Acadia Healthcare Company Inc (ACHC) 2018 Q2 法說會逐字稿

As a reminder, this call is being recorded. Please proceed.

Good morning. I'm Brent Turner, President of Acadia Healthcare, and I'd like to welcome you to our second quarter 2018 conference call.

To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP on our website by viewing yesterday's news release under the Investors link.

This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Acadia's expected quarterly and annual financial performance for 2018 and beyond.

For this purpose, any statements made during the call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans and expects and similar expressions are intended to identify forward-looking statements.

You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Acadia's filings with the Securities and Exchange Commission and in the company's second quarter news release. And consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

At this time for opening remarks, I'll now turn the conference over to our Chairman and Chief Executive Officer, Joey Jacobs.

Good morning, and thank you for being with us today for our second quarter conference call. In addition to Brent, I'm here today with our Chief Financial Officer, David Duckworth, and other members of our executive management team. David and I each have some remarks about the second quarter and our outlook for going forward in 2018, then we'll open the line for your questions.

Acadia produced solid growth of 7% in revenue and 6.1% in adjusted EPS for the second quarter. Our revenue growth continued to be driven primarily by organic growth, including a 5.2% increase in total same facility for the quarter. This growth was mainly the result of adding 889 beds to our operations over the last 12 months, including an 88-bed facility opened in the second quarter through our joint venture with Erlanger Health System in Chattanooga, Tennessee. We added 155 beds during the second quarter and 276 in the first half of the year, and we expect to add more than 800 beds to existing facilities and new facilities in 2018.

Our 5.2% total same facility revenue growth included a 1.7% increase in patient days and a 3.4% increase in revenue per patient day. U.S. same facility revenue increased 5% for the quarter, with a 1.9% increase in patient days and a 3.1% increase in revenue per patient day. U.S. same facility EBITDA margin declined 30 basis points, 28.1%.

Our operations in the U.K. produced their best same facility growth in 2 years, with an increase in same facility revenue of 5.6%, consisting of a 1.6% increase in patient days and a 3.9% increase in revenue per patient day. Same facility EBITDA margin declined 110 basis points to 21.3 for the quarter. We expect continued pressure on labor costs due to the shortage of available personnel and reliance on agency labor.

Thanks for your time this morning and your interest in Acadia. Now here's David Duckworth to discuss our financial results and increased guidance in more detail.

Thanks, Joey, and good morning. The company's revenue for the second quarter of 2018 was $765.7 million, an increase of 7% from $715.9 million for the second quarter of 2017. Adjusted earnings per diluted share increased to $0.70 for the second quarter of 2018, up 6.1% from $0.66 for the second quarter last year. Adjusted EPS excludes transaction-related expenses of $2.9 million for the second quarter of 2018 and $9.1 million for the second quarter of 2017 as well as debt extinguishment cost of approximately $800,000 for the second quarter of 2017.

Acadia's tax rate on adjusted income before income taxes was 15.2% for the second quarter of 2018 compared with 24.8% for the second quarter of 2017. We project an effective tax rate of approximately 16% for the remainder of 2018.

The company's consolidated adjusted EBITDA for the second quarter of 2018 was $165 million or 21.5% of revenue. Acadia's operating cash flows from continuing operations increased 10.9% to $145.2 million for the second quarter of 2018 from $131 million for the second quarter of 2017.

Turning to our financial guidance and as announced in yesterday afternoon's news release, we have adjusted our 2018 financial guidance based on the recent decline in the U.S. dollar-to-British pound sterling exchange rate as well as the impact of higher interest rates than anticipated for the second half of 2018. We expect an exchange rate of $1.30 per British pound sterling and interest expense to be approximately $95 million for the second half of the year.

Our guidance is as follows: revenue in the range of $3,020,000,000 to $3,060,000,000, adjusted EBITDA in a range of $632 million to $639 million and adjusted diluted EPS in a range of $2.52 to $2.56. Our financial guidance does not include the impact from any future acquisitions and transaction-related expenses.

This concludes our prepared remarks this morning, and thank you for being with us. I'll now ask Sylvia to open the floor for your questions.

(Operator Instructions) We'll take our first person from the queue, Brian Tanquilut from Jefferies.

Joey, first question for you. So as I think about the organic growth here in the U.S. and how that has seemed to have decelerated a little bit, how would you explain the disconnect between that and the organic bed adds that you've done over the last 12 to 24 months? And I understand that's JVs and de novos. I just want to hear how you're thinking about that and when do you think the organic bed adds rate will catch up with your reported organic volume growth?

Brian, thanks for the question. I expect in the third quarter in the U.S. that our patient day growth will be above 2% and approaching 3% growth if the trends today continue. We had a few facilities in the first and second quarter that hurt our growth there, but they are improving as we speak. So I think the patient day growth could very well -- I expect patient day growth to be in the 2% to 3% range for the third quarter. And -- but as you know, we are always careful about the month of August. That is the most seasonal month for us. But right now, it looks like we would be into the mid-2s on patient day growth and look forward to that. So the de novos, we have 4 of those that are ramping up as we -- and joint ventures are ramping up as we speak. So those things are going well, and we just had a few facilities that hurt us in the second quarter.

Got it. And then, Joey, the follow-up for me. As I think about free cash flow, you had good free cash flow generation during the quarter. How are you thinking about deployment of that? I mean, does it make sense to pay down some debt at this point and think of that as the strategy given the sort of lack of M&A activity? Or do you think that you have deals coming up that you have to save the cash for, for the next few quarters?

The pipeline is very active, and we would just continue to hold the cash. I expect that by the time we talk to you again at the end of October that we would have spent some of this cash on an acquisition.

And now we'll take our next person from the queue, Peter Costa from Wells Fargo Securities.

Your admissions in the U.S. and the U.K. actually both looked reasonably good, but your average length of stay continued to see pressure and seemed like there was more pressure this quarter. Can you describe what caused the increase in pressure on length of stay this quarter relative to the first quarter in both the U.S. and the U.K.?

The -- it is really just a mix change, of where in the U.S. we're having more acute patients versus the RT and specialty patients. It's a mix issue that's just driving that math. In the U.K., if you notice that their numbers are so small and their length of stay is so long that it only takes a handful of admissions or discharges to impact that number. So here in the U.S., it was just purely mix. And then in the U.K., the numbers are so small there, and because the length of stay is so high, it doesn't take a lot of movement there to make that happen. We are, in the U.K., retrofitting some beds to take on a different type of patient that would have a long length of stay as compared to the U.S. but a shorter length of stay as compared to their average overall.

I guess I see those as sort of the long-term trends that we've seen, but I'm trying to figure out why it would be so much of a change from Q1 to Q2, if there's anything in particular. There's -- and if it's not, is there a seasonal effect that I should be aware of that maybe we should think about going forward?

Well, the seasonal effect is that as you get towards the summer, the kids -- the child and adolescent population, there is more discharges there, and they're usually in the RTC facilities. So that would also impact it some, too. But there's nothing other than the mix of the acute beds as a percentage to the total beds here in the U.S. that's causing this to occur.

Now we'll take our next person from the queue, A.J. Rice from Crédit Suisse.

First of all, just on the capital deployment, you mentioned your hope to have an acquisition announced in the third quarter, and you've also mentioned the JV opportunity a couple of times. Can you just sort of update us on the pipeline of -- are we talking about a larger deal in that acquisition? And then on the JV pipeline, what does that look like? And will that be a contributor to growth, you think next year?

A.J., the acquisitions are from a single facility to multi-facility. I think, most likely, it would be a single facility in the third quarter, acute facility that we would acquire in the third quarter. But there may be a comprehensive treatment center acquisition that would bring us more than one facility in the third quarter. So that's how the pipeline -- pipeline's strong. It's -- we go over it every Monday. Now on the joint ventures, absolutely, it's a big positive for us. And as you know, we opened up Erlanger in the second quarter. We've got Mount Carmel coming online. We've got a de novo in San Antonio coming online in the near future. So the joint venture opportunities are tremendous, and we have many negotiations, discussions going on. Actually, they took me out on one of those in the past 2 weeks to go meet with a joint venture -- potential joint venture partner. So we've got the University of Miami selecting its land to build the joint venture down there. So the joint venture front and the occasional de novo still look good. I would expect that we would do 3 to 5 joint ventures next year and somewhere around 2 to 3 de novos.

Okay. And on -- my follow-up on the labor cost, you were up about 80 basis points. Professional fees was well contained, so maybe there wasn't much contract labor. I think that's more on that line. But can you just drill down a little bit more? Is this still mostly U.K.? Or are you seeing pressure in the U.S. as well? And what are you attributing it? Is it Brexit? Is it NHS moves or just the underlying market trend?

Okay. Overall, the U.S. market is tight, but we're able to find the personnel to open up our beds and staff our facilities. So -- but it is tight here in the U.S. In the U.K, that is where there is more of the acute shortage, and it's all around immigration and allowing workers to enter the U.K. And Brexit, as you know, put many obstacles in place, but the NHS and the government both are working towards freeing that up. And right now, you can recruit nurses from the Commonwealth countries and bring them into the U.K., and we're working on that as we speak. The acute part of the labor shortage for the company is in the U.K. But here in the U.S., when you have labor market, when you have unemployment under 4%, there are certain labor markets that are tight.

Our next question comes from Kevin Ellich from Craig-Hallum.

Joey, [last one it] talked about already, wondering if you could help us with the phasing of the remainder -- remaining beds, I think 524 for the back half. Will that be more weighted to Q3 or should we just spread it out evenly?

Once again, as we've seen for the past several years, the Q4 seems to be where we build the most beds. So -- and the timing of that is usually when a de novo or a big same-store project comes online. And we got several of those we're working on, so the timing of the completion really controls that. But within the next 6 months, we're going to have a lot of beds hopefully finish up.

Okay, that's helpful. And then just wondering if there has been any interesting changes or anything you guys have seen in the competitive landscape? Or has it pretty much stayed the same?

I think it's basically the same. We don't run into a lot of competition on the joint ventures. We run into none where we're doing the de novos. The acquisition that we're working on for the third quarter, the acute facility, there really wasn't any competition there with that transaction. They did have a banker, which kind of kept the process reasonable. So there's not been anybody new enter the market that I'm aware of that is a competitor. So it's basically the way it was. The first part of this year and last year, we are by far the consolidator in the market.

Next question comes from John Ransom from Raymond James.

I had 3 quick ones. First of all, I assume, maybe this is wrong, but you're getting close to knowing what your kind of forward Medicaid rate looks like over the next 12 months. Are there any states that are still wrapping up budget cycles? Secondly, could you compare U.S. wage inflation today versus, say, 6 months to a year ago? And then thirdly, maybe you could remind us of the economics of these JVs and how long it takes them to get to profitability.

Okay. First, one, John, the Medicaid rate, states are still finishing up their budgets. We got some good increases this past year. The budget -- the state budgets still look good. The support for mental health still looks good. So once again, if we can get in that 2% to 3% range for Medicaid, we'll be pleased with that. As far as wage inflation, if you were talking to me this time last year, I was probably saying our budgets included a 2% wage inflation. This year, the budgets included a 3% wage inflation. And I think next year, we would probably budget around a 3% wage inflation for the labor force. And then on the joint ventures, our preferred model is an 80-20 joint venture. We own 80%, the other partner has 20%. We do have a 4% to 6% management fee that we get paid for providing management services to the facility, and then the earnings are prorated based on the 80-20. How? It varies a lot here. We've seen some of ours ramp up within 12 months and be breakeven after the end of 12 months. And really, the key starting time of tracking this is when you get your Medicare number. So you'll get your certificate of occupancy, but then it'll take you another 90 days, 120 days to get all your provider numbers. And once you get your provider numbers, usually, this ramping up of the census gets us to breakeven or profitable in 12 months. So that's how we see it, the model working.

And if I could just follow up, one of your competitors talked this week about one of the unexpected outcomes of IMD exclusion going away was that your hospital referrals are keeping more commercial patients and sending you more Medicaid patients. Are you seeing that?

We don't see that at all. We don't see that at all. And quite frankly, maybe we're just lucky in that. Where our acute facilities are at, that's not occurring. And then on the Medicaid side, David Duckworth did an analysis looking at our Medicaid rates, and we have some very good, reasonable rates for the services we provide. So the Medicaid patient -- the incremental Medicaid patient to us is profitable.

Next question comes from Ryan Daniels from William Blair.

Let me ask a quick one. With all the focus on the opioids legislation, can you give us an update on kind of what your thoughts are there for potential for increased funding? Number one. And then my follow-up would be, given the focus there, is that increasing M&A multiples in that space at all, given future hopes [of kind of] more volume and more treatment dollars flowing down?

I think the consolidation of that space is still with the mom-and-pops, so the multiple pressures creep is not there. However, if you get to a company that has, say, more than 15 of these facilities, then they are going to want a higher multiple for that book of business, so -- now as far as legislation, it's all been positive. We have one large state that not only are they going to use their Cures money to expand it, but the state is actually going to use some of its money that it has because of the surpluses, and they're going to open the state up for this -- for the CTC or the MAT treatment centers. So we hope there'll be some other states that will follow that lead because this is a bellwether state that's doing this, where the governor is stepping up and putting money there. Now I was with a governor this past week in one of our states, and it was a meeting with him privately but then also in a larger population. And he very much talked about mental health and opiates and that -- what they needed to be doing to help save lives in that population. So Bryan Kaegi who heads up government affairs for us, it's -- right now, it's all positive for the states and the federal government and their support of increasing funding for the opiate patients.

Okay. And just a quick follow-up, given that specific funding in certain states, is there opportunities for you to look for de novo opportunities in the CTC space? Or is that really more of an area where you just do a tuck-in deal and expand capacity that way if you saw an opportunity?

No, Ryan. We do 4 to 6 de novos in that space every year. Now this bellwether state may give us the opportunity with our other de novos that we'll have mid-double-digit number of facilities come online next year. So -- and then there is the tuck-in acquisitions that Steve and his -- Steve Davidson and his department work on, but we could have double-digit de novos just on our own next year.

Next question comes from Kevin Fischbeck from Bank of America.

Wanted to follow up on some of the labor cost comments. I guess you guys are talking about 3% wage inflation, but your rate per day was kind of above that number this quarter, and we still saw some margin pressure. So what do you think the same-store revenue growth has to be in order for you guys to maintain margins given this labor backdrop?

Well, a little bit in the U.S. Kevin, I'm sure you recognize that the second quarter margin last year was the highest margin we've ever had, and we got close to it again at 28.1%. So even though it was down slightly, it's going up against the highest margins that we've seen. Obviously, you would like to have 200 basis points in between the revenue growth and the expense growth and let as much of that possible flow to the EBITDA margin, which would be accretive earnings to us internally. So if we can get a 200 spread or 100 basis point spread between those 2 numbers, I think that maintains and improves the margin.

Okay. And I think last quarter, you mentioned a goal in the U.K. of kind of getting the labor costs down to 64% of revenue from 65% in Q4. Is that still the target or are kind of the things you're seeing now make that more difficult to get to? And then I guess maybe based or following up on that, in the past, you've seen labor shortages restrict growth. Do you expect that to happen? Or is this really more about you can find them, you just have to pay up for them?

It's more of the latter and that we are working as hard as we can to get to that 64% number. And by no means have we given up on that as a goal for this year. And we met with our U.K. people, our team from the U.K. last week, and there's a lot of effort being put on achieving that goal. But however, if we've got -- if the NHS comes to us and wants us to build 20 beds for our CAMs unit, which is a needed service and one of our higher reimbursement services, if we have to use more agency expense to get those beds online, we're going to do that knowing that long term, we're going to be creating our own staffing, and that cost will eventually go away.

We'll take our next question from Ralph Giacobbe from Citi.

I guess, first, just the lower guidance all related -- was it all related to FX and interest costs? Or were there other sort of operational tweaks such as -- we've been talking a lot about sort of the continued labor cost pressures. And then maybe just give some details on some of the back half assumptions for the U.S. and U.K. both in terms of volume pricing if you could and just the confidence on the cost side to get back to sort of the implied -- what implies sort of a 6% EBITDA growth from the low single digit that you saw this quarter.

Well, there was a lot in that question. First, let's deal with the guidance. The guidance change was only for the FX. Originally, starting out the year, we had it at 1.35, and we're adjusting that for the last 6 months to be 1.30, which reflects basically what -- where it's at today, maybe slightly higher, might be 1.31 today, but that is the FX. And then the interest expense, interest rates have risen. There's a possibility that there might be another rate hike in the last 6 months. And we wanted to reforecast that last 6 months for the interest expense, so the guidance was only impacted by those 2 items, period. And the other part of your question was...

Just the back half assumptions.

Back half assumptions. Now as I stated earlier, I very much want the U.S. to get into the 2% patient day growth, maybe even 3% patient day growth as we bring these beds online and get them staffed up and ready to go. So that's our goal there. Now the U.K. numbers for the second quarter on revenue growth and patient day, I think it's the best they've had in a long time, and that's coming off a better first quarter. So all we would want them to do there is to continue to chip away and improve those numbers. So -- and hopefully, we would find and they would find a way to manage the agency expense better. So those would be our expectations.

Okay, that's helpful. If I could squeeze in one more, length of stay, we've talked about it a little bit. You attribute it to sort of mix changes. Didn't really hear you talk much about pressures from managed Medicaid or insurers squeezing on days. So are you seeing any of those types of pressures? And then just related to that, why is the decline in the length of stay significantly worse in the non-same-store base?

The non-same-store base, I have not looked at it that way, but I have a feeling because of the few facilities that are in those numbers and that they are ramping up and they're mainly de novo joint ventures, that small number movements probably are impacting those more than the big base of the same-store numbers, whether you have it here or in the U.K. And once again, in the U.S., it's just a mix. The length of stay is still very stable, similar to what it was for the past several years. And then in the U.K., the numbers are so small, it doesn't take many admissions or discharges to impact those numbers on the length of stay. And we are building some services there where the NHS has come to us and asked us to add services that would have a somewhat shorter length of stay, but it's a service that's needed and something we specialize in.

Next question comes from Frank Morgan from RBC Capital Markets.

I wanted to go back to the rate growth again. And obviously, there were discussions around the change in the mix of patients. So I'm just curious, between actual real rate increases versus the mix issue here, could you kind of break that out into the components? And then how much more remaining mix shift -- presumably, I think you were meaning by that more of the acute side versus the RTC. Like, where are you now? Where do you think that the positive effect of the mix shift will settle out in terms of rate growth? That's my first question.

Okay. Frank, well, now you've just stumped me. I've been able to answer all the questions, but this detail really lies with David. So I'm going to ask David to give you the answers here.

Yes. And Frank, there is some service mix that is a positive to our rate growth as we do see acute growth become more significant for the company. I would say the effect of that on rate is very small. And as we look at the rate growth by service line, we are seeing a very similar rate growth in that 3% range. So seeing good rate increases as you look at it by service line and in total. And then outpatient, the revenue growth that we see from our CTC business, which is part of the mix effect, has also been very positive for the company.

Got you. And since I've got the CFO, I'll ask you a question. In light of the fact that rates are rising, do you have any plans to either try to hedge that debt or do anything to reduce your exposure to rate increases? And I'll hop off.

Well, it's a conversation we have, of course, historically had. The variable rates that we have had have been very positive for the company in the last few years. As we think about hedging our exposure there, we do look at the effect of that and the immediate step-up in our interest expense associated with that. Right now, we don't think there's a significant benefit to have an immediate step-up in our interest expense in order to lock in a fixed rate. That is a conversation that we have periodically, but right now, we don't think that makes sense based on the economic analysis of that.

Next question comes from Anagha Gupte from Leerink Partners.

So going to the U.K. again, the recovery that you're seeing on your admissions growth, how much of this is because you're repurposing your addiction and eating disorder beds to the child and adolescent? And is that the strategy going forward? Or is there going to still that pent-up demand that you talked about when the NHS changed their referral process and decentralized it more to the primary care trusts?

I think where we're doing -- these -- the changing of the mix there is one-off requests from the NHS, that the other pieces of the business continue to have demand and need services. So it's more a one-off really where we're retrofitting the service line, and that is due to the request from the NHS, and we try to be a good partner with them. And the reason we do that is that the NHS looks for a continuum of care. And if we can be their full continuum of care, we think that positions us very well in not only taking care of the patient and getting a positive outcome, but the patient -- they know that when the patient comes to our facilities that we're able to take them all the way to the end to be discharged. So -- but many a time -- most of the time when we're retrofitting, it's a request from the NHS or there's such a demand in services for that area that we would do it also ourselves.

Got it, okay. So -- but is there any expectation of that pent-up demand resuming at some point? Are these untreated patients sitting there waiting for treatment? And will the NHS change their stance toward admissions? And will you build out additional beds in that case to reap -- or to get that?

We are pretty much -- we're not guaranteed, but we have high confidence in that if we retrofit a service for the NHS, that we have confidence that they are going to give us the patients to fill up that facility.

And then on revenue per patient day, which looked really good at 3.9%, is that, again, more of a mix effect just given the pressures with Brexit and everything?

It is a little -- it is mix, but it's also our people have done a very good job at the local level in the U.K. in negotiating rates, so that is very positive there, too. So it's a combination of both of those.

And as far as the labor contract, which, as I understand, was implemented on April 1, so is that included in the second half, I'm assuming, of guidance? And does that pressure escalate into '19 and '20 given it's a 3-year contract?

I'm going to have to defer to David again on this answer.

Well, there is a contract, not between our company and our employees, that's more on the NHS employee side. So no, that does not directly impact us in the second half of the year. We do have pay increases with our employees that we have given annually that is factored into our projections for the remainder of the year as well as 2019.

We'll take the next question from Matthew Gillmor from Robert Baird.

One more on the U.K. labor issues. Joey mentioned Brexit and immigration barriers as some of the macro factors. What impact does the exchange rate itself have on labor supply in terms of clinicians being willing to come to the U.K.? And how important is that in terms of improving the labor issues?

Well, obviously, for the continent there, the lower value of the pound hurts them coming to the U.K. Now as I mentioned earlier in my comments, we see the Commonwealth countries are going to be a possible solution to our labor mix there because they have opened up the barriers for them to come to the U.K. So we're optimistic about that. Now there will be -- if the Brexit was removed or the immigration barriers were removed, naturally, there's some Europeans that would rather work in the U.K., independent of what the pound level is. So -- but the pound level can hurt you on having the employees from the continent come in.

Okay. And then one on the JV pipeline. I was curious if you could characterize that in terms of the activity level you're seeing from -- for smaller systems with 1 to 2 hospitals versus large systems like Ascension. And are those larger systems typically looking for a JV partner in a single market? Or do those relationships contemplate sort of multiple JVs in multiple markets over time?

We are having discussions with all sizes of systems. And on the larger systems, I think what you would do is get a joint venture started with them. And if it goes well, then I think you might -- could become their preferred joint venture partner throughout their system, which would give you more opportunities to do more deals with that one system.

Next question comes from Dana Hambly from Stephens.

Just to follow up on the U.K. pricing, because the number was so high, I'm just wondering if that's a good number to be using into the second half of the year. Should we temper expectations there?

Dana, I think -- this is David. I do think that is a number that we expect for the second half of the year. And again, it reflects rate increases that we have already seen and continue to see, as well as the service mix where we are growing more in health care than we are in some of the other service lines. So that is an expectation we have for the year.

That's helpful. And then, Joey, you mentioned in the U.S. in the same store that there are some issues that some facilities -- I think you mentioned in the first quarter a handful of facilities that were dragging on growth as well. And just curious, are we talking about the same group of facilities? Or are there newer facilities with newer issues that popped up in the second quarter?

We're still talking about the same group, but the number of those facilities is getting much smaller.

Okay, that's helpful. Last one for me. I just -- on construction costs, have you seen a material uptick in construction costs in the last, call it, year?

Well, there's no doubt that construction costs across the country have gone up. I think now we're using around $250,000 per same-store bed. And in some places, we can do it less, but in some places, it's more than that. I can tell you that an 80-bed hospital all-in, land, construction costs usually costs somewhere in the low $30 million range for a brand-new facility. So I do know that cost range.

Next question comes from Ann Hynes from Mizuho Securities.

So just to get back to the second half of the guidance ramp, so just to clarify, you think that if you can get that U.S. same-store patient day growth back to 2% to 3% plus control labor, you think you can kind of reach that mid- to high single-digit EBITDA that's implied in guidance?

Yes.

And the past couple of years, Q3 has been a rough quarter for you, and I know a lot of it has to do with seasonality. Do you think guidance fully reflects the seasonality, especially in the U.K.? Are you comfortable with your assumptions going into the summer months?

Ann, that's -- I wish I had that answer. We think we've done the best we can at looking at the third quarter and trying to make sure that our operations deliver on the third quarter. We had a little bit of that concern in the second quarter, that there were some that still didn't believe how the employment tax issue worked, in that how can you increase your earnings per share from the first quarter to second quarter? And we did that. So we've got our fingers crossed. We look at the census every day, and Ann, we don't know what August is going to bring us yet, but I'm hopeful that operations will have a terrific third quarter.

Next question comes from John Ransom from Raymond James.

So this is a numbers question. So Joey, you can just beg this one off, and I'm going to go to my man David. The new beds that came online, is there any way to think about second half contribution versus first half -- is that -- in terms of a potential tailwind?

Yes, we do think about that. The 4 new facilities that we've opened since the fourth quarter are a drag on our second quarter numbers. We do think the ones that opened in the fourth quarter will start to improve over the second half of the year, but we did have one very recent opening in June. So at this point, we have some new facilities that are making great progress, but we also have some new facilities coming online. But I think those as a group will improve over the second half of the year.

Would you guys ever consider, as you get more of these, just breaking out your novo losses? I know some companies do that. That might be helpful.

John, we'll take that under advisement for 2019, absolutely.

This concludes the question-and-answer session. Now I would like to turn the call back to Mr. Jacobs for any additional or closing remarks.

Thank you, operator. Thank you all for showing your interest in Acadia. We had a great second quarter. We did hit our numbers, so very pleased about that. The operations team throughout the company worked very, very hard. And then also, the opportunity before us to continue to grow this company and make acquisitions and hit all our metrics is there for us, we've just got the job to do. So once again, thank you for listening in, and we'll see you again on the third quarter call.

Thank you. Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You may now disconnect.