sgry-20260331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

Form 10-Q

_____________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37576

Surgery Partners, Inc.

(Exact name of registrant as specified in its charter)


Delaware						47-3620923
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

340 Seven Springs Way, Suite 600
Brentwood, Tennessee						37027
(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

Common Stock, par value $0.01 per share

SGRY

The Nasdaq Global Select Market

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 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.


Large accelerated filer ☒						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 April 28, 2026, there were 130,788,162 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)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	23

Signatures		24

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)

	March 31, 2026		December 31, 2025
ASSETS
Current assets:
Cash and cash equivalents	$	182.3	$	239.9
Accounts receivable	603.4		602.2
Inventories	100.5		96.6
Prepaid expenses	38.8		41.1
Other current assets	157.5		170.9
Total current assets	1,082.5		1,150.7
Property and equipment, net of accumulated depreciation of $686.0 and $651.2, respectively	1,134.9		1,153.4


Goodwill and other intangible assets, net	5,245.0		5,235.6
Investments in and advances to affiliates	225.4		234.0
Right-of-use operating lease assets	281.5		289.2

Other long-term assets	72.8		56.8
Total assets	$	8,042.1	$	8,119.7

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	168.6	$	208.7
Accrued payroll and benefits	77.1		64.9
Other current liabilities	235.6		242.6
Current maturities of long-term debt	100.4		99.3
Total current liabilities	581.7		615.5
Long-term debt, less current maturities	3,613.5		3,602.9
Right-of-use operating lease liabilities	271.9		279.9
Long-term deferred tax liabilities	52.1		53.4
Other long-term liabilities	41.6		41.2

Non-controlling interests—redeemable	383.4		395.5

Stockholders' equity:
Preferred stock, $0.01 par value; shares authorized - 20,310,000; shares issued or outstanding - none	—		—
Common stock, $0.01 par value; shares authorized - 300,000,000; shares issued and outstanding - 130,797,216 and 129,321,144, respectively	1.3		1.3
Additional paid-in capital	2,548.3		2,540.6
Accumulated other comprehensive income (loss)	(10.5)		(13.8)
Retained deficit	(851.1)		(815.2)
Total Surgery Partners, Inc. stockholders' equity	1,688.0		1,712.9
Non-controlling interests—non-redeemable	1,409.9		1,418.4
Total stockholders' equity	3,097.9		3,131.3
Total liabilities and stockholders' equity	$	8,042.1	$	8,119.7

See notes to unaudited condensed consolidated financial statements.

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SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, dollars in millions, except per share amounts; shares in thousands)


	Three Months Ended March 31,
	2026		2025

Revenues	$	810.9	$	776.0
Operating expenses:
Salaries and benefits	247.4		238.6
Supplies	220.2		215.8
Professional and medical fees	101.3		95.3
Lease expense	23.0		20.8
Other operating expenses	58.8		43.6
Cost of revenues	650.7		614.1
General and administrative expenses	39.3		36.0
Depreciation and amortization	38.5		36.3
Transaction and integration costs	15.6		24.7
Net loss on disposals, consolidations and deconsolidations	4.3		6.4
Equity in earnings of unconsolidated affiliates	(4.1)		(5.6)
Litigation settlements	2.5		2.2

Other income, net	(1.7)		—
	745.1		714.1
Operating income	65.8		61.9
Interest expense, net	(69.1)		(62.2)
Income (loss) before income taxes	(3.3)		(0.3)
Income tax (expense) benefit	1.2		—
Net income (loss)	(2.1)		(0.3)
Less: Net income attributable to non-controlling interests	(33.8)		(37.4)
Net income (loss) attributable to Surgery Partners, Inc.	$	(35.9)	$	(37.7)

Net loss per share attributable to common stockholders:
Basic	$	(0.28)	$	(0.30)
Diluted (1)	$	(0.28)	$	(0.30)
Weighted average common shares outstanding:
Basic	128,367		126,602
Diluted (1)	128,367		126,602

(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.

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SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, dollars in millions)


	Three Months Ended March 31,
	2026		2025

Net income (loss)	$	(2.1)	$	(0.3)
Other comprehensive income (loss), net of tax:
Derivative activity, net of tax of $0	3.3		(16.6)
Comprehensive income (loss)	1.2		(16.9)
Less: Comprehensive income attributable to non-controlling interests	(33.8)		(37.4)
Comprehensive income (loss) attributable to Surgery Partners, Inc.	$	(32.6)	$	(54.3)

See notes to unaudited condensed consolidated financial statements.

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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	129,321	$	1.3	$	2,540.6	$	(13.8)	$	(815.2)	$	1,418.4	$	3,131.3
Net income (loss)	—	—		—		—		(35.9)		34.2		(1.7)
Equity-based compensation	1,476	—		6.0		—		—		—		6.0
Other comprehensive income (loss)	—	—		—		3.3		—		—		3.3
Acquisition and disposal of shares of non-controlling interests, net	—	—		1.7		—		—		3.3		5.0
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(46.0)		(46.0)
Balance as of March 31, 2026	130,797	$	1.3	$	2,548.3	$	(10.5)	$	(851.1)	$	1,409.9	$	3,097.9




Balance as of December 31, 2024	127,109	$	1.3	$	2,520.9	$	4.8	$	(737.3)	$	1,406.7	$	3,196.4
Net income (loss)	—	—		—		—		(37.7)		32.6		(5.1)
Equity-based compensation	1,084	—		7.6		—		—		—		7.6
Other comprehensive income (loss)	—	—		—		(16.6)		—		—		(16.6)
Acquisition and disposal of shares of non-controlling interests, net	—	—		(2.6)		—		—		25.6		23.0
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(49.3)		(49.3)
Balance as of March 31, 2025	128,193	$	1.3	$	2,525.9	$	(11.8)	$	(775.0)	$	1,415.6	$	3,156.0

See notes to unaudited condensed consolidated financial statements.

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SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [Open]

(Unaudited, dollars in millions)


	Three Months Ended March 31,
	2026		2025

Cash flows from operating activities:
Net income (loss)	$	(2.1)	$	(0.3)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	38.5		36.3
Non-cash lease expense	11.2		9.6
Non-cash interest expense, net	2.3		2.5
Equity-based compensation expense	5.8		7.6
Net loss on disposals, consolidations and deconsolidations	4.3		6.4

Deferred income taxes	(1.3)		(0.3)
Equity in earnings of unconsolidated affiliates, net of distributions received	2.6		1.1

Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable	3.6		4.8

Other operating assets and liabilities	(53.2)		(61.7)
Net cash provided by (used in) operating activities	11.7		6.0

Cash flows from investing activities:
Purchases of property and equipment	(16.0)		(22.7)
Payments for acquisitions, net of cash acquired	(4.2)		(44.0)
Proceeds from disposals of facilities and other assets	—		4.8
Purchases of equity investments	—		(3.8)
Proceeds from sales of equity investments	0.9		—
Other investing activities	5.9		(10.7)
Net cash provided by (used in) investing activities	(13.4)		(76.4)

Cash flows from financing activities:
Principal payments on long-term debt	(193.8)		(119.3)
Borrowings of long-term debt	195.4		213.6
Payments of debt issuance costs	(0.4)		—



Distributions to non-controlling interest holders	(58.0)		(62.3)
Proceeds related to ownership transactions with non-controlling interest holders	0.5		1.7

Other financing activities	0.4		(3.5)
Net cash provided by (used in) financing activities	(55.9)		30.2
Net increase (decrease) in cash and cash equivalents	(57.6)		(40.2)
Cash and cash equivalents at beginning of period	239.9		269.5
Cash and cash equivalents at end of period	$	182.3	$	229.3

See notes to unaudited condensed consolidated financial statements.

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SURGERY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 March 31, 2026, the Company owned or operated a portfolio of 180 surgical facilities, comprised of 161 ASCs and 19 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 89 of these surgical facilities and consolidated 122 surgical facilities for financial reporting purposes.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation of the Company's financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Annual Report on Form 10-K"). Certain prior year amounts have been reclassified to conform with the current year presentation.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in partnerships and limited liability companies controlled by the Company through its ownership of a majority voting interest or other rights granted to the Company by contract to manage and control the affiliate's business. All significant intercompany balances and transactions are eliminated in consolidation.

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., Medicare, Medicaid and private insurance organizations, including plans offered through the health insurance exchanges) 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.

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 March 31,
	2026		2025
Patient service revenues	97.7	%	97.8	%
Other service revenues	2.3	%	2.2	%
Total revenues	100.0	%	100.0	%

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 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.

Other service revenues. Other service revenues include management and administrative service fees derived from the non-consolidated facilities that the Company accounts for under the equity method, management of surgical facilities in which it does not own an interest, and management services provided to physician practices for which the Company is not required to provide capital or additional assets and other non-patient services. The management agreements typically require the Company to provide recurring management services over a multi-year period, which are billed and collected on a monthly basis. The fees derived from these management arrangements are based on a predetermined percentage of the revenues of each facility or practice and are recognized in the period in which management services are rendered and billed.

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 March 31,
	2026				2025
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	398.9	50.4	%	$	393.8	51.9	%
Government	357.4		45.1	%	328.5		43.3	%
Self-pay	19.2		2.4	%	20.1		2.7	%
Other (1)	16.6		2.1	%	16.0		2.1	%
Total patient service revenues	792.1		100.0	%	758.4		100.0	%
Other service revenues	18.8				17.6
Total revenues	$	810.9			$	776.0

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SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(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.

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.

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 three months ended March 31, 2026 is included in Note 2. "Acquisitions, Disposals and Deconsolidations."

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SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A summary of activity related to goodwill for the three months ended March 31, 2026 is as follows (in millions):


Balance as of December 31, 2025	$	5,194.6
Acquisitions, including post acquisition adjustments	10.6
Disposals	—
Balance as of March 31, 2026	$	5,205.2

A detailed evaluation of potential impairment indicators was performed as of March 31, 2026, which specifically considered recent changes in interest rates, inflation risk and market volatility. On the basis of available evidence as of March 31, 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.

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 March 31, 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):


	Three Months Ended March 31,
	2026		2025

Balance at beginning of period	$	395.5	$	438.8
Net income attributable to non-controlling interests—redeemable	(0.4)		4.8
Acquisition and disposal of shares of non-controlling interests, net—redeemable	0.3		1.0
Distributions to non-controlling interest —redeemable holders	(12.0)		(14.1)
Balance at end of period	$	383.4	$	430.5

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.

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SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A summary of the carrying amounts and estimated fair values of the Company's long-term debt follows (in millions):


	Carrying Amount				Fair Value
	March 31, 2026		December 31, 2025		March 31, 2026		December 31, 2025

Senior secured term loan	$	1,371.0	$	1,374.4	$	1,371.0	$	1,379.6
7.250% senior unsecured notes due 2032	$	1,225.0	$	1,225.0	$	1,212.8	$	1,237.3

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 condensed consolidated financial statements include the accounts of variable interest entities ("VIE") in which the Company is the primary beneficiary under the provisions of the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification 810, "Consolidation." The Company has the power to direct the activities that most significantly impact a VIE's economic performance. Additionally, the Company would absorb the majority of the expected losses from any of these entities should such expected losses occur. As of March 31, 2026, the Company's consolidated VIEs consisted of nine surgical facilities and 27 physician practices.

The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025, were $77.1 million and $75.1 million, respectively, and the total liabilities of the consolidated VIEs were $40.4 million and $40.4 million, respectively.\

2. Acquisitions, Disposals and Deconsolidations

Acquisitions

During the three months ended March 31, 2026:

•The Company acquired a controlling interest in one surgical facility for aggregate cash consideration of $4.2 million, net of cash acquired. In connection with this acquisition, the Company preliminarily recognized non-controlling interests of $4.1 million and goodwill of $8.3 million.

During the three months ended March 31, 2025:

•The Company acquired a controlling interest in four surgical facilities and one physician practice for aggregate cash consideration of $44.0 million, net of cash acquired. In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $28.0 million and goodwill of $70.2 million.

•The Company acquired non-controlling interests in one surgical facility and for aggregate cash consideration of $3.8 million. The 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 three months ended March 31, 2026:

•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 loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations.

During the three months ended March 31, 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 pretax net loss on deconsolidation of $3.0 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations. The net gain 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 of the entity immediately prior to the transaction.

•The Company sold or otherwise disposed of its controlling interests in two surgical facilities for aggregate net cash proceeds of $4.3 million. In connection with the transactions, the Company recognized a pre-tax net gain of $0.5 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations.

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SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Long-Term Debt

A summary of long-term debt follows (in millions):


	March 31, 2026		December 31, 2025

Senior secured term loan (1)	$	1,371.0	$	1,374.4
Senior secured revolving credit facility	28.0		—
7.250% senior unsecured notes due 2032	1,225.0		1,225.0
Notes payable and other secured loans	195.4		199.3
Finance lease obligations	925.7		935.5
Less: unamortized debt issuance costs and discounts	(31.2)		(32.0)
Total debt	3,713.9		3,702.2
Less: current maturities	100.4		99.3
Total long-term debt	$	3,613.5	$	3,602.9

(1)Includes unamortized fair value discount of $1.2 million as of both March 31, 2026 and December 31, 2025.

Revolving Credit Facility

As of March 31, 2026, the Company's availability on its $703.8 million senior secured revolving credit facility (the "Revolver") was $666.1 million (including letters of credit of $9.7 million). The increase in outstanding borrowings on the Revolver compared to December 31, 2025 was primarily due to changes in working capital needs.

4. Leases

The Company's operating leases are primarily for real estate, including medical office buildings, and corporate and other administrative offices. The Company's finance leases include certain land, buildings and improvements, medical equipment and information technology and telecommunications assets.

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	March 31, 2026		December 31, 2025

Assets:
Operating lease assets	Right-of-use operating lease assets	$	281.5	$	289.2
Finance lease assets	Property and equipment, net of accumulated depreciation	725.4		740.4
Total leased assets		$	1,006.9	$	1,029.6

Liabilities:
Operating lease liabilities:
Current	Other current liabilities	$	42.2	$	42.7
Long-term	Right-of-use operating lease liabilities	271.9		279.9
Total operating lease liabilities		314.1		322.6
Finance lease liabilities:
Current	Current maturities of long-term debt	39.3		39.0
Long-term	Long-term debt, less current maturities	886.4		896.5
Total finance lease liabilities		925.7		935.5
Total lease liabilities		$	1,239.8	$	1,258.1

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SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the components of the Company's lease expense and their classification in the condensed consolidated statements of operations (in millions):


	Three Months Ended March 31,
	2026		2025

Operating lease costs	$	16.7	$	16.5
Finance lease costs:
Amortization of leased assets	16.9		16.0
Interest on lease liabilities	16.1		18.2
Total finance lease costs	33.0		34.2
Variable and short-term lease costs	6.5		4.6
Total lease costs	$	56.2	$	55.3

The following table presents supplemental cash flow information (in millions):


	Three Months Ended March 31,
	2026		2025

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	16.8	$	15.8
Operating cash outflows from finance leases	15.1		16.7
Financing cash outflows from finance leases	10.8		6.2

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	3.6		10.8
Finance leases	1.5		60.0

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:

March 31, 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

392.0

Active

393.0

Active

December 31, 2028

Deferred premium cap

March 31, 2025

196.0

Active

196.5

Active

December 31, 2028

Deferred premium cap

March 31, 2025

392.0

Active

393.0

Active

December 31, 2028

Deferred premium cap

March 31, 2025

196.0

Active

196.5

Active

December 31, 2028

Deferred premium cap

March 31, 2025

196.0

Active

196.5

Active

December 31, 2028

1,372.0

1,375.5

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 other comprehensive income ("OCI") and subsequently reclassified into interest expense in the same period(s) during which

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SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 $5.4 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):


	March 31, 2026				December 31, 2025
	Assets		Liabilities		Assets		Liabilities





Derivatives in cash flow hedging relationships


Interest rate caps (1)	$	—	$	10.5	$	—	$	13.8

Total	$	—	$	10.5	$	—	$	13.8

(1)Amounts were included in other long-term liabilities on the condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025.

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 March 31,
	Location	2026		2025
Derivatives not designated as hedging instruments
Gain (loss) recognized in income	Other income, net	$	—	$	—


Derivatives in cash flow hedging relationships
Gain (loss) recognized in OCI (effective portion)		$	1.9	$	(5.6)
Gain (loss) reclassified from accumulated OCI into income (effective portion)	Interest expense, net	1.4

SEC Form 10-Q filed by Surgery Partners Inc.