Pediatrix Medical Group, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the MEDNAC's first quarter 2021 earnings conference call. At this time, your telephone lines are in a listen-only mode. Later, we will have an opportunity for questions and answers with instructions given at that time. If you should require assistance during the conference call, please press star, then zero, and an AT&T specialist will assist you offline. As a reminder, your call today is being recorded. I'll now turn the conference call over to your host, Charles Lynch. Please go ahead.

Thanks, Operator, and good morning, everyone. Welcome to our first quarter earnings call. With me today are Mark Ford and our CEO and Mark Richards, our CFO. I'll quickly read our forward-looking statements, and then we'll get into the call. 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. These forward-looking statements are based on assumptions and assessments made by Mednax's 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 of today, and Mednax 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 The different materially from forward-looking statements are described in the company's most recent annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K, including the sections entitled Risk Factors. In today's remarks by management, we will be discussing non-GAAP financial metrics. The 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 reports on 10Q, and our annual report on Form 10K. With that, I'll turn the call over to Mark Horton.

Thanks, Charlie, and good morning, everyone. Along with Charlie, joining me this morning are Mark Richards, Dr. Matt Hinson, Dr. Jim Swift, Dominic Andreano, and John Teppia. My comments this morning will be in three areas. The results we reported this morning, the essence of what we do as a company, and how we're strengthening and reshaping MedNet. I'm, of course, pleased with our results for the quarter, which were ahead of what we could have foreseen when we talked to you in February. Our patient volume strengthened through the quarter, ramping up through March and into April. I'm sure most of you saw the statistics published this week by the CDC, which indicated a sharp downturn in nationwide births in the fourth quarter of 2020. As you know, we experienced the same trajectory at the end of last year, but to a significantly lesser degree. We believe this reflects the typical profile of the hospitals where we provide neonatology services, which tend to be larger and bigger markets and with extensive labor and delivery services, including robust neonatal ICUs. It may also reflect our geographic footprint, which has a heavier weighting in faster growing states and markets. Fast forward to the first quarter, and for the roughly 400 hospitals that make up our own birth statistics, this downward trajectory in births did not continue. Adjusting for the leap year, total births at the hospitals where we provide NICU services were essentially unchanged in Q1, which is better than what we reported in late 2020. Lastly, while it's too early to make a final call, the improvement in our payer mix so far suggests that the volatility we experienced in November and December could have been more of an anomaly. To give you one quick insight into how this rebound in trends impacted our results, our revenue for the quarter excluding the CARES money we recorded, was over $30 million ahead of our internal expectations, which translated into meaningful year-over-year growth in adjusted EBITDA versus the expectation we shared with you in February that it could easily be down versus 2020. Looking ahead to our full-year 2021 expectations, we expect that our 2021 adjusted EBITDA will be at or above $220 million. I'll explain. I said last quarter that we're looking closely at our 2019 adjusted EBITDA of $265 million before the pandemic as the best available benchmark for how our business is recovering, as well as backing out our estimate that the 2020 impact of the pandemic was roughly $40 to $50 million. If you look at the first quarter of 2021, our adjusted EBITDA of $45 million was still below the first quarter of 2019, And that's when we also reported $50 million in adjusted EBITDA. And when you exclude the roughly $4 million in contribution from the CARES funds we recorded this quarter, we were roughly 18% below Q1 2019. So while I'm certainly pleased with our results, it's still clear that we're not back to normal. And in fact, our first quarter results reflect a similar run rate of COVID impact to what we experienced last year. I don't think this should be surprising, given the unique nature of the services we provide and the time-led of this COVID impact, and since much of our patient volume is based on pregnancies and childbirth timing. Lastly, I'll add that our operating results for the past two quarters have been unusually volatile, so we're also mindful of the still uncertain nature of how fast or consistently we'll see things recover. Now, I've talked for a couple of quarters about my confidence that we can achieve a run rate of $270 million in adjusted EBITDA once we move past the impact of COVID-19 pandemic. Our results bolster our confidence that we will reach and exceed that run rate. But I'm not confident just because we saw better trends over the past couple of months. I'm confident because we continue to push our operating plans and because we are reshaping how we do things here. Our singular focus at MedNAS is to reinforce our position as a formal provider of women's and children's health care in the markets we serve and to do so efficiently and as the best partner we can be to the patients we serve as well as to the payers and health systems we work with. So let me talk about what we've been focused on and speak to you about our core pediatrics and obstetrics medical groups. It's all about the patients. Since MedNAC first began caring for mothers and babies in their most challenging times over 40 years ago, the only absolute imperative that our founder and board member, Dr. Medell, prescribed has been take great care of the patients. Much of my time is spent with our clinicians, hospital partners, prospective partners, and, of course, with my team. And I can attest to this unwavering commitment. There is an unshakable conviction at MedNAC that if we always take great care of the patients Everything else will follow. Now, that's easier said than done. To take the best care of the patient, the mothers, babies, and children require a lot of work and investment. First, we have to recruit and retain the finest physicians and clinicians. Second, to do this, we try to provide more support for our affiliated clinicians than anyone else in our field. Third, we have a foremost independent research organization in our field of medicine, including complex newborn screenings, one in four babies in the U.S., are patients of ours. We have more knowledge and data in these areas than anyone else. And since our care is provided, of course, at the very local level, we have to provide more support for our affiliated clinicians in each market where we are in than anyone else. Finally, we must always lead in our field. For example, one of the most critical and active parts of our organization is our clinical support group. This group, along with our full support team, make sure that we can continue to advance our skill and knowledge for the sake of our patients. In two weeks, as we did even during the depth of the pandemic last year, we will be holding our annual medical director's meeting where over 2,000 clinicians will actively participate and will learn from research, quality, and clinical experts. On top of these areas, we provide system support, recruiting support, and every other kind of help to allow our clinicians to, again, take great care of the patients. This long-winded tour of what we do is what I believe makes us the choice among our nation's hospitals. This is what makes us a leading choice of partners in great medical practice. This is what makes us the leading referral choice of physicians who want their patients to be in our care during their most difficult minutes, days, and weeks. I've spoken about our drive to employ our practice data and dashboards to improve patient access. This has and continues to be of paramount importance to us. It's a steady drumbeat. We want to be certain that a patient who needs care from one of our affiliated physicians gets that care as soon as possible. I'm sure anyone on this call can relate to how a medical appointment process can win or lose loyalty. And we know as business leaders and owners the effect that this can have on volume. So we're working with all of our practices to help them Make scheduling as driven and efficient as we can, making sure that appointments are kept, immediately rescheduling no-shows, backfilling cancellations, using our scheduling tools to open additional slots, staggering staff, outreach, and referral management. They're all part of this necessary equation. We've already seen improvements in many practices, particularly in terms of higher percentages of kept appointments and reductions in no-shows. This focus is also helping us to share best practices and create benchmarking capabilities so we can measure how effective our data is on practice scheduling and every measurable factor beyond just the post-COVID recoveries we've recently seen. We also recently welcomed a new leader in telehealth to help make that buzzword a truly active part of what we are for our patients. We all know that a physical visit is not always needed or possible. and we will make our telehealth process fluid to help our patients and attract new patients. This efficiency and effectiveness also applies to our growth plans. Our sales and business development team has re-engineered a focused market-by-market approach that's driven by local intelligence and relationships. We've also added resources to this team to make sure that we're highly integrated, not just in identifying and winning new business, but providing services quickly and seamlessly to the partners who put their trust in us and in pediatrics-affiliated physicians. In my view, we've lacked until now two other major ingredients to propel us forward. First, our patient relationships have not extended past our subspecialty practices. We need to make sure, as well as we can, that when a patient needs to see a physician in our network, they can do so as quickly and easily as possible. We're moving forward in pediatric urgent care to develop plans for expansion of their business in markets where we have a significant presence and we will expand with our brand name, Pediatrics. We believe that providing pediatric primary and urgent care in patient-friendly, dedicated clinics will allow us to give patients easier access to the exceptional specialists across our organization when they need it, and will also help strengthen our relationships with the communities where we provide services and with our hospital partners. And maybe most significantly, we believe nobody knows how to care for babies, children, and mothers like we do. And we want to fully extend the types of relationships we currently have. When a mother and child want to find the best primary and urgent care practice, our answer should be, and will be, right here with us at Pediatrics. Second, our brands, Pediatrics and Obstetrics, are not widely known. We do believe our hospital partners know our name very well, and more importantly, they know that they can rely on us for what we can do for their patients. But patients learn about us and count on us at their most challenging times, and then they move on. Our prospective practices and clinicians do not always think of who we are and what we provide as they plot their career paths. To address this and all of our work, we've launched a marketing campaign, and its obvious key theme is trust. Our ads are going to be widespread, and they're completely authentic. They feature only our own doctors who speak about why people should trust them and trust us. We will continue to reach out to reinforce the very unique importance of pediatrics and obstetrics. In hospitals, pediatrics and obstetrics mean trust, life-saving, world-class clinicians. Our brand will be known for that. I'll finish this morning where I started. We're working to ensure that Mednext can be the best possible partner to the patients we serve and to the physicians, payers, and health systems we work with, all driven by our vision to take great care of the patient while at the same time taking great care of the business. This isn't always easy, but we have a long track record of working hard to the best solution when we need to. With that, I'll turn the call over to Mark Richards to provide some more details. Thanks, Mark.