For five quarters in a row, Acadia Healthcare (Nasdaq: ACHC) has seen a decline in specialty revenue, contributing to a broader deceleration trend for the company. This has been largely driven by facility closures, including the shuttering of its Timberline Knolls facility back in January following abuse allegations.

At the same time, there has been slight growth in Acadia’s Medicaid specialty inpatient business, Heather Dixon, the company’s chief financial officer, said during its first quarter earnings call.

Chris Hunter, CEO of Acadia, also blamed the underperformance of other facilities on negative “local media coverage.”

While the company denies the allegations of abuse at Timberline, Acadia Healthcare has still been navigating legal headwinds, including ongoing investigations by the Department of Justice and the Securities and Exchange Commission. Legal expenses from the company’s first quarter of business this year reflect that notable line item, totaling more than $20 million, which was not a reality in its finances this time last year.

“We have both the DOJ and the SEC that we are working very cooperatively and diligently with,” Dixon said. “What I would say is that at the earlier stages of investigation, there is a lot of preliminary work to do and certainly a large amount of work that needs to get done, and again, we are working as quickly as we possibly can.”

Despite that, Acadia’s revenue for Q1 was $770.5 million, up slightly from $768.1 million in Q1 of 2024. Net income landed at $8.4 million.

The results were in line with expectations, Hunter said, and position the company well for expansion and growth ahead.

During the first quarter alone, Acadia added 378 newly licensed beds, including 288 from newly constructed facilities and 90 to existing ones. Its growth rate is underpinned by plans to add between 600-800 beds annually beginning 2026 – the largest expansion of bed capacity in the company’s history, providing a runway for extended growth.

This year, Acadia expects to add between 800-1000 beds total. By the end of 2025, the company will have added roughly 1,600-1,800 beds since it began the ramp-up in 2024.

“We want to highlight that most of these bed editions come in the form of brand-new facilities, which, on average, typically ramp to run rate occupancy and EBITDA margin within a five-year period,” Dixon said. “As a result, we expect to recognize incremental EBITDA for a majority of this cohort beyond 2028 as these beds continue to ramp to mature occupancy and margin levels.”

So far in 2025, Acadia has added seven comprehensive treatment centers and began operations at a joint venture hospital in Michigan with Henry Ford Health and a separate one in Florida. Nine additional joint venture hospital partnerships are expected to open in the coming years.

“We believe our differentiated quality initiatives are having a positive impact on our ability to recruit and retain our staff,” Hunter said. “These efforts are directly connected to our emphasis on employee engagement and talent acquisition, ensuring we have appropriately staffed facilities with trained employees, which have improved underlying labor trends for our company. This is further reinforced by our premium pay, which declined on both a sequential and year-over-year basis in the first quarter.”

However, questions surrounding staffing levels and oversight at its facilities have been one area of criticism, like in the case of Timberline Knolls.

Acadia also reported positive discussions with its payer partners and is not anticipating any changes this year.

“I think we’ve done a very good job pointing out our commitment to quality,” Hunter said. “We have obviously invested heavily in being able to quantify outcomes and we’ve shared that with our payer partners. I think all of that has led to a consistent demand environment.

Looking ahead to the second quarter, Dixon avoided giving specific guidance, but noted that the most pressing swing factor will be its pending Tennessee supplemental payment program, which will impact whichever quarter it gets approved.