Pediatrix Medical Group, Inc. (NYSE: MD), the nation’s leading
provider of highly specialized health care for women, children and
babies, today reported earnings from continuing operations of $0.26
per share for the three months ended September 30, 2023. On a
non-GAAP basis, Pediatrix reported Adjusted EPS from continuing
operations of $0.32.
For the 2023 third quarter, Pediatrix reported the following
results from continuing operations:
- Net revenue of $507 million;
- Income from continuing operations of $21 million; and
- Adjusted EBITDA of $50 million.
“We believe the underlying fundamentals of our business remain
strong, however, the third quarter was more challenged than
expected with relatively soft patient volumes and persistent
practice-level cost growth,” said James D. Swift, M.D., Chief
Executive Officer of Pediatrix Medical Group. “We are moving with
speed and agility to take actions designed to enhance operating
effectiveness, support and bolster our core business and generate a
stable gross-margin profile.”
Operating Results from Continuing Operations – Three Months
Ended September 30, 2023
Pediatrix’s net revenue for the three months ended September 30,
2023 was $506.6 million, compared to $489.9 million for the
prior-year period. Pediatrix’s overall same-unit revenue increased
by 4.1 percent, slightly offset by the impact of net non-same unit
activity.
Same-unit revenue from net reimbursement-related factors
increased by 5.3 percent for the 2023 third quarter as compared to
the prior-year period. This primarily reflects improvements in cash
collection rates in the current period as compared to those rates
in the prior year period, which prior year rates were significantly
impacted by unfavorable revenue cycle management performance, and a
150 basis-point increase in the percentage of services reimbursed
by commercial and other non-government payors compared to the
prior-year period.
Same-unit revenue attributable to patient volume declined by 1.2
percent for the 2023 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, 2023. (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, 2023
Nine Months Ended September
30, 2023
Hospital-based patient services
(1.8)%
(0.3)%
Office-based patient services
0.0%
0.7%
Neonatology services (within
hospital-based services):
Neonatal intensive care unit (NICU)
days
(0.7)%
(0.2)%
For the 2023 third quarter, practice salaries and benefits
expense was $368.4 million, compared to $342.9 million for the
prior-year period. This increase primarily reflects same-unit
clinical compensation increases, increases in incentive
compensation based on practice results, as well as increases in
malpractice expense and group health insurance costs.
For the 2023 third quarter, general and administrative expenses
were $57.4 million, as compared to $57.9 million for the prior-year
period.
For the third quarter of 2023, the Company did not incur any
transformational and restructuring related expenses, compared to
$1.0 million for the third quarter of 2022.
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 $50.4 million for the 2023
third quarter, compared to $58.3 million for the prior-year
period.
Depreciation and amortization expense was $9.2 million for the
third quarter of 2023, compared to $9.0 million for the third
quarter of 2022.
Investment and other income was $0.3 million for the third
quarter of 2023, compared to $0.6 million for the third quarter of
2022.
Interest expense was $10.4 million for the third quarter of
2023, compared to $9.5 million for the third quarter of 2022. This
increase primarily reflects higher interest rates on the Company’s
adjustable-rate borrowings, partially offset by lower total
borrowings.
Pediatrix generated income from continuing operations of $21.4
million, or $0.26 per diluted share, for the 2023 third quarter,
based on a weighted average 83.0 million shares outstanding. This
compares with income from continuing operations of $28.8 million,
or $0.35 per diluted share, for the 2022 third quarter, based on a
weighted average 82.8 million shares outstanding.
For the third quarter of 2023, Pediatrix reported Adjusted EPS
from continuing operations of $0.32, compared to $0.40 for the
third quarter of 2022. 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,
transformational and restructuring related expenses, and discrete
tax events.
Operating Results from Continuing Operations – Nine Months Ended
September 30, 2023
For the nine months ended September 30, 2023, Pediatrix
generated revenue from continuing operations of $1.50 billion,
compared to $1.46 billion for the prior-year period. Adjusted
EBITDA from continuing operations for the nine months ended
September 30, 2023 was $149.6 million, compared to $174.5 million
for the prior year. Pediatrix generated income from continuing
operations of $63.9 million, or $0.77 per share, for the nine
months ended September 30, 2023, based on a weighted average 82.5
million shares outstanding, which compares to income from
continuing operations of $38.6 million, or $0.45 per share, based
on a weighted average 84.8 million shares outstanding for the first
nine months of 2022. For the nine months ended September 30, 2023,
Pediatrix reported Adjusted EPS from continuing operations of
$0.94, compared to $1.20 in the same period of 2022.
Financial Position and Cash Flow – Continuing Operations
Pediatrix had cash and cash equivalents of $21.2 million at
September 30, 2023, compared to $9.8 million at December 31, 2022,
and net accounts receivable was $277.4 million.
For the third quarter of 2023, Pediatrix generated cash from
continuing operations of $81.1 million, compared to $88.4 million
for the third quarter of 2022. During the third quarter of 2023,
the Company used $9.2 million to fund capital expenditures.
At September 30, 2023, Pediatrix had total debt outstanding of
$631 million, consisting of its $400 million in 5.375% Senior Notes
due 2030 and $231 million in borrowings under its Term A Loan.
There were no borrowings under the Company’s revolving line of
credit at September 30, 2023.
2023 Outlook
Pediatrix anticipates that its 2023 Adjusted EBITDA, as defined
above, will be in a range of $200 million to $210 million. This
outlook reflects Adjusted EBITDA for the first nine months of 2023
of $149.6 million.
Revenue Cycle Management (RCM) Vendor Transition
On October 30, 2023, Pediatrix notified R1 RCM, its enterprise
RCM services vendor, that it is terminating its services agreement,
effective December 15, 2023, for service level metrics related to
performance. In connection with the termination, Pediatrix
anticipates incurring certain immaterial early termination
fees.
Following the termination of the services agreement, Pediatrix
plans to utilize a hybrid revenue cycle management function that
utilizes both the Company’s corporate personnel as well as one or
more third-party service providers that Pediatrix intends to engage
to support these activities.
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, 2023 and 2022 and of forward looking Adjusted EBITDA
from continuing operations to the most directly comparable GAAP
measure for the year ending December 31, 2023 is provided in the
financial tables of this press release.
Earnings Conference Call
Pediatrix 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.pediatrix.com. A
telephone replay of the conference call will be available from
12:45 p.m. ET today through midnight ET November 16, 2023 by
dialing 1-866-207-1041, access Code 1823424. The replay will also
be available at www.pediatrix.com.
ABOUT PEDIATRIX MEDICAL GROUP
Pediatrix® Medical Group, Inc. (NYSE:MD) is the nation’s leading
provider of physician services. Pediatrix-affiliated clinicians are
committed to providing coordinated, compassionate and clinically
excellent services to women, babies and children across the
continuum of care, both in hospital settings and office-based
practices. Specialties include obstetrics, maternal-fetal medicine
and neonatology complemented by more than 20 pediatric
subspecialties, as well as pediatric primary and urgent care
clinics. The group’s high-quality, evidence-based care is bolstered
by significant investments in research, education,
quality-improvement and safety initiatives. The physician-led
company was founded in 1979 as a single neonatology practice and
today provides its highly specialized and often critical care
services through more than 5,000 affiliated physicians and other
clinicians in 37 states. To learn more about Pediatrix, visit
www.pediatrix.com or follow us on Facebook, Instagram, LinkedIn,
Twitter and the Pediatrix blog. Investment information can be found
at www.pediatrix.com/investors.
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 Company’s termination of its current third-party
revenue cycle management provider and transition to a hybrid
revenue cycle management model with one or more new third-party
service providers, including any transition costs associated
therewith; the impact of surprise billing legislation; the effects
of economic conditions on the Company’s business; the effects of
the Affordable Care Act and potential healthcare reform; 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 impact of the COVID-19 pandemic on the
Company and its financial condition and results of operations; 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 or organic growth
initiatives; 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.
Pediatrix Medical Group,
Inc.
Consolidated Statements of
Income and Comprehensive Income
(in thousands, except per
share data)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net revenue
$
506,612
$
489,915
$
1,498,197
$
1,458,177
Operating expenses:
Practice salaries and benefits
368,404
342,850
1,084,671
1,016,762
Practice supplies and other operating
expenses
31,319
31,857
93,128
90,189
General and administrative expenses
57,406
57,888
174,478
180,340
Depreciation and amortization
9,211
8,956
27,109
26,500
Transformational and restructuring related
expenses
—
977
—
7,736
Total operating expenses
466,340
442,528
1,379,386
1,321,527
Income from operations
40,272
47,387
118,811
136,650
Investment and other income
273
617
2,096
2,336
Interest expense
(10,374
)
(9,516
)
(31,994
)
(29,743
)
Loss on early extinguishment of debt
—
—
—
(57,016
)
Equity in earnings of unconsolidated
affiliate
661
371
1,578
1,319
Total non-operating expenses
(9,440
)
(8,528
)
(28,320
)
(83,104
)
Income from continuing operations before
income taxes
30,832
38,859
90,491
53,546
Income tax provision
(9,441
)
(10,051
)
(26,612
)
(14,982
)
Income from continuing operations
21,391
28,808
63,879
38,564
Income (loss) from discontinued
operations, net of tax
—
1,920
—
(1,892
)
Net income
21,391
30,728
63,879
36,672
Net loss attributable to noncontrolling
interest
—
—
—
4
Net income attributable to Pediatrix
Medical Group, Inc.
$
21,391
$
30,728
$
63,879
$
36,676
Other comprehensive income (loss), net of
tax
Unrealized holding gain (loss) on
investments, net of tax of $ -, $508, $100 and $1,816
1
(1,515
)
218
(5,417
)
Total comprehensive income attributable to
Pediatrix Medical Group, Inc.
$
21,392
$
29,213
$
64,097
$
31,259
Per common and common equivalent share
data (diluted):
Net income attributable to Pediatrix
Medical Group, Inc.:
$
0.26
$
0.37
$
0.77
$
0.43
Weighted average common shares
82,950
82,776
82,492
84,821
Pediatrix Medical Group,
Inc.
Reconciliation of Income from
Continuing Operations
to Adjusted EBITDA from
Continuing Operations Attributable to
Pediatrix Medical Group,
Inc.
(in thousands)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Income from continuing operations
attributable to Pediatrix Medical Group, Inc.
$
21,391
$
28,808
$
63,879
$
38,568
Interest expense
10,374
9,516
31,994
29,743
Loss on early extinguishment of debt
—
—
—
57,016
Income tax provision
9,441
10,051
26,612
14,982
Depreciation and amortization expense
9,211
8,956
27,109
26,500
Transformational and restructuring related
expenses
—
977
—
7,736
Adjusted EBITDA from continuing operations
attributable to Pediatrix Medical Group, Inc.
$
50,417
$
58,308
$
149,594
$
174,545
Pediatrix Medical Group,
Inc.
Reconciliation of Diluted
Income from Continuing Operations per Share
to Adjusted Income from
Continuing Operations per Diluted Share (“Adjusted EPS”)
(in thousands, except per
share data)
(Unaudited)
Three Months Ended September
30,
2023
2022
Weighted average diluted shares
outstanding
82,950
82,776
Income from continuing operations and
diluted income from continuing operations per share attributable to
Pediatrix Medical Group, Inc.
$
21,391
$
0.26
$
28,808
$
0.35
Adjustments (1):
Amortization (net of tax of $498 and
$554)
1,493
0.02
1,662
0.02
Stock-based compensation (net of tax of
$791 and $1,030)
2,373
0.03
3,090
0.03
Transformational and restructuring
expenses (net of tax of $244)
—
—
733
0.01
Net impact from discrete tax events
1,114
0.01
(1,083
)
(0.01
)
Adjusted income and diluted EPS from
continuing operations attributable to Pediatrix Medical Group,
Inc.
$
26,371
$
0.32
$
33,210
$
0.40
(1) A blended tax rate of 25% was used to
calculate the tax effects of the adjustments for the three months
ended September 30, 2023 and 2022.
Nine Months Ended September
30,
2023
2022
Weighted average diluted shares
outstanding
82,492
84,821
Income from continuing operations and
diluted income from continuing operations per share attributable to
Pediatrix Medical Group, Inc.
$
63,879
$
0.77
$
38,568
$
0.45
Adjustments (1):
Amortization (net of tax of $1,508 and
$1,635)
4,522
0.06
4,907
0.06
Stock-based compensation (net of tax of
$2,325 and $3,223)
6,974
0.09
9,668
0.12
Transformational and restructuring
expenses (net of tax of $1,934)
—
—
5,802
0.07
Loss on early extinguishment of debt (net
of tax of $14,254)
—
—
42,762
0.50
Net impact from discrete tax events
1,984
0.02
(297
)
—
Adjusted income and diluted EPS from
continuing operations attributable to Pediatrix Medical Group,
Inc.
$
77,359
$
0.94
$
101,410
$
1.20
(1) A blended tax rate of 25% was used to
calculate the tax effects of the adjustments for the nine months
ended September 30, 2023 and 2022.
Pediatrix Medical Group,
Inc.
Balance Sheet
Highlights
(in thousands)
(Unaudited)
As of September 30,
2023
As of December 31,
2022
Assets:
Cash and cash equivalents
$
21,179
$
9,824
Investments
103,541
93,239
Accounts receivable, net
277,352
296,787
Other current assets
18,452
28,139
Intangible assets, net
15,486
18,491
Operating and finance lease right-of-use
assets
72,443
66,924
Goodwill, other assets, property and
equipment
1,817,886
1,834,483
Total assets
$
2,326,339
$
2,347,887
Liabilities and shareholders'
equity:
Accounts payable and accrued expenses
$
302,583
$
374,225
Total debt, including finance leases,
net
636,620
651,279
Operating lease liabilities
70,303
65,802
Other liabilities
348,848
364,949
Total liabilities
1,358,354
1,456,255
Total shareholders' equity
967,985
891,632
Total liabilities and shareholders'
equity
$
2,326,339
$
2,347,887
Pediatrix Medical Group,
Inc.
Reconciliation of Income from
Continuing Operations
to Forward-Looking Adjusted
EBITDA from Continuing Operations Attributable to
Pediatrix Medical Group,
Inc.
(in thousands)
(Unaudited)
Year Ended December 31,
2023
Income from continuing operations
attributable to Pediatrix Medical Group, Inc.
$
86,000
$
94,000
Interest expense
42,300
41,300
Income tax provision
34,700
37,700
Depreciation and amortization expense
37,000
37,000
Adjusted EBITDA from continuing operations
attributable to Pediatrix Medical Group, Inc.
$
200,000
$
210,000
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102399693/en/
Charles Lynch Senior Vice President, Finance and Strategy
954-384-0175, x 5692 charles.lynch@pediatrix.com
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