pediatrix(MD) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Mednax reported a Q1 2022 net loss of $21.2 million driven by a $57.0 million debt extinguishment loss, despite 7.9% revenue growth and significant balance sheet shifts Consolidated Balance Sheets Total assets decreased to $2.34 billion as of March 31, 2022, primarily due to a significant reduction in cash for debt redemption, with total liabilities also decreasing Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $7,179 | $387,391 | | Total current assets | $439,777 | $840,564 | | Goodwill | $1,528,694 | $1,505,430 | | Total assets | $2,340,976 | $2,722,546 | | Liabilities & Equity | | | | Total current liabilities | $269,727 | $427,366 | | Long-term debt and finance lease liabilities, net | $655,930 | $1,002,258 | | Total liabilities | $1,463,900 | $1,825,854 | | Total equity | $877,076 | $896,692 | Consolidated Statements of Income Net revenue increased 7.9% to $482.2 million in Q1 2022, but a $57.0 million debt extinguishment loss led to a $20.9 million loss from continuing operations Consolidated Statements of Income (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net revenue | $482,229 | $446,753 | | Income from operations | $39,108 | $26,104 | | Loss on early extinguishment of debt | $(57,016) | $(14,532) | | (Loss) income from continuing operations | $(20,945) | $5,344 | | Net (loss) income attributable to Mednax, Inc. | $(21,188) | $17,642 | | Diluted (Loss) income per share from continuing operations | $(0.25) | $0.06 | | Diluted Net (loss) income per share | $(0.25) | $0.21 | Consolidated Statements of Cash Flows Net cash used in operating activities was $97.5 million, with financing activities using $256.5 million primarily for debt redemption, resulting in a $380.2 million net cash decrease Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(97,482) | $(82,188) | | Net cash used in investing activities | $(26,273) | $(10,364) | | Net cash used in financing activities | $(256,457) | $(761,661) | | Net decrease in cash and cash equivalents | $(380,212) | $(854,213) | | Cash and cash equivalents at end of period | $7,179 | $269,630 | Notes to Consolidated Financial Statements Notes detail normalized COVID-19 impact, $10.4 million in CARES Act funds, a major debt restructuring, and a $26.0 million pediatric urgent care acquisition - The company's operating results were not materially impacted by COVID-19 in 2021 or Q1 2022, though uncertainty remains. Affiliated practices received $10.4 million in CARES Act relief funds during Q1 2022[25][26] Net Revenue by Category (in thousands) | Category | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net patient service revenue | $406,035 | $381,063 | | Hospital contract administrative fees | $63,526 | $57,066 | | Other revenue | $12,668 | $8,624 | | Total Net Revenue | $482,229 | $446,753 | - In Q1 2022, the company acquired one pediatric urgent care practice for $26.0 million, recording $23.3 million in goodwill[39] - On February 11, 2022, the company issued $400.0 million of 5.375% senior notes due 2030 and entered into a new credit agreement with a $450 million revolving credit line and a $250 million term loan. Proceeds were used to redeem the $1.0 billion 6.25% senior notes due 2027[44][46] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 7.9% revenue growth, improved operating income, and the $57.0 million debt extinguishment loss, highlighting non-GAAP Adjusted EBITDA growth and sufficient liquidity post-refinancing Results of Operations Net revenue increased 7.9% to $482.2 million in Q1 2022, with operating income growing 49.8% to $39.1 million, though non-operating expenses rose due to debt extinguishment - Same-unit net revenue increased by $5.6 million (1.3%), driven by a $14.2 million (3.2%) increase from patient service volumes, partially offset by an $8.6 million (1.9%) decrease from net reimbursement-related factors[88] - General and administrative expenses decreased by $5.2 million to $61.3 million, primarily due to lower professional fees and savings in revenue cycle management expenses[91] - The company reported a loss from continuing operations of $20.9 million, compared to income of $5.4 million in Q1 2021, driven by the $57.0 million loss on early debt extinguishment[97][95] Non-GAAP Measures Non-GAAP Adjusted EBITDA from continuing operations increased to $50.7 million in Q1 2022, with Adjusted EPS rising to $0.33, providing a clearer view of underlying performance Reconciliation of Non-GAAP Measures (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Adjusted EBITDA | | | | (Loss) income from continuing operations | $(20,941) | $5,352 | | Adjustments (Interest, Tax, D&A, etc.) | $71,623 | $39,789 | | Adjusted EBITDA from continuing operations | $50,682 | $45,483 | | Adjusted EPS | | | | Diluted (Loss) income from cont. ops. per share | $(0.25) | $0.06 | | Adjustments (Amortization, Stock Comp, etc.) | $0.58 | $0.18 | | Adjusted Diluted EPS from continuing operations | $0.33 | $0.24 | Liquidity and Capital Resources As of March 31, 2022, the company held $7.2 million in cash, having completed a major debt refinancing to issue $400 million in new notes and secure a new credit facility - Net cash used in financing activities of $256.5 million primarily consisted of the $1.05 billion redemption of 2027 Notes, offset by proceeds from $400.0 million in new 2030 Notes, a $250.0 million term loan, and $149.0 million in net borrowings on the revolving credit line[107] - The company recognized a loss on early extinguishment of debt of $57.0 million in Q1 2022 related to the debt refinancing[113] - Management believes that funds from operations, cash on hand, and availability under the Amended Credit Agreement are sufficient to meet obligations for at least the next 12 months[120] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on its $399.0 million variable-rate debt, where a 1% change impacts annual income by $4.0 million - The company is exposed to interest rate risk on its $399.0 million Amended Credit Agreement, which has a variable rate based on SOFR[122] - A hypothetical 1% change in interest rates would result in an approximate $4.0 million annual impact to income before taxes[122] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022[124] - No material changes in internal control over financial reporting occurred during the first quarter of 2022[125] PART II - OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings, primarily medical malpractice claims, which management does not expect to materially impact financial condition - The company is subject to audits, inquiries, and investigations from government authorities, as well as pending and threatened legal actions, primarily medical malpractice claims[128][129] - The company self-insures a significant portion of its professional liability risk through a wholly owned captive insurance subsidiary[130] Risk Factors No material changes to risk factors have been reported since the company's Annual Report on Form 10-K for December 31, 2021 - No material changes to risk factors were reported since the 2021 Form 10-K filing[131] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2022, the company repurchased 49,707 common shares for $1.2 million to satisfy tax withholding obligations related to restricted stock vesting - In Q1 2022, the company repurchased 49,707 shares of common stock for an aggregate of $1.2 million[132][133] - The repurchases were conducted to satisfy minimum statutory withholding obligations in connection with the vesting of restricted stock[132] Exhibits This section lists exhibits filed with the Form 10-Q, including documents for new senior notes, the amended credit agreement, and Sarbanes-Oxley certifications - Key exhibits filed include the form of the 5.375% Senior Notes due 2030, the amended and restated credit agreement, and Sarbanes-Oxley certifications[135]