Acadia Healthcare Reports Third Quarter 2023 Results and Updates Guidance Ranges to Reflect Continued Strong Business Growth and Momentum
Acadia Healthcare Company, Inc. (“Acadia”) (NASDAQ: ACHC) today announced financial results for the third quarter ended September 30, 2023.
Third Quarter Highlights
Revenue totaled $750.3 million, an increase of 12.5% over the third quarter of 2022 Same facility revenue increased 13.0% compared with the third quarter of 2022, including an increase in revenue per patient day of 6.6% and an increase in patient days of 6.0% Net loss attributable to Acadia totaled $217.7 million, or $2.39 per diluted share, including the impact of legal settlements expense of $394.2 million, less expected tax benefits Adjusted income attributable to Acadia was $83.9 million, or $0.91 per diluted share, excluding $0.04 of income from the Provider Relief Fund (“PRF”) established under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act Adjusted EBITDA was $175.9 million, an increase of 13.4% over the third quarter of 2022, excluding income from the PRF Continued progress on the execution of the Company’s growth strategy through opening two new hospitals with joint venture partners and two comprehensive treatment centers (“CTCs”)A reconciliation of all non-GAAP financial measures in this press release begins on page 9.
Third Quarter Results
Chris Hunter, Chief Executive Officer of Acadia, remarked, “Our results for the third quarter reflect our continued execution on our growth strategy as well as strong operational execution across all four of our business lines. Our dedicated employees and clinicians are addressing the nation’s critical need for safe, high-quality treatment for mental health and substance use issues.
“We produced strong financial results with impressive top line growth and favorable volume trends compared with the third quarter of 2022. We are pleased that the overall labor market is stabilizing with our base wage inflation continuing to decline. We expect the strategic technology investments we have made will further enhance our performance, drive efficiencies, and support strong clinical outcomes. Demand for our services is continuing to rise, and we are confident that we have a solid foundation and the right strategy in place to capitalize on this Demand and deliver significant, sustainable value creation.”
Strategic Investments for Long-Term Growth
During the third quarter of 2023, the Company continued to make progress in meeting its strategic growth objectives with the following accomplishments across its five defined growth pathways:
Facility Expansions – Added a total of 204 beds to existing facilities through the first nine months of the year, on track to meet the Company’s goal to add 300 beds by the end of 2023. De Novo Facilities – Opened two CTCs offering medication-assisted treatment for patients dealing with opioid use disorder, bringing Acadia’s total to four CTCs opened this year. The Company expects to meet its objective of adding a total of six CTCs in 2023. Additionally, the Company remains on track to open two de novo acute inpatient hospitals by the end of the year – the renovated 101-bed adult hospital and outpatient facility are part of the Montrose Behavioral Health Hospital in Chicago, Illinois, as well as an 80-bed inpatient hospital, Coachella Valley Behavioral Health, in Indio, California. Joint Ventures – Opened two new behavioral health hospitals with joint venture partners, Bronson Healthcare in Michigan, and Geisinger in Pennsylvania, early in the third quarter. These facilities have made favorable progress to date as they continue to ramp up admissions. The Company also broke ground and commenced construction in early November on the previously announced behavioral health hospital with joint venture partner ECU Health, eastern North Carolina’s premier health system. Acadia has 20 joint venture partnerships for 21 hospitals, with 11 hospitals already in operation and 10 additional hospitals expected to open over the next few years. Acquisitions – Announced a definitive agreement to acquire Turning Point Centers, a 76-bed specialty provider of substance use disorder and primary mental health treatment services that supports the Salt Lake City, Utah, metropolitan market. The transaction is expected to close by the end of the year. Extend Continuum of Care – Expanded treatment options by adding three outpatient programs during the third quarter, bringing Acadia’s total to 26 outpatient programs added during the nine months ended September 30, 2023. These programs include Partial Hospitalization Programs (PHP), Intensive Outpatient Programs (IOP) or virtual services.Cash and Liquidity
Acadia has a strong financial position with sufficient capital to make strategic investments in its business. As of September 30, 2023, the Company had $99.6 million in cash and cash equivalents and $520 million available under its $600 million revolving credit facility with a net leverage ratio of approximately 2.0x.
Litigation Resolution
As described in the Form 8-K the Company filed on October 30, 2023, Acadia entered into settlement agreements with the respective plaintiffs across the three cases related to the previously disclosed litigation in New Mexico. Under the terms of these settlement agreements, which are subject to approval by the New Mexico State District Court, and which fully resolve each of the cases and include no admission or finding of liability by Acadia or Desert Hills, the Company will pay an aggregate amount of $400 million in exchange for the release and discharge of all related claims. The Company currently intends to pay the funds from a combination of insurance, cash on hand and existing credit lines.
Looking Ahead
Hunter concluded, “The World Health Organization recently recognized the importance of mental health as a universal human right. This theme is fundamental to Acadia’s mission, and our focus of ensuring access to industry-leading, high-quality care for all those in need of our services. As the nation’s largest stand-alone behavioral health provider, we are committed to applying our recognized scale and expertise to help set the standards for care that address the escalating demand for behavioral health and substance use treatment. We continue to look for opportunities and innovation that support patients across the continuum of care and help to expand the scope of those we serve. Our results to date demonstrate our ability to execute our strategy with favorable results, and we believe 2024 will be another year of impressive growth and progress for Acadia. We are proud of the work we are doing and are committed to providing safe, quality care for the patients, families and communities we serve and creating long-term value for our stockholders.”
Financial Guidance
Acadia today adjusted its previously announced financial guidance for 2023 for the following:
2023 Guidance Range
Revenue
$2.90 to $2.92 billion
Adjusted EBITDA, excluding income from the PRF
$665 to $675 million
Adjusted earnings per diluted share, excluding income from the PRF
$3.33 to $3.43
Expansion capital expenditures
$300 to $350 million
The Company affirmed the previously announced financial guidance for the following:
Interest expense
$82 to $85 million
Tax rate
25% to 26%
Depreciation and amortization expense
$125 to $135 million
Stock compensation expense
$30 to $35 million
Operating cash flows
$450 to $500 million
Maintenance capital expenditures
$40 to $50 million
IT capital expenditures
$35 to $45 million
The Company’s guidance does not include the impact of any future acquisitions, divestitures, transaction-related expenses, legal settlements expense or recognition of additional income from the CARES Act.
Conference Call
Acadia will hold a conference call to discuss its third quarter financial results at 8:00 a.m. Central Time/9:00 a.m. Eastern Time on Friday, November 3, 2023. 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 for 30 days.
About Acadia
Acadia is a leading provider of behavioral healthcare services across the United States. As of September 30, 2023, Acadia operated a network of 253 behavioral healthcare facilities with approximately 11,100 beds in 39 states and Puerto Rico. With approximately 23,000 employees serving more than 75,000 patients daily, Acadia is the largest stand-alone behavioral healthcare company in the U.S. 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) potential difficulties in successfully integrating the operations of acquired facilities or realizing the expected benefits and synergies of our facility expansions, acquisitions, joint ventures and de novo transactions; (ii) Acadia’s ability to add beds, expand services, enhance marketing programs and improve efficiencies at its facilities; (iii) potential reductions in payments received by Acadia from government and commercial payors; (iv) the occurrence of patient incidents, governmental investigations, litigation and adverse regulatory actions, which could adversely affect the price of our common stock and result in substantial payments and incremental regulatory burdens; (v) the risk that Acadia may not generate sufficient cash from operations to service its debt and meet its working capital and capital expenditure requirements; (vi) potential disruptions to our information technology systems or a cybersecurity incident; and (vii) potential operating difficulties, including, without limitation, disruption to the U.S. economy and financial markets; reduced admissions and patient volumes; increased costs relating to labor, supply chain and other expenditures; changes in competition and client preferences; 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 periodic reports and other filings with the SEC.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
(In thousands, except per share amounts)
Revenue$
750,334
$
666,732
$
2,185,938
$
1,935,104
Salaries, wages and benefits (including equity-based compensation expense of $8,163, $7,240, $23,140 and $21,745, respectively)
394,150
352,582
1,171,960
1,027,732
Professional fees
45,540
40,367
130,468
117,718
Supplies
27,147
25,570
79,312
74,291
Rents and leases
11,731
11,339
34,880
33,780
Other operating expenses
104,048
88,993
290,798
255,355
Income from provider relief fund
(4,442
)
(7,656
)
(4,442
)
(16,206
)
Depreciation and amortization
33,388
29,573
96,969
87,627
Interest expense, net
20,742
18,003
61,651
50,355
Legal settlements expense
394,181
—
394,181
—
Loss on impairment
—
—
8,694
—
Transaction-related expenses
11,247
10,859
26,792
18,381
Total expenses
1,037,732
569,630
2,291,263
1,649,033
(Loss) income before income taxes
(287,398
)
97,102
(105,325
)
286,071
(Benefit from) provision for income taxes
(71,873
)
24,056
(29,907
)
69,183
Net (loss) income
(215,525
)
73,046
(75,418
)
216,888
Net income attributable to noncontrolling interests
(2,185
)
(1,947
)
(3,978
)
(4,873
)
Net (loss) income attributable to Acadia Healthcare Company, Inc.$
(217,710
)
$
71,099
$
(79,396
)
$
212,015
(Loss) earnings per share attributable to Acadia Healthcare Company, Inc. stockholders: Basic
$
(2.39
)
$
0.79
$
(0.87
)
$
2.37
Diluted
$
(2.39
)
$
0.78
$
(0.87
)
$
2.31
Weighted-average shares outstanding: Basic
91,168
89,833
90,852
89,607
Diluted
91,168
91,723
90,852
91,668
Acadia Healthcare Company, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30,
December 31,
2023
2022
(In thousands)
ASSETS Current assets: Cash and cash equivalents$
99,591
$
97,649
Accounts receivable, net
362,666
322,439
Other current assets
241,218
86,037
Total current assets
703,475
506,125
Property and equipment, net
2,145,599
1,952,045
2,225,962
2,222,805
Intangible assets, net
73,811
76,041
Deferred tax assets
2,850
2,950
Operating lease right-of-use assets
122,090
135,238
Other assets
72,431
92,697
Total assets$
5,346,218
$
4,987,901
LIABILITIES AND EQUITY Current liabilities: Current portion of long-term debt$
26,563
$
21,250
Accounts payable
149,874
104,723
Accrued salaries and benefits
122,264
125,298
Current portion of operating lease liabilities
26,242
26,463
Other accrued liabilities
539,947
110,592
Total current liabilities
864,890
388,326
Long-term debt
1,349,954
1,364,541
Deferred tax liabilities
70,450
92,588
Operating lease liabilities
104,873
116,429
Other liabilities
145,907
125,033
Total liabilities
2,536,074
2,086,917
Redeemable noncontrolling interests
97,582
88,257
Equity: Common stock
912
899
Additional paid-in capital
2,637,658
2,658,440
Retained earnings
73,992
153,388
Total equity
2,712,562
2,812,727
Total liabilities and equity$
5,346,218
$
4,987,901
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
2023
2022
(In thousands)
Operating activities: Net (loss) income$
(75,418
)
$
216,888
Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization
96,969
87,627
Amortization of debt issuance costs
2,485
2,440
Equity-based compensation expense
23,140
21,745
Deferred income taxes
(21,655
)
20,176
Legal settlements expense
394,181
—
Loss on impairment
8,694
—
Other
1,423
2,422
Change in operating assets and liabilities, net of effect of acquisitions: Accounts receivable, net
(40,227
)
(35,538
)
Other current assets
(77,165
)
(28,692
)
Other assets
309
3,373
Accounts payable and other accrued liabilities
23,057
7,729
Accrued salaries and benefits
(3,038
)
(8,831
)
Other liabilities
17,723
10,303
Government relief funds
(4,442
)
(32,617
)
Net cash provided by operating activities
346,036
267,025
Investing activities: Cash paid for acquisitions, net of cash acquired
(349
)
—
Cash paid for capital expenditures
(285,410
)
(208,792
)
Proceeds from sale of property and equipment
633
1,784
Other
(1,925
)
(6,802
)
Net cash used in investing activities
(287,051
)
(213,810
)
Financing activities: Borrowings on revolving credit facility
40,000
—
Principal payments on revolving credit facility
(35,000
)
(85,000
)
Principal payments on long-term debt
(15,938
)
(13,281
)
Repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises
(45,193
)
(7,541
)
Contributions from noncontrolling partners in joint ventures
2,538
13,178
Distributions to noncontrolling partners in joint ventures
(3,480
)
(1,004
)
Other
30
39
Net cash used in financing activities
(57,043
)
(93,609
)
Net increase (decrease) in cash and cash equivalents
1,942
(40,394
)
Cash and cash equivalents at beginning of the period
97,649
133,813
Cash and cash equivalents at end of the period
$
99,591
$
93,419
Effect of acquisitions: Assets acquired, excluding cash
$
6,766
$
—
Liabilities assumed
(128
)
—
Redeemable noncontrolling interest resulting from an acquisition
(6,289
)
—
Cash paid for acquisitions, net of cash acquired
$
349
$
—
Acadia Healthcare Company, Inc.
Operating Statistics
(Unaudited, Revenue in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
%
Change
2023
2022
%
Change
Same Facility Results (1) Revenue$
744,868
$
659,336
13.0
%
$
2,161,096
$
1,920,229
12.5
%
Patient Days
774,996
731,282
6.0
%
2,285,467
2,160,232
5.8
%
Admissions
49,658
47,260
5.1
%
147,734
139,430
6.0
%
Average Length of Stay (2)
15.6
15.5
0.9
%
15.5
15.5
-0.1
%
Revenue per Patient Day$
961
$
902
6.6
%
$
946
$
889
6.4
%
Adjusted EBITDA margin (3)
29.8
%
29.6
%
20 bps
29.1
%
28.8
%
30 bps Adjusted EBITDA margin excluding income from provider relief fund
29.2
%
28.4
%
80 bps
28.9
%
28.0
%
90 bps Facility Results Revenue$
750,334
$
666,732
12.5
%
$
2,185,938
$
1,935,104
13.0
%
Patient Days
779,296
738,702
5.5
%
2,306,109
2,179,805
5.8
%
Admissions
50,302
47,692
5.5
%
150,237
139,930
7.4
%
Average Length of Stay (2)
15.5
15.5
0.0
%
15.3
15.6
-1.5
%
Revenue per Patient Day$
963
$
903
6.7
%
$
948
$
888
6.8
%
Adjusted EBITDA margin (3)
28.7
%
28.7
%
0 bps
28.0
%
28.3
%
-30 bps Adjusted EBITDA margin excluding income from provider relief fund
28.1
%
27.5
%
60 bps
27.8
%
27.4
%
40 bps (1) Same facility results for the periods presented include facilities we have operated for more than one year and exclude certain closed services. (2) Average length of stay is defined as patient days divided by admissions. (3) For each of the three and nine months ended September 30, 2023, includes income from provider relief fund of $4.4 million. For the three and nine months ended September 30, 2022, includes income from provider relief fund of $7.7 million and $16.2 million, respectively.Acadia Healthcare Company, Inc.
Reconciliation of Net (Loss) Income Attributable to Acadia Healthcare Company, Inc. to Adjusted EBITDA
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
(in thousands)
Net (loss) income attributable to Acadia Healthcare Company, Inc.$
(217,710
)
$
71,099
$
(79,396
)
$
212,015
Net income attributable to noncontrolling interests
2,185
1,947
3,978
4,873
(Benefit from) provision for income taxes
(71,873
)
24,056
(29,907
)
69,183
Interest expense, net
20,742
18,003
61,651
50,355
Depreciation and amortization
33,388
29,573
96,969
87,627
EBITDA
(233,268
)
144,678
53,295
424,053
Adjustments: Equity-based compensation expense (a)
8,163
7,240
23,140
21,745
Transaction-related expenses (b)
11,247
10,859
26,792
18,381
Legal settlements expense (c)
394,181
—
394,181
—
Loss on impairment (d)
—
—
8,694
—
Adjusted EBITDA
$
180,323
$
162,777
$
506,102
$
464,179
Adjusted EBITDA margin
24.0
%
24.4
%
23.2
%
24.0
%
Adjusted EBITDA excluding income from provider relief fund$
175,881
$
155,121
$
501,660
$
447,973
Adjusted EBITDA margin excluding income from provider relief fund
23.4
%
23.3
%
22.9
%
23.1
%
See footnotes on page 11.Acadia Healthcare Company, Inc.
Reconciliation of Net (Loss) Income Attributable to Acadia Healthcare Company, Inc. to
Adjusted Income Attributable to Acadia Healthcare Company, Inc.
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
(in thousands, except per share amounts)
Net (loss) income attributable to Acadia Healthcare Company, Inc.$
(217,710
)
$
71,099
$
(79,396
)
$
212,015
Adjustments to income: Transaction-related expenses (b)
11,247
10,859
26,792
18,381
Legal settlements expense (c)
394,181
—
394,181
—
Loss on impairment (d)
—
—
8,694
—
(Benefit from) provision for income taxes
(71,873
)
24,056
(29,907
)
69,183
Adjusted income before income taxes attributable to Acadia Healthcare Company, Inc.
115,845
106,014
320,364
299,579
Income tax effect of adjustments to Income (e)
28,756
27,148
79,947
76,662
Adjusted income attributable to Acadia Healthcare Company, Inc.
87,089
78,866
240,417
222,917
Income from provider relief fund, net of taxes
(3,237
)
(5,579
)
(3,237
)
(11,809
)
Adjusted income attributable to Acadia Healthcare Company, Inc. excluding income from provider relief fund$
83,852
$
73,287
$
237,180
$
211,108
Weighted-average shares outstanding - diluted (f)
91,655
91,723
91,684
91,668
Adjusted income attributable to Acadia Healthcare Company, Inc. per diluted share
$
0.95
$
0.86
$
2.62
$
2.43
Income from provider relief fund, net of taxes, per diluted share
(0.04
)
(0.06
)
(0.04
)
(0.13
)
Adjusted income attributable to Acadia Healthcare Company, Inc., excluding income from provider relief fund, per diluted share$
0.91
$
0.80
$
2.58
$
2.30
See footnotes on page 11.
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