MEDNAX (MD) Tops Q4 EPS by 2c, Revenues Beat; Offers 1Q EPS Guidance Below Consensus

MEDNAX (NYSE: MD) reported Q4 EPS of $0.92, $0.02 better than the analyst estimate of $0.90. Revenue for the quarter came in at $933 million versus the consensus estimate of $909.73 million.

Net revenue of $933 million;
Net income of $60 million; and
EBITDA of $137 million.

“Our operating results for the fourth quarter were in line with our expectations and reflect continued execution of our shared services and operational initiatives,” said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX. “We achieved the goal we established for these initiatives of $60 million in improvements in 2018, and we remain committed to achieving our target of $120 million in annualized improvements by the end of 2019. Our focus in 2019 is on generating consistent, stable operating performance against our outlook of clinical and non-clinical compensation growth, reimbursement trends, and a utilization environment that reflects soft birth rates and a continued adverse migration of anesthesia payor mix. We believe a combination of our internal focus, investments in the optimization of our shared services and physician group performance, and the use of our capital toward targeted acquisitions and share repurchases positions us well to generate enhanced shareholder value while continuing to take great care of our patients.”

2019 First Quarter Outlook

For the 2019 first quarter, MEDNAX expects earnings per share will be in a range of $0.41 to $0.49 per diluted share and Adjusted EPS will be in a range of $0.67 to $0.75. The Adjusted EPS range excludes $0.14 per diluted share of estimated amortization expense, $0.09 per diluted share of estimated stock-based compensation expense and $0.03 per diluted share of transformation related expenses.

Additionally, for the 2019 first quarter, MEDNAX expects that Adjusted EBITDA will be between $108 million and $118 million, compared to the prior-year period Adjusted EBITDA of $133.6 million. For the 2019 first quarter, MEDNAX has one fewer weekday compared to the 2018 first quarter, which is expected to impact Adjusted EBITDA unfavorably by approximately $4 million. In addition, Adjusted EBITDA for the first quarter of 2018 includes approximately $5 million in contribution from the previously mentioned anesthesiology contract that was not renewed subsequent to that period.

This outlook assumes that total same-unit revenue growth for the three months ended March 31, 2019 will be in a range of flat to two percent, compared to the prior-year period.

This outlook also assumes an effective tax rate for the first quarter of 2019 of 27.5 percent and average diluted shares outstanding of 87.3 million.

Consistent with prior years, MEDNAX’s results from operations in the 2019 first quarter, when compared on a sequential basis to the 2018 fourth quarter, will be affected by annual seasonality. These recurring items reduce MEDNAX’s net income, Adjusted EBITDA and earnings per share for the first quarter of each year, relative to other quarters throughout the year.

These factors include the incurrence of a disproportionate share of the annual expenses associated with Social Security payroll taxes and 401(k) match. In 2018, the Company’s total expenses related to these items were approximately $167 million, of which $67 million, or 40 percent, was incurred in the first quarter. Consequently, MEDNAX’s Adjusted EBITDA and EPS for the first quarter of 2018 reflected expenses related to these items that were approximately $25 million, or $0.21, higher than if they were incurred ratably throughout the year. The Company’s outlook for the first quarter of 2019 reflects a similar impact due to the seasonality of these expense items.

These seasonal factors also include impacts on net revenue during the first quarter, on a sequential basis, because there are fewer calendar days than in the fourth quarter. Related to 2019, the previously noted impact of one less weekday during the first quarter will magnify this normal seasonality.

Preliminary 2019 Outlook

On a preliminary basis, MEDNAX anticipates that its 2019 Adjusted EBITDA, as defined above, will be between $550 million and $580 million.

“Our preliminary outlook of 2019 Adjusted EBITDA contemplates a range of scenarios related to revenue and cost assumptions, as well as our ongoing performance improvement initiatives,” said Mr. Farber. “We expect a significant portion of this Adjusted EBITDA to convert to operating cash flow, in a manner substantially similar to our historical experience. We expect to use our significant free cash flow, as well as the potential proceeds from the ongoing sale process for MedData, in a balanced approach across targeted, strategic acquisitions, debt repayment, and routine, persistent share repurchases. Consistent with this outlook, we intend to utilize a portion of our remaining $250 million share repurchase authorization via open market purchases in the first quarter of 2019.”

GUIDANCE:

MEDNAX sees Q1 2019 EPS of $0.67-$0.75, versus the consensus of $0.86.

For earnings history and earnings-related data on MEDNAX (MD) click here.

You May Also Be Interested In

• Broadcom (AVGO) Tops Q2 EPS by 5c, Offers Guidance
• Petco Health and Wellness (WOOF) Misses Q1 EPS by 6c
• PVH Corp. (PVH) Tops Q1 EPS by 19c, Offers Guidance