Acadia Healthcare Company, Inc.

We're about to begin. As a reminder, this call is being recorded. Please proceed.

Good morning and welcome to Acadia's first quarter 2020 conference call. I'm Gretchen Homrick, Director of Investor Relations for Acadia. I'll provide you with our safe harbor before turning the call over to our Chief Executive Officer Debbie Osteen. to the extent any non-GAAP financial measure is discussed in today's call. You'll 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 operational and financial performance 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. We caution you 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 first 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, I would like to turn the call over to Debbie Osteen for opening remarks.

Good morning and thank you for being with us today for our first quarter 2020 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 on our response to the COVID-19 pandemic and on our financial and operating results for the first quarter. We'll also discuss what we are seeing so far in the second quarter. We will then open the call for your questions. Before I discuss our results, I believe it is important to reinforce in times like these that our top priorities now and always are the health and safety of our patients, employees, and visitors. We have put into action the following initiatives to protect them while continuing to provide quality care to our patients. First, in February, we implemented the recommended precautionary measures in response to COVID-19, including recommendations and requirements issued by the CDC and state and local health authorities. Second, we instituted social distancing practices and protective measures throughout our facilities, which includes restricting and, in many cases, suspending visitor access, closing common areas, limiting group therapy, and screening patients and staff who enter our facilities based on criteria established by the CDC. Third, we enhanced our supply chain management to ensure we have key PPE and supplies for the continued safety of our employees. This included conducting and updating a weekly inventory across the company for PPE and establishing a web-based process to request PPE for better visibility of our needs and distribution. I want to thank our procurement team who has been an integral part of this process. Fourth, over the course of the last two months, we have significantly increased communications with physicians, facility staff, division leadership, and our corporate employees, including daily updates, calls and webinars with resources and guidance for the facilities, and we established a task force of key leaders that meets daily to address concerns, develop action plans and monitor responses throughout our facilities. Moving to our results for the first quarter, they were in line with our expectations. During the quarter, we achieved revenue growth of 2.9% compared to the same period of 2019, reflecting our continued focus on growth initiatives both through service expansion at our existing facilities and opening new facilities. Through the first two months of the quarter, we were very pleased with our same facility patient day trends for both the U.S. and U.K. operations. For our U.S. operations, same facility patient days increased more than 4% through the first two months of the year compared to the prior year. The COVID-19 pandemic affected our business starting in late March and caused same facility patient day volumes to decline 3% in the last two weeks of the month relative to the same period last year. In the UK, same facility patient days were flat through the first two months of 2020 and then declined 3% in the last two weeks of March as compared to the same period last year. The impact of COVID-19 varied by geography and business line, with facilities and hotspot areas across our network more affected than others. The diversity of our service model, breadth of our network, and actions taken to shift our marketing efforts has offset some of the impact of the pandemic and continues to serve us well during this crisis. Some of the factors that affect who directed our business line starting in late March were first to slow down in referrals from traditional sources such as emergency rooms and medical professionals. In many of our markets, our acute facilities receive referrals from emergency rooms. As ER visits declined, there was a corresponding effect on our admissions. Second, the stay-at-home orders implemented by many cities and states. We saw a very direct correlation to our admissions as states encouraged individuals to remain home. While not intended, we believe our potential patients did not seek the care they needed. As states begin to modify these orders, we anticipate that our potential patients will again seek needed mental health assistance. Third, the various effects of travel restrictions on our facilities who draw patients nationally for treatment, particularly in our specialty service line. We have some facilities that admit patients from a wide geographic area and a portion of these patients travel to reach our services. We believe these factors are temporary and the demand for our services remains strong across the portfolio. and we expect to see continued improvement as restrictions are lifted. However, we do not have visibility on when volumes from our referral sources will return to prior levels. In the month of April, our volumes declined 7% compared to last year, reflecting some deterioration in the first two weeks with signs of stabilization and improvement during the last two weeks. Shifting to the U.K. operations, beginning in late March, our U.K. operations also faced temporary disruptions from the impact of the stay-at-home orders on the referral and commissioning process. While the volume impact in the U.K. has been limited due to the longer length of stay for many of our service lines, certain services with a shorter length of stay have been impacted. In April, we have seen stability in our census, ending the month at a 5% decline compared to the prior year. From our discussions with the NHS, we believe there may be a surge in individuals requiring mental health and addiction treatment, and we have developed a comprehensive plan to meet this need across our service lines. Due to the pandemic, There has only been a slight delay in the construction of our retooled beds, and we are still on target to reopen those beds by the end of the year. As we move forward, these beds will be important to help address the demand following the pandemic. With the help of our experienced senior leadership team, strong local leadership, and staff in our facilities, we have implemented the following actions to help mitigate some of the impact from the COVID-19 pandemic. These include increased utilization of technologies to support stay-at-home orders and better serve market demand, including telehealth options for patients and virtual visitations for families and guardians. I would like to thank the administration and state agencies for relaxing and modifying regulations for telehealth. They worked rapidly to allow practitioners to work across state lines as we strive to accommodate our patients. We shifted the approach for our sales and marketing platform to better reach patients who need our help during this pandemic and with our referral sources, many of whom have been working from home through telehealth for care continuity. We launched a national behavioral health crisis hotline designed to offer urgent assistance to any individuals in need of mental health or addiction treatment. The centralized 24-7 crisis line offers immediate, no charge, clinically approved assessments to support underserved communities and connect patients with the treatment they need. and we collaborated with other large public healthcare providers across the country in an effort to absorb patients coming from medical hospitals as they converted their resources to fight COVID-19. In addition, as volumes started to decline in the latter part of March and throughout April, our operations team was very proactive in implementing necessary changes to mitigate the financial impact, including aligning corporate and facility-level staffing costs with patient volumes and implementing a hiring freeze for nonclinical staff, canceling all nonessential business travel, reducing discretionary expenditures, and temporarily reducing marketing spending. Negotiating with our vendors and lessors for discounts and or revised payment terms and closely managing our working capital as our facilities continue to build and collect for services rendered. We continue to make prudent investments to serve our patients' needs, ensure the safety and wellbeing of everyone in our facilities and prepare for the mental and emotional impacts that this pandemic could produce in the months ahead. During the quarter, we added 78 beds to existing facilities in the US. Moving forward in 2020, we plan to reduce our capital expenditures and have modified the number of beds that we will add during the year. We also remain committed to our partnership strategy. In recent discussions with our partners and prospects during this crisis, They acknowledge that while COVID-19 requires considerable resources and executive attention from their health system, their leaders also believe this crisis will end and it is critical that they keep working on future plans. We expect to open three de novo facilities later in 2020, including two facilities with joint venture partners. positioning us for the growth that we see across the portfolio. I would like to update you on our sales process for our UK business. As we announced in March, the board decided to temporarily suspend the sale process of our UK business until market conditions recover. We believe interest from potential buyers remains strong and our objective will be to restart the process at the appropriate time to maximize value for our stockholders. Lastly, before I turn the call over to David, I'd like to recognize and thank every one of our employees across our network. Their strength and dedication to providing care to our patients during these challenging times has been nothing short of amazing. We continue to draw strength from each other and our patients as they continue on their path to recovery. This pandemic has undoubtedly created mental and emotional issues that will need to be treated in the months and potentially years ahead. And Acadia is ready to answer that call. Now I will turn the call over to David Duckworth to discuss our financial results and guidance in more detail.