Pediatrix Medical Group Reports Second Quarter Results

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 $0.34 per share for the three months ended June 30, 2023. On a non-GAAP basis, Pediatrix reported Adjusted EPS from continuing operations of $0.39.

For the 2023 second quarter, Pediatrix reported the following results from continuing operations:

  • Net revenue of $501 million;
  • Income from continuing operations of $28 million; and
  • Adjusted EBITDA of $59 million.

“Our second quarter operating results were in line with our expectations and reflect stable patient volumes and strong cash generation,” said James D. Swift, M.D., Chief Executive Officer of Pediatrix Medical Group. “As we focus on improvements in our revenue cycle management operations, our priorities also include strengthening and growing our organization through new sales, the expansion of our primary and urgent care clinic footprint, and contemplated allocation of our capital toward acquisitions.”

Operating Results from Continuing Operations – Three Months Ended June 30, 2023

Pediatrix’s net revenue for the three months ended June 30, 2023 was $500.6 million, compared to $486.0 million for the prior-year period. Pediatrix’s overall same-unit revenue increased by 3.2 percent, slightly offset by the impact of net non-same unit activity.

Same-unit revenue from net reimbursement-related factors increased by 2.6 percent for the 2023 second quarter as compared to the prior-year period. This primarily reflects improved collections related to revenue cycle management activities and increases in contract and administrative fees, partially offset by a decrease in Coronavirus Aid, Relief, and Economic Security (“CARES”) Act funds recorded.

During the second quarter of 2023, the Company did not record any miscellaneous revenue for CARES Act funds, compared to $0.7 million in the prior year period, which decreased the Company’s same-unit revenue from net reimbursement-related factors by 0.2 percent for the three months ended June 30, 2023. The percentage of services reimbursed by commercial and other non-government payors was unchanged compared to the prior-year period.

Same-unit revenue attributable to patient volume increased by 0.6 percent for the 2023 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, 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 June 30, 2023

 

Six Months Ended

June 30, 2023

 

 

 

 

 

Hospital-based patient services

 

0.0%

 

0.5%

Office-based patient services

 

2.4%

 

1.9%

 

 

 

 

 

Neonatology services

(within hospital-based services):

 

 

 

 

 

Total births

 

(2.0)%

 

(2.0)%

Neonatal intensive care unit (NICU) days

 

0.7%

 

0.1%

For the 2023 second quarter, practice salaries and benefits expense was $354.0 million, compared to $330.8 million for the prior-year period. This increase primarily reflects same-unit clinical compensation increases as well as increases in incentive compensation, based on practice results.

For the 2023 second quarter, general and administrative expenses were $58.0 million, as compared to $61.2 million for the prior-year period. This net decrease is primarily related to cost reductions from professional services and other non-staffing expenses.

For the second quarter of 2023, the Company did not incur any transformational and restructuring related expenses, compared to $5.3 million for the second 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 $59.1 million for the 2023 second quarter, compared to $65.6 million for the prior-year period. Funds recorded from the provider relief fund established by the CARES Act favorably impacted Adjusted EBITDA by approximately $0.5 million for the second quarter of 2022.

Depreciation and amortization expense was $8.9 million for the second quarter of 2023, compared to $8.8 million for the second quarter of 2022.

Investment and other income was $1.2 million for the second quarter of 2023, compared to $0.8 million for the second quarter of 2022.

Interest expense was $11.2 million for the second quarter of 2023, compared to $8.4 million for the second 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 $28.3 million, or $0.34 per diluted share, for the 2023 second quarter, based on a weighted average 82.7 million shares outstanding. This compares with income from continuing operations of $30.7 million, or $0.36 per diluted share, for the 2022 second quarter, based on a weighted average 85.6 million shares outstanding. The decrease in weighted average shares outstanding is related to share repurchases completed during 2022.

For the second quarter of 2023, Pediatrix reported Adjusted EPS from continuing operations of $0.39, compared to $0.47 for the second 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 – Six Months Ended June 30, 2023

For the six months ended June 30, 2023, Pediatrix generated revenue from continuing operations of $991.6 million, compared to $968.3 million for the prior-year period. Adjusted EBITDA from continuing operations for the six months ended June 30, 2023 was $99.2 million, compared to $116.2 million for the prior year. Pediatrix generated income from continuing operations of $42.5 million, or $0.52 per share, for the six months ended June 30, 2023, based on a weighted average 82.4 million shares outstanding, which compares to income from continuing operations of $9.8 million, or $0.11 per share, based on a weighted average 85.9 million shares outstanding for the first six months of 2022. For the six months ended June 30, 2023, Pediatrix reported Adjusted EPS from continuing operations of $0.62, compared to $0.79 in the same period of 2022.

Financial Position and Cash Flow – Continuing Operations

Pediatrix had cash and cash equivalents of $5.8 million at June 30, 2023, compared to $9.8 million at December 31, 2022, and net accounts receivable was $270.9 million.

For the second quarter of 2023, Pediatrix generated cash from continuing operations of $92.6 million, compared to $81.6 million during the second quarter of 2022. During the second quarter of 2023, the Company used $8.1 million to fund capital expenditures.

At June 30, 2023, Pediatrix had total debt outstanding of $675 million, consisting of its $400 million in 5.375% Senior Notes due 2030; $234 million in borrowings under its Term A Loan; and $41 million in borrowings under its revolving line of credit.

2023 Outlook

As previously disclosed, Pediatrix anticipates that its 2023 Adjusted EBITDA, as defined below, will be in a range of $235 million to $245 million.

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 six months ended June 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 August 17, 2023 by dialing 1-866-207-1041, access Code 6377399. 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 transition to a third-party revenue cycle management provider; 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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net revenue

 

$

500,577

 

 

$

486,033

 

 

$

991,585

 

 

$

968,262

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Practice salaries and benefits

 

 

354,032

 

 

 

330,757

 

 

 

716,267

 

 

 

673,912

 

Practice supplies and other operating expenses

 

 

31,089

 

 

 

29,843

 

 

 

61,809

 

 

 

58,332

 

General and administrative expenses

 

 

58,013

 

 

 

61,165

 

 

 

117,072

 

 

 

122,452

 

Depreciation and amortization

 

 

8,945

 

 

 

8,775

 

 

 

17,898

 

 

 

17,544

 

Transformational and restructuring related expenses

 

 

 

 

 

5,338

 

 

 

 

 

 

6,759

 

Total operating expenses

 

 

452,079

 

 

 

435,878

 

 

 

913,046

 

 

 

878,999

 

Income from operations

 

 

48,498

 

 

 

50,155

 

 

 

78,539

 

 

 

89,263

 

Investment and other income

 

 

1,189

 

 

 

844

 

 

 

1,823

 

 

 

1,719

 

Interest expense

 

 

(11,230

)

 

 

(8,409

)

 

 

(21,620

)

 

 

(20,227

)

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(57,016

)

Equity in earnings of unconsolidated affiliates

 

 

490

 

 

 

443

 

 

 

917

 

 

 

948

 

Total non-operating expenses

 

 

(9,551

)

 

 

(7,122

)

 

 

(18,880

)

 

 

(74,576

)

Income from continuing operations before income taxes

 

 

38,947

 

 

 

43,033

 

 

 

59,659

 

 

 

14,687

 

Income tax provision

 

 

(10,665

)

 

 

(12,332

)

 

 

(17,171

)

 

 

(4,931

)

Income from continuing operations

 

 

28,282

 

 

 

30,701

 

 

 

42,488

 

 

 

9,756

 

Loss from discontinued operations, net of tax

 

 

 

 

 

(3,565

)

 

 

 

 

 

(3,812

)

Net income

 

 

28,282

 

 

 

27,136

 

 

 

42,488

 

 

 

5,944

 

Net loss attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

4

 

Net income attributable to Pediatrix Medical Group, Inc.

 

$

28,282

 

 

$

27,136

 

 

$

42,488

 

 

$

5,948

 

Other comprehensive (loss) income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (loss) gain on investments,

net of tax of $126, $414, $353 and $1,308

 

 

(387

)

 

 

(1,234

)

 

 

217

 

 

 

(3,902

)

Total comprehensive income attributable to Pediatrix

Medical Group, Inc.

 

$

27,895

 

 

$

25,902

 

 

$

42,705

 

 

$

2,046

 

Per common and common equivalent share data (diluted):

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Pediatrix Medical Group, Inc.:

 

$

0.34

 

 

$

0.32

 

 

$

0.52

 

 

$

0.07

 

Weighted average common shares

 

 

82,664

 

 

 

85,619

 

 

 

82,377

 

 

 

85,914

 

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

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Income from continuing operations attributable to Pediatrix

Medical Group, Inc.

 

$

28,282

 

 

$

30,701

 

 

$

42,488

 

 

$

9,760

 

Interest expense

 

 

11,230

 

 

 

8,409

 

 

 

21,620

 

 

 

20,227

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

57,016

 

Income tax provision

 

 

10,665

 

 

 

12,332

 

 

 

17,171

 

 

 

4,931

 

Depreciation and amortization expense

 

 

8,945

 

 

 

8,775

 

 

 

17,898

 

 

 

17,544

 

Transformational and restructuring related expenses

 

 

 

 

 

5,338

 

 

 

 

 

 

6,759

 

Adjusted EBITDA from continuing operations attributable to

Pediatrix Medical Group, Inc.

 

$

59,122

 

 

$

65,555

 

 

$

99,177

 

 

$

116,237

 

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

June 30,

 

 

 

2023

 

 

2022

 

Weighted average diluted shares outstanding

 

82,664

 

 

85,619

 

Income from continuing operations and diluted income from

continuing operations per share attributable to Pediatrix

Medical Group, Inc.

 

$

28,282

 

 

$

0.34

 

 

$

30,701

 

 

$

0.36

 

Adjustments (1):

 

 

 

 

 

 

 

 

 

 

 

 

Amortization (net of tax of $512 and $541)

 

 

1,533

 

 

 

0.02

 

 

 

1,624

 

 

 

0.02

 

Stock-based compensation (net of tax of $782 and $1,084)

 

 

2,344

 

 

 

0.03

 

 

 

3,252

 

 

 

0.04

 

Transformational and restructuring expenses (net of tax of $1,335)

 

 

 

 

 

 

 

 

4,003

 

 

 

0.05

 

Net impact from discrete tax events

 

 

150

 

 

 

 

 

 

294

 

 

 

 

Adjusted income and diluted EPS from continuing operations

attributable to Pediatrix Medical Group, Inc.

 

$

32,309

 

 

$

0.39

 

 

$

39,874

 

 

$

0.47

 

(1) A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the three months ended June 30, 2023 and 2022.

 

 

Six Months Ended

June 30,

 

 

 

2023

 

 

2022

 

Weighted average diluted shares outstanding

 

82,377

 

 

85,914

 

Income from continuing operations and diluted income from

continuing operations per share attributable to Pediatrix

Medical Group, Inc.

 

$

42,488

 

 

$

0.52

 

 

$

9,760

 

 

$

0.11

 

Adjustments (1):

 

 

 

 

 

 

 

 

 

 

 

 

Amortization (net of tax of $1,010 and $1,082)

 

 

3,029

 

 

 

0.04

 

 

 

3,245

 

 

 

0.04

 

Stock-based compensation (net of tax of $1,534 and $2,193)

 

 

4,601

 

 

 

0.06

 

 

 

6,578

 

 

 

0.07

 

Transformational and restructuring expenses (net of tax of $1,690)

 

 

 

 

 

 

 

 

5,069

 

 

 

0.06

 

Loss on early extinguishment of debt (net of tax of $14,254)

 

 

 

 

 

 

 

 

42,762

 

 

 

0.50

 

Net impact from discrete tax events

 

 

870

 

 

 

 

 

 

786

 

 

 

0.01

 

Adjusted income and diluted EPS from continuing operations

attributable to Pediatrix Medical Group, Inc.

 

$

50,988

 

 

$

0.62

 

 

$

68,200

 

 

$

0.79

 

(1) A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the six months ended June 30, 2023 and 2022.

Pediatrix Medical Group, Inc.

Balance Sheet Highlights

(in thousands)

(Unaudited)

 

 

As of

June 30, 2023

 

 

As of

December 31, 2022

 

Assets:

 

 

 

 

Cash and cash equivalents

 

$

5,849

 

 

$

9,824

 

Investments

 

 

98,490

 

 

 

93,239

 

Accounts receivable, net

 

 

270,852

 

 

 

296,787

 

Other current assets

 

 

22,576

 

 

 

28,139

 

Intangible assets, net

 

 

16,800

 

 

 

18,491

 

Operating and finance lease right-of-use assets

 

 

67,088

 

 

 

66,924

 

Goodwill, other assets, property and equipment

 

 

1,823,855

 

 

 

1,834,483

 

Total assets

 

$

2,305,510

 

 

$

2,347,887

 

Liabilities and shareholders' equity:

 

 

 

 

Accounts payable and accrued expenses

 

$

277,680

 

 

$

374,225

 

Total debt, including finance leases, net

 

 

681,192

 

 

 

651,279

 

Operating lease liabilities

 

 

64,633

 

 

 

65,802

 

Other liabilities

 

 

339,630

 

 

 

364,949

 

Total liabilities

 

 

1,363,135

 

 

 

1,456,255

 

Total shareholders' equity

 

 

942,375

 

 

 

891,632

 

Total liabilities and shareholders' equity

 

$

2,305,510

 

 

$

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.

 

$

110,000

 

 

$

120,000

 

Interest expense

 

 

42,200

 

 

 

40,000

 

Income tax provision

 

 

44,800

 

 

 

47,000

 

Depreciation and amortization expense

 

 

38,000

 

 

 

38,000

 

Adjusted EBITDA from continuing operations attributable to Pediatrix Medical Group, Inc.

 

$

235,000

 

 

$

245,000

 

 

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