Mednax, Inc. (Pediatrix Medical Group in request metadata) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The filing identifies the registrant as Mednax, Inc.; the supplied company metadata uses Pediatrix Medical Group, Inc.
Business context and financial performance
The company provides physician services in newborn, maternal-fetal, and pediatric specialties across 38 states and Puerto Rico. Unless noted otherwise, comparisons are with Q1 2021.
- Revenue: $482.2 million, up 7.9% from $446.8 million. Net patient service revenue was $406.0 million; hospital administrative fees were $63.5 million. Same-unit revenue rose 1.3%.
- Operating results: Operating income increased to $39.1 million from $26.1 million; operating margin improved to 8.1% from 5.8%. Practice salaries and benefits rose 7.6% to $343.2 million, while general and administrative expense fell to $61.3 million from $66.5 million.
- Profit: Loss from continuing operations was $20.9 million, or $0.25 per diluted share, versus income of $5.3 million, or $0.06 per diluted share. The Q1 2022 loss included a $57.0 million debt-extinguishment charge. Adjusted EBITDA was $50.7 million versus $45.5 million, and adjusted EPS was $0.33 versus $0.24; these are non-GAAP measures.
- Cash flow: Continuing-operations operating cash use was $89.9 million, compared with $98.9 million a year earlier. Continuing-operations investing cash use was $26.3 million and financing cash use was $256.5 million. Cash and cash equivalents ended at $7.2 million.
- Liquidity: Short-term investments were $89.6 million, and working capital was $170.1 million. The company reported $301.0 million available under its revolving credit facility. DSO increased to 59.2 days from 55.2 days at year-end 2021.
- Debt: In February, the company issued $400 million of 5.375% notes due 2030 and entered into a $250 million term loan and a $450 million revolving facility, using proceeds and cash on hand to redeem $1.0 billion of 6.25% notes due 2027. At quarter-end, borrowings were $799 million: $400 million of notes, $250 million term loan, and $149 million revolver borrowings.
Material changes and notable items
- Revenue growth reflected acquisitions and a $5.6 million increase in same-unit revenue. Patient-service volume contributed $14.2 million of same-unit growth, partly offset by $8.6 million of lower reimbursement-related revenue.
- Operating margin improvement reflected revenue growth, CARES Act relief and lower overall operating expenses. The company received $10.4 million in CARES Act relief in Q1 2022.
- The $57.0 million early debt-extinguishment loss primarily included redemption premiums and accelerated amortization of financing costs. Q1 2021 also included a $12.3 million benefit from discontinued operations; Q1 2022 recorded a nominal loss in discontinued operations.
- The company acquired a multi-location pediatric urgent care practice for $26.0 million, including $2.0 million of contingent consideration.
- Accrued salaries and incentive compensation declined $138.6 million during the quarter, primarily because annual performance-based compensation was paid.
Outlook, risks and contingencies
- No specific revenue or earnings guidance was provided. Management expects operating funds, cash and available credit to cover working capital, anticipated acquisitions and capital expenditures, restructuring costs, repurchases and contractual obligations for at least the next 12 months. Management stated it believed covenant compliance would continue through 2022.
- Management reported no material COVID-19 impact in 2021 or through Q1 2022, but said future effects remain uncertain. Potential risks include changes in government reimbursement, payer mix and patient collections, and the No Surprises Act’s effect on out-of-network reimbursement and contracting.
- Professional liability exposure is partly self-insured. The recorded professional liability obligation was $299.1 million, with a related insurance receivable of $54.9 million. The filing also discusses ordinary-course government audits and legal claims; outcomes cannot be predicted with certainty.
- A 1% change in interest rates on the $399 million outstanding under the credit agreement would affect annual pretax income by approximately $4.0 million. The company reported no material changes to previously disclosed risk factors.
Investor facts to verify
- Confirm the company identity and applicable ticker, given the filing names Mednax, Inc. while the request metadata names Pediatrix Medical Group, Inc.
- Track whether same-unit growth, volume trends, reimbursement and elevated DSO translate into improved collections and operating cash flow.
- Review debt balances, interest costs, covenant headroom and liquidity after the refinancing and substantial cash use.
- Assess the sustainability of adjusted EBITDA and adjusted EPS alongside GAAP results, including the one-time debt-extinguishment charge and CARES Act relief.
- Monitor implementation of the No Surprises Act, professional liability reserves and any material developments in audits or litigation.