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Pediatrix Medical Group Reports Second Quarter Results
FORT LAUDERDALE, Fla., August 4, 2022 - 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 $0.36 per share for the three months ended June 30, 2022. On a non-GAAP basis, Pediatrix reported Adjusted EPS from continuing operations of $0.47.
For the 2022 second quarter, Pediatrix reported the following results from continuing operations:
-Net revenue of $486 million;
-Income from continuing operations of $31 million; and
-Adjusted EBITDA of $66 million.
Our bottom line results reflected modest volume growth and continued operating efficiency, said Mark S. Ordan, Chief Executive Officer of Pediatrix Medical Group. Our formal return to the Pediatrix name and brand reflects our commitment to the highest quality care possible for women, babies and children, and that is where 100 percent of our efforts are focused.
Operating Results from Continuing Operations Three Months Ended June 30, 2022
Pediatrix's net revenue for the three months ended June 30, 2022 was $486.0 million, compared to $473.0 million for the prior-year period. Pediatrix's revenue growth was driven by net acquisition activity, modestly offset by an overall same-unit revenue decrease of 1.3 percent.
Same-unit revenue attributable to patient volume increased by 0.6 percent for the 2022 second quarter as compared to the prior-year period, with growth in neonatology and other pediatric services partially offset by slight declines in maternal-fetal medicine and pediatric cardiology services. Shown below are year-over-year percentage changes in certain same-unit volume statistics for the three and six months ended June 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 June 30, 2022 | Six Months Ended June 30, 2022 | |||
| Hospital-based patient services | 0.7% | 2.0% | ||
| Office-based patient services | 0.7% | 3.1% | ||
| Neonatology services (within hospital-based services): | ||||
| Total births | 0.0% | 1.9% | ||
| Neonatal intensive care unit (NICU) days | 0.4% | 1.3% |
Same-unit revenue from net reimbursement-related factors declined by 1.9 percent for the 2022 second quarter as compared to the prior-year period. This net decrease primarily reflects a modest decline in the percentage of services reimbursed by commercial and other non-government payors compared to the prior-year period and the timing of certain revenue cycle management transition activities, partially offset by increases in contract and administrative fees and funds received under the Coronavirus Aid, Relief, and Economic Security ( CARES ) Act. The percentage of services reimbursed by commercial and other non-government payors declined by approximately 120 basis points compared to the prior-year period. For the 2022 second quarter, the Company recorded $0.7 million of miscellaneous revenue from funds received under the CARES Act, which increased the Company's same-unit revenue from net reimbursement-related factors by 0.2 percent for the three months ended June 30, 2022.
For the 2022 second quarter, practice salaries and benefits expense was $330.8 million, compared to $317.0 million for the prior-year period. This increase primarily reflects acquisitions completed over the past year.
For the 2022 second quarter, general and administrative expenses were $61.2 million, as compared to $71.0 million for the prior-year period. The net decrease of $9.8 million is primarily related to lower professional fees, including legal fees, as well as a net savings in revenue cycle management expenses.
For the second quarter of 2022, transformational and restructuring related expenses totaled $5.3 million, compared to $9.9 million for the second quarter of 2021. The expense recorded during the second quarter of 2022 related predominantly to position eliminations.
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 $65.6 million for the 2022 second quarter, compared to $65.5 million for the prior-year period. Funds received 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 $8.8 million for the second quarter of 2022 compared to $8.1 million for the second quarter of 2021.
Investment and other income was $0.8 million for the second quarter of 2022, compared to $4.2 million for the second quarter of 2021. This decrease primarily reflects the reimbursement received in the prior year period related to the transition services provided to the buyers of the Company's divested medical groups.
Interest expense was $8.4 million for the second quarter of 2022 compared to $16.9 million for the second 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 $30.7 million, or $0.36 per diluted share, for the 2022 second quarter, based on a weighted average 85.6 million shares outstanding. This compares with income from continuing operations of $30.5 million, or $0.36 per diluted share, for the 2021 second quarter, based on a weighted average 85.9 million shares outstanding.
For the second quarter of 2022, Pediatrix reported Adjusted EPS from continuing operations of $0.47, compared to $0.41 for the second 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, and for the prior year period also excludes the gain on sale of building.
Operating Results from Continuing Operations Six Months Ended June 30, 2022
For the six months ended June 30, 2022, Pediatrix generated revenue from continuing operations of $968.3 million, compared to $919.7 million for the prior-year period. Adjusted EBITDA from continuing operations for the six months ended June 30, 2022 was $116.2 million, compared to $111.0 million for the prior year. Pediatrix generated income from continuing operations of $9.8 million, or $0.11 per share, for the six months ended June 30, 2022, based on a weighted average 85.9 million shares outstanding, which compares to income from continuing operations of $35.9 million, or $0.42 per share, based on a weighted average 85.7 million shares outstanding for the first six months of 2021. For the six months ended June 30, 2022, Pediatrix reported Adjusted EPS from continuing operations of $0.79, compared to $0.65 in the same period of 2021.
Financial Position and Cash Flow Continuing Operations
Pediatrix had cash and cash equivalents of $14.1 million at June 30, 2022, compared to $387.4 million on December 31, 2021, and net accounts receivable were $307.2 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 second quarter of 2022, Pediatrix generated cash from continuing operations of $81.6 million, compared to $70.4 million for the second quarter of 2021. During the second quarter of 2022, the Company used $64.4 million to fund the repurchase of 3.3 million shares under the Company's previously announced repurchase program, $6.6 million to fund capital expenditures and $3 million to fund one practice acquisition.
At June 30, 2022, Pediatrix had total debt outstanding of $800 million, consisting of its $400 million in 5.375% Senior Notes due 2030; $247 million in borrowings under its Term A Loan; and $153 million in borrowings under its revolving line of credit.
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, 2022 and 2021 is provided in the financial tables of this press release.
Pediatrix anticipates that its 2022 Adjusted EBITDA, as defined above, will be in a range of $260 million to $270 million. This outlook reflects Adjusted EBITDA for the first six months of 2022 of $116.2 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 August 18, 2022 by dialing 866.207.1041, access Code 9245025. The replay will also be available at www.pediatrix.com.
ABOUT PEDIATRIX MEDICAL GROUP
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)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net revenue | $ | 486,033 | $ | 472,959 | $ | 968,262 | $ | 919,712 | ||||||||
| Operating expenses: | ||||||||||||||||
| Practice salaries and benefits | 330,757 | 317,035 | 673,912 | 636,047 | ||||||||||||
| Practice supplies and other operating expenses | 29,843 | 24,182 | 58,332 | 46,394 | ||||||||||||
| General and administrative expenses | 61,165 | 70,968 | 122,452 | 137,484 | ||||||||||||
| Gain on sale of building | (7,280 | ) | (7,280 | ) | ||||||||||||
| Depreciation and amortization | 8,775 | 8,106 | 17,544 | 16,137 | ||||||||||||
| Transformational and restructuring related expenses | 5,338 | 9,932 | 6,759 | 14,810 | ||||||||||||
| Total operating expenses | 435,878 | 422,943 | 878,999 | 843,592 | ||||||||||||
| Income from operations | 50,155 | 50,016 | 89,263 | 76,120 | ||||||||||||
| Investment and other income | 844 | 4,176 | 1,719 | 10,143 | ||||||||||||
| Interest expense | (8,409 | ) | (16,879 | ) | (20,227 | ) | (34,524 | ) | ||||||||
| Loss on early extinguishment of debt | (57,016 | ) | (14,532 | ) | ||||||||||||
| Equity in earnings of unconsolidated affiliate | 443 | 577 | 948 | 1,072 | ||||||||||||
| Total non-operating expenses | (7,122 | ) | (12,126 | ) | (74,576 | ) | (37,841 | ) | ||||||||
| Income from continuing operations before income taxes | 43,033 | 37,890 | 14,687 | 38,279 | ||||||||||||
| Income tax provision | (12,332 | ) | (7,363 | ) | (4,931 | ) | (2,408 | ) | ||||||||
| Income from continuing operations | 30,701 | 30,527 | 9,756 | 35,871 | ||||||||||||
| (Loss) income from discontinued operations, net of tax | (3,565 | ) | 4,478 | (3,812 | ) | 16,768 | ||||||||||
| Net income | 27,136 | 35,005 | 5,944 | 52,639 | ||||||||||||
| Net loss attributable to noncontrolling interest | 6 | 4 | 14 | |||||||||||||
| Net income attributable to Pediatrix Medical Group, Inc. | $ | 27,136 | $ | 35,011 | $ | 5,948 | $ | 52,653 | ||||||||
| Per common and common equivalent share data (diluted): | ||||||||||||||||
| Income from continuing operations | $ | 0.36 | $ | 0.36 | $ | 0.11 | $ | 0.42 | ||||||||
| (Loss) income from discontinued operations | $ | (0.04 | ) | $ | 0.05 | $ | (0.04 | ) | $ | 0.19 | ||||||
| Net income attributable to Pediatrix Medical Group, Inc. | $ | 0.32 | $ | 0.41 | $ | 0.07 | $ | 0.61 | ||||||||
| Weighted average common shares | 85,619 | 85,933 | 85,914 | 85,653 |
Pediatrix Medical Group, Inc.
Reconciliation of Income from Continuing Operations
to Adjusted EBITDA from Continuing Operations Attributable to Pediatrix Medical Group, Inc.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Income from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 30,701 | $ | 30,533 | $ | 9,760 | $ | 35,885 | ||||||||
| Interest expense | 8,409 | 16,879 | 20,227 | 34,524 | ||||||||||||
| Gain on sale of building | (7,280 | ) | (7,280 | ) | ||||||||||||
| Loss on early extinguishment of debt | 57,016 | 14,532 | ||||||||||||||
| Income tax provision | 12,332 | 7,363 | 4,931 | 2,408 | ||||||||||||
| Depreciation and amortization expense | 8,775 | 8,106 | 17,544 | 16,137 | ||||||||||||
| Transformational and restructuring related expenses | 5,338 | 9,932 | 6,759 | 14,810 | ||||||||||||
| Adjusted EBITDA from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 65,555 | $ | 65,533 | $ | 116,237 | $ | 111,016 |
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)
| Three Months Ended June 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Weighted average diluted shares outstanding | 85,619 | 85,933 | ||||||||||||||
| Income from continuing operations and diluted income from continuing operations per share attributable to Pediatrix Medical Group, Inc. | $ | 30,701 | $ | 0.36 | $ | 30,533 | $ | 0.36 | ||||||||
| Adjustments (1) : | ||||||||||||||||
| Amortization (net of tax of $541 and $576) | 1,624 | 0.02 | 1,728 | 0.02 | ||||||||||||
| Stock-based compensation (net of tax of $1,084 and $1,434) | 3,252 | 0.04 | 4,301 | 0.04 | ||||||||||||
| Transformational and restructuring expenses (net of tax of $1,335 and $2,483) | 4,003 | 0.05 | 7,449 | 0.09 | ||||||||||||
| Gain on sale of building (net of tax of $1,820) | (5,460 | ) | (0.06 | ) | ||||||||||||
| Net impact from discrete tax events | 294 | (3,516 | ) | (0.04 | ) | |||||||||||
| Adjusted income and diluted EPS from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 39,874 | $ | 0.47 | $ | 35,035 | $ | 0.41 |
(1)A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the three months ended June 30, 2022 and 2021.
| Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Weighted average diluted shares outstanding | 85,914 | 85,653 | ||||||||||||||
| Income from continuing operations and diluted income from continuing operations per share attributable to Pediatrix Medical Group, Inc. | $ | 9,760 | $ | 0.11 | $ | 35,885 | $ | 0.42 | ||||||||
| Adjustments (1) : | ||||||||||||||||
| Amortization (net of tax of $1,082 and $1,466) | 3,245 | 0.04 | 4,400 | 0.05 | ||||||||||||
| Stock-based compensation (net of tax of $2,193 and $2,363) | 6,578 | 0.07 | 7,089 | 0.08 | ||||||||||||
| Transformational and restructuring expenses (net of tax of $1,690 and $3,702) | 5,069 | 0.06 | 11,108 | 0.13 | ||||||||||||
| 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 | 786 | 0.01 | (8,583 | ) | (0.10 | ) | ||||||||||
| Adjusted income and diluted EPS from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 68,200 | $ | 0.79 | $ | 55,338 | $ | 0.65 |
(1)A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the six months ended June 30, 2022 and 2021.
Pediatrix Medical Group, Inc.
Balance Sheet Highlights
| As of June 30, 2022 | As of December 31, 2021 | |||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 14,088 | $ | 387,391 | ||||
| Investments | 93,386 | 99,715 | ||||||
| Accounts receivable, net | 307,201 | 301,775 | ||||||
| Income taxes receivable | 21,529 | 14,249 | ||||||
| Other current assets | 23,097 | 37,434 | ||||||
| Intangible assets, net | 20,965 | 21,565 | ||||||
| Operating and finance lease right-of-use assets | 67,504 | 65,461 | ||||||
| Goodwill, other assets, property and equipment | 1,821,846 | 1,794,956 | ||||||
| Total assets | $ | 2,369,616 | $ | 2,722,546 | ||||
| Liabilities and equity: | ||||||||
| Accounts payable and accrued expenses | $ | 287,463 | $ | 394,118 | ||||
| Total debt, including finance leases, net | 808,176 | 1,004,748 | ||||||
| Operating lease liabilities | 62,667 | 61,080 | ||||||
| Other liabilities | 365,880 | 365,908 | ||||||
| Total liabilities | 1,524,186 | 1,825,854 | ||||||
| Total equity | 845,430 | 896,692 | ||||||
| Total liabilities and equity | $ | 2,369,616 | $ | 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.
| Year Ended December 31, 2022 | ||||||||
| Income from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 86,000 | $ | 95,000 | ||||
| Interest expense | 38,000 | 36,000 | ||||||
| Loss on early extinguishment of debt | 57,000 | 57,000 | ||||||
| Income tax provision | 35,700 | 38,700 | ||||||
| Depreciation and amortization expense | 34,000 | 34,000 | ||||||
| Transformational and restructuring related expenses | 9,300 | 9,300 | ||||||
| Adjusted EBITDA from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 260,000 | $ | 270,000 |