Acadia Healthcare Company, Inc.

Good morning, and welcome to Acadia Healthcare's first quarter 2022 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 telephone keypad. To withdraw a question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Gretchen Homrick. Please go ahead.

Good morning and welcome to Acadia's first quarter 2022 conference call. I'm Gretchen Homrick, 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, Chris Hunter. 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 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 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 for opening remarks, I would like to turn the conference call over to Chief Executive Officer Chris Hunter. Thank you.

Thank you, Gretchen. Good morning, everyone, and thank you for being with us today for our first quarter 2022 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 business and financial and operating results for the first quarter of 2022. Following our comments, we will open the line for your questions. But before we get into the results, I just want to start by saying what an honor it is to be with you today as the new CEO. Acadia is a strong, respected organization, and I look forward to building on the successful trajectory set by Debbie Osteen and the Acadia leadership team. I want to personally thank Debbie for her leadership, for the solid foundation she leaves in place, for her time since I joined the company, and for the future work ahead as we continue our CEO transition plan. I'm grateful that Debbie is continuing her role on our board of directors and know we will benefit from her expertise. Some quick background on me. I'm passionate about healthcare and the difference our industry makes in people's lives. I've worked in the healthcare industry now for over two decades in managed care and healthcare IT. For the past eight years, I've worked at Humana in two different roles, first as Humana's Chief Strategy Officer with responsibility for corporate strategy in mergers and acquisitions, and most recently as the president of a business unit that together served the combined 20 million members in 45 states. Prior to Humana, I ran the provider business at Trizetto Corporation, and from these multiple vantage points, I have witnessed firsthand the critical need for effective behavioral health solutions. As we may finally be emerging from the height of the COVID-19 pandemic, there's clear evidence that the challenges around mental health are only increasing. Recent studies reported that approximately one-third of Americans experienced elevated depressive symptoms in 2021, compared to only 8.5% prior to the pandemic, while more than 55% of adults with a mental illness received no treatment for their conditions. As the leading pure play provider of behavioral health care services, Acadia has a significant opportunity to meet this critical societal need in our country. We take this responsibility seriously, and across our operations, we have a shared commitment to ensure that Acadia is well positioned to address this growing need. Since I joined three weeks ago, I have been encouraged by our team's discipline and ability to execute in a tough environment with COVID and labor challenges while continuing to meet the growing demand across all of our service lines. I'm also very impressed with our diversified offering of comprehensive services within behavioral health, which are focused on real patient needs that continue to be undertreated and the strong growth pathways across our businesses to serve those patients. Moving to an update on the first quarter, we continued to build on our solid foundation and proven operating model through Acadia's four strategic growth pathways. First, our facility expansion efforts continue to address the unmet demand for behavioral healthcare services and reach more patients in new and existing markets. We added 28 beds to current facilities in the first quarter and expect to add approximately 300 beds through facility expansions this calendar year. Our second growth avenue is to identify underserved markets for behavioral health treatment and develop wholly owned de novo facilities that help fill this gap. At the end of 2021, Acadia completed the purchase of three non-operational facilities in Chicago. We have since commenced work on the planned improvements for a 60-bed children's hospital that we expect to open next month. In addition, both a 101-bed adult hospital and an outpatient facility are slated to begin Chicago operations in 2023 and will operate as Montrose Behavioral Health Hospitals. Additionally, We continue to expand our network of comprehensive treatment centers, or CDCs, which are designed to address the growing and critical need for medication-assisted treatment for patients dealing with opioid use disorder. In the first quarter of 2022, we opened one new CTC in Virginia, and we plan to open at least five more CTCs in 2022. Our third lever for Acadia's continued growth is through joint venture partnerships. We announced six new partnerships with health systems in 2021 and plan to open a new facility in partnership with Covenant Health in Knoxville, Tennessee this summer and expect to launch operations in a new facility in partnership with the Lutheran Health Network in Fort Wayne, Indiana later in 2022. Working together with these partners, we can combine our expertise and resources with a shared commitment to expand access to quality behavioral health care. Finally, for our fourth growth pathway, we will continue to look for acquisition opportunities in high-growth markets that meet the criteria of our disciplined capital allocation framework. Acadia has a proven operating model, and our strategy is to identify facilities and programs where we can leverage our scale and expertise, make necessary investments for expansion, and add service offerings to further enhance the continuum of care. So to recap these four growth avenues, in 2022, we expect to add over 600 beds in total through approximately 300 bed additions to existing facilities, opening two inpatient de novos, two facilities with JV partners, and at least six CTC locations. As we witness the significant need for more effective treatment, we have also seen a greater public acceptance of mental health at parity with other health issues, as well as a reduction in the stigma that has often prevented patients from seeking the health they need. My goal is to build upon our strong momentum and extend our market reach to more patients and communities. We will continue to execute on our strategic growth plans as we address the unmet needs that exist across all service lines. I plan to conduct ongoing reviews of each of our businesses in order to identify incremental opportunities to create long-term value and determine how we can best position Acadia to lead the industry into the future. I look forward to sharing this perspective in the coming months and also to conducting our first Acadia Investor Day in New York later this year. I would like to address some of our industry headwinds. As with many other healthcare providers and other industries across the country, we are currently dealing with a tight labor market. At the same time, I've been impressed with our team's ability to manage through this environment with an unwavering focus on treating our patients. We continue to be intentional in recruiting and retaining our clinical staff in line with patient needs, and we believe we have the tools to effectively manage through potential challenges. We continue to be successful with recruiting new employees through robust local efforts and utilizing our centralized recruiting function to support our facilities. While we have focused on market competitive pay for our valuable employees, our wage inflation is manageable, and our premium pay is stable and continues to account for a low percentage of our labor costs. 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 health care provider that our country is counting on to grow and serve more families in need. At this time, I'll now turn the call over to David Duckworth to discuss our financial results for the quarter and our 2022 guidance in more detail.