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Pediatrix Medical Group Reports Fourth Quarter Results
FORT LAUDERDALE, Fla., February 17, 2023 - 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 $0.29 per share for the three months ended December 31, 2022. On a non-GAAP basis, Pediatrix reported Adjusted EPS from continuing operations of $0.47.
For the 2022 fourth quarter, Pediatrix reported the following results from continuing operations:
-Net revenue of $514 million;
-Income from continuing operations of $36 million; and
-Adjusted EBITDA of $66 million.
Our fourth quarter operating results reflected solid patient volumes, stable payor mix, and reduced overhead, counterbalanced by continuing underperformance by our revenue cycle management vendor, said Mark S. Ordan, Executive Chair of Pediatrix Medical Group. We continued to steadily reduce overhead costs during 2022, we ended the year in a sector leading financial position, and we seamlessly transitioned to our new Chief Executive Officer, Dr. Jim Swift. Our team is fully focused on driving improvements from our revenue cycle management vendor and employing internal personnel and strategies to make up for deficiencies in our outsourced function. This is in addition to our daily drive to maintain and enhance our strong relationships with hospitals and clinicians as the nation's leader in women's, babies' and children's care.
Generating improved revenue cycle management performance remains a near-term priority, and our 2023 outlook reflects what we believe is a realistic and achievable pathway of that performance, said James D. Swift, M.D., Chief Executive Officer of Pediatrix Medical Group. We also believe the successful execution of our improvement plans, our financial
strength and our ability to build our clinical organization both organically and inorganically will position Pediatrix well to drive strong results for all stakeholders.
Operating Results from Continuing Operations Three Months Ended December 31, 2022
Pediatrix's net revenue for the three months ended December 31, 2022 was $513.8 million, compared to $498.5 million for the prior-year period. Pediatrix's overall same-unit revenue increased by 0.9 percent, complemented by revenue growth driven by net acquisition activity.
Same-unit revenue attributable to patient volume increased by 4.1 percent for the 2022 fourth quarter as compared to the prior-year period, reflecting growth across all services. Shown below are year-over-year percentage changes in certain same-unit volume statistics for the three and 12 months ended December 31, 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 December 31, 2022 | Year Ended December 31, 2022 | |||
| Hospital-based patient services | 5.0% | 2.0% | ||
| Office-based patient services | 4.7% | 1.6% | ||
| Neonatology services (within hospital-based services): | ||||
| Total births | (0.9)% | 0.5% | ||
| Neonatal intensive care unit (NICU) days | 3.1% | 0.8% |
Same-unit revenue from net reimbursement-related factors declined by 3.2 percent for the 2022 fourth quarter as compared to the prior-year period. This primarily reflects a decrease in funds received under the Coronavirus Aid, Relief, and Economic Security ( CARES ) Act. During the fourth quarter of 2022, the Company recorded $1.9 million of miscellaneous revenue from funds received under the CARES Act compared to $18.4 million in the prior year, which decreased the Company's same-unit revenue from net reimbursement-related factors by 3.4 percent during the three months ended December 31, 2022. The percentage of services reimbursed by commercial and other non-government payors increased by approximately 20 basis points compared to the prior-year period. For the fourth quarter of 2022, the ongoing negative impact of revenue cycle management transition activities was largely offset by financial support provided by the Company's revenue cycle management vendor.
For the 2022 fourth quarter, practice salaries and benefits expense was $366.6 million, compared to $332.7 million for the prior-year period. This increase primarily reflects same-unit clinical compensation increases, an increase in incentive compensation based on practice results, salary increases related to acquisitions completed over the past year, and an increase in malpractice expense.
For the 2022 fourth quarter, general and administrative expenses were $51.1 million, as compared to $59.0 million for the prior-year period. The net decrease of $7.9 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 fourth quarter of 2022, transformational and restructuring related expenses totaled $19.6 million, compared to $3.1 million for the fourth quarter of 2021. The expense recorded for the fourth 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 $66.5 million for the 2022 fourth quarter, compared to $81.0 million for the prior-year period. Funds received from the provider relief fund established by the CARES Act favorably impacted Adjusted EBITDA by approximately $1.5 million for the fourth quarter of 2022, compared to $11.8 million for the fourth quarter of 2021.
Depreciation and amortization expense was $9.1 million for the fourth quarter of 2022 compared to $7.9 million for the fourth quarter of 2021.
Investment and other income was $1.3 million for the fourth quarter of 2022, compared to $1.8 million for the fourth quarter of 2021.
Interest expense was $10.0 million for the fourth quarter of 2022 compared to $16.6 million for the fourth 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 $24.0 million, or $0.29 per diluted share, for the 2022 fourth quarter, based on a weighted average 82.2 million shares outstanding. This compares with income from continuing operations of $40.3 million, or $0.47 per diluted share, for the 2021 fourth quarter, based on a weighted average 86.2 million shares outstanding. The decrease in weighted average shares outstanding is related to the share repurchases completed during 2022.
For the fourth quarter of 2022, Pediatrix reported Adjusted EPS from continuing operations of $0.47, compared to $0.52 for the fourth 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. Funds received from the provider relief fund established by the CARES Act favorably impacted Adjusted EPS by $0.02 for the fourth quarter of 2022, compared to $0.10 for the fourth quarter of 2021.
Operating Results from Continuing Operations Year Ended December 31, 2022
For the year ended December 31, 2022, Pediatrix generated revenue from continuing operations of $1.97 billion, compared to $1.91 billion for the prior year. For 2022, the Company recorded $13.3 million of miscellaneous revenue from the provider relief fund established by the CARES Act compared to $26.1 million for the prior year. Adjusted EBITDA from continuing operations for the year ended December 31, 2022 was $241.0 million, compared to $265.5 million for the prior year. Funds received from the provider relief fund established by the CARES Act favorably impacted Adjusted EBITDA by approximately $6.7 million for the year ended December 31, 2022, compared to $16.5 million for the prior year. Pediatrix generated income from continuing operations of $62.6 million, or $0.74 per share, for the year ended
December 31, 2022, based on a weighted average 84.1 million shares outstanding, which compares to income from continuing operations of $108.0 million, or $1.26 per share, based on a weighted average 85.8 million shares outstanding for the prior year. For the year ended December 31, 2022, Pediatrix reported Adjusted EPS from continuing operations of $1.66, compared to $1.63 for 2021. Funds received from the provider relief fund established by the CARES Act favorably impacted Adjusted EPS by approximately $0.07 for the year ended December 31, 2022, compared to $0.14 for the prior year.
Financial Position and Cash Flow Continuing Operations
Pediatrix had cash and cash equivalents of $9.8 million at December 31, 2022, compared to $387.4 million on December 31, 2021, and net accounts receivable were $296.8 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 fourth quarter of 2022, Pediatrix generated cash from continuing operations of $102.3 million, compared to $75.0 million for the fourth quarter of 2021. During the fourth quarter of 2022, the Company used $9.1 million to fund capital expenditures.
At December 31, 2022, Pediatrix had total debt outstanding of $645 million, consisting of its $400 million in 5.375% Senior Notes due 2030; $241 million in borrowings under its Term A Loan; and $4 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 months and years ended December 31, 2022 and 2021 is provided in the financial tables of this press release.
Preliminary 2023 Outlook
On a preliminary basis, Pediatrix anticipates that its 2023 Adjusted EBITDA, as defined above, will be in a range of $235 million to $245 million. This outlook does not reflect any additional funds from the provider relief fund established by the CARES Act, which favorably impacted Adjusted EBITDA by approximately $6.7 million for the year ended December 31, 2022.
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 March 3, 2023 by dialing 1-402-970-0847, access Code 7838189. 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 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)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net revenue | $ | 513,844 | $ | 498,530 | $ | 1,972,021 | $ | 1,911,191 | ||||||||
| Operating expenses: | ||||||||||||||||
| Practice salaries and benefits | 366,557 | 332,671 | 1,383,319 | 1,297,477 | ||||||||||||
| Practice supplies and other operating expenses | 31,480 | 27,956 | 121,669 | 100,472 | ||||||||||||
| General and administrative expenses | 51,057 | 58,981 | 231,397 | 263,357 | ||||||||||||
| Gain on sale of building | (7,280 | ) | ||||||||||||||
| Depreciation and amortization | 9,136 | 7,859 | 35,636 | 32,147 | ||||||||||||
| Transformational and restructuring related expenses | 19,576 | 3,058 | 27,312 | 22,100 | ||||||||||||
| Total operating expenses | 477,806 | 430,525 | 1,799,333 | 1,708,273 | ||||||||||||
| Income from operations | 36,038 | 68,005 | 172,688 | 202,918 | ||||||||||||
| Investment and other income | 1,335 | 1,823 | 3,671 | 13,652 | ||||||||||||
| Interest expense | (9,952 | ) | (16,603 | ) | (39,695 | ) | (68,722 | ) | ||||||||
| Loss on early extinguishment of debt | (57,016 | ) | (14,532 | ) | ||||||||||||
| Equity in earnings of unconsolidated affiliates | 403 | 290 | 1,722 | 1,912 | ||||||||||||
| Total non-operating expenses | (8,214 | ) | (14,490 | ) | (91,318 | ) | (67,690 | ) | ||||||||
| Income from continuing operations before income taxes | 27,824 | 53,515 | 81,370 | 135,228 | ||||||||||||
| Income tax provision | (3,824 | ) | (13,239 | ) | (18,806 | ) | (27,241 | ) | ||||||||
| Income from continuing operations | 24,000 | 40,276 | 62,564 | 107,987 | ||||||||||||
| Income from discontinued operations, net of tax | 5,659 | 7,234 | 3,767 | 22,950 | ||||||||||||
| Net income | 29,659 | 47,510 | 66,331 | 130,937 | ||||||||||||
| Net loss attributable to noncontrolling interest | 6 | 4 | 27 | |||||||||||||
| Net income attributable to Pediatrix Medical Group, Inc. | $ | 29,659 | $ | 47,516 | $ | 66,335 | $ | 130,964 | ||||||||
| Other comprehensive (loss) income, net of tax | ||||||||||||||||
| Unrealized holding gain (loss) on investments, net of tax of $122, $304, $1,694 and $742 | 366 | (906 | ) | (5,051 | ) | (2,213 | ) | |||||||||
| Total comprehensive income (loss) attributable to Pediatrix Medical Group, Inc. | $ | 30,025 | $ | 46,610 | $ | 61,284 | $ | 128,751 | ||||||||
| Per common and common equivalent share data (diluted): | ||||||||||||||||
| Income from continuing operations | $ | 0.29 | $ | 0.47 | $ | 0.74 | $ | 1.26 | ||||||||
| Income from discontinued operations | $ | 0.07 | $ | 0.08 | $ | 0.05 | $ | 0.27 | ||||||||
| Net income attributable to Pediatrix Medical Group, Inc. | $ | 0.36 | $ | 0.55 | $ | 0.79 | $ | 1.53 | ||||||||
| Weighted average common shares | 82,158 | 86,245 | 84,121 | 85,828 |
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 December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Income from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 24,000 | $ | 40,282 | $ | 62,568 | $ | 108,014 | ||||||||
| Interest expense | 9,952 | 16,603 | 39,695 | 68,722 | ||||||||||||
| Gain on sale of building | (7,280 | ) | ||||||||||||||
| Loss on early extinguishment of debt | 57,016 | 14,532 | ||||||||||||||
| Income tax provision | 3,824 | 13,239 | 18,806 | 27,241 | ||||||||||||
| Depreciation and amortization expense | 9,136 | 7,859 | 35,636 | 32,147 | ||||||||||||
| Transformational and restructuring related expenses | 19,576 | 3,058 | 27,312 | 22,100 | ||||||||||||
| Adjusted EBITDA from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 66,488 | $ | 81,041 | $ | 241,033 | $ | 265,476 |
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 December 31, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Weighted average diluted shares outstanding | 82,158 | 86,245 | ||||||||||||||
| Income from continuing operations and diluted income from continuing operations per share attributable to Pediatrix Medical Group, Inc. | $ | 24,000 | $ | 0.29 | $ | 40,282 | $ | 0.47 | ||||||||
| Adjustments (1) : | ||||||||||||||||
| Amortization (net of tax of $606 and $593) | 1,820 | 0.02 | 1,780 | 0.02 | ||||||||||||
| Stock-based compensation (net of tax of $374 and $1,005) | 1,120 | 0.01 | 3,015 | 0.03 | ||||||||||||
| Transformational and restructuring expenses (net of tax of $4,894 and $764) | 14,682 | 0.18 | 2,294 | 0.03 | ||||||||||||
| Net impact from discrete tax events | (3,073 | ) | (0.03 | ) | (2,672 | ) | (0.03 | ) | ||||||||
| Adjusted income and diluted EPS from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 38,549 | $ | 0.47 | $ | 44,699 | $ | 0.52 |
(1)A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the three months ended December 31, 2022 and 2021.
| Twelve Months Ended December 31, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Weighted average diluted shares outstanding | 84,121 | 85,828 | ||||||||||||||
| Income from continuing operations and diluted income from continuing operations per share attributable to Pediatrix Medical Group, Inc. | $ | 62,568 | $ | 0.74 | $ | 108,014 | $ | 1.26 | ||||||||
| Adjustments (1) : | ||||||||||||||||
| Amortization (net of tax of $2,242 and $2,643) | 6,727 | 0.08 | 7,928 | 0.09 | ||||||||||||
| Stock-based compensation (net of tax of $3,596 and $4,742) | 10,788 | 0.13 | 14,226 | 0.16 | ||||||||||||
| Transformational and restructuring related expenses (net of tax of $6,828 and $5,525) | 20,484 | 0.24 | 16,575 | 0.19 | ||||||||||||
| 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 | 0.51 | 10,899 | 0.13 | ||||||||||||
| Net impact from discrete tax events | (3,370 | ) | (0.04 | ) | (12,156 | ) | (0.14 | ) | ||||||||
| Adjusted income and diluted EPS from continuing operations attributable to Pediatrix Medical Group, Inc. | $ | 139,959 | $ | 1.66 | $ | 140,026 | $ | 1.63 |
(1)A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the twelve months ended December 31, 2022 and 2021.
Pediatrix Medical Group, Inc.
Balance Sheet Highlights
| As of December 31, 2022 | As of December 31, 2021 | |||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 9,824 | $ | 387,391 | ||||
| Investments | 93,239 | 99,715 | ||||||
| Accounts receivable, net | 296,787 | 301,775 | ||||||
| Other current assets | 28,139 | 51,683 | ||||||
| Intangible assets, net | 18,491 | 21,565 | ||||||
| Operating and finance lease right-of-use assets | 66,924 | 65,461 | ||||||
| Goodwill, other assets, property and equipment | 1,834,483 | 1,794,956 | ||||||
| Total assets | $ | 2,347,887 | $ | 2,722,546 | ||||
| Liabilities and equity: | ||||||||
| Accounts payable and accrued expenses | $ | 374,225 | $ | 394,118 | ||||
| Total debt, net | 651,279 | 1,004,748 | ||||||
| Operating lease liabilities | 65,802 | 61,080 | ||||||
| Other liabilities | 364,949 | 365,908 | ||||||
| Total liabilities | 1,456,255 | 1,825,854 | ||||||
| Total equity | 891,632 | 896,692 | ||||||
| Total liabilities and equity | $ | 2,347,887 | $ | 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, 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 |