Acadia Healthcare Reports Third Quarter 2020 Results
Acadia Healthcare Company, Inc. (NASDAQ: ACHC) today announced financial results for the quarter ended September 30, 2020, and provided guidance for the fourth quarter of 2020.
The Company reported revenue of $833.3 million for the third quarter of 2020, compared with $777.3 million for the third quarter of 2019. Net income attributable to Acadia stockholders for the third quarter of 2020 was $37.0 million, or $0.42 per diluted share, compared to net income of $42.6 million, or $0.48 per diluted share, for the same period in 2019.
Results for the third quarter of 2020 include a reversal of $18.1 million in other income recorded in the second quarter of 2020 related to the Provider Relief Fund (“PRF”) established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The Company’s decision to reverse this income was based on additional guidance issued by the U.S. Department of Health and Human Services (“HHS”). The Company received $12.8 million of additional general distributions from the PRF in the third quarter of 2020 and has received cumulative total distributions of approximately $32.5 million, which are recorded in other accrued liabilities on the Company’s balance sheet at September 30, 2020, pending the Company’s final review of HHS guidance.
Debbie Osteen, Chief Executive Officer of Acadia, remarked, “We are pleased with our financial and operating performance for the third quarter, reflecting strong demand for our behavioral health services. The ongoing challenges and uncertainties related to the COVID-19 global pandemic have had a profound impact on everyone’s lives, especially for the more vulnerable populations served by Acadia. We commend the work of our dedicated employees across our operations, who have worked hard to meet this demand and provide quality care in a safe environment. Acadia is well positioned to address the needs of those seeking treatment for mental health and substance use issues. We expect demand for our services will continue to increase as the mental and emotional toll caused by economic and societal concerns persists and more individuals across our markets look to Acadia for the highest quality of patient care.”
Acadia’s consolidated adjusted EBITDA for the third quarter of 2020 was $159.4 million, compared to $146.6 million for the third quarter of 2019. Excluding the reversal of the CARES Act income, consolidated adjusted EBITDA was $177.5 million. Adjusted income attributable to Acadia stockholders per diluted share was $0.68 for the third quarter of 2020.
Adjusted results for the third quarter of 2020 exclude loss on impairment of $20.2 million, transaction-related expenses of $8.5 million and the income tax effect of adjustments to income of $(5.4) million. Adjusted results for the third quarter of 2019 exclude transaction-related expenses of $5.8 million and the income tax effect of adjustments to income of $(2.4) million. A reconciliation of all non-GAAP financial results in this press release appears beginning on page 8.
U.S. same facility revenue increased 7.5% with a 4.2% increase in patient days and a 3.1% increase in revenue per patient day, compared to the third quarter last year. U.S. same facility EBITDA margin increased 50 basis points to 25.7%.
For the U.K. operations, same facility revenue increased 2.7% from the third quarter last year, reflecting a 2.8% increase in revenue per patient day, offset by a 0.1% decrease in patient days. Same facility patient days recovered to pre-COVID levels in the beginning of the third quarter and continued to increase throughout the quarter. U.K. same facility EBITDA margin increased 50 basis points to 17.2%.
Osteen continued, “During the third quarter, we continued to make meaningful improvement in almost every facet of our business. Our financial results for the third quarter reflect the cost management initiatives we have implemented in 2019 and 2020. We remain focused on managing our operations efficiently, while following strict protocol measures to ensure a safe environment for our employees, patients and their families. At the same time, we have continued to make the necessary investments in our facilities to support further growth opportunities through additional service offerings and bed expansions. During the quarter, we added 100 beds to our U.S. operations, bringing our total to 206 new bed additions in 2020. We announced the opening of our new 144-bed behavioral health facility, Tower Behavioral Health, in Pennsylvania with our joint venture partner, Tower Health. In the U.K., we continued to drive operational improvements and make investments in the retooling of beds.
“As previously announced, we recently relaunched the formal process regarding the potential sale of our U.K. business. Our objective continues to be maximizing value for our stockholders. As we continue to work with our financial and legal advisors, we will update the market on the sales process when and as we determine it is appropriate,” added Osteen.
Cash and Liquidity
Acadia’s balance sheet remains strong with ample liquidity and capital to invest in and grow its business. As of September 30, 2020, the Company had $339 million in cash and cash equivalents. The Company also has full availability under its $500 million revolving credit facility.
Financial Guidance
Acadia today established its financial guidance for the fourth quarter of 2020, as follows:
Revenue in a range of $810 million to $835 million; Adjusted EBITDA in a range of $160 million to $165 million; and Adjusted earnings per diluted share in a range of $0.68 to $0.72.The Company’s guidance does not include the impact of any future acquisitions or transaction-related expenses.
“We are optimistic about the opportunities ahead for Acadia, as we focus on our primary objective to support our patients with safe and quality care. Our performance reflects solid execution of our growth strategy amidst a challenging environment. We will continue to pursue our strategy to further enhance our position as a leading provider of behavioral healthcare services,” concluded Osteen.
Acadia will hold a conference call to discuss its third quarter financial results at 9:00 a.m. Eastern Time on Friday, October 30, 2020. A live webcast of the conference call will be available at www.acadiahealthcare.com in the “Investors” section of the website. The webcast of the conference call will be available through November 13, 2020.
About Acadia
Acadia is a leading provider of behavioral healthcare services. As of September 30, 2020, Acadia operated a network of 582 behavioral healthcare facilities with approximately 18,300 beds in 40 states, the United Kingdom and Puerto Rico. Acadia provides behavioral healthcare services to its patients in a variety of settings, including inpatient psychiatric hospitals, specialty treatment facilities, residential treatment centers and outpatient clinics.
Forward-Looking Information
This press release contains forward-looking statements. Generally, words such as “may,” “will,” “should,” “could,” “anticipate,” “expect,” “intend,” “estimate,” “plan,” “continue,” and “believe” or the negative of or other variation on these and other similar expressions identify forward-looking statements. These forward-looking statements are made only as of the date of this press release. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements are based on current expectations and involve risks and uncertainties and our future results could differ significantly from those expressed or implied by our forward-looking statements. Factors that may cause actual results to differ materially include, without limitation, (i) the impact of the COVID-19 pandemic, including, without limitation, disruption to the U.S. and U.K. economies and financial markets; reduced admissions and patient volumes; increased costs relating to labor, supply chain and other expenditures; and difficulty in collecting patient accounts receivable due to increases in the unemployment rate and the number of underinsured and uninsured patients; (ii) potential difficulties operating our business in light of political and economic instability in the U.K. and globally relating to the U.K.’s departure from the European Union; (iii) the impact of fluctuations in foreign exchange rates, including the devaluation of the British Pound Sterling (GBP) relative to the U.S. Dollar (USD); (iv) Acadia’s efforts to sell its U.K. operations may not result in any definitive transaction or enhance stockholder value; (v) potential difficulties in successfully integrating the operations of acquired facilities or realizing the expected benefits and synergies of our acquisitions, joint ventures and de novo transactions; (vi) Acadia’s ability to add beds, expand services, enhance marketing programs and improve efficiencies at its facilities; (vii) potential reductions in payments received by Acadia from government and third-party payors; (viii) the occurrence of patient incidents, governmental investigations and adverse regulatory actions, which could adversely affect the price of our common stock and result in substantial payments and incremental regulatory burdens; (ix) the risk that Acadia may not generate sufficient cash from operations to service its debt and meet its working capital and capital expenditure requirements; and (x) potential operating difficulties, labor costs, client preferences, changes in competition and general economic or industry conditions that may prevent Acadia from realizing the expected benefits of its business strategies. These factors and others are more fully described in Acadia’s Annual Report on Form 10-K for the year ended December 31, 2019, and subsequent periodic reports and other filings with the SEC.
2020
2019
2020
2019
(In thousands, except per share amounts) Revenue$
833,304
$
777,251
2,366,425
$
2,327,230
Salaries, wages and benefits (including equity-based compensation expense of $5,471, $4,039, $16,258 and $14,322, respectively)
450,459
428,601
1,318,378
1,288,399
Professional fees
61,359
62,152
183,273
177,588
Supplies
31,207
30,790
93,302
91,661
Rents and leases
21,182
20,134
62,833
60,860
Other operating expenses
97,093
92,975
288,222
281,517
Other income
18,070
-
-
-
Depreciation and amortization
42,912
40,620
126,037
122,277
Interest expense, net
37,553
46,644
119,064
143,384
Debt extinguishment costs
-
-
3,271
-
Loss on impairment
20,239
-
20,239
-
Transaction-related expenses
8,503
5,775
17,293
15,308
Total expenses
788,577
727,691
2,231,912
2,180,994
Income before income taxes
44,727
49,560
134,513
146,236
Provision for income taxes
7,166
6,837
21,171
25,801
Net income
37,561
42,723
113,342
120,435
Net income attributable to noncontrolling interests
(563
)
(157
)
(1,802
)
(258
)
Net income attributable to Acadia Healthcare Company, Inc.$
36,998
$
42,566
$
111,540
$
120,177
Earnings per share attributable to Acadia Healthcare Company, Inc. stockholders: Basic
$
0.42
$
0.49
$
1.27
$
1.37
Diluted
$
0.42
$
0.48
$
1.26
$
1.37
Weighted-average shares outstanding: Basic
87,911
87,649
87,849
87,591
Diluted
88,856
87,859
88,449
87,805
2020
2019
(In thousands) ASSETS Current assets: Cash and cash equivalents$
338,702
$
124,192
Accounts receivable, net
333,231
339,775
Other current assets
84,477
78,244
Total current assets
756,410
542,211
Property and equipment, net
3,253,720
3,224,034
Goodwill
2,460,722
2,449,131
Intangible assets, net
90,023
90,357
Deferred tax assets
3,242
3,339
Operating lease right-of-use assets
464,596
501,837
Other assets
76,432
68,233
Total assets
$
7,105,145
$
6,879,142
LIABILITIES AND EQUITY Current liabilities: Current portion of long-term debt
$
50,858
$
43,679
Accounts payable
130,395
127,045
Accrued salaries and benefits
138,476
122,552
Current portion of operating lease liabilities
30,433
29,140
Other accrued liabilities
251,177
141,160
Total current liabilities
601,339
463,576
Long-term debt
3,067,243
3,105,420
Deferred tax liabilities
104,351
71,860
Operating lease liabilities
477,355
502,252
Derivative instrument liabilities
39,859
68,915
Other liabilities
153,812
128,587
Total liabilities
4,443,959
4,340,610
Redeemable noncontrolling interests
54,547
33,151
Equity: Common stock
879
877
Additional paid-in capital
2,572,587
2,557,642
Accumulated other comprehensive loss
(440,113
)
(414,884
)
Retained earnings
473,286
361,746
Total equity
2,606,639
2,505,381
Total liabilities and equity
$
7,105,145
$
6,879,142
2020
2019
(In thousands) Operating activities: Net income$
113,342
$
120,435
Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization
126,037
122,277
Amortization of debt issuance costs
9,696
8,926
Equity-based compensation expense
16,258
14,322
Deferred income taxes
41,803
5,150
Debt extinguishment costs
3,271
-
Loss on impairment
20,239
-
Other
810
4,444
Change in operating assets and liabilities: Accounts receivable, net
5,392
(32,956
)
Other current assets
(3,809
)
(3,912
)
Other assets
316
530
Accounts payable and other accrued liabilities
90,752
(35,610
)
Accrued salaries and benefits
16,477
4,813
Other liabilities
31,656
5,110
Net cash provided by operating activities
472,240
213,529
Investing activities: Cash paid for acquisitions, net of cash acquired
-
(44,900
)
Cash paid for capital expenditures
(195,834
)
(202,722
)
Cash paid for real estate acquisitions
(5,595
)
(6,976
)
Proceeds from sale of property and equipment
2,509
13,470
Settlement of foreign currency derivatives
-
105,008
Other
(10,734
)
(1,072
)
Net cash used in investing activities
(209,654
)
(137,192
)
Financing activities: Borrowings on long-term debt
450,000
-
Borrowings on revolving credit facility
100,000
76,573
Principal payments on revolving credit facility
(100,000
)
(76,573
)
Principal payments on long-term debt
(31,863
)
(24,738
)
Repayment of long-term debt
(450,000
)
-
Payment of debt issuance costs
(11,220
)
-
Common stock withheld for minimum statutory taxes, net
(1,311
)
(1,498
)
Distributions to noncontrolling interests
(653
)
-
Other
(3,517
)
(5,923
)
Net cash used in financing activities
(48,564
)
(32,159
)
Effect of exchange rate changes on cash
488
(1,788
)
Net increase in cash and cash equivalents
214,510
42,390
Cash and cash equivalents at beginning of the period
124,192
50,510
Cash and cash equivalents at end of the period
$
338,702
$
92,900
Effect of acquisitions: Assets acquired, excluding cash
$
20,300
$
48,594
Liabilities assumed
(53
)
(3,694
)
Redeemable noncontrolling interest resulting from an acquisition
(20,247
)
-
Cash paid for acquisitions, net of cash acquired
$
-
$
44,900
2020
2019
% Change2020
2019
% Change Same Facility Results (a,c) Revenue$
808,708
$
763,619
5.9
%
$
2,286,165
$
2,243,145
1.9
%
Patient Days
1,187,848
1,160,582
2.3
%
3,455,645
3,442,064
0.4
%
Admissions
47,256
46,930
0.7
%
134,872
136,828
-1.4
%
Average Length of Stay (b)
25.1
24.7
1.6
%
25.6
25.2
1.9
%
Revenue per Patient Day$
681
$
658
3.5
%
$
662
$
652
1.5
%
EBITDA margin
22.9
%
22.3
%
60 bps
22.4
%
22.8
%
-40 bps
U.S. Same Facility Results (a) Revenue$
546,357
$
508,150
7.5
%
$
1,538,309
$
1,497,584
2.7
%
Patient Days
685,472
657,556
4.2
%
1,980,304
1,938,588
2.2
%
Admissions
44,724
44,522
0.5
%
128,352
129,747
-1.1
%
Average Length of Stay (b)
15.3
14.8
3.8
%
15.4
14.9
3.3
%
Revenue per Patient Day$
797
$
773
3.1
%
$
777
$
773
0.6
%
EBITDA margin
25.7
%
25.2
%
50 bps
25.8
%
25.7
%
10 bps
U.K. Same Facility Results (a,c) Revenue$
262,351
$
255,469
2.7
%
$
747,856
$
745,561
0.3
%
Patient Days
502,376
503,026
-0.1
%
1,475,341
1,503,476
-1.9
%
Admissions
2,532
2,408
5.1
%
6,520
7,081
-7.9
%
Average Length of Stay (b)
198.4
208.9
-5.0
%
226.3
212.3
6.6
%
Revenue per Patient Day$
522
$
508
2.8
%
$
507
$
496
2.2
%
EBITDA margin
17.2
%
16.7
%
50 bps
15.5
%
16.9
%
-140 bps
U.S. Facility Results Revenue$
547,961
$
509,383
7.6
%
$
1,548,653
$
1,507,156
2.8
%
Patient Days
689,402
663,969
3.8
%
1,995,922
1,960,749
1.8
%
Admissions
44,877
44,693
0.4
%
129,638
130,098
-0.4
%
Average Length of Stay (b)
15.4
14.9
3.4
%
15.4
15.1
2.2
%
Revenue per Patient Day$
795
$
767
3.6
%
$
776
$
769
0.9
%
EBITDA margin
25.3
%
24.9
%
40 bps
25.4
%
25.3
%
10 bps
U.K. Facility Results (c) Revenue$
285,343
$
280,579
1.7
%
$
817,772
$
818,465
-0.1
%
Patient Days
649,522
673,473
-3.6
%
1,939,840
2,009,006
-3.4
%
Admissions
2,828
2,749
2.9
%
7,494
8,160
-8.2
%
Average Length of Stay (b)
229.7
245.0
-6.3
%
258.9
246.2
5.1
%
Revenue per Patient Day$
439
$
417
5.4
%
$
422
$
407
3.5
%
EBITDA margin
15.2
%
15.2
%
0 bps
13.6
%
15.4
%
-180 bps
Total Facility Results (c) Revenue$
833,304
$
789,962
5.5
%
$
2,366,425
$
2,325,621
1.8
%
Patient Days
1,338,924
1,337,442
0.1
%
3,935,762
3,969,755
-0.9
%
Admissions
47,705
47,442
0.6
%
137,132
138,258
-0.8
%
Average Length of Stay (b)
28.1
28.2
-0.4
%
28.7
28.7
0.0
%
Revenue per Patient Day$
622
$
591
5.4
%
$
601
$
586
2.6
%
EBITDA margin
21.8
%
21.5
%
30 bps
21.3
%
21.8
%
-50 bps
(a) Results for the periods presented exclude the elderly care division of our U.K. operations and certain closed services. (b) Average length of stay is defined as patient days divided by admissions. (c) Revenue and revenue per patient day for the three and nine months ended September 30, 2019 is adjusted to reflect the foreign currency exchange rate for the comparable periods of 2020 in order to eliminate the effect of changes in the exchange rate. The exchange rate used in the adjusted revenue and revenue per patient day amounts for the three and nine months ended September 30, 2019 is 1.29 and 1.27, respectively.2020
2019
2020
2019
(in thousands) Net income attributable to Acadia Healthcare Company, Inc.$
36,998
$
42,566
$
111,540
$
120,177
Net income attributable to noncontrolling interests
563
157
1,802
258
Provision for income taxes
7,166
6,837
21,171
25,801
Interest expense, net
37,553
46,644
119,064
143,384
Depreciation and amortization
42,912
40,620
126,037
122,277
EBITDA
125,192
136,824
379,614
411,897
Adjustments: Equity-based compensation expense (a)
5,471
4,039
16,258
14,322
Transaction-related expenses (b)
8,503
5,775
17,293
15,308
Debt extinguishment costs (c)
-
-
3,271
-
Loss on impairment (d)
20,239
-
20,239
-
Adjusted EBITDA
$
159,405
$
146,638
$
436,675
$
441,527
Adjusted EBITDA margin
19.1
%
18.9
%
18.5
%
19.0
%
See footnotes on page 10.2020
2019
2020
2019
(in thousands, except per share amounts) Net income attributable to Acadia Healthcare Company, Inc.$
36,998
$
42,566
$
111,540
$
120,177
Adjustments to income: Transaction-related expenses (b)
8,503
5,775
17,293
15,308
Debt extinguishment costs (c)
-
-
3,271
-
Loss on impairment (d)
20,239
-
20,239
-
Income tax effect of adjustments to income (e)
(5,396
)
(2,371
)
(7,201
)
(1,384
)
Adjusted income attributable to Acadia Healthcare Company, Inc.$
60,344
$
45,970
$
145,142
$
134,101
Weighted-average shares outstanding - diluted
88,856
87,859
88,449
87,805
Adjusted income attributable to Acadia Healthcare Company, Inc. per diluted share
$
0.68
$
0.52
$
1.64
$
1.53
See footnotes on page 10.
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