Core Viewpoint - Activist investor Engine Capital has urged Acadia Healthcare's board to consider a potential asset sale and to appoint new directors to enhance governance and strategic direction [1] Group 1 - Engine Capital sent a letter to Acadia Healthcare's board on Wednesday [1] - The letter emphasizes the need for Acadia Healthcare to explore a potential asset sale [1] - Engine Capital is advocating for the addition of new directors to Acadia Healthcare's board [1]

Core Viewpoint - Acadia Healthcare (NASDAQ: ACHC) experienced a 4% increase in premarket trading following the announcement that activist investor Engine Capital acquired a 3% stake and is advocating for changes in the board and other strategic moves [2] Company Summary - Engine Capital has reported a 3% stake in Acadia Healthcare, indicating a significant interest in influencing the company's governance and strategic direction [2] - The activist investor is pushing for board changes and other initiatives to enhance the company's performance and shareholder value [2]

Core Insights - Acadia Healthcare Company, Inc. will participate in a fireside chat at the Jefferies 2025 Healthcare Services Conference [1] - The conference is scheduled for September 29 - 30, 2025, in Nashville, Tennessee [1] - An online webcast of the Company's presentation will be available on its website starting at 8:35 a.m. Central Time / 9:35 a.m. Eastern Time on September 29, 2025 [1]

Group 1 - Bank of America (BofA) downgraded Acadia Healthcare Inc from Buy to Neutral and lowered the price forecast from $27 to $25 due to anticipated headwinds from Medicaid state-directed payment program cuts in 2028 and beyond [1] - Acadia's same-store volumes have decelerated to low single digits, impacted by legal issues at some locations and reduced inpatient admissions due to payor pressure [3] - Acadia Healthcare reported second-quarter adjusted earnings of 83 cents per share, exceeding the consensus estimate of 68 cents, with sales increasing 9.2% year over year to $869.23 million, also surpassing the consensus of $840.02 million [4] Group 2 - Analyst Joanna Gajuk expects volume growth to improve as new bed capacity increases, with Acadia expanding beds by 12% in 2024 and an additional 8% planned for 2025 [4] - Acadia Healthcare has revised its fiscal 2025 adjusted earnings per share guidance down from $2.50-$2.80 to $2.45-$2.65, compared to the consensus of $2.67 [5] - The company narrowed its sales guidance for fiscal 2025 from $3.3 billion-$3.4 billion to $3.3 billion-$3.35 billion, against a consensus of $3.334 billion [5]

Core Viewpoint - Bank of America downgraded Acadia Healthcare from Buy to Neutral due to stronger-than-expected headwinds from cuts to Medicaid state-directed payment programs [5] Summary by Relevant Categories Company Analysis - Acadia Healthcare, a psychiatric facility operator, is facing challenges due to recent changes in Medicaid funding [5] Industry Impact - The downgrade reflects broader implications for the healthcare industry, particularly for companies reliant on Medicaid funding [5]

Core Insights - Acadia Healthcare Company, Inc. (ACHC) has inaugurated a 144-bed Behavioral Health Hospital in partnership with ECU Health, set to begin operations in September 2025, providing services for various age groups facing mental health challenges [1][10] - The hospital will serve as a training ground for future healthcare professionals through collaborations with the Brody School of Medicine, addressing the shortage of behavioral health professionals in the region [2] - This initiative responds to the increasing demand for behavioral health services in the U.S., where over one in five adults experiences a mental health disorder, with a notable prevalence of depression among females [3] Company Strategy - The joint venture with ECU Health aligns with ACHC's strategy to expand partnerships with academic medical centers and community health systems, enhancing service delivery close to patients' homes [4] - The new hospital is expected to integrate care, innovation, and education, potentially serving as a model for similar partnerships nationwide, while also contributing to ACHC's revenue growth in the behavioral health sector [5] Financial Performance - In the first half of 2025, ACHC's total revenues increased by 4.8% year-over-year to $1.6 billion, with expectations for total revenues to reach between $3.3 billion and $3.35 billion in 2025 [5] - Year-to-date, ACHC's stock has declined by 44.1%, contrasting with a 26.9% rise in the industry [8]

Core Insights - Acadia Healthcare Company, Inc. (ACHC) reported adjusted second-quarter earnings of 83 cents per share, exceeding the Zacks Consensus Estimate by 16.9%, although the earnings declined 8.8% year over year [1][10] - Total revenues increased by 9.2% year over year to $869.2 million, surpassing the consensus mark by 4% [1][10] Financial Performance - Same-facility revenues reached $851.2 million, a 9.5% increase year over year, exceeding the estimate of $827.8 million [3] - Patient days increased by 1.8%, while admissions grew by 1.4% year over year [3] - Revenue per patient day rose by 7.5% year over year [3] - Total adjusted EBITDA increased by 7.6% year over year to $201.8 million, higher than the estimate of $178.4 million [4][10] Expense Analysis - Total expenses rose by 18.8% year over year to $819.2 million, exceeding the estimate of $760.2 million, driven by higher salaries, wages, benefits, and operating expenses [5] Cash and Debt Position - As of June 30, 2025, cash and cash equivalents were $131.4 million, up from $76.3 million at the end of 2024 [6] - Long-term debt increased to $2.2 billion from $1.9 billion as of December 31, 2024 [7] - Total assets grew to $6.3 billion from $6 billion at the end of 2024 [6] Share Repurchase Activity - The company repurchased shares worth $3.2 million in the quarter, totaling $50.4 million year-to-date, with $250 million remaining in the share repurchase fund [8] 2025 Guidance - Revenues are projected to be between $3.3 billion and $3.35 billion, with adjusted EBITDA estimated to be in the range of $675 million to $700 million [11] - Adjusted earnings per share (EPS) are expected to be between $2.45 and $2.65 [11] - Operating cash flows are forecasted to be between $460 million and $485 million [12]

Group 1 - The article promotes a weekly newsletter focused on stocks in the biotech, pharma, and healthcare industries, aimed at both novice and experienced investors [1] - The newsletter provides insights on key trends, catalysts driving valuations, product sales forecasts, and integrated financial statements for major pharmaceutical companies [1] - The author, Edmund Ingham, has over 5 years of experience in the biotech sector and has compiled detailed reports on more than 1,000 companies [1]

Financial Data and Key Metrics Changes - The company reported total revenue of $869.2 million for Q2 2025, representing a 9.2% increase year-over-year [5][19] - Adjusted EBITDA for the quarter was $201.8 million, reflecting a 7.5% increase compared to the same period last year, with an adjusted EBITDA margin of 23.2% [5][19] - Same facility revenue grew by 9.5% year-over-year, including a 7.5% increase in revenue per patient day and a 1.8% growth in patient days [19][20] Business Line Data and Key Metrics Changes - The company added 101 beds to existing facilities in Q2, totaling 191 beds added for 2025, and 479 beds added to date in 2025 [8][10] - Same facility patient days increased by 1.8%, with strong performance in specialty and comprehensive treatment centers (CTCs) [11][12] - The company experienced a slight decline in Medicaid volumes year-over-year in its acute care hospitals, while commercial and Medicare volumes increased by 98% respectively [12] Market Data and Key Metrics Changes - The company anticipates approximately $230 million in gross revenue from existing state Medicaid supplemental programs for the full year 2025, with potential reductions starting in fiscal 2028 [6][20] - The approval of the Tennessee supplemental payment program resulted in a favorable pre-tax benefit of $51.8 million for the quarter [20] Company Strategy and Development Direction - The company remains committed to delivering essential care to underserved populations and prioritizes partnerships with payers and state agencies [7] - The company is focusing on quality initiatives and technology investments to enhance patient safety and care coordination [12][15] - The company plans to pause some capital spending to unlock more free cash flow and reduce startup costs [35][36] Management's Comments on Operating Environment and Future Outlook - Management noted that the primary driver of lower-than-expected volumes was weaker Medicaid volumes in the acute care business, reflecting evolving utilization patterns among managed Medicaid plans [26][27] - The company expects adjusted EBITDA for the full year to be in the range of $675 million to $700 million, with startup losses projected to be approximately $60 million to $65 million [21][22] - Management expressed confidence in the long-term growth potential despite current challenges, emphasizing the importance of quality care and operational efficiency [15][34] Other Important Information - Heather Dixon, the Chief Financial Officer, will be stepping down, and Tim Sides will assume the role of Interim CFO [17][18] - The company is experiencing more favorable labor trends in 2025, supported by initiatives focused on recruitment and retention [16] Q&A Session Summary Question: Can you elaborate on the Medicaid volume issues? - Management indicated that weaker Medicaid volumes were primarily due to evolving utilization patterns among managed Medicaid plans, impacting admissions trends [26][27] Question: What is driving the increase in startup costs? - The increase in startup costs is due to an accelerated opening pace of new facilities, resulting in earlier-than-expected costs [28][29] Question: How does the company view free cash flow opportunities in 2026? - Management believes there is an opportunity to accelerate the path to becoming free cash flow positive by pausing some capital spending [34][35] Question: What is the impact of underperforming facilities on patient volumes? - Underperforming facilities had a negative impact of about 80 basis points on same facility patient volume growth in Q2, with management monitoring the situation closely [42][43] Question: How is the company addressing referral sources for underperforming facilities? - The company is actively engaging with referral sources to highlight the quality of care and investments made in technology and patient outcomes [95][96]

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) H1 2025 financials: assets $6.31B, liabilities $3.08B, revenue $1.64B, net income $38.5M (down due to legal costs), operating cash flow improved to $145.0M [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in thousands) | Balance Sheet Items | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $691,560 | $577,492 | | Property and equipment, net | $3,063,523 | $2,853,193 | | Goodwill | $2,276,232 | $2,264,851 | | **Total Assets** | **$6,308,359** | **$5,956,915** | | **Total Current Liabilities** | $523,712 | $577,919 | | Long-term debt | $2,247,027 | $1,880,093 | | **Total Liabilities** | **$3,084,830** | **$2,766,084** | | **Total Equity** | **$3,077,986** | **$3,073,715** | - Total assets increased by **$351.4 million**, primarily driven by growth in property and equipment. Total liabilities rose by **$318.7 million**, largely due to an increase in long-term debt[9](index=9&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $869,232 | $796,040 | $1,639,737 | $1,564,091 | | Total expenses | $819,229 | $689,580 | $1,576,266 | $1,358,787 | | **Net income attributable to Acadia** | $30,127 | $78,482 | $38,501 | $154,865 | | **Diluted EPS** | $0.33 | $0.85 | $0.42 | $1.68 | - Revenue increased **9.2%** in Q2 2025 and **4.8%** in H1 2025 year-over-year. However, net income and EPS declined significantly due to a sharp rise in 'Transaction, legal and other costs,' which surged to **$64.4 million** in Q2 2025 from **$6.1 million** in Q2 2024[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $144,981 | $(150,137) | | Net cash used in investing activities | $(334,021) | $(340,098) | | Net cash provided by financing activities | $244,156 | $467,329 | | **Net increase (decrease) in cash** | $55,116 | $(22,906) | - Operating cash flow showed a significant improvement, becoming a source of cash of **$145.0 million** in H1 2025 compared to a use of **$150.1 million** in H1 2024. Investing activities were driven by **$342.4 million** in capital expenditures. Financing activities included new borrowings, debt repayments, and **$50.0 million** in common stock repurchases[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - As of June 30, 2025, the company operated **274** behavioral healthcare facilities with approximately **12,100** beds across **39** states and Puerto Rico[19](index=19&type=chunk) - In Q2 2025, the company recognized **$65.6 million** of revenue related to a state government program, of which **$34.4 million** related to services in 2024 and **$14.3 million** to Q1 2025[34](index=34&type=chunk) - The company is subject to multiple legal proceedings, including the Desert Hills Litigation, securities class actions, and government investigations by the DOJ and SEC into its acute care service line regarding admissions, length of stay, and billing practices[47](index=47&type=chunk)[52](index=52&type=chunk)[60](index=60&type=chunk) - On February 28, 2025, the company entered into a new credit agreement, securing a **$1.0 billion** revolving facility and a **$650.0 million** term loan facility, and used the proceeds to refinance its prior credit facility[64](index=64&type=chunk)[65](index=65&type=chunk) - A share repurchase program of up to **$300.0 million** was authorized in February 2025. During the six months ended June 30, 2025, the company repurchased **1.7 million** shares for **$50.4 million**[93](index=93&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2/H1 2025 revenue growth, but profitability was severely impacted by increased legal costs; capital actions and bed expansion continued Same Facility Operating Data (% Change YoY) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Revenue growth | 9.5% | 5.8% | | Patient days growth | 1.8% | 2.0% | | Admissions growth | 1.4% | 1.7% | | Revenue per patient day growth | 7.5% | 3.8% | - Revenue for Q2 2025 increased by **$73.2 million** (**9.2%**) YoY, which included a **$65.6 million** revenue recognition from a state government program based on timing of approval[116](index=116&type=chunk) Transaction, Legal and Other Costs (in thousands) | Cost Category | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Government investigations | $53,526 | $2,051 | $84,538 | $2,532 | | Termination and restructuring costs | $10,074 | $1,419 | $12,239 | $(1,981) | | **Total** | **$64,425** | **$6,091** | **$95,497** | **$8,938** | - The company's business strategy focuses on five growth pathways: facility expansions, joint ventures, de novo facilities, acquisitions, and continuum of care expansion. In H1 2025, the company added **479** beds and opened **eleven** comprehensive treatment centers (CTCs)[108](index=108&type=chunk) - Cash from operations was **$145.0 million** for H1 2025, a significant turnaround from a **$150.1 million** use of cash in H1 2024. Capital expenditures totaled **$342.4 million**, with **$291.2 million** dedicated to expansion projects[148](index=148&type=chunk)[149](index=149&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate risk from variable-rate debt; a 1% increase would decrease annual pretax income by $8.1 million - At June 30, 2025, the company's long-term debt consisted of **$1,460.9 million** of fixed-rate debt and **$806.5 million** of variable-rate debt[175](index=175&type=chunk) - A hypothetical **1%** increase in market interest rates would reduce the company's annual pretax income by an estimated **$8.1 million**[175](index=175&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during Q2 - The CEO and CFO concluded that the company's disclosure controls and procedures are effective[176](index=176&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[177](index=177&type=chunk) [PART II – OTHER INFORMATION](index=47&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates Note 9 details on significant legal matters, including Desert Hills Litigation, securities class actions, and government investigations - The report refers to Note 9 for details on legal proceedings, which cover the Desert Hills Litigation, securities litigation, derivative actions, and government investigations[180](index=180&type=chunk)[46](index=46&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - The company incorporates by reference the risk factors discussed in its Annual Report on Form 10-K for the year ended December 31, 2024, indicating no material changes[181](index=181&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2025, the company repurchased 132,073 shares, with $250.0 million remaining available under the Share Repurchase Program as of June 30, 2025 Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - April 30 | 107,192 | $30.20 | | May 1 - May 31 | 12,381 | $23.91 | | June 1 - June 30 | 12,500 | $21.47 | | **Total** | **132,073** | N/A | - Of the shares repurchased in Q2 2025, **103,939** were under the formal Share Repurchase Program, while **28,134** were withheld for tax payments related to employee stock awards[184](index=184&type=chunk) - As of June 30, 2025, **$250.0 million** remained authorized for purchase under the Share Repurchase Program, which has no termination date[184](index=184&type=chunk) [Other Information](index=47&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the second quarter of 2025[183](index=183&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and other corporate documents - Lists exhibits filed with the report, including CEO/CFO certifications (31.1, 31.2, 32) and Inline XBRL data (101, 104)[185](index=185&type=chunk)