Q3 2025 Pediatrix Medical Group Inc Earnings Call

November 3, 2025

Yeah.

Third quarter 2025, Pediatrics Medical group incorporated earnings Conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. So if you'd like to ask a question at that time. Please press Star then the number one on your telephone keypad.

If you'd like to withdraw your question or your question has been answered already please press star one again.

Thank you.

I would now like to turn the conference over to our Chief administrative Officer Marianne Moore. Please go ahead.

Thank you operator, and good morning, certain statements and information during this call may be deemed to be forward looking statements within the meaning of the federal private Securities Litigation Reform Act of 1095.

These forward looking statements are based on assumptions and assessments made by pediatrics 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 pediatrics undertakes no duty to update or revise.

Kasandra Rossi: Thanks, Mark, and good morning, everyone. This is definitely not my real voice, so please forgive me. Our consolidated revenue decrease was driven by our portfolio restructuring activity of just under $54 million. This decrease was partially offset by strong same-unit growth of 8%, with same-unit pricing up about 7.5% and patient service volumes up just under 40 basis points. Pricing was driven by solid RCM cash collections, increased patient acuity in neonatology, an increase in contract administrative fees, and favorable payer mix, while volumes reflected modest growth in neonatology, where NICU days were up by 2%. Practice-level SW&B expenses declined year over year, also reflecting our portfolio restructuring activity. On a same-unit basis, we saw increases in salary expense, incentive compensation based on practice results, and benefits expense.

Any such statements, whether as a result of new information future events or otherwise.

Speaker #1: Ladies and gentlemen, thank you for standing by. Hello, my name is Dustin, and I will be your conference operator today. At this time, I would like to welcome you to the Third Quarter 2025 Pediatrix Medical Group, Inc. earnings conference call.

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 sections 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.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. So if you'd like to ask a question at that time, please press star, then the number one on your telephone keypad.

And the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly and annual reports and on our website at Www Dot pediatrics dot com with that I will turn the call over to Mark <unk>, Our Chief Executive Officer.

Speaker #1: If you'd like to withdraw your question or your question has been answered already, please press star one again. Thank you. I would now like to turn the conference over to our Chief Administrative Officer, Mary Moore.

Thank you Mary Ann and good morning, everyone also with me today is Cassandra Rossi, our Chief Financial Officer, who is recovering from the flu.

Kasandra Rossi: Salary growth for the third quarter was modestly below the ranges that we have seen for the prior five quarters that averaged 3 to 3.5%. Our G&A expense increased slightly year over year, driven by an increase in incentive compensation expense based on overall company financial results. Other non-operating income included a net gain on investments in divested businesses of $21 million, with the remaining net increase driven by higher interest income on cash balances and a decrease in interest expense on modestly lower average borrowings at slightly lower rates. Moving to cash flow, we generated $138 million in operating cash flow in the third quarter, compared to $96 million in the prior year, driven by higher earnings and increases in cash flow from AR.

Speaker #1: Please go ahead.

We didn't forecast that out.

Speaker #2: Thank you, Operator, and good morning. Certain statements and information during this call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995.

Our third quarter results, including adjusted EBITDA of $87 million exceeded our expectations a confluence of positive outcomes in pricing collections and expense controls together led to another very strong quarter 2025 year to date results have been strong and we see no reason to expect a shift from normal seasonality in.

Speaker #2: 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.

The fourth quarter.

Because of the practice bonus variability our outlook for the full year adjusted EBITDA is a longer than usual range of $270 million to $290 million.

Speaker #2: Any forward-looking statements made during this call are made as of today. And pediatrics undertakes no duty to update or revise any such statements whether as a result of new information, future events, or otherwise.

Note that we also disclosed in our Q filing that we bought back one 2 million shares in the quarter to date that number is now $1 7 million shares.

Speaker #2: 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 sections entitled Risk Factors.

After Cassandra I will speak about the big picture about where pediatrics is today and where we're heading.

Kasandra Rossi: We also used $21 million of cash during the quarter for share repurchases and used $19 million to acquire several neonatology, MFM, and OB hospitalist practices in a single transaction. We ended the quarter with cash of $340 million and net debt of just over $260 million. This reflects net leverage of just under 1x, using the midpoint of our updated adjusted EBITDA outlook range for 2025. Our ARDSO at 30 September 2024 of 43.1 days were down over three days from 30 June 2024, but were down almost nine days year over year, driven by improved cash collections at our existing unit.

Speaker #2: 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 earnings press release, our quarterly and annual reports, and on our website at www.pediatrics.com.

Thanks, Mark and good morning, everyone. This is definitely not my real boy. So please forgive me.

Our consolidated revenue decrease was driven by our portfolio restructuring activity of just under $54 million. This decrease was partially offset by strong same unit growth of 8% with same unit pricing up about seven 5% and patient service volumes up just under 40 basis points.

Speaker #2: With that, I will turn the call over to Mark Ordan, our Chief Executive Officer.

Speaker #3: Thank you, Mary, and good morning, everyone. Also with me today is Kasandra Rossi, our Chief Financial Officer, who is recovering from the flu. We didn't forecast that.

<unk> was driven by solid RCM cash collections increased patient acuity in neonatology, and increasing contract administrative fees and favorable payer mix, while volumes reflected modest growth in neonatology NICU days were up by 2%.

Speaker #3: Our Third Quarter results, including adjusted EBITDA of $87 million exceeded our expectations. A confluence of positive outcomes in pricing, collections, and expense controls together led to another very strong quarter.

Mark Ordan: Thanks, Kasandra. I think that when we release stronger-than-expected results, people go straight to the components of those results and miss the core of who Pediatrix really is. Yes, we employ clinicians in hospitals and in ambulatory settings, and yes, there are strong components of our results that are out of our control. That fact is hardly unique to us. Let me tell you the combination of some factors that do make us quite unique. At our recent medical directors meeting, we assembled over 250 practice medical directors, OB hospitalists, pediatric intensive care physicians, maternal-fetal medicine physicians, and neonatologists. Nobody else could assemble a group of clinician leaders like we can. This is the nation's largest assembly of practices in these most critical areas.

Practice level SWM be expenses declined year over year also reflecting our portfolio restructuring activity on a same unit basis, we saw increases in salary expense incentive compensation based on practice results and benefits expense.

Speaker #3: 2025 year-to-date results have been strong, and we see no reason to expect a shift from normal seasonality in the fourth quarter. The cause of practice bonus variability are outlook for the full year's adjusted EBITDA is wider than usual range at $270 to $290 million.

Ulery growth for the third quarter was modestly below the ranges that we have seen for the prior five quarters that averaged three to three 5% our G&A expense increased slightly year over year, driven by an increase in incentive compensation expense based on overall company financial results.

Speaker #3: Note that we also disclosed in our Q filing that we bought back $1.2 million shares in the quarter. To date, that number is now $1.7 million shares.

Speaker #3: After Kasandra, I will speak about the big picture about where pediatrics is today and where we are heading.

Other non operating income income included a net gain on investments and divested businesses of $21 million with the remaining net increase driven by higher interest income on cash balances and a decrease in interest expense on modestly lower average borrowings at slightly lower rates.

Speaker #4: Thanks, Mark, and good morning, everyone. This is definitely not my real voice, so please forgive me. Our consolidated revenue decrease was driven by our portfolio restructuring activity of just under $54 million.

Mark Ordan: Presenting to the group were our research clinicians, who, in addition to their practice work, produce more research on neonatology than any other organization, including academic medical centers. Let me give you some details. Our market-leading position: we have massive clinical scale. Our research activity is supported by our substantial neonatology clinical footprint of over 1,300 physicians and 1,170 advanced practice providers serving patients in 322 locations across 33 states. We maintain the industry's most detailed, comprehensive clinical data warehouse, with 37 million patient days and 2 million NICU admissions. We drive industry standards. Our research productivity is evidenced by 1,395 peer-reviewed publications authored by our clinicians and researchers, including 62 publications in 2024. Our active research spans 39 sites, conducting 72 clinical research studies. The portfolio is diversified across funding sources, including 16 federally funded studies, 19 industry-sponsored pharmaceutical studies, and 7 foundation and international collaborations.

Moving to cash flow, we generated $138 million in operating cash flow in the third quarter compared to $96 million in the prior year driven by higher earnings and increases in cash flow from a are we also used $21 million of cash during the quarter for share repurchases and used $19 million to occur.

Speaker #4: This decrease was partially offset by strong same-unit growth of 8%, with same-unit pricing up about 7.5% and patient service volumes up just under 40 basis points.

Speaker #4: Pricing was driven by solid RCM cash collections, increased patient acuity in neonatology, and increasing contract administrative fees, along with a favorable payer mix. While volumes reflected modest growth in neonatology, where NICU days were up by 2%.

Fire several neonatology M. S N an ob hospitalist practices in a single transaction, we ended the quarter with cash of $340 million and net debt of just over 260 million. This reflects net leverage of just under one times using the midpoint of our updated adjusted EBITDA outlook range.

Speaker #4: Practice-level SW&B expenses declined year over year, also reflecting our portfolio restructuring activity. On a same-unit basis, we saw increases in salary expense, incentive compensation based on practice results, and benefits expense.

For 2025 are a our DSO at September 30th.

43, one days were down over three days from June 30th but were down almost nine days year over year, driven by improved cash collections at our existing units.

Speaker #4: Salary growth for the third quarter was modestly below the ranges that we have seen for the prior five quarters, which averaged 3% to 3.5%.

Speaker #4: Our G&A expense increased slightly year over year, driven by an increase in incentive compensation expense based on overall company financial results. Other non-operating income included in net gain on investments in divested businesses was $21 million, with the remaining net increase driven by higher interest income on cash balances and a decrease in interest expense on modestly lower average borrowings at slightly lower rates.

Thanks Cassandra.

I think that when we release stronger than expected results people go straight to the components of those results and Miss the core of who pediatrics really is yes.

Yes, we employed clinicians in hospitals and ambulatory settings, and yes. There was strong components of our results that are out of our control, but that tax is hardly unique to us.

Mark Ordan: As of 31 October 2024, we maintain 130 active research applications. We strongly believe that this commitment to research drives higher quality and safety, innovation, and branding. Our results are also driven by our commitment to technology, and we view ourselves as the innovative technology leader in neonatology. As many of you know, we have a proprietary Pediatrix-developed system called BabySteps to support clinicians as they care for mothers and the frailest of babies. Let me elaborate. It was designed and curated by our physicians and developed by our technology team to address the needs of the highest-risk NICU patients. It specifically addresses the following: supports clinical decision-making, increases efficiency and accuracy in documentation, provides risk mitigation, including med mal, and increases clinician well-being via reduced documentation and cognitive burden. It is constantly updated and evolving based on our quality and research team input.

Let me tell you the combination of some factors that do make us quite unique.

At a recent medical directors meeting, we assembled over 250 practice medical directors Ob Hospitalists pediatric intensive care physicians maternal fetal medicine physicians and neonatology.

Speaker #4: Moving to cash flow, we generated $138 million in operating cash flow in the third quarter. Compared to $96 million in the prior year, driven by higher earnings and increases in cash flow from AR.

Speaker #4: We also used $21 million in cash during the quarter for share repurchases and allocated $19 million to acquire several neonatology, MFM, and OB hospitalist practices in a single transaction.

Nobody else could assemble a group of clinicians of clinician leaders like weekend.

This is the nation's largest assembly of practices and these most critical areas.

Presenting to the group, where our research clinicians who in addition to their practice work produced more research on neonatology than any other organization, including academic Medical Center.

Let me give you some details.

Our market leading position we have massive clinical scale. Our research activity is supported by our substantial neonatology clinical footprint of over 1300 conditions and 1100 70 events classes providers, serving patients and 322 locations across 33 states.

We maintained the industry's most detailed comprehensive clinical data warehouse with 37 million patient days and $2 million NICU admit.

Mark Ordan: Let me give you a specific example. Hypoxic ischemic encephalopathy. HIE is a condition that may occur when a newborn baby's brain does not receive enough oxygen and blood flow, with a high mortality rate in severe cases. BabySteps programming prompts timely, specific intervention to assist our physicians in diagnosis and care, improving clinical outcomes. After surveying alternatives, we believe BabySteps is a clear differentiator for us and has no peer in the industry, and we are confident that our hospital partners view that as one of our many strengths. Going forward, we plan to increase our prioritization of enhanced technological support. Our clinicians don't just work in hospitals. They and we, as an organization, are true partners to these hospitals. We don't just put up a sign to attract this very rare group of clinicians for our hospital partners.

We drive the industry standards, our research productivity as evidenced by 30 595 peer reviewed publication authored by our clinicians and researchers including 62 publications in 2024.

Our active research spans 39 sites conducting 72 clinical research studies the portfolio was diversified across funding sources, including 16 federally funded studies 19 industry sponsored pharmaceutical studies and seven foundation and international collaborations.

As of October 31, we maintained 130 <unk> research applications.

<unk> strongly believes that this commitment to research drives higher quality and safety innovation and branding.

Mark Ordan: We have the largest, and I believe the strongest, recruiting team in these areas, ensuring we welcome the finest clinicians in our critical fields. Our results include an increase in acuity. Why? Because we lead more level three and level four NICUs than anyone else. With the support of our research and quality teams, and many others at Pediatrix, we provide more support in these fields than anybody else possibly could. This all results in miracles. I speak with and spend a great deal of time with our clinicians, and it is not at all uncommon for me to hear about 22-week-old babies being discharged home. Stop and think about what that means to have an organization that is at the forefront of such amazing care for the frailest patients anywhere, and likely does this more than anyone else.

Our results are also driven by our commitment to technology, and we view ourselves as the innovative technology leader in neonatology as many of you know we have a proprietary pediatrics developed system called baby steps to support clinicians as they care for mothers and the friendliest of babies.

Let me elaborate it.

It was designed and curated by our physicians and developed by our technology team to address the needs of the highest risk patients.

Specifically addresses the phone.

Supports clinical decision, making increases efficiency and accuracy in documentation.

<unk> risk mitigation, including med Mal and increases clinician wellbeing via reduced documentation and cognitive burden burden.

It is constantly updated and evolving based on our quality and research team input.

Mark Ordan: Our strong results, to a great degree, result from our focus on our four areas of concentration. While we restructured our portfolio to further that focus, we continue to boast strength around the country in pediatric surgery, neurology, cardiac intensive care, and other highly specialized areas. All of what I've described is to further our reputation as a leader in this immensely critical and vital field so that hospital systems know they could not internally do what we can do as their partners. I spoke in May about a portfolio of NICU, MFM, and OBH operations we were planning to add. Very happy to report that we did this on schedule and quite successfully, welcoming great clinicians and providing a significant hospital partner with the support they needed. We expect to see more of this going forward.

Let me give you a specific example.

Hypoxic ischemic encephalopathy.

H a is a condition that it may occur when a newborn baby's brain does not receive enough oxygen and blood flow the high mortality rate in severe cases.

As of October 31, we maintained 130 assays research applications.

These depths programming prompt timely specific intervention to assist our physicians and diagnosis and care improving clinical outcomes.

We strongly believe that this commitment to research drives higher quality and safety innovation and branding.

After surveying alternatives, we believe that is the clear differentiator for US and has no peer in the industry and we are confident that our hospital partners view.

That is one of our many strengths.

Going forward, we plan to increase our prioritization of enhanced technological support.

Our clinicians don't just work in hospitals, they and we as an organization are true partners to these hospitals, we don't just put up a sign to attract is very rare group of coalitions for our hospital partners. We have the largest and I believe the strongest recruiting team in these areas, ensuring we welcomed the final conditions and outlook.

Let me elaborate.

Mark Ordan: Even on a personal note, many of my administrator colleagues are clinicians or former clinicians, and many of us are not. I will assure you that what unites us is an unwavering dedication to the support of our clinicians so that, by extension, we live up to our simple charge: take care of the patients. We have a lot happening here, and I'm grateful to and proud of the work that my colleagues are doing. I will end by returning to our results and outlook. We have had a combination of positive factors propel our strong results. We don't view us as being at a peak, while we are certainly in the midst of significant healthcare headwinds. We all know that. We still see many opportunities to strengthen our operations and our results, and we are working hard to enable a very strong future.

It was designed and curated by our physicians and developed by our technology team to address the needs of the highest risk patients.

Specifically addresses the phone.

Supports clinical decision, making increases efficiency and accuracy in documentation.

Critical fields.

Our results include an increase in acuity why.

Revised risk mitigation, including med Mal and increases clinician wellbeing by a reduced documentation and cognitive burden burden.

Because we lead more level, three and level four nic use than anyone else and with the support of our research and quality teams and many others at pediatrics, we provide more support in these fields than anybody else, possibly could.

It is constantly updated and evolving based on our quality and research team input.

Let me give you a specific example.

This all results in miracles, I speak with and spend a great deal of time with our clinicians and it does not at all uncommon for me to hear about 'twenty two week old babies being discharged home stop and think about what that means I have an organization that is at the forefront of such amazing Ter for the railroads.

Hypoxic ischemic encephalopathy.

H a is a condition that it may occur when a newborn baby's brain does not receive enough oxygen and blood flow the high mortality rate in severe cases.

<unk> programming prompt and timely specific intervention to assist our physicians and diagnosis and care improving clinical outcomes.

Mark Ordan: Operator, let's now open the call for questions.

Patients anywhere.

Operator: Thank you. Again, a quick reminder before we begin the question-and-answer session. If you'd like to ask a question, please press Star and the number one on your telephone keypad. If your question has been answered or you'd like to withdraw your question, please press Star one again. Our first question comes from the line of A.J. Rice from UBS. Please go ahead.

Unlikely does this more than anyone else.

After surveying alternatives, we believe that is the clear differentiator for US and has no peer in the industry and we are confident that our hospital partners.

Our strong results to a great degree of results from our focus on our four areas of concentration and while restructured restructured our portfolio to further their focus we continue to both strength around the country and the pediatric surgery neurology cardiology cardiac intensive care and other highly specialized areas.

That is one of our many strengths.

Going forward, we plan to increase our prioritization of enhanced technological support.

All of what I've described as to further our reputation as a leader in this immensely critical and vital field. So that hospital systems know they could not internally do what we can do their part.

[Analyst] (UBS): Hi, everybody. Thanks for the question. First, obviously, you're sitting on a large cash balance. Your leverage is about as low as we've seen it. Any updated thoughts on capital deployment? I know you've been fairly cautious up to this point. Any thoughts about being more aggressive on the share repurchase, or is there other development or acquisition opportunities that are interesting?

The largest and I believe the strongest recruiting team in these areas, ensuring we welcomed the scientists clinicians and other critical seals.

I spoke in May about our portfolio of NICU MSM and O V. H operations, we were planning to add.

Very happy to report that we did this on schedule and quite successfully welcoming great clinicians and providing a significant hospital partner with the support they need it.

Our results include an increase in acuity why.

Because we lead more level, three and level four nic use than anyone else and with the support of our research and quality teams and many others. The pediatrics, we provide more support in these fields than anybody else, possibly could.

Mark Ordan: Well, a few things. One, as we said, A.J., we have fairly aggressively been buying back shares, and we're very pleased that that's come at the same time as the results that we've been posting. We are looking at many different opportunities, both inside and possibly outside the company. Nothing to tell at this moment. We announced at our last call that we had welcomed a colleague, a longtime colleague of mine, Greg Neeb, who's working with me at looking at ways that we can really expand what we do, both internally and possibly externally. As you know, and anybody who's been listening to these calls, we do favor low debt, especially at a time when we have the kind of headwinds that we have. We'll continue to be cautious, and we look forward to reporting other opportunities as we move forward.

Spec to see more of this going forward.

And even on a personal note many of my administrative colleagues are clinicians or former clinicians and many of us or not but I will assure you.

This all results in miracles.

What unites us as an unwavering dedication to the support of our clinicians so they by extension, we live up to our simple charge take care of the patients.

With and spent a great deal of time with our ownership and it does not at all uncommon for me to hear about 'twenty two week old babies being discharged home stop and think about what that means I have an organization that is at the forefront of such amazing Ter for the frail.

We have a lot happening here I'm grateful and proud of the work that my colleagues are doing.

I will end by returning to our results and outlook, while William we have had a combination of positive factors propel our strong results. We don't deal with is that being at a peak.

<unk> patients anywhere.

And likely does this more than anyone else.

Our strong results to a great degree results from our focus on our four areas of concentration and while restructured restructured our portfolio to further their focus we continue to both strength around the country in pediatric surgery, neurology cardiology cardiac intensive care and other highly specialized areas.

We are certainly in the midst of significant health care headwinds.

We all know that we still see many opportunities to strengthen our operations and our results and we are working hard to enable a very strong future.

[Analyst] (UBS): Okay, thanks. Maybe one other follow-up. Obviously, the restructuring of the portfolio has been a great success in terms of improving the operating performance of the company. I wonder, we haven't asked you in a while, has it changed the dynamic of the company and the marketplace as you talk to new practices about potentially joining with you? Has it given pause that you did the restructuring, or has it changed the competitive landscape in any way?

Operator, let's now open the call for questions.

All of what I've described as to further our reputation as a leader in this immensely critical and battlefield. So that hospital systems know they could not internally do what we can do their part.

Okay.

Thank you.

Again, a quick reminder, before we begin to question and answer session.

Like to ask a question. Please press star and the number one on your telephone keypad again. If your question has been answered or you would like to withdraw your question. Please press star one again.

I spoke in May about our portfolio of NICU M. S. N O V. H operations, we were planning to add.

Very happy to report that we did this on schedule and quite successfully welcoming great clinicians and providing a significant hospital partner with the support they need it.

And our first question comes from the line of a J rice from UBS.

Please go ahead.

Back to see more of this going forward.

Hi, everybody. Thanks for the question.

Mark Ordan: No, I think actually, on the contrary, I think that both new practices, people that we've welcomed in, as I mentioned before, and our existing practices see, if anything, just an obvious increase in concentration of our efforts because we have, in that sense, a smaller footprint. Our team is so focused on working with our hospital partners and working with our clinicians that I think it creates a much better environment than we had before. Also, think about our recruiting efforts and our recruiting team. We're able to really focus on our areas of need, and that makes them also much more effective. I think in every way, while we obviously would, it's always sad to say goodbye to terrific clinicians, we felt that this concentration makes us stronger in just about every regard.

And even on a personal note many of my administrator colleagues are clinicians or former clinicians and many of us or not but I will assure you.

First obviously, you're sitting on a large cash balance your libraries is about as low as.

What we've seen is any.

What unites us as an unwavering dedication to the support of our clinicians so that by extension, we live up to our simple charge take care of their patients.

Any updated thoughts on capital deployment I know you've been fairly cautious at this point any thoughts about being more aggressive on the share repurchase or is there other development or acquisition opportunities that are interesting.

We have a lot happening here I'm grateful and proud of the work that my colleagues are doing.

Oh, well hear things, but.

I will end by returning to our results and outlook.

As we said.

We have fairly aggressively you've been buying back shares and we're very pleased.

We have had a combination of positive factors propel our strong results, we don't deal with or that being at a peak.

That's come at the same time as the as the results that we've been that we've been posting.

We are certainly in the midst of significant health care headwinds.

We are looking at many different opportunities, both inside and possibly outside the company.

And we all know that we still see many opportunities to strengthen our operations and our results and we are working hard to enable a very strong future.

Nothing to nothing to tell at this moment, we announced at our last call that we had welcomed a colleague a longtime colleague of mine, Greg Neeb, who is working with me at looking at ways that we can really expand what we do both internally and possibly externally.

Operator, let's now open the call for questions.

Mark Ordan: As I mentioned, we still have very important areas in some of these subspecialties, and if our hospital system needs that kind of support, we'll work with them to figure out how to provide it. Our recruiting team can help us, can also help our hospital system partners.

Okay.

Thank you.

Again, a quick reminder, before we begin to question and answer session.

As you know and anybody who has been listening to these calls we do favor we do favor low debt, especially at a time when we have the kind of headwinds that we have so we will continue to be cautious and we look forward to reporting other opportunities are as we move forward.

I'd like to ask a question. Please press star and the number one on your telephone keypad again. If your question has been answered or you would like to withdraw your question. Please press star one again.

[Analyst] (UBS): Okay, great. Thanks a lot.

And our first question comes from the line of a J rice from UBS.

Okay, maybe one other follow up.

Operator: Thank you. Our next question comes from the line of Peter Chikarin from Deutsche Bank. Please go ahead.

Please go ahead.

Obviously, the restructuring of the portfolio has been.

Hi, everybody. Thanks for the question.

Great success in terms of improving the operating performance of the company I Wonder we haven't asked in a while.

First obviously, you're sitting on a large cash balance your library is about as low as.

[Analyst] (Deutsche Bank): Hi there. You've got Kieran Ryan on for Peter this morning. Appreciate you taking the questions. Wanted to start and see if you could maybe break out the different buckets of the strong pricing in the quarter. It sounds like it's a lot of the same stuff you saw in Q2 around collections, acuity, admin fees, and some payer mix. Any color you can provide on how that kind of split out in Q3, and your thoughts on the durability and how those factors look as we go into next year.

We've seen it.

It changed the dynamics of the company in the market place.

David thoughts on capital deployment I know you've been.

Fairly cautious up to this point any thoughts about being more aggressive on the share repurchase or is there other development or acquisition opportunities that are interesting.

You talked to new practices about potentially joining with you.

They give them pause that you did the restructuring or doesn't.

Change the competitive landscape in any way.

Oh, well hear things, but.

No I think actually on the contrary I think that.

As we said.

We have fairly aggressively you've been buying back shares and we're very pleased that that's come at the same time as a as a result of.

Both new practices people practices that we've welcomed in as I mentioned before in our existing practices see if anything just the obvious increase in concentration of our efforts because we have we have in that sense a smaller footprint. So our team is so focused on <unk>.

And we've been posting.

Kasandra Rossi: Sure. This is Kasandra. On the strong pricing, over 1/3 of that was from strong RCM collections activity. We did see some of the factors that we saw in prior quarters on acuity. Acuity made up about 20% of that pricing increase. We have also continued to see some contract administrative fees from our hospitals increasing by about 10%. Payer mix, which had really been stable last quarter from the increases or the favorability we saw in 2024, we actually did see a bit more favorability on that in the quarter of about 10%. That really is the bulk of what made up a really strong pricing quarter. As you know, many of these things are variable. We would anticipate, like we had mentioned, payer mix continuing to be a bit stable. I think acuity has been strong the last few quarters, but that, again, is also variable.

We are looking at many different opportunities, both inside and possibly outside the company.

Nothing to nothing to tell at this moment we.

We announced at our last call that we'd welcome to a colleague a longtime colleague of mine Greg name, who is working with me at looking at ways that we can really expand what we do both internally and possibly externally.

<unk> with our hospital partners and working with our clinicians that I think it creates a much better environment than we had before also think about our our recruiting efforts on our recruiting team, we're able to really focus on our areas of need.

And that makes them also much more effective I think in every way, while we obviously, but what.

It's always there to say goodbye to terrific clinicians we felt that this concentration makes us stronger in just about every regard.

Okay, maybe one other follow up.

And as I mentioned, we still have we still have very important areas and some of these sub specialties and of a hospital system needs that kind of support will work with them to figure out how to provider or a recruiting team.

Obviously, the restructuring of the portfolio has been.

Our great success in terms of improving the operating performance of the company I Wonder.

We haven't asked in a while.

Kasandra Rossi: We've made it very clear that on the contract admin fees, it's tough to get some increases. We have had some success, but we don't see that becoming any easier with some of the pressures that hospitals are facing. For the collections, I think I see 2025 as a reset year. Obviously, we've been talking a lot about our transition, and that has gone extremely well. I think we are at a place where we have hit our stride there.

Has it changed the dynamics of the company in the market place.

Can help us can also help our hospital system partners.

Talk to new practices about potentially joining with you.

Okay, great. Thanks, a lot.

They give them pause that you did the restructuring.

It doesn't change the competitive landscape in any way.

Thank you.

No I think actually on the contrary I think that that.

Our next question comes from the line of <unk> Chickering from Deutsche Bank.

New practices people practices that we've welcomed in as I mentioned before in our existing practices see if anything just the obvious increase in concentration of our efforts because we have we have and that's a smaller footprint. So our team is so focused on working with our hospice.

Please go ahead.

Operator: That's helpful. Thank you. I guess just going back to the guidance, appreciate the commentary on the spread and the seasonality. I was wondering if you could kind of maybe just parse that out a little bit more on the seasonality, as well as any other factors that you'd note between the high end and the low end, particularly maybe on volumes, because I think you might have a pretty big office space comp this quarter. Thanks a lot.

Hi, there you've got Kieran Ryan on for Andre Peto. This morning, I appreciate you taking the questions.

So I wanted to start and see if you can maybe break out the different buckets of the strong pricing in the quarter. It sounds like it's a lot of the same stuff you saw in <unk> around collections.

Partners and working with our clinicians that I think it creates a much better environment than we had before also think about our our recruiting efforts and our recruiting team, we're able to really focus on our areas of need.

Alrighty admin fees and some payer mix. So any color you can provide on how that kind of split out in <unk> and your thoughts on the durability and how those factors look as we go.

Mark Ordan: There's nothing on volumes. We're working on several things. In the fourth quarter, as a company normally does toward the end of the year, that could create some variability there. We'll report back later if, of course, if anything materializes from that. That's the reason to have it slightly wider than normal. Nothing else.

The next year.

Sure. This is cassandra so on the on the price on the strong pricing over a third of that was from strong RCM collections activity.

And that makes them also much more effective I think in every way, while we obviously, but it's.

It's always sad to say goodbye to terrific clinicians we felt that this concentration makes us stronger in just about every regard and as I mentioned, we still have we still have very important areas and some of these sub specialties and of a hospital system needs that kind of support will work with them to figure out how to provided R. R.

And we did see some of the factors that we saw in prior quarters on acuity acuity made up about 20% of that pricing increase and we have also continued to see some contract administrative fees from our hospitals, increasing by about 10%.

Operator: Thank you. Again, if you'd like to have or if you'd like to ask a question, please press Star and the number one on your telephone keypad. Our next question comes from the line of Jack Sleven from Jefferies. Please go ahead.

Payer mix, which had really been stable really last quarter from the the increases were the favorability. We saw in 2024, we actually did see a bit more favorability on that in the quarter of about 10%. So that really is the bulk of what made a really strong pricing quarter and as you know many of these things are variable so we would and.

Our recruiting team.

Can help us can also help our hospital system partners.

Okay, great. Thanks, a lot.

[Analyst] (Jefferies): Hey, good morning. Thanks for taking the questions, and congrats on the really awesome quarter. Mark, I just want to dig in a little bit on some of your comments about the longer term and sort of where you can drive things. Just wondering if you can unpack those a little bit, and then maybe more specifically, as we think about a key topic for some investors, these enhanced subsidies on the exchange plans and what that might mean for your business.

Thank you.

Our next question comes from the line of <unk> Chickering from Deutsche Bank.

<unk> you know like we had mentioned payer mix continuing to be a bit stable I think acuity has been strong the last few quarters, but that again is also variable and we've made it very clear that on the contract admin fees.

Please go ahead.

Hi, there you've got Kieran Ryan on for Andre Keto. This morning. Appreciate you taking the questions start wanted to start and see if you could maybe break out the different buckets of the strong pricing in the quarter. It sounds like it's a lot of the same stuff you saw in <unk> around collections security admin fees and some payer mix.

It's tough to get some increases we have had some success, but we don't see that becoming any easier with some of the pressures that hospitals are facing and for the collections I think I see 2025 as a reset year, obviously, we've been talking a lot about our transition and that has gone extremely well and I think we are at a place where we have hit our stride there.

[Analyst] (Jefferies): Not asking necessarily for you to comment on what seems to still be a period of uncertainty in Washington, more just wanted to hear if you've had any conversations maybe on the OB side or things that you're hearing in MFM that might sort of give a lead on where expecting mothers could be leading, even if they're facing premium step-ups next year, if it's something that they might be looking to sort of retain coverage on. Thanks.

So any color you can provide on how that kind of split out in <unk> and your thoughts on the durability and how those doctors look as we go into next year.

That's helpful. Thank you and then I guess just going back to the guidance I appreciate the commentary on <unk>.

Sure. This is cassandra so on the on the price on the strong pricing over a third of that was from strong RCM collections activity and we did see some of the factors. We saw in prior quarters on acuity acuity made up about 20% of that pricing increase and we have also continued to see some contract.

On the spread and the seasonality I was wondering if you could kind of maybe just parse that out a little bit a little bit more on seasonality as well as any other factors.

Mark Ordan: Well, look, we commented on it last time and I continue. We certainly hope that the exchange credits continue. They seem to be beneficial. We're not able to pinpoint the effect that that's had on us, but we think obviously it's a positive for us. Again, we're hopeful. We haven't seen any change. I think the world is waiting to see what happens there. In terms of our outlook and our future, I know it sounds boring. I think I used this word on our last call. We do believe that by being laser-focused on the needs of our hospital systems, that provides additional opportunities. I personally am involved with many discussions where people haven't had the results internally that they would like to have and are looking for a partner that can specialize in these important areas.

You'd note between the high end and the low end, particularly maybe on volumes because I think he might have a pretty big office space comp this quarter. Thanks a lot.

Administrative fees from our hospitals, increasing by about 10%.

There's nothing like volumes were working on several things.

In the fourth quarter as the company normally does towards the end of the year and that could create some variability there. We'll report back later, if if if of course if anything <unk>.

Materializes from that but that's the reason to have it.

Lately.

The wider than normal nothing else.

Dissipate you know like we had mentioned payer mix continuing to be a bit stable I think acuity has been strong the last few quarters, but that again is also variable and we've made it very clear that on the contract admin fees.

Thanks.

Thank you.

Again, if you'd like to have or if you'd like to ask a question. Please press star and the number one on your telephone keypad.

Tough to get some increases we have had some success, but we don't see that becoming any easier with some of the pressures that hospitals are facing and for the collections I think I see 2025 as a reset year, obviously, we've been talking a lot about our transition and that has gone extremely well and I think we are at a place where we have hit our stride there.

And our next question comes from the line of Jacks Leven from Jefferies.

Mark Ordan: I think at a time like this, our financial strength will inevitably provide additional opportunities. We are able to invest with hospital partners and do things that other people can't do. That's where we see strong potential going forward. At a time like this, with the headwinds that we've seen and other companies were not financed the way we have been, there could be opportunities there as well. We think we're in a good position that way.

Please go ahead.

Hey, good morning, Thanks for taking the questions and congrats on a really awesome quarter.

Mark I just wanted to dig in a little bit on some of your comments about the longer term and sort of where you can drive things. So just wondering if you can unpack those a little bit and then maybe more specifically as we think about.

That's helpful. Thank you and then I guess just going back to the guidance I appreciate the commentary on <unk>.

Key topic for some investors has been.

These enhanced subsidies on the exchange plans and what that might mean for your business not asking necessarily for you to comment on on what seems to still be a period of uncertainty in Washington, but more just wanted to hear if you've had any conversations.

On the spread and the seasonality I was wondering if you could kind of maybe just parse that out a little bit a little bit more on seasonality as well as any other factors you'd note between the high end and the low end, particularly maybe on volumes because I think he might have a pretty big office space. This quarter. Thanks a lot.

[Analyst] (Jefferies): Got it. Okay, that's really helpful. Maybe one, just piggybacking on A.J.'s question around the capital allocation. We'd just love to hear, if you can go back over some of the details on the deal that you completed in the quarter and how that's going to feather its way into the business and into the numbers. Secondly, just thinking about what the environment looks like out there as far as deals at the hospitals. As we expect hospitals to have a couple of years of headwinds here, are there any acceleration of conversations for some of those practices to pull their way out of hospitals or for hospitals to look to monetize? Thanks.

On the Ob side or things that you're hearing an MFN that might sort of gave a lead on on sort of we're expecting mothers could be leading you know even if they are facing premium step ups next year, if it's something that they might be looking to sort of retain coverage on thanks.

Theres nothing on volumes, we are working on several things.

In the fourth quarter as the company normally does towards the end of the year and that could create some variability there.

Port back later, if if if of course, if anything materializes.

Well look we comment on it last time and continue.

Materializes from that but that's the reason to have that.

We certainly hope that the that.

Lightly slightly wider than normal nothing else.

The exchange credits continue they seem to be beneficial where we're not able to pinpoint.

Thanks.

Pinpoint the effect it has had on us, but we think it's obviously, it's a positive for us.

Mark Ordan: Well, no, we haven't seen a change in tone with hospitals trying to monetize that. We do see, we're very fortunate, we're partners with hospital systems that are actually strong in this environment and are growing in this environment. We look for ways to grow with them. As far as the acquisition that we made, it wasn't material, so we didn't break out the details of it. We tend not to. We have acquisitions that take place over the years. The reason we highlighted it was that it was a hospital system that easily could have taken these units in-house and felt that we could do a better job. We think that that's our calling card.

Thank you.

So again were hopeful.

Again, if you'd like to have it.

Haven't seen any change I think though I think the world is waiting to see what.

If you'd like to ask a question. Please press star and the number one on your telephone keypad.

What happens there.

In terms of our outlook and our future.

And our next question comes from the line of Jacks Leven from Jefferies.

I mean, I know it sounds sounds boring I think I'd use this word our last call. We do believe that by by being laser focused on the needs of our hospital system that provides additional opportunities.

Please go ahead.

Hey, good morning, Thanks for taking the questions and congrats on the really awesome quarter.

Personally I'm involved with many discussions.

Where people haven't had the results internally that they'd like to have and are looking for a partner that can specialize in these important areas.

A key topic for some investors has been these enhanced subsidies on the exchange plans and what that might mean for your business not asking necessarily for you to comment on on what seems to still be a period of uncertainty in Washington, but more just wanted to hear if you've had any conversations.

And I think at a time like this our financial strength.

It will inevitably provide additional opportunities.

We're able to invest with hospital partners and do things that other people other people can't do so that's where we see.

Mark Ordan: We are in the midst of it and intend to continue to push for that, to be very forward-thinking with our hospital partners and say, hey, if you're going, if you're growing, you need help, why would you possibly not work with us? As I mentioned, my pride and appreciation for my team, when they do, they realize that there's a group of people, a big group of people that are pulling 24/7 for them. When I talk about our quality initiatives and our research initiatives, we bring those positives to our hospital system partners. They couldn't do this internally. In an area, you think about the frailest patients of all, the things that we do reduce risk. If you're a hospital system, why wouldn't you want to be partners with a group that can reduce risk within your four walls? We think that's a very compelling point.

<unk> strong potential going forward and.

Maybe on the Ob side or things that you're hearing an MFN that might sort of gave a lead on on sort of we're expecting mothers could be leading you know even if they are facing premium step ups next year, if it's something that they might be looking to sort of retain coverage on thanks.

At a time like this with the headwinds that we've seen in other companies. We're not financed the way we have been.

There could be opportunities there as well.

So.

Granted would position that way.

Yes.

Well look we comment on it last time and continue.

Got it Okay. That's really helpful. And then maybe one just piggybacking on <unk> question around the capital allocation.

We certainly hope that the.

The exchange credits continue.

Would just love to hear sort of you can go back over some of the details on the deal that you completed in the quarter.

To be beneficial, where we're not able to pinpoint.

Pinpoint the effect it has had on us, but we think it's obviously, it's a positive for us.

Sort of how that's going to feather its way into the business and into the numbers and then secondly, just thinking about what the environment looks like out there as far as deals at the hospitals as we expect hospitals to have a couple of years of headwinds here.

So again were hopeful.

Haven't seen any change I think that I think the world is waiting to see.

What happens there.

In terms of our outlook and our future.

Are there any acceleration of conversations for some of those practices to sort of pull their way out of hospitals or for hospitals to look to to monetize.

I know it sounds sounds boring I think I use this word our last call.

Mark Ordan: By the way, it seems like a lot of them do too.

We do believe that by being laser focused on the needs of our hospital system that provides additional opportunities I personally am involved with many discussions.

[Analyst] (Jefferies): Makes sense. Appreciate all the color, Mark. Congrats again on the quarter.

Mark Ordan: Thank you.

Well.

No Theres no I haven't we haven't seen a change in tone.

Where people haven't had the results internally that they'd like to have and are looking for a partner that can specialize in these important areas.

Operator: Thank you. There are no further questions. I'll now pass the call back over to our CEO, Mark Ordan, for closing remarks.

Hospitals trying to monetize that.

We do see.

Very Fortunately partners with hospital systems that are actually.

Strong in this environment.

And I think at a time like this our financial strength.

Mark Ordan: Great. Well, thank you very much, everybody, for your support. We look forward to updating you on our future progress. Have a great day.

And are growing in this environment and we look for ways.

It will inevitably provide additional opportunities.

We look for ways to grow with them.

We are able to invest with hospital partners and do things that other people other people can't do so that's where we see.

So as far as the acquisition that we made it wasn't material. So we didn't break out the details of it we tend not to do.

Operator: The meeting has now concluded. Thank you all for joining, and you may now disconnect.

Strong potential going forward and you know.

We have acquisitions that take place over the years. The reason we highlighted it.

A time like this.

Headwinds that we've seen in other companies, we're not financed the way we have been.

Was that it was a hospital system that easily could have taken. These these units in house and felt that we could do a better job.

There could be opportunities there as well.

So we think granted with position that way.

But as.

We think that that.

Yeah.

That's our calling card so.

Got it Okay. That's really helpful. And then maybe one just piggybacking on <unk> question around the capital allocation.

We are in the midst of an intent to continue to push for that to be very.

Would just love to hear sort of you can go back over some of the details on on the deal that you completed in the quarter and sort of how that's going to feather its way into the business and into the numbers and then secondly, just thinking about what the environment looks like out there as far as deals at the hospitals as we expect hospitals I have a couple of years.

Very forward thinking with our hospital partners and say, Hey, if you're going to if youre going to feel growing.

I need help while we can possibly not not worked with us and as I mentioned my pride and appreciation for my team when they do they realize that there is a group of people and a group of people that are pulling 24, seven for that and when I talk about our quality initiatives and our research initiative initiatives, if we bring those pas.

As of headwinds here.

Are there any acceleration of conversations for some of those practices to sort of pull their way out of hospitals or for hospitals to look to monetize thanks.

Positives to our hospital system partners. They couldn't do this internally. So you know in an area that you think about the frail patients.

Okay.

Well.

No Theres no I haven't we haven't seen a change in tone.

All the things that we do reduce risk and if you're a hospital system why wouldn't you want to be partners with a group that can reduce risk within your four walls, but we think that's a very compelling point.

Hospitals trying to monetize that.

We do see.

Very Fortunately, we're partners with hospital systems that are actually.

Strong in this environment.

And by the way it seems like a lot of them do too.

And are growing in this environment and we look for ways.

They look for ways to grow with them.

Makes sense I appreciate all the color Mark Congrats again on the corner.

So as far as the acquisition that we made it wasn't material. So we didn't break out the details of it we tend not to have.

Thank you.

Thank you there are no further questions.

Acquisitions that take place over the years. The reason we highlighted it was.

I'll pass the call back over to our CEO, Michael <unk> for closing remarks.

Was that it was a hospital system that easily could have taken. These these units in house and felt that we could do a better job.

Great well. Thank you very much everybody for your support and we look forward to updating you on our future progress have a great day.

But.

We think that that.

That's our calling card so.

Yeah.

We are in the midst of an intent to continue to push for that to be very.

The meeting is now concluded.

Thank you all for joining you may now disconnect.

Very forward thinking with our hospital partners and say, Hey, if you're going to if youre going to feel growing.

I need help while we can possibly not not worked with us and as I mentioned.

I had an appreciation for my team when they do they realize that there is a group of people a group of people that are pulling 24, seven for that and when I talk about our quality initiatives and our research initiatives initiatives. If we bring those positives to our hospital system partners. They couldn't do this internally so in an era.

Or do you think about the frail patients.

All the things that we do reduce risk and if you're a hospital system why wouldn't you want to be partners with a group that can reduce risk within your four walls. So we think that's a very compelling point.

And by the way it seems like a lot of them do too.

Makes sense I appreciate all the color Mike Congrats again on the corner.

Thank you.

Thank you there are no further questions I will now pass the call back over to our CEO, Michael <unk> for closing remarks.

Great well, thank you very much everybody for your support.

We look forward to updating you on our future progress have a great day.

Yeah.

The meeting is now concluded. Thank you all for joining you may now disconnect.

Q3 2025 Pediatrix Medical Group Inc Earnings Call

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