Acadia Healthcare Company, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparative period is Q1 2021. Acadia operates behavioral healthcare facilities in the U.S. and Puerto Rico. At quarter-end it had 238 facilities and approximately 10,600 beds. The U.K. business was sold in January 2021 and is presented as discontinued operations.
Financial performance and liquidity
- Revenue: $616.7 million, up 11.9% from $551.2 million. Same-facility revenue grew 8.6%, driven by patient days growth of 2.2% and revenue per patient day growth of 6.2%.
- Profit: Income from continuing operations was $61.9 million versus $23.1 million; net income attributable to Acadia was $60.8 million versus $9.7 million. Diluted EPS was $0.67 versus $0.11. Continuing-operations pretax margin was 12.9% versus 5.3%; net margin was 10.0% versus 1.9%.
- Costs and margins: Salaries, wages and benefits were $335.8 million (54.4% of revenue), compared with $304.3 million (55.2%). Management cited added staffing and wage inflation. Same-facility Adjusted EBITDA margin improved 150 basis points; the filing does not provide its absolute margin in the presented text.
- Cash flow: Continuing operating cash flow was $76.8 million versus $75.8 million. Capital expenditures were $50.5 million, including $38.5 million for expansion. Cash and equivalents ended at $140.4 million, up from $133.8 million.
- Debt and liquidity: Debt carrying value was approximately $1.485 billion, including $21.3 million current; cash was $140.4 million. Revolver availability was $436.8 million, with $3.2 million of letters of credit outstanding. Acadia reported compliance with its leverage and interest-coverage covenants. Management said available cash, operating cash flow and revolver availability should meet expected liquidity needs for the next 12 months.
Changes versus Q1 2021
- Revenue increased $65.5 million. Same-facility revenue contributed $46.8 million of growth.
- Net income attributable to Acadia rose from $9.7 million to $60.8 million. The comparison is affected by Q1 2021 discontinued U.K. operations, including a $12.6 million after-tax loss, and $24.7 million of debt extinguishment costs; neither item was recorded in Q1 2022. Interest expense also declined to $15.8 million from $29.0 million, primarily reflecting debt reduction following the U.K. sale.
- Operating cash flow was broadly stable. Investing cash flow shifted from $1.368 billion provided in Q1 2021, largely reflecting U.K. sale proceeds, to $49.7 million used in Q1 2022, mainly for capital spending.
Outlook, commentary and risks
- For 2022, management expected to add approximately 300 beds at existing facilities and open two wholly owned facilities, two joint-venture facilities and at least six comprehensive treatment centers. No earnings or revenue forecast is stated in the provided filing text.
- Management described favorable demand trends but noted a tight labor market. Key risks include staffing availability and wage inflation, COVID-19 or other disruptions, payer and reimbursement changes, acquisition integration, regulation and government investigations, patient-care claims, cybersecurity, and the company’s significant indebtedness.
- Medicaid represented 48.6% of Q1 revenue; commercial payors were 31.6%. The company continued repaying approximately $45 million of Medicare advance payments received in 2020, including about $7.6 million paid in Q1 2022, and expected to repay the remaining balance during 2022. It also expected to repay the remaining half of approximately $39 million in deferred payroll taxes in the second half of 2022.
- Acadia disclosed ongoing securities and derivative litigation and government investigations involving alleged regulatory and patient-care matters; it said potential liabilities could not be quantified. The filing also notes self-insurance for professional liability claims up to $10 million, with reinsurance above that retention.
- CenterPointe, acquired on December 31, 2021 for approximately $139 million cash consideration, operates four inpatient hospitals and ten outpatient locations. Certain acquired asset and liability valuations remained preliminary.
Important facts for investors to verify
- Whether revenue and patient-volume growth can continue while labor costs and staffing constraints remain elevated.
- How much of reported earnings improvement reflects ongoing operations versus the absence of prior-year U.K. discontinued-operation losses and debt extinguishment costs.
- Progress on planned facility, bed and treatment-center openings, and integration of CenterPointe.
- Cash generation, capital spending, debt repayment, floating-rate exposure and continued covenant compliance.
- Developments in government investigations, litigation, reimbursement, and repayment of Medicare advances and deferred payroll taxes.