Acadia Healthcare Reports Third Quarter 2019 Revenue of $777.3 Million, EPS of $0.48 and Adjusted EPS of $0.52

Company Updates 2019 Guidance

FRANKLIN, Tenn.--()--Acadia Healthcare Company, Inc. (NASDAQ: ACHC) today announced financial results for the third quarter and nine months ended September 30, 2019. Revenue was $777.3 million for the third quarter, up 2.1% from $760.9 million for the third quarter of 2018. Net income attributable to Acadia stockholders for the third quarter of 2019 was $42.6 million, or $0.48 per diluted share, compared with $46.2 million, or $0.53 per diluted share, for the third quarter of 2018. Results for the third quarter of 2019 include transaction-related expenses of $5.8 million and the income tax effect of adjustments to income of $2.4 million based on a tax rate of 16.7%. Adjusted income attributable to Acadia stockholders per diluted share (“adjusted EPS”) was $0.52 for the third quarter of 2019. Results for the third quarter of 2018 included transaction-related expenses of $2.4 million and the income tax effect of adjustments to income of $0.4 million based on a tax rate of 16.0%. A reconciliation of all non-GAAP financial results in this release appears beginning on page 7.

For the third quarter of 2019, Acadia’s total same facility revenue increased 4.6% compared with the third quarter of 2018, including a 1.1% increase in patient days and a 3.5% increase in revenue per patient day. Total same facility EBITDA margin decreased 100 basis points to 22.9%. U.S. same facility revenue increased 4.9%, including a 2.8% increase in patient days and a 2.0% increase in revenue per patient day. U.S. same facility EBITDA margin decreased 140 basis points to 25.9%. For the U.K. operations, same facility revenue was up 4.0% for the third quarter of 2019 from the third quarter last year, reflecting a 5.1% increase in revenue per patient day offset by a 1.1% decrease in patient days. U.K. same facility EBITDA margin declined 30 basis points to 16.7%. Acadia’s consolidated adjusted EBITDA for the third quarter of 2019 was $146.6 million, compared with $148.9 million for the third quarter of 2018.

Debbie Osteen, Chief Executive Officer of Acadia Healthcare Company, remarked, “During the third quarter of 2019, certain of our U.S. facilities faced operational issues that negatively affected U.S. EBITDA margin. We believe these operational issues are temporary. Our U.K. facilities performed as expected, and we were pleased to see continuing stability in our operating trends. During the quarter, we continued to work through the initiatives identified during our strategic review earlier this year to improve operational efficiencies throughout our operations. At this time, we expect to achieve our goal of $20 to $25 million in cost savings by the end of 2020. Going forward, we will remain focused on these objectives, while we continue to honor our commitment to deliver the highest quality of patient care.

“During the third quarter, we added 82 beds to Acadia’s operations, supporting our growth initiatives focused on both bed expansion opportunities and additional service offerings. For the first nine months of the year, we added 414 beds to existing and new facilities, and we expect to add approximately 650 beds for 2019, exclusive of acquisitions,” added Osteen.

Acadia today updated its financial guidance for 2019, consistent with the Company’s performance for the first nine months of 2019 and its expectations for the fourth quarter of the year, as follows:

  • Revenue for 2019 in a range of $3.10 billion to $3.125 billion;
  • Adjusted EBITDA for 2019 in a range of $584 million to $589 million; and
  • Adjusted earnings per diluted share for 2019 in a range of $2.00 to $2.05.

The Company’s guidance does not include the impact of any future acquisitions or transaction-related expenses.

EBITDA is defined as net income adjusted for net income attributable to noncontrolling interests, provision for income taxes, net interest expense and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for equity-based compensation expense, transaction-related expenses and debt extinguishment costs. Adjusted income is defined as net income adjusted for transaction-related expenses, tax reform impact, debt extinguishment costs and income tax effect of adjustments to income.

Acadia will hold a conference call to discuss its third quarter financial results at 9:00 a.m. Eastern Time on Wednesday, November 6, 2019. A live webcast of the conference call will be available at www.acadiahealthcare.com in the “Investors” section of the website. The webcast of the conference call will be available through November 20, 2019.

Risk Factors

This news release contains forward-looking statements. Generally, words such as “may,” “will,” “should,” “could,” “anticipate,” “expect,” “intend,” “estimate,” “plan,” “continue,” and “believe” or the negative of or other variation on these and other similar expressions identify forward-looking statements. These forward-looking statements are made only as of the date of this news release. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements are based on current expectations and involve risks and uncertainties and our future results could differ significantly from those expressed or implied by our forward-looking statements. Factors that may cause actual results to differ materially include, without limitation, (i) potential difficulties operating our business in light of political and economic instability in the U.K. and globally relating to the U.K.’s departure from the European Union; (ii) the impact of fluctuations in foreign exchange rates, including the devaluation of the British Pound Sterling (GBP) relative to the U.S. Dollar (USD); (iii) potential difficulties in successfully integrating the operations of acquired facilities or realizing the expected benefits and synergies of our acquisitions, joint ventures and de novo transactions; (iv) Acadia’s ability to add beds, expand services, enhance marketing programs and improve efficiencies at its facilities; (v) potential reductions in payments received by Acadia from government and third-party payors; (vi) the occurrence of patient incidents, governmental investigations and adverse regulatory actions, which could adversely affect the price of our common stock and result in substantial payments and incremental regulatory burdens; (vii) the risk that Acadia may not generate sufficient cash from operations to service its debt and meet its working capital and capital expenditure requirements; and (viii) potential operating difficulties, labor costs, client preferences, changes in competition and general economic or industry conditions that may prevent Acadia from realizing the expected benefits of its business strategies. These factors and others are more fully described in Acadia’s periodic reports and other filings with the SEC.

About Acadia

Acadia is a provider of behavioral healthcare services. At September 30, 2019, Acadia operated a network of 589 behavioral healthcare facilities with approximately 18,000 beds in 40 states, the United Kingdom and Puerto Rico. Acadia provides behavioral health and addiction services to its patients in a variety of settings, including inpatient psychiatric hospitals, specialty treatment facilities, residential treatment centers and outpatient clinics.

 
 
 

Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

(In thousands, except per share amounts)

 
Revenue

 $           777,251

 

 $           760,916

 

 $        2,327,230

 

 $        2,268,895

 

 
Salaries, wages and benefits (including equity-based compensation expense of $4,039, $5,225, $14,322 and $19,273, respectively)

              428,601

 

              417,917

 

           1,288,399

 

           1,246,186

 

Professional fees 

               62,152

 

               59,509

 

              177,588

 

              166,988

 

Supplies 

               30,790

 

               29,461

 

               91,661

 

               88,958

 

Rents and leases 

               20,134

 

               19,866

 

               60,860

 

               60,390

 

Other operating expenses 

               92,975

 

               90,464

 

              281,517

 

              265,977

 

Depreciation and amortization 

               40,620

 

               39,659

 

              122,277

 

              119,360

 

Interest expense, net

               46,644

 

               46,651

 

              143,384

 

              137,706

 

Debt extinguishment costs

                      -  

 

                      -  

 

                      -  

 

                    940

 

Transaction-related expenses 

                 5,775

 

                 2,353

 

               15,308

 

               10,008

 

Total expenses 

              727,691

 

              705,880

 

           2,180,994

 

           2,096,513

 

Income before income taxes

               49,560

 

               55,036

 

              146,236

 

              172,382

 

Provision for income taxes 

                 6,837

 

                 8,757

 

               25,801

 

               16,339

 

Net income

               42,723

 

               46,279

 

              120,435

 

              156,043

 

Net income attributable to noncontrolling interests

                  (157

)

                    (47

)

                  (258

)

                  (156

)

Net income attributable to Acadia Healthcare Company, Inc.

 $             42,566

 

 $             46,232

 

 $           120,177

 

 $           155,887

 

 
Earnings per share attributable to Acadia Healthcare Company, Inc. stockholders: 
Basic 

 $                0.49

 

 $                0.53

 

 $                1.37

 

 $                1.79

 

Diluted

 $                0.48

 

 $                0.53

 

 $                1.37

 

 $                1.78

 

                 
Weighted-average shares outstanding: 
Basic 

               87,649

 

               87,344

 

               87,591

 

               87,233

 

Diluted 

               87,859

 

               87,537

 

               87,805

 

               87,386

 

 
 
 

Acadia Healthcare Company, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

September 30,

 

December 31,

  

  

2019

  

2018

  

  

(In thousands) 

  
ASSETS 
Current assets:          
Cash and cash equivalents    

 $             92,900

 

 $             50,510

 

Accounts receivable, net   

              350,225

 

              318,087

 

Other current assets    

               93,788

 

               81,820

 

Total current assets    

              536,913

 

    

              450,417

 

Property and equipment, net

           3,131,419

 

           3,107,766

 

Goodwill    

           2,424,241

 

    

           2,396,412

 

Intangible assets, net    

               89,028

 

    

               88,990

 

Deferred tax assets

                 3,371

 

                 3,468

 

Derivative instrument assets

                      -  

 

               60,524

 

Operating lease right-of-use assets

              479,881

 

                      -  

 

Other assets    

               63,272

 

    

               64,927

 

Total assets    

 $        6,728,125

 

    

 $        6,172,504

 

                 
  
LIABILITIES AND EQUITY 
Current liabilities:                   
Current portion of long-term debt    

 $             41,287

 

    

 $             34,112

 

Accounts payable    

              131,472

 

    

              117,740

 

Accrued salaries and benefits    

              117,683

 

    

              113,299

 

Current portion of operating lease liabilities

               28,010

 

                      -  

 

Other accrued liabilities    

              139,754

 

    

              151,226

 

Total current liabilities    

              458,206

 

    

              416,377

 

Long-term debt    

           3,133,635

 

    

           3,159,375

 

Deferred tax liabilities

               63,154

 

               80,372

 

Operating lease liabilities

              478,894

 

                      -  

 

Derivative instrument liabilities

               15,896

 

                      -  

 

Other liabilities    

              125,285

 

    

              154,267

 

Total liabilities    

           4,275,070

 

    

           3,810,391

 

Redeemable noncontrolling interests

               32,364

 

               28,806

 

Equity:         
Common stock   

                    877

 

    

                    874

 

Additional paid-in capital    

           2,554,808

 

    

           2,541,987

 

Accumulated other comprehensive loss

            (507,994

)

            (462,377

)

Retained earnings   

              373,000

 

    

              252,823

 

Total equity    

           2,420,691

 

    

           2,333,307

 

Total liabilities and equity    

 $        6,728,125

 

    

 $        6,172,504

 

 
 
 

Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

  

 

 

 

 

Nine Months Ended September 30,

  

2019

 

2018

  

(In thousands)

Operating activities: 
Net income

 $           120,435

 

 $           156,043

 

Adjustments to reconcile net income to net cash provided by continuing operating activities: 
Depreciation and amortization 

              122,277

 

              119,360

 

Amortization of debt issuance costs 

                 8,926

 

                 7,763

 

Equity-based compensation expense

               14,322

 

               19,273

 

Deferred income taxes

                 5,150

 

                (1,738

)

Debt extinguishment costs

                      -  

 

                    940

 

Other 

                 4,444

 

                 3,025

 

Change in operating assets and liabilities: 
Accounts receivable, net

              (32,956

)

              (43,252

)

Other current assets 

                (3,912

)

                 3,021

 

Other assets 

                    530

 

                 3,868

 

Accounts payable and other accrued liabilities

              (35,610

)

                 9,230

 

Accrued salaries and benefits 

                 4,813

 

               11,049

 

Other liabilities 

                 5,110

 

                    149

 

Net cash provided by continuing operating activities 

              213,529

 

              288,731

 

Net cash used in discontinued operating activities 

                      -  

 

                (2,548

)

Net cash provided by operating activities

              213,529

 

              286,183

 

 
Investing activities: 
Cash paid for acquisitions, net of cash acquired 

              (44,900

)

                      -  

 

Cash paid for capital expenditures 

            (202,722

)

            (249,989

)

Cash paid for real estate acquisitions

                (6,976

)

                (9,391

)

Settlement of foreign currency derivatives

              105,008

 

                      -  

 

Other 

               12,398

 

                (3,114

)

Net cash used in investing activities

            (137,192

)

            (262,494

)

 
Financing activities: 
Borrowings on revolving credit facility

               76,573

 

                      -  

 

Principal payments on revolving credit facility

              (76,573

)

                      -  

 

Principal payments on long-term debt 

              (24,738

)

              (31,492

)

Common stock withheld for minimum statutory taxes, net

                (1,498

)

                (2,272

)

Other

                (5,923

)

                (6,973

)

Net cash used in financing activities 

              (32,159

)

              (40,737

)

 
Effect of exchange rate changes on cash

                (1,788

)

                (1,314

)

  
Net increase (decrease) in cash and cash equivalents 

               42,390

 

              (18,362

)

Cash and cash equivalents at beginning of the period 

               50,510

 

               67,290

 

Cash and cash equivalents at end of the period 

 $             92,900

 

 $             48,928

 

    
Effect of acquisitions: 
Assets acquired, excluding cash 

 $             48,594

 

 $                   -  

 

Liabilities assumed 

                (3,694

)

                      -  

 

Cash paid for acquisitions, net of cash acquired 

 $             44,900

 

 $                   -  

 

 
 
 

Acadia Healthcare Company, Inc.

Operating Statistics

(Unaudited, Revenue in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

Same Facility Results (a,c)
Revenue

 $    741,976

 $    709,474

4.6%

 $ 2,214,660

 $ 2,103,372

5.3%

Patient Days

    1,151,793

    1,139,501

1.1%

    3,414,315

    3,351,815

1.9%

Admissions

        45,655

        43,763

4.3%

       133,143

       127,463

4.5%

Average Length of Stay (b)

            25.2

            26.0

-3.1%

            25.6

            26.3

-2.5%

Revenue per Patient Day

 $          644

 $          623

3.5%

 $          649

 $          628

3.4%

EBITDA margin

22.9%

23.9%

-100 bps

23.4%

24.7%

-130 bps
 
U.S. Same Facility Results (a)
Revenue

 $    498,076

 $    474,912

4.9%

 $ 1,467,618

 $ 1,386,457

5.9%

Patient Days

       648,767

       631,115

2.8%

    1,910,839

    1,846,748

3.5%

Admissions

        43,247

        41,318

4.7%

       126,062

       120,209

4.9%

Average Length of Stay (b)

            15.0

            15.3

-1.8%

            15.2

            15.4

-1.3%

Revenue per Patient Day

 $          768

 $          752

2.0%

 $          768

 $          751

2.3%

EBITDA margin

25.9%

27.3%

-140 bps

26.7%

27.2%

-50 bps
 
U.K. Same Facility Results (a,c)
Revenue

 $    243,900

 $    234,562

4.0%

 $    747,042

 $    716,915

4.2%

Patient Days

       503,026

       508,386

-1.1%

    1,503,476

    1,505,067

-0.1%

Admissions

          2,408

          2,445

-1.5%

          7,081

          7,254

-2.4%

Average Length of Stay (b)

          208.9

          207.9

0.5%

          212.3

          207.5

2.3%

Revenue per Patient Day

 $          485

 $          461

5.1%

 $          497

 $          476

4.3%

EBITDA margin

16.7%

17.0%

-30 bps

17.0%

19.7%

-270 bps
 
 
U.S. Facility Results
Revenue

 $    509,383

 $    488,626

4.2%

 $ 1,507,156

 $ 1,432,501

5.2%

Patient Days

       663,969

       650,395

2.1%

    1,960,749

    1,899,050

3.2%

Admissions

        44,693

        41,614

7.4%

       130,098

       121,065

7.5%

Average Length of Stay (b)

            14.9

            15.6

-4.9%

            15.1

            15.7

-3.9%

Revenue per Patient Day

 $          767

 $          751

2.1%

 $          769

 $          754

1.9%

EBITDA margin

24.9%

26.3%

-140 bps

25.3%

26.2%

-90 bps
 
U.K. Facility Results (c)
Revenue

 $    267,868

 $    257,650

4.0%

 $    820,074

 $    788,103

4.1%

Patient Days

       673,473

       681,917

-1.2%

    2,009,006

    2,024,389

-0.8%

Admissions

          2,749

          2,752

-0.1%

          8,160

          8,226

-0.8%

Average Length of Stay (b)

          245.0

          247.8

-1.1%

          246.2

          246.1

0.0%

Revenue per Patient Day

 $          398

 $          378

5.3%

 $          408

 $          389

4.9%

EBITDA margin

15.2%

15.0%

20 bps

15.4%

17.5%

-210 bps
 
Total Facility Results (c)
Revenue

 $    777,251

 $    746,276

4.2%

 $ 2,327,230

 $ 2,220,604

4.8%

Patient Days

    1,337,442

    1,332,312

0.4%

    3,969,755

    3,923,439

1.2%

Admissions

        47,442

        44,366

6.9%

       138,258

       129,291

6.9%

Average Length of Stay (b)

            28.2

            30.0

-6.1%

            28.7

            30.3

-5.4%

Revenue per Patient Day

 $          581

 $          560

3.8%

 $          586

 $          566

3.6%

EBITDA margin

21.6%

22.4%

-80 bps

21.8%

23.1%

-130 bps
 
(a) Results for the periods presented exclude the elderly care division of our U.K. operations and certain closed services.
(b) Average length of stay is defined as patient days divided by admissions.
(c) Revenue and revenue per patient day for the three and nine months ended September 30, 2018 is adjusted to reflect the foreign currency exchange rate for the comparable periods of 2019 in order to eliminate the effect of changes in the exchange rate. The exchange rate used in the adjusted revenue and revenue per patient day amounts for the three and nine months ended September 30, 2018 is 1.23 and 1.27, respectively.
 
 
 

Acadia Healthcare Company, Inc.

Reconciliation of Net Income Attributable to Acadia Healthcare Company, Inc. to Adjusted EBITDA

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands)

Net income attributable to Acadia Healthcare Company, Inc.

 $             42,566

 $             46,232

 $           120,177

$           155,887

Net income attributable to noncontrolling interests

                    157

                     47

                    258

156

Provision for income taxes 

                 6,837

                 8,757

               25,801

16,339

Interest expense, net

               46,644

               46,651

              143,384

137,706

Depreciation and amortization

               40,620

               39,659

              122,277

119,360

EBITDA

              136,824

              141,346

              411,897

429,448

Adjustments:
Equity-based compensation expense (a)

                 4,039

                 5,225

               14,322

19,273

Transaction-related expenses  (b)

                 5,775

                 2,353

               15,308

10,008

Debt extinguishment costs (c)

                        -

                        -

                        -

940

Adjusted EBITDA

 $           146,638

 $           148,924

 $           441,527

$           459,669

 
See footnotes on page 9.
 
 
 

Acadia Healthcare Company, Inc.

Reconciliation of Adjusted Income Attributable to Acadia Healthcare Company, Inc. to

Net Income Attributable to Acadia Healthcare Company, Inc.

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except per share amounts)
 
Net income attributable to Acadia Healthcare Company, Inc.

 $            42,566

 

 $            46,232

 

 $          120,177

 

 $          155,887

 

 
Adjustments to income:
Transaction-related expenses  (b)

                5,775

 

                2,353

 

               15,308

 

               10,008

 

Tax reform impact (d)

                       -

 

                       -

 

                       -

 

             (10,472

)

Debt extinguishment costs (c)

                       -

 

                       -

 

                       -

 

                   940

 

Income tax effect of adjustments to income (e)

               (2,371

)

                 (406

)

               (1,384

)

               (1,821

)

Adjusted income attributable to Acadia Healthcare Company, Inc.

 $            45,970

 

 $            48,179

 

 $          134,101

 

 $          154,542

 

 
Weighted-average shares outstanding - diluted

               87,859

 

               87,537

 

               87,805

 

               87,386

 

 
Adjusted income attributable to Acadia Healthcare Company, Inc. per diluted share

 $               0.52

 

 $               0.55

 

 $               1.53

 

 $               1.77

 

 
See footnotes on page 9.
 
 
 
Acadia Healthcare Company, Inc.
Footnotes
 
We have included certain financial measures in this press release, including EBITDA, Adjusted EBITDA, and Adjusted income, which are “non-GAAP financial measures” as defined under the rules and regulations promulgated by the SEC. We define EBITDA as net income adjusted for net income attributable to noncontrolling interests, provision for income taxes, net interest expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted for equity-based compensation expense, transaction-related expenses and debt extinguishment costs. We define Adjusted income as net income adjusted for transaction-related expenses, tax reform impact, debt extinguishment costs, and income tax effect of adjustments to income. 
 
EBITDA, Adjusted EBITDA, and Adjusted income are supplemental measures of our performance and are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). EBITDA, Adjusted EBITDA, and Adjusted income are not measures of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as measures of our liquidity. Our measurements of EBITDA, Adjusted EBITDA, and Adjusted income may not be comparable to similarly titled measures of other companies. We have included information concerning EBITDA, Adjusted EBITDA, and Adjusted income in this press release because we believe that such information is used by certain investors as measures of a company’s historical performance. We believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of issuers of equity securities, many of which present EBITDA, Adjusted EBITDA, and Adjusted income when reporting their results. Our presentation of EBITDA, Adjusted EBITDA, and Adjusted income should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
 
The Company is not able to provide a reconciliation of projected Adjusted EBITDA and adjusted earnings per diluted share, where provided, to expected results due to the unknown effect, timing and potential significance of transaction-related expenses and the tax effect of such expenses. 
 
(a) Represents the equity-based compensation expense of Acadia.
 
(b) Represents transaction-related expenses incurred by Acadia primarily related to acquisitions and integration efforts.
 
(c) Represents debt extinguishment costs recorded in connection with the repricing amendments to the Amended and Restated Credit Agreement in March 2018.
 
(d) Represents tax benefit related to the enactment of the Tax Cuts and Jobs Act.
 
(e) Represents the income tax effect of adjustments to income based on tax rates of 16.7% and 16.0% for the three months ended September 30, 2019 and 2018, respectively, and 16.9% and 15.6% for the nine months ended September 30, 2019 and 2018, respectively. 

 

Contacts

Gretchen Hommrich
Director, Investor Relations
(615) 861-6000

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Contacts

Gretchen Hommrich
Director, Investor Relations
(615) 861-6000