MD Pediatrix Medical Group Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 02, 2023

 

 

 

 

 

 

Pediatrix Medical Group, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Florida			001-12111	26-3667538
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
1301 Concord Terrace
Sunrise, Florida				33323
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: 954-384-0175

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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 $.01 per share		MD		The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

On November 2, 2023, Pediatrix Medical Group, Inc., a Florida corporation (the “Company”), issued a press release announcing the results of its operations for the three months and nine months ended September 30, 2023 (the “Third Quarter Release”). A copy of the Third Quarter Release is attached hereto as Exhibit 99.1 and is hereby incorporated in this Current Report by reference. The information contained in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement or other document filed by the Company under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

Exhibit Index

99.1— Press Release of Pediatrix Medical Group, Inc. dated November 2, 2023.

104 — Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

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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 hereunto duly authorized.

			Pediatrix Medical Group, Inc.
Date:	November 2, 2023	By:	/s/ C. Marc Richards
			C. Marc Richards Chief Financial Officer

 

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FOR MORE INFORMATION:

Charles Lynch

Senior Vice President, Finance and Strategy

954-384-0175, x 5692

charles.lynch@pediatrix.com

FOR IMMEDIATE RELEASE

Pediatrix Medical Group Reports Third Quarter Results

FORT LAUDERDALE, Fla., November 2, 2023 - 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:

 

“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.

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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		Six 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.

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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.

 

 

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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

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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.

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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

 

 

 

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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

 

 

 

 

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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.

 

 

 

 

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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

 

 

 

 

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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

 

 

 

 

 

 

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v3.23.3

Document And Entity Information	Nov. 02, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 02, 2023
Entity Registrant Name	Pediatrix Medical Group, Inc.
Entity Central Index Key	0000893949
Entity Emerging Growth Company	false
Securities Act File Number	001-12111
Entity Incorporation, State or Country Code	FL
Entity Tax Identification Number	26-3667538
Entity Address, Address Line One	1301 Concord Terrace
Entity Address, City or Town	Sunrise
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33323
City Area Code	954
Local Phone Number	384-0175
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $.01 per share
Trading Symbol	MD
Security Exchange Name	NYSE

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