Acadia Healthcare Co., Inc. Q3 FY2024 earnings call

• Results and Key Highlights: Total revenue grew 8.7% driven by rate improvement and patient day growth. Adjusted EBITDA grew 10.5%. Underlying labor costs trended favorably. On pace to complete construction on ~1,200 beds this year, including nearly 700 beds in Q4 from new facilities.
• Quality Commitment: Mission is to provide compassionate care. Medical necessity drives patient care decisions. Average length of stay at Acadia's hospitals is in line with industry average. Facilities are highly regulated and subject to oversight.
• Legal Update: Received subpoenas, but Southern District of New York withdrew its request, and DOJ withdrew subpoenas from Western District of Missouri. Recently received SEC subpoena.
• Quality Focus: Spent ~$100 million on technology investments. Separated quality and compliance into distinct teams. Implemented quality dashboards and monthly quality reviews. In 2023, 81% of patients reported feeling hopeful.
• Expanding Access: Investing billions to expand access, with over 2,000 beds under construction. Closed two subscale satellite programs in Q3.

During the third quarter, total revenue was $816 million, representing an 8.7% growth over the third quarter of 2023, driven by rate improvement and patient day growth. Adjusted EBITDA grew 10.5% over the same quarter last year. Same facility revenue grew 8.6% compared with the third quarter of 2023, including patient day growth of 4.7% and an increase in revenue per patient day of 3.6%. Revenue per patient day, excluding the CTC business, increased 4.9%. Adjusted EBITDA for the third quarter of 2024 was $194.3 million, an increase of 10.5% over the prior year. Adjusted EBITDA margin was 23.8% compared with 23.4% for the same quarter last year, and on a same-facility basis, it increased to 29.7%.

Updated 2024 guidance: revenue in the range of $3.15 billion to $3.165 billion, adjusted EBITDA in the range of $725 million to $735 million, and adjusted earnings per diluted share in the range of $3.35 to $3.45. Fourth quarter same-facility volume growth expected to be ~3% to 4%, a reduction from previous expectations, impacting revenue and EBITDA by $20 million to $30 million and $10 million to $15 million respectively. Anticipates headwinds are temporary. Has a large pipeline of over 2,000 beds under construction, with ~1,000 beds expected to open in the next few months. Excludes contribution from Tennessee supplemental payment program.

Facing legal scrutiny with received subpoenas from U.S. Attorney's Office and courts, and potential additional requests from other federal agencies as investigations continue.

Q: Looking at referral sources on acute, have you seen any channel more impacted than others?

A: Chris Hunter said there aren't any specifically called out, they continue to be intentional about reaching out to all referral sources.

Q: Can you give an idea of normal patient-based seasonality throughout 4Q?

A: Heather Dixon said October is normally the strongest month in fourth quarter, with families potentially bringing someone home over holiday period impacting volumes.

Q: How has labor been trending in terms of wage inflation or turnover?

A: Heather Dixon said wage inflation has trended favorably, tracking below 5% and holding steady in the first nine months.

Q: Any update on Desert Hills and legal strategy?

A: Chris Hunter said can't comment on individual cases, but has bolstered legal team and hired Kirkland and Ellis, limited in what can be said publicly about ongoing investigations and cases.