Acadia Healthcare Company, Inc. (NASDAQ:ACHC) Stocks tumbled on Wednesday after cutting its 2025 outlook, warning of sharply higher litigation-related costs that will hit profits.
On Tuesday, the company revised its outlook after completing its annual third-party actuarial review of professional and general liability (PLGL) costs.
The company said the updated reserves reflect higher expected costs primarily related to patient-related litigation.
Also read: Activist investor builds 3% stake in Acadia and calls for board renewal
As a result, Acadia Healthcare lowered its 2025 guidance, cutting adjusted EBITDA to $1.94 to $2.04 from $650 million to $660 million previously and adjusted EBITDA to $1.94 to $2.04 from $601 million to $611 million previously.
The guidelines reflect higher professional and general liability (PLGL) costs. The company expects PLGL spending to increase to approximately $116 million in 2025, up from $54 million in 2024.
In addition, Acadia Healthcare now expects its net PLGL liability to increase from $78 million as of December 31, 2024 to $145 million – $165 million.
Acadia also expects PLGL costs to be between $100 million and $110 million by 2026, citing a 168% increase in claims frequency and higher incurred but unreported (IBNR) reserves.
Recent earnings
Last month, Acadia Healthcare reported third-quarter adjusted earnings per share of 72 cents, beating expectations of 67 cents, while revenue came in at $851.573 million, above the estimate of $845.733 million.
However, the company lowered its full-year 2025 guidance, lowering adjusted earnings per share to $2.45 from the previous range of $2.45 to $2.65, versus the $2.48 consensus.
Acadia also cut its 2025 revenue guidance to $3.350 billion from $3.300 billion, compared to the Street forecast of $3.315 billion.
ACHC Price Promotion: Shares of Acadia Healthcare Co. fell, according to data from Benzinga Pro. Wednesday in premarket trading, up 26.50% to $12.11.
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