Acadia Healthcare Company, Inc.

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

Good morning and welcome to Acadia's second quarter 2020 conference call. I'm Gretchen Homrick, Director of Investor Relations for Acadia. I'll first 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 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 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 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 second 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 about our financial and operating results for the second quarter and year. We will then open the line for your questions. I would like to begin by acknowledging and thanking all our employees and clinicians for their dedication and relentless focus on providing the highest quality care to our patients and their families, especially during these challenging times. Our top priority remains supporting our patients with quality care provided in a safe manner. Behavioral health care providers are playing a critical role in addressing the ongoing mental health needs in communities throughout the US and the UK, especially for those who had previous mental health issues and suffer from the added anxiety and isolation. Our experienced teams across our operations and diverse services have met the demand and advanced our position as a leading operator of behavioral healthcare facilities. Our 40,000 employees truly illustrate the strength of Acadia. They are a key reason we are well positioned to meet the current demand and stand ready for the opportunities to serve those in need in the future. During the second quarter, we continued to make meaningful improvement in almost every facet of our business. We made prudent investments to increase our market reach and quality of care. We further strengthened our liquidity and longer-term financial position. As states reopened, we shifted our marketing strategy to connect with our referral sources and emphasize our key advantages in this current environment. We also quickly expanded our telehealth capabilities to better reach and support our patients. and we did all of this while closely monitoring the business and aligning our expenses with revenues. These actions lead to results that improved each month throughout the second quarter. As we discussed on our first quarter call, the initial actions taken by the federal, state and local governments related to the COVID-19 pandemic led to lower volumes in April in the U.S. Due to the actions we implemented as well as the easing of restrictions, we saw a reversal of these trends beginning in late April from a 6.7% decline in the month of April to a 0.1% increase in May as compared to the prior year. In June, we surpassed our pre-COVID volumes and our same facility patient days increased 4.7% versus the prior year. For the month of July, we have continued to see strong demand with greater patient admissions. Same facility patient days were up 5.4% in July compared to the prior year. We believe these trends are indicative of the strength of our services, our ability to make real-time adjustments to our strategy, as well as the ongoing need for our services. The ramp of activity has also affirmed our view that the need for behavioral health services will accelerate as we navigate through the current environment. We believe we have passed the trough of the volume declines and remain focused on stabilization and improvement across our business. Within our acute service line, we have seen an improvement in volumes driven by our strong network of referral sources, including ERs. Our teams acted quickly to address the early second quarter decline in volumes by shifting our marketing approach to better reach our patients, their families, and referral sources to reinforce the message that we have the expertise and capacity to help. We also developed additional access points, assisted patients with virtual visits, established a crisis hotline, and conducted wellness checks. Additionally, we continue to see stabilization and improvement in volumes in our specialty service line. As we previously stated, several of our specialty facilities have a wide geographic network. and draw patients from across the US. While our specialty patients have continued to travel throughout the quarter, there is still some reluctance to travel, especially from areas experiencing an increase in COVID cases. This has led to a slower pace of recovery for certain of our specialty facilities. In response, we shifted some of our marketing strategies to focus on local and regional markets, which contributed positively to the quarter. Our RTC line of business continued to see stable volumes throughout the quarter. These facilities leverage relationships with state referring agencies to serve adolescents with behavioral conditions. As a result, we had consistent patient admissions throughout the quarter and expect that to continue into the second half of the year. And in our CTC business line, we also continue to experience solid demand as substance use issues remain very prevalent throughout the country. We firmly believe the ongoing mental and emotional toll caused by continuing economic and society concerns will further increase the already strong demand for mental health and Substance Use Treatments we provide in the US. And we are well positioned to meet this increase in demand. Shifting to the UK operations, the impact on our volumes have been limited due to the longer length of stay for many of our service lines. However, certain services within our healthcare division with a shorter length of stay have been affected. In addition, our labor costs were temporarily impacted by a high level of employees who quarantined. Our same facility patient days experienced a decrease of approximately 5% in April and May. As the UK government eased restrictions, we have seen increased patient admissions, especially in the service lines with the shorter length of stay. Our same facility patient days improved to a decline of 3.4% in June and 2.1% in July compared to the same period in the prior year. Similar to the US, we expect to see continued growth in demand from individuals in the UK requiring mental health and addiction treatment. We continue to work with the NHS and other referral sources to align our services with expected demand and we are able to meet this need across our service lines. We continue to move forward with our plan to retool beds to meet the demand from the NHS despite a slight delay in the construction of the beds. We reopened 24 beds in the second quarter and still expect to reopen 100 additional beds by the end of the year. We've already started to see the benefits from this retooling strategy and we expect to see further improvement going forward in the UK as these additional beds will be critical to help meet the anticipated increase in demand. Likewise, we are making strategic investments in our future growth in the US. We continue to expand our market reach through bed expansions and additional service opportunities. Through the first half of 2020, we have added 106 beds to our US operations, and we expect more than 400 additional beds to come online in the second half of the year. These new beds include a continuation of our strategy of expanding our reach through joint venture partnerships. Along with our joint venture partner, Tower Health, we opened 144-bed behavioral health facility, Tower Behavioral Health, in July. Located in Redding, Pennsylvania, the facility will serve individuals who have been experiencing mental health concerns. This is an example of how Acadia can partner with a leading hospital system to bring essential mental health and addiction services to an underserved area. We expect to open a new joint venture hospital with Ascension St. Thomas in the fourth quarter. Together, our bed expansions, de novo facilities, and joint ventures provide many growth opportunities for Acadia to reach more patients in new and existing markets and further advance our position in the market as well as the growth of our business. As we look ahead to the second half of 2020, we are not providing guidance due to ongoing uncertainties driven by the COVID pandemic in both the US and the UK. At this time and based on recent trends, we have a positive outlook on the second half of the year. Acadia is well positioned to meet the expected demand for mental health and substance use treatment. We will continue to deliver the highest quality of patient care, extend our market reach, and advance our market leadership as a behavioral healthcare facilities operator. Now, I will turn the call over to David Duckworth, to discuss our financial results in more detail.