Executive Summary

Q1 2024 landed in line with internal expectations: net revenue $495.1M (+0.8% YoY), GAAP diluted EPS $0.05, Adjusted EPS $0.20, and Adjusted EBITDA $37.2M; management reaffirmed FY24 Adjusted EBITDA guidance of $200–$220M .
Mix and volume were constructive: NICU days +2.5% (≈+1.5 pts excluding leap day) and maternal-fetal medicine (MFM) volumes “about 3%,” while primary/urgent care volumes declined; commercial payor mix improved ~130 bps YoY .
Strategic actions intensified: exit of ~two dozen primary/urgent care clinics to be completed in Q2, accelerated disposal of underperforming office-based practices, and formalization of a hybrid RCM model with Guidehouse; roughly one-third of practices had transitioned by the call with completion targeted by end of Q3 .
Cash usage was seasonally heavy (operating cash flow used: $122.6M), with DSO up ~1.5 days from 12/31 tied to Change Healthcare disruption and RCM transition timing; company expects Q2 Adjusted EBITDA to represent 24–25% of FY24 guidance, implying second-half weighting as restructuring benefits phase in .
Wall Street estimate comparison (S&P Global) was unavailable due to data access limits; beat/miss cannot be assessed this quarter (see Estimates Context) [S&P Global data unavailable].

What Went Well and What Went Wrong

What Went Well
- Hospital-based volumes improved and mix helped: NICU days +2.5% YoY and commercial mix +130 bps; MFM volume “about 3%” despite no leap year boost to office days .
- Reaffirmed FY24 Adjusted EBITDA guidance ($200–$220M); management emphasized margin stabilization via portfolio restructuring and hybrid RCM transition .
- RCM execution tracking to plan: contract finalized with Guidehouse; ~1/3 of practices transitioned with no negative impact to RCM performance cited .
What Went Wrong
- Adjusted EBITDA fell YoY to $37.2M (from $40.1M), and seasonally weak Q1 used $122.6M in operating cash flow; DSO rose ~1.5 days due to external (Change Healthcare) and transition timing .
- Office-based primary/urgent care volumes declined; management is exiting the primary/urgent care platform and accelerating disposals of underperforming office-based practices to address margin dilution .
- Practice salaries & benefits remained elevated, reflecting salary and group health cost pressures; G&A rose modestly on internal staffing to build the hybrid RCM capability .

Financial Results

Metric	Q1 2023	Q3 2023	Q4 2023	Q1 2024
Net Revenue ($M)	$491.0	$506.6	$496.4	$495.1
GAAP Diluted EPS ($)	$0.17	$0.26	($1.50)	$0.05
Adjusted EPS ($)	$0.23	$0.32	$0.32	$0.20
Adjusted EBITDA ($M)	$40.1	$50.4	$50.8	$37.2
Adjusted EBITDA Margin (%)	8.2% (40.1/491.0)	10.0% (50.4/506.6)	10.2% (50.8/496.4)	7.5% (37.2/495.1)
Vs Estimates (EPS, Revenue)	Unavailable (SPGI access limit)	Unavailable (SPGI access limit)	Unavailable (SPGI access limit)	Unavailable (SPGI access limit)

Cost Structure and Mix

Metric	Q1 2023	Q3 2023	Q4 2023	Q1 2024
Practice Salaries & Benefits ($M)	$362.2	$368.4	$363.6	$369.1
PS&B as % of Revenue	73.8% (362.2/491.0)	72.7% (368.4/506.6)	73.2% (363.6/496.4)	74.5% (369.1/495.1)
G&A ($M)	$59.1	$57.4	$53.1	$60.2
G&A as % of Revenue	12.0% (59.1/491.0)	11.3% (57.4/506.6)	10.7% (53.1/496.4)	12.2% (60.2/495.1)

KPIs and Same-Unit Trends

KPI	Q1 2023	Q3 2023	Q4 2023	Q1 2024
Same-Unit Revenue YoY	—	+4.1%	(1.5)%	+2.3%
Same-Unit Volume YoY	—	(1.2)%	(1.0)%	+1.3%
Same-Unit Net Reimb. YoY	—	+5.3%	(0.5)%	+1.0%
Hospital-Based Patient Services Vol. YoY	—	(1.8)%	(3.0)%	+2.5%
Office-Based Patient Services Vol. YoY	—	0.0%	+3.9%	(0.9)%
NICU Days YoY	—	(0.7)%	(2.0)%	+2.5%
Commercial Payor Mix Δ (bps)	—	+150 bps	+40 bps	+130 bps
MFM Volume YoY	—	—	—	≈+3% (“about 3%”)
DSO Δ vs 12/31 (days)	—	—	—	+~1.5 days

Balance Sheet and Liquidity

Metric	12/31/23	3/31/24
Cash & Cash Equivalents ($M)	$73.3	$8.0
Net A/R ($M)	$272.3	$283.7
Total Debt Outstanding ($M)	$628–633 (Q4 press)	$705 (Sr Notes $400; Term A $225; Revolver $80)
Operating Cash Flow ($M)	Q4’23: +$72.1; FY’23: +$146.0	Q1’24: ($122.6)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA ($M)	FY 2024	$200–$220 (2/20/24 preliminary)	$200–$220 (reaffirmed 5/7/24)	Maintained
Adjusted EBITDA Cadence	Q2 2024	—	Q2 ≈24–25% of FY24	New detail
Hybrid RCM Transition	2024 Timeline	Transition underway (Q4 call)	~1/3 practices transitioned; completion by end of Q3	Schedule specified
Portfolio Restructuring	2024 Actions	Portfolio review underway (Q4 call)	Accelerated exits of underperforming office-based practices	Accelerated
Primary/Urgent Care Clinics	Exit Timing	—	Exit ~two dozen clinics by end of Q2 2024	New action
G&A as % of Revenue	FY 2024	Comparable to 2023 (Q4 call)	Comparable or lower vs 2023 despite RCM staffing	Maintained/Refined

Implied Q2 Adjusted EBITDA from cadence: ~$48–$55M (24–25% of $200–$220M) based on management’s stated percentage of full-year guidance .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 2024)	Trend
Revenue Cycle Management	Transition to hybrid model; in-network progress and NSA arbitration win rate approaching ~90% (Q4 call)	Guidehouse contracted; ~1/3 of practices transitioned; no negative impact cited; completion by end of Q3	Execution progressing
Portfolio Restructuring	Plan to address practice-level margin dispersion (Q3/Q4)	Accelerated exits of underperforming office-based practices to remove/remediate margin dilution	Accelerating
Exit of Primary/Urgent Care	—	Strategic exit of ~two dozen clinics; complete in Q2	New/decisive pivot
Volume/Mix	Q3 softer volumes; Q4 stable pricing with mix tailwinds	NICU days +2.5%; MFM “about 3%”; commercial mix +130 bps	Improving
Labor/Cost Inflation	Elevated salaries and group health; moderation targeted in 2H’24+ (Q3/Q4)	Practice salaries & benefits remained elevated; restructuring expected to improve profile in 2H’24	Still a headwind near term
Payer/Network & NSA	In-network status improved; arbitration processes refined (Q4)	Mix tailwind continues; in-network supports ambulatory volumes	Favorable structural support
Capital Allocation	M&A focused on core (Q4)	Acquired MFM practice in CA; focus on core inpatient/ambulatory services	Targeted tuck-ins

Management Commentary

“We are reaffirming our full year 2024 outlook of adjusted EBITDA between $200 million and $220 million… [and] enacting changes that will stabilize our margins… and enable a lower cost structure going forward.”
“We’ve… made the strategic decision to exit our primary and urgent care clinic platform… roughly two dozen clinics… We intend to complete this exit during the second quarter of this year.”
“We finalized a contract with Guidehouse, under which that organization will be our third-party RCM provider… [hybrid] structure is the most cost-effective way to fully support our practices.”
“During Q1, we used $123 million in operating cash flow… DSO rose roughly 1.5 days from 12/31, reflecting a slight impact from the Change Healthcare incident and… RCM transition process.”
“We expect that adjusted EBITDA for the second quarter will contribute 24% to 25% of our full year outlook of $200 million to $220 million.”

Q&A Highlights

Sizing and cadence of restructuring: Non-same unit revenue down ~$6.8M in Q1 reflects in-process dispositions; that impact should grow as exits continue; Q3 typically the strongest EBITDA quarter seasonally, with 1H representing ~18% (Q1) and ~24–25% (Q2) of FY guidance .
Rationale for practice exits: Not tied to contract renewal cycles; targeted at practices with negative EBITDA contribution after prior remediation attempts .
Volumes outlook: Stable demand expected for 2024; MFM volumes encouraging; NICU days growth driven by admission rate and length of stay .
SWB trajectory: Salaries remain elevated vs historical; portfolio actions should lower SWB as a % of revenue as high-SWB sites are removed .
Stipends: Ongoing renegotiations with health systems to ensure adequate coverage support, especially for services requiring subsidies .

Estimates Context

S&P Global consensus estimates for Q1 2024 EPS and Revenue were unavailable due to access limits at the time of this analysis, so beat/miss cannot be determined this quarter (we anchor estimate comparisons to S&P Global when available). Values retrieved from S&P Global were unavailable at query time.
Given management’s FY24 Adjusted EBITDA reaffirmation and explicit Q2 contribution (24–25% of FY), near-term sell-side models may need to reflect heavier 2H weighting as portfolio exits and RCM progress flow through .

Key Takeaways for Investors

Execution quarter: modest growth, reaffirmed FY24 EBITDA guide, and detailed 1H-to-2H cadence reduce near-term estimate risk; watch for Q2 delivery of ~$48–$55M Adjusted EBITDA implied by cadence .
Structural pivot: exiting primary/urgent care and accelerating office-based practice disposals should lift margins by removing dilutive sites; progress updates in Q2/Q3 are key catalysts .
RCM de-risking: Guidehouse hybrid model and staged transition (~1/3 completed) aim to stabilize cash conversion; monitor DSOs and cash flow normalization in Q2 .
Demand stable with positive mix: NICU days +2.5% and commercial mix +130 bps offset office-based softness; MFM volumes remain a bright spot .
Cost vigilance: PS&B and G&A remain elevated as RCM insourcing builds; management targets G&A as % of revenue comparable to or lower than 2023, with restructuring benefits weighted to 2H .
Balance sheet: leverage increased sequentially with revolver usage in Q1; free cash flow inflection typically starts in Q2 as seasonal cash headwinds abate .
Stock drivers: evidence of timely clinic exits, RCM conversion milestones, and Q2 print in the guided contribution range likely drive near-term sentiment; sustained improvement in EBITDA margin into 2H would support re-rating .

References: Q1 2024 earnings press release and financial tables ; Q1 2024 earnings call transcript ; Q4 2023 press release/transcript ; Q3 2023 press release/transcript .

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