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Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Q2 2026 Pediatrics and Medical Group, Inc. Earnings Conference Call. lines been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, press star 1 again. Thank you. I'd now like to turn the call over to Ashley Schneider. Please go ahead.

Good morning. Certain statements and information during this conference call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions and assessments made by pediatrics' management in light of their experience and assessment of historic trends. current conditions, expected future development, and other factors they believe to be appropriate. Looking forward looking statements made during this call are made as of today and pediatrics undertakes no duty to update or revise any such statements whether as a result of new information, future events or otherwise. Important factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements are described in the company's filings with the SEC, including the sections entitled Risk Factors. In today's remarks by management, they will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's report. EARNINGS PRESS RELEASE, IN THE COMPANY'S QUARTERLY AND ANNUAL REPORTS, AND ON THE PEDIATRICS WEBSITE AT WWW.PEDIATRICS.COM.

With that, I will turn the call over to Mark Wardan, Chief Executive Officer of Pediatrics Medical Group.

Thank you, Ashley, and good morning, everyone. Also with me today is Cassandra Rossi, our Chief Financial Officer. We are pleased to report another solid quarter with adjusted EBITDA of $76 million. SAME UNIT REVENUE WAS BOILED BY STRONG RCM COLLECTIONS, PAYER and 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 and we reaffirm our full year 2026 outlook of $280 to $300 million in adjusted EBITDA. In the quarter, we repurchased just under 2 million shares of our stock, bringing our total buybacks since August of 2025 to 7 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 285. $589 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 Cassandra 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. And 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 Pediatrics 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 telehybrid medicine to add significant value to pediatrics as it furthers our expansion in women's and children's care. This important area is not limited to MFM. including retinopathy, neurology, infectious disease, and of course neonatology are all under this umbrella.

I spoke on 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 telehybrid 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 strengths 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 Cassandra to provide those additional details. Thanks, Mark, and good morning, everyone. Our consolidated revenue increased by 4%, driven by non-Same Unit activity, primarily recent acquisitions, and Same Unit growth of 2%. Game unit pricing was up 4% driven by strong RCM cash collections, favorable payer mix, and increased patient acuity, primarily in neonatology. Their 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 FW&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. The CNA 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 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.

In 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. And now we are able to take questions if you have them.

As a reminder, if you'd like to ask a question, simply press star followed by the number one on your telephone keypad. Your first question comes from the line of Ryan Daniels from William Blair. Your line is live.

Yes, hello, this is Matthew Mardula on for Ryan. And thank you for taking the question, as well as for the details and the prepared remarks. So with the payer mix remain stable this quarter and then increasing for commercial non government payers year over year, and then also from Q1 based on the prepared remarks, why do you think you have been having a stable payer mix compared to your other peers in healthcare and then any color on the consumer trends that is driving that payer mix for you, as well as any insights into your expectations of how this payer mix could hold up into the second half.

Well, you know, we've said on, Matthew, thanks for the question. We've said on previous calls and we said recently in a filing that we have not seen the same effect that others have experienced. You know, we can guess that it has something to do with the fact that if you're pregnant, then the relative value of the pregnancy is going to be higher. of insurance is a lot greater for you than it might be for somebody else. So it would make sense to me that somebody would retain their health insurance until if you're pregnant. We don't know what the future... what the future holds. Many people were concerned that we hadn't built in some negative assumption, but we look at the facts, we looked at that to date, it's still very strong. saying we're immune from it, we don't really know, we can only say that there is a logical reason that we would be continuing to be strong. And it would make sense that in other cases people would drop off the insurance because of the subsidy lapse.

So that's all we know. But there has been absolutely no sign of a change to date at pediatrics.

Great. Thank you for those details. And then, kind of given that we've seen a couple of quarters of this volume decrease, do you still believe this is not a trend occurring? And then if so, what's that reasoning behind the belief that the decrease in the patient volume seen is not a trend occurring? And I know you were kind of talking about in your remarks the tough comp, and it's just difficult to assess or predict. the birth trends, but if you could give any color to maybe when you believe in an increase in patient volume, maybe it's that second half of this year given the easier counts we see in the second half of this year, but just any color to the potential increase in that patient volume.

Well, the change in volume is pretty much on trend with past seasonal patterns. We expect for the year that we'll be overall flat in volume to maybe slightly down. As for an ongoing trend, we don't know. We have seen the numbers that we report that show a slight decline in volume that's been offset by the factors that we outlined. Other than that, we look at what the birth rate is, which is not a perfect indicator of what happens the neonatology and importantly because we sit on the high acuity side of neonatology, we look a lot at that. And when I talked in my remarks about medicine we can reach into other parts of the country where there are really care deserts where there isn't care available to provide care and when necessary bring bring patients in for physical care. But we're on trend. This is typically a lower volume quarter, and so we're on trend for the year to be flat to possibly slightly down.

Great. Thank you so much for all the details. I greatly appreciate it.

thank you question your next question comes from the line of AJ rice from UBS your line is.

Hi, everybody. Just a couple things maybe. On the pricing, I know you're attributing part of that to Better Collections, part of it to Pay or Mix, and it sounds like some of it to Actuity. Is there any way to delineate that a little further into what are the drivers of the extent to which any either.

any of those were the primary driver? Hey AJ, it's Cassandra. So yes, on the drivers, they are really following the same order that we've seen for the past several quarters. The biggest contributor is the RCM collections. And then really kind of coming in a close second is the payer mix impact. And then rearing it up there is the acuity. So those three drivers are about 95% of the pricing for the quarter. And as we've talked about, we do anticipate that the RCM collections piece that we've been seeing that tailwind will begin to dissipate in the last in the second half of 2026.

But like Mark said, we have no reason to believe at this time that acuity will wane. You know, we've seen over the past few years that is definitely on an upward trajectory. And then payer mix Mark already covered.

Okay, that's good. On the non-save store contribution to growth, acquisitions offset maybe by a little bit of dispositions. Can you tell us a little more about what you're doing on the acquisition front, what you're seeing, pricing, and then was there much in the way of dispositions or is most of that behind you at this point?.

Well, all the dispositions are definitely behind us. All the dispositions are behind us, and then all that MARC cover...

Yes, look, we do see a lot of opportunities where pricing is fair. So we expect to find opportunities. And as I mentioned before, if there are larger opportunities, we also see a big appetite from capital partners to join us in some way. to help provide additional financing. Look, we obviously are looking for ways to grow. We just want to make sure that it makes sense, as I said in the call, both on an operating basis and a financial basis. But it does seem like a good time in the market to find smart opportunities that fit in the women's and children's.

Okay, and then maybe just the last point of clarification. It sounded like there might be some unusual items. I think you mentioned executive transition compensation in the GNA. Is there an unusual item in there that we should back out to come up with a run rate for GNA going forward?.

Yes, so we said that G&A we expect for 2026 to be somewhere in the range of $230 to $240 million. It'll probably be on the higher end of that range. And like we mentioned in our remarks, most of the growth in G&A was related to those executive transition costs that we would say are one-time-ish.

okay but that's done for the second half so you won't you'll see it step down a bit in the second half is that the way to think about it.

Yes, there was an increase in the second quarter in particular. Okay. All right. Thanks so much.

Thank you, Jane. Your next question comes from the line of Jack Sledden from Jefferies.

Now live. Hi, good morning. This is Brett Grolkowski on for Jack Slevin. Thanks for taking the questions here. Maybe just to double click into the previous questions and ask your pricing in the back half of the year. What are the trends you're currently expecting? I know you kind of called out the RCM comps there,.

but do you see any other incremental opportunities? Thank you. No, so, I mean, our pricing drivers, they pretty much follow the four, you know, RCM collections, which we've covered, which we will be lapping to some extent. Like we said, we do anticipate acuity will continue to be a positive factor for us in pricing. Payer mix, we've already covered. And then we have seen, you know, contract revenue drop, come in through our pricing in past quarters. It wasn't as much of a contributor this quarter, but no other, nothing else to really call out there for the back half of the year.

Okay, great. And then maybe, could you give some extra color on where you're seeing wage inflation tracking? How can we expect this to progress into the rest of the year and then maybe into 2027?.

Yes, so on the salaries expense, you know, we've talked about that quite a bit for the past several quarters. We've been able to keep our salary increases in a pretty tight band, you know, somewhere in that three to three and a half percent area. And if you go back historically, you know, we were up in the in the mid single digits. So we don't see anything. really changing we've got really tight controls in that area great thank you.

Sure, Brett. There are no further questions. I'd like to turn the call back to Mark or Dan for close.

and remarks. Thank you very much, and thanks, everybody, for your continued support and interest in pediatrics. I hope you're enjoying your summer. Have a great day.

That concludes today's meeting. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Hello, and thank you for standing by. At this time, I would like to welcome everyone to the Q1 2026 Pediatrix Medical Group Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Mary Ann Moore, General Counsel. You may begin.

Thank you, operator, and good morning. Certain statements and information during this conference call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995 and -- these forward-looking statements are based on assumptions and assessments made by Pediatrix management in light of their experience and assessment of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Any forward-looking statements made during this call are made as of today, and Pediatrix undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the company's filings with the SEC, including the section entitled Risk Factors.

In today's remarks by management, we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's press release, our quarterly and annual reports and on our website at www.pediatrix.com.

With that, I will turn the call over to Mark Ordan, our Chief Executive Officer.

Thank you, Mary Ann, and good morning, everyone. Also with me today is Kasandra Rossi, our Chief Financial Officer. We were pleased with our strong first quarter results driven by top line growth with adjusted EBITDA coming in at $58 million. We saw strong pricing that outpaced a modest decline in same unit volumes across our service lines. although recent volume results don't show a trend. Our pyramid continues to be strong, and we are comfortable with our decision to not have a headwind estimate for the potential effect of the tax subsidy lapse. We know that major hospital systems have seen a decline in patient volume and revenue, and we may see that in the future. So now this area is strong for us, and we will continue to report as the year continues.

Given the uncertainty of whether we will experience this headwind and since it's still early in the year, we are reaffirming our full 2026 outlook of $280 million to $300 million in adjusted EBITDA. Kasandra will now provide some additional details, and I'll be back shortly.

Thanks, Mark, and good morning, everyone. Our consolidated revenue increase was driven by same unit growth of just under 3% and net non-same unit activity of about $6 million, including growth from recent acquisitions and organic growth, which was partially offset by decreases in revenue from our portfolio restructuring. Pricing growth of 4% was driven by solid RCM cash collections, increases in contract administrative fees, favorable payer mix and increased patient acuity in neonatology, while we saw volume declines across our service lines during the quarter, including NICU days that were down about 1%. Practice level SW&B expenses increased by $9 million year-over-year primarily reflecting same unit increases in clinical salary expense.

Net salary growth for the first quarter was in line with the ranges we have seen over the past 18 months that have averaged around 3%. Our G&A expense increased slightly year-over-year driven by a modest increase in salary and incentive compensation expense, partially offset by decreases in professional services and IT expenses. D&A expense increased slightly year-over-year, resulting from higher same unit amortization expense and D&A related to our recent acquisitions. Other nonoperating expense decreased year-over-year driven by a decrease in interest expense on modestly lower average borrowing at slightly lower rates.

Moving on to cash flow. As a reminder, we are a user of cash in the first quarter of each year as we pay out incentive compensation and other benefits, namely 401(k) matching contribution. We used $130 million in operating cash flow in the first quarter compared to $116 million in the prior year, with the differential related to decreases in cash flow from AP and accrued expenses primarily related to incentive compensation payments and decreases in cash flow from AR partially offset by higher earnings. We also deployed $21 million of capital during the quarter to buy 1 million shares of our stock leaving us with 82 million shares outstanding. We ended the quarter with cash of just over $200 million and net debt of just over $385 million. This reflects net leverage of just over 1.3x using the midpoint of our updated adjusted EBITDA outlook for 2026.

Our accounts receivable DSO at March 31 of 42.5 days were down slightly from December 31, but were down over 5 days year-over-year, driven by improved cash collections at our existing units. We are maintaining our previously issued outlook range for the full year of $280 million to $300 million in adjusted EBITDA. And while our first quarter results represented about 20% of that annual expected range, we do expect that adjusted EBITDA for the remaining 3 quarters will be fairly ratable.

I'll now turn the call back over to Mark.

Thank you, Kasandra. I pounded the drum over the last few quarters that investments in care quality are always wise. Hospital systems want a partner who will outperform and our patients, of course, deserve nothing less. In the first quarter, we announced the 2 extraordinary physician leaders from the top of academic medicine are joining Pediatrix. Dr. Jim Barry, Chief Clinical Quality and Transformation Officer; and Dr. Jochen Profit as Chief Quality Adviser. Jim is nationally recognized for his contributions in neonatal critical care, artificial intelligence and medicine, patient safety and health care leadership. He has co-founded 2 national organizations, 1 is a learning collaborative to neonatologists, data scientists and clinical informationist to study the application of artificial intelligence in neonatal critical care and pediatric medicine.

And the other is the clinical leaders group of the American Academy of Pediatrics, which is a training, education and collaboration resource for medical and quality directors of NICUs in the United States. Dr. Barry joins Pediatrix from the University of Colorado Health System, where he was Chair of newborn Governance as well as the Professor of Pediatrics Neonatology at the University of Colorado School of Medicine.

Obviously, Jim, who is an MD and an MBA brings a full package of quality, data, AI and business acumen. Jochen Profit brings nearly 2 decades of leadership in perinatal quality improvement as Chair and principal investigator of the California perinatal and maternal Quality Care collaboratives. He is a Professor of Pediatrics at Stanford Medicine. These individuals will respectively help lead and advise a team of extraordinary clinicians to continue to raise the bar on quality to analyzing clinical data, reducing care variation and improving patient outcomes using evidence-based strategies.

Beyond the benefit to our core that our quality focus brings, our team is actively engaged in many opportunities to expand what we do. We have more hospital partnerships than any other organization in our core fields which provides great opportunities in neonatology, maternal fetal medicine, OB hospitalists and pediatric intensive care. And in addition to our leading in-house presence, we see a major opportunity to expand our teleservices and obstetrics presence nationwide. We believe that an organization like ours will continue to outperform if we stay laser-focused on care quality that is databased. We see great opportunity to leverage our leading footprint both through our data and through tele and remote services. It is that insistence on quality that binds us to our patients and hospital partners, and we have the ability to use our strong balance sheet where there are opportunities to expand our core and emerging areas.

On our last call, I spoke about a new program to integrate share price-based awards as part of our compensation program. We successfully rolled this out in last year's fourth quarter and in Q1 of this year. Included in this was welcoming 45 clinician leaders to our inaugural class of Pediatrix partners. This group is already actively helping us expand on the work we are known for by combining the superb clinical acumen with the spirit of ownership alignment. We believe this is unique in our field, but so is Pediatrix, and we can already see the tangible positives of this new initiative. As a matter of fact, doctors Profit and Barry are joining us because of the really hard work that some of our doctors did to look for the really 2 top people in the field to join us. And I thank them for that.

I'll close by speaking about our General Counsel and CAO, Mary Ann Moore. In our filing this morning, we announced that Mary Ann will be leaving her role and retiring before the end of the year. In 20 years with Pediatrix, Mary Ann has and continues to play a very important role in many areas of our operations from legal administrative to overall supervision and guidance. Mary Ann is a trusted colleague and adviser to the whole company and certainly to me and our Board of Directors. We will promptly begin a new search for a new General Counsel.

Operator, let's open the call for questions.

[Operator Instructions] And our first question comes from the line of Ryan Daniels with William Blair.

This is actually Matthew Mardula on for Ryan. So when I'm looking at pricing above 4%, are there any potential headwinds or impacts that we should be aware of? Or maybe that you have internally that could reduce the trajectory of this growth going forward? And I know you're a little bit touched up on the tax subsidies, but any other details there? And then are you still expecting pricing to be flat for the rest of the year, given the Q1 results? And if not, just how are you thinking about pricing for the rest of the year?

Sure. So on the pricing components, we've talked about really the same 4 factors that have driven pricing over the past several quarters. The first 1 of those is our RCM cash collections. And we mentioned in 2025 that we had almost kind of a hockey stick effect for those RCM cash collection impacts coming through pricing. So we would expect the first half of the year to still be strong and then I think it will start to lap as we move into the second half. The other 3 components that have driven positive pricing are contract revenue, those -- that has continued to be strong. We don't know that, that will continue at this pace. But right now, we know hospitals are facing pressures in that area, but it continues to be strong for us.

The third item that we always talk about is payer mix, and I know you touched on the tax subsidies, that's an unknown for us. But that has continued to be an area of strength for us that has flowed through pricing. And the final one, of course, is acuity we've seen really strong acuity primarily in neonatology. And these 4 factors have contributed to the last several quarters. Of course, coming in strong at over 4%. We would expect that to tick down a bit as we move through the year, but I don't know of any other headwinds.

Great. Perfect. And I do want to talk about how the last 2 kind of quarters we've seen declining volume trends. And I know last quarter it was more because of the strong comp, but any thoughts the continued decrease in volume in NICU days. And I know it's difficult to point a reason what is causing this. But just how are you thinking about volume going forward and maybe the potential improvements of it?

Well, as I said in my comments, while we saw that in those 2 quarters, in recent results, we haven't seen to continue with that trend. So we don't have any different forecast there.

And our next question comes from the line of Jack Slevin with Jefferies.

I appreciate the color so far. I just want to maybe double click on a little bit on the pricing side to understand 2 things. So the rev cycle piece is very clear. I guess, maybe just taking it from a visibility perspective, and I appreciate all the comments around HICS or the subsidies going away. But is there anything you can share on like what you're seeing on the ground right now as it relates to that continued strength in payer mix or maybe things you're hearing out of your MFM practices that might tell you a little bit about how things might be shifting around? We started to obviously get some data points from payers and from hospitals on what they've seen from volumes or enrollments in HICS. But just curious if there's anything additional you can share on that front.

And then on the admin fee side, just if you can share like I understand that can move around a little, but the visibility to that for the rest of the year would be really helpful.

Well, on the first part, we know the answer is we don't see any signs of weakness, and we have looked carefully by geography, by type of line service -- and we don't. We are not -- I wouldn't say we're surprised, we're pleased. We've speculated that perhaps people are making a cost benefit calculation when it comes to pregnancy that keeps them in the exchanges. We don't really know, but we haven't seen any negative. And we expected, as I said on the last call that there would be some negative around it. And as I said in my comments earlier, we know that hospital systems broadly have experienced it. But in no line of our business, have we seen any weakness or any trend that would suggest any difference. It could be that there'll be a delayed effect or it could be that we can get through this as we have been.

Okay. Got it. Very helpful. I appreciate that. And then maybe...

Sorry, Jack, on the contract revenue, I think you had a question there.

Yes. Yes, absolutely. I appreciate that, Kasandra.

Sure. So on that line, one of the things we've talked about is there are sometimes salary increases in SW&B that we will only effect if we do get support from a hospital. So there is some net effect there. So even though you're seeing a bit of growth on that top line, some of that is really going to pay for some of the salary increases on the SW&B line. But we do anticipate, again, continuing to have those conversations. They are getting tougher. So we hope that it continues to stay strong. It has been anywhere from 10% to 20% of our pricing increase for the last few quarters. And so we expect that as we move through the year. But if anything changes, of course, we'll let you know.

But don't misunderstand, we're not -- it may sound like we're a one-trick pony talking about quality. But the whole thesis of Pediatrix business is to be a partner, a irreplaceable partner to our hospital partners. So if we are providing superior quality and really being the leader in our field, we think it justifies the kind of payments that we get. So as Kasandra is right that the environment for hospitals is tougher than it has been, which just makes us make sure that we're offering a service that hospitals provide -- the hospitals find very valuable and irreplaceable.

Got it. Okay. Appreciate that. And maybe I'll sneak 2 into 1 here. Just to wrap it on my end. The couple of deals you've done, obviously, not massive in terms of dollar amounts, but it's sizable enough that it could have a little bit of impact. Anything you can share in terms of what you're seeing on that front?

And then just Kasandra as it relates to the second quarter, are there any onetimers or things we should think about as we're looking at that for modeling purposes?

Well, we don't -- because they're not material. We don't disclose the results. I could say -- I will say that the recent acquisitions we've made have done better than our initial projections. So we're very happy about that. And we -- as I said in my call, we are actively working on opportunities that we think could bear fruit and be great additions to Pediatrix.

And no onetime to call out for the quarter, Jack.

[Operator Instructions] And your next question comes from the line of Pito Chickering with Deutsche Bank.

One more pricing question here, and I apologize. It's just so much stronger than expectations and obviously had a wonderful impact on EBITDA here. Can you quantify how much of the pricing in the first quarter came from the cash collections just as you think about it sort of fading or coming out in the back half of the year?

About 25%.

Okay. Okay. Fair enough. And then like you said, on the admin fees, again, that's about 10% to 20% as well, I assume that, that was the same for this quarter?

Yes, that was around 20% on the higher end for the quarter.

Okay. And then what percent of the book has admin fees at this point? And kind of how has that changed year-over-year? And once you have an admin fee, is that a onetime and then that stops increasing? Or does that increase at inflation levels once it's implemented?

It depends on the contract. I mean they vary. We have obviously a couple of thousand of those contracts.

Okay. I mean like half of those are increasing at inflation and half of them? Is there any ballpark, in generally where this goes, again, as we think about just out of your modeling?

No. I know where you're going with that, but as Kasandra said, we have thousands of contracts and they're all very different. And we don't -- there's no -- if there was a trend in any way, we would call it out.

Okay. Fair enough. And then last question, and maybe I missed this, but I think actually the lead question asked if you're going to maintain pricing being flat for the year. Are you guys still maintaining that? Just looking at first quarter was 9% stacked comp. And if that -- if this is stable, this could lead to pricing of a couple of percent this year versus guidance. So I guess are you still maintaining flat pricing guidance for the year?

Yes. I think we are. I mean, again, we do expect that, that RCM cash collections, which has been really strong for us will tail off as we move through the year. And so we are maintaining our flat outlook. Again, it's early. And if that does change as we move into the next quarter, we'll update you on that. But right now, we are maintaining flat.

Great.

After last quarter, we -- when we forecast the year in our last quarter call, people asked, why didn't you put in some kind of hedge. And I'd say everything indicates that things continue to be strong. So it's hard to forecast something based on a fear or a possibility, if there's no data behind it. So that's why we are.

Fair enough. It's showing through. So I guess that's it for me. Thanks for the questions, and a nice job in the quarter.

There's no further question at this time. I will now turn the call back over to Mark Ordan for any closing remarks. Mark.

Thank you all very much for your support, and we look forward to keeping you updated as the year unfolds. Have a great day.

That concludes today's call. You may now disconnect.

Hello, and thank you for standing by. At this time, I would like to welcome everyone to the Q4 2025 Pediatrix Medical Group, Inc. Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mary Ann Moore, Chief Administrative Officer and General Counsel. You may begin.

Thank you, operator, and good morning. Certain statements and information during this call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions and assessments made by Pediatrix management in light of their experience and assessment of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Any forward-looking statements made during this call are made as of today, and Pediatrix undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise.

Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the company's filings with the SEC, including the sections entitled Risk Factors. In today's remarks by management, we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly and annual report and on our website at www.pediatrix.com.

With that, I will turn the call over to Mark Ordan, our Chief Executive Officer.

Thanks, Mary Ann and good morning, everyone. Also with me today is Kasandra Rossi, our Chief Financial Officer. Our fourth quarter results were quite strong and capped an equally strong 2025. Our adjusted EBITDA of $66 million was in line with our upwardly adjusted guidance. Throughout 2025, including the fourth quarter, strong volume, acuity and payer mix, combined with strong financial control, gave rise to these results.

During this time, we welcomed new leaders in key areas of the company, all of whom are dedicated in some way to focusing on care quality, which, of course, is the very essence of Pediatrix.

With these investments and record practice bonuses, our full year adjusted EBITDA was a very strong $276 million. We expect our results in 2026 to be in the range of $280 million to $300 million, which at its midpoint, of course, is 5% above 2025. This projection assumes steady metrics, including volume, acuity and payer mix and recent though early results support this outlook.

Despite these steady metrics on our top line, we have several operational initiatives, which we believe will flow favorably to our adjusted EBITDA. We have said that we assumed that there was some payer mix benefit in 2025 from ACA subsidies. If those continue to lapse with no effective remedy, we would expect some effect. And as we have said before, this is very difficult to quantify such an effect because there are many possible outcomes.

Kasandra will now provide some additional details on the quarter and preliminary outlook for 2026.

Thanks, Mark, and good morning, everyone. Our consolidated revenue decrease was driven by net non-same-unit activity of $26 million, including a decrease in revenue from our portfolio restructuring, partially offset by an increase in revenue from acquisition and organic growth. This decrease was partially offset by same-unit growth of 4%, with same-unit pricing up just under 7% and overall patient service volumes down just under 3%. Pricing was driven by solid RCM cash collections, favorable payer mix, increased patient acuity in neonatology and an increase in contract administrative fees.

And while we saw volume declines across all our service lines during the quarter, including NICU days down about 2%, we were up against a tough comp. Practice-level SW&B expenses declined slightly year-over-year, reflecting our portfolio restructuring activity, partially offset by same-unit increases. On a same-unit basis, we saw increases in variable practice incentive compensation and salary and benefits. Salary growth for the fourth quarter was modestly below the ranges that we have seen for the prior 6 quarters, those averaged around 3%.

Our G&A expense increased year-over-year, driven by a modest increase in salary expense as well as some travel expenses. D&A expense decreased year-over-year, resulting from lower overall CapEx and an increase in fully depreciated assets. Other non-operating expense decreased year-over-year, driven by higher interest income on cash balances and a decrease in interest expense on modestly lower average borrowings at slightly lower rates.

Moving on to cash flow. We generated $115 million in operating cash flow in the fourth quarter compared to $135 million in the prior year, primarily related to decreases in cash flow from AP and accrued and other liabilities. We also deployed $64 million of capital during the quarter to buy 2.9 million shares of our stock, leaving us with just about 83 million shares outstanding. We ended the quarter with cash of $375 million and net debt of just over $220 million. This reflects net leverage of just under 1x.

Our AR DSO at December 31 of 42.8 days were down slightly from September 30, but were down almost 5 days year-over-year, driven by improved cash collections at our existing units. Moving on to our preliminary 2026 outlook that Mark noted earlier. This outlook contemplates full-year revenue of approximately $1.9 billion, in line with 2025. It also contemplates full-year G&A expense in the range of $230 million to $240 million compared to our 2025 G&A of $241 million. Achieving the middle of the range would put it down about 20 basis points as a percent of revenue.

I'll also note the normal seasonality of our quarterly results. With our expectations of full year adjusted EBITDA, we anticipate that our first quarter 2026 adjusted EBITDA will represent about 17% to 19% of that annual expected range. Historically, the first quarter adjusted EBITDA has ranged from 17% to 21% of the full year. We have also not factored any contribution to our results from M&A activity in 2026 and would plan to update you on the timing and magnitude of any potential additions.

I'll now turn the call back over to Mark.

Thanks, Kasandra. Our very strong balance sheet and cash flow enable us to invest in quality and clinical support and to attract and retain the finest clinicians in each of our areas of concentration. In the fourth quarter, we introduced 2 new programs to further align our physicians at Pediatrix. The first program provides a portion of the physician's cash bonus and a stock price tracking element that is paid out over multiple years. This program is a first step for us toward creating greater alignment across the entire organization, and we hope to expand it in the future.

More than 500 physicians are participating in this program in its first year, and we expect this to create greater awareness of and responsibility for our collaborative role in delivering best-in-class care. We are also excited to announce Pediatrix Partners. This is a group of 46 physicians from across our specialties who have received a stock price tracking grant to recognize their leadership role along with future efforts to help guide our decisions in quality, hospital relations, recruiting and retention and growth. We anticipate annually adding physicians to this inaugural class.

Looking into 2026 and beyond, we see many areas of potential opportunity. With our great physical footprint, we have the ability to leverage advanced telemedicine. This can provide vital assistance and care to people who are currently out of reach and can be a bridge to our national in-person care presence. As we speak, we are looking at additional growth opportunities in our physical core, both in NICUs and maternal-fetal medicine along with OBH. On OBH, we have a very strong presence in OB hospital medicine, and we see very strong demand for us to really increase our presence here.

Remember, our long-established hospital relations, thanks to our NICU, PICU and MFM practices provide an obvious entrée here. And given our existing physical presence and dedicated overhead already, we believe we could provide a cost advantage to our hospital partners. We love the space we are in, and we enjoy our leadership position. We're also very aware of opportunities outside of our pediatrics and obstetrics space. We assure you that we will guard our balance sheet strength carefully and only consider other opportunities that do not dilute our great strength in pediatrics and obstetrics. And in our core areas in pediatrics and obstetrics, we see many viable growth avenues. We are uniquely positioned, have the financial strength and discipline to accomplish this, and we are determined to do all we can to achieve smart growth.

Operator, I'd like to now turn the call over to questions.

[Operator Instructions] Your first question comes from the line of Ryan Daniels with William Blair.

This is Matthew Mardula on for Ryan Daniels. And I know in your prepared remarks, you said full-year revenue of $1.9 billion for 2026. Could you kind of give us the drivers of that revenue growth? Any color into the expectations for facility volume growth or pricing expectations for the 2026 year would be great to hear about.

Matthew, so really, this overall assumes that we are going to be flat both in volume and in pricing. While there will be some kind of ups and downs within the components that are part of pricing, overall, we do expect those to be pretty flat.

And then with the negative patient volume year-over-year this quarter, is there anything you could call out regarding kind of what happened there? And I know you previously mentioned it's difficult to call out one exact factor or one reason why. But kind of with the strong volume we have seen in the past couple of quarters, is there any color we can hear about with what happened this quarter?

No, it really -- that's about the comp. And so we tried to mention that the volume being down this quarter was really -- it's because that the comp was fairly tough from the fourth quarter of last year.

Your next question comes from the line of Jack Slevin with Jefferies.

I want to drill in a little bit on probably the quarter and the guidance as well. Maybe slightly different start on the quarter. The variable comp expense, I think we saw this in 2021, where you had a really strong year and then variable comp sort of spiked higher. I know you sort of gave a little bit of a hint at it with the wide guidance range heading into the quarter. Is there any way to quantify or talk about sort of what that was in the quarter and how that drove earnings? And then the second piece, Mark, hearing your commentary on some of the changes to some of the physician or stock-based comp structures, should we think about that as something that might have a smoothing effect for the same sort of dynamic in future years?

Well, so two things. One is there were a variety of factors that led to our fourth quarter operations and going into 2026. So there's really no better parsing that I could provide. In terms of alignment, I would say that's really the key driver of this. It's not to achieve a smoothing effect. It's really just to make sure that over time, our doctors who have an enormous role in our hospital relations, quality recruiting, and retention really feel a strong tie to the company and that we have a mutual bond to each other. So that's the driver of this.

I appreciate that. And then just thinking about the guidance, hearing your commentary, and it's been consistent over a decent period about how it's hard to quantify for you all to parse out exchange impact or subsidy impact on your overall volumes. But I guess trying to think about the guidance, like is there any way to understand what could possibly be embedded in the guidance for that factor. And then hearing a little bit of your commentary, it sounds like you might have said early in the year, you have indications that sort of things are consistent. Should I take that as like payer mix, other sort of early indicators on this specific issue would tell you that you're not really seeing a change yet...

That's exactly right. But we're not seeing a change yet, but the government hasn't yet figured out what the changes are in enrollment. We don't know yet whether people who said they're going to enroll are going to pay. We don't know yet what the government might do in terms of a stop gap. And then the question is what do people do? Are people going on to commercial insurance? There are so many variables that make this up. So we are -- obviously, our antenna is up and I probably look twice a day and see what the government is up to. So it's just very hard to quantify. But in our guidance, we assume that we have the same metrics that we had during 2025.

And maybe just one follow-up, Mark or Kasandra on that. Just like to think about pricing really strong. There really wasn't that much payer mix movement in '25. So if I think about that flat-pricing assumption, is it fair to say that like in the way you've built that some of the trends on hospital contract admin fees or core pricing or acuity might be balancing against some sort of implicit downside protection for an issue on exchanges. Is that a fair way to think about how you've structured that pricing assumption?

No. So it's not really tied to anything with the exchanges. But we did actually see some incremental favorable payer mix in '25, although, of course, the start of the shift was in '24. So we did see that. So really, we're just saying that we expect everything to remain pretty steady in 2026, really an average of what we saw in 2025. So that's where the guidance is based on.

Okay...

As you know, there are many components of it from volume, acuity, basic payer mix. So we're assuming all of the factors that were in -- we have no reason to think that any of those will change for 2026. So that's why our forecast is as it is.

[Operator Instructions] Your next question comes from the line of A.J. Rice with UBS.

So your EBITDA at the midpoint is supposed to grow about $14 million year-to-year in '26. I mean it looks like you've got some assumptions about G&A cost reduction in there, maybe other cost reduction. Can you just flesh out a little bit more what is embedded in guidance with respect to the cost or expense side of the equation?

It's really just that. We did call out, I think Kasandra called out likely expense reduction at a small scale. And that's really it. We're overall forecasting pretty much the same kind of results that we had in '25 carrying into '26. And just because of normal operations changes quarter-to-quarter, that's where we fall out. As I said in my comments, there are many things that we're working on that could affect us going forward, but nothing that we could call out specifically at this time.

Yes. I was just saying unusually, people would assume you get some kind of inflationary update in G&A, and you're actually forecasting about a $6 million decline year-to-year, which I don't know, I thought there might be something specific behind that. On the comments about capital deployment, you said no M&A is embedded in the guidance. Obviously, you've got -- you're doing share repurchase.

Can you just give us a little flavor for how much share repurchase is anticipated in the current guidance? And then on -- if you did M&A, I know you said you got the opportunity to grow in NICU. You got the opportunity with maternal-fetal medicine. Is it that type of thing? Or those are just potentially bid on contracts to recruit individual doctors. Is there any place where you're looking for M&A that might be a little bigger and chunkier that you would potentially consider?

Well, on the first part of your question, we assume in our guidance a small -- a much smaller amount of stock buyback depending on -- we'll be opportunistic about that. But probably, we don't anticipate at the same scale as we did in 2025. In terms of growth opportunities, there are really many. They range from physical practices to telemedicine within our space. I mentioned OB hospitalist, which is a very important program nationwide in many hospitals, and we have a real strength in that.

And as I said earlier, because of our NICU relationships, maternal-fetal medicine relationships, PICU relationships across the nation, we're uniquely positioned to do that and do it in a cost-efficient way. And then A.J., yes, there are lots of companies out there, many that are private equity owned that are looking for a new home. And I think there are a lot of people out there that are aware of our balance sheet.

And my team and I have certainly done deals like that over time. So we get a lot of inbound interest. We want to balance that inbound interest with the strength of our core and make sure that we don't do anything that can take away from our core. But this is a time when it's good to have strong cash flow, strong balance sheet, great relationship with hospitals and be opportunistic if there's something out there that we can do.

Next question comes from the line of Ann Hynes with Mizuho.

Can we just talk about pricing? I mean it seemed very strong in the quarter, up around over 9%, and this is versus the 7% in Q3. And I know you talked about acuity and other drivers, but it still seems very high. Can you tell us what's happening with the acuity shift in payer mix? Just more detail on just that strength over the past couple of quarters and how sustainable you think it is, that would be great.

Yes. So for the quarter, it was actually up just under 7%. And it's really the same things we've seen for the past couple of quarters. We really have strong RCM collections coming through, which was related to all the stabilization efforts that we undertook in '25 with our revenue cycle management transition. And then we did have some favorable impact from payer mix that we've talked a little bit about. Acuity was also strong again. And we did have contract administrative fees that were up a bit. So it's really the same things we've seen. And then what we anticipate is that is going to stay -- kind of get steady as we move into '26. And of course, in '26, the comps are going to be tougher.

On acuity, with advances, our hospitals are known because of our NICUs to be able to handle patients that in the past, you could never have handled. So I think there is certainly something that favors us because we are the leader in Level 3 and Level 4 NICUs around the country. And as Kasandra said, there's just been a real strengthening in that part of the business.

There are no further questions at this time. I will turn the call back over to Mark Ordan, CEO, for closing remarks.

Great. Thank you all very much, and have a great day.

That concludes today's call. Thank you all for joining, and you may now disconnect.

Ladies and gentlemen, thank you for standing by. Hello. My name is Dustin, and I will be your conference operator today. At this time, I would like to welcome you to Third quarter 2025 Pediatrix Medical Group, Inc. Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to our Chief Administrative Officer, Mary Ann Moore. Please go ahead.

Thank you, operator, and good morning. Certain statements and information during this call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions and assessments made by pediatrics management in light of their experience and assessment of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

Any forward-looking statements made during this call are made as of today, and Pediatrix undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Important factors that could cause actual results developments and business decisions to differ materially from forward-looking statements are described in the company's filings with the SEC, including the sections entitled Risk Factors.

In today's remarks by management, we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly and annual reports and on our website at www.pediatrix.com.

With that, I will turn the call over to Mark Ordan, our Chief Executive Officer.

Thank you, Mary Ann, and good morning, everyone. Also with me today is Kasandra Rossi, our Chief Financial Officer, who is recovering from the flu. We didn't forecast that.

Our third quarter results, including adjusted EBITDA of $87 million exceeded our expectations, a confluence of positive outcomes in pricing, collections and expense controls together led to another very strong quarter. 2025 year-to-date results have been strong, and we see no reason to expect a shift from normal seasonality in the fourth quarter. Because of practice bonus variability, our outlook for the full year's adjusted EBITDA is a wider-than-usual range at $270 million to $290 million.

Note that we also disclosed in our Q filing that we bought back 1.2 million shares in the quarter. To date, that number is now 1.7 million shares.

After Kasandra, I will speak about the big picture about where Pediatrix is today and where we are heading.

Thanks, Mark, and good morning, everyone. This is definitely not my real voice, so please forgive me.

Our consolidated revenue decrease was driven by our portfolio restructuring activity of just under $54 million. This decrease was partially offset by strong same-unit growth of 8% and with same unit pricing up about 7.5% and patient service volumes up just under 40 basis points. Pricing was driven by solid RCM cash collections, increased patient acuity and neonatology, an increase in contract administrative fees and favorable payer mix. While volumes reflected modest growth in neonatology, where NICU days were up by 2%.

Practice-level SW&B expenses declined year-over-year, also reflecting our portfolio restructuring activity.

On a same-unit basis, we saw increases in salary expense, incentive compensation based on practice results and benefits expense. Salary growth for the third quarter was modestly below the ranges that we have seen for the prior 5 quarters that averaged 3% to 3.5%.

Our G&A expense increased slightly year-over-year, driven by an increase in incentive compensation expense based on overall company financial results.

Other nonoperating income included a net gain on investments in divested businesses of $21 million, with the remaining net increase driven by higher interest income on cash balances and a decrease in interest expense on modestly lower average borrowings at slightly lower rates.

Moving to cash flow. We generated $138 million in operating cash flow in the third quarter compared to $96 million in the prior year, driven by higher earnings and increases in cash flow from AR. We also used $21 million of cash during the quarter for share repurchases and used $19 million to acquire several neonatology, MFM and OB hospitalist practices in a single transaction.

We ended the quarter with cash of $340 million and net debt of just over $260 million. This reflects net leverage of just under 1x using the midpoint of our updated adjusted EBITDA outlook range for 2025. Our AR DSO at September 30 of 43.1 days were down over 3 days from June 30, but were down almost 9 days year-over-year, driven by improved cash collections at our existing units.

Thanks, Kasandra. I think that when we release stronger-than-expected results, people go straight to the components of those results and miss the core of who Pediatrix really is. Yes, we employ clinicians and hospitals in an ambulatory setting. And yes, there were strong components of our results that are out of our control, but that fact is hardly unique to us.

Let me tell you the combination of some factors that do make us quite unique. At our recent medical directors meeting, we assembled over 250 practice medical directors, OB hospitalists, pediatric intensive care physicians, maternal fetal medicine physicians and the neonatologist. Nobody else could assemble a group of clinicians -- of clinician leaders like we can. This is the nation's largest assembly of practices in these most critical areas. Presenting to the group were our research clinicians who, in addition to their practice work produce more research on neonatology than any other organization, including academic medical sectors.

Let me give you some details. Our market-leading position. We have massive clinical scale. Our research activity is supported by our substantial neonatology clinical footprint of over 1,300 physicians and 1,170 advanced practice providers, serving patients in 322 locations across 33 states. We maintain the industry's most detailed comprehensive clinical data warehouse with 37 million patient days and 2 million NICU admissions. We drive industry standards.

Our research productivity is evidenced by 1,395 peer-reviewed publications authored by our clinicians and researchers, including 62 publications in 2024. Our active research spans 39 sites conducting 72 clinical research studies. The portfolio is diversified across funding sources, including 16 federally funded studies, 19 industry-sponsored pharmaceutical studies and 7 foundation and international collaborations.

As of October 31, we maintained 130 active research applications. We strongly believe that this commitment to research drives higher quality and safety, innovative and branding. Our results are also driven by our commitment to technology, and we view ourselves as the innovative technology leader in neonatology. As many of you know, we have a proprietary Pediatrix developed system called BabySteps to support clinicians as they care from for mothers and the frailest of babies.

Let me elaborate. It was designed and curated by our physicians and developed by our technology team to address the needs of the highest-risk NICU patients. It specifically addresses the following: supports clinical decision-making, increases efficiency and accuracy and documentation, provides risk mitigation, including med mal and increases clinician well-being via reduced documentation and cognitive burden. It is constantly updated and evolving based on our quality and research team input.

Let me give you a specific example, hypoxic ischemic encephalopathy. HIE is a condition and it may occur when a newborn baby's brain does not receive enough oxygen and blood flow with a high mortality rate in severe cases. BabySteps programming prompts timely specific intervention to assist our physicians in diagnosis and care, improving clinical outcomes. After surveying alternatives, we believe BabySteps is a clear differentiator for us and has no peer in the industry, and we are confident that our hospital partners view that as one of our many strengths.

Going forward, we plan to increase our prioritization of enhanced technological support. Our clinicians don't just work in hospitals. They and we as an organization, are true partners to these hospitals. We don't just put up a sign to attract this very rare group of clinicians for our hospital partners. We have the largest and I believe, the strongest recruiting team in these areas, ensuring we welcome the finest clinicians in our critical fields.

Our results include an increase in acuity. Why? Because we lead more Level 3 and Level 4 NICUs than anyone else and with the support of our research and quality teams and many others of pediatrics, we provide more support in these fields than anybody else possibly could.

This all results in miracles. I speak with and spend a great deal of time with our clinicians, and it is not at all uncommon for me to hear about 22-week-old babies being discharged home. Stop and think about what that means to have an organization that is at the forefront of such amazing care to the frailest patients anywhere and likely does this more than anyone else.

Our strong results to a great degree results from our focus on 4 areas of concentration. And while we restructured our portfolio to further that focus, we continue to build strength around the country in pediatric surgery, neurology, cardiac intensive care and other highly specialized areas.

All of what I've described is to further our reputation as a leader in this immensely critical and vital field so that hospital systems know they could not internally do what we can do with that partner.

I spoke in May about a portfolio of NICU, MFM and OBH operations we were planning to add. Very happy to report that we did this on schedule and quite successfully welcoming great clinicians and providing a significant hospital partner with the support they needed. We expect to see more of this going forward.

And even on our personal note, many of my administrator colleagues are clinicians or former clinicians and many of us are not, but I will assure you that what unites us is an unwavering dedication to the support of our clinicians so that by extension, we live up to our simple charge, take care of the patients. We have a lot happening here, and I'm grateful to and proud of the work that my colleagues are doing.

I will end by returning to our results and outlook. While we have had a combination of positive factors to propel our strong results, we don't view it as a being at a peak. While we are certainly in the midst of significant health care headwinds, we all know that, we still see many opportunities to strengthen our operations and our results, and we are working hard to enable a very strong future.

Operator, let's now open the call for questions.

Our first question comes from the line of A.J. Rice from UBS.

First, obviously, you're sitting on a large cash balance. Your leverage is about as low as we've seen it. Any updated thoughts on capital deployment? I know you've been fairly cautious up to this point. Any thoughts about being more aggressive on the share repurchase? Or is there other development or acquisition opportunities that are interesting?

Well, a few things. One, as we said, A.J. we have fairly aggressively been buying back shares, and we're very pleased that, that's come at the same time as the results that we've been posting.

We are looking at many different opportunities, both inside and possibly outside the company, nothing to detail at this moment. We announced at our last call that we had welcomed a colleague, a long-time colleague of mine, Greg Neeb, who is working with me at looking at ways that we can really expand what we do, both internally and possibly externally.

As you know and anybody who's been listening to these calls, we do favor low debt, especially at a time when we have the kind of headwinds that we have. So we'll continue to be cautious, and we look forward to reporting other opportunities as we move forward.

Okay. Maybe one other follow-up. Obviously, the restructuring of the portfolio has been a great success in terms of improving the operating performance of the company. I wonder -- we haven't asked you a while. Has it changed the dynamics of the company in the marketplace as you talk to new practices about potentially joining with you? Does it give them pause that you did the restructuring? Or has it changed the competitive landscape in any ways?

No, I think actually, on the contrary, I think that both new practices, people -- practices that we've welcomed in, as I mentioned before, and our existing practices see, if anything, just an obvious increase in concentration of our efforts because we have, in that sense, a smaller footprint. So our team is so focused on working with our hospital partners and working with our clinicians that I think it creates a much better environment than we had before.

Also think about our recruiting efforts and our recruiting team, we're able to really focus on our areas of need, and that makes them also much more effective. I think in every way, while we obviously would -- it's always sad to say goodbye to terrific clinicians, we felt that this concentration makes us stronger in just about every regard. And as I mentioned, we still have very important areas in some of these subspecialties. And if a hospital system needs that kind of support, we'll work with them to figure out how to provide it. Our recruiting team can help us, can also help our hospital system partners.

[Operator Instructions] Our next question comes from the line of Pito Chickering from Deutsche Bank.

You've got Kieran Ryan on for Pito this morning. So I wanted to start and see if you can maybe break out the different buckets of the strong pricing in the quarter. It sounds like it's a lot of the same stuff you saw in 2Q around collections acuity, admin fees and some payer mix. So any color you can provide on how that kind of split out in 3Q and your thoughts on the durability and how those factors look as we go into next year?

Sure. This is Kasandra. So on the price -- on the strong pricing, over 1/3 of that was from strong RCM collections activity. And we did see some of the factors we saw in the prior quarters on acuity. Acuity made up about 20% of that pricing increase. And we have also continued to see some contract administrative fees from our hospitals increasing by about 10%. Payer mix, which had really been stable really last quarter from the increases or the favorability we saw in 2024. We actually did see a bit more favorability on that in the quarter of about 10%. So that really is the bulk of what made up a really strong pricing quarter.

And as you know, many of these things are variable. So we would anticipate, like we had mentioned, payer mix continuing to be a bit stable. I think acuity has been strong in the last few quarters, but that, again, is also variable. And we've made it very clear that on the contract admin fees, it's tough to get some increases. We have had some success, but we don't see that becoming any easier with some of the pressures that hospitals are facing.

And for the collections, I think I see 2025 as a reset year. Obviously, we've been talking a lot about our transition, and that has gone extremely well. And I think we are at a place where we have hit our stride there.

That's helpful. And then I guess just going back to the guidance. I appreciate the commentary on the spread and the seasonality. I was wondering if you could kind of maybe just parse that out a little bit -- a little bit more on the seasonality as well as any other factors that you'd note between the high end and the low end, particularly maybe on volumes because I mean you may have a pretty big office space comp this quarter.

There's nothing on volumes. We're working on several things in the fourth quarter as the company normally does towards the end of the year, and that could create some variability there. We'll report back later if -- of course, if anything materializes from that. But that's the reason to have a slightly wider than normal, nothing else.

And our next question comes from the line of Jack Slevin from Jefferies.

Congrats on the really awesome quarter. Mark, I just want to dig in a little bit on some of your comments about the longer term and sort of where you can drive things. Just wondering if you can unpack those a little bit?

And then maybe more specifically, as we think about a key topic for some investors has been these enhanced subsidies on the exchange plans and what that might mean for your business, not asking necessarily for you to comment on what seems to still be a period of uncertainty in Washington, but more just wanted to hear if you've had any conversations maybe on the OB side or things that you're hearing in MFN that might sort of give a lead on sort of where expecting mothers could be leading, even if they're facing premium step-ups next year, if it's something that they might be looking to sort of retain coverage on?

Well, look, we've commented on it last time and I continue -- we certainly hope that the exchange credits continue. They seem to be beneficial. We're not able to pinpoint the effect that, that's had on us, but we think it's -- obviously, it's a positive for us. So again, we're hopeful.

We haven't seen any change. I think the world is waiting to see what happens there. In terms of our outlook and our future, we -- I know it sounds boring. I think I used this word on our last call. We do believe that by being laser-focused on the needs of our hospital systems, that provides additional opportunities.

I personally am involved with many discussions where people haven't had the results internally that they'd like to have and are looking for a partner that can specialize in these important areas. And I think at a time like this, our financial strength will inevitably provide additional opportunities. We are able to invest with hospital partners and do things that other people can't do. So that's where we see strong potential going forward.

And at time like this, with the headwinds that we've seen and other companies were not financed the way we have been, there could be opportunities there as well. So we think we're in a good position that way.

Got it. Okay. That's really helpful. And then maybe one just piggybacking on A.J.'s question around the capital allocation. Would just love to hear sort of if you can go back over some of the details on the deal that you completed in the quarter and sort of how that's going to feather its way into the business and into the numbers?

And then secondly, just thinking about what the environment looks like out there as far as deals at the hospitals, as we expect hospitals to have a couple of years of headwinds here. Are there any acceleration of conversations for some of those practices to sort of pull their way out of hospitals or for hospitals to look to monetize?

Well, no, there's no, I haven't -- we haven't seen a change in tone with hospitals trying to monetize that. We do see -- we're very fortunately partners with hospital systems that are actually strong in this environment and are growing in this environment, and we look for ways to grow with them.

As far as the acquisition that we made, it wasn't material, so we didn't break out the details of it. We tend not to. We do -- we have acquisitions that take place over the years. The reason we highlighted it was that it was a hospital system that easily could have taken these units in-house and felt that we could do a better job. But -- and we think that, that's our calling part.

So we are in the midst of and intend to continue to push for that to be very forward thinking with our hospital partners and say, hey, if you're growing, you need help, why would you possibly not work with us. And as I mentioned my pride and appreciation for my team, when they do, they realize that there's a group of people, a big group of people that are pulling 24/7 for them.

And when I talk about our quality initiatives and our research initiatives, we bring those positives to our hospital system partners. They couldn't do this internally. So in an area when you think about the frailest patients of all the things that we do reduce risk. And if you're a hospital system, why wouldn't you want to be partners with a group that can reduce risk within your 4 walls. So we think that's a very compelling point. And by the way, it seems like a lot of them do, too.

There are no further questions. I will now pass the call back over to our CEO, Mark Ordan, for closing remarks.

Great. Well, thank you very much, everybody, for your support, and we look forward to updating you on our future progress. Have a great day.

The meeting has now concluded. Thank you all for joining. You may now disconnect.