Good morning, and welcome to Acadia's fourth quarter 2019 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 2020 and beyond. For this purpose, any statements made during this 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, 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 fourth 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 would like to turn the conference call over to Chief Executive Officer, Debbie Osteen.
Good morning, and thank you for being with us today for our fourth quarter and year-end 2019 conference call. I'm here today with Chief Financial Officer, David Duckworth, and other members of our executive management team. David and I will provide some remarks about our financial and operating results for the fourth quarter and year. We will open the line for your questions. Our results for the fourth quarter were in line with our expectations. We achieved overall revenue growth of 4.9% over the fourth quarter of 2018, reflecting our continued focus on growth initiatives, both through service expansion at our existing facilities and additional bed capacity. On a same-facility basis, overall revenue was up 4.5% in the fourth quarter of 2019 compared with 2018. Our U.S. facilities showed solid improvement across key metrics.
For the fourth quarter, U.S. same-facility revenue increased 5.5%, with a 2.4% increase in patient days and a 3% increase in revenue per patient day compared with the prior year period. U.S. same-facility EBITDA margin increased 30 basis points to 25%, compared with 24.7% for the fourth quarter of 2018. Regarding the specific facility issues that affected our results in the third quarter, we believe that we have addressed the issues with the action plans that have been implemented by our operations team during the fourth quarter. We are very pleased with the progress that has been made, which is in line with our expectations. David will provide additional details on the fourth quarter impact and 2020 expectations for these facilities. During the fourth quarter, we added 171 beds, including 150 beds in the U.S. and 21 beds in the U.K.
For the full-year, we added 585 beds to existing and new facilities. Moving forward to 2020, we expect to add approximately 600 beds to existing and new facilities in the U.S. We are excited about these opportunities to expand capacity in our markets, which adds beds to 10 states across all service lines. 2020 presents an opportunity to add the highest number of beds to our U.S. facilities in the last three years. We also continue to work on our partnership strategy. We have a strong track record of partnering with health systems and hospitals across the country. We have five joint ventures operating and three currently in development. Our integration team has received increased interest from health systems who would like to partner with us. We now have a robust pipeline of approximately 30 projects.
The market remains strong, and the value proposition to our provider partners is very compelling. Acadia is collaborating with health system partners nationwide to improve integration of behavioral healthcare throughout their organization as they focus on population health initiatives and improving clinical outcomes for their patients. We look forward to opening a new joint venture hospital with Tower Health in Reading, Pennsylvania, planned for the second quarter, and a new joint venture hospital with Ascension Saint Thomas, planned for the fourth quarter. We also expect to open a de novo facility in Cincinnati, Ohio, planned for the fourth quarter of 2020.
We are excited about these and other opportunities ahead for Acadia to meet the growing demands in the market, better serve the needs in the local community, and advance our position as a leading operator of behavioral healthcare facilities. We have seen new opportunities and pathways to grow in our CTC service line. We plan to open six CTC de novos in 2020 to expand our footprint into new markets that are underserved. As of January 1st, Medicare expanded coverage to include opioid treatment programs. While it is too early to cite the full benefit, we expect that this will drive volume growth by treating new patients and allowing improved coverage and access for dual-eligible patients.
As you can see through our JV activity, new bed expansion, and de novo activity, the growth opportunity in behavioral health services remains robust, and Acadia is well-positioned to capitalize on these multiple pathways to grow revenue and profitability. Throughout the quarter, we have continued to make progress in achieving the savings generated through the operational initiatives outlined in the strategic review update we provided last May. We remain focused on implementing these initiatives to improve operational efficiencies throughout our operations. We believe we will achieve approximately $20 million in annualized cost savings by the end of 2020, which is in line with our original announcement in May of last year. As previously mentioned, most of the savings will be in procurement, which will impact supplies and other operating expenses. We have successfully completed a conversion of our contracted GPO in early February.
Our new GPO will provide additional resources and closer alignment to drive the identified cost savings. As we continue to implement initiatives throughout the year, we expect a gradual ramp to the full run rate savings amount of $20 million by the end of the year. Because the facilities have done a fantastic job implementing the initial changes, we are very pleased with our progress to date and look forward to realizing the incremental benefits of our strategy while we continue to support our patients with the highest quality of care. The performance of our U.K. facilities was in line with our expectations. For the fourth quarter, same-facility revenue was up 2.7%, consisting of a 4.7% increase in revenue per patient day, driven by our rate increases from the NHS and local payers and higher reimbursement related to an increase in the acuity of our patients.
The increase in revenue per patient day was partially offset by a 2% decrease in patient days, which is related to the retooling efforts we discussed on previous calls. Same-facility EBITDA margin was 16.1%, consistent with our expectations. Operationally, the U.K. business continues to demonstrate stability. The team in the U.K. remains focused on operating the business as our process of assessing strategic alternatives continues. As we have previously discussed, the demand for our services in the U.K. has been consistent. Priory continues to receive referrals for the highest levels of acuity across all divisions and continuously reviews our services to ensure this market need is safely met. At the end of the year, we had approximately 150 beds offline for retooling. We have a detailed timeline for each project, and we're working diligently to reopen the beds on schedule.
We believe there is a real long-term benefit from retooling that will add value to our operations. With the beds that we've retooled, we have already seen good results and believe this will contribute to our future growth. We will continue to work with the NHS and other referral sources to identify areas in which we can help meet their demands and believe we are well-positioned across our service lines. I would like to update you on our strategic review and potential sale of the U.K. business. As we announced last year, the board has engaged a financial advisor to run a process to explore the sale of the entirety of our U.K. business. The formal process was launched in January 2020, following the U.K. elections and preliminary discussions with prospective buyers at the end of last year.
Consistent with market practice for U.K. transactions of this nature and in conjunction with our advisors, we solicited and now have received initial non-binding offers to acquire our U.K. business from multiple bidders. We are currently in the second phase of the sale process, during which interested bidders will receive proposed transaction documents and complete their confirmatory due diligence. We expect to complete the sale of our U.K. business in the second quarter or early in the third quarter of 2020 if, as a result of our sale process, we receive a final firm offer that our board determines maximizes value for our shareholders.
Lastly, before I turn the call over to David, I'd like to set the stage for 2020. We will continue to focus on quality in everything we do, whether it is maintaining exceptional standards and patient care across our network, investing in new beds, or acquiring hospitals to serve the critical needs in our society, or aligning ourselves with the premier joint venture partners around the U.S. We are pursuing a purposeful and best-in-class growth trajectory. We will continue to deleverage the company while making prudent investments based on a disciplined return on capital allocation framework. As we continue to grow our four lines of business, you will see the synergies, complementary investments, and corresponding operating leverage we can achieve through this approach. We believe Acadia is in the ideal position to meet the tremendous market need that exists.
Now I will turn the call over to David Duckworth to discuss our financial results and guidance in more detail.
Thanks, Debbie, and good morning. Revenue for the fourth quarter was $780.2 million, compared with $743.5 million for the fourth quarter of 2018. Our consolidated revenue growth of 4.9% was affected by revenue generated by closed facilities in the prior year. The closed facilities had $9.4 million of revenue in the fourth quarter of 2018, which represents a 1.3% impact on revenue growth. Consolidated revenue growth adjusted for these facility closures was 6.2%. As a reminder, our fourth quarter 2018 U.S. revenue was impacted by an accounts receivable adjustment of approximately $8 million. Adjusting our U.S. same-facility stats for this adjustment as well as the impact from the specific facilities we highlighted in the third quarter, fourth quarter 2019 U.S. same-facility revenue growth was 6.6%. Patient day growth was 4.4%, revenue per patient day growth was 2.2%, and EBITDA margins increased 40 basis points as compared to the prior period.
The company's consolidated adjusted EBITDA for the fourth quarter of 2019 was $144.4 million, or 18.5% of revenue. Adjusted income attributable to Acadia stockholders for the fourth quarter of 2019 was $45 million or $0.51 per diluted share, excluding transaction-related expenses of $11.8 million, a $54.4 million loss on impairment, and an income tax effect of adjustments to income of $9.9 million based on a tax rate of 18.1%. The loss on impairment relates to property values at facilities that were closed during 2019. As noted in our press release, we are providing guidance for the full-year 2020 as follows.
Revenue in a range of $3.28 billion-$3.34 billion, adjusted EBITDA in a range of $610 million-$630 million, adjusted earnings per diluted share in a range of $2.20-$2.40, depreciation and amortization expense in a range of $175 million-$180 million, interest expense in a range of $172 million-$177 million, total diluted shares outstanding of approximately 88.1 million shares, operating cash flows in a range of $375 million-$420 million, total capital expenditures in a range of $330 million-$350 million, which includes maintenance CapEx of approximately $90 million. Our guidance also assumes an exchange rate of $1.30 per British pound sterling and a tax rate of approximately 17%. Our guidance for the first quarter of 2020 is as follows.
Revenue in a range of $795 million to $805 million, adjusted EBITDA in a range of $133 million- $137 million, and adjusted earnings per diluted share in a range of $0.37-$0.42. This guidance does not include the impact of any future acquisitions, divestitures, or transaction-related expenses. Due to the process relating to our U.K. business, we are providing the following annual guidance for that segment for 2020. Revenue in a range of $1.16 billion - $1.19 billion, adjusted EBITDA in a range of $180 million- $190 million, and depreciation expense related to our U.K. business in a range of $78 million-$80 million. As we look to 2020, there are several items that we would like to highlight regarding the timing of factors that impact our guidance.
We continue to see progress at the specific facilities we highlighted in the third quarter of 2019. The action plans at these facilities have been implemented. We're seeing these facilities ramp up and expect improvement will continue through the first and second quarter. As Debbie mentioned, we expect to see an ongoing contribution from the operational improvement initiatives throughout the year, which we expect to achieve a run rate of $20 million by the end of the year. We expect bed additions to continue to drive strong growth throughout the year. We have added 585 beds in 2019, and expect to bring approximately 600 beds online in the U.S. in 2020. We expect to achieve revenue growth in the 5%-7% range throughout 2020 for our U.S. operations.
Additionally, in the second half of the year, we expect to achieve our goal of revenue growth at the high end of that range and EBITDA margin improvement for our U.S. operations. This concludes our prepared remarks this morning. I will now ask Lisa to open the floor for your questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute option's turned off to allow your signal to reach our equipment. Please limit yourself to one question and one follow-up question. Again, that is star one to ask a question. We'll take our first question from A.J. Rice with Credit Suisse.
Hi, everybody. Thanks. Just maybe looking at the U.K., I think you're putting It's a slight moderation in growth in the fourth quarter revenue and EBITDA versus what you'd seen earlier in the year. It sounds like that's mostly just retooling beds to get ready to take higher acuity patients. We also do have the political backdrop going on and the move ahead with Brexit and so forth. Is it still your view that that's not having any impact on the business or the way NHS is relating to either staffing needs across the country or reimbursement or patient flow?
A.J., I've talked with the team in the U.K., and they don't see any significant impact from Brexit. I think that historically, they really employed very few people from Europe, I think less than 5% of their workforce. They don't see that being an impact. I think, as far as the election and just the political climate, there is a focus on mental health throughout the U.K. I think that there may be more funding through NHS, there's not going to be capital necessarily for extra beds. We think there's actually going to be more opportunities for independent providers. There are provider collaboratives that are going to be in place and there's been a lot of discussion. They actually become effective in the spring. We're very involved with that, and we think that's going to open new opportunities regionally for us.
We don't see an impact from the Brexit, and also, we don't see really changes in the labor market. There are talks about doing more from a NHS perspective to provide more training and money for education for nurses and others. We will be a recipient of that if that happens.
Okay. Maybe my follow-up would be around discussion around partnerships with health systems. That seems like it's going to become an increasing avenue for growth. Can you just tell us, now that that sort of settled out last year or two, anything about the terms of the deals? Is every deal its own thing, or is their own situation, or is there interesting aspects to the way terms are being done? Are most of these situations competitive? Are they coming through brokers, or is these things that your network, you just are making contact with systems and really pretty much working with them exclusively?
I'd probably answer that, A.J., to say all of the above. I think that there are some processes that are competitive. There are some systems that have taken the position they want to hire bankers to represent them and look at who is out there to partner with them. We also have several that have not done a competitive process, have reached out to us exclusively, and I think that's based really on our track record. Most of the systems will do a back check of how we are doing with our partnerships. When they do that, we have excellent recommendations from the partners that we currently have our existing relationships with.
I also think that it's a growing area, and I think, as I said in my remarks, we see actually more systems reaching out to us because I think they're seeing that they need to have mental health expertise as they look at how to serve their patients' population health and other areas. Each one is really different, and I think that we do have a template that we try and look at for deal terms, but we also want to be responsive to our partners. We want to listen to what they feel is appropriate, and we usually come to terms so that it's really positive for both of us.
Okay. All right. Thanks a lot.
Thank you.
We'll take our next question from Brian Tanquilut with Jefferies.
Hey, good morning. It's Jason Plagman for Brian. Thanks for the update on the U.K. sale process. Looking forward, any thoughts on potential deployment of the proceeds you'd receive from a transaction? Thoughts on potential capital structure, debt leverage, things like that, after a potential transaction.
Jason, this is David. We don't have specifics to share with you at this time. We do intend to de-leverage the company and have a capital structure that allows us to pursue the growth and the different opportunities that we believe we have. The initial intent is absolutely to de-leverage the company, and we will share more specifics on what that looks like immediately and in the long term for our capital structure as the process continues.
Okay, fair enough. My follow-up. It seems like the de novo performance improved in Q4. Can you just talk about the outlook for those facilities in 2020, and then what you've baked into your guidance for 2020 as far as EBITDA impact from the new de novos you have planned to open in 2020?
Sure. We did talk about having two new facilities that opened in the first quarter of 2019 and some of the startup losses relating to those facilities throughout the year. We were very pleased that both of those facilities achieved breakeven in the fourth quarter. That is within a year of opening. That is the goal that we generally have for our new facilities, and both of those facilities, after getting off to a slow start, did achieve that goal in the fourth quarter. For the new facilities that we mentioned earlier for 2020, we do have about $5 million of start-up costs in our 2020 guidance relating to those facilities. Those open throughout the year. Unlike 2019, where we had two at the same time, we have more of a phased approach for the de novos that we see coming online in 2020.
The start-up losses for those will be $5 million as a group.
Great. Thanks for the questions.
Thanks.
We'll take our next question from Ralph Giacobbe with Citi.
Thanks. Good morning. Just want to go to the guidance, specifically the revenue guidance for 6.5% revenue growth. 2019, obviously, a slower year, and you still have the U.K. challenges and it under a sales process. I guess just the comfort on that magnitude of growth, and maybe if you can give us sort of the underlying growth expectations for the U.S. and the U.K.
Sure. This is David. We do have a strong revenue growth outlook in both the U.S. and the U.K. We are expecting for the U.S. 5%-7% revenue growth throughout the year. We see that being at the high end of the range, in the second half of the year, with the primary factors driving that being the bed additions being a strong number, as well as the facilities that we highlighted in the third quarter improving throughout the year. In the U.K., we also have a strong revenue growth outlook. That primarily relates to the retooling. We now have, for the 150 beds that are currently offline, a detailed timeline as to when those beds come back online. We see that starting in the first quarter and continuing throughout the year.
The volume growth that we see in the U.K., and the project timelines that we have supporting the visibility that we now have around the retooling is the key driver of the revenue growth in the U.K. Our pricing outlook in both markets is between 2%-3%. In addition to the volume, we do expect an ongoing stability and strong pricing in the 2%-3% range.
Okay. That's helpful. Then just to follow up, maybe I missed it. Can you give us what the U.K. volume growth would've been ex retooling? Is that sort of the bridge? I think given the guidance that you gave just on the U.K. of EBITDA of GBP 180 million-GBP 190 million, I think that implies, at the midpoint, growth of about 11% EBITDA growth. Can you just help bridge that? I mean, that's a pretty sizable jump kind of year-over-year to what we saw in 2019. Thanks.
Sure. In the U.K., there is about a 2% impact from the retooling beds. The revenue per day performance has been strong on increased pricing as well as improved acuity and service mix. There is the volume impact from the beds that were closed for retooling. As those beds come back online, we think there's 2% volume growth just from that, with other volume growth relating to an overall improvement in the U.K. occupancy. Mid-single digit U.K. revenue growth is supported by the retooling beds coming back online. Overall, other opportunities we have in the occupancy as well as the pricing that we mentioned. The U.K. revenue growth is in that 4%-6% if you look at it on a constant currency basis.
There's a little bit of contribution from the foreign currency, so I'm not sure if you're seeing that in your numbers, but on a same constant currency basis. It's a mid-single digit expectation for the U.K.
I'll just add that as we have been opening the retool beds, the team in the U.K. has had a lot of success working with commissioners to obtain block contracts. What that does is it assures us of reimbursement for all of the beds we're reopening, and it gives us the ability to ramp back up on our staffing and get the beds back open, but through a block contract that assures payment. We have over 30 of those presently. As we do reopen and we get to a point where we finish construction, that's when the negotiation starts with our commissioners, and I think that protects us a little bit from reopening the beds and having to ramp back up because we have taken that down obviously for construction.
They've done a good job with that, and we expect more of those with the retool beds that open during 2020.
Okay. That's helpful. Thank you.
We'll take our next question from Kevin Fischbeck with Bank of America.
Hey, good morning. This is actually Joanna Gajuk filling in for Kevin today. Thanks for taking the question. First, I just want to clarify, or I guess, also get additional color on the comment around the U.K. sale process. You said, you expect to complete this transaction, I guess at the end of Q2 into Q3. Does it mean that it's going to be closed or you're going to have a final decision announced by that time?
Well, we're in the second phase, Joanna, of our process. When we talk about the second quarter early in the third, we're talking about completing the sale and actually having that finished. Now, that is providing that we do have, as I said in my remarks, a firm and final bid that we determine maximizes value. If we do have those circumstances, we expect to close either second quarter or early third quarter.
Okay, great. The other piece I appreciate a comment that you're not commenting on specifics in terms of the use of proceeds, but just philosophically or I guess longer term, when you talk about trying to delever, so can you give us a frame, I guess, how you think about the optimal leverage for the remaining U.S. business? Are you thinking more 4x or is it a different number in terms of debt to EBITDA kind of target for the business? Thank you.
Yeah. We're confirming that we are targeting a leverage that is lower than where we are today. We will provide more specifics and a range once we complete the deal.
Okay, great. If I also can squeeze in a question on the guidance. Now you are talking about the specific segments, the U.K. growth seems to be implying, or the guidance for the U.K. business seems to be implying a pretty decent growth. When we put the numbers on the paper, it seems like for the U.S., it's kind of surprisingly low. Is there a missing piece in terms of the unallocated corporate overhead that we should be also considering here in terms of just trying to get the implied U.S. numbers? Because we're getting a very low single-digit growth rate. I don't think that will be what the guidance should be implying because you're talking about much stronger revenue growth on same-store basis.
Can you just frame to us how you think about the U.S. growth outlook for the EBITDA 2020 or maybe also throw it in there kind of long term in terms of how you think about that business? Thank you.
Sure, Joanna. We did provide the guidance around the margin throughout the year with improvement happening throughout the year. Really in the second half of the year, getting to a margin improvement on a year-over-year basis. The EBITDA, if you just look at our U.S. facilities without the corporate overhead, it is in a strong mid to upper single-digit range. The timing is just part of that, as we mentioned. If you include the corporate office cost, let me just provide the detail around that because it sounds like that is something to clarify. We did finish 2019 with about $84 million of corporate overhead in the U.S. That supports our U.S. facilities. We don't have overhead in that number relating to our U.K. operations. We do see that growing. The expectation for next year is in a range of $95 million-$98 million.
The reason for that really is items in the 2019 number that just cause that to be lower than what we target in a normal year. Specifically, our bonus accruals are resetting in the 2020 guidance to more the targeted number. That is the primary reason for our corporate office projection going from $84 million to around the $95 million-$98 million range.
Great. Thanks for clarifying that. Thank you.
Thanks.
We're taking our next question from Pito Chickering with Deutsche Bank.
Good morning, guys. Thanks for taking my questions. First one on bed retooling. Can you quantify the number of beds that were retooled and open during 2019, and that's in addition to the 150 that are closed at the end of the year?
Pito, we gone through the program 19, and we mentioned having 150 beds at the end of the year that will be reopening in 2020.
Okay. During, I guess, A.J.'s question, you talked about provider collaborations, which I believe starts in April. Do you think that leads to any new bed retoolings throughout the year? Do you think that sort of the 150 and then having those come online, we won't see any additional bed retoolings during 2020?
The team believes that we're really at, I think, the peak of the retooling. I don't think that they expect to have a substantial number of beds like we've seen in 2019. We're always going to look for opportunity if we think a bed could be providing a higher level of service, if we're asked by our customers. There aren't any plans to do any more in a more of a material way around the retooling for this year.
Okay, great. The last question. Beginning of the U.S., have you seen an impact from niche competitors in autism or eating disorders in your markets? Thanks so much.
We really haven't. There are competitors in both of those areas. We do provide some autism services, but not to any great extent. We have several eating disorder specialty programs, and they seem to be doing well and actually growing. I think, there are competitors and there have been. It's an area that I think there's a great need in for that kind of treatment, but we have not seen any real meaningful impact from competition.
Great. Thanks so much.
Our next question comes from Whit Mayo with UBS.
Hey, thanks. Good morning. Just wanted to go back to the U.K. a bit. I'm struggling a little bit with the guidance. Looking at the fourth quarter, on a constant currency basis, the operating cost per patient day increased about 7%, which is actually sequentially worse. This trend of continued cost inflation really hasn't improved and just continues to trend in the wrong direction, which I know is partially a function of the retooling effort. There's just a lot going on, and I guess I'm just trying to understand, what are you sort of underwriting in your plan for 2020 operating costs per patient day? If there's any way that you can provide some context around the last quarter or two, how much extra expense you're carrying through your run rate right now from all these retooling efforts?
Yeah. Whit, on a cost per patient day basis, we actually see the growth. If you look at it in constant currency, it's less than 5% year-over-year. That really reflects the service mix and the higher acuity of the patients we're seeing. We are focused on the margin, and just making sure that the revenue growth reflects that service mix and that higher acuity. From that perspective, the margin has been very stable over the last six quarters. As we look at the labor metrics, we've seen stability in both the agency percentage that we're utilizing within the labor, as well as just the overall labor cost as a percentage of revenue. There is an increase in the operating cost, but it does relate to the acuity and service mix that we see.
Maybe I didn't understand it. How are you assuming that trends in 2020? I mean, it should moderate. I'm just trying to get a sense of what your assumptions are.
Yeah. It does moderate. The other part of the equation is obviously the volume.
Yeah.
We have maintained some staff during the retooling, and that allows us to see the volume and the margin benefit as those beds come back online. That will be reflected in the 2020 cost per patient day numbers, primarily driven by the stability that we see in the labor cost, but also the incremental benefit of the volume.
Whit, I'll just add, as we have retooled and we have brought the beds down and we've discharged patients to a lower level of care, there's a core staff that we have needed to make sure that the ward is safe. In some instances through the year and actually the third quarter and into the fourth, we were keeping a core group there to make sure that as we ramped down, we had safety on the wards in the U.K.
All right. That's helpful. Maybe just two quick ones. Of the $20 million of savings that you've identified from a host of operational initiatives, what do you actually expect to realize in 2020? I know that you'll hit the run rate of $20 million by the fourth quarter, but wanted to know what the incremental realization is. For your joint ventures, is there a number to think about for real estate acquisition spend this year? That's it for me.
First, on the operational improvement initiative, we do think that we will gradually build to that $20 million that we achieved by the end of the year. It's somewhat gradual throughout the year, around $10 million is our expectation for what's realized during the year. As it relates to the real estate acquisitions, some of that spending does relate to just when we buy land or when we have other real estate that's acquired relating to an expansion or a new facility or joint venture project. Going forward, that will continue to be around where it was this year. It typically is around $10 million-$20 million. We think of that as part of the investments that we're making
Right
in the different types of growth.
Okay. Thanks a lot.
Thanks.
Our next question comes from Matthew Borsch with BMO Capital Markets.
I just had a question on the EPS guidance. If I take the high end of your revenue and adjusted EBITDA ranges, and the other guidance that you're giving on D&A and interest expense in the share count, I'm getting to something well above the range of $2.20 - $2.40. If I'm making a stupid mistake, we can take it offline, but I just wanted to see if there was something obvious that I might be missing. I know the tax rate you're guiding is 17%.
Yeah, Matt, it does depend on the range that you use for those non-operating costs.
Okay.
We've provided clarity around depreciation and interest. Depending on whether you use the low end throughout all of the numbers.
Got it.
You incorporate some type of high end, yeah.
Okay. That makes sense. The other question is on the first quarter. It looks like you're guiding something sort of flat EBITDA for the first quarter. I'm just wondering on the revenue, it was obviously up like 5%. What about the calendar impact? How are you estimating that? Isn't that a benefit, both respect to the leap day, obviously, but there's also a little bit of other year-over-year benefit there?
Yeah, we do see a benefit from having one extra day compared to the first quarter of 2019. We estimate that somewhere in the range of $1 million-$2 million.
Okay.
That is a year-over-year benefit that we expect.
Okay. How are you thinking about Well, are there any stranded costs as you see it, or at least lost operating leverage that you would expect to have for some period of time after the U.K. sale?
No, there's really not. The U.S. corporate office costs that we mentioned a minute ago relate specifically to our U.S. facilities. There are a few million of costs that we have within that number, just that relate to the cost of us being a multinational company. If you think about higher professional fees relating to tax requirements and things like that. There will be a wind down of a few million of additional costs that we carry. We don't think about there being any stranded costs, just given the self-sufficiency of each of those two segments.
Let me just, one last question on that, which is, do you think that we externally have the data elements to really estimate what the run rate's going to look like post the sale of U.K., absent the impacts maybe of the capital reallocation from that sale?
Yes, Matt, we do. Part of our intent in providing the U.K. depreciation number and other metrics
Okay
is just to give you all the information that we think you need.
Yep. Thank you very much.
Okay.
Thank you. Our next question comes from John Ransom with Raymond James.
Hey, good morning. Sorry. In the way back machine, when you bought CRC from Bain, they had about $475 million of revenue, 600 empty beds. I don't think you guys disclosed how big the methadone business was. Could you just approximately size that business today? I'm particularly interested in how much the methadone business has grown in the last six years.
We have 127 clinics. We're now in 32 different states. We have seen strong performance in that business, improvement in the coverage that we have, and really a diversified payer mix within that business. We've seen strong revenue growth in line with what we've reported on an organic basis for our U.S. facilities. It's part of that number. Hopefully that helps you size where the business is today. We don't separately report revenue relating to that segment because it's one component of our U.S. operations.
Do you remember how many you had when you bought it, roughly, versus the 127?
John, I don't. I think it was somewhere around 75 clinics. We've done four or so tuck-in acquisitions within that service line.
Okay. Do you remember approximately, of the $475 million at the time, what percent of that is it fair to say that was maybe 25% of the mix at the time? Is that crazy?
I don't remember what that represented of the CRC business. Where we are today, that segment, that service line is around 15%-17% of our U.S. revenue.
Okay.
I don't recall what piece of previous acquisitions that was.
Then just last one for me is, of the beds you've added and plan to add in 2020, so let's take 2018, 2019, 2020, approximately what percent of those are de novos, freestanding standalones versus adding beds to existing facilities?
John, our de novos are 300 of the 600, and the remaining are bed additions that we will be making
Okay
to our existing facilities. It's about half and half.
Great. All right. See you next week. Thank you.
Okay. Thank you.
I'll take our next question from Gary Taylor with JP Morgan.
Hi, good morning. Most of my questions are answered. I just wanted to understand just a little bit of the U.S. trajectory year-over-year and sequentially. It looks like if we adjust for the AR charge in the fourth quarter of 2018, did see improvement sequentially in the U.S. same-store margins that were down about 140 in the third, down about 90 adjusted in the fourth. Are you, based on your comments, I guess, implying that you do think same-store margin U.S. are down in the first half and then they'll be up in the second half? Sounds like that's what's sort of underlying the guide.
Yeah, Gary, we do. Hopefully we provided enough explanation around some of the factors driving that. There are a few other factors that we do think contributes to that. I'll give you just another example that will hopefully just help you understand the guidance throughout the year. We did make a change in the timing of our merit increases for our U.S. facilities. In 2020, we are transitioning that merit increase to happen, rather than at each employee's annual anniversary date, to once a year, either in January or April, for all facilities. This is an improvement, not only in just the process, the employee evaluation process and performance review process, but also just the visibility, the control that we have as we think about facility-level cost.
As part of that, there was a shift that we will be going through on a one-time basis that affects the year-over-year comparison 2020 versus 2019. It does shift some costs to the first half of the year, but will result in more stable costs throughout the year, going into the second half of the year. That, along with some of the other factors that we mentioned around the specific facilities improving, bed additions coming online, the operational improvements, that's part of our margin expectation improving throughout the year.
That sounds like My follow-up was just, it looks like consolidated margins down 40 this quarter. Your first quarter guidance is for those margins to be down about 100 basis points year-over-year. It sounds like there's some of the corporate overhead stuff you talked about stepping up. Also, this change on the merit comp, probably, I guess, would be two of the biggest factors on just that sequential guide.
Yeah. That's right, Gary.
Okay. Thank you.
Okay, thanks.
Our next question comes from Ryan Daniels with William Blair.
Hey, guys, Nick Spiekhout out in for Ryan. Thanks for taking my questions. I guess I know we've talked about this in the past and you haven't seen anything. Just wondering what you guys are seeing on the labor front in the U.S. I know a competitor north there having some trouble filling some vacancies, and I think they quoted that their annual wage increases jumped about 1% this year. Just a little bit of update there if you can.
This is Debbie. We haven't really seen labor pressures really differ from 2019 or project into. I think part of it, looking at others in the industry, we have our service lines that I believe factor into some of the labor pressures, particularly around RNs. We do have the specialty area and CTC, which are not as dependent on RNs. They use other professionals. The other, I think, factor, which I think is very positive, is we have had a very focused process on recruiting and retention. I think that while we make changes in markets when we think we might be at a point where we might limit census, which we have not done, and we see capacity issues developing because of staffing, we have been proactive in making sure that we're putting in wage adjustments as necessary.
It's very variable by market, and I think, again, comparing to others in the industry, we're not in all of the same markets, so we have markets where we do have pressures, but then we have others where we're keeping up with the competition through our wages.
Great. Thanks for that. I guess just shifting to the U.K. retooling, what's the progression of that for 2020? Is that weighted in the back half or in the front half, or pretty even about for those beds coming back online?
It's really evenly throughout the year. We do have some of the projects that tend to be larger than others. They typically range between 10 and 30 beds each. We have the first one is ready to open in March and has a block contract for the reopening. It's starting in March and it's somewhat evenly throughout the year.
Okay, great. Thanks, guys. That's it for me.
Thank you.
That does conclude the question and answer session. I'd like to turn the call back over to Debbie Osteen for any additional or closing remarks.
I just want to say thanks for being with us today and for your interest in Acadia Healthcare. I'd like to conclude by thanking all of our employees and our clinicians. Every day, they show real dedication and focus. They want to provide the highest quality care to our patients and our families, and I appreciate their efforts, and I just want to thank them. I'll also say that if you have additional questions today, please do not hesitate to contact us directly, and have a good day.
That concludes today's presentation. Thank you for your participation, and you may now disconnect.