Mednax, Inc. (NYSE: MD), the national medical group specializing
in prenatal, neonatal, and pediatric services, today reported
earnings from continuing operations of $0.37 per share for the
three months ended September 30, 2021. On a non-GAAP basis, Mednax
reported Adjusted EPS from continuing operations of $0.46.
For the 2021 third quarter, Mednax reported the following
results from continuing operations:
- Net revenue of $493 million;
- Income from continuing operations of $32 million; and
- Adjusted EBITDA of $73 million.
“We are pleased with our third-quarter results, the strategic
steps we have been taking, and the strength of our balance sheet,”
said Mark S. Ordan, Chief Executive Officer of Mednax. “Our
financial performance accompanied many positive steps in the
organization, the combination of which we believe positions us very
well to face challenges and to seize opportunities. Our recent
investment in Brave Care, which brings us a suite of innovative
technology and operating systems, should enable us to accelerate
our activities in pediatric primary and urgent care. All of what we
are doing is part of our drive to lead in the continuum of women’s
and children’s care.”
Operating Results from Continuing Operations – Three Months
Ended September 30, 2021
Mednax’s net revenue for the three months ended September 30,
2021 was $492.9 million, compared to $460.6 million for the
prior-year period. Mednax’s overall same-unit revenue increased by
5.9 percent, modestly complemented by net acquisition activity.
Same-unit revenue attributable to patient volume increased by
6.5 percent for the 2021 third quarter as compared to the
prior-year period. Shown below are year-over-year percentage
changes in certain same-unit volume statistics for the three and
nine months ended September 30, 2021. (Note: figures in the below
table reflect contributions only to net patient service revenue and
exclude other contributions to total same-unit revenue, including
contract and administrative fees.)
Three Months Ended
September 30, 2021
Nine Months
Ended
September 30, 2021
Hospital-based patient services
7.8%
3.5%
Office-based patient services
7.4%
10.8%
Neonatology services
(within hospital-based
services):
Total births
2.8%
1.6%
Neonatal intensive care unit (NICU)
days
5.6%
2.7%
Same-unit revenue from net reimbursement-related factors
decreased by 0.6 percent for the 2021 third quarter as compared to
the prior-year period. The net decrease primarily reflects the fact
that during the 2021 third quarter, the Company did not record any
funds under the Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act, as compared to $14.2 million in CARES Act funds
recorded during the 2020 third quarter. This decreased the
Company’s same-unit revenue from net reimbursement-related factors
by 3.2 percent. This was partially offset by increases in contract
administrative fees; an approximately 80 basis point increase in
the percentage of services reimbursed by commercial and other
non-government payors; and modest improvements in managed care
contracting.
For the 2021 third quarter, practice salaries and benefits
expense was $328.8 million, compared to $309.9 million for the
prior-year period. This increase reflects comparisons with the
temporary reductions in salary expense related to COVID-19 cost
mitigation initiatives during the 2020 third quarter, as well as
current year increases in variable incentive compensation, based on
practice-level revenue and other financial results during the
quarter.
For the 2021 third quarter, general and administrative expenses
were $66.9 million, as compared to $66.3 million for the prior-year
period. This increase primarily reflects higher expenditures
related to information-technology initiatives, as well as
comparisons with temporary reductions in salary expense related to
COVID-19 mitigation initiatives during the 2020 third quarter.
For the third quarter of 2021, transformational and
restructuring related expenses totaled $4.2 million, compared to
$34.3 million for the third quarter of 2020. Of the expense
recorded during the third quarter of 2021, $3.1 million related to
contract termination fees as part of the Company’s transition to a
third-party revenue cycle management provider, while the remainder
related primarily to third-party consulting fees.
Adjusted EBITDA from continuing operations, which is defined as
earnings from continuing operations before interest, taxes,
depreciation and amortization, and transformational and
restructuring related expenses was $73.4 million for the 2021 third
quarter, compared to $72.8 million for the prior-year period. Funds
received from the provider relief fund established by the CARES Act
impacted Adjusted EBITDA positively by approximately $8 million for
the prior-year third quarter.
Depreciation and amortization expense was $8.2 million for the
third quarter of 2021 compared to $7.2 million for the third
quarter of 2020.
Investment and other income was $1.7 million for the third
quarter of 2021 compared to $10.5 million for the third quarter of
2020. The decrease of $8.8 million primarily reflects the reduced
reimbursement received related to the transition services being
provided to the buyer of the Company’s former anesthesiology
medical group.
Interest expense was $17.6 million for the third quarter of 2021
compared to $27.3 million for the third quarter of 2020. This
decrease primarily reflects the Company’s January 2021 redemption
of its $750 million in outstanding principle amount of 5.25% senior
notes due 2023 (the “2023 Notes”).
Mednax generated income from continuing operations of $31.8
million, or $0.37 per diluted share, for the 2021 third quarter,
based on a weighted average 86.1 million shares outstanding. This
compares with loss from continuing operations of $2.7 million, or
$0.03 per diluted share, for the 2020 third quarter, based on a
weighted average 83.9 million shares outstanding.
For the third quarter of 2021, Mednax reported Adjusted EPS from
continuing operations of $0.46, compared to $0.37 for the third
quarter of 2020. For these periods, Adjusted EPS from continuing
operations is defined as diluted income from continuing operations
per common and common equivalent share excluding non-cash
amortization expense, stock-based compensation expense, and
transformational and restructuring related expenses.
Operating Results from Continuing Operations – Nine Months Ended
September 30, 2021
For the nine months ended September 30, 2021, Mednax generated
revenue from continuing operations of $1.41 billion, compared to
$1.32 billion in the prior-year period. Adjusted EBITDA from
continuing operations for the nine months ended September 30, 2021
was $184.4 million, compared to $161.6 million for the prior year.
Mednax generated income from continuing operations of $67.7
million, or $0.79 per share, for the nine months ended September
30, 2021, based on a weighted average 85.8 million shares
outstanding, which compares to a loss from continuing operations of
$14.1 million, or $0.17 per share, based on a weighted average 83.3
million shares outstanding for the first nine months of 2020. For
the nine months ended September 30, 2021, Mednax reported Adjusted
EPS from continuing operations of $1.11, compared to $0.70 in the
same period of 2020. For the nine months ended September 30, 2021
Adjusted EPS also excludes the loss on early extinguishment of debt
and gain on sale of building.
Financial Position and Cash Flow – Continuing Operations
Mednax had cash and cash equivalents of $358 million at
September 30, 2021, compared to $1.12 billion on December 31, 2020,
and net accounts receivable were $262 million. As previously
disclosed, Mednax used $764 million in cash in January 2021 to
redeem its $750 million 2023 Notes, including cash premiums and
accrued interest.
During the third quarter of 2021, Mednax generated cash from
continuing operations of $67.2 million, compared to $127.1 million
during the third quarter of 2020, primarily reflecting decreases in
cash flow from income taxes, changes in accounts payable and
accrued expenses, and accounts receivable, partially offset by
improved results. During the third quarter of 2021, the Company
used $20.0 million to fund an investment in Brave Care, $12.3
million to fund practice acquisitions and $10.5 million in capital
expenditures.
During the third quarter of 2021, Mednax permanently reduced the
size of its revolving credit facility from $1.2 billion to $600
million. At September 30, 2021, Mednax had no outstanding
borrowings under its $600 million revolving credit facility and had
total debt outstanding of $1.0 billion, consisting solely of its
senior notes due 2027, and net debt of $642 million.
Discontinued Operations
Discontinued operations for the three and nine months ended
September 30, 2021 and 2020 includes the operating results of the
Company’s former anesthesiology and radiology medical groups as
well as adjustments to the losses on sale for relevant periods.
Non-GAAP Measures
A reconciliation of Adjusted EBITDA from continuing operations
and Adjusted EPS from continuing operations to the most directly
comparable GAAP measures for the three and nine months ended
September 30, 2021 and 2020 is provided in the financial tables of
this press release.
Earnings Conference Call
Mednax, Inc. will host an investor conference call to discuss
the quarterly results at 9 a.m., ET today. The conference call
Webcast may be accessed from the Company’s Website, www.mednax.com.
A telephone replay of the conference call will be available from
1:30 p.m. ET today through midnight ET November 11, 2021 by dialing
866.207.1041, access Code 1506799. The replay will also be
available at www.mednax.com.
ABOUT MEDNAX
Mednax, Inc. is a national medical group comprised of the
nation’s leading providers of physician services. Physicians and
advanced practitioners practicing as part of Mednax’s Pediatrix and
Obstetrix Medical Groups are reshaping the delivery of care within
their specialties and subspecialties, using evidence-based tools,
continuous quality initiatives, clinical research and telehealth
programs to enhance patient outcomes and provide high-quality,
cost-effective care. The Company was founded in 1979, and today,
through its affiliated professional entities, Mednax provides
services through a network of more than 2,300 physicians in 39
states and Puerto Rico. Additional information is available at
www.mednax.com.
Certain statements and information in this press release may be
deemed to contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements may include, but are not limited to,
statements relating to the Company’s objectives, plans and
strategies, and all statements, other than statements of historical
facts, that address activities, events or developments that we
intend, expect, project, believe or anticipate will or may occur in
the future. These statements are often characterized by terminology
such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,”
“plan,” “will,” “expect,” “estimate,” “project,” “positioned,”
“strategy” and similar expressions, and are based on assumptions
and assessments made by the Company’s management in light of their
experience and their perception of historical trends, current
conditions, expected future developments and other factors they
believe to be appropriate. Any forward-looking statements in this
press release are made as of the date hereof, and the Company
undertakes no duty to update or revise any such statements, whether
as a result of new information, future events or otherwise.
Forward-looking statements are not guarantees of future performance
and are subject to risks and uncertainties. Important factors that
could cause actual results, developments, and business decisions to
differ materially from forward-looking statements are described in
the Company’s most recent Annual Report on Form 10-K and its
Quarterly Reports on Form 10-Q, including the sections entitled
“Risk Factors”, as well the Company’s current reports on Form 8-K,
filed with the Securities and Exchange Commission, and include the
impact of the COVID-19 pandemic on the Company and its financial
condition and results of operations; the effects of economic
conditions on the Company’s business; the effects of the Affordable
Care Act and potential changes thereto or a repeal thereof; the
Company’s relationships with government-sponsored or funded
healthcare programs, including Medicare and Medicaid, and with
managed care organizations and commercial health insurance payors;
the Company’s ability to comply with the terms of its debt
financing arrangements; the Company’s transition to a third-party
revenue cycle management provider; the impact of the divestiture of
the Company’s anesthesiology and radiology medical groups; the
impact of management transitions; the timing and contribution of
future acquisitions; the effects of share repurchases; and the
effects of the Company’s transformation initiatives, including its
reorientation on, and growth strategy for, its pediatrics and
obstetrics business.
Mednax, Inc.
Consolidated Statements of
Income
(in thousands, except per
share data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Net revenue
$
492,949
$
460,635
$
1,412,661
$
1,317,321
Operating expenses:
Practice salaries and benefits
328,759
309,904
964,806
909,168
Practice supplies and other operating
expenses
26,122
22,440
72,516
66,455
General and administrative expenses
66,892
66,346
204,376
194,276
Gain on sale of building
—
—
(7,280
)
—
Depreciation and amortization
8,151
7,195
24,288
20,749
Transformational and restructuring related
expenses
4,232
34,291
19,042
60,846
Total operating expenses
434,156
440,176
1,277,748
1,251,494
Income from operations
58,793
20,459
134,913
65,827
Investment and other income
1,686
10,534
11,829
13,064
Interest expense
(17,595
)
(27,250
)
(52,119
)
(83,180
)
Loss on early extinguishment of debt
—
—
(14,532
)
—
Equity in earnings of unconsolidated
affiliate
550
282
1,622
1,081
Total non-operating expenses
(15,359
)
(16,434
)
(53,200
)
(69,035
)
Income (loss) from continuing operations
before
income taxes
43,434
4,025
81,713
(3,208
)
Income tax provision
(11,594
)
(6,677
)
(14,002
)
(10,859
)
Income (loss) from continuing
operations
31,840
(2,652
)
67,711
(14,067
)
(Loss) income from discontinued
operations, net of tax
(1,052
)
(38,392
)
15,716
(718,125
)
Net income (loss)
30,788
(41,044
)
83,427
(732,192
)
Net loss attributable to noncontrolling
interest
7
—
21
—
Net income (loss) attributable to Mednax,
Inc.
$
30,795
$
(41,044
)
$
83,448
$
(732,192
)
Per common and common equivalent share
data (diluted):
Income (loss) from continuing
operations
$
0.37
$
(0.03
)
$
0.79
$
(0.17
)
(Loss) income from discontinued
operations
$
(0.01
)
$
(0.46
)
$
0.18
$
(8.62
)
Net income (loss) attributable to Mednax,
Inc
$
0.36
$
(0.49
)
$
0.97
$
(8.79
)
Weighted average common shares
86,096
83,862
85,759
83,260
Mednax, Inc.
Reconciliation of Income
(Loss) from Continuing Operations
to Adjusted EBITDA from
Continuing Operations Attributable to Mednax, Inc.
(in thousands)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Income (loss) from continuing operations
attributable to Mednax, Inc.
$
31,847
$
(2,652
)
$
67,732
$
(14,067
)
Interest expense
17,595
27,250
52,119
83,180
Gain on sale of building
─
─
(7,280
)
─
Loss on early extinguishment of debt
─
─
14,532
─
Income tax provision
11,594
6,677
14,002
10,859
Depreciation and amortization expense
8,151
7,195
24,288
20,749
Transformational and restructuring related
expenses
4,232
34,291
19,042
60,846
Adjusted EBITDA from continuing operations
attributable to
Mednax, Inc.
$
73,419
$
72,761
$
184,435
$
161,567
Mednax, Inc.
Reconciliation of Diluted
Income (Loss) from Continuing Operations per Share
to Adjusted Income from
Continuing Operations Attributable to Mednax, Inc. per Diluted
Share (“Adjusted EPS”)
(in thousands, except per
share data)
(Unaudited)
Three Months Ended
September 30,
2021
2020
Weighted average diluted shares
outstanding
86,096
83,862
Income (loss) from continuing operations
and diluted income from continuing operations per share
attributable to Mednax, Inc.
$
31,847
$
0.37
$
(2,652
)
$
(0.03
)
Adjustments (1):
Amortization (net of tax of $583 and
$601)
1,749
0.02
1,802
0.02
Stock-based compensation (net of tax of
$1,374 and $1,132)
4,121
0.05
3,398
0.04
Transformational and restructuring
expenses (net of tax of $1,058 and $8,573)
3,174
0.03
25,718
0.31
Net impact from discrete tax events
(901
)
(0.01
)
2,905
0.03
Adjusted income and diluted EPS from
continuing operations attributable to Mednax, Inc.
$
39,990
$
0.46
$
31,171
$
0.37
(1)
A blended statutory rate of 25.0% was used
to calculate the tax effects of the adjustments for the three
months ended September 30, 2021 and 2020.
Nine Months Ended
September 30,
2021
2020
Weighted average diluted shares
outstanding
85,759
83,260
Income (loss) from continuing operations
and diluted income from continuing operations per share
attributable to Mednax, Inc.
$
67,732
$
0.79
$
(14,067
)
$
(0.17
)
Adjustments (1):
Amortization (net of tax of $2,049 and
$1,632)
6,149
0.07
4,896
0.06
Stock-based compensation (net of tax of
$3,737 and $4,550)
11,210
0.13
13,652
0.16
Transformational and restructuring
expenses (net of tax of $4,760
and $15,211)
14,282
0.16
45,635
0.55
Gain on sale of building (net of tax of
$1,820)
(5,460
)
(0.06
)
—
—
Loss on early extinguishment of debt (net
of tax of $3,633)
10,899
0.13
—
—
Net impact from discrete tax events
(9,484
)
(0.11
)
7,849
0.10
Adjusted income and diluted EPS from
continuing operations attributable to Mednax, Inc.
$
95,328
$
1.11
$
57,965
$
0.70
(1)
A blended statutory rate of 25.0% was used
to calculate the tax effects of the adjustments for the nine months
ended September 30, 2021 and 2020.
Mednax, Inc.
Balance Sheet
Highlights
(in thousands)
(Unaudited)
As of
As of
September 30, 2021
December 31, 2020
Assets:
Cash and cash equivalents
$
357,914
$
1,123,843
Investments
98,510
104,870
Accounts receivable, net
261,972
241,931
Other current assets
69,633
78,704
Intangible assets, net
21,617
26,642
Operating and finance lease right-of-use
assets
65,145
55,972
Goodwill, other assets, property and
equipment
1,771,313
1,715,986
Total assets
$
2,646,104
$
3,347,948
Liabilities and equity:
Accounts payable and accrued expenses
$
375,839
$
423,183
Total debt, net
1,005,067
1,744,805
Operating lease liabilities
60,244
59,903
Other liabilities
359,277
372,340
Total liabilities
1,800,427
2,600,231
Total equity
845,677
747,717
Total liabilities and equity
$
2,646,104
$
3,347,948
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211028005329/en/
Charles Lynch Senior Vice President, Finance and Strategy
954-384-0175, x 5692 charles_lynch@mednax.com
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