Pediatrix Medical Group, Inc. 2026 Q2 Earnings Call

Thank you, Ashley. Good morning, everyone. Also with me today is Kasandra Rossi, our Chief Financial Officer. We are pleased to report another solid quarter with adjusted EBITDA of $76 million. Same unit revenue was buoyed by strong RCM collections, payer mix, importantly, continuing rise in acuity. While we did see modestly lower volumes, primarily in neonatology, with NICU days down 3%. Our overall results for the quarter were in line with our expectations. We reaffirm our full year 2026 outlook of $280 million-$300 million in adjusted EBITDA. In the quarter, we repurchased just under two million shares of our stock, bringing our total buybacks since August of 2025 to seven million shares and our shares outstanding to 81 million, down from 87 million at the end of the second quarter of 2025. Our cash balance is at $289 million, with total debt of $584 million.

We've spoken before about our financial strength, which enables our consistent support for our practices, quality programs, research, and growth. Before Kasandra provides additional details on the quarter, I'll comment on how the pieces of our business fit our strategic positioning. You know our sector-leading footprint in neonatology and Maternal-fetal medicine. Today, we are in the process of building a significant function to augment our physical services with teleservices nationwide. No other entity is able to provide the services that we can offer to hospital partners, obstetricians, and patients. I'm sure you can imagine, we believe telemedicine is most effective when it's combined with physical patient visits. As one of our MFM physician leaders, Dr. Amber Samuel, put it, "Access when you need it and hands-on when required." Only Pediatrix has a multi-state footprint of over 170 MFMs, by far the largest in the nation.

These practices are very closely linked to the over 360 NICUs across 32 states in which our clinicians provide services, which also is, of course, by far the largest in the country and which also handles more high acuity patients than anyone else. We believe that telemedicine without a physical link is an imperfect offering. We expect tele-hybrid medicines to add significant value to Pediatrix as it furthers our expansion in women's and children's care. This important area is not limited to MFM. Areas including retinopathy, neurology, infectious disease, and of course, neonatology are all under this umbrella. I spoke on a previous call about our expanding OBH footprint, which takes advantage of our embedded significant relationship with over 400 hospitals. We have recruited leaders in both tele-hybrid medicine and in OBH to help us expand both areas effectively.

Last on growth, we're not a bank and our business is not holding deposits. Our strong balance sheet, cash position, and debt capacity enables us to take advantage of outside opportunities as they arise. We are very actively looking at possible growth avenues within women's and children's medicine, including potential opportunities to augment our strength by working with outside JV and capital investors. We have continued to buy back our shares and will continue to, unless and until we see opportunities that make clear operating and financial sense. Now I'll turn the call to Kasandra to provide those additional details.

Thanks, Mark. Good morning, everyone.

Our consolidated revenue increased by 4%, driven by non-same unit activity, primarily recent acquisitions and same unit growth of 2%. Same unit pricing was up 4%, driven by strong RCM cash collections, favorable payer mix, and increased patient acuity, primarily in neonatology. Payer mix improved by 135 basis points as compared to the prior year second quarter, and importantly, improved by 120 basis points as compared to the first quarter of 2026. Same unit patient service volumes were down 2%, driven by hospital-based services, primarily neonatology, and we were up against a tough comp. Practice level SW&B expenses increased year-over-year, and on a same unit basis, reflected increases in salary expenses and malpractice expense. Salary growth has remained in a pretty tight band, consistent with the ranges we have seen for the last 18 months.

Our G&A expense increased year-over-year, primarily related to executive transition-related costs flowing through compensation expense. G&A expense increased to $5.8 million as compared to $5.3 million in the prior year, primarily reflecting capital expenditures and amortization of intangible assets from recent acquisitions. Other non-operating expense decreased to $2.9 million as compared to $4.9 million for the prior year period, primarily reflecting a decrease in interest expense from modestly lower interest rates and borrowings, and an increase in interest income on higher cash balances. Moving to cash flow, we generated $126 million in operating cash flow in the second quarter, compared to $138 million in the prior year, with the change driven by decreases in cash flow from accounts payable and accrued expenses and accounts receivable.

With cash of $289 million and net debt of just over $295 million, leverage sits at just above one time using the midpoint of our adjusted EBITDA outlook range for 2026. Our accounts receivable DSO at June 30th of 42.5 days were fairly unchanged from March 31st and December 31st, but were down just under four days year-over-year, primarily related to improved cash collections at our existing units. For the second half of 2026, we expect that our adjusted EBITDA will be fairly ratable in the third and fourth quarters. Now, I'll turn the call back over to Mark.

Thanks, Cassandra. Now, we are able to take questions if you have them.