Shares of Pediatrix Medical Group, Inc. (MD Quick QuoteMD – Free Report) declined 11.7% since it reported third-quarter 2023 results on Nov 2. Investors might be concerned about the earnings miss as well as the significant year-over-year decline in the bottom line, which stemmed from comparatively softer patient volumes and continued growth of practice-level expenses. A decline in the adjusted EBITDA guidance for 2023 may also have worried investors. Nevertheless, improved cash collection rates partly offset the negatives.
MD reported a third-quarter 2023 adjusted earnings per share (EPS) of 32 cents, which missed the Zacks Consensus Estimate by 25.6%. The bottom line dropped 20% year over year.
Its net revenues grew 3.4% year over year to $506.6 million in the quarter under review. The top line fell short of the consensus mark by a whisker.
Pediatrix Medical Group, Inc. Price, Consensus and EPS Surprise
Q3 Update
Overall same-unit revenues improved 4.1% year over year in the third quarter, higher than our growth estimate of 2.8%. However, same-unit revenues attributable to patient volume dipped 1.2% year over year.
Same-unit revenues from net reimbursement-related factors improved 5.3% year over year on the back of better cash collection rates in the quarter under review.
Total operating expenses of $466.3 million increased 5.4% year over year and came higher than our estimate of $452.9 million. The increase was due to an elevated practice salaries and benefits expense level resulting from higher same-unit clinical compensation, incentive compensation and group health insurance costs.
Yet, general and administrative expenses of Pediatrix dipped 0.8% year over year to $57.4 million in the third quarter, lower than our estimate of $58 million.
Interest expenses of $10.4 million rose 9% year over year due to increased interest rates on MD’s adjustable-rate borrowings.
Adjusted EBITDA tumbled 13.6% year over year to $50.4 million, which lagged our estimate of $65.2 million.
Financial Update (as of Sep 30, 2023)
Pediatrix exited the third quarter with cash and cash equivalents of $21.2 million, which more than doubled from the figure at 2022 end.
Total assets of $2,326.3 million dipped 0.9% from the 2022-end level.
Total debt, including finance leases, net, amounted to $636.6 million. The figure decreased 2.3% from the figure as of Dec 31, 2022.
Total shareholders’ equity of $968 million improved 8.6% from the level at 2022 end.
MD generated net cash from operations of $68.1 million in the first nine months of 2023, which dipped 0.3% from the prior-year comparable period.
Share Repurchase Update
Pediatrix bought back a nominal number of its common shares for $0.1 million. It had a leftover capacity of $4.6 million under its $500 million repurchase program (approved in Aug 2018) as of Sep 30, 2023.
4Q23 Outlook
Management estimates fourth-quarter adjusted EBITDA to stay in line with the third-quarter 2023 level.
2023 View Updated
Management presently projects adjusted EBITDA to lie between $200 million and $210 million this year, down from the earlier guidance of $235-$245 million. The midpoint of the revised outlook indicates a decline of 14.9% from the 2022 reported figure.
Interest expense is anticipated to be within $41.3-$42.3 million, up from the prior view of $40-$42.2 million. The midpoint of the updated guidance suggests 5.3% growth from the 2022 figure.
Depreciation and amortization expense is currently estimated at $37 million, down from the previous outlook of $38 million. Income tax expense is expected to stay within $34.7-$37.7 million this year.
Income from continuing operations attributable to MD is forecasted to lie between $86 million and $94 million for 2023, down from the earlier view of $110-$120 million.