Acadia Healthcare Co. Inc. (Nasdaq: ACHC) is looking to position itself as a “proactive acquirer,” its CEO said.
However, during its second-quarter earnings conference call on Thursday, the company’s leadership was mum on specifics around its M&A strategy.
“We have the opportunity to be opportunistic, but also patient,” CEO Christopher Hunter said on the call. “We’ve been very proactive in getting out there and meeting with companies across the service lines.”
Acadia Healthcare has teased growth plays since it divested its business in the United Kingdom in January 2021.
On the call, Hunter said Acadia Healthcare is focused on the four areas of expansion that his predecessor, former CEO Debbie Osteen, set forth — adding new beds to existing facilities, building new facilities, joint ventures and M&A.
He noted Acadia Healthcare’s “strong balance sheet” and a net leverage ratio of 2.1x at the end of the second quarter illustrates the company’s preparedness for M&A.
The company’s M&A and JV efforts are mainly focused on developing partnerships and relationships with other health care providers, especially in the acute care space.
The company is also focusing on geographies that meet Acadia Healthcare’s profile, Hunter added.
“Given some of the valuations that we’ve seen in the last year, there will be more and more companies that are interested in a partner,” Hunter said. “It’s incumbent on us to build that relationship and to get out and be with them proactively, which we’re doing.”
How Acadia Healthcare grew in 1H ’22
In 2022, Acadia Healthcare expects to add 600 beds to the company’s footprint, Hunter said. These are planned to come through 300 new beds at current facilities, opening one new Acadia-owned inpatient facility, opening two facilities through joint ventures and opening at least six comprehensive treatment centers. Comprehensive treatment centers focus on providing substance-use disorder treatment.
In the year so far, Acadia Healthcare has added 78 beds to existing facilities. The company will add another 150 beds during the third quarter and is in line to hit its goal for new beds at existing facilities, Hunter said.
In July, Acadia Healthcare opened a 60-bed children’s hospital in Chicago’s North Side that will become Montrose Behavioral Health Hospital. It will open a 110-bed adult inpatient facility at some point in 2023.
Acadia Healthcare opened two new comprehensive treatment centers during the first half of the year. Hunter said Acadia is on track to open at least six in 2022. At the end of the second quarter, Acadia had 142 comprehensive treatment centers open.
The company has 19 joint ventures that are underway. Earlier in the month, it announced a $65 million partnership with Tufts Medicine and a JV with ECU Health. The latter marks Acadia Healthcare’s expansion into North Carolina, Hunter said.
“We plan to open our eighth joint venture facility in partnership with Covenant Health in Knoxville, Tennessee, during the third quarter, and our ninth joint venture facility in partnership with Lutheran Health Network in Fort Wayne, Indiana, during the fourth quarter of 2022, Hunter said.
Hunter didn’t cite any M&A activity during the call, only reiterating the company’s strong financial position.
As of the end of the second quarter, Acadia Healthcare operated 239 behavioral healthcare facilities with approximately 10,600 beds in 39 states and Puerto Rico. It employed 22,500 employees who served a daily census of about 70,000 patients.
By the numbers
Acadia Healthcare beat earnings and revenue estimates for the second quarter.
Net income increased by 79% to $81.9 million, or 89¢ per share. That beat the Zacks Consensus Estimate of 77¢ per share.
Total revenue grew to $652 million, up year-over-year by 12%. This surpassed the Zacks Consensus Estimate of $647 million.
“While labor is still a challenging issue for all health care providers, we are cautiously optimistic that the market is improving,” Hunter said. “We have seen sequential improvement and our net new hires from March through the first half of July and our contract labor continues to be stable and represents a very low percentage of our labor.”
Universal Health Services Inc. (NYSE: UHS), a fellow national publicly traded behavioral operator, has seen workforce shortages and contract labor as a major reason why it had to slash its annual financial guidance.
By contrast, Acadia Healthcare announced it is increasing its annual guidance for 2022. Here are some of its new estimates and how they compare to the previous guidance:
— Revenue: $2.56 to $2.60 billion, 0.4% increase on lower limit
— Adjusted EBITDA, excluding income from federal assistance: $583 to $613 million, a 1.4% increase on the lower limit and a 0.5% increase on the upper limit
— Adjusted earnings per diluted share, excluding income from federal assistance: $2.93 to $3.18, 2.8% increase on lower limit and a 1% increase on the upper limit