishment | 3.7 | 1.3 | ||||||||||||
| Other income, net | (4.0) | (1.7) | ||||||||||||
| 729.7 | 715.8 | |||||||||||||
| Operating income | 85.6 | 105.7 | ||||||||||||
| Interest expense, net | (67.9) | (74.9) | ||||||||||||
Income (loss) before income taxes | 17.7 | 30.8 | ||||||||||||
Income tax (expense) benefit | (3.6) | (5.5) | ||||||||||||
Net income (loss) | 14.1 | 25.3 | ||||||||||||
| Less: Net income attributable to non-controlling interests | (35.2) | (48.0) | ||||||||||||
Net income (loss) attributable to Surgery Partners, Inc. | $ | (21.1) | $ | (22.7) | ||||||||||
Revenues. The following table sets forth patient service revenues and other service revenues (in millions):
| Three Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Patient service revenues | $ | 798.0 | $ | 798.5 | ||||||||||
| Other service revenues | 17.3 | 23.0 | ||||||||||||
| Total revenues | $ | 815.3 | $ | 821.5 | ||||||||||
Patient service revenues decreased (0.1)% to $798.0 million for the three months ended September 30, 2026 compared to $798.5 million for the three months ended September 30, 2025. The decrease was primarily driven by the Idaho Transaction partially offset by a 6.0% increase in days adjusted same-facility revenues. The increase in days adjusted same-facility revenues was attributable to a 0.2% increase in same-facility case volumes and a 5.8% increase in same-facility revenue per case.
Cost of Revenues. Cost of revenues was $630.3 million for the three months ended September 30, 2026 compared to $626.2 million for the three months ended September 30, 2025. The increase was primarily driven by an increase in performance of high acuity procedures partially offset by the Idaho Transaction. As a percentage of revenues, cost of revenues was 77.3% and 76.2% for the three months ended September 30, 2026 and 2025, respectively.
General and Administrative Expenses. General and administrative expenses were $40.6 million and $22.4 million for the three months ended September 30, 2026 and 2025, respectively. The increase was driven by lower cash and equity incentive-based compensation for the three months ended September 30, 2025 due to year-to-date performance. As a percentage of revenues, general and administrative expenses were 5.0% and 2.7% for the three months ended September 30, 2026 and 2025, respectively.
Depreciation and Amortization. Depreciation and amortization expenses were $39.6 million and $39.5 million for the three months ended September 30, 2026 and 2025, respectively. As a percentage of revenues, depreciation and amortization expenses were 4.9% and 4.8% for the three months ended September 30, 2026 and 2025, respectively.
Transaction and Integration Costs. The Company incurred $22.6 million of transaction and integration costs for the three months ended September 30, 2026 compared to $12.6 million for the three months ended September 30, 2025. The costs for both periods primarily
23
Table of Contents
related to ongoing development initiatives and the integration of acquisitions. The increase was primarily driven by increased integration related costs related to acquisitions and other costs associated with implementation, standardization and integration efforts.
Net (Gain) Loss on Disposals, Consolidations and Deconsolidations. The net (gain) loss on disposals, consolidations and deconsolidations for the three months ended September 30, 2026 and 2025 includes activity discussed in Note 2. "Acquisitions, Disposals and Deconsolidations" of the accompanying notes to the condensed consolidated financial statements.
Loss on Debt Extinguishment. We incurred a loss on debt extinguishment of $3.7 million for the three months ended September 30, 2026 related to a voluntary prepayment of $285.0 million on our Term Loan (See Note 3. "Long-Term Debt" to our condensed consolidated financial statements).
Interest Expense, Net. Interest expense, net was $67.9 million for the three months ended September 30, 2026 compared to $74.9 million for the three months ended September 30, 2025. As a percentage of revenues, interest expense, net was 8.3% and 9.1% for the three months ended September 30, 2026 and 2025, respectively. The $7.0 million decrease in interest expense is primarily driven by reduced borrowings on the Revolver during the three months ended September 30, 2026 compared to the three months ended September 30, 2025.
Income Tax (Expense) Benefit. Income tax expense was $3.6 million and $5.5 million for the three months ended September 30, 2026 and September 30, 2025, respectively. The effective tax rate was 20.3% and 17.9% for the three months ended September 30, 2026 and 2025, respectively. See Note 7. “Income Taxes” for additional information related to the Company’s effective tax rates for the three months ended September 30, 2026 and September 30, 2025, including why these rates differed from the U.S. federal statutory rate of 21%.
Net Income Attributable to Non-Controlling Interests. As a percentage of revenues, net income attributable to non-controlling interests was 4.3% and 5.8% for the three months ended September 30, 2026 and 2025, respectively.
Comparison of Operating Results for the Nine Months Ended September 30, 2026 to the Nine Months Ended September 30, 2025
The following tables summarize certain results from the statements of operations for the periods indicated (dollars in millions):
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Revenues | $ | 2,475.1 | $ | 2,423.7 | ||||||||||
| Operating expenses: | ||||||||||||||
| Cost of revenues | 1,939.7 | 1,870.9 | ||||||||||||
| General and administrative expenses | 116.2 | 94.5 | ||||||||||||
| Depreciation and amortization | 117.4 | 116.1 | ||||||||||||
| Transaction and integration costs | 56.6 | 55.4 | ||||||||||||
| Net (gain) loss on disposals, consolidations and deconsolidations | 9.6 | 19.0 | ||||||||||||
| Equity in earnings of unconsolidated affiliates | (16.9) | (16.3) | ||||||||||||
| Litigation settlements | 2.9 | 7.3 | ||||||||||||
| Loss on debt extinguishment | 3.7 | 1.3 | ||||||||||||
| Other income, net | (7.6) | (3.8) | ||||||||||||
| 2,221.6 | 2,144.4 | |||||||||||||
| Operating income | 253.5 | 279.3 | ||||||||||||
| Interest expense, net | (206.8) | (205.0) | ||||||||||||
| Income (loss) before income taxes | 46.7 | 74.3 | ||||||||||||
| Income tax (expense) benefit | (5.0) | (4.4) | ||||||||||||
| Net income (loss) | 41.7 | 69.9 | ||||||||||||
| Less: Net income attributable to non-controlling interests | (113.7) | (132.8) | ||||||||||||
| Net income (loss) attributable to Surgery Partners, Inc. | $ | (72.0) | $ | (62.9) | ||||||||||
Revenues. The following table sets forth patient service revenues and other service revenues (in millions):
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Patient service revenues | $ | 2,416.2 | $ | 2,361.1 | ||||||||||
| Other service revenues | 58.9 | 62.6 | ||||||||||||
| Total revenues | $ | 2,475.1 | $ | 2,423.7 | ||||||||||
24
Table of Contents
Patient service revenues increased 2.3% to $2,416.2 million for the nine months ended September 30, 2026 compared to $2,361.1 million for the nine months ended September 30, 2025. The increase was primarily driven by a 4.6% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed during the nine months ended September 30, 2026. The increase in days adjusted same-facility revenues was attributable to a 0.3% increase in same-facility case volumes and a 4.2% increase in same-facility revenue per case.
Cost of Revenues. Cost of revenues was $1,939.7 million for the nine months ended September 30, 2026 compared to $1,870.9 million for the nine months ended September 30, 2025. The increase was primarily driven by an increase in performance of high acuity procedures and increased hospital provider taxes related to certain state supplemental programs. As a percentage of revenues, cost of revenues was 78.4% and 77.2% for the nine months ended September 30, 2026 and 2025, respectively.
General and Administrative Expenses. General and administrative expenses were $116.2 million and $94.5 million for the nine months ended September 30, 2026 and 2025, respectively. The increase was driven by lower cash and equity incentive-based compensation for the nine months ended September 30, 2025 due to year-to-date performance. As a percentage of revenues, general and administrative expenses were 4.7% and 3.9% for the nine months ended September 30, 2026 and 2025, respectively.
Depreciation and Amortization. Depreciation and amortization expenses were $117.4 million and $116.1 million for the nine months ended September 30, 2026 and 2025, respectively. As a percentage of revenues, depreciation and amortization expenses were 4.7% and 4.8% for the nine months ended September 30, 2026 and 2025, respectively.
Transaction and Integration Costs. The Company incurred $56.6 million of transaction and integration costs for the nine months ended September 30, 2026 compared to $55.4 million for the nine months ended September 30, 2025.
Net (Gain) Loss on Disposals, Consolidations and Deconsolidations. The net (gain) loss on disposals, consolidations and deconsolidations for the nine months ended September 30, 2026 and 2025 includes activity discussed in Note 2. "Acquisitions, Disposals and Deconsolidations" of the accompanying notes to the condensed consolidated financial statements.
Loss on Debt Extinguishment. We incurred a loss on debt extinguishment of $3.7 million for the nine months ended September 30, 2026 related to a voluntary prepayment of $285.0 million on our Term Loan (See Note 3. "Long-Term Debt" to our condensed consolidated financial statements).
Interest Expense, Net. Interest expense, net was $206.8 million for the nine months ended September 30, 2026 compared to $205.0 million for the nine months ended September 30, 2025. As a percentage of revenues, interest expense, net was 8.4% and 8.5% for the nine months ended September 30, 2026 and 2025, respectively.
Income Tax (Expense) Benefit. Income tax expense was $5.0 million and $4.4 million for the nine months ended September 30, 2026 and September 30, 2025, respectively. The effective tax rate was 10.7% and 5.9% for the nine months ended September 30, 2026 and 2025, respectively. See Note 7. "Income Taxes" for additional information related to the Company's effective tax rates for the nine months ended September 30, 2026 and 2025, including why these rates differed from the U.S. federal statutory rate of 21%.
Net Income Attributable to Non-Controlling Interests. As a percentage of revenues, net income attributable to non-controlling interests was 4.6% and 5.5% for the nine months ended September 30, 2026 and 2025, respectively.
Liquidity and Capital Resources
Cash and cash equivalents were $354.5 million at September 30, 2026 compared to $239.9 million at December 31, 2025.
The primary source of our operating cash flows is the collection of accounts receivable from private insurance companies, federal and state agencies (under the Medicare and Medicaid programs) and individuals. Our cash flows provided by operating activities was $174.5 million for the nine months ended September 30, 2026 compared to $170.9 million for the nine months ended September 30, 2025. The $3.6 million increase was primarily driven by timing of changes in working capital.
Net cash provided by investing activities for the nine months ended September 30, 2026 was $434.8 million compared to net cash used in investing activities of $120.5 million for the nine months ended September 30, 2025. The $555.3 million increase in cash provided by investing activities was primarily driven by a $455.4 million increase in proceeds from divestitures (including the Idaho Transaction), a $42.4 million reduction in payments for acquisitions, and a $39.6 million increase in other investing activity primarily related to receivables from unconsolidated affiliates.
Net cash used in financing activities for the nine months ended September 30, 2026 was $494.7 million compared to $116.5 million for the nine months ended September 30, 2025. The increase of $378.2 million was primarily driven by a $398.2 million increase in paydowns of long-term debt partially offset by a $14.6 million reduction in borrowings on long-term debt.
Capital Resources
Net working capital was approximately $581.4 million at September 30, 2026 compared to $535.2 million at December 31, 2025.
In addition to cash flows from operations and available cash, other sources of capital include amounts available on our Revolver as well as anticipated continued access to the capital markets.
25
Table of Contents
Material Cash Requirements
During 2026, the Company made a voluntary prepayment of $285.0 million on its Term Loan without premium or penalty. As a result of the prepayment, the Term Loan is no longer subject to quarterly payments prior to maturity. See Note 3. "Long-Term Debt" for additional disclosure related to the prepayment. There have been no other material changes outside of the ordinary course of business to our upcoming cash obligations during the nine months ended September 30, 2026 from those disclosed under “Material Cash Requirements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2025 Annual Report on Form 10-K.
Summary
Broad economic factors, including recent changes in interest rates, inflation and supply chain risks and market volatility, could negatively affect our payor mix, increase the relative proportion of lower margin services we provide and reduce patient volumes, as well as diminish our ability to collect outstanding receivables. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working capital.
If general economic conditions, including recent changes in interest rates, inflation risk and market volatility, continue to deteriorate or remain uncertain for an extended period of time, our ability to access capital could be harmed, which could negatively affect our liquidity and ability to repay our outstanding debt.
Based on our current level of operations, we believe cash flows from operations, available cash, available capacity on our Revolver and continued anticipated access to capital markets, will be adequate to meet our short-term (i.e., 12 months) and long-term (beyond 12 months) liquidity needs.
Certain Non-GAAP Measures
Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with GAAP. The items excluded from this non-GAAP metric are significant components in understanding and evaluating our financial performance. We believe such adjustments are appropriate, as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance. Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used by our management to assess operating performance, make business decisions and allocate resources.
The following table reconciles Adjusted EBITDA to income (loss) before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
Condensed Consolidated Statements of Operations Data: | ||||||||||||||||||||||||||
| Income (loss) before income taxes | $ | 17.7 | $ | 30.8 | $ | 46.7 | $ | 74.3 | ||||||||||||||||||
| Plus (minus): | ||||||||||||||||||||||||||
| Net income attributable to non-controlling interests | (35.2) | (48.0) | (113.7) | (132.8) | ||||||||||||||||||||||
| Interest expense, net | 67.9 | 74.9 | 206.8 | 205.0 | ||||||||||||||||||||||
| Depreciation and amortization | 39.6 | 39.5 | 117.4 | 116.1 | ||||||||||||||||||||||
| Equity-based compensation expense | 6.0 | 2.6 | 15.6 | 17.0 | ||||||||||||||||||||||
Transaction and integration costs (1) | 22.6 | 12.6 | 56.6 | 55.4 | ||||||||||||||||||||||
| De novo start-up costs | 1.2 | 1.7 | 4.3 | 5.4 | ||||||||||||||||||||||
| Net loss on disposals, consolidations and deconsolidations | 2.9 | 15.6 | 9.6 | 19.0 | ||||||||||||||||||||||
Litigation settlements and other litigation costs (2) | 5.9 | 5.4 | 12.8 | 8.6 | ||||||||||||||||||||||
| Loss on debt extinguishment | 3.7 | 1.3 | 3.7 | 1.3 | ||||||||||||||||||||||
| Undesignated derivative activity | 0.4 | — | 0.4 | — | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 132.7 | $ | 136.4 | $ | 360.2 | $ | 369.3 | ||||||||||||||||||
26
Table of Contents
(1)For the three months ended September 30, 2026, this amount includes due diligence, transaction and integration costs related to acquisitions (both completed and in the pipeline - collectively “M&A costs”) of $14.1 million and other costs, including severance, IT implementation and revenue cycle standardization of $8.5 million. For the three months ended September 30, 2025, this amount includes M&A costs of $8.6 million and other costs, including severance, IT implementation and revenue cycle standardization of $4.0 million.
For the nine months ended September 30, 2026, this amount includes M&A costs of $38.5 million and other costs, including severance, IT implementation and revenue cycle standardization of $18.1 million. For the nine months ended September 30, 2025, this amount includes M&A costs of $39.5 million and other costs, including severance, IT implementation and revenue cycle standardization of $15.9 million.
(2)This amount includes a litigation settlement loss of $0.4 million and $5.1 million for the three months ended September 30, 2026 and 2025, respectively. This amount also includes other litigation costs of $5.5 million and $0.3 million for the three months ended September 30, 2026 and 2025, respectively
This amount includes a litigation settlement loss of $2.9 million and $7.3 million for the nine months ended September 30, 2026 and 2025, respectively. This amount also includes other litigation costs of $9.9 million and $1.3 million for the nine months ended September 30, 2026 and 2025, respectively.
We use Credit Agreement EBITDA as a measure of liquidity and to determine our compliance under certain covenants pursuant to the credit agreement governing our senior secured credit facilities, as amended. Credit Agreement EBITDA is determined on a trailing twelve-month basis. We have included it because we believe that it provides investors with additional information about our ability to incur and service debt and make capital expenditures. Credit Agreement EBITDA is not a measurement of liquidity under GAAP and should not be considered in isolation or as a substitute for any other measure calculated in accordance with GAAP. The items excluded from Credit Agreement EBITDA are significant components in understanding and evaluating our liquidity. Our calculation of Credit Agreement EBITDA may not be comparable to similarly titled measures reported by other companies.
When we use the term "Credit Agreement EBITDA," we are referring to Adjusted EBITDA, as defined above, further adjusted for acquisitions and synergies. These adjustments do not relate to our historical financial performance and instead relate to estimates compiled by management and calculated in conformance with the definition of "Consolidated EBITDA" used in the credit agreement.
The following table reconciles Credit Agreement EBITDA to cash flows from operating activities, the most directly comparable GAAP financial measure (in millions and unaudited):
| Twelve Months Ended September 30, 2026 | ||||||||
| Cash flows from operating activities | $ | 277.9 | ||||||
| Plus (minus): | ||||||||
| Non-cash interest expense, net | (10.0) | |||||||
| Non-cash lease expense | (39.0) | |||||||
| Deferred income taxes | (12.3) | |||||||
| Equity in earnings of unconsolidated affiliates, net of distributions received | 0.4 | |||||||
| Changes in operating assets and liabilities, net of acquisitions and divestitures | 69.1 | |||||||
| Income tax expense | 18.6 | |||||||
| Net income attributable to non-controlling interests | (157.7) | |||||||
| Interest expense, net | 274.4 | |||||||
| Transaction and integration costs | 75.1 | |||||||
| De novo start-up costs | 5.6 | |||||||
| Litigation settlements and other litigation costs | 14.6 | |||||||
| Undesignated derivative activity | 0.4 | |||||||
Acquisitions and synergies (1) | (58.8) | |||||||
| Credit Agreement EBITDA | $ | 458.3 | ||||||
(1)Represents impact of acquisitions as if each acquisition had occurred on October 1, 2025. Further this includes revenue and cost synergies from other business initiatives and de novo facilities, as defined in the credit agreement.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to market risk primarily from exposure to changes in interest rates based on our financing, investing and cash management activities. We utilize a balanced mix of maturities along with both fixed rate and variable rate debt to manage our exposures to changes in interest rates. Additionally, we periodically enter into interest rate swap and cap agreements to manage our exposure to interest rate fluctuations. Our interest rate cap agreements are derivative instruments that provide protection against increases in variable interest rates above a specified contractual rate, based on common notional principal amounts and maturity dates. The notional amounts of the agreements represent balances used solely to calculate contingent cash settlements and do not represent our assets or liabilities. Under these agreements, we receive cash payments from the counterparty when the applicable variable interest rate exceeds the cap rate. Our credit risk related to these agreements is considered low because the agreements are with creditworthy financial institutions. Cash settlements under
27
Table of Contents
these agreements are made on a net basis. These derivatives have been recognized in the financial statements at their respective fair values. Changes in the fair value of these derivatives, which are designated as cash flow hedges, are included in other comprehensive income.
Our variable rate debt instruments are primarily indexed to the prime rate or SOFR. Without derivatives, interest rate changes would result in gains or losses in the market value of our fixed rate debt portfolio due to differences in market interest rates and the rates at the inception of the debt agreements. Based on our indebtedness and the effectiveness of our interest rate cap agreements at September 30, 2026, we do not expect changes in interest rates to have a material effect on our net earnings or cash flows in 2026.
For more information regarding our interest rate swap and cap agreements, please refer to Note 5. "Derivatives and Hedging Activities" of the accompanying notes to the condensed consolidated financial statements for additional information.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including the chief executive officer and the chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2026. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
28
Table of Contents
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are, from time to time, subject to claims and suits, or threats of claims or suits, relating to our business, including claims for damages for personal injuries, breach of management contracts and employment related claims. In certain of these actions, plaintiffs request payment for damages, including punitive damages, which may not be covered by insurance or may otherwise have a material adverse effect on our business or results of operations. In the opinion of management, we are not currently a party to any proceedings that would have a material adverse effect on our business, financial condition, or results of operations.
Item 1A. Risk Factors
As of September 30, 2026, there have been no material changes with respect to the risk factors discussed in our 2025 Annual Report on Form 10-K, except as described below:
We may not complete the Merger within the anticipated timeframe, or at all, which could have a material adverse impact on our business, financial condition or results of operations, as well as negatively impact the per share price of our common stock.
On October 23, 2026, we entered into the Original Merger Agreement which was further amended on November 8, 2026 by the Merger Agreement Amendment. For more information, see Note 11, Subsequent Events, in Item 1 of this report. The consummation of the Merger is subject to the satisfaction or waiver, to the extent permitted by law, of certain customary closing conditions, as set forth in the Amended Merger Agreement, including, but not limited to: (i) the adoption of the Amended Merger Agreement by the Company’s stockholders; (ii) the expiration or termination of any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and (iii) the absence of any law or order enjoining or otherwise prohibiting the Merger. In addition, the obligation of each party to consummate the Merger is conditioned upon the other party’s representations and warranties being true in all respects (subject to certain customary materiality exceptions) and the other party having performed in all material respects its covenants, obligations and conditions under the Amended Merger Agreement. The obligation of Parent and Merger Subsidiary to consummate the Merger is also subject to the absence of a Material Adverse Effect (as defined in the Amended Merger Agreement) on the Company that is continuing. A number of the conditions to completion of the Merger are not within our control, and, in addition, the Merger may fail to close for other reasons. We cannot provide any assurance that the Merger will be consummated on the terms specified in the Amended Merger Agreement, within the anticipated timeframe or at all.
Failure to complete the Merger within the anticipated timeframe, or at all, could adversely affect our business and the market price of our common stock in a number of ways, including:
•The price of our common stock may decline to the extent that current market price of our common stock reflects assumptions that the Merger will be completed and/or completed on a timely basis;
•The failure to complete the Merger may result in negative publicity and negatively affect our relationship with our stockholders, employees or our other business relationships;
•If the Merger is not completed, the time and resources committed by our management team could have been devoted to pursuing other business opportunities and initiatives; and
•Under specified circumstances, upon termination of the Amended Merger Agreement, we may be required to pay Parent a termination fee of approximately $149.1 million and reimburse Parent for certain reasonable and documented out-of-pocket expenses incurred in connection with the Merger, up to an aggregate cap of $8.25 million. These payments could have a material adverse impact on our business, financial condition, or results of operations.
The announcement and pendency of the Merger could materially adversely affect our business, financial condition or results of operations, as well as negatively impact the share price of our common stock.
The pending Merger, and the announcement thereof, as well as any delays in the expected timeframe, could cause disruption in and create uncertainties, which could have an adverse effect on our business, operating results, financial condition and trading price of our common stock, regardless of whether the Merger is completed, and could cause us not to realize some or all of the benefits that we expect to achieve if the Merger is successfully completed within its expected timeframe. These risks include, but are not limited to:
•A substantial amount of our management’s and employees’ attention has been and will continue to be directed toward the consummation of the Merger and thus is being diverted from our day-to-day operations;
•There may be potential adverse reactions or changes to business relationships with our customers, health system and joint venture partners, suppliers, vendors, employees and other business partners resulting from the announcement or completion of the Merger, including if existing or potential business partners or employees attempt to negotiate changes in existing business
29
Table of Contents
relationships, consider entering into business relationships with parties other than us, delay or defer decisions concerning their business with us, or terminate their existing business relationships with us while the Merger is pending; and
•There may be developments beyond our control, including, but not limited to, developments in macro-economic and industry conditions that may affect the timing or success of the Merger.
We have incurred, and will continue to incur, direct and indirect costs as a result of the proposed Merger.
We have incurred, and will continue to incur, significant costs and expenses, including legal, financial, accounting and other advisory fees and other transaction costs, in connection with the proposed Merger. These costs may exceed our expectations as a result of unexpected factors or events, and any delay in consummation could result in additional transaction-related costs and expenses. We will be required to pay a substantial portion of these costs and expenses whether or not the proposed Merger is completed and may receive little or no benefit from them if it is not completed. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses. Additionally, the Amended Merger Agreement also contains customary termination provisions and provides for an approximately $149.1 million termination fee payable by the Company to Parent under certain circumstances. In certain circumstances, the Company may be required to reimburse Parent for certain reasonable and documented out-of-pocket expenses incurred in connection with the Merger, up to an aggregate cap of $8.25 million.
Restrictions in the Amended Merger Agreement could limit our ability to pursue business opportunities while the Merger is pending.
Due to certain restrictions in the Amended Merger Agreement on the conduct of our business prior to completing the Merger, we may be unable (without Parent’s prior written consent, not to be unreasonably withheld, conditioned or delayed, subject to the exceptions set forth in the Amended Merger Agreement), during the pendency of the Merger, to pursue certain strategic transactions, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.
Uncertainties associated with the Merger may cause a loss of our employees during the pendency of the Merger and under Parent’s ownership following the Merger.
Our current and prospective employees may experience uncertainty about their future roles under Parent’s management following the Merger, which may materially adversely affect our ability to attract, retain, and motivate key personnel during the pendency of the Merger. Our employees could lose productivity as a result of uncertainty regarding their employment following the Merger. Key personnel may depart the Company because of issues relating to the uncertainty and difficulty of the post-closing operations of our business or a desire not to remain with the Company under Parent’s management following the Merger. Accordingly, no assurance can be given that we will be able to retain key employees to the same extent that we have been able to in the past. We may lose significant expertise and talent relating to our business. The loss of any member of the senior management team could impair our ability to execute our business plan and growth strategy, have a negative impact on our revenues and the effective working relationships that our executive management have developed and cause employee morale problems and the loss of additional key employees and business partners.
We may be the target of securities class action and derivative lawsuits that could result in substantial costs and may delay or prevent the Merger from being completed.
We may in the future be the target of securities class action and derivative lawsuits, including putative stockholder complaints or stockholder class action complaints, as a result of our entry into the Amended Merger Agreement. Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. The outcome of litigation is uncertain and we may not be successful in defending against future claims brought against us even if they are without merit. Regardless of the outcome, any such lawsuits or enforcement proceedings commenced against us in connection with the Merger could delay or prevent completion of the Merger, including through an injunction prohibiting completion, require significant time and resources, divert the attention of our management and employees from our day-to-day business, result in substantial costs and otherwise adversely affect our business, financial condition or results of operations. Adverse judgments or settlements could have a negative impact on our liquidity and financial condition.
Our executive officers and directors may have interests in the proposed Merger that are different from, or in addition to, those of our stockholders generally.
Our executive officers and directors may have interests in the proposed Merger that are different from the interests of our stockholders generally, including, among others, the acceleration of the vesting of equity awards, receipt by certain executive officers of severance payments and benefits upon a qualifying termination within a set time period following the Merger, and continued indemnification following the Merger. These interests, among others, may influence, or appear to influence, our executive officers and directors and cause them to view the Merger differently from how our stockholders generally may view it.
30
Table of Contents
Even if the Merger is completed, our stockholders will remain subject to certain risks relating to the Merger.
If the Merger is consummated, each share of our common stock (other than certain excluded shares, including the shares held by rollover stockholders) held by our stockholders immediately prior to the Effective Time will be cancelled and automatically cease to exist and will be converted into the right to receive $25.00 per share in cash and any Additional Consideration, as applicable, without interest, subject to applicable withholding taxes. Risks to our stockholders include:
•The Per Share Consideration is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or operating results or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock;
•Other than the rollover stockholders, our current stockholders will not participate in any future growth of our business or benefit from any future increase in its value; and
•Receipt of the Merger Consideration under the Amended Merger Agreement is taxable to stockholders that are treated as U.S. holders for U.S. federal income tax purposes.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On February 26, 2026, the Board of Directors of the Company authorized a new share repurchase program that permits the repurchase of up to $200 million of the Company’s common stock. No repurchases were made during the three months ended September 30, 2026, and $200 million of authorization remains available.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Insider Trading Arrangements
From time to time, certain of our executive officers and directors have, and we expect they will in the future, enter into, amend and terminate written trading arrangements pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 or otherwise. During the three months ended September 30, 2026, none of the Company’s directors or officers adopted terminated
31
Table of Contents
Item 6. Exhibits
| No. | Description | |||||||
| 2.1* | Agreement and Plan of Merger, dated as of October 23, 2026, by and among Surgery Partners, Inc., Spyglass Topco, LLC, Spyglass Merger Subsidiary, Inc. and, solely for the limited purposes set forth therein, Bon Secours Mercy Health, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed October 26, 2026). | |||||||
| 2.2 | Amendment No. 1 to the Agreement and Plan of Merger, dated as of November 8, 2026, by and among the Company, Parent, Merger Subsidiary and Guarantor (incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed November 9, 2026). | |||||||
| 10.1* | Voting and Support Agreement, dated as of October 23, 2026, by and among Spyglass Topco, LLC, Surgery Partners, Inc. and the Reinvestment Stockholders party thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 26, 2026). | |||||||
| 10.2 | Securities Purchase Agreement by and among IHC Health Services, Inc., Mountain View Hospital, LLC, SMBI Idaho, LLC, and Surgery Partners, Inc. dated September 14, 2026. | |||||||
| 10.3 | Securities Purchase Agreement by and among IHC Health Services, Inc., Idaho Falls Community Hospital, LLC, SMBI Idaho, LLC, and Surgery Partners, Inc. dated September 14, 2026. | |||||||
| 31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 101.INS | Inline XBRL Taxonomy Extension Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL (included in Exhibit 101). | |||||||
| * | Certain schedules and exhibits have been omitted pursuant to Instruction 4 of Item 1.01 and in accordance with Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request. | |||||||
32
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SURGERY PARTNERS, INC. | |||||||||||
Date: | November 9, 2026 | By: | /s/ David T. Doherty | ||||||||
| David T. Doherty | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
| (Principal Financial and Accounting Officer) | |||||||||||
33