pediatrix(MD) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The company's financial statements for H1 2025 show a shift to profitability, driven by the absence of prior-year impairment charges, with improved cash flow from operations Consolidated Balance Sheets As of June 30, 2025, total assets slightly decreased to $2.10 billion, while total liabilities significantly reduced, increasing shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $2,102,100 | $2,152,700 | ($50,600) | | Total Current Assets | $613,050 | $639,607 | ($26,557) | | Goodwill | $1,242,606 | $1,242,606 | $0 | | Total Liabilities | $1,268,347 | $1,387,762 | ($119,415) | | Total Current Liabilities | $341,043 | $434,110 | ($93,067) | | Long-term debt, net | $583,863 | $597,119 | ($13,256) | | Total Shareholders' Equity | $833,753 | $764,938 | $68,815 | Consolidated Statements of Income and Comprehensive Income Q2 2025 net income of $39.3 million marks a significant turnaround from a prior-year loss, primarily due to the absence of impairment charges, despite a 7.0% revenue decrease Q2 Performance Comparison (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $468,844 | $504,296 | -7.0% | | Income (Loss) from Operations | $59,867 | ($157,723) | N/A | | Net Income (Loss) | $39,260 | ($153,025) | N/A | | Diluted EPS | $0.46 | ($1.84) | N/A | Six-Month Performance Comparison (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $927,203 | $999,397 | -7.2% | | Income (Loss) from Operations | $91,968 | ($141,831) | N/A | | Net Income (Loss) | $59,997 | ($148,990) | N/A | | Diluted EPS | $0.70 | ($1.79) | N/A | - The significant improvement in net income for both the three and six-month periods in 2025 is largely attributable to the absence of the $154.2 million goodwill impairment, $27.8 million long-lived asset impairment, and $10.9 million loss on disposal of businesses recorded in 2024[12] Consolidated Statements of Cash Flows H1 2025 net cash from operations turned positive at $19.7 million, a substantial improvement from the prior year's usage, reflecting better earnings and working capital Six-Month Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $19,704 | ($18,275) | | Net cash used in investing activities | ($14,618) | ($29,130) | | Net cash used in financing activities | ($10,294) | ($6,451) | | Net decrease in cash and cash equivalents | ($5,208) | ($53,856) | Notes to Consolidated Financial Statements Key notes detail revenue recognition, debt structure, and significant prior-year impairment charges related to the company's strategic exit from office-based practices - In 2024, the company exited almost all of its affiliated office-based practices, including its primary and urgent care service line, to refocus its operations[20] Net Revenue by Category (in thousands) | Category | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net patient service revenue | $397,410 | $432,847 | $786,788 | $854,678 | | Hospital contract administrative fees | $68,224 | $70,913 | $133,408 | $142,716 | | Other revenue | $3,210 | $536 | $7,007 | $2,003 | | Total | $468,844 | $504,296 | $927,203 | $999,397 | - In Q2 2024, the company recognized a non-cash goodwill impairment charge of $154.2 million, fixed asset impairments of $20.1 million, intangible asset impairments of $7.7 million, and a loss on disposal of businesses of $10.9 million[34][35] - As of June 30, 2025, the company had outstanding debt consisting of $400.0 million in 5.375% senior notes due 2030 and a $206.3 million balance on its Term A Loan. The revolving credit line of $450.0 million was fully available[37][41][42] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q2 2025 revenue decline to practice dispositions, offset by same-unit growth, leading to improved operating margins and strong liquidity Results of Operations Q2 2025 net revenue decreased 7.0% due to dispositions, but same-unit revenue grew 6.4%, leading to a swing to operating profit and increased Adjusted EBITDA and EPS - For Q2 2025, the $35.5 million (7.0%) decrease in net revenue was primarily due to practice dispositions, which was partially offset by a $27.9 million (6.4%) increase in same-unit revenue[75] - Same-unit revenue growth in Q2 2025 was driven by a $15.0 million (3.5%) increase from net reimbursement-related factors (like patient acuity and collections) and a $12.9 million (2.9%) increase from patient service volumes[75] Non-GAAP Performance Reconciliation (Q2) | Metric (in millions, except EPS) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $39.3 | ($153.0) | | Adjusted EBITDA | $73.2 | $57.9 | | Diluted EPS | $0.46 | ($1.84) | | Adjusted EPS | $0.53 | $0.34 | Liquidity and Capital Resources The company maintains strong liquidity with $224.7 million in cash and a fully available $450.0 million credit line, alongside improved working capital and DSO - The company's liquidity position at June 30, 2025 included $224.7 million in cash and cash equivalents and full availability of its $450.0 million Revolving Credit Line[102][113] - Days Sales Outstanding (DSO) improved to 46.4 days at June 30, 2025, down from 47.6 days at December 31, 2024, and 49.5 days at June 30, 2024, primarily due to improved cash collections[106] - Total outstanding debt principal at June 30, 2025, was $606.3 million, composed of the $400.0 million 2030 Notes and the $206.3 million Term A Loan[113][114] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on its $206.3 million variable-rate Term A Loan, with a 1% rate change impacting pre-tax income by $2.1 million annually - The company is exposed to interest rate risk on its $206.3 million outstanding balance of the Term A Loan. A 1% change in interest rates would result in an annual impact of approximately $2.1 million to pre-tax income[120] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[122] - No material changes to internal control over financial reporting occurred during the second quarter of 2025[123] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings, primarily medical malpractice claims, which management does not expect to have a material adverse effect - The company is involved in routine legal proceedings, mostly related to medical malpractice claims, and does not expect them to have a material adverse effect on its financial condition[126] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K were reported - No material changes to risk factors were reported since the company's 2024 Form 10-K[128] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, the company repurchased 14,631 shares of common stock for $0.2 million to satisfy tax withholding obligations related to restricted stock vesting - In Q2 2025, the company withheld 14,631 shares of common stock to satisfy tax withholding obligations from vesting restricted stock[129][130] Item 5. Other Information Mr. Don Gregory Neeb was appointed Chief Investment and Strategy Officer, effective August 1, 2025, with a compensation package including salary, retention award, and equity - The Board of Directors appointed Mr. Don Gregory Neeb as the company's Chief Investment and Strategy Officer, effective August 1, 2025[132] - Mr. Neeb's compensation package includes a $550,000 annual salary, a $1 million one-time cash retention award, a target bonus of 125% of salary, and substantial performance-based equity awards[134] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the new Chief Investment and Strategy Officer's employment agreement and required certifications - The exhibits filed with the report include the employment agreement for Don Gregory Neeb and required certifications under the Sarbanes-Oxley Act[139]