Acadia Healthcare Company, Inc. Q4 FY2025 earnings call

Debbie Osteen returned as CEO, emphasizing stability, execution, and clear communication. Key priorities include reviewing management quality at all levels, returning to fundamentals with tighter operating focus, evaluating new hospital openings, expanding through joint ventures, and shifting focus to operational excellence post expansion. Todd Young reviewed financial results, discussing revenue growth, adjusted EBITDA, CapEx, and development activity. He also outlined the 2026 outlook, including revenue, adjusted EBITDA, EPS, bed adds, start-up losses, and the impact of the New York Medicaid change.

Fourth quarter revenue was $821.5 million, representing a 6.1% increase over the prior year. Adjusted EBITDA for the quarter was $99.8 million. For the full year 2025, revenue was $3.31 billion, an increase of 5% over the prior year, and adjusted EBITDA was $608.9 million. Same-facility revenue grew 4.4% year-over-year in the fourth quarter, driven by a 1.3% increase in revenue per patient day and a 3.1% increase in patient days. In the fourth quarter, there were $12.8 million in start-up losses related to newly opened facilities. CapEx in the fourth quarter was $93 million, and total CapEx for 2025 was $572 million. During the fourth quarter, 181 beds were added, and for the full year 2025, 1,089 beds were added. For 2026, Acadia expects to add between 400 and 600 new beds. The 2026 full year revenue is expected to be between $3.37 billion and $3.45 billion, adjusted EBITDA between $575 million and $610 million, and adjusted EPS between $1.30 and $1.55. First quarter 2026 revenue is expected to fall between $820 million and $830 million, and adjusted EBITDA between $130 million and $137 million.

For 2026, full year revenue is expected to be between $3.37 billion and $3.45 billion. Adjusted EBITDA is projected to be in the range of $575 million to $610 million, and adjusted EPS is expected to be between $1.30 and $1.55. The first quarter of 2026 revenue is anticipated to be between $820 million and $830 million, with adjusted EBITDA between $130 million and $137 million. Acadia expects full year same-facility volume growth between 0% and 1% in 2026, driven by ramping beds but partially offset by the New York Medicaid program change. There is a 2% to 3% expected increase in same-facility revenue per patient day in 2026. Start-up losses are expected to be in the range of $47 million to $53 million in 2026. The closure of facilities in 2025 is expected to create a $9 million tailwind to 2026 adjusted EBITDA. The State of New York's decision is estimated to have a $25 million to $30 million annual EBITDA impact. PLGL expense is expected to range between $100 million and $110 million in 2026, and Acadia anticipates positive free cash flow with CapEx declining to a range of $255 million to $280 million.

Regulatory matters are ongoing with cooperation. The impact of the New York Medicaid policy change on EBITDA. Potential effects from California's staffing requirements. Risks associated with medical malpractice and lawsuits, although efforts are being made to reduce opportunities. Issues with DSO and cash collection, including slower payments in some states and denials.

Q: Update on the value creation review.

A: It's ongoing, focused on short-term and long-term value, looking at service lines to create shareholder value.

Q: Thoughts on the growth algorithm.

A: Demand is strong, no reason to think the growth algorithm is different.

Q: Time frame to realize $200 million incremental EBITDA.

A: Inside 5 years, based on increasing occupancy at new facilities.

Q: Pressure from managed Medicaid on length of stay.

A: Advocate for patients, have strong relationships with payers, New York Medicaid has an impact on length of stay.

Q: Bed closures and net beds.

A: Accelerated pace of closures is behind, focus on operating existing portfolio, only consider closures if no path to viability.

Q: Rebuilding trust with referral sources.

A: Focus on delivering quality care, outcome data helps in building trust with referral sources.

Q: Long-term CapEx cadence.

A: CapEx will be reduced in 2026, evaluate markets with high demand, consider M&A based on cost multiple.

Q: DSO and payer impact.

A: Some slower payments due to state program issues, expect better cash collection in 2026.

Q: Pennsylvania facilities and payer mix.

A: Consolidated facilities, changing payer mix to fill up and deliver better results.

Q: Operational discipline and organizational structure.

A: Looking at corporate and field leadership structure to rightsize, ensuring support for field operations.

Q: Cash flow and leverage.

A: Expect cash flow positive in 2026, leverage to improve with EBITDA growth, considering legal costs.

Q: Service lines review.

A: Reviewing service lines to ensure highest performance, CTC is strategic with low capital and labor intensity.

Q: Quality dashboards and metrics.

A: Use quality dashboard data in payer negotiations, dashboards provide immediate visibility for problem solving.

Q: Referral channel mix.

A: Referral patterns are similar, focus on connecting with referrers and using outcome data to maintain and improve the mix