MEDNAX (MD) Misses Q1 EPS by 5c, Revenues Miss; Offers Q2 EPS Guidance Below Consensus

MEDNAX (NYSE: MD) reported Q1 EPS of $0.65, $0.05 worse than the analyst estimate of $0.70. Revenue for the quarter came in at $851 million versus the consensus estimate of $906.41 million.

For the 2019 first quarter, MEDNAX reported the following results from continuing operations:

• Net revenue of $851 million;
• Net income of $42 million; and
• Adjusted EBITDA of $105 million.

“Our operating results for the first quarter were in line with our expectations, reflecting execution of our shared services and operational initiatives against a challenging revenue and cost environment,” said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX. “We also utilized our capital for targeted acquisitions and have been buyers of our own stock, repurchasing $100 million of shares year to date, including $79 million during the first quarter. Our focus in 2019 remains on generating consistent, stable operating performance against our outlook of utilization and cost trends. To that end, we have significantly expanded the scope of our transformational initiatives, which are now being supplemented with best-in-class third-party resources, in order to optimize the services we provide to our clinicians. We believe the strategic use of free cash flow to broaden and accelerate these initiatives, combined with targeted acquisitions and share repurchases, positions us well to generate enhanced shareholder value while continuing to take great care of our patients.”

2019 Second Quarter Outlook

For the 2019 second quarter, MEDNAX expects earnings per share from continuing operations will be in a range of $0.54 to $0.62 per diluted share and Adjusted EPS from continuing operations will be in a range of $0.84 to $0.92. The Adjusted EPS from continuing operations range excludes $0.11 per diluted share of estimated amortization expense, $0.10 per diluted share of estimated stock-based compensation expense and $0.09 per diluted share of transformational and restructuring related expenses.

This outlook assumes that total same-unit revenue growth for the three months ended June 30, 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 second quarter of 2019 of 27.5 percent and average diluted shares outstanding of 84.8 million.

Additionally, for the 2019 second quarter, MEDNAX expects that Adjusted EBITDA from continuing operations will be between $125 million and $135 million, compared to the prior-year period Adjusted EBITDA from continuing operations of $145.1 million. For the 2019 second quarter, MEDNAX expects that Adjusted EBITDA from continuing operations will exclude roughly $10 million in third-party costs within transformational and restructuring expenses.

“We continue to move forward methodically, with a focus on Adjusted EBITDA as our primary measure of operating performance in 2019,” said Stephen D. Farber, Executive Vice President and Chief Financial Officer. “Our priorities remain the continued progress of our operational and shared services initiatives and the reinvestment of our significant, recurring free cash flow.”

“To that end, we have expanded our scope of internal investments to improve processes and performance across our organization,” continued Mr. Farber. “In addition to clinical-resource management tools within our anesthesiology organization, these investments now also include a range of initiatives such as enterprise information-technology infrastructure enhancements across multiple shared-services functions. We anticipate that our aggregate investments in these transformational and restructuring activities will total $75 million to $100 million over the course of 2019 and 2020.”

2019 Full Year Outlook

MEDNAX is revising its outlook of 2019 Adjusted EBITDA to reflect the classification of MedData as discontinued operations. The Company now anticipates that its 2019 Adjusted EBITDA from continuing operations will be between $505 and $535 million, with the sole adjustment from the previous range reflecting this classification.

GUIDANCE:

MEDNAX sees Q2 2019 EPS of $0.84-$0.92, versus the consensus of $0.95.

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

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