Transcript: Pediatrix Medical Group Q1 2026 Earnings Conference Call

Pediatrix Medical Group (NYSE:MD) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below. This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation. View the webcast at https://edge.media-server.com/mmc/p/iiedcnw3/ Summary Pediatrix Medical Group reported strong first quarter results with adjusted EBITDA of $58 million, driven by top-line growth despite a modest decline in same-unit volumes. The company reaffirmed its full-year 2026 adjusted EBITDA outlook of $280 to $300 million, citing strong pricing from RCM cash collections, favorable payer mix, and increased patient acuity. Strategic initiatives include the recruitment of top physician leaders to enhance care quality and expand hospital partnerships, as well as the rollout of a stock-based compensation program for clinician leaders. Operational highlights include a 3% increase in same-unit growth and successful cash collections, with net salary growth consistent with previous ranges. Management noted a potential decline in pricing strength in the latter half of the year but maintained a positive outlook based on current performance indicators. Full Transcript OPERATOR Hello and thank you for standing by. At this time, I would like to welcome everyone to the Q1 2026 Pediatrix Medical Group earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, just press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Marianne Moore, General Counsel. You may begin. Marianne Moore (General Counsel) Thank you, operator and good morning. Certain statements and information during this conference call may be deemed to be forward looking statements within the meaning of the Federal Private Securities Litigation Reform act of 1995. These forward looking statements are based on assumptions and assessments made by Pediatrix Management in light of their experience and assessment of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Any forward looking statements made during this call are made as of today and Pediatrics undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise important factors that could cause actual results, developments and business decisions to differ materially from forward looking statements are described in the company's filings with the SEC, including the SECtions entitled Risk Factors. In today's remarks by Management, we will be discussing non GAAP financial metrics. A reconciliation of these non GAAP financial measures to the most comparable GAAP measures can be found in this morning's press release, our quarterly and annual report, and on our website@www.pediatrix.com. with that, I will turn the call over to Mark Gordan, our Chief Executive Officer. Mark Gordan (Chief Executive Officer) Thank you, Marianne and good morning, everyone. Also with me today is Cassandra Rossi, our Chief Financial Officer. We were pleased with our strong first quarter results driven by top line growth with adjusted EBITDA coming in at $58 million. We saw strong pricing that outpaced a modest decline in same unit volumes across our service lines. Although recent volume results don't show a trend, our parametric continues to be strong and we are comfortable with our decision to not have a headwind estimate for the potential effect of the tax subsidy lapse. We know that major hospital systems have seen a decline in patient volume and revenue and we may see that in the future. For now, this area is strong for us and we will continue to report on it as the year continues. Given the uncertainty of whether we will experience this headwind, and since it's still early in the year, we are reaffirming our full 2026 outlook of $280 to $300 million in adjusted EBITDA. Cassandra will now provide some additional details and I'll be back shortly. Cassandra Rossi (Chief Financial Officer) Thanks Mark and good morning everyone. Our consolidated revenue increase was driven by same unit growth of just under 3% and net non same unit activity of about $6 million, including growth from recent acquisitions and organic growth which was partially offset by decreases in revenue from our portfolio restructuring. Pricing growth of 4% was driven by solid RCM cash collections, increases in contract administrative fees, favorable payer mix and increased patient acuity in neonatology. While we saw volume declines across our service lines during the quarter, including NICU days that were down about 1%, practice level SWB expenses increased by $9 million year over year, primarily reflecting same unit increases in clinical salary expense. Net salary growth for the first quarter was in line with the ranges we have seen over the past 18 months that have averaged around 3%. Our G and A expense increased slightly year over year driven by a modest increase in salary and incentive compensation expense partially offset by decreases in professional services and IT expenses. DNA expense increased slightly year over year resulting from higher same unit amortization expense and DNA related to our recent acquisitions. Other non operating expense decreased year over year driven by a decrease in interest expense on modestly lower average borrowings at slower Moving on to Cash Flow As a reminder, we are a user of cash in the first quarter of each year as we pay out incentive compensation and other benefits, namely 401k matching contributions. We used $130 million in operating cash flow in the first quarter compared to 116 million in the prior year, with the differential related to decreases in cash flow from AP and accrued expenses primarily related to incentive compensation payments and decreases in cash flow from AR partially offset by higher earnings. We also deployed $21 million of capital during the quarter to buy a million shares of our stock, leaving us with 82 million shares outstanding. We ended the quarter with cash of just over 200 million and net debt of just over 385 million. This reflects net leverage of just over 1.3 times. Using the midpoint of our updated adjusted EBITDA outlook for 2026, our accounts receivable DSO at March 31st of 42.5 days were down slightly from December 31st but were down over 5 days year over year driven by improved cash collections at our existing units. We are maintaining our previously issued outlook range for the full year of 280 million to $300 million in adjusted EBITDA and while our first quarter results represented about 20% of that annual expected range, we do expect that adjusted EBITDA for the remaining 3/4 will be fairly ratable. I'll now turn the call back over to Mark. Mark Gordan (Chief Executive Officer) Thank you, Cassandra. I pounded the drum over the last few quarters that investments in care quality are always wise. Hospital systems want a partner who will outperform and our patients, of course, deserve nothing less. In the first quarter, we announced that two extraordinary physician leaders, from the top of academic medicine are joining Pediatrics Dr. Jim Barry as Chief Clinical Quality and transformation officer and Dr. Jochen Profitt as Chief Quality Advisor. Jim is nationally recognized for his contributions in neonatal critical care, artificial intelligence and medicine, patient safety and healthcare leadership. He has co founded two national organizations. One is a learning collaborative to neonatologist data scientists and clinical information to study the application of artificial intelligence in neonatal critical care and pediatric medicine and the other is the Clinical Leaders Group of the American Academy of Pediatrics, which is a training, education and collaboration resource for medical and quality directors of NICUs in the United States. Dr. Barry joins Pediatrics from the University of Colorado Health System where he was Chair of Newborn Governance as well as a Professor of Pediatrics Neonatology at the University of Colorado School of Medicine. Obviously, Jim, who is an MD and an mba, brings a full package of quality data, AI and business acumen. Jochen Profitt brings nearly two decades of leadership in perinatal quality improvement as Chair and Principal Investigator of the California Perinatal and Maternal Quality Care Collaboratives. He is a Professor of Pediatrics at Stanford Medicine. These individuals will respectively help lead and advise a team of extraordinary clinicians to continue to raise the bar on quality to analyzing clinical data, reducing care variation and improving patient outcomes using evidence based strategies. Beyond the benefit to our core that our quality focus brings, our team is actively engaged in many opportunities to expand what we do. We have more hospital partnerships than any other organization in our core fields which provides great opportunities in neonatology, maternal field medicine, OB hospitalist and pediatric intensive care. And in addition to our leading in house presence, we see a major opportunity to expand our teleservices and obstetrics presence nationwide. We believe that an organization like ours will continue to outperform if we stay laser focused on care quality that is data based. We see great opportunity to leverage our leading footprint both through our data and through tele and remote services. It is that insistence on quality that binds us to our patients and hospital partners and we have the ability to use our strong balance sheet where there are opportunities to expand our core and emerging areas. On our last call, I spoke about a new program to integrate share price based awards as part of our compensation program. We successfully rolled this out in last year's fourth quarter and Q1 of this year. Included in this was welcoming 45 clinician leaders to our inaugural class of Pediatrics partners. This group is already actively helping us expand on the work we are known for by combining their superb clinical acumen with the spirit of ownership and alignment. We believe this is unique in our field, but so is pediatrics and we can already see the tangible positives of this new initiative. As a matter of fact, Drs. Proffitt and Barry are joining us because of the really hard work that some of our doctors did to look for the really two top people in the field to join us. And I thank them for that. I'll close by speaking about our General Counsel and cao, Maryanne Moore. In our filing this morning, we announced that Marianne will be leaving her role and retiring before the end of the year. In 20 years with Pediatrics, Mary Ann has and continues to play a very important role in many areas of her operations, from legal administrative to overall supervision and guidance. Marianne is a trusted colleague and advisor to the whole company and certainly to me and our board of Directors. We will promptly begin a new search for a new General Counsel operator. Let's open the call for questions. We will now begin the question and answer session. If you would like to ask a question at this time, simply press star followed by the number one on your telephone keypad. And our first question comes from the line of Ryan Daniels with William Blair. Ryan, please go ahead. Hello, this is actually Matthew Mardula on for Ryan. Thank you for taking the questions. So when I'm looking at pricing above 4%, are there any potential headwinds or impacts that we should be aware of, or maybe that you have internally that could reduce the trajectory of this growth going forward? And I know you're a little bit touched up on the tax subsidies, but any other details there? And then, are you still expecting pricing to be flat for the rest of the year, given the Q1 results? And if not, just how are you thinking about pricing for the rest of the year? Cassandra Rossi (Chief Financial Officer) Sure. So on the pricing components, you know, we've talked about really the same four factors that have driven pricing over the past several quarters. You know, the first one of those is our RCM cash collections. And we mentioned in 2025 that we had almost kind of a hockey stick effect for those RCM cash collection impacts. Coming through pricing. So we would expect the first half of the year to still be strong and then I think it will start to lap as we move into the second half. The other three components that have driven positive pricing are contract revenue. That has continued to be strong. We don't know that that will continue at this pace. But right now we know hospitals are facing pressures in that area, but it continues to be strong for us. The third item that we always talk about is payer mix. And I know you touched on the tax subsidies. That's an unknown for us, but that has continued to be an area of strength for us that has flowed through pricing. And the final one, of course, is acuity. We've seen really strong acuity, primarily in neonatology, and these four factors have contributed to the last several quarters. Of course, coming in strong at over 4%. We would expect that to tick down a bit as we move through the year, but I don't know of any other headwinds. Matthew Mardula Great. Perfect. Thank you for that. And I do want to talk about how the last two kind of quarters we've seen declining volume trends and I know last quarter was more because of the strong comp. But any thoughts on the continued decrease in volume and NICU days? And I know it's difficult to, you know, to pinpoint a reason what is causing this, but just how are you thinking about volume going forward and maybe the potential improvements of it? Well, as I said in my comments, while we saw that in those two quarters in recent results, we haven't seen a continue of that trend. So we don't have any different forecast there. Great, thank you for that. And our next question comes from the line of Jack Slevin with Jeffreys. Jack, please go ahead. Hey, good morning. Appreciate the color so far. I just want to maybe double click on a little bit on the pricing side to understand two things. So the rev cycle pieces is very clear. I guess maybe just taking it from a visibility perspective and appreciate all the comments around Hicks or the subsidies going away, but is there anything you can share on what you're seeing on the ground right now as it relates to that continued strength in payer mix or maybe things you're hearing out of your MFM practices that might tell you a little bit about how things might be shifting around? We've started to obviously get some data points from payers and from hospitals on what they've seen from volumes or enrollments in Hicks, but just curious if there's anything, you know, additional you can share on that front and then on the, the admin fee side, just if you can share like, understand that can move around a little, but the visibility to that for the rest of the year would be really helpful. Thank you. On the first part, we know the answer is we don't see any signs of weakness. And we have looked carefully by geography, by type of line of service, and we don't. We are not. I wouldn't say we're surprised. We're pleased. We've speculated that perhaps people are making a cost benefit calculation when it comes to pregnancy that keeps them in the exchanges. We don't really know, but we haven't seen any negative. And we expected, as I said on the last call, that there would be some negative around it. And as I said in my comments earlier, we know that hospital systems broadly have experienced it, but in no line of our business have we seen any weakness or any trend that would suggest any difference. It could be that there'll be delayed effect or it could be that we can get through this as we have been. Okay, got it. Very helpful, I appreciate that. And then maybe. Oh yeah, we'll see. Jack Slevin I'm sorry, Jack, on the contract revenue, I think you had a question there. Yes, yeah, absolutely. Appreciate that, Cassandra. Cassandra Rossi (Chief Financial Officer) Sure. So, you know, on that line, you know, one of the things we've talked about is there are sometimes salary increases in SW&B that we will only effect if we do get support from a hospital. So there is some net effect there. So even though you're seeing a bit of growth on that top line, some of that is really going to pay for some of the salary increases on the SW&B line. But we do anticipate, again, continuing to have those conversations. They are getting tougher. So we hope that it continues to stay strong. It has been anywhere from 10 to 20% of our pricing increase for the last few quarters. And so we expect that as we move through the year. But if anything changes course, we'll let you know. Mark Gordan (Chief Executive Officer) But don't misunderstand. You know, it might sound like we're a one trick pony talking about quality, but the whole thesis of pediatrics business is to be a partner, an irreplaceable partner to our hospital partners. So if we are providing superior quality and really being a leader in our field, you know, we think it justifies the kind of payments that we get. So when Cassandra is right that the environment for hospitals is tougher than it has been, which just makes us make sure that we're offering the service that hospitals provide, that hospitals find very valuable and irreplaceable Got it. Okay. Appreciate that. And maybe I'll sneak two into one here just to wrap it on my end. The couple deals you've done, obviously not massive in terms of dollar amounts, but. But, you know, it's sizable enough that it could have a little bit of impact. Anything you can share in terms of what you're seeing on that front. And then just Cassandra, as it relates to the second quarter, are there any one timers or things we should think about as we're looking at that for modeling purposes? Thanks. Well, we don't, because they're not material. We don't disclose the results. I could say, I will say that the recent acquisitions we've made have done better than our initial projections. So we're very happy about that. And as I said in my call, we are actively working on opportunities that we think could bear fruit and be great additions to Pediatrics. Cassandra Rossi (Chief Financial Officer) And no one times to call out for the quarter. Jack. Peto Shikaring Yeah. Awesome. Thank you both. Appreciate it. Thank you again. If you would like to ask a question, just press star followed by the number one on your telephone keypad. And your next question comes from the line of Peto Shikaring with Deutsche Bank. Peto, please go ahead. Hey, good morning, guys. Thanks for my question. One more pricing question here and I apologize. It's just so much stronger than expectations and obviously had a wonderful impact on EBITDA here. Can you quantify how much of the pricing the first quarter came from the cash collections? Just as you think about it, sort of fading or comping out in the back half of the year? Cassandra Rossi (Chief Financial Officer) About 25%. Peto Shikaring Okay. Okay, fair enough. And then like you said on the admin fees, again, that's about 10 to 20% as well. Assume that that was the same for this quarter. Cassandra Rossi (Chief Financial Officer) Yeah, that was around 20 on the higher end for the quarter. Peto Shikaring Okay. And then what percent of the book has admin fees at this point? And kind of how has that changed year over year? And once you have an admin fee, is that a one time and then that stops increasing or does that increase at inflation levels once it's implemented? Cassandra Rossi (Chief Financial Officer) It depends on the contract. I mean, they vary. You know, we have obviously a couple thousand of those contracts. Peto Shikaring Okay. I mean, do like, you know, half of those. Are those increasing at inflation and half of them. Is there any ballpark in generally where, you know, where this go? You know, again, as we think about just out your modeling now, I know where you're going with that, but as Cassandra said, we have thousands of contracts and they're all Very different. And we don't, there's no. If there was a trend in any way we would call it out. Okay, fair enough. And then last question, and maybe I missed this, but I think actually the lead US question asked if you're going to maintain pricing being flat for the year, are you guys still maintaining that? Just looking at first quarter was 9% stacked comp. And if that, if this is stable, this could lead to pricing of a couple percent this year versus guidance. So I guess are you still maintaining flat pricing guidance for the year? Cassandra Rossi (Chief Financial Officer) Yes, I think we are. I mean again, we do expect that that RCM cash collections, which has been really strong for us, will tail off as we move through the year. And so we are maintaining our flat outlook. Again, it's early. If that does change as we move into the next quarter, you know, we'll update you on that. But right now we are maintaining flat. Mark Gordan (Chief Executive Officer) Great. After last quarter, we, when we forecast the year in our last quarter call, people ask why didn't you put in some kind of hedge? And I'd say everything indicates that things continue to be strong. So it's hard to, it's hard to forecast something based on a fear or possibility if there's no if there's no data behind it. So that's why we are fair enough. You know, it's showing through. So I guess that's it for me, you know, thanks for the questions and a nice job in the quarter. Peto Shikaring Thank you. OPERATOR There's no further question at this time. I will now turn the call back over to Mark Gordan for any closing remarks. Mark, thank you all very much for your support and we look forward to keeping you updated as the year unfolds. Have a great day. That concludes today's call. You may now disconnect. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.