MEDNAX (MD) Tops Q4 EPS by 1c, Revenues Beat; Offers Q1 EPS Mid-Point Guidance Below Consensus

MEDNAX (NYSE: MD) reported Q4 EPS of $0.91, $0.01 better than the analyst estimate of $0.90. Revenue for the quarter came in at $905 million versus the consensus estimate of $901.2 million.

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

• Net revenue of $905 million;
• Net income of $33 million; and
• Adjusted EBITDA of $132 million.

“Our operating results for the fourth quarter were in line with our expectations,” said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX. “2019 was a year of significant organizational change, leadership restructuring and broad, aggressive transformational activity. We believe that we enter 2020 with distinct and effective operating plans for each of our core medical groups, and that we have established a pathway to stabilizing our financial results over the coming year and setting the stage for growth in the years to follow. I am also tremendously proud of the clinical achievements of our affiliated physicians, which reflect significant investments in quality, safety and efficiency and underscore our unchanging commitment to take great care of the patient.”

GUIDANCE:

MEDNAX sees Q1 2020 EPS of $0.55-$0.63, versus the consensus of $0.63.

2020 First Quarter Outlook

• For the 2020 first quarter, MEDNAX expects Adjusted EPS will be in a range of $0.55 to $0.63. The Adjusted EPS from continuing operations range excludes $0.11 per diluted share of estimated amortization expense, $0.07 per diluted share of estimated stock-based compensation expense and $0.22 per diluted share of third-party costs within transformational and restructuring related expenses.
• This outlook assumes that total same-unit revenue growth for the three months ended March 31, 2020 will be in a range of two to four percent, compared to the prior-year period.
• This outlook also assumes an effective tax rate for the first quarter of 2020 of 27.0 percent and average diluted shares outstanding of 84.5 million.
• Additionally, for the 2020 first quarter, MEDNAX expects that Adjusted EBITDA will be $95 million at the midpoint, with a range of between $90 million and $100 million. For the 2020 first quarter, MEDNAX expects that Adjusted EBITDA from continuing operations will exclude roughly $25 million in third-party costs within transformational and restructuring expenses.
• The Company’s outlook for the first quarter of 2020 does not include any potential impact from the announced contract terminations initiated by UnitedHealth. MEDNAX is not able to forecast the outcome of this matter, nor estimate the potential impact to its results.
• Consistent with prior years, MEDNAX’s results from operations in the 2020 first quarter, when compared on a sequential basis to the 2019 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. 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.

Preliminary 2020 Outlook

• On a preliminary basis, MEDNAX anticipates that its 2020 Adjusted EBITDA, as defined above, will be $470 million at the midpoint, with a range of between $450 million and $490 million. Additionally, the Company anticipates an effective tax rate for the full year 2020 will be 27 percent and that average diluted shares for the full year will be approximately 85 million.
• This outlook does not include any potential impact from the announced contract terminations initiated by UnitedHealth. The Company is not able to forecast the outcome of this matter, nor estimate the potential impact to its results.
• “Our preliminary outlook for 2020 Adjusted EBITDA contemplates a moderation of the margin pressure we have experienced in the recent past as we undertake aggressive operating plans within our medical groups and our shared-services functions,” said Mr. Farber. “Consistent with our previous outlook, we also anticipate that our transformational investments will begin to decline later in the year as projects are completed, and that we will both realize increasing benefits from these projects and exit the majority of our third-party engagements through 2021.”

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

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