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MEDNAX Reports Second Quarter Results
Results from Continuing Operations Reflect Significant Recovery in Second Half of Quarter Following Initial Disruption from COVID-19
Company Anticipates Full Normalization of Patient Volumes across All Service Lines,
FORT LAUDERDALE, Fla., July 30, 2020 - MEDNAX, Inc. (NYSE: MD), the national health solutions partner
specializing in prenatal, neonatal, pediatric, and radiology services, today reported a net loss of of $8.03 per share for the three months ended June 30, 2020, primarily reflecting a non-cash loss on
sale related to the Company s previously announced divestiture of American Anesthesiology. On a non-GAAP basis, MEDNAX reported Adjusted EPS from continuing operations of $0.32.
For the 2020 second quarter, MEDNAX reported the following results from continuing operations:
As previously announced, on July 12, Mark S. Ordan was appointed Chief Executive Officer and a Director of the Company. Mr. Ordan
succeeds Roger J. Medel, M.D., MEDNAX s founder, who remains a Director.
As CEO, I will champion our long standing mission to take great care of the patient,
every day and in every way, said Mr. Ordan. Particularly during such an unprecedented healthcare crisis, clinicians affiliated with MEDNAX have proved their unwavering dedication to that mission. I m most excited about the
growth opportunities available to the Company, and I will work closely with our clinicians, our streamlined organization and our Board to support this organization s success, and its unique and important role in the healthcare ecosystem.
Intent to Sell MEDNAX Radiology Solutions and Refocus as Pediatrix Medical Group
As previously disclosed, MEDNAX is pursuing strategic alternatives for its radiology medical group, MEDNAX Radiology Solutions, with the intent
of divesting this organization. The Company is actively engaged in this process, and does not intend to provide further public comments during its execution.
Through this process, the Company intends to refocus its resources as a dedicated pediatrics and obstetrics organization, and, accordingly,
MEDNAX intends to return to its original company name, Pediatrix Medical Group, Inc., pending approval by the Company s shareholders at its 2020 annual meeting on September 9th. Based on its
operating results for the second quarter of 2020, the Company is maintaining its outlook for the initial financial profile of Pediatrix Medical Group provided as part of its investor presentation on June 5th, 2020.
I support our ongoing initiatives to dedicate our focus on our Pediatrix
and Obstetrix Medical Groups, as the leading provider of specialty women s health services and pediatric care in the United States, said Mr. Ordan. We believe this focus will enable us to benefit from proven clinical leadership
and innovation, an extensive national footprint, and significant growth opportunities. The Company s growth initiatives have continued throughout this challenging period, which demonstrates that we are a partner of choice for health systems
Operating Results from Continuing Operations
During the 2020 second quarter, MEDNAX s operations were significantly impacted by reductions in patient volumes and revenue as a result
of the COVID-19 pandemic. The impact to net revenue was greatest during the month of April, and the Company s operations began to normalize during the month of May and substantially recovered during the
We believe the rapid recovery in our operating results during the latter part of the second quarter demonstrates
strong resiliency in demand for the critical, and often acute and life-saving, nature of services provided by clinicians affiliated with MEDNAX, said Stephen D. Farber, Executive Vice President and Chief Financial Officer. During the
month of April, our revenue from continuing operations reflected approximately 75 to 80 percent of normalized, pre-COVID 19 patient volumes. During the month of June, volumes recovered to approximately 90 to 95 percent of normalized
levels. This recovery has persisted during the month of July, with some geographic variation, on a preliminary basis.
As previously disclosed, on May 6, 2020, MEDNAX completed the sale of its
anesthesiology medical group, American Anesthesiology, to North American Partners in Anesthesia (NAPA). The Company s discussion of its results from continuing operations for the three and six months ended June 30, 2020 and the prior-year
periods excludes the operating results from American Anesthesiology.
A significant event during the second quarter was our ability
to achieve a transaction to divest our anesthesiology medical group, American Anesthesiogy, where operating results were significantly impacted by the COVID-19 pandemic, said Mr. Farber. This
transaction enables us to focus our efforts and resources on our ongoing medical groups, which have proven to enjoy highly resilient demand and we believe are well positioned to grow and succeed.
MEDNAX s net revenue for the three months ended June 30, 2020 was $509.2 million, compared to $561.2 million for the
prior-year period. MEDNAX s same-unit revenue declined by 11.7 percent, modestly offset by growth attributable to recent acquisitions.
The impact to the Company s operating results from the COVID-19 pandemic is reflected in both
same-unit revenue from net reimbursement-related factors and same-unit revenue attributable to patient volume, as discussed below.
Same-unit revenue from net reimbursement-related factors increased by 0.2 percent for the 2020 second quarter as compared to the
prior-year period. During the 2020 second quarter, the Company received $11.7 million from the provider relief fund established by the Coronavirus Aid, Relief, and Economic Security ( CARES ) Act, which was recorded as revenue and,
within the Company s same-unit revenue, as a contribution to net reimbursement-related factors. Partially offsetting this contribution, net pricing for services provided by certain radiology medical groups was negatively affected by reductions
in administrative fees that are based on the volume of services provided. The net increase in revenue from net reimbursement-related factors also reflects modest improvements in managed care contracting and favorable payor mix compared to the
prior-year period. For the quarter, the percentage of services reimbursed by commercial and other non-government payors increased by approximately 65 basis points compared with the prior-year period.
Same-unit revenue attributable to patient volume decreased by 11.9 percent for the 2020 second quarter as compared to the prior-year
period, driven by declines across all service lines. This decline primarily reflects a significant impact to operations during the month of April, and a recovery in volumes during the latter part of the second quarter. The timing of this most
significant impact, and recovery in volumes, was similar within each of the Company s major service lines, and MEDNAX does not currently anticipate long-term effects on the demand for any of its clinical services following the COVID-19 pandemic.
For the quarter, patient volumes within the Company s hospital-based Pediatrix
and Obstetrix services lines, which include neonatal intensive care unit (NICU) and other NICU related services, patient volumes for the second quarter declined by approximately 6 percent, with volume in the month of April declining by
approximately 8 percent but recovering to above 95 percent of pre-COVID levels by the end of the second quarter.
Within hospital-based services, neonatal intensive care unit (NICU) patient days decreased by 5.0 percent for the second quarter compared
to the prior-year period, which reflects lower births at the hospitals where MEDNAX-affiliated practices provide neonatology services and a lower rate of admission into the NICU, partially offset by a modest increase in average length of stay.
For the quarter, patient volumes within the Company s office-based Pediatrix and
Obstetrix service lines, which include maternal-fetal medicine, pediatric cardiology and other pediatric subspecialty services, declined by approximately 16 percent, with volume in the month of April declining by approximately 25 percent
but recovering to approximately 90 percent of pre-COVID levels by the end of the second quarter.
For the quarter, radiology services volume declined by approximately 29 percent, with volume in the month of April declining by
approximately 50 percent but recovering to approximately 85 to 90 percent of pre-COVID levels by the end of the second quarter.
For the 2020 second quarter, practice salaries and benefits expense was $349.3 million, compared to $361.2 million for the
prior-year period, a decrease of $11.9 million. This decrease primarily reflects reductions in salary expense related to COVID-19 mitigation initiatives.
For the 2020 second quarter, general and administrative expenses were $77.7 million, as compared to $84.2 million for the prior-year
period. This decrease in general and administrative expenses compared to the prior-year period reflects salary and net staffing reductions, partially offset by increases in legal and other non-labor expenses.
As previously disclosed, MEDNAX has incurred certain expenses related to transformational and restructuring activities. For the second
quarter of 2020, these expenses totaled $11.5 million, primarily consisting of external consulting costs and contract termination fees, compared to $17.9 million for the second quarter of 2019 and $19.1 million in the first quarter of
2020. As previously disclosed, a significant amount of historical transformational and restructuring activities were related to the Company s anesthesiology medical group, which was divested during the second quarter of 2020, and is therefore
not included in the above results. Additionally, as part of MEDNAX s response to the COVID-19 pandemic, the Company has curtailed, paused, or is in the process of narrowing the scope of certain ongoing
transformational and restructuring investments.
Adjusted EBITDA from continuing operations, which is defined as earnings from continuing
operations before interest, taxes, depreciation, amortization, and transformational and restructuring related expenses, was $65.2 million for the 2020 second quarter, compared to $94.2 million for the prior-year period. Funds received from
the provider relief fund established by the CARES Act impacted Adjusted EBITDA positively by $6.0 million for the 2020 second quarter.
Depreciation and amortization expense was $14.4 million for the second quarter of 2020 compared to $13.8 million for the second
Interest expense was $28.3 million for the second quarter of 2020 compared to $31.1 million for the second
quarter of 2019. This decline primarily reflects lower average borrowings compared to the prior-year period.
MEDNAX generated income from
continuing operations of $7.6 million, or $0.09 per diluted share, for the 2020 second quarter, based on a weighted average 83.7 million shares outstanding. This compares with income from continuing operations of $20.0 million, or
$0.24 per diluted share, for the 2019 second quarter, based on a weighted average 83.7 million shares outstanding.
For the second quarter of 2020, MEDNAX reported Adjusted EPS from continuing operations of
$0.32, compared to $0.58 for the second quarter of 2019. 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 items. Funds received from the provider relief fund established by the CARES Act
impacted Adjusted EPS positively by $0.05 for the 2020 second quarter.
For the six months ended June 30, 2020, MEDNAX generated
revenue from continuing operations of $1.07 billion, compared to $1.10 billion in the prior-year period. Adjusted EBITDA from continuing operations for the six months ended June 30, 2020 was $115.3 million, compared to
$165.8 million for the prior year. MEDNAX reported a loss from continuing operations of $6.1 million, or $0.07 per share, for the six months ended June 30, 2020, based on a weighted average 83.1 million shares outstanding, which
compares to income from continuing operations of $42.6 million, or $0.50 per share, based on a weighted average 85.1 million shares outstanding for the first six months of 2019. For the six months ended June 30, 2020, MEDNAX reported
Adjusted EPS from continuing operations of $0.52, compared to $0.96 in the same period of 2019.
Financial Position and Cash Flow Continuing
MEDNAX had cash and cash equivalents of $132.2 million at June 30, 2020, compared to approximately $90 million
on May 31, 2020, as previously disclosed, and net accounts receivable were $345.7 million.
During the second quarter of 2020,
MEDNAX generated cash from continuing operations of $193.4 million, compared to $71.1 million during the second quarter of 2019.
At June 30, 2020, MEDNAX had no outstanding borrowings under its $1.2 billion revolving credit facility and had total debt
outstanding of $1.75 billion, consisting solely of its senior notes, and net debt of $1.62 billion. Additionally, the Company expects to realize significant one-time cash benefits during the second
half of 2020 that total more than $100 million, including the collection of remaining working capital retained as part of the divestiture of American Anesthesiology and certain cash income taxes receivable.
A key priority throughout this tremendously challenging period has been to ensure that we maintain meaningful financial strength in
order to support our national medical group and our commitment to be there for patients every day, said Mr. Farber. Our strong cash flow generated during the quarter, combined with significant efforts to reduce expenses, enabled us
to do just that, on behalf of our affiliated clinicians, their patients, and our health system partners.
Discontinued Operations
The results for American Anesthesiology are presented as a component of discontinued operations for the three and six months ended
June 30, 2020 and all prior periods.