Acadia is the largest pure-play provider of behavioral and substance abuse treatment in the US. Presenting today, we have Chris Hunter, who's the CEO, as well as Heather Dixon, who's the CFO. I think we're just gonna jump right into Q&A. Let's do it. All right. Can you just maybe talk about the demand outlook? You guys have kind of four main business lines that you operate in. And, you know, can you talk about where we are, what kind of outlook you expect for revenue from across each one? Yeah. I mean, I would just say overall, we just continue to see strong demand across all four lines of business. And I think overall, just in the incidence of mental health issues, whether it's serious mental illness, substance use disorder, suicide deaths, opioid overdose deaths, every single one of those has increased just even in the last year alone. So we continue to see this movement towards higher acuity conditions overall, which we think really plays well in line with our strategy. And there just continues to be significant unmet need for healthcare services just across the country. You know, I think just with respect to our growth strategy, we are looking to significantly, you know, meet that demand and, you know, increase the number of facilities that we have from 570 in 2022 to almost 600 beds that we did in 2023. We're expecting to approximately double that to 1,200 beds this year. Just overall, the demand outlook, we just think across the board consistently sets us up well. Yeah. And so I guess, you know, it seems like you guys talk about relatively consistent growth rates across the four businesses. But, like, is there one that kind of stands out, or either on the positive or the negative side, kind of being above or below the average? Yeah, definitely. I mean, we've seen just in this past year, you know, our CTC business and our acute businesses have, you know, have both been performing, you know, extremely well. You know, our acute facilities are addressing the most complex behavioral health challenges that really ties closely into our strategy and just some of the broader demographics that we just covered. And I think our CTC business as well, where we did the tour that you led yesterday with one of our clinics here in Las Vegas, we have 160 of those facilities now across 32 states. And in this country alone, we have 9 million individuals that are suffering from opioid use disorder, and a record 110,000 overdoses last year alone. So we just continue to, you know, meet that demand. Those are the two lines of business that, you know, have been particularly overperforming. All right. I'm trying to write my note while we're doing this. So you said CTC and then acute? Yeah. That's the other two? Exactly. Exactly. Okay. And then, I guess when we think about that volume trajectory, the volume numbers started out kind of low in the beginning of the year, and you're expecting it to ramp as the year goes on. Yeah. To, I guess, to kind of mid-single digits. Is that, but it's not like a little bit like Q1 started off a little bit softer than you initially were thinking. So, like, how do you think about the visibility into that ramp as the year goes on? Is it a function of just bed additions, or is it a function of comps? You know, how should we think about that? You're right. We did call out on the earnings call a couple of areas where we were experiencing a bit of softness, towards the end of the first quarter. We think that was in large part due to timing, the seasonality between Easter and spring break. We think that's something similar to what our peers experience as well. But what gives us confidence in volume acceleration over the rest of the year, to your question, is and I would really point to a few things. First, you know, we expect what we experienced in March is transitory. We're pleased with the year-over-year admissions growth and the way census has been rebuilding since that time, since quarter end. And we would expect that the softness that we experienced is largely behind us at this point. Yeah. It's 'cause it's interesting 'cause I guess there seems to be some, you know, confusion from the investor base around, around that, but it doesn't feel like anything's fundamentally changed from a demand perspective from kind of how you were starting off the, the conversation. But, you know, I guess it you say you expect that they're gonna grow. Is there something about the bed additions? I felt like the bed additions were also kind of a little bit more backend load. Is that true, or? Yes. That's, that's certainly true. I mean, you know, if I just think about, you know, what we saw, we'll start to see the benefit from the ramp of those bed additions and de novos that we put in place over the last several quarters, you know, 3, 4 quarters, as well as our current year expansion plans. And those will start to really come into play in the back half of the year. If you recall, as Chris just mentioned as well, last year we added nearly 600 beds. We have a plan for about 1,200 new beds this year as well. So if you combine those things, you know, what we expect from a year-over-year perspective, we continue to, you know, have, have confidence in our guidance that we put out at the beginning of the period and that we reiterated just a couple of weeks ago. From a quarterly basis, I know there's been a lot of questions about the second quarter. You know, we would expect our year-over-year same facility patient day growth will be at least in line with what we saw for the first quarter, if not better. Okay. Maybe if I just point out one other thing, I think it would be remiss not to point out what we saw in the quarter in regards to EBITDA as well for Q1. We saw some really strong labor cost trends that continued and certainly were contributing to the EBITDA that we presented in Q1. And that, in addition to sort of the volume aspects that I just talked to, give us a lot of confidence in our EBITDA outlook for the full year as well. All right. Now that's, that's helpful about the, the Q2. But so Q2, though, is kind of similar to a little bit higher than Q1. To be the mid-single digits for the year, we're talking about high single digits in the back half of the year. That's kind of how you're thinking about the trajectory for the year? Yeah. For volume. If you think about it, if you put all of that together, you know, the first half volume is trending a little bit lower because of some of those things that happened at the start of the year. But it's really early in the year for us to be looking at what we have ahead of us. We still feel comfortable with that mid-single digit guidance range and, you know, that we have out there. And we still estimate that's where we'll land. Okay. And then, you know, so you said that the Q1 outperformance was about, you know, on the labor side of things. It's interesting 'cause, you know, your biggest peer in this business has had issues, you know, sourcing labor has been a constraint to their volume growth. Have you seen any of that in any of your business? Was that at all a factor in Q1 volumes being a little bit softer? Yeah. I would say overall, we don't see labor as having a significant impact, you know, on our ability to just respond to that demand. You know, we have put a number of initiatives in place to focus, you know, on labor. And, you know, we really saw, you know, peak base wage inflation in the fourth quarter of 2022, which was just over 8%. And, we were able to, you know, steadily and progressively bring that down to ending the year under 5%, which is also where we ended the quarter as well. So our outlook assumes wage growth overall will continue to trend in that range for the remainder of the year. We put a number of strategies in place focusing on employee engagement, focusing on employee training that have really improved our employee retention and continue to help us attract talent into the company as well. Okay. And then, I guess when you think about the reimbursement backdrop for your business lines, can you talk a little bit about kind of what you're expecting from a rate update perspective? Sure. Yes. If we think about, you know, our pricing, we have good visibility into the first half. We have, you know, good reason to believe that that will continue. We did have some, you know, strong pricing in Q1. Of course, we had some one-time payment that we called out, about $7 million in the first quarter. You'll recall that we pointed that out whenever we issued our guidance as well. I would think about one other thing from a rate perspective. If you look at revenue per patient day, CTC growth was strong for the quarter, and that was about 14% year-over-year. And that certainly contributes about 100 basis points to the revenue per patient day. Okay. So that does help the kind of the math around the rate growth. Yeah. 'Cause I guess that's one of the things that we've seen from the outside is I think the market likes puts a higher multiple on volume growth. It seems volume growth seems a little bit more durable. The rate growth is always the mix of the business. It's kind of hard to see from the outside looking in as to what it is. And so when you disaggregate that rate update, you're saying, like, 100 basis points or so just from CTC. And then, when you think about kind of core rate updates versus, like, supplemental payments, like, how would you break out the rest of that component? I would say from a supplemental perspective, you know, we consider that as part of our reimbursement unless it is an outsized one-time payment. And of course, we'll call those out, like the $7 million I just mentioned. Those are really from our perspective and what we see consistently, the state's way of really ensuring that we have adequate reimbursement and sort of making up for some deficiencies that we've seen over the past years. And so, to a large extent, if we know that those are coming, if they're recurring payments, we'll expect that in our guidance. Okay. I guess it is interesting. There has been a little bit of a debate around some of these supplemental payments about how much of them is, like, you know, we should be thinking about as one-time versus in the core basis. It sounds like you're thinking about it as the core, part of the rate update. Can you give us some color, I guess, maybe when you think about the states that have done these things? Like, how do they come about, like, and how do they think about it? 'Cause I, I guess the concern is that if ever was scrutiny on these payments and they had to go down, would the state say, "This is how we were getting to the appropriate rate, and so now I have to find a new way to get to the appropriate rate," or does the state say, "Hey, this was free money, and well, free money's gone, and now we have to go back to what we were paying before"? I mean, like, any color about, you know, the sustainability or how the states think about, you know, the rates that they're setting? The only thing I would add is I think in many cases, these are multi-year analyses where the states are not just doing this within the calendar year. I think, you know, there have been several that are called out that go back, you know, three-plus years where the states are looking at what the reimbursement has been. They see the supplemental, you know, as a way to augment some of the existing rates and some of the underinvestment, candidly, in various states. But, you know, every state is a little bit different, so it's difficult, I think, to extrapolate across the board. Okay. And then, one of the other things that I guess has been a focus from investors is just the legal environment that we've seen. I mean, you guys have been hit by a lawsuit, which feels very much one-time or, you know, non-core in relationship. But then one of your competitors sees a lawsuit. So how would you frame the legal environment today? What is the risk of, you know, additional large suits like this coming up? Yeah. I would say that both of those are historical outliers relative to what we've seen in the past. I'd say that, you know, as a company, we just continue to be very focused on addressing all of our legal matters, swiftly and efficiently. We're constantly evaluating these processes. And we've invested really heavily not only in quality but also in clinical, in patient safety, in staff safety. And we have some really strong outcomes that we've been able to demonstrate even in a short period of time. So that's really central to how we want to compete as an organization into the future on the strength of our clinical health outcomes. And I think, you know, these quality investments will continue to help us on the legal front as well. Okay. And then, when you think about the, you know, I have to start off by saying four businesses. You guys often talk about five growth drivers. Yeah. One of the growth drivers you talk about is kind of expanding the service lines and going to partial hospitalization and things like that. Sure. So can you talk a little bit about what that actually is, what the opportunity is? You know, can you size it for us? Like, is when you think about the four businesses, is this like a fifth business? Is it gonna be that big, or are we talking about something that could be 5% of revenue, 10% of revenue? Like, how do we? I'm not sure how exactly to think about that. You know, it's a fair question. I would say that just we're really excited about outpatient and partial hospitalization overall. You know, it is a small financial contributor to the business today, but I think it's just one that we have significant upside over time. I think it really starts with, clinically, this can be very advantageous for a patient where the majority of our patients that are either in an acute or in a specialty facility, there's benefit from stepping them down into a PHP or IOP program as they prepare to transition back into the community. PHP, IOP overall, I mean, there's a strong track record of very solid clinical outcomes post-discharge. So I think that's one of the things that, you know, we start with. You know, the clinical results for the patient can be, you know, really, really appealing. I still think that, while we do have some form of PHP, IOP programs at almost all of our acute and specialty facilities, there isn't consistency always within the lines of business at each facility. So from an economic standpoint, I think there's a lot of opportunity there. I think, from a connectivity within the patient, when the patient leaves us, continuing to extend that connectivity beyond the initial stay while still delivering strong health outcomes is advantageous for the patient. And I think payers increasingly appreciate that. I think it's also a less intensive form of care than inpatient care. And so the reimbursement and the cost to deliver that, you know, reflect it. And then finally, just from a return on capital perspective, which is something that we spend a significant amount of time focusing on, we see PHP, IOP as an attractive opportunity because the capital requirements for that growth lever are significantly lower as well. So, it's something that we are just gonna continue to focus on and where we see continued upside in the days ahead. Okay. And then, I guess when you think about then building new facilities, adding beds, pretty big step up to your point about, like, how many beds you're looking to add. Is this kind of like a bullet list of beds that you should have been adding, and it all come together? Or should we think about this as, you know, like, this is still not even enough to match the demand growth that you see, and this is a multi-year like, this is how we should be thinking about bed additions for years and years to come? Sure. You wanna start? Yeah. Yeah. I'll start. Sure. You know, as Chris started, you guys started talking about demand. You know, this industry remains very fragmented and underbedded. There's just no slowing in the need that's out there from a volume perspective. I would say as one of, you know, the only scaled players in this market, we're uniquely positioned to really meet those demands, and there's a long runway to answer your question directly. I mean, that's really the reason that we've focused on increasing the bed additions that we're doing, whatever, you know, whatever form those might take. We added 570 beds in 2022. We grew that, you know, as we've mentioned a couple of times, to 600-ish last year. Then we're expecting to add, you know, 1,200 this year, and then that trend would certainly continue at those elevated numbers. You know, we expect to add around 1,000 beds on average over the next few years. So we, we constantly weigh sort of what the opportunities are to deploy capital, whether we do that via a bed expansion to an existing facility, a JV, a de novo, M&A is the question that we'll ask. But bed expansions to existing facilities certainly continue to be our best use of capital. They're very efficient. We have high returns. They're really sort of quick to, to contribute. Certainly, we like what we see there. You know, we've, we've accelerated the JV partnerships also that we have with a lot of marquee health systems. And we have some great partners around the country, and, and they're seeing us as a partner of choice. And so we continue to see those come in from a demand perspective. And I would just maybe call out to the most recent JVs that we opened, for example, Geisinger and Bronson that we opened last year and the third quarter have been the best-performing joint ventures that we've had so far. We've seen those as some of our quickest facilities to ramp up. And so we, we really like the trajectory of those as well. But, you know, all of these, these different growth levers can contribute. They all have sort of their place. Our M&A also comes into play here. It just depends on what's attractive and what geographies we'd like to go into. Okay. Then can you maybe just talk about the returns that you're getting? You know, you said these are good-return businesses, but it's always interesting to see a 600-1,200. You're like, "Can you be can you be getting the same returns on 1,200 as you were on 600?" you know, so how do you think about the return dynamic? Yeah. The bed additions, as I mentioned, those continue to be our highest return, the highest return on capital. That's really because we have an installed base, and we add those beds, and they contribute quite quickly. From a JV and a De Novo perspective, those typically look very similar in terms of returns. They're both De Novo facilities just with or without a JV partner, and that just depends on the market and how we access the market. But we see, you know, really good returns from those as well. And then, of course, you know, the M&A will vary, but of what we would evaluate those as we look at the returns and the allocation of capital. How do you think about a de novo fully owned versus a JV? What's the thought process that goes into that? Yeah. I'll take that one. I mean, I think it really starts with beginning with an attractive geography. We spend a lot of time analyzing various markets based on many different factors to think through the attractiveness. We wanna make sure that there's demand for behavioral health services. We wanna look at the competitive environment. We wanna make sure that payer reimbursement looks good in that in that environment too. Clearly, there are times where just planting a flag and doing a de novo can make sense. If there is a marquee health system that's in that market, we think that there's a lot of attractiveness with those. And, you know, we've seen that historically over time. The brand that some of these players have in their markets is just frequently centuries old. So you just look at the groundbreakings that I've personally been to in the last several months. I mean, it's kind of a who's who of healthcare. It's Tufts in Boston, Geisinger in Pennsylvania, you know, Henry Ford where we're opening a joint venture in Detroit, later this year, and then Intermountain in Colorado later this year as well. So they're bringing just strong market recognition that we wouldn't have on our own. They're also bringing very strong relationships with payers that are highly advantageous. I think providers, you know, the integration between physical health that they're bringing with their, you know, med-surg capabilities and our behavioral know-how, I think that's very important to payers and increasingly become more important. And then I think just the talent pool, the staff that they're frequently bringing over, at the time that we're doing these de novos is really helpful, as well as their referral sources. So, you know, we've really if there is a strong health system that can make financial sense, you know, we like to go that route. But sometimes, you know, if the referral sources are very fragmented, it just makes sense to do a de novo. Okay. And then, you know, you guys talk a lot, a lot about the long-term growth of the business. How does that impact margins? Are we the margins kind of where they should be, or with that type of growth over time, do you expect margin, you know, to continue to trend up as well? You know, we haven't set a long-term margin target. But what I can say is that, you know, we set our long-term targets for EBITDA growth and for revenue growth. And EBITDA, we think, is around 10%-12% on a long-term basis and revenue of around 9%-11%. So I suppose you could do the math in between there to what that implies from a margin expectation embedded within. Okay. And then, you know, I guess one of the growth drivers that you've talked about is M&A. You guys have done some deals recently. Some of them have been kind of unique in as far as not just buying a fully running facility. So, like, what's the environment look like right now from an M&A perspective? I think it's increasingly attractive. I mean, I still think it is very, very fragmented, and healthcare, at the end of the day, is local. And, you know, as always, I think it depends. One of the things that we saw depends on the line of business. On the CTC side, we see that there were a number of fragmented players that really struggled with redetermination. I mean, just the investment that we were able to make in the kiosks that, you know, we you were able to see yesterday in touring the facility, the 800 line that we put up, the staff that we invested in to work with these patients that were at risk of losing coverage and making sure that they had continuity of coverage. Those are all investments that smaller players just have not been able to make. I think it's well known in the industry, the strength of our balance sheet and the fact that we have historically, as a company, been very acquisitive. So we've seen a number of outreaches to us, players that are interested in transacting. And I think we have a very strong pipeline right now. But I think also in other lines of business, whether it's acute specialty, even RTC, you know, I think we are increasingly seen as a partner of choice. We, start with that geographic focus and, you know, where are the markets that we really want to be? And then we look and say, "Is M&A a way for us to accelerate our growth?" And, you know, frequently in this market, we think that there's some really attractive opportunities. And our pipeline reflects that. But, you know, I think the multiples in the space, it really depends on the line of business. It depends on the market. They were, I think, very frothy two years ago. I think they're coming down to more reasonable levels. A company like ours, we have so many attractive ways to deploy capital. We're gonna have a very high bar for doing M&A, but we do see that as, you know, as a lever that we certainly wanna pull this year and beyond. Yeah. And so, do you think that it's gonna be kind of these smaller deals, or is it an opportunity for anything larger? I think, you know, there are our pipeline has more, more deals on the smaller side right now that are interested in transacting. I think the larger platform deals have not been in the market whereas they were two years ago. I think that at some point, so many of them are private equity owned that that will change. But we're not seeing the level of activity right now for more of the scale assets. Okay. You mentioned redeterminations being a, you know, a pressure on, on at least one of the businesses. Can you talk about how, how it has been for you guys? Has it been a pressure, how you managed through it? Yeah. We, we really asked our CTC business line because they had, you know, so many of their members are Medicaid-oriented. We have nearly 70,000 patients in that business. They took the lead on that a year and a half ago. And we did significant advanced planning, working with all the service lines across the company. And I think just the, the effort that we put, the readiness that we had, for redetermination played out really well. I mean, we found out that when one of our patients lost coverage, over 80% of the time, we were able to get them, re-enrolled within a 30-day period, really minimized the disruption for them. So we planned just extensively for redetermination on the front end, and I think that has served us really well. So we've seen very little impact. You know, we've always estimated by midyear, we think that all of our patients will have run through that. So we're really almost at that point where there's, you know, not much redetermination risk that's left in our book of business. Okay. Then I guess when we think about capital deployment, I guess that there's always a question then on the balance sheet and leverage. So, you know, I leveraged that a little bit because of the settlement. So, like, where do you think the right leverage is for you guys? You know, we're currently at 2.6x. That's reflective of our balance sheet, the strengths of the balance sheet that we've just been talking about. We're comfortable with that level. We do think we have the flexibility given where we are from a balance sheet perspective and a leverage perspective to be opportunistic. So if we have the opportunity to really deliver more on our growth plans, we think that that gives us the opportunity to do that. Yeah. 'Cause I mean, it seems like most of the free cash flow or all the free cash flow is built on or is being deployed onto these organic development opportunities, which is great. I don't know. I I think that's, to your point, the returns seem to be pretty strong for that. But, you know, is there a time where you think that we'll be able to see, you know, free cash flow being augmented to, you know, the overall organic growth profile, or is it just it's always gonna be put it back into the business as long as the opportunity is there? Yeah. I think as long as we continue to evaluate these opportunities, as Chris said, we look across the markets, we determine where the right opportunities are from a market perspective and a line of business point of view. We'll continue to focus on those and just evaluate the returns. We're fortunate that the returns that we have and the different pathways to grow that are in front of us are all attractive returns. And so as we look at those and we weigh those up against our cost of capital, we still have a lot of opportunity there to really drive growth in the business. So I think, you know, for the time being, we're pleased with the opportunities we have ahead of us and the flexibility that we have on the balance sheet to meet those. And then I guess one other thing around reimbursement goes, that, the opioid settlement, like, that's money that's been out there for a number of years. It feels like it's always coming under. Like, when do you think you'll see that? How should we think about seeing that, coming through to you guys? What kind of opportunity is that for you? We still think it's a significant opportunity for the company. There's been roughly $50 billion of opioid, you know, settlement dollars. And, you know, only less than 10% of that, about $4.5 billion, has been allocated to states. And then the states have to pass that down to the individual counties. And just, you know, very little has been dispersed at that at this point. But we have a team that is dedicated to watching RFPs. And we've certainly, you know, had some nice early wins on that front. But I think from, you know, from a, you know, longer-term standpoint, this is really more of a 2025 phenomenon than it is 2024. I mean, again, we've won several this year. I think we'll continue to, to see some wins later this year. But I don't think the dollars are gonna begin to flow extensively until 2025. Okay. Actually, I don't know. Do we have a question from the audience? No? Okay. And then maybe, maybe then I'll just kinda wrap it up here. I mean, I, I guess when you think about your business, you know, what, what kinda keeps you up at night? Like, what are you worried about? This algorithm, you know, that you outlined as far as, you know, high single-digit top-line growth, low double-digit EBITDA growth, you know, from what we can see, it feels pretty strong. But, like, you know, what keeps you up at night as far as delivering against that? Well, I mean, just as we started, I mean, the demand tailwinds for the business are very strong. Our biggest constraint to growth has been labor and our ability to attract talent into the company, which we've been very effective at here more recently. I think there's a lot to like about behavioral health. I think telling our story, attracting people into the industry, will be, you know, one of the ways that we kind of, you know, mitigate that challenge. But I think that's primarily what keeps us up at night. I think the pace of change in the industry as well. This is a part of healthcare that has seen significant underinvestment. I think it's that there is more tech enablement within behavioral health. The pace of change is going to speed up. I just wanna make sure that we, as a company, are able to stay ahead of that, which I think we're very well positioned to do given the investments that we've made on the EHR front, certainly on the patient monitoring front and the employee safety front that Heather mentioned earlier as well. All right. I think that's all we have time for. Thank you very much. Thank you.