Acadia Healthcare (Nasdaq: ACHC) has bounced back from COVID-19 and then some, the company’s second-quarter 2021 financials show. In fact, strong performance for the quarter prompted Acadia to up its guidance for the year.
In Q2, Acadia reported a year-over-year jump in patient days of 9.8%. Admittedly, COVID-19 hurt Acadia’s volumes in Q2 2020; but even after adjusting for that impact, patient days were up 4.8% in the second quarter of 2021.
Meanwhile, same facility revenue increased 18% and revenue per patient day increased 7.5% in Q2 2021 compared to Q2 2020.
“We are pleased to see these solid volume trends,” Acadia CEO Debbie Osteen said on the company’s Q2 earnings call, pointing to increased demand, decreased stigma and recovery from COVID-19 as contributing factors. “Leveraging the strength of our diversified service lines, Acadia is well positioned to meet the needs of those seeking behavioral treatment, and we expect to see continued growth in demand.”
Acadia is the nation’s largest standalone behavioral health company, with 229 behavioral healthcare facilities and 10,100 beds across 40 states and Puerto Rico. It also previously had a U.K. business, which the company sold earlier this year for about $1.47 billion.
On Acadia’s Q2 earnings call, Osteen and CFO David Duckworth doubled down on the company’s commitment to its four-pronged growth strategy, which leaders have detailed on previous earnings calls. Those prongs include facility expansions, wholly owned de novos, strategic joint ventures and acquisitions.
Of those growth avenues, facility expansions provide the best return on investment and remain “a primary focus” for Acadia, Osteen said on the call. In Q2, Acadia added 86 beds, 72 of which were incremental from the opening of a 260-bed replacement facility for Belmont Behavioral Hospital in Philadelphia. The provider remains on track to hit its goal of adding 300 new beds in 2021, Osteen said.
Additionally, Acadia opened one new outpatient comprehensive treatment center (CTC) last quarter. The company’s CTCs offer a mix of medication and therapy to help people recover from opioid use disorder (OUD).
Also in Q2, the company added Glenwood Behavioral Health — a de novo hospital with 80 beds in Cincinnati, Ohio — and announced a new joint venture agreement with Bronson Healthcare to build a new 96-bed facility in Battle Creek, Michigan.
Overall, Acadia has 13 JV partnerships with “premiere health systems,” a growth pathway that’s been accelerating for the company since before the pandemic. It currently has a robust pipeline of more than 30 opportunities, according to Osteen, with potential projects and partnerships in a variety of different stages.
“We have signed several LOIs that we have not announced,” she said. “We will do so when we have a definitive agreement.”
While Acadia didn’t make any acquisitions in the second quarter, Osteen said the company is well positioned and has significant capital available to pursue opportunities that make sense in the future.
“There are a number of the smaller multi-facility systems, and then certainly single-facility operators, that present future opportunities for us,” Osteen said. “We are looking at the strategic fit, as well as the financial.”
Combined, Acadia’s four growth avenues will mean additional capacity and margin improvements for the company down the line, according to Duckworth. He pointed to same-facility growth in particular.
“That should add around 50 basis points of margin improvement to our same facility group of facilities,” he said on the second-quarter call. “We will continue, of course, to invest in new facilities, joint ventures and de novos. … But once those mature, we think those will be accretive to margins as well.”
When it comes to potential pain points, Osteen said Acadia has seen a slight uptick in COVID at certain facilities amid the rise of the Delta variant. However, the rise hasn’t been significant and it hasn’t affected volumes or staffing. Additionally, Osteen said the company is prepared in the event of a COVID resurgence.
Plus, while the labor market is tight, she said Acadia has done a good job managing it, though staffing is a bigger problem in some areas than others.
Financial results
Acadia’s revenue was up 18.5% year-over-year in Q2 at $582.2 million. Meanwhile, net income attributable to stockholders came in at $44.5 million, and adjusted EBITDA increased 25% to $141.3 million.
Also during the quarter, the company repaid $41 million in debt, including $35 million on its senior secured revolving credit facility, reducing the outstanding balance to $125 million as of June 30.
Due to the company’s strong Q2 performance, Acadia increased its financial guidance for the year to a range of $2.28 billion to $2.32 billion. Plus, it upped adjusted EBITDA for 2021 to a range of $530 million to $550 million.
Overall, analysts seemed impressed by Acadia’s Q2 performance and optimistic about the company’s future. Take this Jefferies note obtained by Behavioral Health Business, for example.
“We remain positive on ACHC and view its strong Q2 results and accompanying guidance raise as proof that demand for mental health services will remain elevated, which, combined with [management’s] commitment to expanding bed capacity, should translate to multi-[year] organic EBITDA growth of at least 10%,” analysts said in the note. “As ACHC continues to execute on its growth goals — including capital deployment toward M&A — expect positive earnings surprises, multiple expansion, and stock upside.”
Acadia’s stock closed at $63.62 per share at the end of the trading Tuesday, up more than 3%.
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