Pediatrix (MD) Q1 2026 Earnings Transcript

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Date

Tuesday, May 5, 2026 at 9 a.m. ET

Call participants

• Chief Executive Officer — Mark Ordan
• Chief Financial Officer — Kasandra Rossi

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Takeaways

• Adjusted EBITDA -- $58 million, representing about 20% of the full-year outlook range, with management reaffirming annual guidance of $280 million-$300 million.
• Revenue -- Growth included nearly 3% same-unit increase and $6 million net non-same-unit contribution, partially offset by a decline from portfolio restructuring.
• Pricing growth -- 4% increase, driven by revenue cycle management (RCM) cash collection (25% contribution), administrative fee increases (20%), favorable payer mix, and higher patient acuity in neonatology.
• Volume trends -- Same-unit volumes declined modestly across service lines, with neonatal intensive care unit (NICU) days down about 1%.
• Practice-level salary, wages, and benefits expense -- Increased by $9 million year over year, primarily due to same-unit clinical salary increases averaging 3%.
• General and administrative expense -- Rose slightly year over year due to higher salary and incentive costs, partly offset by lower professional services and IT spending.
• Cash flow -- First-quarter operating cash outflow was $130 million, compared to $116 million in the prior year, mainly attributed to higher incentive compensation and decreased cash flow from accounts payable and accounts receivable.
• Share repurchases -- $21 million used to repurchase 1 million shares, leaving 82 million shares outstanding.
• Balance sheet -- Ended quarter with just over $200 million in cash and net debt slightly above $385 million, equating to net leverage of just over 1.3 times at the midpoint of adjusted EBITDA guidance.
• Accounts receivable days sales outstanding (DSO) -- 42.5 days at March 31, down over five days year over year, reflecting improved cash collections.
• Administrative fee contracts -- Represented approximately 20% of pricing increase; prevalence is wide, with several thousand contracts varying in terms.
• Hospital partnership expansion -- Management highlighted more hospital partnerships than any other peer in core fields, providing opportunities in neonatology, maternal-fetal medicine, and pediatric intensive care.
• Leadership additions -- Announced appointments of Dr. Jim Barry as Chief Clinical Quality and Transformation Officer and Dr. Jochen Proffitt as Chief Quality Advisor, bringing expertise in neonatology, quality improvement, and artificial intelligence.
• Clinician compensation program -- Rolled out share price-based awards, with 45 clinician leaders welcomed as inaugural partners, aimed at aligning clinical and ownership interests.
• General counsel transition -- Announced that General Counsel and CIO Mary Ann Moore will retire before year-end, triggering a search for her successor.

Summary

Pediatrix Medical Group (NYSE:MD) executives emphasized quarterly financial performance supported by pricing actions, disciplined operating expense management, and reaffirmed adjusted EBITDA guidance for the full year. Management stated, "We saw strong pricing that outpaced a modest decline in same-unit volumes," with 4% pricing growth underpinned by favorable revenue cycle management, administrative fees, payer mix, and patient acuity. Operating cash outflow and accounts receivable days sales outstanding both reflected operational seasonality and efficiency gains, while strategic share repurchases and net leverage levels were explicitly quantified. New senior physician leaders were introduced to drive quality initiatives and clinical differentiation, supporting the company's expansion goals in both traditional and telehealth service lines.

• CEO Ordan said, "We know that major hospital systems have seen a decline in patient volume and revenue, and we may see that in the future. For now, this area is strong for us," directly addressing market concerns.
• Chief Financial Officer Rossi provided that RCM cash collection contributed about 25% to first-quarter pricing gains, with administrative fee revenue at 20%, clarifying drivers of margin resilience.
• Management specified that "practice-level S, W, and B expenses increased by $9 million year over year, primarily reflecting same-unit increases in clinical salary expense," disclosing detail on expense pressures.
• The company confirmed 82 million shares outstanding after buybacks, detailing capital allocation strategy.
• Kasandra Rossi addressed future pricing outlook: "We do expect that RCM cash collections, which have been really strong for us, will tail off as we move through the year, and so we are maintaining our flat outlook."
• No material one-time items were reported for the quarter, per direct management response.

Industry glossary

• RCM (Revenue Cycle Management): Processes and technology used to track revenue from patients, improve collections, and manage the entire billing cycle in healthcare organizations.
• NICU (Neonatal Intensive Care Unit): Specialized hospital unit for the care of ill or premature newborn infants, a key service line for Pediatrix Medical Group.
• DSO (Days Sales Outstanding): A financial metric indicating the average number of days it takes a company to collect payment after a sale, particularly important in evaluating healthcare provider cash flow.
• S, W, and B (Salary, Wages, and Benefits): Clinical and administrative compensation expenses, as reported by management in expense breakdowns.

Full Conference Call Transcript

With that, I will turn the call over to Mark Ordan, our Chief Executive Officer.

Mark Ordan: Thank you, Mary Ann, and good morning, everyone. Also with me today is Kasandra Rossi, our Chief Financial Officer. We were pleased with our strong first quarter results driven by top-line growth with adjusted EBITDA coming in at $58 million. We saw strong pricing that outpaced a modest decline in same-unit volumes across our service lines. Although recent volume results do not show a trend, our payer mix continues to be strong, and we are comfortable with our decision to not have a headwind estimate for the potential effect of the tax subsidy lapse. We know that major hospital systems have seen a decline in patient volume and revenue, and we may see that in the future.

For now, this area is strong for us, and we will continue to report on it as the year continues. Given the uncertainty of whether we will experience this headwind, and since it is still early in the year, we are reaffirming our full 2026 outlook of $280 million to $300 million in adjusted EBITDA. Kasandra Rossi will now provide some additional details, and I will be back shortly.

Kasandra Rossi: Thanks, Mark, and good morning, everyone. Our consolidated revenue increase was driven by same-unit growth of just under 3% and net non-same-unit activity of about $6 million, including growth from recent acquisitions and organic growth, which was partially offset by decreases in revenue from our portfolio restructuring. Pricing growth of 4% was driven by solid RCM cash collection, increases in contract administrative fees, favorable payer mix, and increased patient acuity in neonatology. While we saw volume declines across our service lines during the quarter, including NICU days that were down about 1%, practice-level S, W, and B expenses increased by $9 million year over year, primarily reflecting same-unit increases in clinical salary expense.

Net salary growth for the first quarter was in line with the ranges we have seen over the past 18 months that have averaged around 3%. Our G&A expense increased slightly year over year, driven by a modest increase in salary and incentive compensation expense, partially offset by decreases in professional services and IT expenses. D&A expense increased slightly year over year, resulting from higher same-unit amortization expense and D&A related to our recent acquisitions. Other nonoperating expense decreased year over year, driven by a decrease in interest expense on modestly 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(k) matching contributions. We used $130 million in operating cash flow in the first quarter compared to $116 million in the prior year, with the differential related to decreases in cash flow from AP and accrued expenses primarily related to incentive compensation payments, and decreases in cash flow from AR, partially offset by higher earnings. We also deployed $21 million of capital during the quarter to buy 1 million shares of our stock, leaving us with 82 million shares outstanding.

We ended the quarter with cash of just over $200 million and net debt of just over $385 million. This reflects net leverage of just over 1.3 times using the midpoint of our updated adjusted EBITDA outlook for 2026. Our accounts receivable DSO at March 31 of 42.5 days was down slightly from December 31, but was down over five days year over year, driven by improved cash collections at our existing units.

We are maintaining our previously issued outlook range for the full year of $280 million to $300 million in adjusted EBITDA, and while our first quarter results represented about 20% of that annual expected range, we do expect that adjusted EBITDA for the remaining three quarters will be fairly ratable. I will now turn the call back over to Mark.

Mark Ordan: Thank you, Kasandra. I have pounded the drum over the last few quarters that investments in care quality are always wise. Hospital systems want a partner who will outperform, and our patients, of course, deserve nothing less. In the first quarter, we announced that two extraordinary physician leaders from the top of academic medicine are joining Pediatrix Medical Group, Inc.: Dr. Jim Barry, the Chief Clinical Quality and Transformation Officer, and Dr. Jochen Proffitt as Chief Quality Advisor. Jim is nationally recognized for his contributions in neonatal critical care, artificial intelligence in medicine, patient safety, and health care leadership.

He has co-founded two national organizations: one is a learning collaborative of neonatologists, data scientists, and clinical information scientists to study the application of artificial intelligence in neonatal critical care and pediatric medicine; and the other is the Clinical Leaders Group of the American Academy of Pediatrics, which is a training, education, and collaboration resource for medical and quality directors of NICUs in the United States. Dr. Barry joined Pediatrix Medical Group, Inc. from the University of Colorado Health System, where he was chair of newborn governance as well as a professor of pediatrics and neonatology at the University of Colorado School of Medicine.

Obviously, Jim, who is an MD and an MBA, brings a full package of quality, data, AI, and business acumen. Jochen Proffitt brings nearly two decades of leadership in perinatal quality improvement as chair and principal investigator of the California Perinatal and Maternal Quality Care Collaboratives. He is a professor of pediatrics at Stanford Medicine. These individuals will respectively help lead and advise a team of extraordinary clinicians to continue to raise the bar on quality through analyzing clinical data, reducing care variation, and improving patient outcomes using evidence-based strategies. Beyond the benefit to our core that our quality focus brings, our team is actively engaged in many opportunities to expand what we do.

We have more hospital partnerships than any other organization in our core fields, which provides great opportunities in neonatology, maternal-fetal medicine, OB hospitalist, and pediatric intensive care. In addition to our leading in-house presence, we see a major opportunity to expand our teleservices and obstetrics presence nationwide. We believe that an organization like ours will continue to outperform if we stay laser focused on care quality that is data-based. We see great opportunity to leverage our leading footprint both through our data and through tele and remote services. It is that insistence on quality that binds us to our patients and hospital partners.

We have the ability to use our strong balance sheet where there are opportunities to expand our core and emerging areas. On our last call, I spoke about a new program to integrate share price-based awards as part of our compensation program. We successfully rolled this out in last year's fourth quarter and in Q1 of this year. Included in this was welcoming 45 clinician leaders to our inaugural class of Pediatrix partners. This group is already actively helping us expand on the work we are known for by combining this superb clinical acumen with the spirit of ownership and alignment.

We believe this is unique in our field—but so is Pediatrix Medical Group, Inc.—and we can already see the tangible positives of this new initiative. As a matter of fact, Drs. Proffitt and Barry are joining us because of the really hard work that some of our doctors did to look for the two top people in the field to join us, and I thank them for that. I will close by speaking about our General Counsel and CIO, Mary Ann Moore. In our filing this morning, we announced that Mary Ann will be leaving her role and retiring before the end of the year.

In 20 years with Pediatrix Medical Group, Inc., Mary Ann has, and continues to, play a very important role in many areas of our operations, from legal and administrative to overall supervision and guidance. Mary Ann is a trusted colleague and adviser to the whole company and certainly to me and our Board of Directors. We will promptly begin a new search for a new General Counsel. We will now open the call for questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, press star 1 again. Our first question comes from the line of Ryan Daniels with William Blair. Ryan, please go ahead.

Matthew Mardula: Hello. This is actually Matthew Mardula on for Ryan. Thank you for taking the questions. When I look at pricing above 4%, are there any potential headwinds or impacts that we should be aware of, or that you see internally, that could reduce the trajectory of this growth going forward? I know you touched on the tax subsidy, but any other details there? Then are you still expecting pricing to be flat for the rest of the year, given the Q1 results? If not, how are you thinking about pricing for the rest of the year?

Kasandra Rossi: Sure. On the pricing components, we have talked about the same four factors that have driven pricing over the past several quarters. The first is our RCM cash collections, and we mentioned in 2025 that we had almost a hockey-stick effect for those RCM cash collection impacts coming through pricing. We would expect the first half of the year to still be strong, and then I think it will start to lap as we move into the second half. The other three components that have driven positive pricing are contract revenue—those have continued to be strong.

We do not know that will continue at this pace, but right now we know hospitals are facing pressures in that area, and it continues to be strong for us. The third item is payer mix. I know you touched on the tax subsidies. That is an unknown for us, but that has continued to be an area of strength for us that has flowed through pricing. The final one is acuity. We have seen really strong acuity, primarily in neonatology. These four factors have contributed to the last several quarters.

Coming in strong at over 4%, we would expect that to tick down a bit as we move through the year, but I do not know of any other headwinds.

Matthew Mardula: Great. Thank you for that. Over the last two and a half quarters we have seen declining volume trends, and I know last quarter was more because of the strong top line, but any thoughts on the continued decrease in volume in NICU days? I know it is difficult to pinpoint a reason for this, but how are you thinking about volume going forward and the potential for improvement?

Mark Ordan: As I said in my comments, while we saw that in those two quarters, in recent results we have not seen a continuation of that trend. We do not have any different forecast there.

Matthew Mardula: Great. Thank you for that.

Operator: Our next question comes from the line of Jack Slevin with Jefferies. Jack, please go ahead.

Jack Slevin: Hey, good morning. Appreciate the color so far. I want to double click a bit on the pricing side to understand two things. The rev cycle piece is very clear. From a visibility perspective—and I appreciate all the comments around HIX or the subsidies going away—is there anything you can share on what you are seeing on the ground right now as it relates to that continued strength in payer mix, or things you are hearing out of your MFM practices that might tell you how things might be shifting around?

We have started to get some data points from payers and from hospitals on what they have seen from volumes or enrollments in HIX, but curious if there is anything additional you can share on that front. Then on the admin fee side, I understand that can move around a little; any visibility to that for the rest of the year would be really helpful. Thank you.

Mark Ordan: On the first part, we do not see any signs of weakness. We have looked carefully by geography and by type of line of service, and we do not. I would not say we are surprised; we are pleased. We have speculated that perhaps people are making a cost-benefit calculation when it comes to pregnancy that keeps them in the exchanges. We do not really know, but we have not seen any negative. We expected, as I said on the last call, that there would be some negative around it, and as I said earlier, we know that hospital systems broadly have experienced it.

But in no line of our business have we seen any weakness or any trend that would suggest any difference. It could be that there will be a delayed effect, or it could be that we can get through this as we have been. I am sorry, Jack—you also had a question on contract revenue. Kasandra Rossi, do you want to take that?

Kasandra Rossi: Sure. On that line, one of the things we have talked about is there are sometimes salary increases in S, W, and B that we will only effect if we do get support from a hospital, so there is some net effect there. Even though you are seeing a bit of growth on that top line, some of that is really going to pay for some of the salary increase on the S, W, and B line. We do anticipate continuing to have those conversations. They are getting tougher, so we hope that it continues to stay strong.

It has been anywhere from 10% to 20% of our pricing increase for the last few quarters, and we expect that as we move through the year. If anything changes, of course, we will let you know.

Mark Ordan: Do not misunderstand. When it may sound like we are a one-trick pony talking about quality, the whole thesis of Pediatrix Medical Group, Inc.’s business is to be an irreplaceable partner to our hospital partners. If we are providing superior quality and really being a leader in our field, we think it justifies the kind of payments that we get. Kasandra is right that the environment for hospitals is tougher than it has been, which just makes us make sure that we are offering services that hospitals find very valuable and irreplaceable.

Jack Slevin: Got it. Appreciate that. Maybe I will sneak two into one to wrap on my end. The couple of deals you have done—obviously not massive in terms of dollar amounts—but sizable enough that they could have a little bit of impact. Anything you can share in terms of what you are seeing on that front? Then, Kasandra, as it relates to the second quarter, are there any one-timers or things we should think about as we are looking at that for modeling purposes? Thanks.

Mark Ordan: Because they are not material, we do not disclose the results. I will say that the recent acquisitions we have made have done better than our initial projections, so we are very happy about that. As I said in my remarks, we are actively working on opportunities that we think could bear fruit and be great additions to Pediatrix Medical Group, Inc.

Kasandra Rossi: No one-timers to call out for the quarter, Jack.

Jack Slevin: Awesome. Thank you both. Appreciate it.

Mark Ordan: Thank you.

Operator: Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your next question comes from the line of Pito Chickering with Deutsche Bank. Pito, please go ahead.

Philip Chickering: Hey, good morning. Thanks for taking my questions. One more pricing question, and I apologize—it was so much stronger than expectations and obviously had a positive impact on EBITDA. Can you quantify how much of the pricing in the first quarter came from cash collections, just as you think about it fading or comping out in the back half of the year? And then, as you said on the admin fees, that is about 10% to 20%—I assume that was the same for this quarter. What percent of the book has admin fees at this point, and how has that changed year over year?

Once you have an admin fee, is that a one-time step-up and then it stops increasing, or does that increase at inflation levels once it is implemented?

Kasandra Rossi: About 25% from cash collections. On admin fees, that was around 20%—on the higher end—for the quarter. As to the prevalence and how they change, it depends on the contract. They vary. We have a couple thousand of those contracts.

Philip Chickering: Okay, fair enough. Is there any ballpark on how many increase at inflation versus remain flat, just to help with modeling?

Mark Ordan: No. I know where you are going with that, but as Kasandra said, we have thousands of contracts and they are all very different. If there were a trend in any way, we would call it out.

Philip Chickering: Okay, fair enough. Last question—and maybe I missed this—but I think the previous question asked if you are going to maintain pricing being flat for the year. Are you still maintaining that? Looking at the first quarter with a strong comp, if this is stable, it could lead to pricing of a couple percent this year versus guidance. Are you still maintaining flat pricing guidance for the year?

Kasandra Rossi: Yes, we are. We do expect that RCM cash collections, which have been really strong for us, will tail off as we move through the year, and so we are maintaining our flat outlook. It is early; if that does change as we move into the next quarter, we will update you on that. But right now, we are maintaining flat.

Mark Ordan: After the last quarter, when we forecast the year on our last call, people asked why we did not put in some kind of hedge. I would say everything indicates that things continue to be strong, so it is hard to forecast something based on a fear or a possibility if there is no data behind it. That is why we are where we are.

Philip Chickering: Fair enough. That is it for me. Thanks for the questions, and nice job in the quarter.

Kasandra Rossi: Thank you.

Operator: There are no further questions at this time. I will now turn the call back over to Mark Ordan for any closing remarks. Mark?

Mark Ordan: Thank you all very much for your support, and we look forward to keeping you updated as the year unfolds. Have a great day.

Operator: That concludes today’s call. You may now disconnect.

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