Acadia Healthcare (ACHC) Q2 FY26 earnings call: guidance and Q&A

Can you provide more qualitative comments on the progress and achievability of the $200 million incremental adjusted EBITDA target from the 2023-2026 new bed cohorts?

Management expressed high confidence in achieving the $200 million target, noting that revenue, volume, and facility-level EBITDA for these cohorts are ahead of expectations. They cited the Coachella Valley facility (2024 de novo) as an example, which is now over 90% occupancy and planning for additional beds, demonstrating successful ramp-up.

“We have confidence in delivering on the $200 million of the incremental adjusted EBITDA. It's been a significant focus for the team. I think we've made further progress during the second quarter with really revenue volume, facility level EBITDA. They were ahead of our expectations for each cohort.”

asked by Brian Tanquilut · answered by Debra Osteen

What is driving the increase in operating cash flow guidance and the reduction in CapEx targets?

The improved operating cash flow is due to strong core business performance, successful new facility execution, positive working capital trends (AR days declined to 49%), and lower cash interest. The revised CapEx forecast reflects a disciplined approach to capital deployment and timing of projects.

“We were pleased with the free cash flow performance during the second quarter, and expect that to continue into the back half of the year. And it is attributable to strong performance in the core business and strong execution on many of our new facilities in addition to just some EBITDA visibility and confidence in the full year number.”

asked by Brian Tanquilut · answered by David Duckworth

Since your return as CEO, where has the company made progress in addressing past challenges (managed care, litigation, JV pacing) and where are there still opportunities?

Progress has been made by building a strong, experienced operations team, which has led to cohort facilities ramping ahead of expectations. The company has strengthened referral relationships, demonstrated outcomes, improved problem-solving, implemented new dashboards, and focused on expense management. Management believes this momentum is sustainable.

“I mean we really have the back to basics, and you mentioned some of the challenges that the company faced. But I think just building a strong experienced operations team has just made a big difference to our focus and our execution.”

asked by Albert Rice · answered by Debra Osteen

What are the current trends in labor, including wage rates and turnover?

The labor environment remains stable and positive, with strong recruiting and retention. The company has successfully staffed new facilities. Wage cost growth is trending around 3% year-over-year, varying by role and geography. JV partnerships also provide an advantage in staffing new facilities.

“we are continuing to see a stable and positive labor environment and have seen for several quarters just a strong recruiting ability to recruit as well as just a retention of our existing employees.”

asked by Albert Rice · answered by David Duckworth

Can you update on the trends in bad debt and payer denials, and the progress made in revenue cycle management?

Bad debt and denials showed stability sequentially from Q1 to Q2, and a year-over-year improvement in the headwind from $9 million to $7 million. The company employs a three-pronged approach: strengthening processes, leveraging technology for proactive intervention, and a strategic appeals process to drive improvement.

“We were encouraged in the second quarter to see stability in our bad debts and denials as we look at that sequentially versus Q1. We did see a stable number sequentially compared to the first quarter.”

asked by Matthew Gillmor · answered by David Duckworth

What is the pace of the de novo pipeline, and what is the expected trajectory of startup losses for Q3 and Q4 2026, and potentially into 2027?

One more de novo facility near Jacksonville, Florida, is planned for Q3 FY26, contributing to the 500-600 beds target for the year. No new de novo or JV projects are currently planned to start in Q4 FY26 or early FY27. Startup losses are expected to be $12 million to $14 million in Q3, then decrease to below $12 million in Q4. Management is also focused on adding beds to existing facilities with high occupancy for optimal capital return.

“With respect to the start-up losses, we have had 2 quarters in a row where our losses for the facilities opening in the last 12 months has been around $12 million. ... I think it could get a little bit larger, not significantly, but maybe in the $12 million to $14 million range before we really have an opportunity starting in the fourth quarter to see that number come back down certainly below the $12 million.”

asked by Matthew Gillmor · answered by David Duckworth

Regarding the $28.6 million PLGL adjustment, was this due to claim frequency/severity changes, is it a one-time event, and how can investors be comfortable about future reserves?

The adjustment was primarily for 2025 claims with higher case severity, consistent with broader industry trends. While difficult to predict if it's a one-time event, the current year (2026) forecast for PLGL reserves remains stable at $100 million to $110 million, unchanged by the mid-year review. The company emphasizes strong risk management programs and aggressive claim defense.

“this year's adjustment to just the higher case severity, certainly something that we believe is consistent with the litigation environment, the industry trend that many others in health care are seeing, but was specifically related from our perspective to the 2025 cases that we highlighted.”

asked by Benjamin Mayo · answered by David Duckworth

What is the company's updated view on the impact of Medicaid work requirements?

Management does not expect a material impact from Medicaid work requirements. They believe that Acadia's patients, particularly those with severe mental illness and substance use disorders, will qualify for the exemptions that have been thoughtfully laid out in the requirements.

“we don't believe that there will be a material impact. We think our patients will qualify for the exemptions that have been laid out. I think they've been very thoughtful about how they've done that and with respect to severe mental illness as well as substance use.”

asked by Benjamin Mayo · answered by Debra Osteen

Can you discuss the flat revenue growth in CTC clinics despite new centers, the mix in the methadone market, and macro demand trends?

The CTC service line performed slightly behind expectations with flat year-over-year revenue in Q2. However, demand remains strong, and the company sees opportunities to improve revenue growth and selectively add clinics. Management emphasized the high incidence of opioid use and the focus on making their clinics the first choice for patients.

“It did perform slightly behind our expectations for the second quarter, and was flat on a year-over-year basis from a revenue perspective. ... we do see continued opportunity there to improve the revenue growth and the performance of that business.”

asked by Pito Chickering · answered by David Duckworth

What specific initiatives have been put in place to drive corporate changes and improve de novo performance in 2026 compared to 2025?

Initiatives include talent review, restructuring the acute service line to flatten the structure and focus on geography, removing a level of middle management at the corporate level to facilitate problem-solving, and improving JV alignment and communication. These efforts have led to cutting approval times for new facilities in half, enabling faster ramping and patient intake.

“we have improved our alignment and communication. Part of that was bringing in management to focus on the JVs. I think there are best practices that can be really deployed across our company with respect, even though they're all very different.”

asked by Pito Chickering · answered by Debra Osteen