Pediatrix Medical (MD) 6 Aug 232023 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Pediatrix Second Quarter Earnings Conference Call. At this time, your telephone lines are in a listen-only mode. Later, there will be an opportunity for questions and answers, with instructions given at that time. [Operator Instructions].

call being your reminder, a today recorded. is As

conference to ahead. your will now Charles over the turn go I host, call Lynch. Please

XXXX. Thank Reform call our the assessments Federal morning, forward-looking I you, based Certain statements statements These get good within to during comments. Act deemed Allen, call. this Private on of by statements, made to information Pediatrix's events our forward-looking factors management experience new conference into as everyone. our the will be whether Pediatrix undertakes are of statements Securities meaning forward-looking and forward-looking such Welcome otherwise. read of statements of and to Litigation of in before expected may of information, we statements Any future and quickly appropriate. light assumptions historical and conditions, be trends, today, or other and future made be developments revise duty any their current as no during are assessment call or update result to believe a they and this made

Form XX-K, current Important entitled quarterly actual including Risk recent and differ to annual decisions company's statements results, on sections in from factors reports forward-looking report on Form cause Form business materially are on most its developments reports described could XX-Q the that and the its X-K, Factors.

measures annual and reconciliation In website XX-Q release, today's GAAP Form remarks found morning's on these Form be report non-GAAP of non-GAAP A quarterly measures pediatrix.com. by on XX-K be financial the and our metrics. will on earnings management, comparable at can our we in financial reports to most our finally discussing press this

Dr. over call the Swift. turn Jim I'll to our that, CEO, With

Richards, good Financial today is Charlie, our morning, me with everyone. Also and Chief you, Officer. Thank Marc

the trends somewhat positive. operating second our remained Patient track the expectations. continue volume near stable from first decelerated to but quarter results to quarter, very for Our

this to And into days we will after and as NICU summer normal pediatric the a number offset from of attribute seasonality and services, by years ICU volumes return settings distortions pediatric we a of that seasonally the increased anticipate the volumes non-seasonal respiratory floor. move in fall through winter. in hospital-based the diagnoses. We to these COVID year-over-year, our and Within softer increase

ambulatory peds was fetal and seasonal reacceleration seasonal we similar in pediatric in growth And patient driven similarly, ambulatory traffic side, growth ENT school saw a our our the saw ICU year Certain volume peds the such the On of volume maternal a as and floor. we both medicine to by the cardiology. as anticipate subspecialties, in what practices, our would deceleration begins.

Turning to rate.

Our reported cycle in our strong, quite was revenue made the operations. which reflects we've improving pricing largely progress

mix payer Our also year-over-year. was stable

first expense the XXXX. both side, benefits of and the cost our deceleration as a practice quarter and reflected level to quarter growth compared salary underlying On fourth the in compensation

our expense efficiencies declined and by Additionally, against X% maintain G&A reflecting leverage growth. year-over-year, revenue roughly generate to our ability our

strong Lastly, repay the we XX to flow generated cash million quarter us which in borrowings. allowed during roughly

outlook for our we on year XXX million. EBITDA maintaining this adjusted second our As based press quarter you'll our XXX results, in see between are and release million full morning,

on touch strategic and number a I'll Now of priorities. business

this frontend through First, the the focused reflect as forth half efforts year. turn we I second improved results remain collections, staff to further improvement which AR our on mentioned, reflect quarter our put internally. in second activities of We

three Second We're working fronts. on growth. on

we're growth. great we new which to we side, with have to new relationships. partners, also our relationships existing contract continue believe But On hospital view on focused strongest pathway the as sales we our

leadership under opportunity in independent and which pediatric intensivist highest excited of We're that York a the Hospital, possible. with will to hospitalists State, New specialty children's clinicians example with As affiliated of the and Children's receive good the we this, quality patients care help that Blythedale pediatrics an provide services. only Blythedale there arrangement hospital finalized ensure to the work

market platform, expanding. and the urgent novo Houston half actively And our de during to half clinic open rebranding market, clinic we clinics we're marking to we our this Denver XXXX, during the we in for we Houston market, are the three of also branded of Orlando, care our last In name. are primary into acquired an In de third opened are entry lastly, de the planning a scheduled And this additional under fall. clinics Within Pediatrix both novo second the novo priority our us. pediatrics second year. first open

We may begin year-to-date. core during any the our amount anticipate the acquisitions a of modest in market, opportunities haven't of the and service we half we Finally, in second committing believe there lines. year, are we completed focusing that capital

Lastly, No I'll Surprises Act. comment on the briefly

As in-network our predominantly at our discussed past, the strong in and we've status. been has maintaining payer length focus relationships

where the at an to in we're a instances While same position. thoughtful time, process out-of-network undertaking those comprehensive, the in arbitration approach

payer also to note lead averages providers. to I provided believe payer agreement in-network our an have want benefits our when and team reestablish constructively arbitration structure services a work of ability and managed markets affiliated able reflects we also period commend with critical economically Against foremost, level success. for to represents at by in continues previously backdrop, been our but rate this industry a were our that that of We patients we success partners the clinicians. Our I'm pleased to this of for care out compensation our an And first arrive following appropriate our that, in for one network. now to

Richards. call the With Marc to that, turn I'll over

details Thanks, additional the Jim. provide some quarter. Good everyone. for morning, I'll

our mentioned, both second the receivable continued to First, and in decrease quarter. as gross net Jim we accounts

were XX, our that from AR supported from at a the turn, down contribution XX In June this March at XX net growth we year-to-date. to morning. XX days and improvement Our four-day at XX the XX this revenue for December improvement reported rate

above points compared based XXX the by to compensation improvement historical modestly which under in remained G&A salary financial full of Underlying quarter incentive million Also and on revenue. was of 'XX. the Quickly quarter. first of be of norms, QX practice-level SW&B to growth our sequential within we remained line, continue but this will within performance. our outlook decelerate P&L, over the practice-level for 'XX, did offset this same-unit XX revenue growth our turning as to anticipate our less our basis year Within year accruals, that financial higher G&A And our by P&L. XX% and expense than that to are

net repaid based adjusted on repaid in And at term million months, revolver debt on and have EBITDA. we over our our the of trailing We Turning second finally A. quarter. past roughly million borrowings during June to leverage Notably, the Xx XX total XX loan of XXX in total was balance XXX our for borrowings sheet. revolver a million XX XX

we appropriate to given Keep position our begin our year. We our may all that coming the in We in million. with and capacity anticipate that we borrowings third liquidity that to commit the flow capital of generate quarter of revolver build is mind cash will acquisitions total strong, during is that. position repay $XXX sufficient outlook following a to revolver cash very this believe

turn the back over call I'll that, Jim. to With

open now up Marc. Operator, you, let's the for Thank questions. call

of Chickering to the We'll Deutsche go ahead. line Go Bank. you. with Thank [Operator Pito first Instructions].

we implied back us Thanks the in bridge Good the half pad XQ as into morning, then a the the can And guys. you EBITDA taking of margins Can half XXXX? use back year? for help my the from margins launch year questions. for

Hi. This is you, How are Pito? Marc Richards.

our are margins, within unpack you that a items Let couple specifically year. and me second the that of with this help quarter of in

related accounted XX for comp. was the was up You to despite $XX will fact related of salary that quarter-over-quarter our to note million, incentive the line and plan. about million. $XX salaries, growth benefits quarter-over-quarter about $XX.X wages rate our million million, $X.X and compensation that it remainder, about compensation that call by And same-store million, item was

same-store million margin bonus growth at is And periods. indicative as comp of respect rate level. portion a the than the the result incentive of practice-by-practice to higher in quarter-over-quarter there in XX.X increasing XX rate And what rate certain receiving disproportionately corporate-wide isn't improvement, with growth, are to are a your prior that to million. that despite that improvement practices for by necessarily want distribution in that about attention call I quarter So a

will -- compensation. as incentive that, our related stabilizes the will So so RCM with we portfolio, improvement across the

DSOs enough. have quarters come Fair down in Okay. a row. five

previously this written is any off? RCM? all a been also, of receivables to able process? And So Is change been it have have that of the just collect you

on Sure. your I'll expand even And observation yes, there.

quarter, there improvement days Over And XX months, is despite coming are the still at The And our for days. down end room vast here with majority anticipates improvement. by the quarters. nine that has great the we over XX DSO second this our guidance of the at of fact that associated come the improvement. is past

recover was the of And then, like [indiscernible] year? last have you guys able to any written that off been

Yes.

Our revenue experience-based recognition an is model.

to To have catching through is extent, to that. the X.X% P&L, are the same-store very collected on negligible of extent up a small of rate component prior is the component receivables. flowing it which reserved the So been we those plus amounts growth. they're a But

so Perfect. Thanks much. Great.

next our Brian Tanquilut please the of And moment Jefferies. line come One with question. will that for from

I Thanks being called of incentive for salary you guess, question. up because the out same-unit Jim, guys taking comp.

cost to reset how But line? across back or a item the So that do that's adjust about good down sign. specific probably think opportunity we

want up? to I'll follow You start and

incentive from plans cases, Those contractual automatically place and they're in are year-to-year. Sure. most renew in and

discussion. is on So dependent it really a practice-specific

make to averages And that's terms in sure cross Brian, active of for these market at having internally looking compensation market this but conversation just be we're at country the that we're conversations above those making we're specialties, year different one practices number competitive to of in areas, some slightly 'XX. or an that the into and across these of some sure

free cash flow then, cash or obviously, general flow Got it. And strong. Marc, were in

right? cash is is Some of what normalized about think some of your as collecting that forward, the look we AR, way more But you think to generation? right do this

right. you're Well,

course, months that. some flexed, had respect past lumpiness balance have the quarter-to-quarter. with over We The has sheet to XX of from

up in go in then as that Our to we tails quarter I the first payments building but net about quarter. that as flow, approach third year, year coming end free zero we down first in borrower, on out a the of the with borrowing the would the Therefore, here of quarter the were year. bonus cash the think

question me, may. One Got it. if I last for

we Denver with care the called yours? the to should legacy -- and new the the strategy. How urgent for businesses clinic margin this out entering and You Thanks. market core you're be between thinking about the strategy of differential

Hi, It's Charlie. Brian.

Orlando, they're our overall with to care. pre-existing got your accretive only pre-existing care Keep little Houston, experience the these thumb primary albeit think mind not two rule bit as pretty on side best with margin clinics I comparable traffic, we've clinics, mature of markets, or profile. urgent patient a in to in in and

obviously a there where losses that's some that's little experience. ramp few then clinics openings, Houston bit in So in patient our opening we those but new start-up with another staffed new the and this we'll been opened, traffic. Denver, year ground, a get then and a sustain as be will period And build

with metro add Yes. I'll the just market. it's important in us the in hospitals in our presence nurseries, Brian, multiple floor newborn the Jim. an in in Denver the that NICUs, in PICU and peds it's market the for

for services So advantage a us we patient the community feel of the that extension natural relationship market. a is and have in provide we in that think be will that this an we

Thank Awesome. guys. you,

requeued. [Operator ahead. have go Kevin Mr. -- [Operator America. Kevin I'm Instructions]. Fischbeck, your sorry, of Fischbeck's to We'll line Bank line. follow-up accidentally next Go Instructions]. we released we've a question has of with Fischbeck line Meanwhile, the

ahead. up Go We that will open line.

is [indiscernible] for taking question. Hi. Thanks on This Kevin. the for

was much comps? on in So the improving quarter. update that collections out was pricing, parse strong versus Can due you of that the rate in to how the

Sure.

the earlier, majority driving sheet, DSO by as as directly look vast driven that into AR of at is piece place. the said you that if a the of improved corresponds is is collections, I As which coming well of balance course which -- down,

normalized a ongoing. reserve it's which is primarily still So rate, to reversion a

industry? you. you're what and the about what and then Thank your can the how talk the working Surprises you to And on rate Act, win No is process seeing is compared

I'll Jim let some Yes, color. on it add more touch and

range Jim, success of in the our in the rate past rate success from which almost over quoted think arbitration in some actually like CMS plus. XX%, win of a providers, And XX% As last has you want just exclusively over improved rate I of their report. average as reports to you're XX% some cases, aware, is is fashion, might add We've linear -- time. the initiators

Yes.

we standpoint. what -- unfortunately, from have think a the believe or to service this I capability physician industry provider has

the make to continued by with arbitration capability we So that process contracting and are this the data really not out the payment some have QPAs truly of we that drawn on amount, that understand internally build accurate to markets to in QPA payers. this what qualified make sure down we've sure is a bit the piece these

So it's that improve robust continue upon. think a we we process to

team So be We with continue in-network. participate payers. feel and the arbitration leading we're want of to in this very that engage to the proud the we But extent we're out-of-network, will we'll really process. to strongly

Thanks.

from line Deutsche with of Bank. the Go We Chickering ahead. have a Pito follow-up question

bridge you half for your us more are morning. should be of Good guidance year kind can aren't One for Yes. thinking you tailwinds in. into And I XX% about? the XX%. know headwinds giving we XXXX the come XXXX, back It margin for question and back the think around next Thanks about where using like letting of is that me you. guidance, looks while help

heading course, rate year forecast we have despite guidance. our year, next the heavily provide point think 'XX seen. our we concern RCM I where continues this related the to this We're Obviously, be that impact efforts position into not with driving 'XX be financial up a at will of that guidance. in related of end and to and improvements a

related little may And than Pito, last just 'XX and one QX bit but helpful. it's of piece a more be 'XX to

you overall Marc couple on salary on for of trend, of the that to delta is top As here year, kind way think the compensation watermark outlook thing educates passed of this in we closes second this compensation and and of talked the about referenced about particularly line high the our incentive us which as about it, remainder you trends, think And the going something as overall hopefully trend how last side. one quarter, view we've a and quarter, 'XX. about exiting quarters the between is compensation into in which the and we

have shrugging around appreciate of you would sort risk been guess out-of-network of with look Okay, for off for contracting around exposure. practices. can about care increases great. guys been then your as of ranges? That at be has sort managed kind helpful. I you other commentary which the you in I historical year, just you're what seeing talk rate next And crippling and And [indiscernible] versus

start then can Charlie I'll and on. Well, follow

said bear. standpoint in-network relatively out-of-network the a of success I conversations we the things process. participate shrugging on just are payers think other back what to done No not And want to be Obviously, from coming in come substantive that made being be we and anything not -- court and remain innings to process. want we've calls, importantly, more we in we're about related the the work. still to are are some having off with We certainly to those gleeful try Act. are we're one of Surprises to -- on arbitration where early decisions And this as these cases of I've there to

goal Charlie, in-network. on with the follow that. you want largely So is if being to

I would in say is Yes. next our rates of Pito, not providers. contracted from other what visibility into you terms hear dissimilar from year

of a full in could modest. XXXX. I allowables referenced I typically as fairly have don't trend We and -- based of got past, agreements term the very such a think quote, managed that underlying but that diversified rate care in-network that in have that we've number broad multiyear our a a is we've of into And contracts have visibility specific high have percentage book terms I

like inclusive range. from in to mix, distortions what Medicaid a talked lot relatively pricing flat is be to RCM our X% is I've the past, that things the in X% payer And factors or experience, As excluding tends pricing. of

to we best your look we Jim that guidepost NSA are with So caveats the unknowns about don't that's think the that that into around want as past. probably mentioned to glide there just 'XX,

Okay.

increases, one you to that's just think inflationary to of on have or system. the those ammunition pretty world in? Obviously, that Is massive live been guys giving quick the pressures you Just guys healthcare across it's the up increase rate sort follow that there.

environment physician services feeling payer environment. payer that it's counterbalance And and I'd firm around try consolidated NSA say to out admittedly the you of the how side. pass to providers are the pretty can a pressures related an wheeled when to inflationary some along on there the -- trying unknowns the against be components

places of a bit pressures on that in this point. through counterbalancing our of pass we restriction So that experience how measures inflationary some we felt those fully the little could at are

job Thanks on so down, great those guys. great. much getting and Okay, DSOs

you. Thank

Speakers, in time. this at we queue have no further questions

Thank We'll operator. the third see you, you call. you quarter. all for Thank the joining in

conclude for using and for that call Ladies and your Thank you today. gentlemen, your event will teleconferencing. AT&T participation conference for

may disconnect. now You