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Pediatrix Medical Group, Inc. (MD)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 modestly exceeded internal expectations on stronger same‑unit revenue (+5.2%), with payer mix tailwinds and stable-to-positive volumes; Adjusted EBITDA rose to $60.2M and Adjusted EPS to $0.44 .
  • Guidance narrowed to FY24 Adjusted EBITDA of $205–$215M (midpoint unchanged), reflecting solid YTD execution, RCM transition completion, and back‑half portfolio exits; management expects the remainder of portfolio benefits in 2025 .
  • Cash generation remained strong ($95.7M from operations in Q3) and cash balances increased to $103.8M; net leverage improved to just under ~2.5x based on guidance, supporting flexible capital deployment heading into 2025 .
  • Near‑term stock catalysts: confirmation of exit timing for office‑based practices, sustained payer mix strength, and any early RCM-driven performance gains; watch trajectory of same‑unit growth and G&A containment into Q4 .

What Went Well and What Went Wrong

What Went Well

  • Same‑unit revenue growth of 5.2% YoY, driven by net reimbursement factors (+3.4% on improved payer mix and modest hospital admin fees) and patient volume (+1.8%); commercial and other non‑government payer mix up ~250 bps YoY .
  • RCM transition completed without meaningful disruption; management now shifting from transition to performance improvement with vendor Guidehouse and a fully staffed internal team (~mid‑130s heads) .
  • Cash from operations was strong at $95.7M; cash and equivalents rose to $103.8M; no borrowings on the revolver at quarter‑end .

Quote: “Our third quarter operating results modestly exceeded our expectations, driven primarily by strength in same‑unit revenue.” – CEO James Swift .

What Went Wrong

  • GAAP net income declined YoY ($19.4M vs $21.4M) as operating expenses remained elevated (including $18.6M transformation/restructuring) despite portfolio progress; diluted EPS fell to $0.23 vs $0.26 .
  • Portfolio dispositions pressured non‑same‑unit revenue in‑quarter (~$20M impact), with the bulk of exit activity back‑loaded to Q4; majority of EBITDA benefit expected in 2025 (only ~1/3 in 2024) .
  • Payer mix tailwind moderated toward quarter‑end, and management cannot yet quantify RCM performance uplift over 12–24 months; characterization of 2024 is stabilization rather than optimization .

Financial Results

Quarterly progression (oldest → newest)

MetricQ1 2024Q2 2024Q3 2024
Revenue ($M)$495.1 $504.3 $511.2
Net Income ($M)$4.0 $(153.0) $19.4
Diluted EPS ($)$0.05 $(1.84) $0.23
Adjusted EBITDA ($M, non‑GAAP)$37.2 $57.9 $60.2
Adjusted EPS ($, non‑GAAP)$0.20 $0.34 $0.44

Q3 YoY comparison

MetricQ3 2023Q3 2024
Revenue ($M)$506.6 $511.2
Net Income ($M)$21.4 $19.4
Diluted EPS ($)$0.26 $0.23
Adjusted EBITDA ($M, non‑GAAP)$50.4 $60.2
Adjusted EPS ($, non‑GAAP)$0.32 $0.44

Same‑unit revenue drivers & KPIs (Q3 2024)

KPI (YoY unless noted)Q3 2024
Same‑unit revenue growth5.2%
Net reimbursement factors+3.4% (payer mix + hospital admin fees)
Patient volume+1.8%
Payer mix (commercial/other non‑gov)+~250 bps YoY
Hospital‑based patient services+1.6%
Office‑based patient services+3.8%
NICU days+0.4%

Cash flow and balance sheet highlights (sequential)

MetricQ1 2024Q2 2024Q3 2024
Cash from operations ($M)$(122.6) (seasonal) $109.3 $95.7
Cash & equivalents ($M, end)$8.0 $19.4 $103.8
Total debt incl. finance leases, net ($M)$709.8 $630.4 $626.7

Results vs Wall Street consensus (S&P Global)

MetricConsensus (S&P Global)*Actual
Revenue ($M)N/A (unavailable due to SPGI rate limit)$511.2
EPS ($)N/A (unavailable due to SPGI rate limit)$0.23 (GAAP); $0.44 Adj.
EBITDA/Adj. EBITDA ($M)N/A (unavailable due to SPGI rate limit)$60.2 (Adj.)

*Estimates retrieval from S&P Global was unavailable at this time due to daily request limits.

Non‑GAAP adjustment detail (Q3 2024): Adjusted EPS adds amortization ($0.02), stock‑based comp ($0.02), transformation/restructuring ($0.16), discrete tax items ($0.08), and offsets tax effect of goodwill impairment (−$0.07) to reach $0.44 from GAAP $0.23 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA (non‑GAAP)FY 2024$200M–$220M (Q1 & Q2) $205M–$215M (Q3) Narrowed range; midpoint maintained
G&A ExpenseFY 2024Comparable to/lower than 2023 (Q2 remark) Comparable to 2023 (Q3 reaffirmation) Maintained qualitative outlook
CapEx (run‑rate)Forward~$16–$20M annual post‑restructuring (prelim) No update in Q3 callNo change disclosed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Revenue Cycle Management (RCM)Transition to hybrid model with Guidehouse underway; ~¾ practices moved; focus on stabilization through 2024 Transition completed; fully staffed internal team (~mid‑130s); move to automation and performance improvement; too early to quantify uplift Improving; execution milestone reached
Portfolio RestructuringFormalized plan to exit almost all office‑based practices (except MFM) and divest urgent care; ~$200M revenue to exit; ~$30M annualized Adjusted EBITDA benefit when complete ~+$20M non‑same‑unit revenue headwind in Q3; bulk of exits in Q4; ~1/3 of $30M benefit in 2024, remainder 2025+ Back‑loaded to Q4; benefits 2025‑weighted
Payer MixImprovement emerging; not forecasting tailwind; stable managed care landscape Tailwind persisted but moderated late‑Q3; viewed as “4‑quarter reset” likely to level off Positive but moderating
VolumesStable; NICU days +2.5% in Q1; Q2 NICU days −0.8% YoY but other inpatient subspecialties strong; MFM volumes strong Stable-to-positive across core lines; NICU days +0.4%; office‑based +3.8%; MFM strength continues into 2025 Stable/slightly positive
G&A and CostG&A comparable to or lower than 2023; SW&B elevated but decelerating G&A modestly higher YoY on RCM staffing/incentives, offset by efficiencies; expect full‑year G&A comparable to 2023 Stable/contained
Capital & LeverageCash use in Q1 seasonal; leverage ≤3x; free cash flow to improve H2; CapEx to decline post‑restructuring Operating cash flow solid; cash invested at rates similar to debt cost; net leverage just under ~2.5x midpoint; consider M&A, buybacks, debt paydown in 2025 Strengthening balance sheet, optionality rising

Management Commentary

  • Strategic focus: “Focus our attention on those service lines with solid financial underpinnings and solidify our margin profile and create meaningful operating efficiencies” .
  • RCM milestone: “Between March and September we moved $1.6B of revenue and $800M a day with no material disruption… now move to automation and improved performance” – CFO Rossi .
  • Portfolio exits cadence and impact: “Most of that activity is slated toward the end of the year… expect about 1/3 of the ~$30M benefit in ‘24; rest in ‘25” – CFO Rossi .
  • Payer mix view: “We’ve seen about a 4‑quarter reset… probably some type of a reset that will level off” – CFO Rossi .

Q&A Highlights

  • RCM resourcing: Internal team fully staffed (~mid‑130s heads vs original plan +150); focus shifts to automation/performance in 2025 .
  • Payer mix sustainability: Tailwind observed across four quarters, expected to level; admin fee gains largely from prior renegotiations; go‑forward pricing viewed as stable .
  • Portfolio impact modeling: ~$20M revenue headwind in Q3 from non‑same‑unit; bulk of $200M revenue exits in Q4; ~1/3 of $30M EBITDA benefit in ‘24 .
  • Hospital subsidies: Relationships stable; increases negotiated where needed for inflation/staffing; opportunity exists but not same requirements as adult service lines .
  • Capital deployment: Improved leverage; considering M&A in core services, buybacks, debt paydown as cash builds in 2025 .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q3 2024 EPS, revenue, and EBITDA, but the query exceeded the daily request limit; therefore, Street comparisons are unavailable in this report. We will update upon access restoration. Values would be retrieved from S&P Global.

Key Takeaways for Investors

  • Execution momentum: Q3 outperformed internal plans on same‑unit growth while completing the RCM transition—reducing operational risk ahead of Q4 exits .
  • 2024 is a stabilization year; the main EBITDA uplift (~$30M annualized) is mostly a 2025 event as exits complete in Q4 .
  • Payer mix tailwinds boosted net reimbursement factors but moderated late in Q3; watch for normalization into 2025 .
  • Cash generation and deleveraging are tracking well, providing optionality (M&A/buybacks/debt paydown) as restructuring winds down .
  • Modeling cues: Assume narrow FY24 Adjusted EBITDA range ($205–$215M), G&A comparable to 2023, and limited incremental RCM benefit in 2024 beyond stabilization .
  • Near‑term catalysts: Confirmation of Q4 exit timing, persistence of favorable payer mix, early signs of RCM performance gains, and clarity on 2025 growth algorithm (organic MFM strength plus selective M&A) .