Acadia Healthcare Company, Inc.

Good morning, and welcome to Acadia Healthcare's first quarter 2023 earnings conference call. All participants will be in a listen-only mode for the duration of the call. And 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 your telephone keypad. And to withdraw your question, please press star, then two. Please also note that this event is being recorded today. I would now like to turn the conference over to Gretchen Homrick. Please go ahead.

Good morning and welcome to Acadia's first quarter 2023 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'll 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 2023 and beyond. 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. At this time for opening remarks, I would like to turn the conference call over to our 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 2023 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 first quarter of 2023, and following our comments, we'll open the line for your questions. Today, I'm pleased to share that our first quarter results mark a strong start to 2023 as we continue to execute our strategy with favorable results. We reported year-over-year revenue growth of 14.2 percent, adjusted EBITDA growth of 11.6 percent, and adjusted EPS growth of 11.9 percent, driven by robust demand for our behavioral healthcare services. Stepping back, our ability at Acadia to address complex behavioral health needs in our country has never been more urgent. According to the National Alliance on Mental Illness, suicide is now the second leading cause of death among Americans age 15 to 24. Nearly 20% of high school students report serious thoughts of suicide. And a recent study by the Institute of Mental Health estimated that one in five American adults is living with some type of mental illness. These are discouraging statistics. And that is why we remain so proud of the role Acadia is playing to help lead the way in not only how we deliver outstanding care for those in need, but also how we work to reduce the stigma around mental illness. Earlier this month, the New York Times detailed the growing need for access to quality behavioral health care services and highlighted our Acadia Maple Heights Behavioral Health Facility in Indiana is one that is helping to make standalone behavioral health treatment more accessible. Today, Acadia is uniquely positioned to help support, shape, and deliver care across the full behavioral health spectrum. Each day, our 23,000 employees across our network of 250 facilities and diversified service lines work tirelessly to care for patients and advance behavioral health care across the country. Working more effectively together as we expand our care strategy to meet the growing demand has helped to deliver continued strong results in the first quarter. To start, our same facility revenue increased 13.3 percent compared with the first quarter of 2022. As we shared in February and demonstrated in our results released last night, we saw record patient volumes during the first quarter. The 6.5% year-over-year patient day growth for the first quarter was above the high end of our outlook range. We are also very pleased with our revenue per day growth of 6.4%, which was driven by favorable rate increases across our service lines, markets, and payers. Like other healthcare providers, we're continuing to manage through a tight labor market. Our team has done an excellent job navigating this environment while maintaining our high standards of patient care. We were pleased with our labor metrics for the first quarter of 2023 and believe the labor environment continues to show signs of improvement, positioning the company for further stability and an easing of wage growth over the remainder of the year. For the first quarter, our labor costs were in line with our expectations and our base wage inflation of 7.5% and premium pay showed sequential improvement as compared with the fourth quarter of 2022. Even as we saw a record census that required increased staffing to support our patients, we were able to manage our labor costs with incremental improvement. As we have previously shared with you, our growth strategy is centered around our five distinct pathways, and we continue to make the necessary investments to support our growth objectives. I will briefly update you on our continued work related to these five pathways during the first quarter. Our first pathway, facility expansions, remains our primary and most efficient driver of growth. We added 106 beds to our existing facilities during the first quarter well on our way to our expected total bed additions of approximately 300 in 2023. Importantly, As we indicated on the fourth quarter call, we continue to expect that many of the bed additions in 2023 will open in the first half of the year and are expected to contribute to an accelerating volume growth outlook for the company. Our second growth pathway is to develop wholly-owned de novo facilities in underserved markets for behavioral health care services. We look forward to increasing the pace of our de novos from opening one per year to two per year in 2023, And we are on track to meet that goal with the opening of a 101-bed adult hospital in Chicago and a new 80-bed facility in Indio, California. During the first quarter, we commenced construction on a new 100-bed acute care behavioral health hospital, Agave Ridge Behavioral Hospital, that will serve the residents of Mesa, Arizona, and surrounding communities. Opening additional de novo acute and specialty facilities remains a high priority for Acadia as we focus on supporting more communities. Expanding our network of comprehensive treatment centers, or CTCs, is another important priority for Acadia. We will continue to expand our network of 151 CTCs in 32 states with the goal of adding at least six CTCs in 2023. Our third attractive growth pathway is through forming strategic partnerships with leading health systems across the country. Acadia has joint venture partnerships for 19 facilities in various stages of development, with nine facilities in operation and 10 facilities expected to open over the next several years. We expect to open two facilities with our JV partners, Geisinger Health in Pennsylvania and Bronson Healthcare in Michigan in the third quarter. We remain encouraged by the growing interest from potential JV partners and continue to strengthen our JV pipeline, and we expect additional announcements later in 2023. With respect to our fourth growth pathway, we continue to look for selective acquisitions that complement our growth objectives and meet the criteria of our capital allocation strategy. We're fortunate to have a strong balance sheet that provides the flexibility to pursue M&A opportunities as well as make the necessary investments to support our other strategic growth pathways. For our fifth and final growth pathway, we continue to identify additional ways to support the patients who come to Acadia for treatment by extending our continuum of care. For example, we strengthened our mid-level acuity programming with nine additional PHP IOPs to assist our patients after residential treatment and provided greater access to virtual care offerings. We have also improved our cross-referral program through enhanced systems that allow nurses and clinicians to more easily identify cross-referral opportunities across our Acadia network and identify the appropriate level of patient care. Through each of these distinct pathways, we are well positioned to maintain our strong growth trajectory and meet our development targets for calendar 2023, which are summarized as follows. Adding approximately 670 beds through approximately 300 bed additions to existing facilities, opening two inpatient de novo facilities, opening two facilities with JV partners, and opening at least six CTC locations. Looking ahead, we are focused on expanding access and availability of our services across new and existing markets. We will also look for ways to improve upon the delivery of care we provide and strengthen our capabilities with the right technology investments and differentiated services that continue to drive favorable clinical outcomes. As a leader in our industry, we also recognize our corporate responsibility to promote sustainability throughout our operations. Earlier this month, we published our inaugural sustainability report, which outlines our focus and ongoing progress towards environmental, social, and governance initiatives across Acadia. Our report, which is posted to our corporate website, highlights our dedication to quality service and care for patients, our drive to foster employee empowerment, engagement, and excellence, and our focus on environmental responsibility. Across our network of 250 facilities, we have a shared mission to provide high-quality behavioral health care services, and we look forward to the opportunities ahead for Acadia in 2023 and beyond. At this time, I will now turn the call over to David Duckworth to discuss our financial results for the quarter and 2023 guidance.