Results Reflect Classification of MedData as Discontinued Operations

FORT LAUDERDALE, Fla.–(BUSINESS WIRE)–MEDNAX, Inc. (NYSE: MD), the national health solutions partner
specializing in neonatology, anesthesiology, radiology, maternal-fetal
medicine, other pediatric services, and management services, today
reported earnings from continuing operations of $0.48 per diluted share
for the three months ended March 31, 2019. On a non-GAAP basis, MEDNAX
reported Adjusted EPS from continuing operations of $0.65.

The results for MedData, the Company’s management-services organization,
have been classified as discontinued operations, and prior period
results have been recast to classify MedData as discontinued operations
for comparison purposes. For the first quarter of 2019, MedData
generated revenue, Adjusted EBITDA and Adjusted EPS of $51 million, $9
million and $0.06, respectively.

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.”

Operating Results from Continuing Operations

MEDNAX’s net revenue for the three months ended March 31, 2019 was
$851.2 million, essentially flat compared to $852.6 million for the
prior-year period. MEDNAX’s same-unit revenue increased by 1.0 percent,
while growth attributable to recent acquisitions was offset by the
non-renewal of certain contracts. For the first quarter of 2019, MEDNAX
had one fewer weekday compared to the 2018 first quarter, which impacted
same-unit volume growth by approximately 60 basis points, primarily in
anesthesiology and office-based Women’s and Children’s services.

Same-unit revenue from net reimbursement-related factors increased by
1.3 percent for the 2019 first quarter as compared to the prior-year
period. The net increase in revenue was primarily due to modest
improvements in managed care contracting and favorable rate growth in
our radiology service line.

The percentage of services reimbursed under government programs
decreased by 40 basis points for the first quarter compared with the
prior-year period, reflecting a favorable comparison for neonatology and
other pediatric services, offset by a slightly unfavorable comparison
for anesthesiology services.

Same-unit revenue attributable to patient volume decreased by 0.3
percent for the 2019 first quarter as compared to the prior-year period.
Volume increases across neonatology, other NICU services, radiology and
pediatric cardiology services were offset by volume decreases in
anesthesiology and maternal-fetal medicine services. For the quarter,
neonatal intensive care unit (NICU) patient days increased by 1.6
percent compared to the prior-year period, which reflects modest
increases in average rate of admission and length of stay, partially
offset by a slight decline in total births at the hospitals where
MEDNAX-affiliated practices provide neonatology services.

For the 2019 first quarter, practice salaries and benefits expense was
$621.5 million, compared to $604.0 million for the prior-year period.
Practice salaries and benefits expense as a percentage of net revenue
was 73.0 percent for the first quarter of 2019, compared to 70.8 percent
for the prior-year period. This increase was primarily attributable to
growth in clinician compensation expense at existing practices.

For the 2019 first quarter, general and administrative expenses were
$101.8 million, as compared to $101.7 million for the prior-year period.
General and administrative expenses as a percentage of net revenue was
12.0 percent for the first quarter of 2019, compared to 11.9 percent for
the prior-year period.

As previously disclosed, MEDNAX anticipates that it will incur certain
expenses related to transformational and restructuring activities. For
the first quarter of 2019, these expenses totaled $3.5 million. MEDNAX
now reports Adjusted EBITDA from continuing operations, which is defined
as earnings from continuing operations before interest, taxes,
depreciation, amortization, and these transformational and restructuring
related expenses. The Company’s Adjusted EPS from continuing operations
also excludes the impact of these transformational and restructuring
related expenses and for the first quarter of 2019 also excludes
favorable discrete tax items from net settlements of certain tax matters.

Adjusted EBITDA from continuing operations for the 2019 first quarter
was $104.9 million, compared to $122.6 million for the prior-year
period. Adjusted EBITDA from continuing operations as a percentage of
net revenue was 12.3 percent for the first quarter of 2019, compared to
14.4 percent in the prior-year period. This decline primarily reflects
the revenue and cost items detailed above, as well as the loss of the
contribution from the previously noted non-renewal of certain contracts.
Additionally, the previously noted first-quarter weekday comparison to
the prior year period reduced Adjusted EBITDA from continuing operations
by $4 million.

Depreciation and amortization expense was $20.0 million for the first
quarter of 2019 compared to $19.9 million for the first quarter of 2018.

Interest expense was $30.7 million for the first quarter of 2019
compared to $19.9 million for the first quarter of 2018, due primarily
to a higher effective interest rate on borrowings between the two
periods. The increase in effective interest rate specifically reflects
the impact of the Company’s issuance in November of 2018 of $500 million
in 6.25% senior notes, as well as the partial-period impact of the
Company’s issuance of an additional $500 million in 6.25% senior notes
in February of 2019. The proceeds of both of these issuances were used
to repay a portion of the indebtedness outstanding under the Company’s
senior unsecured revolving credit facility. Additionally, in March of
2019, MEDNAX amended and reduced the size of its revolving credit
facility, and interest expense in the first quarter of 2019 included
approximately $1.5 million, or approximately $0.01 per share, of
deferred debt issuance costs that were written off concurrent with that
amendment.

MEDNAX generated income from continuing operations of $41.7 million for
the 2019 first quarter, or $0.48 per diluted share based on a weighted
average 86.5 million shares outstanding. This compares with income from
continuing operations of $60.0 million, or $0.64 per diluted share, for
the 2018 first quarter, based on a weighted average 93.5 million shares
outstanding. Income from continuing operations for the 2019 first
quarter included a net tax benefit of $4.8 million, or $0.06 per share,
related to the favorable settlement of certain tax matters during the
first quarter of 2019. The decrease in weighted average shares
outstanding is primarily related to the impact of shares repurchased
under an accelerated repurchase program completed in the fourth quarter
of 2018, as well as through other open market repurchase activity.

For the first quarter of 2019, MEDNAX reported Adjusted EPS from
continuing operations of $0.65, compared to $0.82 for the first quarter
of 2018. For these periods, Adjusted EPS from continuing operations is
defined as diluted income from continuing operations per common and
common equivalent share excluding non-cash amortization expense,
stock-based compensation expense, and transformational and restructuring
related expenses. For the first quarter of 2019, Adjusted EPS from
continuing operations also excludes a $0.06 benefit from the tax item
discussed above.

Results from Discontinued Operations

Based on the progress of MEDNAX’s previously disclosed and ongoing sale
process for MedData, the Company’s management-services organization, the
net assets of MedData have been classified as held for sale, and the
operating results for MedData have been classified as discontinued
operations in the current and prior period financial statements. In
connection with the classification as assets held for sale, the Company
recorded a non-cash impairment charge of $285.0 million, net of the
related income tax benefit, to reduce the net assets carrying value to
fair value.

For the first quarter of 2019, MedData generated revenue of $51.2
million, as compared to $56.1 million for the first quarter of 2018.
Adjusted EBITDA and Adjusted EPS for MedData were $8.7 million and
$0.06, respectively, compared to $11.0 million and $0.07, for the first
quarter of 2018. Adjusted EBITDA for MedData is defined as income from
discontinued operations before interest, taxes, depreciation,
amortization, transaction costs and loss on classification as held for
sale. Adjusted EPS for MedData is defined as diluted income from
discontinued operations per common and common equivalent share excluding
non-cash amortization expense, stock-based compensation expense,
transaction costs, loss on classification as assets held for sale and
income tax benefits associated with the loss on classification as assets
held for sale.

Consolidated Operating Results

For the first quarter on a consolidated basis, MEDNAX reported a net
loss of $242.9 million, or $2.81 per share. On a non-GAAP basis, the
Company reported Adjusted EBITDA of $113.6 million and Adjusted EPS of
$0.71. These non-GAAP operating results are within MEDNAX’s previously
disclosed outlook for the first quarter of 2019 of Adjusted EBITDA of
between $108 million and $118 million and Adjusted EPS of between $0.67
and $0.75.

Financial Position and Cash Flow – Continuing Operations

MEDNAX had cash and cash equivalents of $46.5 million at March 31, 2019,
and net accounts receivable were $522.6 million.

During the first quarter of 2019, MEDNAX used $60.4 million to fund
operations, which compares to $116.9 million used during the first
quarter of 2018. MEDNAX typically uses cash during the first quarter of
each year as it pays incentive compensation, principally to its
physicians, and employee benefit plan matching contributions that were
accrued during the prior year. The use of cash during the first quarter
of 2018 also reflects the payment of approximately $62 million in taxes
related to 2017 that were deferred for companies impacted by the 2017
hurricanes.

MEDNAX used $79 million during the first quarter of 2019 to fund
repurchases of its common stock in open-market transactions. The Company
also used $5.8 million to fund capital expenditures, and $5.6 million to
fund acquisitions and to make contingent purchase price payments for
previously completed acquisitions.

At March 31, 2019, MEDNAX had total debt outstanding of $2.1 billion,
consisting of $1.75 billion in senior notes and approximately $390
million in borrowings under its revolving credit facility.

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.

Non-GAAP Measures

A reconciliation of Adjusted EBITDA and Adjusted EPS to the most
directly comparable GAAP measures for the three months ended March 31,
2019 and 2018 is provided in the financial tables of this press release.
Additionally, the reconciliation of forward-looking EBITDA to the most
directly comparable GAAP measure is available on the Company’s website
at www.mednax.com/investors.
Forward-looking information for 2019 Adjusted EBITDA from continuing
operations is provided only on a non-GAAP basis because a reconciliation
to the most comparable GAAP financial measure, 2019 net income from
continuing operations, is not available without unreasonable effort due
to the unpredictable nature of the reconciling item for transformational
and restructuring related expenses. MEDNAX believes that such item and,
accordingly, the other items of the reconciliation, would require an
unreasonable effort to forecast. MEDNAX believes that any such forecast
would result in a broad range of projected values that would not be
meaningful to investors.

Earnings Conference Call

MEDNAX, Inc., will host an investor conference call to discuss the
quarterly results at 10 a.m., ET today. The conference call Webcast may
be accessed from the Company’s Website, www.mednax.com.
A telephone replay of the conference call will be available from 12:00
p.m. ET today through midnight ET May 16, 2019 by dialing 800.475.6701,
access Code 466768. The replay will also be available at www.mednax.com.

ABOUT MEDNAX

MEDNAX, Inc. is a national health solutions partner comprised of the
nation’s leading providers of physician services. Physicians and
advanced practitioners practicing as part of MEDNAX are reshaping the
delivery of care within their specialties and subspecialties, using
evidence-based tools, continuous quality initiatives, clinical research
and telemedicine to enhance patient outcomes and provide high-quality,
cost-effective care. The Company was founded in 1979, and today, through
its affiliated professional corporations, MEDNAX provides services
through a network of more than 4,200 physicians in all 50 states and
Puerto Rico. In addition to its national physician network, MEDNAX
provides services to healthcare facilities and physicians in over 40
states through two complementary businesses, consisting of a management
services company and a consulting services company. Additional
information is available at www.mednax.com.

Certain statements and information in this press release may be
deemed to contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements may
include, but are not limited to, statements relating to our objectives,
plans and strategies, and all statements, other than statements of
historical facts, that address activities, events or developments that
we intend, expect, project, believe or anticipate will or may occur in
the future. These statements are often characterized by terminology such
as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,”
“will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and
similar expressions, and are based on assumptions and assessments made
by MEDNAX’s management in light of their experience and their perception
of historical trends, current conditions, expected future developments
and other factors they believe to be appropriate. Any forward-looking
statements in this press release are made as of the date hereof, and
MEDNAX undertakes no duty to update or revise any such statements,
whether as a result of new information, future events or otherwise.
Forward-looking statements are not guarantees of future performance and
are subject to risks and uncertainties. Important factors that could
cause actual results, developments, and business decisions to differ
materially from forward-looking statements are described in MEDNAX’s
most recent Annual Report on Form 10-K and its Quarterly Reports on Form
10-Q, including the sections entitled “Risk Factors”, as well MEDNAX’s
current reports on Form 8-K,filed with the Securities and Exchange
Commission, and include the effects of economic conditions on MEDNAX’s
business; the effects of the Affordable Care Act and potential changes
thereto or a repeal thereof; MEDNAX’s relationships with
government-sponsored or funded healthcare programs, including Medicare
and Medicaid, and with managed care organizations and commercial health
insurance payors; MEDNAX’s ability to consummate the proposed
disposition of MedData; the effects of share repurchases; and the
effects of MEDNAX’s shared services and operational initiatives.

Contacts

Charles Lynch
Vice President, Strategy and Investor Relations
954-384-0175,
x 5692
[email protected]

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