Pediatrix Medical Group, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the second quarter 2021 earnings conference call. At this time, all parties are in a listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, you can press 1 and then 0 on your telephone keypad, and you can withdraw your question at any time by repeating the 1-0 command. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, it's 1-0. And if you require assistance during the call, you can press star and then zero. As a reminder, this call is being recorded. And now I'd like to turn the conference over to our host, Mr. Charles Lynch. Please go ahead, sir.

Thanks, operator, and good morning, everybody. Welcome to our second quarter earnings call. I'll quickly read our forward-looking statements and then turn the call over to Mark. Certain statements and information during this conference call may be deemed to be forward-looking statements within the meaning of the Federal Private Security 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 development, and other factors they believe to be appropriate. Any forward-looking statements made during this call are made as 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 can cause actual results, developments, differ 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 section 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 to the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly reports on Form 10-Q, and our annual report on Form 10-K, and on our website at www.mednax.com. With that, I'll turn the call over to Mark Hordak.

Thanks, Charlie, and good morning, everyone. Also joining me on today's call are Mark Richards, our CFO, and Dr. Mack Hinton, who leads our pediatrics and obstetrics medical groups. You'll see in this morning's filing that the recovery in patient volumes we reported in the first quarter has continued. In fact, for the second quarter, patient volumes across our total span of services has now exceeded pre-pandemic levels. On the same unit basis, total volume was up 1.3% versus the second quarter of 2019, with hospital-based services up by 10 basis points and office-based services up by 5.2%. I'll add that other key metrics that were particularly volatile through last winter continue to show stable, improving trends coming into the summer. Pay or mix remained favorable on a year-over-year basis for the second consecutive quarter, and the rate of admission into our NICUs did so as well. As a result, our revenue for the quarter of $473 million was above our internal expectations, as was our adjusted EBITDA of $66 million. Based on our results, as well as the actions we've taken in our operations that we'll also discuss this morning, we now expect that our 2021 adjusted EBITDA will be above $240 million, up from our prior expectation of being at least consistent with the prior year for continuing operations, or $220 million. There are, of course, risks that we face. Most importantly, the recent rise in COVID-19 cases driven by the Delta variant. But that said, our updated view for the full year includes our experience to date. Looking forward beyond 2021 and couched with the same risks, there are a number of factors that give me increased confidence that we'll see additional growth in adjusted EBITDA in 2022 that will get us past the $270 million run rate we achieved pre-COVID. I'll expand on these in three areas. First, we're building momentum in our core. While demand has recovered faster than we had anticipated earlier in the year, We are also helping to drive additional growth across our practices. I heard earlier this year about the investments we've made in improving patient access, better scheduling, and a drive for increased pace and efficiency. Q2 is the first quarter where we can estimate the impact of these initiatives, and we think we've just begun by adding roughly $2 million to the top line in the quarter. I'm very confident that this is just the beginning of a long-term payoff, And please remember that we call this initiative Patient Access because it's really just that. We want to make sure the patients that need our care receive our care as soon as possible. Our re-engineered and focused sales efforts are accelerating our pipeline of organic growth. We have such a superb, focused, and organized team that makes this a reality. Halfway through this year, our new business booking, and by that I mean new contract sales, have already approached our total bookings for 2020. Our win rate has increased, our time to close has decreased, and our pipeline remains robust and diversified across multiple specialties. Our M&A pipeline also continues to build with several acquisitions of important specialty groups completed for the year to date. As an example, last week, child neurology consultants at Austin joined the MedNAC families. This group of 12 physicians and three nurse practitioners are among the premier groups of neurologists in the country. The lack of local neurology coverage is a major reason infants are transferred away from the birth hospital. This is the most recent example of investing to further support our hospital-based practices with subspecialty consultation to allow infants to stay near their homes. We believe this is also a platform for growth. both geographically and via telehealth. Second, we're still in the early stages of building our presence in children's primary and urgent care. Following our acquisition of Nightlight, we're now in the planning stages for new clinic openings outside of Nightlight's hometown of Houston. We're also working on additional investments and initiatives in primary and urgent care that we believe will meaningfully accelerate this expansion. We also believe that our breadth and depth in women's and children's health will enable us to actually change nationally many aspects of pediatric care. I look forward in future calls to cataloging our progress. Third, we're making significant progress on improving the efficiency of our practice support infrastructure. Mark Richards will detail some of this progress, but I'll highlight our previously announced agreement with R1 to transfer our RCM operations to them which not only gives us immediate G&A savings, but also enables improved bottom line results that I'm certain would not have been possible had we continued on our own. To put these things together, I think you should view our expectations for 2021 as far from the finished products. Beyond this year, we believe the full benefit of our efficiency improvements will be paired with our ongoing and compounding growth initiatives that today are only just beginning to bear incremental fruit. These factors together support our confidence that in 2022, we can achieve adjusted EBITDA above the $270 million that I've just referenced. Of course, none of this is possible without the strength in our core and a singular, unwavering focus on our top priority, taking great care of the patient. It's so timely for me to reiterate this to you today, but the fact is that in talking to our clinicians and clinical leadership, becoming clear that as the country continues to evolve through this pandemic period, the need for many, many of the highly specialized services our doctors provide is only increasing, which makes it that much more important that these doctors are able to operate as part of a highly integrated collaborative network in order to ensure that patients have access to the services they need exactly at the time they need them. That's why I've asked Mac who's a long-time neonatologist and pediatrician, to talk about the why behind the resurgence in volumes we've seen across many specialties, as well as the why behind the importance of having access to the full continuum of care for expecting parents, newborns, and children. So I will now turn the call over to a person who firsthand understands this importance, Dr. Hinton.