Acadia Healthcare Company, Inc.

among others, regarding Acadia's expected quarterly and annual financial performance for 2024 and beyond. These statements may be affected by the important factors, among others, set forth in Acadia's filings for the Securities and Exchange Commission and the company's second quarter news release, and consequently, actual operations and results may differ materially from the results discussed in the following statements. At this time, I'd like to turn the conference call over to Chris.

Thank you, Patrick, and good morning, everyone. Thank you for being with us for Acadia's second quarter 2024 conference call. For the second quarter, we reported strong results, reflecting continued momentum in our business. Total revenue increased 8.8% over the prior year second quarter to $796 million, driven by both rate improvement and patient day growth. Our top-line growth, combined with solid operating leverage, led to adjusted EBITDA growth of 7.6% over the same quarter last year. Underlying labor trends remain stable into the second quarter. In addition to a more favorable overall labor market, our initiatives centered around recruitment, retention, and employee engagement have helped attract talent and maintain a more stable labor force. On a same-store basis, revenue increased 8.3 percent compared with the second quarter of last year. Overall demand for our services remains strong, and we believe we are well positioned within our markets for continued growth, especially as new beds continue to ramp over the course of the year. We also remain on track for adding approximately 1,200 beds this year, including the addition of over 400 beds to existing facilities which we believe will set us up for strong sustained growth in 2025 and beyond. Now, I'd like to provide an update on our progress against our growth strategy. During the second quarter, we added 37 beds to existing facilities, bringing the year-to-date total to 64 beds. Bed expansions continue to be one of our best uses of capital, and we remain on track to add more than 400 beds to existing facilities for the full year. We also remain focused on developing new facilities and underserved markets for behavioral health care services, including wholly owned de novos and strategic joint ventures. During the second quarter, we opened Agave Ridge Behavioral Hospital, a 100-bed de novo acute care hospital in Mesa, Arizona. We also continue to make progress in creating new opportunities through our strategic joint ventures. We're extremely proud to partner with Premier Healthcare Systems in strategic markets with a shared mission to integrate physical and behavioral healthcare. These partners provide strong market recognition as well as established relationships that are advantageous to Acadia as we enter into these joint ventures. Including our joint ventures and wholly owned de novos, over the past four quarters, we have now opened five new facilities. During the second quarter, we broke ground on a new 96-bed behavioral health hospital in partnership with Geisinger Health in Danville, Pennsylvania, which is their headquarters. This is our second joint venture facility with Geisinger and follows the successful opening of our 96-bed facility in Moosic, Pennsylvania in the third quarter of last year. Looking forward, we have strong visibility into the new bed growth opportunities with nearly 2,000 new beds currently under construction, including both new facilities and bed expansions to existing facilities. In the second half of 2024, we expect to open four new facilities, including two new joint venture facilities, a 192-bed joint venture hospital in partnership with Henry Ford Health System in Detroit, and a 144-bed joint venture hospital in partnership with Intermountain Health in Denver, Colorado. We are also on track to open up to 14 new CTCs in 2024, with three facilities already added to date via acquisition. Our CTC service line offers comprehensive care for patients who are affected by opioid use disorder, or OUD. As the opioid epidemic escalates across the country, we are seeing record demand for our CTC services. It is estimated that 9 million Americans are suffering from OUD, with a record 110,000 overdose deaths reported last year. As we have previously discussed, the increasing prevalence of fentanyl mixed with other potent drugs has heightened the complexity and severity of OUD. Improved access to medication-assisted therapy is essential to helping address this crisis. We remain focused on meeting the critical demand for this treatment and delivering an exceptional and convenient patient experience, including adding mobile vans and reducing dosing wait times. Importantly, we have maintained the highest level standards of care in our CTCs as evidenced by achieving scores of 99% across all 13 dimensions measured by the International Regulatory Body CARF. Acadia now operates 160 CTC locations in 32 states across the country. Extending the continuum of care is also important to our clinical strategy. One of our focus areas is expanding our partial hospitalization programs, or PHP, and intensive outpatient programs, IOP, that can provide four to six hours of care per day. These programs are advantageous for patients stepping down from an acute or specialty facility into a PHP or IOP program as they transition back into the community. Overall, with both PHP and IOP, we have established a strong track record of improved clinical outcomes post-discharge. And from a return on capital perspective, PHPs and IOPs are attractive growth opportunities for Acadia due to the relatively low capital requirements. We added 15 outpatient programs during the second quarter of 2024 for a total of 30 added through the first half of the year. And we will continue to focus on this important clinical service. Quality remains foundational to every aspect of the work we do at Acadia and is key to driving outcomes and operational effectiveness. Our quality initiatives are designed to support our clinical teams with enhanced training and development, and we continue to refine our processes to ensure consistency across our operations. We are making investments in programs that drive greater efficiency, including electronic medical records and patient monitoring technology. and we remain focused on investments that support the clinical side for both patient and staff safety. We recognize the importance of having quality measures and the right technology in place to make sure we are providing data that aligns with what our payer partners want to measure. We expect to compete on the strength of our clinical outcomes, and the ability to measure and demonstrate these outcomes is important to our payer collaborations. We are proud of our role as the leading pure play behavioral health care provider as the demand for behavioral health care services in our nation has never been greater. Whether serious mental illness, substance use disorder, suicide deaths, overdoses, each of these issues have been on the rise in the past year alone. The trends in our business through the first half of the year reflect this demand, and we look forward to the significant opportunities ahead for Acadia to extend our market reach and serve even more patients in 2024. Our strategic priorities remain focused on accelerating facility growth, expanding services across the care continuum, strengthening our core capabilities, and strategically leveraging technology to enhance patient care and improve clinical outcomes all with a focus on delivering the highest quality patient care. With our results to date, we remain confident in our ability to meet our growth objectives in 2024. We have the ability to leverage our proven operating model across our network of 258 facilities with service lines across the continuum of care. Importantly, we have the financial strength to support our continued growth. And finally, we're extremely fortunate to have over 23,500 committed employees and clinicians who work hard every day to address the nation's critical need for safe, quality treatment for mental health and substance use issues. At this time, I will now turn the call over to Heather to discuss our financial results for the quarter.

Thanks, Chris, and good morning, everyone. Our second quarter financial performance reflects continued growth across our business, We reported $796 million in revenue for the quarter, representing an increase of 8.8% over the second quarter of last year. Same facility revenue grew 8.3% compared with the second quarter of 2023, which included an increase in revenue per patient day of 5.6% and patient day growth of 2.6%. We were also pleased to see volume growth accelerate throughout the course of the second quarter, in line with our expectations. Adjusted EBITDA for the second quarter of 2024 increased 7.6% over the prior year to $187.6 million. Adjusted EBITDA margin was 23.6% compared with 23.9% for the same quarter last year. The year-over-year change in margin was primarily driven by the accelerated pace of recently opened de novo facilities. As Chris mentioned, we've now opened five new facilities in the past four quarters. Those facilities are ramping up nicely and remain on pace to deliver strong incremental volume growth and margin expansion in the back half of the year. On a same facility basis, adjusted EBITDA margins were flat in both the second quarter of this year and the prior year's second quarter. Adjusted income attributable to Acadia stockholders per diluted share was 91 cents compared to 92 cents for the prior year period. Consistent with previous periods, adjustments to income for the second quarter of 2024 include transaction legal and other costs, loss on impairment, and the related income tax effects of all items. We continue to focus on maintaining a strong financial position, providing the flexibility to make strategic investments that support our growth and fit our capital allocation framework. As of June 30th, 2024, we had $77.2 million in cash and cash equivalents, and $371.5 million available under our $600 million revolving credit facility, with a net leverage ratio of approximately 2.5 times. Moving on to our outlook for 2024, as noted in our press release, we have adjusted our previously announced 2024 guidance, which includes revenue in the range of $3.18 to $3.225 billion, adjusted EBITDA in the range of $735 to $765 million, adjusted earnings per diluted share in the range of $3.45 to $3.55, and total bed additions of approximately 1,200 beds. Please note that our updated guidance reflects the closure of two underperforming facilities during the second quarter. Prior guidance contemplated approximately $25 million of revenue contribution and break-even EBITDA from these facilities for the full year. As a reminder, the company's guidance does not include the potential benefit of state supplemental payments that have not yet been fully approved, nor does it include the impact of any future acquisitions, divestitures, transaction legal and other costs, or non-recurring legal settlements expense. With that, operator, we're ready to open the call for questions.