Pediatrix Medical Group, Inc.

$70 million of adjusted EBITDA for 2022. On a labor front, I'll share shortly how we'll be focused on ensuring that pediatrics continues to be the organization that people really want to be part of. We all know the challenging labor environment, and this has only deepened our commitment to our amazing clinical team and to our equally amazing support team. On payer relationships, we continue to have constructive discussions around the country including in many states where we've successfully renewed contracts in a fair manner and on schedule. Let me update you on our organizational priorities. I'll start with our people. As a non-physician leader, I'm constantly in awe of the dedication of all of our clinicians have to this company's mission, and I'm likewise confident that our dedication to physician leadership will always keep our organization focused on our highest priority, which is providing great patient care. To that end, we are establishing a Physician Executive Council represented by many of our specialties to enable our affiliated physicians to advance their skill and knowledge for the sake of patients. This group will meet directly with me to ensure my firsthand understanding of issues and opportunities on the minds of our affiliated clinicians. This is also an opportunity for them to have a far better understanding of our decision processes. Dr. Curt Pickard, our Executive Vice President of Clinical Services, is chair of this council, and Dr. Mack Henson will serve as an advisor to the group. On that note, Mack will be transitioning away from his role as president of our women's and children's organization on June 1st, and I want to personally thank him on behalf of the entire organization for all that he has done for the company. Mack has been an invaluable physician leader since he joined pediatrics in 2003, and given his experience and judgment, I'm pleased that in addition to advising our physician Executive Counsel, he will continue to remain as a senior advisor to me and the rest of the team here. Across our entire organization, ensuring that pediatrics is the place of choice for people to practice and to work is absolutely a priority for us in today's market. That's true within our affiliated practices, and it's equally true across all of our non-clinical support teams. A key reason our affiliated practices can be fully devoted to our patients is the work of an amazing group of support professionals in all areas of our operations. On our February earnings call, I talked about a number of steps we've taken, including our commitment to our ESG goals and ensuring that we are truly an equitable organization. Here again, I believe that my deep personal involvement and commitment will ensure that our efforts do not let up on behalf of our teams and that diversity and inclusion are truly in our core and just not a couple of two buzzwords. I also talked about the importance of a strong brand. And in March, we formally introduced our new pediatrics logo, which you'll now find throughout our website and which is being rolled out across our affiliated practices. Further to that, you'll recall that in 2020, we asked our shareholders for approval to rename the company as Pediatrics Medical Group, signifying a return to our core focus and in caring for women's and babies and children. This year, thanks to the great strides of our amazing marketing team, we are now in position to formally return to the Pediatrics name for our corporate entity as well. I'm excited to complete this full return to Pediatrics, which is a well-known and highly respected name nationwide, and will signify our commitment to be the employer of choice, a trusted partner to hospitals and clinicians across the country, and a public company that can meet the high standards of you, our shareholders. The Pediatrics name and brand is also integral to our growth, Following our acquisition earlier this year of a second urgent care clinical platform, Nightlight of Orlando, bringing us to 21 urgent care centers, we've begun the process of de novo development of pediatrics-branded primary and urgent care clinics in several of our key markets with the goal of opening new clinics before the end of this year. As I've said in the past, we'll also contemplate additional opportunistic acquisitions But I believe that these de novo development opportunities give us the chance to tailor the location, size, and layout of clinics exactly to our existing market footprint. Since this is still a new business area for pediatrics and has real estate as a key component to it, we've also added to our senior team a head of real estate who will play a key leadership role in our clinic development and report directly to Dr. Jim Swift, whose role within the company is also expanding. Building a presence of primary and urgent care clinics in our key markets also gives us opportunities to reinforce our brand, since these locations will carry the pediatrics name. Before I turn the call to Mark, I want to thank our people, the clinicians caring for their patients, the operators, and the myriad support teams that make pediatrics the special organization that we are. We continue to operate in a changing and challenging environment, but despite that, the dedication I see every day to our highest priority Our patience has never wavered. It's that dedication that motivates me and that gives me confidence that we can continue to succeed, grow, and serve all of our stakeholders well. Now I'll turn the call to Mark for additional financial details.

Thanks, Mark. Good morning, everyone. I'll provide some details on our quarterly results as they relate to our revenue cycle management transition process and then add to Mark's comments on our outlook to financial positions. Related to revenue cycle, there are two factors within that transition process that modestly impacted our first quarter revenue and financial results, which I would classify as primarily timing related. As you'll see in our balance sheet, our accounts receivable increased sequentially by roughly $16 million, which brought our DSOs to 59 days at March 31st versus 55 at December 31st. This reflects an increase in unbilled AR related to the transition to R1. We were not surprised directly by this extension since there was an expectation there would be some delay as R1 automated various functions that had previously been manual in nature. But it was modestly beyond our expectations as of quarter end. Based on our normal reserving practices for the aging of receivables, our Q1 revenue was slightly affected by this. However, we view this AR aging predominantly as a timing matter. We expect our DSOs to return to historically normal levels over the course of this year, and correspondingly, we also expect a historically normal collection of these amounts. But also related to our RCM transition activity, we also saw a slight uptick in our self-pay receivables, which are not managed by R1, but by other third-party vendors. For context, I'll point out that self-pay, which for us is true self-pay, typically represents only 1% to 2% of our total revenue. So it's a fairly nominal amount. That said, we saw a modest increase in these true self-pay balances, which, as you might imagine, carry a lower collection rate. This also had a modest impact on our revenue for the first quarter. Mednax utilizes several third-party vendors to manage these accounts separate from R1, and we are working closely with these vendors to first determine whether this is a temporary or ongoing shift and second, to ensure that we optimize the collectability of these accounts. Net-net, the combination of these two items are the primary pieces within the modest decline in our same unit pricing in Q1, which again, we believe is primarily related to the timing of our RCM transition to Q1. Offsetting these revenue items, our cost trends in G&A were favorable in Q1, primarily reflecting lower professional fees and the net savings in RCM expenses following our transition to R1. At the practice level, underlying salary trends remained at historically normal levels at our existing practices. All told, these modest variances from our internal expectations yielded adjusted EBITDA largely in line with our expectations, prior to the contribution from the CARES funds we received. As our first quarter results relate to our outlook of adjusted EBITDA for the year, as Mark noted, we're maintaining our underlying expectations for 2022 of revenue in the range of $2 billion and adjusted EBITDA of at least $270 million. Within that outlook, We expect our adjusted EBITDA for the second quarter to be roughly comparable to or slightly higher than the prior year's 66 million, with growth in adjusted EBITDA re-accelerating in the second half of the year. I'll close with a quick overview of our financial position. On March 31st, balance sheet reflects the refinancing of our capital structure that we completed during the quarter. with total borrowings of $799 million and only a modest amount of cash for both gross and net leverage of approximately three times on trailing adjusted EBITDA. Our debt structure is fairly evenly split between fixed and floating rate debt, and all of our borrowings under our revolving credit facility and term loan are prepayable. This refinancing significantly reduced our ongoing debt service costs. Based on our March 31 borrowings, we expect our quarterly interest expense to be approximately $8 million compared to $12 million in the first quarter of this year and $17 million in the fourth quarter of 2021. We also believe our current debt structure provides us with an efficient capital structure that offers optimal flexibility and liquidity for the foreseeable future. I'll turn the call back over to Mark.

Thanks, Mark. We're ready for any questions.