Pediatrix Medical Group, Inc.

Certain statements and information during this conference call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Mitigation Reform Act of 1995. 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 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 to differ materially from forward-looking statements are described in the company's filing with the SEC, including the sections entitled Risk Factors. In these 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 the morning's earnings press release, our quarterly and annual reports, and on our website at www.pediatrics.com. With that, I will turn the call over to Mark or Dan. Pediatrics Medical Group's Chief Executive Officer.

Thank you, Operator. Good morning, everyone. With me today is Cassandra Rossi, our Chief Financial Officer. Our first quarter results exceeded our expectations, driven by same-unit revenue growth of over 6%. This included strong volumes in our hospital-based services, with NICU days increasing by 2%, as well as more modest growth in maternal-fetal medicine, along with continued favorable payer metrics. Our practice-level operating expenses continue to reflect the favorable impacts of our cost management initiatives, partially offset by higher incentive compensation base on our strong financial practice results. As a result, adjusted EBITDA of just over $49 million was significantly above our expectations. I'm particularly pleased with the continued sharp focus on same-unit salary, expense trends that decelerated for the fourth consecutive quarter. As a result of our strong financial performance for the first quarter compared to our expectations, we are raising our full year 2025 adjusted EBITDA outlook from a range of $215 to $235 million to a range of $220 to $240 million. While we are pleased by our first quarter results, we remain mindful that we continue to be in a period of great uncertainty, both in healthcare and throughout the economy. Our operating results for the first quarter include the effectiveness of our strategic approach to the portfolio management activities that we completed in 2024 and our commitment to creating value for our shareholders. This is a direct result of the hard work, collaboration, and dedication of our team, and we're excited to build upon these results. In February, I talked about our strategic priorities in 2025, and in particular, our focus on methodically reinvigorating the relationships that we have built over many years with our hospital and health system partners. I also spoke about all we are doing reasonably to be the employer of choice for physicians and other clinicians who provide the extraordinary critical care our patients require. I'm very pleased to report that I along with our operating leadership team are actively engaged here and we are pleased with the early response. We recently contracted to acquire several NICU, MFM, and OB hospitals operations that are part of a hospital system's portfolio because we believe that that system views us as the best and most reliable partner in these areas. I believe this is directly tied to our renewed active engagement both with our practices and with hospital system leadership. We won't win every opportunity, and at times hospitals choose to bring things in-house, but we are hard at work to be the best and most responsive partner possible. At Pediatrics, we are our people, the women and men who provide the finest possible clinical care in a very difficult area. Here, too, we are very actively focused on our recruiting, onboarding, development, and retention efforts, and we are confident that this focus will meaningfully bolster our core. If this blocking and tackling strategic focus sounds a bit boring to you, you are probably getting my point. Pediatrics has always been at its best when we are focused passionately on our core, and that is exactly where we are today. This is now providing growth opportunities for us, and we believe strongly this will continue. With that, I will turn the call over to Cassandra.

Thank you, Mark, and good morning, everyone. I'll provide some additional details in a few areas. Our consolidated revenue decreased by just over 7%. driven by non-same-unit activity, which declined by about $63 million, primarily related to the impacts from our portfolio restructuring activity. This decrease was partially offset by strong same-unit growth of over 6%. Same unit pricing was up over 4.6 percent, driven by favorable payer mix shifts and modest improvements in contract administrative fees. This was combined with favorable impacts from strong RCM cash collections. On the cost side, practice level SW&B expenses declined year over year, also reflecting our portfolio restructuring activity. On a same unit basis, these expenses did increase year over year, but the increase was primarily related to higher incentive compensation based on strong practice results as well as salary increases. Importantly, salary growth decelerated significantly year over year and on a sequential quarter basis as compared to the second, third, and fourth quarters of 2024. Our G&A expense decreased modestly year over year, primarily reflecting the favorable impacts from the staffing reductions across shared services that were completed in the prior year, partially offset by increases in other expenses, including billing and collection fees, certain professional services, and information technology. Depreciation and amortization expense declined to 5.3 million as compared to 10.3 million in the prior year, primarily reflecting the impacts of the practice dispositions. We expect our DNA expense will be fairly consistent going forward. Other expense was $4 million as compared to $8.1 million for the prior year period, primarily reflecting an increase in interest income on cash balances, as well as a decrease in interest expense on lower average borrowings at slightly lower rates. Moving on to cash flow. As a reminder, we are a user of cash in the first quarter of each year as we pay out incentive compensation and other benefits, namely 401 matching contributions. We used $116 million in operating cash in the first quarter compared to $123 million in the prior year. The differential was primarily due to higher earnings and increases in cash flow from AR. partially offset by decreases in cash flow from accounts payable and accrued expenses, primarily related to those incentive compensation payments. We ended the quarter with cash of $99 million and net debt of $512 million. This reflects net leverage of just over 2.2 times using the midpoint of our updated adjusted EBITDA outlook range for 2025. Our accounts receivable DSO of just under 48 days were flat as compared to 1231, but down over four days year over year, primarily related to improved cash collections at our existing units. Finally, I'll briefly touch on our updated 2025 outlook, noting that the increase was predominantly related to the top line revenue growth achieved during first quarter versus our expectations. The comps for the remainder of 2025 become increasingly challenging and accordingly remain materially in line with our original 2025 expectations. With that, I will turn the call back over to Mark.