Acadia Healthcare Company, Inc.

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

Good morning and welcome to Acadia's third 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 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 third 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 third 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 third quarter and year. We will then open the line for your questions. We were very pleased with our solid financial and operating performance for the third quarter. Before we get into the results, I want to thank all of Acadia's dedicated employees and clinicians for their continued support and relentless focus on providing the highest quality care to our patients and their families, especially during these challenging times. We are fortunate to have an experienced team across our operations who continue to work tirelessly to execute on our growth strategy and effectively manage costs. As the global pandemic continues to affect all our lives, we are mindful of our critical role as a leading provider of behavioral healthcare services. The ongoing uncertainties and economic and societal concerns continue to contribute to the demand for our services, especially for those already struggling with behavioral health and all of our top priority remains supporting our patients with quality care provided in a safe and accessible manner. As such, we have continued to execute our strategy with solid results and importantly, we are optimistic about the opportunities ahead for Acadia. Across both the U.S. and the U.K. operations, we saw strong results driven by solid volumes. In addition, our revenue per day returned to our normal expected range. During the third quarter, we experienced strong top line growth with revenues up 7.2% over the prior year, reflecting robust demand for our behavioral health services. We believe this result is indicative of the intrinsic strength and demand for our services. We have a resilient business model that can respond to a rapidly changing environment. Acadia is well positioned to address the needs of those seeking treatment for mental health and substance use issues, and we expect that demand for our services will continue to increase. In the U.S., this robust demand is demonstrated by our increase in same facility patient days of 4.2% compared to the prior year. Within our acute service line, we have seen solid volumes attributable to our deep network of referral sources. This has remained consistent despite the current environment. Our teams work closely with our patients, their families and referral sources to reinforce the message that we have the expertise and capacity to help. In order to reach our patients, we continue to use additional access points, telehealth capabilities, wellness checks, and our crisis hotline. For our specialty service line, we were pleased to see stabilization in our volumes. By shifting our marketing strategies to focus on local and regional markets We were able to reach those that need the very specialized services that we provide. During the quarter, we also saw sequential improvement in our out-of-state referrals due to patients being more willing to travel. However, we've not yet seen our referrals return to prior year levels. Volumes in our RTC service line remain solid in the quarter. These facilities leverage relationships with state referring agencies to serve children and adolescents with behavioral conditions. As a result, we had solid patient day year-over-year growth throughout the third quarter, and we expect that to continue. In our CTC service line, we also continued to experience strong patient volumes as both demand and coverage trends remain solid. In the U.S., our same facility revenue per day increased 3.1% in the third quarter as compared to the prior year. This reflects annual rate increases in our expected range of 2 to 3%, as well as normalized CTC reimbursement and improvement in our outpatient revenue. Excluding the impact from the reversal of the CARES Act income of 18.1 million, our same facility EBITDA margin improved 380 basis points to 29%. We are realizing measurable improvement in our cost management efforts and operating efficiencies that we've implemented in 2019 and 2020. We continue to proactively manage staffing and other costs. Our team did a great job making timely decisions to reduce FTEs in response to the declines in volume. And as our patients returned at higher volume to our facilities, we utilized tools implemented last year to monitor FTEs at the facility level. Our team is very focused on evaluating every position and determining what expenses are essential. We have implemented a balanced approach to ensure we have appropriate resources to support our patients. In the UK, same facility revenue increased 2.7% from the third quarter last year, reflecting a 2.8% increase in revenue per patient day and flat year-over-year patient day volumes. We saw monthly sequential improvement throughout the third quarter and our volumes surpassed pre-COVID levels in early July, which we were pleased with. 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 well positioned to meet this need across our service lines. We were also pleased to see sequential improvement in our third quarter labor costs in the UK. Total labor costs as a percent of total revenue improved 240 basis points to 68.2% for the third quarter of 2020 from 70.6% in the second quarter and was flat as compared to the third quarter of 2019. Agency labor as a percentage of total labor cost improved from 13.5% in the third quarter of 2019 to 12.7% in the third quarter of 2020. During the quarter, we also finalized negotiations with the NHS and local payers for our rate increases for the fiscal year. We received an average rate increase of 2.8% across all of our service lines. We believe this demonstrates support for the important care that we are providing their patients. As we recently disclosed, we have relaunched The formal process regarding the potential sale of our UK business. Our objective continues to be maximizing value for our shareholders. Consistent with market practice for UK transactions of this nature and in conjunction with our advisors, we have solicited and have now received non-binding offers to acquire our UK business from multiple bidders. As we continue to work with our financial and legal advisors, we will update the market on the sales process when and as we determine it is appropriate. We continue to make strategic investments in our future growth in the U.S., expanding our market reach through bed expansions and additional service opportunities. For the first three quarters of 2020, we have added 206 beds to our existing facilities in the U.S., and we expect to add approximately 100 beds in the fourth quarter. As part of our strategy, we have continued our strong track record of partnering with health systems and hospitals across the country, which has created important growth opportunities for Acadia. Along with our joint venture partner, Tower Health, We opened 144 bed behavioral health facility in Redding, Pennsylvania in July. We expect to open a new joint venture hospital with Ascension St. Thomas in Nashville during 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. Going forward, we believe Acadia will play a critical role in meeting the needs of many people who are struggling with the uncertainties related to the pandemic. We will continue to focus on our primary objective, to deliver the highest quality of patient care as we extend our market reach and advance our position as a leading behavioral healthcare facilities operator. Now, I will turn the call over to David Duckworth to discuss our financial results in more detail.