Pediatrix Medical Group, Inc. (NYSE: MD), a leading provider of
physician services, today reported a loss of $1.84 per share for
the three months ended June 30, 2024. On a non-GAAP basis,
Pediatrix reported Adjusted EPS of $0.34.
For the 2024 second quarter, Pediatrix reported the following
results:
- Net revenue of $504 million;
- Net loss of $153 million; and
- Adjusted EBITDA of $58 million.
“Our second quarter operating results exceeded our expectations
and reflected stable patient volumes, improved payor mix, and
operating efficiencies,” said James D. Swift, M.D., Chief Executive
Officer of Pediatrix Medical Group. “Our previously discussed
portfolio management plans are well underway and we expect to
complete these plans by the end of 2024. We believe that these
operating plans, our strengthening financial position, and our
focus on hospital-based care and maternal-fetal medicine will
benefit all of our stakeholders.”
Operating Results–Three Months Ended June 30, 2024
Pediatrix’s net revenue for the three months ended June 30, 2024
was $504.3 million, compared to $500.6 million for the prior-year
period. This increase reflected growth in same-unit revenue of 2.8
percent, partially offset by the impact of non-same unit activity,
primarily practice dispositions.
Same-unit revenue from net reimbursement-related factors
increased by 2.4 percent for the 2024 second quarter as compared to
the prior-year period. This increase primarily reflects improved
payor mix and modest improvements in hospital contract
administrative fees. The percentage of services reimbursed by
commercial and other non-government payors increased by
approximately 230 basis points compared to the prior year
period.
Same-unit revenue attributable to patient volume increased by
0.4 percent for the 2024 second 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
six months ended June 30, 2024. (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 June 30,
2024
Six Months Ended June 30,
2024
Hospital-based patient services
1.0%
1.7%
Office-based patient services
(1.2)%
0.7%
Neonatology services (within
hospital-based services):
Neonatal intensive care unit (NICU)
days
(0.8)%
0.9%
For the 2024 second quarter, practice salaries and benefits
expense was $357.8 million, compared to $354.0 million for the
prior-year period. This comparison primarily reflects increases in
same-unit clinical compensation costs, partially offset by the
impact of non-same unit activity, primarily practice
dispositions.
For the 2024 second quarter, general and administrative expenses
were $56.6 million, as compared to $58.0 million for the prior-year
period. This decline primarily reflects net staffing reductions
that more than offset increased internal staffing as part of the
Company’s ongoing development of its hybrid revenue cycle
management structure.
For 2024 second quarter, transformational and restructuring
related expenses totaled $13.6 million. These expenses related
primarily to practice dispositions and revenue cycle management
transition activities.
Adjusted EBITDA, which is defined as earnings before interest,
taxes, depreciation and amortization, transformational and
restructuring related expenses, and loss on disposal of businesses
and impairment losses, was $57.9 million for the 2024 second
quarter, compared to $59.1 million for the prior-year period.
Depreciation and amortization expense was $8.8 million for the
second quarter of 2024, compared to $8.9 million for the prior-year
period.
Interest expense was $10.3 million for the second quarter of
2024, compared to $11.2 million for the second quarter of 2023,
reflecting lower outstanding borrowings.
During the second quarter of 2024, the Company recorded an
aggregate non-cash impairment loss of $192.9 million related to
goodwill and long-lived assets related to the Company’s portfolio
management plan.
Pediatrix generated a net loss of $153.0 million, or $1.84 per
diluted share, for the 2024 second quarter, based on a weighted
average 83.3 million shares outstanding. This compares with net
income of $28.3 million, or $0.34 per diluted share, for the 2023
second quarter, based on a weighted average 82.7 million shares
outstanding.
For the second quarter of 2024, Pediatrix reported Adjusted EPS
of $0.34, compared to $0.39 for the second quarter of 2023. For
these periods, Adjusted EPS is defined as diluted income per common
and common equivalent share excluding non-cash amortization
expense, stock-based compensation expense, transformational and
restructuring related expenses, loss on disposal of businesses and
impairment losses, and discrete tax events.
Operating Results – Six Months Ended June 30, 2024
For the six months ended June 30, 2024, Pediatrix generated
revenue of $999.4 million, compared to $991.6 million for the
prior-year period. Pediatrix generated a net loss of $149.0
million, or $1.79 per share, for the six months ended June 30,
2024, based on a weighted average 83.1 million shares outstanding,
which compares to income of $42.5 million, or $0.52 per share,
based on a weighted average 82.4 million shares outstanding for the
first six months of 2023. Adjusted EBITDA for the six months ended
June 30, 2024 was $95.1 million, compared to $99.2 million for the
prior year. For the six months ended June 30, 2024, Pediatrix
reported Adjusted EPS of $0.54, compared to $0.62 in the same
period of 2023.
Financial Position and Cash Flow – Continuing Operations
Pediatrix had cash and cash equivalents of $19.4 million at June
30, 2024, compared to $73.3 million on December 31, 2023, and net
accounts receivable were $274.2 million.
For the second quarter of 2024, Pediatrix generated cash from
continuing operations of $109.3 million, compared to $92.6 million
during the second quarter of 2023. During the second quarter of
2024, the Company used $7.0 million to fund capital
expenditures.
At June 30, 2024, Pediatrix had total debt outstanding of $622
million, consisting of its $400 million in 5.375% Senior Notes due
2030 and $222 million in borrowings under its Term A Loan. At June
30, 2024, the Company had no outstanding borrowings under its $450
million revolving line of credit.
Portfolio Management Update
As previously disclosed, during the second quarter of 2024,
Pediatrix formalized its practice portfolio management plans,
resulting in a decision to exit almost all of its affiliated
office-based practices, other than maternal-fetal medicine. The
Company expects to complete these exits prior to the end of 2024.
In addition, Pediatrix previously disclosed its intent to exit its
primary and urgent care service line. During and subsequent to the
end of the 2024 second quarter, the Company completed the exit of
its primary and urgent care service line through two separate
transactions.
In aggregate, the office-based practices that the Company
intends to exit and the primary and urgent care clinics that have
been divested contributed net revenue of approximately $200 million
in 2023. As previously disclosed, Pediatrix expects that the
annualized favorable impact to Adjusted EBITDA resulting from its
portfolio management plans to be approximately $30 million.
Leadership Transitions
Chief Financial Officer Transition
Pediatrix announced today that its board of directors has
appointed Ms. Kasandra Rossi, who currently serves as the Company’s
Senior Vice President, Financial Reporting and Assistant Treasurer,
to succeed Mr. C. Marc Richards as Executive Vice President, Chief
Financial Officer and Treasurer of the Company. The transition will
be effective on or about October 1, 2024, following the anticipated
completion of the next phase of the Company’s previously announced
transition of its outsourced enterprise revenue cycle management
services and the advancement of the Company’s planned portfolio
management activities.
Chief Administrative Officer Appointment
The Company also announced today that its board of directors has
appointed Ms. Mary Ann E. Moore to serve as the Company’s Chief
Administrative Officer, in addition to her existing roles as the
Company’s Executive Vice President, General Counsel and Secretary,
effective as of August 1, 2024.
In addition, Pediatrix announced that Curtis B. Pickert, M.D.
has transitioned from his role as the Company’s Executive Vice
President, Chief Operating Officer and will now serve as
Pediatrix’s Executive Vice President, Chief Physician Executive,
effective as of August 1, 2024.
2024 Outlook
As previously disclosed, Pediatrix anticipates that its 2024
Adjusted EBITDA, as defined below, will be in a range of $200
million to $220 million.
Non-GAAP Measures
A reconciliation of Adjusted EBITDA and Adjusted EPS to the most
directly comparable GAAP measures for the three and six months
ended June 30, 2024 and 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 August 20, 2024 by dialing
1-866-207-1041, access code 7909485. The replay will also be
available at www.pediatrix.com.
ABOUT PEDIATRIX MEDICAL GROUP
Pediatrix® Medical Group, Inc. (NYSE:MD) is a 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 multiple pediatric subspecialties.
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. 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 practice portfolio management plans and
whether the Company is able to achieve the expected favorable
impact to Adjusted EBITDA therefrom; the impact of the Company’s
termination of its then 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 June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Net revenue
$
504,296
$
500,577
$
999,397
$
991,585
Operating expenses:
Practice salaries and benefits
357,808
354,032
726,946
716,267
Practice supplies and other operating
expenses
32,369
31,089
63,454
61,809
General and administrative expenses
56,565
58,013
116,763
117,072
Depreciation and amortization
8,791
8,945
19,099
17,898
Transformational and restructuring related
expenses
13,579
—
22,059
—
Goodwill impairment
154,243
—
154,243
—
Fixed assets impairments
20,112
—
20,112
—
Intangible assets impairments
7,679
—
7,679
—
Loss on disposal of businesses
10,873
—
10,873
—
Total operating expenses
662,019
452,079
1,141,228
913,046
(Loss) income from operations
(157,723
)
48,498
(141,831
)
78,539
Investment and other (loss) income
(161
)
1,189
1,852
1,823
Interest expense
(10,308
)
(11,230
)
(20,907
)
(21,620
)
Equity in earnings of unconsolidated
affiliate
464
490
982
917
Total non-operating expenses
(10,005
)
(9,551
)
(18,073
)
(18,880
)
(Loss) income before income taxes
(167,728
)
38,947
(159,904
)
59,659
Income tax benefit (provision)
14,703
(10,665
)
10,914
(17,171
)
Net (loss) income
$
(153,025
)
$
28,282
$
(148,990
)
$
42,488
Other comprehensive (loss) income, net of
tax
Unrealized holding gain (loss) on
investments, net of tax of $66, $126, $86 and $353
200
(387
)
260
217
Total comprehensive (loss) income
$
(152,825
)
$
27,895
$
(148,730
)
$
42,705
Per common and common equivalent share
data (diluted):
Net (loss) income:
$
(1.84
)
$
0.34
$
(1.79
)
$
0.52
Weighted average common shares
83,332
82,664
83,074
82,377
Pediatrix Medical Group,
Inc.
Reconciliation of Net (Loss)
Income to Adjusted EBITDA
(in thousands)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Net (loss) income
$
(153,025
)
$
28,282
$
(148,990
)
$
42,488
Interest expense
10,308
11,230
20,907
21,620
Income tax (benefit) provision
(14,703
)
10,665
(10,914
)
17,171
Depreciation and amortization expense
8,791
8,945
19,099
17,898
Transformational and restructuring related
expenses
13,579
—
22,059
—
Goodwill impairment
154,243
—
154,243
—
Fixed assets impairments
20,112
—
20,112
—
Intangible assets impairments
7,679
—
7,679
—
Loss on disposal of businesses
10,873
—
10,873
—
Adjusted EBITDA
$
57,857
$
59,122
$
95,068
$
99,177
Pediatrix Medical Group,
Inc.
Reconciliation of Diluted Net
Income per Share
to Adjusted (Loss) Income per
Diluted Share (“Adjusted EPS”)
(in thousands, except per
share data)
(Unaudited)
Three Months Ended June
30,
2024
2023
Weighted average diluted shares
outstanding
83,332
82,664
Net (loss) income and diluted net (loss)
income per share
$
(153,025
)
$
(1.84
)
$
28,282
$
0.34
Adjustments (1):
Amortization (net of tax of $533 and
$512)
1,599
0.02
1,533
0.02
Stock-based compensation (net of tax of
$500 and $782)
1,501
0.02
2,344
0.03
Transformational and restructuring
expenses (net of tax of $3,395)
10,184
0.12
—
—
Goodwill impairment (net of tax of
$15,490)
138,753
1.67
—
—
Fixed assets impairments (net of tax of
$5,028)
15,084
0.18
—
—
Intangible assets impairments (net of tax
of $1,920)
5,759
0.07
—
—
Loss on disposal of businesses (net of tax
of $2,718)
8,155
0.10
—
—
Net impact from discrete tax events
328
—
150
—
Adjusted income and diluted EPS
$
28,338
$
0.34
$
32,309
$
0.39
(1) A blended tax rate of 25% was used to
calculate the tax effects of the adjustments for the three months
ended June 30, 2024 and 2023, other than for goodwill impairment
for the relevant period. Tax effects for the goodwill impairment
approximate 10% due to a portion of the expense being
non-deductible.
Six Months Ended June
30,
2024
2023
Weighted average diluted shares
outstanding
83,074
82,377
Net (loss) income and diluted net (loss)
income per share
$
(148,990
)
$
(1.79
)
$
42,488
$
0.52
Adjustments (1):
Amortization (net of tax of $1,396 and
$1,010)
4,188
0.05
3,029
0.04
Stock-based compensation (net of tax of
$1,215 and $1,534)
3,647
0.04
4,601
0.06
Transformational and restructuring
expenses (net of tax of $5,515)
16,544
0.20
—
—
Goodwill impairment (net of tax of
$15,490)
138,753
1.67
—
—
Fixed assets impairments (net of tax of
$5,028)
15,084
0.18
—
—
Intangible assets impairments (net of tax
of $1,920)
5,759
0.07
—
—
Loss on disposal of businesses (net of tax
of $2,718)
8,155
0.10
—
—
Net impact from discrete tax events
2,004
0.02
870
—
Adjusted income and diluted EPS
$
45,144
$
0.54
$
50,988
$
0.62
(1) A blended tax rate of 25% was used to
calculate the tax effects of the adjustments for the six months
ended June 30, 2024 and 2023, other than for goodwill impairment
for the relevant period. Tax effects for the goodwill impairment
approximate 10% due to a portion of the expense being
non-deductible.
Pediatrix Medical Group,
Inc.
Balance Sheet
Highlights
(in thousands)
(Unaudited)
As of June 30, 2024
As of December 31,
2023
Assets:
Cash and cash equivalents
$
19,402
$
73,258
Investments
113,795
104,485
Accounts receivable, net
274,164
272,313
Other current assets
21,851
33,398
Intangible assets, net
10,193
21,240
Operating and finance lease right-of-use
assets
65,392
70,294
Goodwill, other assets, property and
equipment
1,490,554
1,644,822
Total assets
$
1,995,351
$
2,219,810
Liabilities and shareholders'
equity:
Accounts payable and accrued expenses
$
267,333
$
350,798
Total debt, including finance leases,
net
630,370
633,334
Operating lease liabilities
67,940
68,314
Other liabilities
323,247
318,303
Total liabilities
1,288,890
1,370,749
Total shareholders' equity
706,461
849,061
Total liabilities and shareholders'
equity
$
1,995,351
$
2,219,810
Pediatrix Medical Group,
Inc.
Reconciliation of Net Loss to
Forward-Looking Adjusted EBITDA
(in thousands)
(Unaudited)
Year Ended December 31,
2024
Net loss
$
(112,507
)
$
(97,907
)
Interest expense
40,020
40,020
Income tax provision
2,580
7,980
Depreciation and amortization expense
37,000
37,000
Transformational and restructuring related
expenses
40,000
40,000
Goodwill and long-lived asset
impairments
182,034
182,034
Loss on disposal of businesses
10,873
10,873
Adjusted EBITDA
$
200,000
$
220,000
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240806739762/en/
Charles Lynch Senior Vice President, Finance and Strategy
954-384-0175, x 5692 charles.lynch@pediatrix.com
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