Acadia Healthcare Company, Inc.

Good morning and welcome to the Acadia HealthCare's fourth quarter and full year 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I'd now like to turn the conference over to Gretchen Homrich. Please go ahead.

Good morning and welcome to Acadia's fourth quarter and year-end 2021 conference call. I'm Gretchen Homrich, Vice President 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'll 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 2022 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 2021 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 of 2021 and our guidance for 2022. Following our comments, we will open the line for your questions. We are pleased with our financial and operating results for the fourth quarter of 2021, completing another year of strong growth for Acadia. These results reflect robust demand for our behavioral health services. While we face challenges late in the fourth quarter of 2021 and early in the first quarter of 2022, related to the surge of the Omicron variant of COVID-19, we continued to see solid year-over-year volume growth and strong operating trends. During the Omicron variant surge, we saw more cases across our entire portfolio than at any other point in the pandemic. While the timing and impact has varied from one market to another, we saw the greatest overall impact starting in December, cases accelerated further in January, and then quickly dropped at the end of January. Despite these challenges, we continue to be successful with recruiting new employees by evaluating real-time data to identify any needs and utilizing our centralized recruiting function to support our facilities. Additionally, our facilities continue to manage through COVID with support from our operations and clinical teams and using the same strict protocols that we have had in place since 2020 with minimal disruption to patient volumes or operations. For the fourth quarter of 2021, our same facility revenue increased 10.7% compared with the fourth quarter of 2020, including an increase in revenue per patient day of 7.8% and an increase in patient days of 2.7%. Throughout this year, we have remained focused on providing care with the highest standards of safety for our patients and the communities we serve. We are fortunate to have an experienced and dedicated team of employees and clinicians across our operations who have continued to provide quality patient care for those seeking treatment for mental health and substance use issues. We are extremely proud of our team of employees for their unwavering support of our patients under extraordinary conditions. Our strong results reflect our ability to manage our operations and execute our growth strategy despite a challenging environment. As we have managed to the global pandemic, we have seen a greater societal acceptance of treatment for mental health and substance use issues. And the demand for our services remains very strong across all of our service lines. Acadia is uniquely positioned and our diversified service lines offer treatment options across all areas of behavioral health, including those with acute psychiatric needs, substance use disorders, eating disorders, and co-occurring disorders, while treating patients of all ages. Our expansive network of treatment facilities and options across the country enable greater access to care, allowing us to serve the diverse needs of patients while maintaining a keen focus on the individual's needs. The fourth quarter of 2021 was very active with respect to key strategic initiatives across our service lines to support sustained long-term growth and address the unmet demand for behavioral health services. In the fourth quarter, we added 13 beds to our existing facilities, bringing our total to 295 bed additions in 2021, extending our strong track record with almost 900 beds added over the past three years. We also acquired the real estate for three non-operational facilities, which are located on the north side of Chicago, Illinois. Prior to reopening, Acadia will make infrastructure investments to improve the behavioral health facilities, which will operate as Montrose Behavioral Health Hospital. The 60-bed children's hospital and outpatient facility are expected to open in the summer of 2022, and the 101-bed adult hospital is slated to begin operations in 2023. This is an exciting opportunity for Acadia to enter the greater Chicago area and address the significant need for behavioral health services for adults and children. We continue to expand our network of comprehensive treatment centers, which are designed to address the growing and critical need for medication assisted treatment for patients dealing with opioid use disorder. During the fourth quarter, we opened five CTCs, bringing the total number to 10 CTCs opened in 2021. During the fourth quarter, we were pleased to announce three new joint ventures, expanding our market reach to 16 partnerships. Each of our partners conduct a thorough and competitive process. We are chosen as their partner because of our strong proven track record, reputation for high quality care, experience in behavioral health, and our knowledge in constructing new behavioral health hospitals. We collaborate with our partners to meet the needs of the system and the communities that they serve. Additionally, it is important to our partners that our mission, values, and culture align with theirs. Our latest partners include Fairview Health Services, one of Minnesota's leading health systems, to build a new hospital with 144 beds in the Twin Cities area. SCL Health, a premier healthcare system in Colorado, for a new 144-bed facility in the Denver area. And Orlando Health, one of Central Florida's premier health systems to expand inpatient and outpatient programs and community outreach. We also continue to expand our operations in high growth markets through select acquisitions that meet the criteria of our disciplined capital allocation framework. On December 31st, 2021, we completed the acquisition of CenterPoint Behavioral Health System, the largest dedicated behavioral healthcare provider in the state of Missouri. The acquired assets consist of four inpatient hospitals and 10 outpatient locations. CenterPoint is an attractive acquisition opportunity because of its growth projects and other initiatives in place. and its existing footprint in Missouri, which is a state that requires a CON. This transaction is consistent with our growth strategy, and we look forward to pursuing additional acquisition opportunities for Acadia in the year ahead. Through our facility expansions, de novos, joint ventures, and acquisitions, We have added 681 beds to Acadia's network in 2021. We also see significant growth opportunities to expand the continuum of care by adding outpatient services. In 2021, we added 28 comprehensive outpatient services, including partial hospital, and intensive outpatient at our acute and specialty facilities. Our success in 2021 confirms the strength of our operating model and our ability to execute our growth strategy. We are encouraged by the favorable trends in our business and believe we are well positioned to capitalize on the expected growth in demand for behavioral health services. This pandemic has pushed the need for mental health and substance use treatment to the forefront. In a study published in the journal The Lancet Regional Health, the percentage of adults who experienced elevated depressive symptoms was 8.5% before the pandemic, 27.8% in the early months of 2020, and approximately 33% in 2021. The researchers noted that the outcomes are notably different than those observed after other national crisis. Typically, they would expect depression to peak following the traumatic event and then lower over time. Instead, they found that 12 months into the pandemic, levels of depression remained high. As always, our primary mission is to support the patients and communities we serve. We will continue to focus on providing high quality patient care while extending our market reach and advancing our position as a leading behavioral healthcare provider. I would also like to provide a brief update on the CEO transition. As you know, I extended my retirement date to March 31st. While I look forward to my retirement and continuing my role on the board, I remain committed to working closely with the management team and board to ensure a smooth CEO transition. The board has conducted a thorough and highly selective search process. We hope that we will have an announcement soon and look forward to updating you. We will not make any further comments on the CEO search on today's call. Now, I will turn the call over to David Duckworth to discuss our financial results and 2022 guidance in more detail.