Acadia Healthcare announced strong 3Q15 results with EPS of $0.62 vs. consensus of $0.57 and EBITDA of $108.5 million vs. consensus of $1.06. The company increased its full year EPS guidance to $2.20-2.22 from $2.15-2.18. Acquisitions continued to be the biggest driver of growth for the company having completed 14 transactions over the last 12 months for 66 inpatient facilities with 3,300 beds and 88 comprehensive treatment centers.
630 bed additions (mostly acute) over the prior 12 months drove organic growth. Acadia announced the completion of four acquisitions so far in 4Q (2UK and 2US). Management stated that it would expect a couple of larger acquisitions in 2016 vs. 2015 and that there could be another acquisition before the end of the year but that the profile of acquisitions next year would look similar to what it achieved in 2015. We have revised our full year 2015 and 2016 EPS estimates to $2.22 and $2.79, from $2.21 and $2.76, respectively.
The company acknowledged that there is a shortage of psychiatrists but did not believe it was a driver of same facility revenue growing at 6.5% or below its 8-10% target; the company did say they expect it will accelerate in 4Q15 due to bed additions in 3Q15. Management noted that while there are pockets where labor is tight it has not been an issue for the company contrary to the experience at a number of acute care providers during the quarter. Management did state that there is a nursing shortage in the U.K. Also in the U.K. revenue per day is likely to be mixed due to Acadia’s addition of both lower acuity and higher acuity beds in order to be able to provide a robust continuum of care for patients. Pricing growth is expected to be about 1% in the U.K. and about 2% in the U.S. While 4Q tends to be weaker for addiction centers the company believes its Comprehensive Treatment Centers (CTC) business has budgeted appropriately.
The company expects to complete about 2 denovos per year and discussed some of the initial challenges at the start-up facilities including acquiring a Medicare provider number and satisfying government certification requirements all of which tends to put a drag on financial results for some period of time. Acadia stated that a partial or complete elimination of the Institutes for Mental Disease (IMD) exclusion is more likely to occur in 2015 vs. 2016. When pressed about the potential benefit from it Mr. Jacobs said that in his opinion it would provide a 5% boost [to revenue].