Acadia outlines $300M CapEx reduction for 2026 while targeting 500-700 new beds

Earnings Call Insights: Acadia Healthcare (ACHC) Q3 2025

MANAGEMENT VIEW

* Christopher Hunter, CEO, introduced Todd Young as the new Chief Financial Officer, noting "Todd brings nearly a decade of public company CFO experience, most recently serving as CFO of Elanco Animal Health where he helped shape the company's strategic direction following its spinoff from Eli Lilly. Prior to that, he served as CFO of Acadia Pharmaceuticals." Hunter also announced Dr. Nasser Khan is stepping down as Chief Operating Officer, continuing as executive advisor through year-end.
* Hunter reported Q3 revenue of $851.6 million, a 4.4% increase over the prior year, and adjusted EBITDA of $173 million, noting the results reflect "softer-than-expected volumes in our Medicaid book of business, particularly in our acute care segment." He highlighted a 1.3% same-facility volume growth, which was "approximately 100 basis points below... internal expectations."
* Hunter stated, "we have taken decisive steps to optimize both our growth investments and our existing portfolio," which includes pausing several development projects and closing five facilities that "no longer aligned with our strategic priorities or demonstrated persistent underperformance."
* Hunter outlined a revised capital expenditure strategy: "we now expect our capital expenditures in 2026 to be at least $300 million lower than our revised 2025 CapEx guidance of $610 million to $630 million."
* The company added over 1,700 beds in 2024 and 2025 year-to-date and plans to add another 500 to 700 beds in 2026, especially through joint ventures with Tufts Medicine and Orlando Health.
* Hunter emphasized operational initiatives: "execution across these initiatives drove over 3% same-facility admissions growth in Q3 compared to last year."
* Todd Young, CFO, stated, "We reported revenue of $851.6 million, representing a 4.4% increase over the third quarter of last year. Same-facility revenue grew 3.7% year-over-year, driven by a 2.3% increase in revenue per patient day and a 1.3% growth in patient days."
* Young reported startup losses of $13.3 million related to newly opened facilities and noted, "We invested $135.8 million in CapEx in Q3, which is more than $20 million favorable to our Q3 plan."
* Young added, "Costs related to managing the government investigations were $39 million in the third quarter, down 28% from the high watermark in Q2."

OUTLOOK

* Young provided revised guidance, stating, "We have revised the range for revenue to be between $3.28 billion and $3.3 billion, from our prior range of $3.3 billion to $3.35 billion. We now expect adjusted EBITDA of $650 million to $660 million versus the prior outlook range of $675 million to $700 million."
* Adjusted EPS guidance was also lowered to $2.35 to $2.45 from $2.45 to $2.65.
* Hunter previewed 2026, citing "key adjusted EBITDA tailwinds include: A reduction in startup losses due to our more focused growth investments next year. Ramping contributions from... bed additions over the past several quarters... And a modest EBITDA uplift from targeted facility closures."

FINANCIAL RESULTS

* Third quarter revenue was $851.6 million, a 4.4% increase year-over-year.
* Adjusted EBITDA for the quarter was $173 million.
* Same-facility revenue grew 3.7% year-over-year, with a 2.3% rise in revenue per patient day and a 1.3% increase in patient days.
* Startup losses for new facilities were $13.3 million, compared to $7.3 million in Q3 2024.
* CapEx for Q3 was $135.8 million. Cash and cash equivalents stood at $118.7 million as of September 30, 2025, with approximately $790 million available under the revolving credit facility.
* Legal expenses related to government investigations were $39 million for the quarter.

Q&A

* Albert Rice, UBS: Asked about payer friction and whether denials are post-treatment or related to length of stay. Hunter responded, "we are seeing some, what I would call, payer friction manifest across both rate dynamics and volume... the most notable pressure has been around length of stay, where we've observed a more frequent utilization review, especially from Medicaid managed care plans."
* Pito Chickering, Deutsche Bank: Asked about the durability of headwinds like bad debt and professional liability into 2026. Young explained, "There are a few items that aren't going to repeat at the same level going forward... startup losses are going to get to the high end of the year here in Q4, $18 million to $20 million... So that will step down in 2026, as we mentioned."
* Brian Tanquilut, Jefferies: Sought clarification on CapEx reduction and bed additions. Hunter explained, "we did make the decision to reduce '26 CapEx by at least $300 million... we'll be opening multiple large acute care facilities in 2026. And actually, the majority of the capital spend associated with those facilities has already been spent in '25."
* Benjamin Mayo, Leerink Partners: Asked if Acadia can walk away from paused de novo projects and about CapEx for 2027. Hunter replied, "For the joint ventures that we've done, I mean, these are contractual obligations, and we would not walk away from those."
* Ryan Langston, TD Cowen: Asked about the trajectory of legal expenses. Hunter stated, "Legal expenses in Q3 did step down about 28% from the prior quarter. So we do continue to expect another material step-down in spend."
* Jason Cassorla, Guggenheim: Asked about runout costs for facility closures. Young answered, "We expect that to flip into kind of a mid-single-digit tailwind in 2026."
* Andrew Mok, Barclays: Sought a breakdown of Q4 EBITDA headwinds. Young explained, "it's split pretty evenly between the rate side with bad debts... as well as in the volume declines... plus the PLGL expense."
* Joanna Gajuk, BofA: Asked about a better starting point for modeling 2026. Young said, "there are risks out there of different states and the like that we're making sure we're capturing appropriately so that as we give guidance going forward, it's very well informed with our expectations for our business."

SENTIMENT ANALYSIS

* Analysts focused on persistent payer friction, volume softness, and the durability of recent headwinds, often pressing management for more specifics on guidance and recovery. The tone was slightly negative, with skepticism around Medicaid volumes and CapEx reduction impacts.
* Management maintained a constructive yet defensive tone, emphasizing decisive actions and future tailwinds. Hunter frequently cited "confidence" in the company's strategy, while Young highlighted proactive cost controls. In Q&A, management acknowledged challenges but focused on operational improvements and capital discipline.
* Compared to the previous quarter, both analysts and management displayed increased caution, with more pointed questions and greater emphasis on mitigating headwinds.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for revenue, adjusted EBITDA, and EPS was revised downward from Q2 levels, reflecting incremental volume softness and rate pressure. CapEx plans for 2026 were more aggressively reduced compared to the prior quarter, shifting toward capital efficiency and free cash flow generation.
* Management's tone shifted from a focus on expansion and market opportunity in Q2 to greater caution and discipline in Q3, with more rigorous portfolio reviews and facility closures.
* Analysts increased their focus on payer dynamics, the sustainability of headwinds, and the impact of cost-saving measures, while management responded with more detailed explanations of mitigation strategies and capital allocation.
* The company reported slower same-facility volume growth and higher startup losses in Q3, compared to stronger top-line growth and margin expansion discussed in Q2.

RISKS AND CONCERNS

* Management cited "increased uncertainty on Medicaid funding at the state level" and "incremental headwinds from rates and benefit expense related to employee health care costs, along with an anticipated increase in professional and general liability expense."
* Analysts raised concerns about the durability of payer friction, bad debts, and denials, as well as the impact of facility closures and paused development projects on future growth.
* Management's mitigation strategies include pausing low-return projects, focusing investment in high-demand/reimbursement markets, and ongoing portfolio optimization.

FINAL TAKEAWAY

Acadia Healthcare's Q3 2025 call highlighted a decisive shift toward capital discipline and portfolio optimization amid persistent Medicaid volume pressures and rising cost headwinds. Revised guidance reflected these challenges, with management emphasizing a $300 million reduction in 2026 CapEx, a focus on high-performing markets, and anticipated tailwinds from new bed additions and facility closures. The company aims to generate positive adjusted free cash flow in 2026 while navigating payer-related friction and maintaining a commitment to operational excellence and quality outcomes.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/achc/earnings/transcripts]

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