Question-and-Answer SessionJust a good place to start off today would be the 8-K that you all filed after the close yesterday, which announced that the company has agreed to settle previously disclosed shareholder litigation for $179 million. Can you just walk us through some of the key considerations there? And why would you all agree to settle that case?Christopher HunterCEO & Director Yes. Thank you, Joseph, and thanks for having us. On the 8-K, I think the first thing that I would mention is just that t ...

Acadia Healthcare Company Conference Call Summary Company Overview - **Company**: Acadia Healthcare Company (NasdaqGS: ACHC) - **Date**: November 11, 2025 - **Speakers**: Chris Hunter (CEO), Todd Young (CFO) Key Points Legal Settlement - Acadia Healthcare has agreed to settle shareholder litigation for **$179 million** without admitting fault or liability, which has been ongoing since **2018** regarding misleading statements about business performance from **April 2014 to end of 2018** [2][3] Financial Performance - Results for 2025 have been **modestly below expectations**, prompting a revision in guidance [4] - The company added **1,700 beds** over the past few years, with **632 beds** contributing to same-store calculations in Q1 2026 [4][5] - Net leverage is expected to increase from **3.4x to approximately 3.65x**, which is considered manageable [3] Growth Strategy - Acadia is focused on capital deployment, planning to reduce **CapEx by $300 million** while still generating significant bed additions [5] - The company aims to unlock free cash flow and improve margins by closing underperforming facilities [6][12] Volume Trends and Managed Care - There has been pressure from managed care companies, particularly regarding pre-authorizations, impacting revenue per patient day despite a **3.3% same-store admission increase** [9][10] - The average length of stay is decreasing due to an increase in acute beds, which typically have shorter stays [9] Future Guidance - The fourth quarter of 2025 is expected to show deterioration compared to Q3, influenced by volume softness and elevated bad debt [12] - Startup losses are anticipated to decline in 2026, with contributions from new bed additions expected to drive growth [13] Market Dynamics - Acadia is experiencing increased scrutiny from payers, particularly in behavioral health, which has historically seen underinvestment [17][18] - The company is actively engaging with payers to demonstrate the value of their investments in quality infrastructure [17] Facility Closures - Acadia closed **five underperforming facilities** in 2025, with ongoing reviews of the remaining **278 facilities** [23][24] - The closures were driven by shifting market dynamics and persistent underperformance [28] Labor and Expense Environment - The labor market is stabilizing, with base wage inflation decreasing slightly [30] - Employee retention has improved over six consecutive quarters, reflecting successful workforce initiatives [30] Liability Expenses - Professional and general liability expenses are expected to remain a headwind, with adjustments made for under-accrued expenses in Q4 [32][33] Supplemental Payment Programs - Acadia anticipates **$22 million** of EBITDA upside from pending supplemental payment programs, which could be recognized in Q4 or early 2026 [34] Public Health Funding - The company is monitoring cuts to the Substance Abuse and Mental Health Services Administration (SAMHSA) but currently sees limited direct exposure [36] - Acadia is tracking opioid settlement dollars and is well-positioned for future RFPs [38][39] Closing Remarks - The management expresses confidence in the company's long-term strategy and the potential for future cash flow generation from existing capital investments [41] Additional Insights - Acadia's focus on quality care and partnerships with joint ventures is seen as a key driver for future growth [20][25] - The company remains committed to addressing the needs of patients with behavioral health issues, leveraging investments to improve outcomes and manage costs effectively [18][19]

Core Insights - Acadia Healthcare Company, Inc. will participate in the UBS Global Healthcare Conference from November 9 to 12, 2025, in Palm Beach Gardens, Florida [1] - An online webcast of the Company's presentation will be available on its website starting at 1:45 p.m. Central Time on November 11, 2025 [2] - Acadia is a leading provider of behavioral healthcare services in the U.S., operating 278 facilities with approximately 12,500 beds across 40 states and Puerto Rico as of September 30, 2025 [3] Financial Performance - For the third quarter of 2025, Acadia reported revenue of $851.6 million, marking a 4.4% increase compared to the same quarter in 2024 [6] - Same facility revenue increased by 3.7% year-over-year, with revenue per patient day rising by 2.3% and patient days increasing by 1.3% [6]

Core Insights - Acadia Healthcare Company, Inc. (ACHC) reported adjusted third-quarter earnings of 72 cents per share, exceeding the Zacks Consensus Estimate by 7.5%, but reflecting a year-over-year decline of 20.9% [1][9] - Total revenues increased by 4.4% year over year to $851.6 million, slightly surpassing the consensus mark by 0.4% [1][9] Financial Performance - Same-facility revenues reached $827.8 million, a 3.7% increase year over year, but fell short of the Zacks Consensus Estimate by 1.4% [3] - Patient days increased by 1.3%, while admissions grew by 3.3% year over year [3] - Average length of stay decreased by 1.9% year over year, missing the consensus estimate by 3.2% [3] - Total expenses rose by 13.2% year over year to $811.6 million, driven by higher salaries, wages, benefits, and other operating costs [4] Cash and Debt Position - As of September 30, 2025, Acadia Healthcare had cash and cash equivalents of $118.7 million, up from $76.3 million at the end of 2024 [5] - Long-term debt increased to $2.3 billion from $1.9 billion as of December 31, 2024 [6] - Total equity rose to $3.1 billion compared to the end of 2024 [6] Share Repurchase and Guidance - Year-to-date share repurchases totaled $50.4 million, with no buyback activity in the third quarter [7] - 2025 revenue guidance was revised down to a range of $3.28 to $3.30 billion, and adjusted EBITDA is now estimated between $650 million and $660 million [8][10] Industry Comparison - HCA Healthcare reported adjusted EPS of $6.96, surpassing estimates by 23.2% and showing a 42% year-over-year improvement [12] - Universal Health Services reported adjusted EPS of $5.69, exceeding estimates by 22.1% and reflecting a 53.4% year-over-year increase [13] - Community Health Systems posted adjusted earnings of $1.27 per share, beating estimates and improving from a prior-year loss [14]

Group 1 - The article emphasizes the importance of staying updated on stocks within the biotech, pharma, and healthcare sectors, highlighting key trends and catalysts that influence market valuations [1] - Edmund Ingham, a biotech consultant with over 5 years of experience, leads the Haggerston BioHealth investing group, which caters to both novice and experienced investors [1] - The investing group provides insights on catalysts, buy and sell ratings, product sales forecasts, integrated financial statements, discounted cash flow analysis, and market-specific analyses for major pharmaceutical companies [1]

Group 1 - The article discusses the importance of staying updated on stocks within the biotech, pharma, and healthcare industries, highlighting key trends and catalysts that drive valuations [1] - Edmund Ingham, a biotech consultant with over 5 years of experience, leads the Haggerston BioHealth investing group, which caters to both novice and experienced biotech investors [1] - The Haggerston BioHealth group provides insights on catalysts, buy and sell ratings, product sales forecasts, integrated financial statements, discounted cash flow analysis, and market-by-market analysis for major pharmaceutical companies [1]

Financial Data and Key Metrics Changes - The company reported revenue of $851.6 million for Q3 2025, a 4.4% increase compared to the same quarter last year [5][20] - Adjusted EBITDA was $173 million, down from $194.3 million in the prior year period, reflecting lower volumes and increased expenses [5][20] - Same facility volume growth was 1.3%, which was approximately 100 basis points below internal expectations [5][6] - Adjusted EBITDA guidance for 2025 was reduced to $650-$660 million from a previous range of $675 million-$700 million [6][24] Business Line Data and Key Metrics Changes - Same facility revenue grew 3.7% year over year, driven by a 2.3% increase in revenue per patient day and a 1.3% growth in patient days [20] - The company faced increased pressure on volumes, particularly in the Medicaid segment, impacting overall performance [6][30] Market Data and Key Metrics Changes - The company added 83 beds to existing facilities in Q3, bringing the year-to-date total to 274 beds added through expansions [22] - The company expects to add 500-700 beds in 2026, following the addition of over 1,700 beds in 2024 and 2025 [8][23] Company Strategy and Development Direction - The company is focusing on optimizing growth investments and its existing portfolio to improve financial performance amid increasing headwinds [7][12] - A comprehensive portfolio and capital allocation review led to a pause on several development projects that no longer projected acceptable returns [11][39] - The company aims to ensure a portfolio that meets patient demand while maximizing returns on investments [12][46] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increasing headwinds in the operating environment, particularly regarding pressures on managed care companies and Medicaid funding uncertainty [6][7] - The company remains confident in its strategy to deliver strong clinical outcomes and expects to see benefits from recent investments in quality and technology [26][52] Other Important Information - The company expects full-year 2025 startup losses to be in the range of $60 million-$65 million, with a modest decrease anticipated in 2026 [21][24] - Legal expenses related to government investigations were $39 million in Q3, down 28% from the previous quarter, with expectations for continued moderation [22][43] Q&A Session Summary Question: Can you provide more color on the challenges with payers, particularly in Medicaid? - Management noted that payer friction is more pronounced in Medicaid-heavy markets, with increased scrutiny on discharge criteria and more frequent utilization reviews [30][31] Question: How should we think about the durability of bad debts and denials as we move into 2026? - Management indicated that Q4 is seasonally slow, and while some pressures may persist, they expect a reduction in startup losses and other costs in 2026 [33][34] Question: Can you clarify the CapEx reduction and its implications for future bed openings? - The company plans to reduce CapEx by at least $300 million in 2026 while still opening multiple large facilities, as much of the capital for these projects has already been spent [39][41] Question: What is the expected impact of the five facility closures on EBITDA? - Management anticipates a mid-single-digit tailwind in 2026 from the closures, with a focus on ensuring returns on capital [45][46] Question: Can you provide insight into the $22 million in Medicaid supplemental benefits? - The company highlighted that Florida is a key state for these benefits, which could provide a significant run rate going forward [49]

Group 1 - Acadia Healthcare Company, Inc. (ACHC) has been added to the Zacks Rank 5 (Strong Sell) List due to a 3.2% downward revision in the consensus estimate for its current year earnings over the last 60 days [1] - Forward Air Corporation (FWRD) is also on the Zacks Rank 5 (Strong Sell) List, with a 12% downward revision in the consensus estimate for its current year earnings over the last 60 days [1] - Century Aluminum Company (CENX) has seen an 11.7% downward revision in the consensus estimate for its current year earnings over the last 60 days, leading to its inclusion in the Zacks Rank 5 (Strong Sell) List [2]

Core Insights - Acadia Healthcare reported quarterly earnings of $0.72 per share, exceeding the Zacks Consensus Estimate of $0.67 per share, but down from $0.91 per share a year ago [1] - The company achieved a revenue of $851.57 million for the quarter, surpassing the Zacks Consensus Estimate by 0.37% and up from $815.63 million year-over-year [3] Earnings Performance - The earnings surprise for the quarter was +7.46%, following a previous quarter where the company had a surprise of +16.9% [2] - Over the last four quarters, Acadia Healthcare has exceeded consensus EPS estimates three times [2] Stock Performance - Acadia Healthcare shares have declined approximately 47.9% year-to-date, contrasting with the S&P 500's gain of 15.1% [4] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [7] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.64 on revenues of $826.88 million, and for the current fiscal year, it is $2.46 on revenues of $3.31 billion [8] - The outlook for the Medical - Hospital industry is favorable, ranking in the top 20% of over 250 Zacks industries, which historically outperforms the bottom 50% by more than 2 to 1 [9]

Revenue Performance - Revenue for the three months ended September 30, 2025, was $851.57 million, a 4.7% increase compared to $815.63 million for the same period in 2024[120] - For the nine months ended September 30, 2025, revenue reached $2.49 billion, up from $2.38 billion in 2024, reflecting a growth of 4.7%[120] - Revenue increased by $35.9 million, or 4.4%, to $851.6 million for the three months ended September 30, 2025, compared to $815.6 million for the same period in 2024[124] - Revenue for the nine months ended September 30, 2025, increased by $111.6 million, or 4.7%, to $2,491.3 million from $2,379.7 million in 2024[139] - Total revenue for the nine months ended September 30, 2025, was $2.49 billion, an increase from $2.38 billion in 2024, with Medicaid contributing 57.5% of total revenue[154] Cost and Expense Analysis - Salaries, wages, and benefits accounted for 54.3% of total revenue in Q3 2025, compared to 52.5% in Q3 2024[120] - Salaries, wages, and benefits (SWB) expense rose to $462.2 million for the three months ended September 30, 2025, an increase of $34.1 million from $428.1 million in 2024, representing 53.6% of revenue[125] - Professional fees were $51.5 million for the three months ended September 30, 2025, or 6.0% of revenue, compared to $48.5 million, or 5.9% of revenue, in the same period of 2024[127] - Other operating expenses increased to $128.8 million, or 15.1% of revenue, for the three months ended September 30, 2025, compared to $112.1 million, or 13.8% of revenue, in 2024[130] - Interest expense increased to $100.9 million for the nine months ended September 30, 2025, compared to $86.3 million in 2024, primarily due to interest on the 7.375% Senior Notes issued in early 2025[146] - Transaction, legal, and other costs surged to $138.4 million for the nine months ended September 30, 2025, compared to $17.2 million in 2024[149] Income and Profitability - The net income attributable to Acadia Healthcare Company, Inc. for Q3 2025 was $36.25 million, a decrease from $68.13 million in Q3 2024[120] - The provision for income taxes for the three months ended September 30, 2025, was $1.7 million, reflecting an effective tax rate of 4.2%, a decrease from $27.2 million and 27.6% in 2024[136] - The provision for income taxes for the nine months ended September 30, 2025, was $18.1 million, reflecting an effective tax rate of 17.5%, down from $72.9 million and 24.0% in 2024[151] - Revenue for the nine months ended September 30, 2025, was $2,011.1 million, with a net income of $24.1 million[180] Operational Metrics - Same facility revenue growth for the three months ended September 30, 2025, was 3.7%, while for the nine months it was 5.1%[121] - Patient days growth was 1.3% for Q3 2025 and 1.8% for the nine months ended September 30, 2025[121] - The average length of stay decreased by 1.9% for Q3 2025 compared to the same period in 2024[121] - Same facility revenue increased by $29.5 million, or 3.7%, driven by a 2.3% growth in revenue per day, 1.3% growth in patient days, and 3.3% growth in admissions[124] Capital and Financing Activities - Cash provided by operating activities for the nine months ended September 30, 2025, was $218.2 million, a substantial increase from $13.0 million in 2024[157] - Cash used in investing activities for the nine months ended September 30, 2025, was $463.8 million, down from $533.1 million in 2024, primarily due to capital expenditures of $478.6 million[158] - Cash provided by financing activities for the nine months ended September 30, 2025, was $288.0 million, compared to $502.2 million in 2024, with significant borrowings on long-term debt of $1.2 billion[159] - The company entered into a Credit Agreement providing for a $1.0 billion Revolving Facility and a $650.0 million Term Loan Facility, both maturing on February 28, 2030[163] - The Term Loan Facility requires quarterly principal repayments starting at $4.0 million, increasing to $16.2 million by June 2029[165] - As of September 30, 2025, the Consolidated Total Net Leverage Ratio was 3.4x, in compliance with all financial covenants[169] - Long-term debt as of September 30, 2025, was $2,284.8 million, an increase from $1,880.1 million as of December 31, 2024[180] - The company issued $550.0 million of 7.375% Senior Notes due 2033 on March 10, 2025, to pay down outstanding borrowings under the Revolving Facility[176] Compliance and Regulatory Matters - For the nine months ended September 30, 2025, total costs related to government investigations amounted to $123.3 million, a significant increase from $5.6 million in the same period of 2024[150] - Total obligations and commitments as of September 30, 2025, amounted to $3,162.4 million[181] Cash and Liquidity - Total available cash and cash equivalents increased to $118.7 million as of September 30, 2025, from $76.3 million at December 31, 2024[161] - Current assets increased to $532.8 million as of September 30, 2025, from $436.6 million as of December 31, 2024[180] - The company had $786.7 million of availability under the Revolving Facility as of September 30, 2025[170] Interest Rate Sensitivity - A hypothetical 1% increase in interest rates would decrease pretax income by approximately $8.5 million annually[184]