Acadia Healthcare(ACHC) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for Q1 2023 increased by 14.2% YoY to $704.3 million, driven by robust demand for behavioral health services [12] - Adjusted EBITDA grew by 11.6% YoY to$ 151.3 million, and adjusted EPS increased by 11.9% YoY to $0.75 [12] - Same-facility revenue grew by 13.3% YoY, with patient day growth of 6.5% and revenue per day growth of 6.4% [6] - Labor costs were in line with expectations, with base wage inflation at 7.5% and premium pay showing sequential improvement [7] Business Line Data and Key Metrics - The company added 106 beds to existing facilities in Q1, with a target of adding approximately 300 beds in 2023 [7] - Two new de novo facilities are planned for 2023, including a 101-bed adult hospital in Chicago and an 80-bed facility in Indio, California [8] - The company aims to add at least six Comprehensive Treatment Centers (CTCs) in 2023, expanding its network of 151 CTCs across 32 states [8] - Strategic partnerships with health systems are progressing, with 19 joint venture facilities in various stages of development [8] Market Data and Key Metrics - The company operates 250 facilities with 23,000 employees, serving diverse markets across the U.S. [6] - Record patient volumes were achieved in Q1, with strong demand across service lines, markets, and payers [6] - The labor market remains tight, but the company has seen improvements in recruiting and retention, particularly for RNs and BHAs [16][17] Company Strategy and Industry Competition - The company’s growth strategy focuses on five pathways: facility expansions, de novo facilities, strategic partnerships, selective acquisitions, and extending the continuum of care [7][8][9] - Acadia is investing in technology and differentiated services to improve care delivery and clinical outcomes [11] - The company published its inaugural sustainability report, highlighting its commitment to environmental, social, and governance (ESG) initiatives [11] Management Commentary on Operating Environment and Future Outlook - Management highlighted the urgent need for behavioral health services in the U.S., with suicide being the second leading cause of death among Americans aged 15-24 [5] - The company expects continued strong demand for its services and is focused on expanding access to care in underserved markets [10] - Labor market conditions are improving, with wage inflation expected to moderate further in 2023 [7][16] Other Important Information - The company has$ 63.8 million in cash and cash equivalents and $485 million available under its revolving credit facility, with a net leverage ratio of approximately 2.2 [12] - Guidance for 2023 includes revenue of$ 2.82 billion to $2.88 billion, adjusted EBITDA of$ 635 million to $675 million, and adjusted EPS of$ 3.10 to $3.40 [12] Q&A Session Summary Labor Trends and Wage Inflation - Base wage inflation improved from 8% in Q4 2022 to 7.5% in Q1 2023, with total wage inflation at 7.1% [16] - The company has implemented strategies to improve recruiting and retention, including partnerships with nursing schools and tuition reimbursement programs [17] Medicaid Redeterminations - Medicaid redetermination is in early stages, with 15 million individuals expected to lose coverage, but 75% of those may transition to commercial insurance [20] - The company has implemented patient education and support programs to mitigate the impact of redetermination [22] CTC Business and Opioid Settlement Funds - The company plans to open six CTCs in 2023 and accelerate to 14 in 2024, with potential benefits from opioid settlement funds [36] - The CTC business has strong margins, with many locations exceeding the company average of 28% [38] Labor Cost and Corporate Overhead - Wage inflation is expected to moderate to 3%-5% by the end of 2023, with improvements in labor cost management [42] - Corporate overhead increased due to investments in IT, HR, and marketing, but these are expected to drive long-term efficiencies [45] IT Initiatives and EHR Rollout - The company is piloting an EHR system, with early benefits seen in employee engagement and compliance [48] - IT investments are expected to improve patient experience, data analytics, and operational efficiency [50] Cash Flow and Working Capital - Q1 operating cash flow was$ 44 million, in line with expectations, with seasonal impacts from working capital and payroll timing [59]