ACHC

Core Strategic Priorities & Progress

• Refocused on operational execution, ramping up newly opened facilities (2023-2026 cohort), and disciplined capital deployment since the CEO returned six months ago. New facilities from this cohort have outperformed startup EBITDA and revenue targets for two consecutive quarters, with more facilities now achieving positive adjusted EBITDA.
• Management reaffirms confidence that this cohort will deliver $200 million in incremental adjusted EBITDA relative to 2025, with growing visibility into this target as ramping progresses.

Operational Improvements

• Restructured the acute service line to flatten management hierarchy, removed a layer of middle management at the corporate level to speed up problem solving, and added dedicated management to improve alignment with JV partners. These changes have cut approval timelines for new facilities in half compared to 2025, accelerating licensing, accreditation and payer contracting.
• Expanded measurement-based care (an evidence-based clinical practice using real-time patient data to adjust treatment plans) across additional acute, specialty and CTC facilities to improve treatment outcomes.
• Implemented new operational dashboards to monitor volume, occupancy, expenses and clinical outcomes at both new and existing facilities, enabling faster course correction when performance lags expectations. Expense discipline has driven $3 million in Q2 corporate overhead reduction vs Q1, with corporate overhead flat YoY.

Capital & Balance Sheet Highlights

• Generated $124 million in free cash flow from $162 million in operating cash flow and $39 million in capital expenditures. Reduced total debt by $113 million in the quarter, ending with a net leverage ratio of 4.1x adjusted EBITDA. Day sales outstanding (DSO) declined to 49 days, better than prior forecasts, improving working capital performance.
• Opened two new 144-bed and 96-bed acute JV facilities in Q2 on schedule, bringing total 2026 bed additions in the first half to over 300. The company remains on track to add 500 to 600 total beds in 2026, with a de novo acute facility near Jacksonville, Florida planned to open in Q3.
• Prioritized incremental bed additions at existing facilities that are at or above 75% occupancy (which often face patient diversion due to capacity constraints) as the highest return-on-capital growth opportunity, and is currently conducting due diligence on multiple expansion opportunities.

• Full year 2026 revenue guidance is updated to a range of $3.4 billion to $3.45 billion.
• Full year 2026 adjusted EBITDA guidance is updated to a range of $590 million to $615 million.
• Full year 2026 adjusted EPS guidance is updated to a range of $1.45 to $1.60.
• Full year 2026 operating cash flow guidance is set at $350 million to $400 million, with positive free cash flow expected in the second half of 2026.
• Full year 2026 capital expenditure guidance is revised downward to a range of $235 million to $255 million, reflecting disciplined capital deployment, prioritization of high-return opportunities, and project timing adjustments.
• Guidance does not include potential incremental gains from pending regulatory approval of expanded supplemental payment programs in Florida and Ohio, which management estimates could add more than $20 million in incremental EBITDA if approved.

Total company revenue for Q2 2026 was $866 million, flat year-over-year. Adjusting for timing of prior-period supplemental payments from Florida and Tennessee programs, total revenue grew 2.8% YoY, and same-facility revenue grew 3.2% YoY.

• Acute: Revenue was $495 million, flat YoY. After normalizing for prior-period supplemental payments, revenue grew 6% YoY, with strong admissions and volume growth from both existing and new joint venture/de novo facilities. Acute contributed 57.2% of total Q2 revenue.
• Specialty: Revenue was $134 million, up 4% sequentially from Q1 2026. The business is still impacted by New York Medicaid program changes affecting Pennsylvania facilities, but the team has made progress mitigating the impact. Specialty contributed 15.5% of total Q2 revenue.
• RTC (Residential Treatment Center): Revenue was $97 million, up 12% YoY, driven by solid volume growth and revenue-per-day growth from capacity expansions completed in 2025. RTC contributed 11.2% of total Q2 revenue.
• CTC (Community Treatment Center): Revenue was $141 million, flat YoY. Demand for CTC services remains steady, and two new CTC clinics were opened during the quarter. CTC contributed 16.3% of total Q2 revenue.

Adjusted EBITDA for Q2 was $149.2 million, with a net negative $2.5 million impact from two unguided items: a $26.1 million benefit from Florida supplemental payments and a $28.6 million increase to professional and general liability reserves. Same-facility adjusted EBITDA was $200.9 million. Startup losses from new facilities were $12 million, better than management expectations.

• The $28.6 million Q2 increase to professional and general liability (PLGL) reserves was driven by higher case severity for 2025 prior-year claims, consistent with broader industry-wide trends of rising litigation costs and settlement severity. While current-year 2026 PLGL costs remain in line with the prior expected range of $100 million to $110 million, including the one-time prior-year adjustment, full year 2026 PLGL costs are now expected to total ~$135 million. Future additional reserve adjustments cannot be ruled out, even with the company's enhanced focus on proactive risk management and safety protocols.
• Ongoing New York Medicaid program changes continue to negatively impact revenue for the company's Pennsylvania facilities, reducing same-facility revenue growth by approximately 1% in Q2. While the company has made progress mitigating the impact, the headwind remains.
• The company faces ongoing tension with payer partners around coverage determination and medical necessity for inpatient care, as payers increasingly push for lower-cost outpatient settings. While management reports strong relationships overall, the friction around coverage continues.
• Pending government investigations create uncertainty around future legal costs, which cannot be reliably forecast for the second half of 2026 or beyond.
• Proposed Medicaid work requirements could create eligibility disruption for patients in expanding Medicaid states, though management believes a majority of the company's patient population will qualify for available medical exemptions and does not expect a material impact.

Q: Management has reaffirmed confidence in the $200 million incremental adjusted EBITDA target for the 2023-2026 new facility cohort. What additional progress confirms this target is achievable? / A: The entire cohort has outperformed expectations for revenue, volume and facility-level EBITDA for two straight quarters. For example, the 2024 Coachella Valley de novo facility is now above 90% occupancy, and management is evaluating adding additional beds to meet unmet demand there. Multiple other new facilities in the cohort are already generating positive EBITDA, with additional progress and visibility expected in the second half of 2026, leaving management highly confident in the full target.

Q: What drove the reduction in full year capital expenditure guidance and the improvement in operating cash flow guidance? / A: CapEx was adjusted downward primarily due to project timing and disciplined prioritization of only high-return projects, rather than broad cuts. Improved operating cash flow is driven by stronger than expected core business performance, better working capital management (DSO fell to 49 days, better than forecasts), lower than expected cash interest from earlier debt paydown, and strong performance from new facilities that reduced startup losses relative to plan.

Q: What explains the divergence between strong 6% same-facility admission growth and only 3.2% adjusted same-facility revenue growth? / A: The gap is purely a service mix shift. Recent bed additions have been heavily weighted to the acute service line, which has shorter average stays and higher admission volumes relative to the longer-stay RTC and specialty segments. As acute makes up a larger share of total business, higher overall admission growth will naturally outpace total revenue growth due to this mix dynamic.

Q: What is the outlook for new de novo and JV facility development after the 2026 Jacksonville opening, and how will startup losses trend? / A: The company's near-term focus is on ramping existing capacity and expanding beds at high-occupancy existing facilities rather than adding new de novo or JV projects, and no new projects are planned for Q4 2026 or early 2027, though attractive opportunities are still evaluated. Startup losses are expected to rise slightly to a $12-14 million range in Q3 from the three most recent openings, then fall below $12 million in Q4 as new facilities ramp.