Acadia Healthcare Company, Inc.

Good morning, and welcome to the Acadia Healthcare Second Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need any 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 a touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Gretchen Homrick, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to Acadia's second 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 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 our Chief Executive Officer, Chris Hunter.

Thank you, Gretchen. Good morning, everyone, and thank you for being with us today for our second quarter 2022 conference call. I'm here today with our 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 performance for the second quarter of 2022. Following our comments, we will open the line for your questions. Acadia has continued to execute our strategy throughout the first half of 2022 with favorable results. Acadia has a proven operating model and diversified service lines across the continuum of care, each of which offer high quality for our patients. After 100 days into my role as CEO, I continue to be confident in our ability to execute our strategy across our growth pathways and service lines, to provide quality patient care, to positively impact the communities we serve, and to create long-term value for our stockholders. We look forward to seeing many of you at our first ever Investor Day later this year, planned for December 7th in New York City. Turning to the second quarter, Acadia delivered strong financial and operating results despite ongoing COVID and labor challenges. During the second quarter, we saw increased COVID cases in certain markets, which had a temporary impact on the company's patient admissions and staffing. Our team has done an excellent job managing through these surges with robust policies and procedures to ensure the safety of our patients and staff. I want to thank all of our dedicated employees and clinicians across our facilities who have continued to work tirelessly through these challenges to meet the needs of our patients in a safe and effective manner. We also continue to navigate through a tight labor market. We've remained diligently focused on our recruiting and retention initiatives, and we have enhanced and adapted our processes for recruiting, hiring, and onboarding new employees. Our operational leadership, centralized recruiting, and other corporate support teams work in close collaboration with our facility operators and clinical staff to recruit employees in their respective markets. We believe that we benefit from our broad geographic footprint across 39 states and our diversified service lines as we recruit clinical staff for various positions and levels of care in our facilities and clinics. While labor is still a challenging issue for all healthcare providers, we are cautiously optimistic that the market is improving. We have seen sequential improvement in our net new hires from March through the first half of July, and our contract labor continues to be stable and represents a very low percentage of our labor. During the second quarter, we saw a continuation of our positive trends in revenue per day. We believe this is attributable to our longstanding favorable relationships with our payers who recognize and appreciate the value and the quality of care we provide. As more payers and states are focused on supporting greater access to mental health and substance use treatment, we are encouraged by the improved coverage trends and positive reimbursement environment. We continue to see strong underlying demand for behavioral health care services. As issues surrounding mental health and substance use have taken center stage in our public discourse, the stigma associated with treatment has lessened, resulting in more people seeking the care they need. Without question, the challenges the past two years related to the pandemic have highlighted the need for quality behavioral health care services. A recent study by the National Center for Educational Statistics found that 87% of public schools reported that the COVID-19 pandemic hindered student socio-emotional development during the 2021 to 2022 school year. and 83% of schools reported that students' behavioral development was stunted. As such, we see the importance of extending our role as a leading provider of behavioral healthcare services to help meet this critical societal need in our country. As we've previously discussed, Acadia has a well-defined growth strategy with four distinct pathways to expand our market reach. Bed additions to existing facilities, de novos, joint ventures, and acquisitions. Acadia has continued to execute this strategy and meet our objectives in the first half of 2022. Let me briefly outline our continued progress on these four growth pathways. Our first pathway is adding beds to existing facilities. During the first half of the year, we added 78 beds to current Acadia facilities, and are on track to meet our goal of adding approximately 300 beds in 2022. As we initially expected, our third quarter will reflect the highest number of bed additions to existing facilities for 2022 with 150 additional beds. These facility expansions are needed to meet demand in our existing markets and will continue to drive same facility volume growth in the near term and provide efficient and profitable growth opportunities in the long term. Our second growth pathway is de novos, both inpatient acute facilities and CTCs. We've worked to identify underserved markets where we can develop and build wholly owned de novo facilities that meet the critical demand for behavioral healthcare services. We believe there are significant opportunities in communities across the country to address this unmet need at the local level. In early July, we opened a 60-bed children's hospital in Chicago as part of the three non-operational facilities acquired by Acadia at the end of 2021, which together will operate as Montrose Behavioral Health Hospital. Renovation work continues for the 101-bed adult hospital and the outpatient facility for Montrose, which are expected to begin operations in 2023. In addition to the new Chicago facilities, we expect to open a de novo acute inpatient facility, Coachella Valley Behavioral Health, in Indio, California, early next year. We also continue to identify opportunities to expand our network of 142 CTCs as these facilities play a critical role by providing medication-assisted treatment for patients dealing with opioid use disorder. Demand for treatment has risen dramatically as the increase in opioid use disorder has led to a national epidemic of opioid overdose deaths with more than 107,000 estimated drug overdose deaths in 2021. We opened two new CTCs during the first half of the year, and we're on track to open at least six CTCs in 2022 to support the high demand for effective addiction treatment. Our third growth pathway is joint venture partnerships with leading health systems across the country. We recently announced our 17th and 18th JV partnerships, and we continue to believe these represent an excellent growth avenue for Acadia. We're very excited about two new joint ventures that we recently announced. The first is with Tufts Medicine, which is one of New England's elite health systems, to build a new 144-bed behavioral health hospital in Malden, Massachusetts, near Boston. And second, a joint venture with ECU Health, one of Eastern North Carolina's premier health systems, to build a 144-bed behavioral health hospital in Greenville, North Carolina. The partnership with ECU will expand our acute service line into the North Carolina market. Through competitive processes, these health systems have chosen Acadia as their partner. These joint ventures further our strategy to bring together the best practices and expertise of Acadia and our partners to expand access to quality behavioral healthcare services in their respective communities. We expect our joint ventures to be a strong driver of our growth in the future. We have previously announced joint venture partnerships for 19 facilities of which seven are currently open and operational. We plan to open our eighth joint venture facility in partnership with Covenant Health in Knoxville, Tennessee during the third quarter, and our ninth joint venture facility in partnership with Lutheran Health Network in Fort Wayne, Indiana during the fourth quarter of 2022. We plan to open an additional 10 hospitals with premier health systems we have already executed partnership agreements with, We have a strong pipeline of potential partners and will continue to pursue this attractive growth pathway for Acadia. Our fourth and final pathway is expansion through strategic acquisitions. We believe these are attractive opportunities for Acadia to acquire existing facilities and implement our operating model and make the necessary investments in both the infrastructure and service offerings to enhance the level of care. We believe both our disciplined approach to capital allocation and our strong balance sheet that we have maintained since exiting our UK business both position Acadia as a proactive acquirer. In conclusion, we're pleased with our continued progress across our four growth pathways. We expect to add approximately 600 beds in 2022 through approximately 300 bed additions to existing facilities, opening one inpatient de novo two facilities with JV partners, and at least six CTC locations. Acadia has demonstrated consistent execution with favorable results through the first half of 2022, and we believe the strong demand trends across our service lines will support continued growth. We're uniquely positioned to meet this demand with enterprise capabilities. They extend across 239 facilities, offering diversified service lines and patient-centered care. At this time, I will now turn the call over to David Duckworth to discuss our financial results for the quarter.