The following discussion highlights the principal factors that have affected our financial condition and results of operations, as well as our liquidity and capital resources, for the periods described. This discussion should be read in conjunction with the unaudited Consolidated Financial Statements and the notes thereto included in this Quarterly Report. In addition, reference is made to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the Securities and Exchange Commission on February 19, 2026 (the “2025 Form 10-K”). As used in this Quarterly Report, the terms “Pediatrix”, the “Company”, “we”, “us” and “our” refer to the parent company, Pediatrix Medical Group, Inc., a Florida corporation, and the consolidated subsidiaries through which its businesses are actually conducted (collectively, “PMG”), together with PMG’s affiliated business corporations or professional associations, professional corporations, limited liability companies and partnerships (“affiliated professional contractors”). Certain subsidiaries of PMG have contracts with our affiliated professional contractors, which are separate legal entities that provide physician services in certain states. The following discussion contains forward-looking statements. Please see the Company’s 2025 Form 10-K, including Item 1A., Risk Factors, for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. In addition, please see “Caution Concerning Forward-Looking Statements” below.
Overview
Pediatrix is a leading provider of physician services including newborn, maternal-fetal, and other pediatric subspecialty care. Our national network is comprised of affiliated physicians who provide clinical care in 37 states. Our affiliated physicians provide neonatal clinical care, primarily within hospital-based neonatal intensive care units (“NICUs”), to babies born prematurely or with medical complications and maternal-fetal and obstetrical medical care to expectant mothers experiencing complicated pregnancies, primarily in areas where our affiliated neonatal physicians practice. Our network also includes other pediatric subspecialists.
General Economic Conditions and Other Factors
Our operations and performance depend significantly on economic conditions. During the three months ended June 30, 2026, the percentage of our patient service revenue being reimbursed under government-sponsored or government-funded healthcare programs (“GHC Programs”) decreased as compared to the three months ended June 30, 2025. However, we could experience shifts toward GHC Programs if changes occur in economic behaviors or population demographics within geographic locations in which we provide services, including an increase in unemployment and underemployment as well as losses of commercial health insurance. Payments received from GHC Programs are substantially less for equivalent services than payments received from commercial insurance payors. In addition, costs of managed care premiums and patient responsibility amounts continue to rise, and accordingly, we may experience lower net revenue resulting from increased bad debt due to patients’ inability to pay for certain services.
“Surprise” Billing Legislation
In late 2020, Congress enacted the No Surprises Act (“NSA”) legislation intended to protect patients from “surprise” medical bills when certain services are furnished by providers who are not in-network with the patient’s insurer. Effective January 1, 2022, if a patient’s insurance plan or coverage is subject to the NSA, providers are not permitted to send such patient an unexpected or “surprise” medical bill that arises from out-of-network emergency care provided at certain out-of-network facilities or at certain in-network facilities by out-of-network emergency providers, as well as nonemergency care provided at certain in-network facilities by out-of-network providers without the patient’s informed consent (as defined by the NSA). Many states have legislation on this topic and will continue to modify and review their laws pertaining to surprise billing.
For claims subject to the NSA, insurers are required to calculate the patient’s total cost-sharing amount pursuant to rules set forth in the NSA and its implementing regulations which, in some cases, can be calculated by reference to the applicable qualifying payment amount for the items or services received. The patient’s cost-sharing amount for out-of-network services covered by the NSA must be no more than the patient’s in-network cost-sharing amounts. Patient cost-sharing amounts for items and services subject to the NSA count toward the patient’s health plan deductible and out-of-pocket cost-sharing limits. For claims subject to the NSA, providers are generally not permitted to balance bill patients beyond this cost-sharing amount. An out-of-network provider is only permitted to bill a patient more than the cost-sharing amount allowed under the NSA for certain types of services if the provider satisfies all aspects of an informed consent process set forth in the NSA’s implementing regulations. Providers that violate these surprise billing prohibitions may be subject to enforcement actions by the Centers for Medicare and Medicaid Services ("CMS"), the U.S. Department of Labor, or by states, one or multiple of which may be tasked with investigating potential non-compliance as a result of patient complaints, as well as any state-specific penalties enforcement action and federal civil monetary penalties.
For claims subject to the NSA, including many emergency care services, out-of-network providers will be paid an initial amount determined by the plan; if a provider is not satisfied with the initial amount paid for the services, the provider can pursue recourse through an independent dispute resolution (“IDR”) process. The outcome of each IDR dispute is generally binding on both the provider and payor with respect to the particular claims at issue in that dispute but may not affect an insurer’s future offers of payment. Providers have had difficulty enforcing IDR awards against insurers, as certain federal courts have held that the NSA does not provide a private right of action to compel payment, leaving enforcement primarily to the U.S. Department of Health and Human Services. Accordingly, we cannot predict how these IDR results will compare to the rates that our affiliated physicians customarily receive for their services. In addition, in May 2026, CMS finalized the most comprehensive revisions to the IDR process since its implementation. These measures could limit the amount we can charge and recover for services we furnish where we have not contracted with the patient’s insurer, and therefore could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our securities.
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Healthcare Reform
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) has altered how health care is delivered and reimbursed in the U.S. and contains various provisions, including the establishment of health insurance exchanges to facilitate the purchase of qualified health plans, expanded Medicaid eligibility, subsidized insurance premiums and additional requirements and incentives for businesses to provide healthcare benefits. Other provisions of the ACA have expanded the scope and reach of the False Claims Act and other healthcare fraud and abuse laws. The status of the ACA may be subject to change as a result of political, legislative, regulatory, and administrative developments, as well as judicial proceedings. As a result, we could be affected by potential changes to various aspects of the ACA, including the loss of enhanced subsidies, changes to tax credits, monthly premiums, healthcare insurance marketplaces and Medicaid expansion. We cannot predict with any assurance the ultimate effect that the loss of enhanced subsidies will have on reimbursement for our services. We cannot say for certain whether there will be additional future challenges to the ACA or what impact, if any, such challenges may have on our business. Changes resulting from various legal proceedings, and any legislative or administrative change to the current healthcare financing system, could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our securities.
In addition to the ACA, there could be changes to other GHC programs, such as a change to the Medicaid program design or Medicaid coverage and reimbursement rates set forth under federal or state law. These changes, if implemented, could eliminate the guarantee that everyone who is eligible and applies for Medicaid benefits would receive them and could potentially give states new authority to restrict eligibility, cut benefits and/or make it more difficult for people to enroll.
Medicare and Medicaid Reform
The ACA also allows states to expand their Medicaid programs through federal payments that fund most of the cost of increasing the Medicaid eligibility income limit from a state’s historic eligibility levels to 133% of the federal poverty level. All of the states in which we operate, however, already cover children in the first year of life and pregnant women if their household income is at or below 133% of the federal poverty level. In recent years, members of Congress have introduced a number of proposals intended to reform the Medicaid program by cutting or expanding coverage and available benefits, and the program is in a state of flux. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act, which reforms the Medicaid program by eliminating certain financial incentives for states that have expanded their Medicaid programs under the ACA, imposing work requirements on certain adult beneficiaries, and requiring states to increase patient cost-sharing amounts for certain services. The Congressional Budget Office has estimated that the One Big Beautiful Bill Act will cut federal spending on Medicaid and Children’s Health Insurance Program benefits by $900 billion, due in part to eliminating millions of people from the programs by 2034. Additionally, several states are considering and pursuing changes to their Medicaid programs, such as requiring recipients to engage in employment or education activities as a condition of eligibility for most adults, disenrolling recipients for failure to pay a premium, or adjusting premium amounts based on income. We cannot predict with any assurance the ultimate effect of these reforms on reimbursements for our services.
In addition, attempts to limit federal and state spending continue on GHC Programs by limiting or reducing Medicare and Medicaid reimbursement for various services. Medicare pays physicians for their services using a formula that multiplies a standard dollar amount (called the conversion factor) by a number of units assigned to each service based on the time and complexity involved. Reducing the conversion factor therefore reduces what Medicare pays for every covered physician service across the board. In July 2026, CMS released the 2027 Medicare Physician Fee Schedule, which proposes to reduce the conversion factor by 1.19% for 2027, in part because a temporary payment increase that had been included in the 2026 fee schedule is set to expire.
Non-GAAP Measures
In our analysis of our results of operations, we use various GAAP and certain non-GAAP financial measures. We have incurred certain expenses that we do not consider representative of our underlying operations, including transformational and restructuring related expenses. Accordingly, we report adjusted earnings before interest, taxes and depreciation and amortization (“Adjusted EBITDA”), defined as net income before interest, taxes, depreciation and amortization, and transformational and restructuring related expenses. Earnings per share has also been adjusted (“Adjusted EPS”) and consists of diluted net income per common and common equivalent share adjusted for amortization expense, stock-based compensation expense, transformational and restructuring related expenses and any impacts from discrete tax events.
We believe these measures, in addition to income from operations, net income and diluted net income per common and common equivalent share, provide investors with useful supplemental information to compare and understand our underlying business trends and performance across reporting periods on a consistent basis. These measures should be considered a supplement to, and not a substitute for, financial performance measures determined in accordance with GAAP. In addition, since these non-GAAP measures are not determined in accordance with GAAP, they are susceptible to varying calculations and may not be comparable to other similarly titled measures of other companies. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
For a reconciliation of each of Adjusted EBITDA and Adjusted EPS to the most directly comparable GAAP measures for the three and six months ended June 30, 2026 and 2025, refer to the tables below (in thousands, except per share data).
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Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Net income $ 39,843 $ 39,260 $ 69,415 $ 59,997
Interest expense 8,172 9,130 16,437 18,284
Income tax provision 14,157 15,709 23,429 23,062
Depreciation and amortization expense 5,782 5,313 11,901 10,645
Transformational and restructuring related expenses 8,475 3,834 13,397 10,439
Adjusted EBITDA $ 76,429 $ 73,246 $ 134,579 $ 122,427
Three Months Ended June 30,
2026 2025
Weighted average diluted shares outstanding 81,412 85,529
Net income and diluted net income per share $ 39,843 $ 0.49 $ 39,260 $ 0.46
Adjustments (1):
Amortization (net of tax of $554 and $421) 1,661 0.02 1,266 0.01
Stock-based compensation (net of tax of $1,214 and $503) 3,642 0.05 1,508 0.02
Transformational and restructuring expenses (net of tax of $2,119 and $959) 6,356 0.08 2,875 0.03
Net impact from discrete tax events (596 ) (0.01 ) 739 0.01
Adjusted income and diluted EPS $ 50,906 $ 0.63 $ 45,648 $ 0.53
(1)A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the three months ended June 30, 2026 and 2025.
Six Months Ended June 30,
2026 2025
Weighted average diluted shares outstanding 82,040 85,517
Net income and diluted net income per share $ 69,415 $ 0.85 $ 59,997 $ 0.70
Adjustments (1):
Amortization (net of tax of $1,119 and $851) 3,356 0.04 2,556 0.03
Stock-based compensation (net of tax of $2,150 and $1,076) 6,450 0.08 3,228 0.04
Transformational and restructuring expenses (net of tax of $3,349 and $2,610) 10,048 0.12 7,829 0.09
Net impact from discrete tax events (1,731 ) (0.02 ) 564 0.01
Adjusted income and diluted EPS $ 87,538 $ 1.07 $ 74,174 $ 0.87
(1)A blended tax rate of 25% was used to calculate the tax effects of the adjustments for the six months ended June 30, 2026 and 2025.
Results of Operations
Three Months Ended June 30, 2026 as Compared to Three Months Ended June 30, 2025
Our net revenue was $487.8 million for the three months ended June 30, 2026, as compared to $468.8 million for the same period in 2025. The increase in net revenue of $19.0 million, or 4.0%, was primarily attributable to an increase in non-same unit activity, primarily from the impact of recent acquisitions, net of dispositions, and from same-unit revenue. Same-units are those units at which we provided services for the entire current period and the entire comparable period. Same-unit net revenue increased by $8.5 million, or 1.9%. The increase in same-unit net revenue was comprised of an increase of $18.1 million, or 4.0%, from net reimbursement-related factors, partially offset by a decrease of $9.6 million, or 2.1%, related to patient service volumes. The net increase in revenue related to net reimbursement-related factors was primarily due to an increase in revenue resulting from improved collection activity, a favorable shift in payor mix and increased patient acuity, primarily in neonatology. The decrease in revenue from patient service volumes was primarily related to our neonatology services.
Practice salaries and benefits increased $12.6 million, or 3.9%, to $336.1 million for the three months ended June 30, 2026, as compared to $323.5 million for the same period in 2025. The increase of $12.6 million was primarily attributable to increases in clinical salaries and malpractice expense at our existing units.
Practice supplies and other operating expenses decreased $1.4 million, or 6.9%, to $19.2 million for the three months ended June 30, 2026, as compared to $20.6 million for the same period in 2025. The decrease was primarily attributable to lower practice supply, professional fees and other expenses at our existing units.
General and administrative expenses primarily include all billing and collection functions and all other salaries, benefits, supplies and operating expenses not specifically related to the day-to-day operations of our affiliated physician practices and services. General and
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administrative expenses were $61.3 million for the three months ended June 30, 2026, as compared to $55.7 million for the same period in 2025. The net increase of $5.6 million was primarily related to increases in compensation expense, primarily from executive transition related costs. General and administrative expenses as a percentage of net revenue were 12.6% for the three months ended June 30, 2026, as compared to 11.9% for the same period in 2025.
Depreciation and amortization expense was $5.8 million for the three months ended June 30, 2026, as compared to $5.3 million for the same period in 2025. The net increase of $0.5 million was primarily related to capital expenditures and amortization of intangible assets from recent acquisitions.
Transformational and restructuring related expenses were $8.5 million for the three months ended June 30, 2026 as compared to $3.8 million for the same period in 2025. The expenses during 2026 primarily related to revenue cycle management transition activities. The expenses in 2025 were primarily related to position eliminations and revenue cycle management transition activities.
Income from operations decreased $3.0 million, or 4.9%, to $56.9 million for the three months ended June 30, 2026, as compared to $59.9 million for the same period in 2025. Our operating margin was 11.7% for the three months ended June 30, 2026, as compared to 12.8% for the same period in 2025. The decrease in our operating margin was primarily due to unfavorable impacts in our same-unit results, primarily from higher operating expenses, partially offset by favorable impacts from recent acquisitions. Excluding transformational and restructuring related expenses, our income from operations was $65.4 million and $63.7 million, and our operating margin was 13.4% and 13.6% for the three months ended June 30, 2026 and 2025, respectively. We believe excluding the impacts from transformational and restructuring related activity provides a more comparable view of our operating income and operating margin.
Total non-operating expenses were $2.9 million for the three months ended June 30, 2026, as compared to $4.9 million for the same period in 2025. The net decrease in non-operating expenses was primarily related to a decrease in interest expense from modestly lower interest rates and borrowings and an increase in interest income due to higher cash balances.
Our effective income tax rate (“tax rate”) was 26.2% for the three months ended June 30, 2026, as compared to 28.6% for the three months ended June 30, 2025. The tax rate for the three months ended June 30, 2026 and 2025 includes a net discrete tax benefit of $0.6 million and tax expense of $0.7 million, respectively. After excluding discrete tax impacts during the three months ended June 30, 2026 and 2025, our tax rate was 27.3% and 27.2%, respectively. We believe excluding discrete tax impacts provides a more comparable view of our tax rate.
Net income was $39.8 million for the three months ended June 30, 2026, as compared to $39.3 million for the same period in 2025. Adjusted EBITDA was $76.4 million for the three months ended June 30, 2026, as compared to $73.2 million for the same period in 2025. The increase in our Adjusted EBITDA was primarily due to net favorable impacts from recent acquisitions, partially offset by a decrease in same-unit results due to higher expenses as compared to revenue growth.
Diluted net income per common and common equivalent share was $0.49 on weighted average shares outstanding of 81.4 million for the three months ended June 30, 2026, as compared to $0.46 on weighted average shares outstanding of 85.5 million for the same period in 2025. The decrease in our weighted average shares outstanding is primarily due to the impact of shares repurchased under our repurchase program, partially offset by issuances of restricted stock. Adjusted EPS was $0.63 for the three months ended June 30, 2026, as compared to $0.53 for the same period in 2025.
Six Months Ended June 30, 2026 as Compared to Six Months Ended June 30, 2025
Our net revenue was $964.0 million for the six months ended June 30, 2026, as compared to $927.2 million for the same period in 2025. The increase in net revenue of $36.8 million, or 4.0%, was primarily attributable to an increase in same-unit revenue and non-same unit activity, primarily from the impact of recent acquisitions, net of dispositions. Same-units are those units at which we provided services for the entire current period and the entire comparable period. Same-unit net revenue increased by $20.1 million, or 2.3%. The increase in same-unit net revenue was comprised of an increase of $37.0 million, or 4.2%, from net reimbursement-related factors partially offset by a decrease of $16.9 million, or 1.9%, related to patient service volumes. The net increase in revenue related to net reimbursement-related factors was primarily due to an increase in revenue resulting from improved collection activity, a favorable shift in payor mix, increased patient acuity, primarily in neonatology, and an increase in administrative fees from our hospital partners. The decrease in revenue from patient service volumes was related to decreases across all our service lines.
Practice salaries and benefits increased $21.3 million, or 3.2%, to $681.9 million for the six months ended June 30, 2026, as compared to $660.5 million for the same period in 2025. The increase of $21.3 million was primarily attributable to increases in clinical salaries and malpractice expense at our existing units.
Practice supplies and other operating expenses decreased $2.6 million, or 6.6%, to $36.7 million for the six months ended June 30, 2026, as compared to $39.3 million for the same period in 2025. The decrease was primarily attributable to non-same unit activity, primarily resulting from practice dispositions and lower supply and other expenses at our existing units.
General and administrative expenses primarily include all billing and collection functions and all other salaries, benefits, supplies and operating expenses not specifically identifiable to the day-to-day operations of our affiliated physician practices and services. General and administrative expenses were $121.6 million for the six months ended June 30, 2026, as compared to $114.3 million for the same period in 2025. The net increase of $7.3 million was primarily related to increases in compensation expense, primarily from executive transition related costs. General and administrative expenses as a percentage of net revenue were 12.6% for the six months ended June 30, 2026, as compared to 12.3% for the same period in 2025.
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Depreciation and amortization expense was $11.9 million for the six months ended June 30, 2026, as compared to $10.6 million for the same period in 2025. The net increase of $1.3 million was primarily related to capital expenditures at our existing units and from capital expenditures and amortization of intangible assets from recent acquisitions.
Transformational and restructuring related expenses were $13.4 million for the six months ended June 30, 2026 as compared to $10.4 million for the same period in 2025. The expenses during 2026 primarily related to revenue cycle management transition activities. The expenses during 2025 primarily related to position eliminations across various shared services departments and revenue cycle management activities.
Income from operations increased $6.6 million, or 7.2%, to $98.6 million for the six months ended June 30, 2026, as compared to $92.0 million for the same period in 2025. Our operating margin was 10.2% for the six months ended June 30, 2026, as compared to 9.9% for the same period in 2025. The increase in our operating margin was primarily due to recent acquisitions. Excluding transformational and restructuring related expenses, our income from operations was $112.0 million and $102.4 million, and our operating margin was 11.6% and 11.0% for the six months ended June 30, 2026 and 2025, respectively. We believe excluding the impacts from transformational and restructuring related activity provides a more comparable view of our operating income and operating margin.
Total non-operating expenses were $5.7 million for the six months ended June 30, 2026, as compared to $8.9 million for the same period in 2025. The net decrease in non-operating expenses was primarily related to a decrease in interest expense from modestly lower interest rates and borrowings and an increase in interest income due to higher cash balances.
Our effective income tax rate (“tax rate”) was 25.2% for the six months ended June 30, 2026 as compared to 27.8% for the six months ended June 30, 2025. The tax rate for the six months ended June 30, 2026 and 2025 includes a net discrete tax benefit of $1.7 million and tax expense of $0.6 million, respectively. After excluding discrete tax impacts during the six months ended June 30, 2026 and 2025, our tax rate was 27.1% for each period. We believe excluding discrete tax impacts provides a more comparable view of our tax rate.
Net income was $69.4 million for the six months ended June 30, 2026, as compared to $60.0 million for the same period in 2025. Adjusted EBITDA was $134.6 million for the six months ended June 30, 2026, as compared to $122.4 million for the same period in 2025. The increase in our Adjusted EBITDA was primarily due to net favorable impacts from recent acquisitions and from our same-unit results.
Diluted net income per common and common equivalent share was $0.85 on weighted average shares outstanding of 82.0 million for the six months ended June 30, 2026, as compared to $0.70 on weighted average shares outstanding of 85.5 million for the same period in 2025. The decrease in our weighted average shares outstanding is primarily due to the impact of shares repurchased under our repurchase program, partially offset by issuances of restricted stock. Adjusted EPS was $1.07 for the six months ended June 30, 2026, as compared to $0.87 for the same period in 2025.
Liquidity and Capital Resources
As of June 30, 2026, we had $288.9 million of cash and cash equivalents as compared to $375.2 million at December 31, 2025. Additionally, we had working capital of $158.6 million at June 30, 2026, a decrease of $146.0 million from working capital of $304.6 million at December 31, 2025. The net decrease in working capital is primarily due to an increase in the current portion of debt from the reclassification of the Term A Loan (as defined below), which matures in February 2027.
Cash Flows
Cash (used in) provided by operating, investing and financing activities from continuing operations is summarized as follows (in thousands):
Six Months Ended June 30,
2026 2025
Operating activities $ (3,193 ) $ 22,020
Investing activities (5,960 ) (14,618 )
Financing activities (75,878 ) (10,294 )
Operating Activities
During the six months ended June 30, 2026, our net cash used in operating activities from continuing operations was $3.2 million, compared to cash provided of $22.0 million for the same period in 2025. The net increase in cash used of $25.2 million was primarily due to an increase in cash used to fund working capital, primarily incentive compensation payments.
During the six months ended June 30, 2026, cash inflow from accounts receivable was $2.1 million, as compared to $21.2 million for the same period in 2025. The decrease in cash flow from accounts receivable for the six months ended June 30, 2026 as compared to the prior year period was primarily due to growth in revenue at existing units and the impact of acquisitions, partially offset by a decrease in days sales outstanding (“DSO”).
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DSO is one of the key factors that we use to evaluate the condition of our accounts receivable and the related allowances for contractual adjustments and uncollectibles. DSO reflects the timeliness of cash collections on billed revenue and the level of reserves on outstanding accounts receivable. Our DSO was 42.5 days at June 30, 2026 as compared to 42.8 days at December 31, 2025 and 46.4 days at June 30, 2025. The decrease in our DSO for both periods was primarily related to improved cash collections at our existing units.
Investing Activities
During the six months ended June 30, 2026, our net cash used in investing activities of $6.0 million consisted of capital expenditures of $7.6 million and acquisition payments of $7.0 million, partially offset by net proceeds from maturities of investments of $8.1 million.
Financing Activities
During the six months ended June 30, 2026, our net cash used in financing activities of $75.9 million consisted primarily of stock repurchases of $64.2 million and payments on our Term A Loan of $12.5 million.
Liquidity
On February 11, 2022, we issued $400.0 million of 5.375% unsecured senior notes due 2030 (the “2030 Notes”).
Interest on the 2030 Notes accrues at the rate of 5.375% per annum, or $21.5 million, and is payable semi-annually in arrears on February 15 and August 15. Our obligations under the 2030 Notes are guaranteed on an unsecured senior basis by the same subsidiaries and affiliated professional contractors that guarantee the Amended Credit Agreement (as defined below). The indenture under which the 2030 Notes are issued, among other things, limits our ability to (1) incur liens, (2) enter into sale and lease-back transactions, and (3) merge or dispose of all or substantially all of our assets, in all cases, subject to a number of customary exceptions. Although we are not required to make mandatory redemption or sinking fund payments with respect to the 2030 Notes, upon the occurrence of a change in control, we may be required to repurchase the 2030 Notes at a purchase price equal to 101% of the aggregate principal amount of the 2030 Notes repurchased plus accrued and unpaid interest.
Concurrently with the issuance of the 2030 Notes, we amended and restated our credit agreement (the “Credit Agreement”, and such amendment and restatement, the “Credit Agreement Amendment”). The Credit Agreement, as amended by the Credit Agreement Amendment (the “Amended Credit Agreement”), among other things, (i) refinanced the prior unsecured revolving credit facility with a $450.0 million unsecured revolving credit facility, including a $37.5 million sub-facility for the issuance of letters of credit (the “Revolving Credit Line”), and a new $250.0 million term A loan facility (“Term A Loan”) and (ii) removed JPMorgan Chase Bank, N.A., as the administrative agent under the Credit Agreement and appointed Bank of America, N.A. as the administrative agent for the lenders under the Amended Credit Agreement.
The Amended Credit Agreement matures on February 11, 2027 and is guaranteed on an unsecured basis by substantially all of our subsidiaries and affiliated professional contractors. At our option, borrowings under the Amended Credit Agreement bear interest at (i) the Alternate Base Rate (defined as the highest of (a) the prime rate as announced by Bank of America, N.A., (b) the Federal Funds Rate plus 0.50% and (c) Term Secured Overnight Financing Rate (“SOFR”) for an interest period of one month plus 1.00% with a 1.00% floor) plus an applicable margin rate of 0.50% for the first two fiscal quarters after the date of the Credit Agreement Amendment, and thereafter at an applicable margin rate ranging from 0.125% to 0.750% based on our consolidated net leverage ratio or (ii) Term SOFR rate (calculated as the Secured Overnight Financing Rate published on the applicable Reuters screen page plus a spread adjustment of 0.10%, 0.15% or 0.25% depending on if we select a one-month, three-month or six-month interest period, respectively, for the applicable loan with a 0% floor), plus an applicable margin rate of 1.50% for the first two full fiscal quarters after the date of the Credit Agreement Amendment, and thereafter at an applicable margin rate ranging from 1.125% to 1.750% based on our consolidated net leverage ratio. The Amended Credit Agreement also provides for other customary fees and charges, including an unused commitment fee with respect to the Revolving Credit Line ranging from 0.150% to 0.200% of the unused lending commitments under the Revolving Credit Line, based on our consolidated net leverage ratio.
The Amended Credit Agreement contains customary covenants and restrictions, including covenants that require us to maintain a minimum interest coverage ratio, a maximum consolidated net leverage ratio and to comply with laws, and restrictions on the ability to pay dividends, incur indebtedness or liens and make certain other distributions subject to baskets and exceptions, in each case, as specified therein. Failure to comply with these covenants would constitute an event of default under the Amended Credit Agreement, notwithstanding the ability of the Company to meet its debt service obligations. The Amended Credit Agreement includes various customary remedies for the lenders following an event of default, including the acceleration of repayment of outstanding amounts under the Amended Credit Agreement. In addition, we may increase the principal amount of the Revolving Credit Line or incur additional term loans under the Amended Credit Agreement in an aggregate principal amount such that on a pro forma basis after giving effect to such increase or additional term loans, we are in compliance with the financial covenants, subject to the satisfaction of specified conditions and additional caps in the event that the Amended Credit Agreement is secured.
At June 30, 2026, we had an outstanding principal balance on the Amended Credit Agreement of $184.4 million, composed of the Term A Loan. There was no balance outstanding under the Revolving Credit Line. We had $450.0 million available on the Revolving Credit Line at June 30, 2026.
At June 30, 2026, we had an outstanding principal balance of $400.0 million on the 2030 Notes. Our obligations under the 2030 Notes are guaranteed on an unsecured senior basis by the same subsidiaries and affiliated professional contractors that guarantee our Amended Credit Agreement. Interest on the 2030 Notes accrues at the rate of 5.375% per annum, or $21.5 million, and is payable semi-annually in arrears on February 15 and August 15, beginning on August 15, 2022.
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At June 30, 2026, we believe we were in compliance, in all material respects, with the financial covenants and other restrictions applicable to us under the Amended Credit Agreement and the 2030 Notes. We believe we will be in compliance with these covenants throughout 2026.
We maintain professional liability insurance policies with third-party insurers, subject to self-insured retention, exclusions and other restrictions. We self-insure our liabilities to pay self-insured retention amounts under our professional liability insurance coverage through a wholly owned captive insurance subsidiary. We record liabilities for self-insured amounts and claims incurred but not reported based on an actuarial valuation using historical loss information, claim emergence patterns and various actuarial assumptions. Our total liability related to professional liability risks at June 30, 2026 was $271.1 million, of which $35.9 million is classified as a current liability within accounts payable and accrued expenses in the Consolidated Balance Sheet. In addition, there is a corresponding insurance receivable of $18.9 million recorded as a component of other assets for certain professional liability claims that are covered by insurance policies.
We anticipate that funds generated from operations and our current cash on hand will be sufficient to finance our working capital requirements, fund anticipated acquisitions and capital expenditures, fund expenses related to our transformational and restructuring activities, fund our share repurchase programs and meet our contractual obligations for at least the next 12 months from the date of issuance of this Quarterly Report on Form 10-Q.
Caution Concerning Forward-Looking Statements
Certain information included or incorporated by reference in this Quarterly Report may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, future impacts of legal, regulatory, political and macroeconomic developments and all statements, other than statements of historical facts, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. These statements are often characterized by terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions, and are based on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Any forward-looking statements in this Quarterly Report are made as of the date hereof, and we undertake no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements include the following: the impact of the Company’s practice portfolio management plans and whether the Company is able to achieve the expected favorable impact to Adjusted EBITDA therefrom, the effects of economic conditions on our business, including a slowdown of economic growth, economic downturns, inflationary pressures, elevated unemployment levels and sluggish or uneven economic recovery; the effects of the Medicare Access and CHIP Reauthorization Act of 2015, the ACA, the One Big Beautiful Bill Act and potential additional healthcare reform; our relationships with government-sponsored or funded healthcare programs and with managed care organizations and commercial health insurance payors and any shifts in the Company’s payor mix; the impact of state budgetary constraints and uncertainty over the future of Medicaid; the impact of surprise billing legislation; our transition to a hybrid revenue cycle management model; the timing and contribution of future acquisitions or organic growth initiatives; our ability to comply with the terms of our debt financing arrangements and our ability to replace, refinance or extend our current debt financing arrangements; the effects of our transformation initiatives, including our renewed focus, and growth strategy for, our hospital-based and maternal-fetal businesses; and other risks and uncertainties set forth under Part I, Item 1A. Risk Factors, of the 2025 Form 10-K as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC.
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