MEDNAX, Inc. (NYSE: MD), the national health solutions partner
specializing in prenatal, neonatal, and pediatric services, today
reported a net loss of $41.0 million, or $0.49 per share for the
three months ended September 30, 2020, primarily reflecting a
non-cash loss on the classification of the MEDNAX Radiology
Solutions medical group to assets held for sale. On a non-GAAP
basis, MEDNAX reported Adjusted EPS from continuing operations of
$0.37.
On September 9, MEDNAX entered into a definitive agreement to
sell MEDNAX Radiology Solutions. The results for MEDNAX Radiology
Solutions have been classified as discontinued operations beginning
with the third quarter of 2020, and prior period results have been
conformed to the current period presentation for comparison
purposes. For the third quarter of 2020, MEDNAX Radiology Solutions
generated net revenue and Adjusted EBITDA of $125.8 million and
$21.1 million, respectively.
For the 2020 third quarter, MEDNAX reported the following
results from continuing operations:
- Net revenue of $461 million;
- Loss of $3 million; and
- Adjusted EBITDA of $73 million.
“We believe the meaningful recovery in patient volumes
experienced during the third quarter demonstrates the critical
nature of services our affiliated physicians and clinicians provide
to their patients across the spectrum of women’s and children’s
care,” said Mark S. Ordan, Chief Executive Officer of MEDNAX. “In
addition, we achieved several important milestones, in particular
our announced definitive agreement to sell MEDNAX Radiology
Solutions. This transaction will enable us to focus fully on our
core services within our Pediatrix and Obstetrix Medical Groups,
which we believe will enable us to support our practices, grow
efficiently and effectively, and drive strong bottom line
results.”
Operating Results from Continuing Operations – Three Months
Ended September 30, 2020
In addition to the announced agreement to sell MEDNAX Radiology
Solutions, as previously disclosed, on May 6, 2020, MEDNAX
completed the sale of its anesthesiology medical group, American
Anesthesiology. The Company’s discussion of its results from
continuing operations for the three and nine months ended September
30, 2020 and the prior-year periods excludes the operating results
from these businesses. Additionally, quarterly results from
continuing operations, including non-GAAP metrics and a
reconciliation to the most directly comparable GAAP measures, for
2019 and 2020 are available on the Company’s website.
During the 2020 third quarter, MEDNAX’s operations continued to
be impacted by reductions in patient volumes and revenue as a
result of the COVID-19 pandemic, although this impact was less
significant than that experienced during the first half of 2020.
The impact to net revenue was relatively consistent throughout the
quarter.
MEDNAX’s net revenue for the three months ended September 30,
2020 was $460.6 million, compared to $454.9 million for the
prior-year period. MEDNAX’s overall same-unit revenue declined by
0.4 percent, offset by growth attributable to recent acquisitions.
During the 2020 third quarter, the Company received $14.2 million
from the provider relief fund established by the Coronavirus Aid,
Relief, and Economic Security (“CARES”) Act, which was recorded as
miscellaneous revenue and increased the Company’s same-unit revenue
from net reimbursement-related factors by 3.1 percent.
Same-unit revenue attributable to patient volume decreased by
4.3 percent for the 2020 third quarter as compared to the
prior-year period, and as compared to a decrease of approximately
9.0 percent for the 2020 second quarter. In each case this decline
was primarily attributable to the impacts from the COVID-19
pandemic.
For the quarter, same-unit patient volumes within the Company’s
hospital-based Pediatrix and Obstetrix services lines, which
include neonatal intensive care unit (NICU) and other NICU related
services, declined by approximately five percent.
Within hospital-based services, NICU patient days decreased by
3.9 percent for the third quarter compared to the prior-year
period, which reflects lower births at the hospitals where
MEDNAX-affiliated practices provide neonatology services and a
lower rate of admission into the NICU, partially offset by a modest
increase in average length of stay. For the 2020 third quarter,
total births at the hospitals where MEDNAX-affiliated practices
provide neonatology services declined year-over-year by 3.2
percent, as compared to an increase of 1.7 percent year-over-year
for the 2019 third quarter.
For the quarter, same-unit patient volumes within the Company’s
office-based service lines, which include maternal-fetal medicine,
pediatric cardiology and other pediatric subspecialty services,
declined by approximately five percent. This decline was driven by
declines in pediatric cardiology and other patient volumes and only
a slight decline in maternal-fetal medicine patient volumes.
Same-unit revenue from net reimbursement-related factors
increased by 3.9 percent for the 2020 third quarter as compared to
the prior-year period. The net increase in revenue from net
reimbursement-related factors reflects funds received under the
CARES Act and modest improvements in managed care contracting,
partially offset by a reduction in revenue from a decrease in the
percentage of services reimbursed by commercial and other
non-government payors. The percentage of patients reimbursed under
commercial and other non-government programs decreased by
approximately 85 basis points compared with the prior-year
period.
For the 2020 third quarter, practice salaries and benefits
expense was $309.9 million, compared to $301.3 million for the
prior-year period, an increase of $8.6 million. This increase
primarily reflects approximately $6 million related to the
incentive compensation impact from provider relief funds received
under the CARES Act during the third quarter of 2020.
For the 2020 third quarter, general and administrative expenses
were $66.3 million, as compared to $63.3 million for the prior-year
period. General and administrative expenses for the 2020 third
quarter include approximately $10 million in expenses incurred as
part of the Company’s transitional services being provided to the
buyer of American Anesthesiology, partially offset by salary and
net staffing reductions. MEDNAX was reimbursed for these transition
services expenses and recorded such reimbursement as a component of
investment and other income within non-operating income.
As previously disclosed, MEDNAX has incurred certain expenses
related to transformational and restructuring activities. For the
third quarter of 2020, these expenses totaled $34.3 million,
compared to $12.8 million for the third quarter of 2019. Of the
expense recorded during the third quarter of 2020, $26.7 million
related to executive management and board of directors
restructuring, while the remainder related to third-party
consulting fees, contract termination fees, and position
eliminations.
Adjusted EBITDA from continuing operations, which is defined as
earnings from continuing operations before interest, taxes,
depreciation and amortization, and transformational and
restructuring related expenses, was $72.7 million for the 2020
third quarter, compared to $69.3 million for the prior-year period.
Funds received from the provider relief fund established by the
CARES Act impacted Adjusted EBITDA positively by approximately $8
million for the 2020 third quarter.
Depreciation and amortization expense was $7.2 million for the
third quarter of 2020 compared to $6.4 million for the third
quarter of 2019.
Investment and other income was $10.5 million for the third
quarter of 2020 compared to $0.8 million for the third quarter of
2019. This increase primarily represents the reimbursement related
to the transition services being provided to American
Anesthesiology.
Interest expense was $27.3 million for the third quarter of 2020
compared to $29.9 million for the third quarter of 2019. This
decline primarily reflects lower average borrowings compared to the
prior-year period.
MEDNAX generated a loss from continuing operations of $2.7
million, or $0.03 per diluted share, for the 2020 third quarter,
based on a weighted average 83.9 million shares outstanding. This
compares with income from continuing operations of $12.9 million,
or $0.16 per diluted share, for the 2019 third quarter, based on a
weighted average 82.9 million shares outstanding.
For the third quarter of 2020, MEDNAX reported Adjusted EPS from
continuing operations of $0.37, compared to $0.38 for the third
quarter of 2019. For these periods, Adjusted EPS from continuing
operations is defined as diluted (loss) income from continuing
operations per common and common equivalent share excluding
non-cash amortization expense, stock-based compensation expense,
transformational and restructuring related expenses and discrete
tax items.
Operating Results from Continuing Operations – Nine Months Ended
September 30, 2020
For the nine months ended September 30, 2020, MEDNAX generated
revenue from continuing operations of $1.32 billion, effectively
unchanged from the prior-year period. Adjusted EBITDA from
continuing operations for the nine months ended September 30, 2020
was $161.6 million, compared to $187.0 million for the prior year.
MEDNAX reported a loss from continuing operations of $14.1 million,
or $0.17 per share, for the nine months ended September 30, 2020,
based on a weighted average 83.3 million shares outstanding, which
compares to income from continuing operations of $32.3 million, or
$0.38 per share, based on a weighted average 84.3 million shares
outstanding for the first nine months of 2019. For the nine months
ended September 30, 2020, MEDNAX reported Adjusted EPS from
continuing operations of $0.70, compared to $0.96 for the same
period of 2019.
Financial Position and Cash Flow – Continuing Operations
MEDNAX had cash and cash equivalents of $294.5 million at
September 30, 2020, compared to $132.2 million on June 30, 2020,
and net accounts receivable were $267.1 million.
During the third quarter of 2020, MEDNAX generated cash from
continuing operations of $127.1 million, compared to $56.7 million
during the third quarter of 2019, primarily reflecting lower income
tax payments in 2020.
At September 30, 2020, MEDNAX had no outstanding borrowings
under its $1.2 billion revolving credit facility and had total debt
outstanding of $1.75 billion, consisting solely of its senior
notes, and net debt of $1.46 billion.
“Our cash inflows and reduced net debt demonstrate MEDNAX’s
strong financial profile, especially given the challenges presented
to the Company and all healthcare providers thus far in 2020,” said
Marc Richards, Executive Vice President and Chief Financial
Officer. “Including the anticipated proceeds from the sale of
MEDNAX Radiology Solutions, we expect to be well positioned to
reduce our total borrowings, support our practices internally, and
fund our strategic growth in the future.”
Discontinued Operations
The results for MEDNAX Radiology Solutions, American
Anesthesiology and MedData, the Company’s former management
services organization, are presented as discontinued operations for
the three and nine months ended September 30, 2020 and all prior
periods as relevant.
During the third quarter of 2020, the Company reported a loss
from discontinued operations of $38.4 million, which predominantly
reflects a loss on the classification of MEDNAX Radiology Solutions
as assets held for sale as of September 30, 2020.
Non-GAAP Measures
A reconciliation of Adjusted EBITDA from continuing operations
and Adjusted EPS from continuing operations to the most directly
comparable GAAP measures for the three and nine months ended
September 30, 2020 and 2019 and Adjusted EBITDA for MEDNAX
Radiology Solutions to the most directly comparable GAAP measure
for the three months ended September 30, 2020 is provided in the
financial tables of this press release.
Earnings Conference Call
MEDNAX, Inc. will host an investor conference call to discuss
the quarterly results at 9 a.m., ET today. The conference call
Webcast may be accessed from the Company’s Website, www.mednax.com.
A telephone replay of the conference call will be available from
1:00 p.m. ET today through midnight ET November 19, 2020 by dialing
866.207.1041, access Code 6818509. The replay will also be
available at www.mednax.com.
ABOUT MEDNAX
MEDNAX, Inc. is a national health solutions partner comprised of
the nation's leading providers of physician services. Physicians
and advanced practitioners practicing as part of MEDNAX are
reshaping the delivery of care within their specialties and
subspecialties, using evidence-based tools, continuous quality
initiatives, consulting services, clinical research and
telemedicine to enhance patient outcomes and provide high-quality,
cost-effective care. The Company was founded in 1979, and today,
through its affiliated professional corporations, MEDNAX provides
services through a network of more than 3,000 physicians in all 50
states and Puerto Rico. Additional information is available at
www.mednax.com.
Certain statements and information in this press release may be
deemed to contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements may include, but are not limited to,
statements relating to the Company’s objectives, plans and
strategies, and all statements, other than statements of historical
facts, that address activities, events or developments that we
intend, expect, project, believe or anticipate will or may occur in
the future. These statements are often characterized by terminology
such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,”
“plan,” “will,” “expect,” “estimate,” “project,” “positioned,”
“strategy” and similar expressions, and are based on assumptions
and assessments made by the Company’s management in light of their
experience and their perception of historical trends, current
conditions, expected future developments and other factors they
believe to be appropriate. Any forward-looking statements in this
press release are made as of the date hereof, and the Company
undertakes no duty to update or revise any such statements, whether
as a result of new information, future events or otherwise.
Forward-looking statements are not guarantees of future performance
and are subject to risks and uncertainties. Important factors that
could cause actual results, developments, and business decisions to
differ materially from forward-looking statements are described in
the Company’s most recent Annual Report on Form 10-K and its
Quarterly Reports on Form 10-Q, including the sections entitled
“Risk Factors”, as well the Company’s current reports on Form 8-K,
filed with the Securities and Exchange Commission, and include the
impact of the COVID-19 outbreak on the Company and its financial
condition and results of operations; the effects of economic
conditions on the Company’s business; the effects of the Affordable
Care Act and potential changes thereto or a repeal thereof; the
Company’s relationships with government-sponsored or funded
healthcare programs, including Medicare and Medicaid, and with
managed care organizations and commercial health insurance payors;
the Company’s ability to comply with the terms of its debt
financing arrangements; the impact of the divestiture of the
Company’s anesthesiology medical group; whether the Company will be
able to complete the divestiture of its radiology medical group and
the potential uses of proceeds thereof; the impact of management
transitions; the timing and contribution of future acquisitions;
the effects of share repurchases; and the effects of the Company’s
transformation initiatives, including its reorientation on, and
growth strategy for, its pediatrics and obstetrics business.
MEDNAX, INC.
Consolidated Statements of
Income
(in thousands, except per
share data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Net revenue
$
460,635
$
454,913
$
1,317,321
$
1,321,159
Operating expenses:
Practice salaries and benefits
309,904
301,306
909,168
880,686
Practice supplies and other operating
expenses
22,440
22,581
66,455
72,688
General and administrative expenses
66,346
63,284
194,276
185,318
Depreciation and amortization
7,195
6,408
20,749
18,830
Transformational and restructuring related
expenses
34,291
12,766
60,846
32,025
Total operating expenses
440,176
406,345
1,251,494
1,189,547
Income from operations
20,459
48,568
65,827
131,612
Investment and other income
10,534
802
13,064
2,777
Interest expense
(27,250)
(29,909)
(83,180)
(91,271)
Equity in earnings of unconsolidated
affiliate
282
786
1,081
1,753
Total non-operating expenses
(16,434)
(28,321)
(69,035)
(86,741)
Income (loss) from continuing operations
before income taxes
4,025
20,247
(3,208)
44,871
Income tax provision
(6,677)
(7,360)
(10,859)
(12,590)
(Loss) income from continuing
operations
(2,652)
12,887
(14,067)
32,281
Loss from discontinued operations, net of
tax
(38,392)
(1,268,803)
(718,125)
(1,539,314)
Net loss
$
(41,044)
$
(1,255,916)
$
(732,192)
$
(1,507,033)
Per common and common equivalent share
data (diluted):
(Loss) income from continuing
operations
$
(0.03)
$
0.16
$
(0.17)
$
0.38
Loss from discontinued operations
$
(0.46)
$
(15.31)
$
(8.62)
$
(18.26)
Net loss
$
(0.49)
$
(15.15)
$
(8.79)
$
(17.88)
Weighted average diluted shares
outstanding
83,862
82,883
83,260
84,302
MEDNAX, Inc.
Reconciliation of (Loss)
Income from Continuing Operations
to Adjusted EBITDA from
Continuing Operations
(in thousands)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
(Loss) income from continuing
operations
$
(2,652
)
$
12,887
$
(14,067
)
$
32,281
Interest expense
27,250
29,909
83,180
91,271
Income tax provision
6,677
7,360
10,859
12,590
Depreciation and amortization
7,195
6,408
20,749
18,830
Transformational and restructuring related
expenses
34,291
12,766
60,846
32,025
Adjusted EBITDA from continuing
operations
$
72,761
$
69,330
$
161,567
$
186,997
MEDNAX, Inc.
Reconciliation of Diluted
(Loss) Income from Continuing Operations per Share
to Adjusted Income from
Continuing Operations per Diluted Share (“Adjusted EPS”)
(in thousands, except per
share data)
(Unaudited)
Three Months Ended
September 30,
2020
2019
Weighted average diluted shares
outstanding
83,862
82,883
(Loss) income from continuing operations
and diluted (loss) income from continuing operations per share
$
(2,652
)
$
(0.03
)
$
12,887
$
0.16
Adjustments (1):
Amortization (net of tax of $601 and
$444)
1,802
0.02
1,333
0.02
Stock-based compensation (net of tax of
$1,132 and $1,902)
3,398
0.04
5,706
0.07
Transformational and restructuring related
expenses (net of tax
of $8,573 and $3,191)
25,718
0.31
9,575
0.12
Net impact from discrete tax events
2,905
0.03
1,784
0.01
Adjusted income and diluted EPS from
continuing operations
$
31,171
$
0.37
$
31,285
$
0.38
(1)
Our blended statutory tax rate of 25% was
used to calculate the tax effects of the adjustments for the three
months ended September 30, 2020 and 2019.
Nine Months Ended
September 30,
2020
2019
Weighted average diluted shares
outstanding
83,260
84,302
(Loss) income from continuing operations
and diluted (loss) income from continuing operations per share
$
(14,067
)
$
(0.17
)
$
32,281
$
0.38
Adjustments (1):
Amortization (net of tax of $1,632 and
$1,289)
4,896
0.06
3,867
0.05
Stock-based compensation (net of tax of
$4,550 and $6,893)
13,652
0.16
20,672
0.25
Transformational and restructuring related
expenses (net of tax
of $15,211 and $8,006)
45,635
0.55
24,019
0.28
Net impact from discrete tax events
7,849
0.10
(5
)
—
Adjusted income and diluted EPS from
continuing operations
$
57,965
$
0.70
$
80,834
$
0.96
(1)
Our blended statutory tax rate of 25% was
used to calculate the tax effects of the adjustments for the nine
months ended September 30, 2020 and 2019.
MEDNAX, INC.
Balance Sheet
Highlights
(in thousands)
(Unaudited)
As of
As of
September 30, 2020
December 31, 2019
Assets:
Cash and cash equivalents
$
294,512
$
107,870
Investments
81,574
74,510
Accounts receivable, net
267,125
434,266
Other current assets
56,401
28,945
Intangible assets, net
27,665
28,587
Operating lease right-of-use assets
58,993
56,413
Goodwill, other assets, property and
equipment
1,687,008
1,687,814
Assets held for sale
951,548
1,727,496
Total assets
$
3,424,826
$
4,145,901
Liabilities and shareholders’
equity:
Accounts payable and accrued expenses
$
388,517
$
410,637
Total debt, net
1,744,703
1,730,238
Operating lease liabilities
58,915
62,897
Other liabilities
348,973
290,240
Liabilities held for sale
78,712
152,893
Total liabilities
2,619,820
2,646,905
Total equity
805,006
1,498,996
Total liabilities and equity
$
3,424,826
$
4,145,901
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201106005095/en/
Charles Lynch Senior Vice President, Finance and Strategy
954-384-0175, x 5692 charles_lynch@mednax.com
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