Ladies and gentlemen, thank you for standing by and welcome to the MEDNAX, Inc. Third Quarter 2021 Earnings Conference. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given to you at that time.

[Operator Instructions] And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to Mr. Charles Lynch, Senior Vice President, Finance and Strategy. Please go ahead..

Thanks Cynthia. Good morning, everyone. I'll quickly read our forward-looking statements and then we'll get into the call. 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 MEDNAX's 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 MEDNAX 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 most recent annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K, including in 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 report on Form 10-Q, and our annual report on Form 10-K, and on our website at www.mednax.com.

With that, I'll turn the call over to our CEO, Mark Ordan..

Thanks Charlie and good morning everyone. Also joining me on today's call are Marc Richards, our CFO; Dr. Mack Hinson, neonatologists and Head of our Pediatrics and Obstetrix Medical Groups; and Dr. Jim Swift, Pediatric -- and our Chief Development Officer. You'll see our strong third quarter results in this morning's filing.

Total births at the hospitals where we provide NICU services were up 2.8% on a same-unit basis, and our NICU days were up 5.6%. Key metrics such as payer mix and rate of admissions continue to be favorable compared to last year.

In fact, for MEDNAX as a whole, our patient volumes, revenue and adjusted EBITDA were all ahead of the same period in 2019, which suggests that at this time, our business has more than recovered from the significant negative impact to the COVID-19 pandemic that we experienced in 2020 and earlier this year.

Marc will give some details of our comparisons to pre-pandemic levels. As a result of volumes exceeding pre-COVID levels, as well as stable cost trends at the practice level and improvements in our G&A infrastructure that we'll detail this morning.

Our revenue for the quarter of $493 million was above our internal expectations as was our adjusted EBITDA of $73 million. Based on our results, we now expect that our 2021 adjusted EBITDA will exceed our prior internal expectation of being above $240 million, and we now expect 2021 adjusted EBITDA of at least $250 million.

We also fully expect adjusted EBITDA next year to exceed $270 million, absent any major external events. This is still a preliminary view into 2022 and we'll be in a better position to provide a more specific outlook after we finish our budgeting process, but I believe we're building momentum in our business.

Demand for the critical services that our affiliated clinicians provide not only recovered from last year's disruptions, but continues to grow. We also estimate that the broader growth efforts we have in place have supplemented this demand so far in 2021. I'll give some detail here as we see our growth concentrated in several areas.

First, we target opportunities to expand practices or add practices and enhance our hospital relationships and also directly improve care through the coordination of different subspecialties that many patients need to access.

Second, in our daily operations, we strive to provide the best 24/7 support possible to our practices, which combines our patient service access initiatives, improving technology support, improving revenue cycle management efficiency, recruiting the best talent, and old-fashioned focused managerial actions.

And third, we look for acquisition opportunities where we see a clear combination of bolstering hospital relationships, adding to our patient care and support, and a demonstrable growth path within that acquisition.

Acquisitions haven't been a major part of our activity so far this year, but they could play just as important role as organic growth when we do see them strategically. The sum of these efforts is continuing to ramp up post-COVID. And importantly, after all of our reorganization activities, pre-COVID.

For the 2021 year-to-date, we estimate that we have added approximately three percentage points to our adjusted EBITDA growth versus 2020, over and above the pure same-store growth that our affiliated practices have experienced.

In addition to all this activity, we recently announced our investment in Brave Care and I want to explain why this is actually a very key piece of our growth plan. We again believe that we are totally uniquely positioned to grow in the combined pediatric and primary emergent care space.

In our major markets, MEDNAX, under our pediatrics brand alone has the concentration of pediatrician population density, hospital relationships and partnerships, and an enormous and growing base of vital patient relationships and our market managerial support that's already in place in our major markets.

With our NightLight acquisition in place and in fact, thriving, we have a nucleus from which we can grow. But for this to grow, we needed the engine and the talent to enable building something really meaningful.

Brave Care brings scalable internal controls and patient-facing technology, systems and protocols that will otherwise take us years to create. The proprietary technology systems and operating platform that Brave's team has built over a two-plus-year period gives patients and their parents a truly seamless experience when they visit.

It also gives Brave remote connectivity to clinicians through an extremely user-friendly remote mobile app, so parents always have a resource at their fingertips. Brave Care systems are integrated with all facets of clinical operations. And my view of the power of the Brave system is not theoretical.

It's proven and up and running in their existing clinics in the Northwest. Our investment in Brave the company by an operating partnership agreement that provides Brave a long-term incentives to help us plan, develop, equip, and open pediatric clinics over the coming years.

The clinic will be ours, and will be led and managed by our team working alongside the Brave team.

At a high level, looking at our geography of existing services, we believe that there's an opportunity for us to open more than 100 pediatric clinics across our footprint within a few years and as we move forward, we'll share with you how this will materialize.

We believe that our growth will include both de novo development and acquisitions, and we're already in discussions with certain existing platforms that we think overlap well with us and they can integrate into our strategic growth.

In summary, looking at all these factors, strengthen our core of amazing patient relationships served by our effective leading clinicians, strength in our balance sheet, our growth efforts, efficiency, and a smart strategic expansion into primary urgent care that together gives me confidence in our diversified growth potential in 2022 and beyond.

Now, Marc will provide additional details on our third quarter activity..

Thanks Mark and good morning, everyone. I'll begin by providing some detailed volume comparisons to 2019 to flesh out Mark's earlier comments.

I'll then walk through where we stand on the number of projects we've discussed so far this year and how they flow through the income statement and finish with our financial position as it stands today, and how we're looking at our capital structure as we look forward.

Compared to 2019 on a same unit basis for the quarter, our hospital volumes were up 4.4%, and office-based volumes were up 2.8%. Within hospital-based services, our NICU days were up 1.4%, pediatric intensive care was up 42% and pediatric hospitalist volumes were up 14%.

On the office-based side, maternal fetal medicine volume was up 8.6%, while pediatric cardiology was down 9%, with this decline likely reflecting some deferrals of appointments during the quarter due to the surge in Delta cases. Turning to G&A, our overall spend in Q3 was down about $4 million sequentially.

This primarily reflects sequential reductions in certain operating and legal expenses as well as RCM savings related to our agreement with R1, which should increase further in Q4. In terms of the transition of our revenue cycle activities to R1, to-date, our metrics reflect that there hasn't been any disruption in service to our practices.

DSOs and cash collection activity in the third quarter were in line with our expectations and with the prior quarter. I'll also reiterate that under the terms of our agreement, we realized near-term G&A savings, which are reflected in our current P&L.

And we also expect to benefit over time from future improvements in RCM performance, yield, and revenue enhancements. During the third quarter, we also completed the support services related to the PSA arrangement attached to last year's sale of our anesthesia organization.

Our Q3 G&A still reflects a comparable run rate of cost to what we were incurring previously, and we'll refine our views on an appropriate G&A level as we finish up our budgeting for 2022. But you'll see that our reimbursement for those costs in Q3, which we record in our investment in other income line, declined substantially.

It was $0.5 million this quarter versus about $9 million in a year ago period. However, the strength of our core operations more than offset this decline, and in fact, enabled both year-over-year and sequential growth in adjusted EBITDA.

Finally, our transformational and restructuring expense in Q3 was $4.2 million, which predominantly reflects the cost of terminating other third-party agreements as part of the R1 transition.

All told, within our updated internal expectation of 2021 adjusted EBITDA, we expect our fourth quarter G&A expense to be flat to down compared to third quarter, based largely on our expectation of RCM cost savings. This reinforces our prior view that the second half G&A will be lower than the $137 million we incurred in the first half of the year.

Turning to our capital structure, we continue to improve our leverage position in the third quarter. We generated $67 million of operating cash flow, which exceeded the investments we made in CapEx, acquisitions, and our Brave Care transaction.

Based on 9/30 debt of $642 million and our 2021 adjusted EBITDA expectation, net leverage stands at about 2.5 times and we would anticipate that to decline by year-end based on fourth quarter cash flows.

During the quarter, we also reduced our revolving credit facility capacity from $1.2 billion to $600 million, all of which is currently available to us with no remaining covenant restrictions.

As most of you know, we have $1 billion in outstanding 6.25% coupon senior notes due 2027, making our debt structure fairly inefficient given our cash position and current net leverage. Given that our notes are callable in January of 2022, we will be reviewing the best debt structure for our size, profitability, and growth in capital plans.

While we haven't made any determinations yet, I anticipate that we'll be able to achieve meaningful savings and interest expense once we determine the most appropriate capital stack for our business as it exists today, and in the foreseeable future. With that, now I'll turn the call back over to Mark..

Thanks Marc. Operator, we're now ready for questions..

Thank you. [Operator Instructions] Our first question will come from the line of Pito Chickering with Deutsche Bank. And your line is open..

Hey good morning guys. thanks for taking my questions. The first one for you on margins. So far, you guys have done an excellent job managing costs through a very volatile time period. And I'm not asking for 2020 guidance at this point. But conceptually, can you give us some color on margin expansion. The topline grows 3%, 4%, 5%, 6%.

How much leverage can you get on different revenue growth?.

Hey Pito, how are you, it's Marc Richards. You'll see some very nominal margin expansion, particularly in adjusted EBITDA quarter-over-quarter sequentially. I'd point out a couple of things in that.

I think we've done a relatively impressive job in maintaining our overall labor costs, which obviously is a concern across the industry at this point in time. We have a lot of focus specifically on our local contract labor and variable costs. You kind of dig into where we stand on that.

We're basically flat year-over-year, both sequentially and looking back into 2019. So, with respect to that margin expansion and the concern relative to labor growth. I think we've done a really good job of managing that, particularly the variable component.

And with continued rate growth on the topline, we expect that mild incremental increase as we continue to manage our labor pool..

Great. And then sort of same question.

Just again, as revenues keep growing here from an SG&A perspective, like you talked about RCM savings in fourth quarter, how much G&A leverage can we get sort of in the out years? Kind of what percent of your G&A is fixed versus variable? Just want to get a sense for how much margin leverage we can get as revenues continue to grow?.

Well, as part of our RCM outsourcing arrangement, we have effectively lived a fixed cost structure in our revenue collection cycle to a variable cost structure. So, that significant component of our overhead just as of this quarter has effectively turned from a fixed component to a variable component.

However, that variable component is specific to RCM and the rest of our G&A, as I've touched on, some of our initiative throughout the year will continue to bleed into our overall G&A cost, but most of that continues to remain relatively fixed..

And it's Mark Ordan. I would say aside from RCM, we think that we are largely a fixed cost operation. We are looking at ways and continuing to chip away at our cost. So, I think that there will be leverage as our revenue grows..

Perfect. And then just one more question on wage inflation, that's obviously been a hot topic sort of this quarter for healthcare service companies. Can you refresh us sort of what percentage of your contracts with doctors are up each year.

What are you seeing on renewals from those? And just is it fair to think that MEDNAX should take very little wage inflation going forward versus a lot of your peers simply because of the timing of those contracts?.

Hey Pito, it's Charlie. Given, I'll just give one observation there for you to keep in mind. Within the pediatrics organization exists probably a good several hundred individual group practices. And that makes our unit size fairly small related to any incidence of contract renewals and the like.

And additionally, given that many of the practices within pediatrics have been affiliated with the organization for a very long period of time, that kind of makes the renewal cycle more of an evergreen cycle.

And by the same token, within that organization, particularly for longer-standing practices, there exists a fairly meaningful variable compensation component within the bonus pool.

So, we really look at less a function of a renewal cycle and more a function of the underlying financial performance of individual practices as it affects compensation trends. I hope that's helpful..

Great. Thanks so much..

Thank you. Next, we'll go to the line of Kevin Fischbeck with Bank of America. One moment. And your line is open..

Great. Thanks. I was wondering if you could comment a little bit on the surprise billing regulation that came out. I wanted to, I guess, understand your views about whether it would have any impact when it goes into effect, I guess, initially if it's an out-of-network revenue that might see compression.

Or then two, whether there's any concerns about whether it impacts the long-term negotiating dynamic between you managed care and your ability to get sufficient rate update?.

Sure, it's Mark. I'll make a few comments about that. First, I remind people that we have publicly spoken against the practice of surprise billing. And we are fully supportive of the legislation, which was very bipartisan in a not-so-bipartisan world. The ruling that came out at September 30th is an interim rule.

And I know that there's an enormous amount of pushback against it, which I think will inform a lot of people's opinions before it's final. I comment that the biggest effect of this ruling would have if it goes into effect, it will take direct aim at rural care and people who are already traditionally underserved.

So, in our view, it will have the perverse effect. We're targeting the very patients that the surprise billing legislation sought to protect. So, we think that's very unfortunate. As far as we're concerned, look, we're in a strong position. We are overwhelmingly in network. We have very good relationships with our payers.

And if we have to make adjustments because of a legislative change or ruling change, then we'll adjust as necessary. But I'm not projecting any long-term effect from this. And I hope that the problems with the ruling are ironed out before the final rule..

Okay.

So, you don't see any reason why this reg, if it goes into effect January 1 as written, would impact your guidance for $270 million-plus next year or--?.

Well, again, no I'm confident I'm confident in our $270 million-plus number, or I wouldn't have said it. I think that it's hard for me to speculate either what the ruling will finally be and what the effect will be. So, I'm confident that in 2022, we'll be fine. And if we have to make adjustments for the future, we'll make adjustments for the future..

All right, great. That's really helpful. And then you guys put out a press release a few weeks ago about how COVID was impacting the birth rate and whether you're coming down with COVID.

I wanted to see if you could maybe spike out for us what impact, if any, that had in the quarter? And how you think about has COVID waived how that might have an impact on your business over the next few quarters?.

Hey Kevin, it's Charlie. I'll get a couple of thoughts and maybe Mack can weigh in as well.

Our clinicians -- and I shouldn't be the one speaking for them, but nonetheless, our clinicians have voiced a lot of concerns throughout this year related to the potential impact to children and expecting mothers based on COVID, particularly because on the pediatric side, children do not have the vaccine available to them.

And as we talked about in our last quarter, we had already seen an impact to patient volumes more related to children coming out of isolation and contracting respiratory illness and the like and needing to go in.

And as you can see in our numbers for the quarter, those areas that would be impacted were impacted and the PICU, on the peace floor and the like. It's harder to tease out on the maternal fetal medicine side, the rationale for referrals to MFM, that's always a very difficult thing to tease out.

I wouldn't be too surprised that there was some increased referral pattern into MFMs related to expecting mothers with COVID. And lastly, we believe that some of the softness in pediatric cardiology volumes probably reflects the deferral of appointments that are regular appointments, but people chose to put off..

Okay. Maybe just to take that point there. I guess, we're always trying to figure out, you mentioned that revenue is back about 2019. Do you feel like core volumes, if we excluded any benefits, sounds like some businesses benefited, some businesses got impacted negatively.

Do you believe that core volume, if COVID wasn't there, and revenue was above 2019, or was there a net positive or negative?.

I mean, I'll answer very simply. And the simple answer is that the predominant impact to our patient volumes through 2020 related to COVID was negative. And as we look where we are today, it looks like that has largely passed. And look, we see across the board in each of our lines, improvements.

We also -- at the same time, we've changed so many facets of our operating protocols in the company that it's hard to tease out where the gains are from. I think as we've discussed, the strong drive for increased patient access. Our focus, our managerial focus, I think, has made everything much more cohesive.

Coordination amongst the specialties that I referred to earlier is greatly improved over where it was. So that, along with an improving environment, I think all contribute to what we've seen, which is why we don't -- we're not going to break out, because we think it's impossible what the sole driver is..

Okay, great. Thank you..

Thank you. Our next question will come from the line of Matt Borsch with BMO Capital Markets. And your line is open..

Good morning. This is Ariana Brady on for Matt Borsch.

Could you provide us with potential headwinds and tailwinds that you're anticipating in 2022? And can we expect to receive any formal guidance from you in the near future in addition to that 270-plus EBITDA figure you provided us with today?.

Well, headwinds and tailwinds are probably nothing more than we've seen in the past. Somebody asked about some product legislation that could enter into the mix. We don't know that now. If there's a change in the birth rate or something else happens, something external happens.

But, look, I think we a -- we are today very focused and expanding company and focused on women's and children's health, which is a vital area to be in. We enjoy good relationships with our payers. We have great relationships with our hospital systems. So we feel comfortable with how we're working and how we're running market.

We discussed changes like in RCM to make us more efficient and better at what we do internally. So we're operating optimistically and terribly. So no change there. As for guidance, as I mentioned in my comments, as we go through the budgeting process, and we could be more precise about where we would be in 2022.

We will share that with you just the same way we've updated our thoughts quarter-by-quarter this year..

Great. Thank you..

Thank you. Our next question comes from the line of Ryan Daniels with William Blair. Ryan, your line is open..

Hey, guys. Nick Spiekhout for Ryan. Thanks for taking my questions. I guess, so you mentioned it too, but the tightness in the labor market has been a pretty big trend kind of for providers in the space. I was wondering, and for a couple of other providers, we've seen kind of things like turnover kind of increasing, earlier retirements happening.

I'm wondering if you guys have experienced any sort of that pressure or if you kind of expect that at all to take place in the future?.

Well, I'm responsible to the good things. Matt responsible for the turnover. So and to describe most like..

Sure. I think for the specialties we're in, there's always a limited number of clinicians available for that. That being said, and Mark referred to our contract labor, if you look at our need for external contract labor, that's decreased sequentially over the last three years.

And I think it speaks to the focus we have on recruiting the clinicians that we need. So it is a tight labor market, but it always is. And I think we're being successful in recruiting the physicians that we need to staff the programs that we have that are ongoing and to set our growth..

Okay. Great. Thanks.

And then kind of as a follow-up, like for your $270 million EBITDA target for 2022, is that assuming kind of sign on bonuses and salaries and benefits for new hires, kind of all those assumptions stay the same as they are most part?.

Yes. It assumes everything we're aware of..

Okay. Great. Thanks And then, I guess, just last one. The uptick in salaries and benefits quarter-over-quarter, is that effectively just a function of more NICU days and a little bit higher variable pay, or I guess, what's the main driver there?..

That is the main driver, yes..

Got you. Okay. Thanks for taking my question. Have a great day..

Thank you. Our next question comes from the line of Whit Mayo with SVB Leerink..

First question, just the increase in AR in the quarter, it's up about $20 million sequentially a couple of days. I heard you say that it was in line with your internal expectations.

But what is that increase attributed to? Is this just the RCM conversion?.

Yes. I mean a lot of it, hey, when it's work, Richard. A lot of this really is just timing from period to period. Our focus through this RCM transition, has been to make sure our revenue cycle, both on the billing and the cash collection side doesn't miss a beat. And that's really where we are with a modest uptick of $20 million in AR.

Some of it's just timing related that will turn around. And of course, there's with a significant transition like we're going through right now, there will be a little bit of noise, but we view that all once again, it's just timing..

Yes. And keep in mind, we've got a sequential increase in total revenue and activity from Q2 to Q3 normally..

Yes. Yes. No, I get it. Maybe just back to the surprise billing for a second. I mean, it's -- we see the movement in the market, where payers are proactively terminating contracts.

And I just want to be clear that have you seen any disruption with contract terminations? Is there anything that we should kind of be aware of? And just maybe internally, how do you manage something like this in the event that there is a unilateral termination from any individual payer?.

Well, we -- it's sort of par for the course that we negotiate with payers and when contracts are coming up, there'll be discussions about rates. So, it's not surprising for us for people to say we want to adjust rates and that leads to a negotiation. Have we seen any major change in that? No, we haven't.

Also the interim final rule is not affected, it may not be in effect. So, a lot of the answer to your question, it remains to be seen. How do we adjust? Like any company, you adjust to external factors. The history of healthcare includes periodic legislative changes that affect the way you do business.

And if you're a good manager and you have the strength to pivot, you pivot. So, if something, no pun intended, surprising comes at us, I'm very confident that we'll adjust accordingly.

My concern is mostly for the patients we serve because I can brag it wasn't my doing, but over the 40-plus years of MEDNAX, we take care of patients regardless of their ability to pay. And this is really going to hit hard in areas that have already been underserved.

And so I think I'm sure payers and legislators and the executive brands will recognize that there could be unintended consequences to patients from it. But look, I think it's par for the course. Payers would always like to pay less, I suppose. And we provide a vital service and we're a leader in that service.

We are the largest research organization in neonatology and it's publicly available research. We don't embargo it for our own purposes. We do it because it elevates healthcare. So, I think that most payers would want us in their network and want us to be robust. We have the best clinicians out there and two of them are sitting with me today.

So, that's my answer..

Okay, that’s helpful. Thanks guys. Nice job..

Thanks very much..

Thank you. Next, we'll go to the line of A.J. Rice with Credit Suisse. And your line is open..

Hi everybody. A couple of quick questions here. First, just to put a finer point on the labor questions and comments. I mean it seems like to me that the tightness in labor pool is mainly in the nursing side and not so much on the doctors side. Would you agree with that? And do you have much exposure to nursing? I don't really think you do..

No, we have a fairly sizable population of advanced practitioners, particularly within our -- and supporting our neonatology practices. So, there is in that sense, a nursing component, although they are advanced neonatal nurse practitioners.

In some of the comments that Marc Richards provided around variable expense being fairly essentially flat over the last three years that includes any definition we would have of agency, labor, locums for physicians or temporary practitioners as well as oncol and other variables components. So it is captured in what we referenced before, A.J..

Okay.

On the Brave Care and the rollout of pediatric urgent care centers, can you comment a little bit on how much upfront start-up costs there are associated with that and then time to breakeven, time to mature margins on those clinics, if you have a view at this early juncture? Just trying to figure out, is this something we should factor in as a drag in the next few years as you roll these 100 targeted facilities out, or is it something that's sort of de minimis?.

Well, if you think about the opening of the clinic, say, if you have roughly a couple of million dollar start-up costs, including early losses and then you have a strong return on that investment. It's a very high return on investment vehicle for us because of the overhead structure that we have in place and the relationships that we already have.

So I think it fits with what we do, probably wouldn't recommend it to others. We will detail this as we go forward. But I think what you should expect is a clustered rollout in cities where we are that will minimize the additional overhead that's required to do this.

As I've said, now importantly, we have the people to do it, the systems to do it and the relationships in our overall business. So we think it's going to be a very strong return vehicle, not a sideline to what we do..

Okay. And then my last question is referenced to as you think about the potential to refinance some outstanding debt, other things, talk about an appropriate capital structure.

I guess as you're evaluating what the appropriate capital structure is, I just want to make sure I understand what are the moving parts or variables that are still open in your mind as you're trying to formulate what the appropriate capital structure would be for the company?.

Well, naturally we have outstanding debt, so you look at the cost of that debt and say, what can we do about it, as Mark noted. And as you know, we have the debt callable in 2022. So that's a factor for us.

Thinking about the expansion plan that we just outlined, if we are going to be making acquisitions and we also are going to be opening 100 clinics over a few years, there's a cash flow need for that. So I think we're evaluating all the things that we're doing and trying to keep our controllable cost down.

So I think early in the year, we'll come back to you with more specificity on that..

Any update on the share repurchases as part of that option?.

No update. We would have mentioned that. But, obviously, I think we're good stewards of our financial capital as you see us being quarter-by-quarter steady state, that can enable, I think, smart choices. So we're on it..

Okay, great. Thanks a lot..

Thank you..

Thank you. Our next question comes from the line of Ralph Giacobbe with Citi. And your line is open..

Thanks. This is Jason Gastar [ph] on for Ralph Giacobbe this morning. I just want to go back to your comments around the 2021, the new 250 floor. So I guess if we look at the implied 4Q EBITDA with that new floor, looks like it's a sequential drop in EBITDA.

I guess, could you discuss what's driving that? And relative to the 2022 discussion around the 274, it looks like if we were to run rate 3Q EBITDA, maybe more of like a 290 number.

So just trying to understand if you have thoughts around that and maybe if the 4Q implied EBITDA is a more correct run rate on a go-forward basis?.

Yes. I do have thoughts about that. First of all, I don't think it's analytically right to annualize our third quarter numbers to necessarily get to that $294 million, which we saw you guys had put out there. We were confident that we would do above $240 million.

The business has improved more than we expected for all the reasons that we've discussed, and that gives us confidence that the year will end up above $250 million and we think that's our right number. We thought our expectations were different, I would say.

As far as next year is concerned, I think we have said that we think we have the earnings power to get to $270 million and now what we're saying is we think we -- it's our confidence level is, very high that we will not only get to it, but we will exceed it. But I don't see today a little rounding to call out a number about that.

As I mentioned in my remarks, we're in the middle of our budgeting process. We'll look at the components of that, how quickly we think acquisitions will fall into place, and what we'll do with our other financial costs, financing costs, rather, and then we'll update you..

And just one observation, Jason. Keep in mind, just from a seasonal standpoint, our third quarter based on our business tends to be our strongest quarter for both revenue and EBITDA, just based on the large and the seasonality for trends.

So as we look at the third quarter in a vacuum transitioning to Q4, we would normally expect something slightly lower from Q3 to Q4..

Got it. That's really helpful. I guess, just a payer mix in the quarter. I mean year-to-date, actually, we've seen improvement, I guess over 2020, each of the 3 quarters.

But is there any way to discuss payer mix trends, I guess, relative to 2019 at this point? And then should we think about that as an improvement in how we're thinking about improvements in payer mix into 2022 and on a go-forward basis? Thanks. .

Yes, I'll take a shot at and Charlie can add. Look, I think we're seeing a trend in our payer mix to related directly to 2019, I think is a little bit difficult. Came out of 2020. We saw the changes in 2020 as COVID has subsided. Our business has changed. We've grown in a lot of ways.

So I think the most instructive is to look at our current trend and it would be hard to go back to 2019 and assume something different..

Yes. As I think you know, our payer mix is largely binary. On the government side, it's predominantly Medicaid and the rest remaining on the managed care and commercial side.

As such, over a fairly long period of time, leading aside quarter-to-quarter, our payer mix by volume tends to be fairly stable and over longer periods of time, may be impacted by economic trends and employment trends more than anything else related to aging or demographics or things you might look at on the med care side.

So it tends to be stable has been gradually improving prior to 2020, largely probably based on overall employment growth. And what we're seeing so far in 2021 is really a reversion to that pre-2020 trend. So we're pleased with that, and it does suggest to us that we continue to have a fairly stable mix..

Got it. Thank you. .

Thank you. And at this time, I'm showing no further questions in queue. Please continue..

Great. Well, thank you, operator. Thank you, everybody, for joining us this morning, and we appreciate your continued support. Have a great day..

Thank you. And ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect..