Pediatrix Medical Group Reports Third Quarter Results

Rhea-AI Summary

Pediatrix Medical Group (NYSE: MD) reported Q3 2022 earnings of $0.35 per share, with net revenue of $490 million, down from $492.9 million year-over-year. Adjusted EBITDA was $58 million, reflecting operational challenges in billing and collections, and a decline in reimbursement from commercial payors. Despite these issues, Pediatrix's Adjusted EPS from continuing operations was $0.40. The company anticipates 2022 Adjusted EBITDA will range from $240 million to $245 million, indicating strategic efforts are underway to enhance revenue cycle management.

Positive

• Adjusted EPS from continuing operations increased to $0.40 from $0.37 YoY.
• Anticipated 2022 Adjusted EBITDA of $240-$245 million reflects potential recovery.

Negative

• Net revenue decreased to $490 million from $492.9 million YoY.
• Adjusted EBITDA fell from $73.4 million to $58 million YoY.
• Same-unit revenue declined by 3.2% and reimbursement from commercial payors decreased by 120 basis points.

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)-- 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 $0.35 per share for the three months ended September 30, 2022. On a non-GAAP basis, Pediatrix reported Adjusted EPS from continuing operations of $0.40.

For the 2022 third quarter, Pediatrix reported the following results from continuing operations:

• Net revenue of $490 million;
• Income from continuing operations of $29 million; and
• Adjusted EBITDA of $58 million.

“We are disappointed in our third-quarter operating results, which reflected operational challenges in billing and collections and modest headwinds in volumes and payor mix,” said Mark S. Ordan, Chief Executive Officer of Pediatrix Medical Group. “We have taken significant steps to address what we have identified as priority areas for enhanced resources and processes in revenue cycle management. We have also executed internal plans that will benefit our corporate cost structure beginning in the fourth quarter. Combined, we intend for these steps to position us for improving revenue and bottom-line performance. To assist our efforts, R1, as our revenue cycle partner, is providing enhanced support in a variety of ways to help effectuate our expected improvement, which is incorporated in our updated outlook for 2022 Adjusted EBITDA.”

Operating Results from Continuing Operations – Three Months Ended September 30, 2022

Pediatrix’s net revenue for the three months ended September 30, 2022 was $489.9 million, compared to $492.9 million for the prior-year period. Pediatrix’s overall same-unit revenue decreased by 3.2 percent, partially offset by revenue growth driven by net acquisition activity.

Same-unit revenue from net reimbursement-related factors declined by 3.5 percent for the 2022 third quarter as compared to the prior-year period. This net decrease primarily reflects the impact of certain revenue cycle management transition activities and a modest decline in the percentage of services reimbursed by commercial and other non-government payors compared to the prior-year period, partially offset by increases in contract and administrative fees. The percentage of services reimbursed by commercial and other non-government payors declined by approximately 120 basis points compared to the prior-year period.

Same-unit revenue attributable to patient volume increased by 0.3 percent for the 2022 third quarter as compared to the prior-year period, with growth in other pediatric services, primarily newborn nursery, maternal-fetal medicine, pediatric cardiology and other pediatric services partially offset by declines in neonatology services. Shown below are year-over-year percentage changes in certain same-unit volume statistics for the three and nine months ended September 30, 2022. (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, 2022		Nine Months Ended September 30, 2022
Hospital-based patient services		(0.6)%		0.8%
Office-based patient services		3.5%		2.8%
Neonatology services (within hospital-based services):
Total births		(0.8)%		0.9%
Neonatal intensive care unit (NICU) days		(1.4)%		0.2%

For the 2022 third quarter, practice salaries and benefits expense was $342.9 million, compared to $328.8 million for the prior-year period. This increase primarily reflects same-unit clinical compensation increases, as well as salary increases related to acquisitions completed over the past year, partially offset by decreases in incentive compensation expense.

For the 2022 third quarter, general and administrative expenses were $57.9 million, as compared to $66.9 million for the prior-year period. The net decrease of $9.0 million is primarily related to cost reductions from net staffing reductions, lower incentive compensation expense based on operating results and a net savings in revenue cycle management expenses.

For the third quarter of 2022, transformational and restructuring related expenses totaled $1.0 million, compared to $4.2 million for the third quarter of 2021. The expense recorded during the third quarter of 2022 related predominantly to contract terminations and modest 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 $58.3 million for the 2022 third quarter, compared to $73.4 million for the prior-year period.

Depreciation and amortization expense was $9.0 million for the third quarter of 2022 compared to $8.2 million for the third quarter of 2021.

Investment and other income was $0.6 million for the third quarter of 2022, compared to $1.7 million for the third quarter of 2021. This decrease primarily reflects the reimbursement received in the prior year period related to the transition services provided to the buyer of one of the Company’s divested medical groups.

Interest expense was $9.5 million for the third quarter of 2022 compared to $17.6 million for the third quarter of 2021. This decrease reflects lower total debt and lower interest rates from the Company’s previously-disclosed refinancing transactions completed during the first quarter of 2022.

Pediatrix generated 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. This compares with 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. The decrease in weighted average shares outstanding is related to the share repurchases completed during 2022.

For the third quarter of 2022, Pediatrix reported Adjusted EPS from continuing operations of $0.40, compared to $0.46 for the third quarter of 2021. 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, 2022

For the nine months ended September 30, 2022, Pediatrix generated revenue from continuing operations of $1.46 billion, compared to $1.41 billion for the prior-year period. Adjusted EBITDA from continuing operations for the nine months ended September 30, 2022 was $174.5 million, compared to $184.4 million for the prior year. Pediatrix generated income from continuing operations of $38.6 million, or $0.45 per share, for the nine months ended September 30, 2022, based on a weighted average 84.8 million shares outstanding, which compares to income from continuing operations of $67.7 million, or $0.79 per share, based on a weighted average 85.8 million shares outstanding for the first nine months of 2021. For the nine months ended September 30, 2022, Pediatrix reported Adjusted EPS from continuing operations of $1.20, compared to $1.11 in the same period of 2021.

Financial Position and Cash Flow – Continuing Operations

Pediatrix had cash and cash equivalents of $8.7 million at September 30, 2022, compared to $387.4 million on December 31, 2021, and net accounts receivable were $294.4 million. As previously disclosed, during the first quarter of 2022 the Company used cash on hand, together with proceeds from the new issuance of debt, to redeem its $1.0 billion in outstanding principal amount of 6.25% Senior Notes due 2027 and pay related fees and expenses.

For the third quarter of 2022, Pediatrix generated cash from continuing operations of $88.4 million, compared to $67.2 million for the third quarter of 2021. During the third quarter of 2022, the Company used $21.5 million to fund the repurchase of 1.1 million shares under the Company’s previously announced repurchase program and $6.9 million to fund capital expenditures.

At September 30, 2022, Pediatrix had total debt outstanding of $739 million, consisting of its $400 million in 5.375% Senior Notes due 2030; $244 million in borrowings under its Term A Loan; and $95 million in borrowings under its revolving line of credit.

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, 2022 and 2021 is provided in the financial tables of this press release.

2022 Outlook

Pediatrix anticipates that its 2022 Adjusted EBITDA, as defined above, will be in a range of $240 million to $245 million. This outlook reflects Adjusted EBITDA for the first nine months of 2022 of $174.5 million.

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 18, 2022 by dialing 866.207.1041, access Code 5783034. 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 a newly expanded area of 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 4,800 affiliated physicians and other clinicians in 37 states and Puerto Rico. 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 name change; 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 impact of surprise billing legislation and its implementation; 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.

Pediatrix Medical Group, Inc. Consolidated Statements of Income (in thousands, except per share data) (Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Net revenue		$	489,915			$	492,949			$	1,458,177			$	1,412,661
Operating expenses:
Practice salaries and benefits			342,850				328,759				1,016,762				964,806
Practice supplies and other operating expenses			31,857				26,122				90,189				72,516
General and administrative expenses			57,888				66,892				180,340				204,376
Gain on sale of building			—				—				—				(7,280	)
Depreciation and amortization			8,956				8,151				26,500				24,288
Transformational and restructuring related expenses			977				4,232				7,736				19,042
Total operating expenses			442,528				434,156				1,321,527				1,277,748
Income from operations			47,387				58,793				136,650				134,913
Investment and other income			617				1,686				2,336				11,829
Interest expense			(9,516	)			(17,595	)			(29,743	)			(52,119	)
Loss on early extinguishment of debt			—				—				(57,016	)			(14,532	)
Equity in earnings of unconsolidated affiliate			371				550				1,319				1,622
Total non-operating expenses			(8,528	)			(15,359	)			(83,104	)			(53,200	)
Income from continuing operations before income taxes			38,859				43,434				53,546				81,713
Income tax provision			(10,051	)			(11,594	)			(14,982	)			(14,002	)
Income from continuing operations			28,808				31,840				38,564				67,711
Income (loss) from discontinued operations, net of tax			1,920				(1,052	)			(1,892	)			15,716
Net income			30,728				30,788				36,672				83,427
Net loss attributable to noncontrolling interest			—				7				4				21
Net income attributable to Pediatrix Medical Group, Inc.		$	30,728			$	30,795			$	36,676			$	83,448
Per common and common equivalent share data (diluted):
Income from continuing operations		$	0.35			$	0.37			$	0.45			$	0.79
Income (loss) from discontinued operations		$	0.02			$	(0.01	)		$	(0.02	)		$	0.18
Net income attributable to Pediatrix Medical Group, Inc.		$	0.37			$	0.36			$	0.43			$	0.97
Weighted average common shares			82,776				86,096				84,821				85,759

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,
		2022				2021				2022				2021
Income from continuing operations attributable to Pediatrix		$	28,808			$	31,847			$	38,568			$	67,732
Medical Group, Inc.
Interest expense			9,516				17,595				29,743				52,119
Gain on sale of building			—				—				—				(7,280	)
Loss on early extinguishment of debt			—				—				57,016				14,532
Income tax provision			10,051				11,594				14,982				14,002
Depreciation and amortization expense			8,956				8,151				26,500				24,288
Transformational and restructuring related expenses			977				4,232				7,736				19,042
Adjusted EBITDA from continuing operations attributable to		$	58,308			$	73,419			$	174,545			$	184,435
Pediatrix Medical Group, Inc.

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,
		2022								2021
Weighted average diluted shares outstanding		82,776								86,096
Income from continuing operations and diluted income from continuing operations per share attributable to Pediatrix Medical Group, Inc.		$	28,808			$	0.35			$	31,847			$	0.37
Adjustments (1):
Amortization (net of tax of $554 and $583)			1,662				0.02				1,749				0.02
Stock-based compensation (net of tax of $1,030 and $1,374)			3,090				0.03				4,121				0.05
Transformational and restructuring expenses (net of tax of $244 and $1,058)			733				0.01				3,174				0.03
Net impact from discrete tax events			(1,083	)			(0.01	)			(901	)			(0.01	)
Adjusted income and diluted EPS from continuing operations attributable to Pediatrix Medical Group, Inc.		$	33,210			$	0.40			$	39,990			$	0.46
(1) A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the three months ended September 30, 2022 and 2021.

		Nine Months Ended September 30,
		2022								2021
Weighted average diluted shares outstanding		84,821								85,759
Income from continuing operations and diluted income from continuing operations per share attributable to Pediatrix Medical Group, Inc.		$	38,568			$	0.45			$	67,732			$	0.79
Adjustments (1):
Amortization (net of tax of $1,635 and $2,049)			4,907				0.06				6,149				0.07
Stock-based compensation (net of tax of $3,223 and $3,737)			9,668				0.12				11,210				0.13
Transformational and restructuring expenses (net of tax of $1,934 and $4,760)			5,802				0.07				14,282				0.16
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 $14,254 and $3,633)			42,762				0.50				10,899				0.13
Net impact from discrete tax events			(297	)			—				(9,484	)			(0.11	)
Adjusted income and diluted EPS from continuing operations attributable to Pediatrix Medical Group, Inc.		$	101,410			$	1.20			$	95,328			$	1.11
A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the three months ended September 30, 2022 and 2021.

Pediatrix Medical Group, Inc. Balance Sheet Highlights (in thousands) (Unaudited)
		As of September 30, 2022				As of December 31, 2021
Assets:
Cash and cash equivalents		$	8,668			$	387,391
Investments			91,396				99,715
Accounts receivable, net			294,351				301,775
Income taxes receivable			9,729				14,249
Other current assets			19,563				37,434
Intangible assets, net			19,534				21,565
Operating and finance lease right-of-use assets			69,346				65,461
Goodwill, other assets, property and equipment			1,819,370				1,794,956
Total assets		$	2,331,957			$	2,722,546
Liabilities and equity:
Accounts payable and accrued expenses		$	306,460			$	394,118
Total debt, including finance leases, net			745,923				1,004,748
Operating lease liabilities			68,213				61,080
Other liabilities			352,694				365,908
Total liabilities			1,473,290				1,825,854
Total equity			858,667				896,692
Total liabilities and equity		$	2,331,957			$	2,722,546

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, 2022
Income from continuing operations attributable to Pediatrix Medical Group, Inc.		$	70,000			$	74,000
Interest expense			39,000				38,500
Loss on early extinguishment of debt			57,000				57,000
Income tax provision			28,700				30,200
Depreciation and amortization expense			35,000				35,000
Transformational and restructuring related expenses			10,300				10,300
Adjusted EBITDA from continuing operations attributable to Pediatrix Medical Group, Inc.		$	240,000			$	245,000

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221103005417/en/

Charles Lynch

Senior Vice President, Finance and Strategy

954-384-0175, x 5692

charles.lynch@pediatrix.com

Source: Pediatrix Medical Group, Inc.

FAQ

What were Pediatrix Medical Group's earnings per share for Q3 2022?

Pediatrix reported earnings of $0.35 per share for the third quarter of 2022.

How much was Pediatrix's net revenue in the third quarter of 2022?

The net revenue for Pediatrix in Q3 2022 was $490 million.

What challenges did Pediatrix face in Q3 2022?

Pediatrix faced operational challenges in billing and collections, as well as headwinds in volumes and payor mix.

What is the outlook for Pediatrix's Adjusted EBITDA in 2022?

Pediatrix expects its 2022 Adjusted EBITDA to range between $240 million and $245 million.

How much did Pediatrix's Adjusted EBITDA change year-over-year in Q3 2022?

Pediatrix's Adjusted EBITDA decreased from $73.4 million in Q3 2021 to $58 million in Q3 2022.