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Transcript Summary

Pediatrix Medical Group reported Q1 2026 adjusted EBITDA of $58 million, driven by a 4% increase in pricing that offset a slight decline in NICU volumes. The pricing growth was fueled by strong RCM collections, increased hospital administrative fees, and high patient acuity. Management reaffirmed its full-year EBITDA guidance of $280 million to $300 million, anticipating that the current pricing tailwinds will moderate in the latter half of the year. A major highlight was the appointment of two elite clinical leaders, Dr. Jim Barry and Dr. Jochen Profit, to enhance the company's data-driven quality initiatives and use of AI in neonatal care. Management also emphasized the success of its new 'Pediatrix Partners' clinician ownership program. While acknowledging broader industry concerns regarding the lapse of healthcare tax subsidies, the company has not yet observed any negative impact on its payer mix. Pediatrix remains focused on its role as a critical partner to hospitals, utilizing a strong balance sheet for share repurchases and potential acquisitions. Long-time General Counsel Mary Ann Moore will retire by year-end, following two decades with the firm.

5-year share-count history (top 10 holders by peak, incl. exited) + price

Revenue Segments

Filing Risk Scores

Pediatrix Medical Group: Healthy Revenue Masking Seasonal Cash Hemorrhaging and Ballooning Debt

Full Earnings Call Transcript — Q1 • 2026-05-05

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. [Operator Instructions] I would now like to turn the conference over to Mary Ann Moore, General Counsel. You may begin.
Mary Ann Moore: 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 and -- 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 Pediatrix 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 section 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 reports and on our website at www.pediatrix.com. With that, I will turn the call over to Mark Ordan, our Chief Executive Officer.
Mark Ordan: Thank you, Mary Ann, and good morning, everyone. Also with me today is Kasandra 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 pyramid 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. So now this area is strong for us, and we will continue to report 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 million to $300 million in adjusted EBITDA. Kasandra will now provide some additional details, and I'll be back shortly.
Kasandra Rossi: 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 SW&B 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&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. D&A expense increased slightly year-over-year, resulting from higher same unit amortization expense and D&A related to our recent acquisitions. Other nonoperating expense decreased year-over-year driven by a decrease in interest expense on modestly lower average borrowing at slightly lower rates. 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 401(k) matching contribution. 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 1 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 1.3x using the midpoint of our updated adjusted EBITDA outlook for 2026. Our accounts receivable DSO at March 31 of 42.5 days were down slightly from December 31, 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 quarters will be fairly ratable. I'll now turn the call back over to Mark.
Mark Ordan: Thank you, Kasandra. 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 the 2 extraordinary physician leaders from the top of academic medicine are joining Pediatrix. Dr. Jim Barry, Chief Clinical Quality and Transformation Officer; and Dr. Jochen Profit as Chief Quality Adviser. Jim is nationally recognized for his contributions in neonatal critical care, artificial intelligence and medicine, patient safety and health care leadership. He has co-founded 2 national organizations, 1 is a learning collaborative to neonatologists, data scientists and clinical informationist 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 Pediatrix from the University of Colorado Health System, where he was Chair of newborn Governance as well as the 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 Profit brings nearly 2 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 fetal medicine, OB hospitalists 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 databased. 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 in Q1 of this year. Included in this was welcoming 45 clinician leaders to our inaugural class of Pediatrix partners. This group is already actively helping us expand on the work we are known for by combining the superb clinical acumen with the spirit of ownership alignment. We believe this is unique in our field, but so is Pediatrix, and we can already see the tangible positives of this new initiative. As a matter of fact, doctors Profit and Barry are joining us because of the really hard work that some of our doctors did to look for the really 2 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, Mary Ann Moore. In our filing this morning, we announced that Mary Ann will be leaving her role and retiring before the end of the year. In 20 years with Pediatrix, Mary Ann has and continues to play a very important role in many areas of our operations from legal administrative to overall supervision and guidance. Mary Ann is a trusted colleague and adviser 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.
Operator: [Operator Instructions] And our first question comes from the line of Ryan Daniels with William Blair.
Matthew Mardula: This is actually Matthew Mardula on for Ryan. 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?
Kasandra Rossi: Sure. So on the pricing components, we've talked about really the same 4 factors that have driven pricing over the past several quarters. The first 1 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 3 components that have driven positive pricing are contract revenue, those -- 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 4 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. And I do want to talk about how the last 2 kind of quarters we've seen declining volume trends. And I know last quarter it was more because of the strong comp, but any thoughts the continued decrease in volume in NICU days. And I know it's difficult to point a reason what is causing this. But just how are you thinking about volume going forward and maybe the potential improvements of it?
Mark Ordan: Well, as I said in my comments, while we saw that in those 2 quarters, in recent results, we haven't seen to continue with that trend. So we don't have any different forecast there.
Operator: And our next question comes from the line of Jack Slevin with Jefferies.
Jack Slevin: I appreciate the color so far. I just want to maybe double click on a little bit on the pricing side to understand 2 things. So the rev cycle piece is very clear. I guess, maybe just taking it from a visibility perspective, and I appreciate all the comments around HICS or the subsidies going away. But is there anything you can share on like 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 started to obviously get some data points from payers and from hospitals on what they've seen from volumes or enrollments in HICS. But just curious if there's anything additional you can share on that front. And then on the admin fee side, just if you can share like I understand that can move around a little, but the visibility to that for the rest of the year would be really helpful.
Mark Ordan: Well, 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 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 a delayed effect or it could be that we can get through this as we have been.
Jack Slevin: Okay. Got it. Very helpful. I appreciate that. And then maybe...
Kasandra Rossi: Sorry, Jack, on the contract revenue, I think you had a question there.
Jack Slevin: Yes. Yes, absolutely. I appreciate that, Kasandra.
Kasandra Rossi: Sure. So on that line, 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, of course, we'll let you know.
Mark Ordan: But don't misunderstand, we're not -- it may sound like we're a one-trick pony talking about quality. But the whole thesis of Pediatrix business is to be a partner, a irreplaceable partner to our hospital partners. So if we are providing superior quality and really being the leader in our field, we think it justifies the kind of payments that we get. So as Kasandra is right that the environment for hospitals is tougher than it has been, which just makes us make sure that we're offering a service that hospitals provide -- the hospitals find very valuable and irreplaceable.
Jack Slevin: Got it. Okay. Appreciate that. And maybe I'll sneak 2 into 1 here. Just to wrap it on my end. The couple of deals you've done, obviously, not massive in terms of dollar amounts, but 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 Kasandra as it relates to the second quarter, are there any onetimers or things we should think about as we're looking at that for modeling purposes?
Mark Ordan: 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 we -- as I said in my call, we are actively working on opportunities that we think could bear fruit and be great additions to Pediatrix.
Kasandra Rossi: And no onetime to call out for the quarter, Jack.
Operator: [Operator Instructions] And your next question comes from the line of Pito Chickering with Deutsche Bank.
Pito Chickering: 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 in the first quarter came from the cash collections just as you think about it sort of fading or coming out in the back half of the year?
Kasandra Rossi: About 25%.
Pito Chickering: Okay. Okay. Fair enough. And then like you said, on the admin fees, again, that's about 10% to 20% as well, I assume that, that was the same for this quarter?
Kasandra Rossi: Yes, that was around 20% on the higher end for the quarter.
Pito Chickering: 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 onetime and then that stops increasing? Or does that increase at inflation levels once it's implemented?
Kasandra Rossi: It depends on the contract. I mean they vary. We have obviously a couple of thousand of those contracts.
Pito Chickering: Okay. I mean like half of those are increasing at inflation and half of them? Is there any ballpark, in generally where this goes, again, as we think about just out of your modeling?
Mark Ordan: No. I know where you're going with that, but as Kasandra 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.
Pito Chickering: Okay. Fair enough. And then last question, and maybe I missed this, but I think actually the lead 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 of percent this year versus guidance. So I guess are you still maintaining flat pricing guidance for the year?
Kasandra Rossi: 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. And if that does change as we move into the next quarter, we'll update you on that. But right now, we are maintaining flat.
Pito Chickering: Great.
Mark Ordan: After last quarter, we -- when we forecast the year in our last quarter call, people asked, 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 forecast something based on a fear or a possibility, if there's no data behind it. So that's why we are.
Pito Chickering: Fair enough. It's showing through. So I guess that's it for me. Thanks for the questions, and a nice job in the quarter.
Operator: There's no further question at this time. I will now turn the call back over to Mark Ordan for any closing remarks. Mark.
Mark Ordan: Thank you all very much for your support, and we look forward to keeping you updated as the year unfolds. Have a great day.
Operator: That concludes today's call. You may now disconnect.