Acadia Healthcare Sees Growth with New Beds Despite Challenges

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Acadia Healthcare Sees Growth with New Beds Despite Challenges

Acadia Healthcare Company, Inc. (ACHC) demonstrated strong performance in the third quarter of 2024, with total revenue reaching $816 million, reflecting an 8.7% year-over-year increase. This growth was primarily attributed to the rise in patient days and improvements in rates. Adjusted EBITDA also increased by 10.5%, rising to $194.3 million. Despite facing legal investigations and a temporary decline in patient day growth in October, the company is expanding its bed capacity and expects continued growth in the coming years.

Key Points:

  • Total revenue for Q3 2024 increased by 8.7% year-over-year to $816 million.
  • Adjusted EBITDA rose by 10.5% to $194.3 million.
  • Acadia is on track to add approximately 1,200 new beds in 2024 and plans significant expansions with partnerships and new facilities.
  • The company is investing in over 2,000 additional beds to meet the unmet need for behavioral health services.
  • Adjusted diluted earnings per share for 2024 are projected between $3.35 and $3.45.
  • The revenue forecast for 2024 has been revised to between $3.15 billion and $3.165 billion.
  • Acadia may close underperforming locations, as seen with the recent closure of two satellite programs.
  • Positive reimbursement developments are expected, particularly in Tennessee.
  • Personnel conditions remain stable despite legal scrutiny, with new quality improvement measures being implemented.

Company Outlook: Acadia is investing billions to address the significant unmet need for behavioral health services in the U.S. The company expects to complete 1,200 new beds this year and add over 2,000 more in the next two years. The 2024 revenue forecast has been revised due to lower-than-expected volume growth in October. Acadia anticipates ongoing volume growth from new beds and positive reimbursement developments.

Negative Aspects:

  • There was a temporary slowdown of about 3% in patient day growth in October.
  • EBITDA is projected to decrease by between $10 million and $15 million due to low patient day growth and other factors.
  • Revenue declines between $20 million and $30 million are expected.
  • There have been acknowledged management issues with delays since the end of August.

Positive Aspects:

  • The inpatient psychiatry sector is underfunded, with an estimated need for 75,000 additional beds.
  • Acadia's expansion plans will significantly increase bed capacity.
  • Positive discussions with payers in Tennessee could improve reimbursement rates.
  • Wage inflation has remained below 5%, indicating improved cost management.

Shortcomings:

  • Revised estimates for 2024 reflect an expected decline in revenue and EBITDA.
  • October's volume growth did not meet expectations, which may impact year-end financials.
  • Closure of underperforming satellite facility beds.

Q&A Highlights:

  • Management is actively addressing referral management issues without a clear timeline for improvement.
  • No significant negative impact on staff has been reported due to ongoing legal reviews.
  • Wage inflation has improved, with current rates below 5%.
  • Specific case details regarding ongoing legal matters cannot be disclosed, but Acadia has bolstered its legal team.

Acadia Healthcare continues its path by focusing on strategic investments and expanding access to behavioral health services in a complex environment. Despite facing challenges like legal investigations and fluctuating patient volumes, the commitment to growth and quality care remains steadfast. With a solid financial position and strategic expansion plan, Acadia Healthcare is well-positioned to meet the demands of the behavioral health sector in the coming years.

InvestingPro Predictions: Acadia Healthcare Company, Inc. (ACHC) has faced some challenges in its recent financial performance and market valuation. According to InvestingPro data, the company's stock has significantly declined; it fell by 16.73% in the last week and 32.74% in the last month. This decline has brought the stock price close to its 52-week low, currently trading at only 48.64% of its 52-week high.

Despite these challenges, there are some positive indicators for ACHC. According to InvestingPro data, the company’s revenue growth remains robust, with a 9.13% increase year-over-year as of Q3 2024, aligning with the reported 8.7% revenue growth for the quarter. This growth is supported by an 11.84% increase in EBITDA during the same period, demonstrating the company’s ability to expand operations and maintain profitability.

An InvestingPro Tip suggests that net income is expected to rise this year, which may provide some reassurance to investors concerned about the recent drop in stock price. Additionally, analysts anticipate the company will be profitable this year, aligning with the adjusted projected earnings per diluted share of $3.35 to $3.45 mentioned.

The company’s valuation metrics present a mixed picture. As of Q3 2024, ACHC is seen as reasonably valued compared to some healthcare sector peers, with a trailing P/E ratio of 15.06 (adjusted). However, the recent stock price decline may offer a buying opportunity, as another InvestingPro Tip indicates that the stock is in the oversold region of the Relative Strength Index (RSI).

For investors wishing to conduct a more in-depth examination of Acadia Healthcare's financial health and outlook, InvestingPro offers five additional tips that could provide valuable insights into the company's investment potential.