Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pediatrix Medical Group Inc reported same-unit revenue growth with NICU days increasing by 2.5%, reflecting positive volumes in hospital-based services.
- The company is undergoing an accelerated portfolio restructuring plan aimed at exiting underperforming office-based practices to increase profitability.
- Pediatrix Medical Group Inc has finalized a contract with GateHouse for third-party RCM services, which is expected to enhance cost-effectiveness and support for practices.
- Despite internal additions to the RCM team, the company expects to maintain G&A expenses in 2024 comparable to or lower than 2023 as a percent of revenue.
- The company reaffirmed its full-year 2024 outlook for adjusted EBITDA between $200 and $220 million, indicating confidence in financial stability and operational efficiency.
Negative Points
- Pediatrix Medical Group Inc observed declines in volumes at primary and urgent care clinics, which offset gains in other areas.
- The company used $123 million in operating cash flow in Q1, an increase from $101 million in the previous year, primarily due to changes in accounts receivable.
- The transition to a new RCM provider and the Change Healthcare incident had a slight negative impact on the company's DSOs in the first quarter.
- Pediatrix Medical Group Inc is exiting its primary and urgent care clinic platform, indicating a shift away from previous growth strategies in these areas.
- The company's portfolio restructuring and exit from certain practices are expected to have a significant impact on financials, which might introduce uncertainty in short-term performance.
Q & A Highlights
Q: What percent of the annual EBITDA should we be modeling on the fourth quarter?
A: Charles Lynch, Senior Vice President - Finance and Strategy, indicated that the first quarter adjusted EBITDA of 37 against the full year outlook of $200 to $220 million is approximately 18%, with the second quarter contributing between 24% and 25%. This suggests a significant portion of EBITDA is expected in the second half of the year, with the third quarter typically being the strongest.
Q: Are the practice dispositions happening due to contract renewals or are they being exited mid-cycle?
A: CEO James Swift clarified that the dispositions are not related to contractual requirements but are decisions made based on the negative EBITDA contributions of these practices. The restructuring was not timed to coincide with contract renewals.
Q: Can Pediatrix grow in 2025 with the revised asset base post-dispositions?
A: Charles Lynch expressed that it's premature to project into 2025 but noted that the financial impact of the restructuring will be more apparent in the second half of this year, which will not reflect the full year impact of this activity.
Q: What is the outlook on the volume and rate side of the business for the year?
A: Charles Lynch reported solid numbers in maternal-fetal medicine with a 3% increase in volumes, and NICU days were up by 2.5%. CEO James Swift added that they are encouraged by the volume trends, especially in maternal-fetal medicine.
Q: How will the SWP line progress throughout the year?
A: CEO James Swift mentioned that salary trends remain slightly elevated, with some offset by lesser growth in other compensation components. The restructuring will impact the SWB to revenue ratio, as practices involved in the restructuring have a higher SWB percentage.
Q: Can you provide the revenue impact of the assets being disposed of?
A: CFO C. Marc Richards indicated that the non-same unit revenue for the quarter was down by about $6.8 million due to disposition activities, which are expected to increase as the year progresses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
