Q1 2025 Acadia Healthcare Co Inc Earnings Call

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Speaker Change: I would now like to turn the call over to Brian Farley General Counsel. Please go ahead.

Speaker Change: Thank you and good morning yesterday after the market close we issued a press release announcing our first quarter 2025 financial results. This press release can be found in the Investor Relations section of the Acadia healthcare Dot Com website here with me today to discuss the results are Chris Hunter Chief Executive.

[music]

Heather Dickson: Officer, and Heather Dickson Chief Financial Officer.

Christopher Hunter: Along those lines, I'd like to provide a progress update on our strategic initiative. In the first quarter, we added 378 new beds, comprised of 90 beds to existing facilities, and 288 beds from two new facilities that were opened in the quarter, which includes a joint venture hospital in partnership with Henry Ford Health in West Bloomfield, Michigan, and a DeNovo facility in Northport, Florida. In addition, Acadia added seven new comprehensive treatment centers in the first quarter, extending the company's market reach to 170 CTCs across 33 states. For the full year 2025, we expect to add between 800 and 1000 total beds.

Heather Dickson: To the extent any non-GAAP financial measure is discussed in today's call you will find in the press release that is posted on our website a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP.

Heather Dickson: This conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of $19 95, including statements among others regarding Acadia is expected quarterly and annual financial performance for 2025 and beyond.

Heather Dickson: These statements may be affected by the important factors among others set forth in <unk> 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.

Chris Hunter: I would like to turn the conference call over to Chris.

Christopher Hunter: Looking forward, we have a solid pipeline of potential opportunities in attractive markets and expect to add between 600 and 800 beds annually over 2026 to 2028.

Chris Hunter: Thank you, Brian and good morning, everyone. Thank you for being with US for Acadia as first quarter 2025 conference call we.

Thank you.

Speaker Change: Good day and welcome to Acadia Healthcare's first quarter of 2025 earnings call. All participants will be in a listen only mode to the duration of the call.

Chris Hunter: We are pleased with our start to 2025 with both first quarter revenue and EBITDA landing in line with our expectations. While we made continued progress against our strategic growth initiatives.

Christopher Hunter: Before I turn the call over to Heather, I would like to spend a few minutes discussing the numerous efforts this company continues undertaking to support our quality initiatives and share a few thoughts on the policy landscape. At Acadia, our commitment to quality and safety is a foundational element of our strategy. Our facilities are licensed, accredited, and regularly inspected to uphold high regulatory and quality standards, including rigorous requirements for employee training and patient safety. We employ a multi-layered approach to patient protection that often exceeds industry and regulatory standards. These measures, such as 24-7 patient monitoring systems, mandatory de-escalation training, and regular safety rounds, are designed to meet the specific needs of the patients and staff at each Acadia facility.

Speaker Change: After today's presentation, there will be an opportunity to ask questions.

Chris Hunter: First quarter revenue of $775 million came in just above the midpoint of our outlook range of 765 million to $775 million, while adjusted EBITDA of $134 2 million was near the high end of our outlook range of 130 to 100.

Speaker Change: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.

Speaker Change: On today's call, we ask that you please remember yourself to one question and one follow up during Q&A. Also, please be aware that today's call is being recorded.

Speaker Change: I would now like to turn the call over to Brian Farley, General Counsel. Please go ahead.

Chris Hunter: Third $35 million.

Chris Hunter: We also reaffirmed our previously issued full year financial guidance ranges for both revenue and adjusted EBITDA, which Heather will provide further detail on later in the call.

Brian Farley: Thank you and good morning. Yesterday after the market closed, we issued a press release announcing our first quarter 2025 financial results. This press release can be found in the Investor Relations section of the AcadiaHealthcare.com website.

Chris Hunter: Moving to volumes same facility patient days grew two 2% in the first quarter, which included an unfavorable leap year impact of roughly 110 basis points over the first quarter of 2024.

Speaker Change: Here with me today to discuss the results are Chris Hunter, Chief Executive Officer, and Heather Dixon, Chief Financial Officer.

Speaker Change: To be extent, any non-GAAP financial measure is discussed in today's call, you will find in the press release that is posted on our website a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP.

Christopher Hunter: Our ability to use data has continued to advance significantly. Our hospital CEOs and leadership teams also use a variety of sophisticated cloud-based systems with deep data capabilities to monitor care quality. Further, our integrated quality dashboard now provides real-time visibility into over 50 distinct safety patient experience and regulatory compliance-related key performance indicators. At the corporate level, our team supports this work with weekly, monthly and quarterly operational and quality performance. We believe the supportive multidisciplinary relationship between the field and the corporate teams ensures we find and eliminate sources of operational and clinical variation and helps us translate behavioral science to practice with consistent.

Chris Hunter: The strong relationships, we've built with our referral sources and our 21 joint venture partners continue to be an important part of our strategy for success.

Chris Hunter: Acadia continues to be the preferred partner for leading health systems with both local and national brand recognition across the country to better serve patients by bridging the gap between physical and behavioral healthcare.

Speaker Change: This conference call may contain forward-looking statements within the meaning of the private security's litigation reform act of 1995, including statements, among others, regarding Acadia's expected quarterly and annual financial performance for 2025 and beyond.

Chris Hunter: Along those lines I'd like to provide a progress update on our strategic initiatives.

Speaker Change: These statements may be affected by the important factors among others, set forth an Acadia's violins with the Securities and Exchange Commission, [inaudible]

Chris Hunter: In the first quarter, we added 378, new beds comprised of 90 beds to existing facilities and 288 beds from two new facilities that were opened in the quarter, which includes the joint venture Hospital in partnership with Henry Ford Health in West Bloomfield, Michigan.

Speaker Change: 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 booking statements. At this time, I would like to turn the conference call over to Chris.

Chris Hunter: Thank you Brian , and good morning everyone. Thank you for being with us for Acadia's first quarter, 2025 conference call

Chris Hunter: And a de novo facility in North Port, Florida.

Chris Hunter: In addition, Acadia added seven new comprehensive treatment centers in the first quarter extending the company's market reach to 170 ctc's across 33 states.

Christopher Hunter: Behavioral health is complex. But it is clear the need has never been greater for high quality behavioral health care, given the severe mental health crisis that our nation faces. Our strategy at Acadia remains centered on high-quality care and clinical health outcomes, and we will continue to prioritize our quality initiatives and expand them when necessary. Turning to labor, we believe our differentiated quality initiatives are having a positive impact on our ability to recruit and retain our staff. These efforts are directly connected to our emphasis on employee engagement and talent acquisition, ensuring we have appropriately staffed facilities with trained employees, which have improved underlying labor trends for our company.

Chris Hunter: We are pleased with our start to 2025 with both first quarter revenue and EBITDA landing in line with our expectations.

while we made continued progress against our strategic growth initiatives.

Chris Hunter: For the full year 2025, we expect to add between 801000 total beds.

Chris Hunter: First quarter revenue of $770.5 million came in just above the midpoint of our outlook range of $765 million to $775 million.

Chris Hunter: Looking forward, we have a solid pipeline of potential opportunities in attractive markets and expect to add between 608 hundred beds annually over 2026 to 2028.

Chris Hunter: While adjusted EBITDA of $134.2 million was near the high end of our Outlook range of $130.135 million.

Speaker Change: Before I turn the call over to Heather I would like to spend a few minutes discussing the numerous efforts. This company continues undertaking to support our quality initiatives and share a few thoughts on the policy landscape.

Chris Hunter: We also reaffirmed our previously issued full-year financial guidance ranges for both revenue and adjusted EBITDA, which Heather will provide further detail on later in the call.

Speaker Change: At Acadia, our commitment to quality and safety is a foundational element of our strategy.

Christopher Hunter: This is further reinforced by our premium pay, which declined on both a sequential and year-over-year basis in the first quarter.

Chris Hunter: Moving to volumes, same facility patient days grew 2.2 percent in the first quarter, which included an unfavorable leap year impact of roughly 110 basis points over the first quarter

Heather Dickson: Our facilities are licensed accredited and regularly inspected to uphold high regulatory and quality standards, including rigorous requirements for employee training and patient safety.

Christopher Hunter: We are extremely proud of the commitment of Acadia's nearly 26,000 employees that have chosen to join our mission to provide compassionate care that improves the lives of patients and their families.

Chris Hunter: The strong relationships we've built with our referral sources and our 21 joint venture partners continue to be an important part of our strategy for success.

Heather Dickson: We employ a multi layered approach to patient protection that often exceeds industry and regulatory standards.

Christopher Hunter: Now I would like to briefly touch on the policy landscape. First, let me say that we believe government policy has an important role to play in continuing to strengthen the behavioral healthcare system, and we remain highly engaged on the policy front so that we can continue advocating strongly on behalf of patients in need. While the situation in Washington is fluid, we believe that the essential care we provide to underserved and vulnerable patient populations will continue to be recognized and supported. To cite one example, supplemental payment programs have been a key enabling force behind not only our ability to serve high acuity behavioral health patients, but also patients in many other essential parts of the healthcare system, including rural hospitals, children's hospitals, and nursing homes.

Chris Hunter: Acadia continues to be the preferred partner for leading health systems with both local and national brand recognition across the country to better serve patients by bridging the gap between physical and behavioral health care.

Heather Dickson: These measures such as 24, seven patient monitoring systems mandatory deescalation training and regular safety rounds are designed to meet the specific needs of the patients and staff at each Acadia facility.

Chris Hunter: Along those lines, I'd like to provide a progress update on our strategic initiatives.

Heather Dickson: Our ability to use data has continued to advance significantly or.

In the first quarter, we added 378 new beds.

Heather Dickson: Our hospital Ceos and leadership teams also use a variety of sophisticated cloud based systems with deep data capabilities to monitor care quality.

comprised of 90 beds to existing facilities.

Chris Hunter: and 288 beds from two new facilities that were opened in the quarter, which includes the Joint Venture Hospital and partnership with Henry Ford Health in West Blinkfield, Michigan and a DeNovo facility in Northport, Florida.

Heather Dickson: Further our integrated quality dashboard now provides real time visibility into over 50 distinct safety patient experience in regulatory compliance related key performance indicators.

Chris Hunter: In addition, Acadia added seven new comprehensive treatment centers in the first quarter, extending the company's market reach to 170 CTCs across 33 states.

Christopher Hunter: With this in mind, we expect these programs to remain an important funding mechanism for Medicaid populations. We remain focused on providing programs and facilities that provide these patients with the best possible care.

Heather Dickson: At the corporate level. Our team supports this work with weekly monthly and quarterly operational and quality performance reviews.

Heather Dickson: We believe the supportive multi disciplinary relationship between the field and the corporate teams ensures we find and eliminate sources of operational and clinical variation and helps us translate behavioral science to practice with consistency.

Chris Hunter: For the full year 2025, we expect to add between 800 and 1000 total beds.

Christopher Hunter: and we'll provide updates to the investment community as we receive clarity on any potential policy related impacts to our business.

Chris Hunter: Looking forward, we have a solid pipeline of potential opportunities in attractive markets and expect to add between 600 and 800 beds annually over 2026 to 2028.

Heather Dixon: With that, I would now like to turn the call over to Heather to discuss our financial results for the quarter. Thanks, Chris, and good morning, everyone. Our first quarter financial performance for both revenue and adjusted EBITDA fell within our guidance ranges, with adjusted EBITDA performing at the high end of the range. We reported $770.5 million in revenue for the quarter, representing a slight increase over the first quarter of last year. Recall, we had expected Medicaid supplemental payments to be down $10 to $15 million year-over-year in Q1, and these came in near the midpoint of that range.

Heather Dickson: Behavioral health is complex.

Heather Dickson: But it is clear the need has never been greater for high quality behavioral health care, given the severe mental health crisis that our nation faces.

Chris Hunter: Before I turn the call over to Heather, I would like to spend a few minutes discussing the numerous efforts this company continues undertaking to support our quality initiatives and share a few thoughts on the policy landscape. Thank you very much.

Heather Dickson: Our strategy at Acadia remains centered on high quality care and clinical health outcomes, and we will continue to prioritize our quality initiatives and expand them when necessary.

Chris Hunter: At Acadia, our commitment to quality and safety is a foundational element of our strategy.

Heather Dickson: Turning to labor, we believe our differentiated quality initiatives are having a positive impact on our ability to recruit and retain our staff.

Chris Hunter: Our facilities are licensed, accredited, and regularly inspected to uphold high regulatory and quality standards, including rigorous requirements for employee training and patient safety.

Heather Dixon: Pain facility revenue grew 2.1% compared with the first quarter of 2024, driven by patient day growth of 2.2%. As Chris mentioned, both same-facility revenue and patient-day growth included an unfavorable impact of approximately 110 basis points from the leap year. Q1 same-facility revenue per patient day growth was roughly flat on a year-on-year basis, primarily due to the timing of supplemental payment. Adjusted EBITDA for the first quarter of 2025 was $134.2 million, reflecting an adjusted EBITDA margin of 17.4 percent. As reflected in our prior guidance, these quarterly results included an approximate $5 million year-on-year EBITDA impact due to the decision to close the facility in the first quarter as a part of our ongoing portfolio management effort.

Heather Dickson: These efforts are directly connected to our emphasis on employee engagement and talent acquisition, ensuring we are appropriately staffed facilities with trained employees, which have improved underlying labor trends for our company.

Chris Hunter: We employ a multi-layered approach to patient protection that often exceeds industry and regulatory standards.

Chris Hunter: These measures, such as 24-7 patient monitoring systems, mandatory de-escalation training and regular safety rounds, are designed to meet the specific needs of the patients and staff at each Acadia facility.

Heather Dickson: This is further reinforced by a premium pay which declined on both a sequential and year over year basis in the first quarter.

Heather Dickson: We are extremely proud of the commitment of Acadia is nearly 26000 employees that have chosen to join our mission to provide compassionate care that improves the lives of patients and their families.

Our ability to use data has continued to advance significantly.

Chris Hunter: Our hospital CEOs and leadership teams also use a variety of sophisticated cloud-based systems with deep data capabilities to monitor care quality.

Heather Dickson: Now I would like to briefly touch on the policy landscape.

Heather Dickson: First let me say that we believe government policy has an important role to play in continuing to strengthen the behavioral health care system and we remain highly engaged on the policy front. So that we can continue advocating strongly on behalf of patients in need.

Heather Dixon: Also included in our results were startup losses related to new facilities, which were higher on both a year-over-year basis and a sequential basis, reflecting a step up in the number of newly constructed facilities. On a same facility basis, adjusted EBITDA was $191.6 million and adjusted EBITDA margin was 25.2% in the first quarter of this year. Our same facility results continued to be affected by a small group of underperforming facilities that you will recall started to have a material impact on our results near the end of the third quarter of 2024. To date, these facilities have performed in line with our expectations.

Heather Dickson: While the situation in Washington is fluid, we believe that the essential care, we provide to underserved and vulnerable patient populations will continue to be recognized and supported.

Chris Hunter: At the corporate level. Our team supports this work with weekly monthly and quarterly operational and quality performance reviews.

Chris Hunter: We believe this supportive multi disciplinary relationship between the field and corporate teams ensures we find and eliminate sources of operational and clinical variation and helps us translate behavioral science to practice with consistency.

Heather Dickson: To cite one example, supplemental payment programs have been a key enabling force behind not only our ability to serve high acuity behavioral health patients.

Heather Dickson: But also patients and many other essential parts of the health care system, including rural hospitals children's hospitals and nursing homes.

Chris Hunter: Behavioral health is complex, but it is clear the need has never been greater for high quality behavioral health care, given the severe mental health crisis that our nation faces.

Heather Dickson: With this in mind, we expect these programs to remain an important funding mechanism for Medicaid populations.

Heather Dixon: While we continue to work diligently to improve performance of these facilities, we acknowledge that it will take time and our 2025 guidance continues to reflect no material improvement at these underperforming facilities as we move throughout the year. We continue to maintain a strong financial position, providing us the ability to make the right strategic investments to enhance our operations and support our growth strategy. As of March 31, 2025, we had $91.2 million in cash and cash equivalents and approximately $900 million under our $1 billion revolving credit facility with a net leverage ratio of approximately 3.2 times.

Heather Dickson: We remain focused on providing programs and facilities that provide these patients with the best possible care.

Chris Hunter: Our strategy at Acadia remains centered on high quality care and clinical health outcomes, and we will continue to prioritize our quality initiatives and expand them when necessary.

Heather Dickson: We will provide updates to the investment community as we receive clarity on any potential policy related impacts to our business.

Chris Hunter: Turning to labor, we believe our differentiated quality initiatives are having a positive impact on our ability to recruit and retain our staff.

Heather Dickson: With that I would now like to turn the call over to Heather to discuss our financial results for the quarter.

Heather Dickson: Thanks, Chris and good morning, everyone, our first quarter financial performance for both revenue and adjusted EBITDA fell within our guidance ranges with adjusted EBITDA performing at the high end of the range.

Chris Hunter: These efforts are directly connected to our emphasis on employee engagement and talent acquisition, ensuring we are appropriately staffed facilities with trained employees, which have improved underlying labor trends for our company.

Heather Dickson: We reported $775 million in revenue for the quarter, representing a slight increase over the first quarter of last year.

Heather Dixon: The company repurchased approximately 1.6 million shares during the first quarter for a total of $47.3 million.

Chris Hunter: This is further reinforced by our premium pay which declined on both a sequential and year over year basis in the first quarter.

Heather Dixon: Moving on to our outlook for 2025, as noted in our press release, we are reaffirming our full year guidance ranges for revenue, adjusted EBITDA, and adjusted earnings per share. As a reminder, our 2025 guidance includes the following considerations. For 2025, we expect to add between 800 and 1000 total beds. As I just mentioned, we expected that a small subset of underperforming facilities would result in an approximate 20 million dollar year over year headwind to our 2025 adjusted EBITDA. As I mentioned, to date, these facilities have performed in line with our expectations and negatively impacted our same facility patient day growth by approximately 90 basis points in the 1st quarter.

Heather Dickson: Recall, we had expected Medicaid supplemental payments to be down $10 million to $15 million year over year in Q1, and these came in near the midpoint of that range.

Chris Hunter: We are extremely proud of the commitment of Acadia is nearly 26000 employees that have chosen to join our mission to provide compassionate care that improves the lives of patients and their families.

Heather Dickson: Same facility revenue grew two 1% compared with the first quarter of 2024, driven by patient day growth of two 2%.

Chris Hunter: Now I would like to briefly touch on the policy landscape.

Chris Hunter: First let me say that we believe government policy has an important role to play in continuing to strengthen the behavioral health care system and we remain highly engaged on the policy front. So that we can continue advocating strongly on behalf of patients in need.

Heather Dickson: As Chris mentioned same facility revenue and patient day growth included an unfavorable impact of approximately 110 basis points from the leap year.

Heather Dickson: Q1 same facility revenue per patient day growth was roughly flat on a year on year basis, primarily due to the timing supplemental payments.

Chris Hunter: While the situation in Washington is fluid, we believe that the essential care, we provide to underserved and vulnerable patient populations will continue to be recognized and supported.

Speaker Change: Adjusted EBITDA for the first quarter of 2025 with $134 $2 million, reflecting an adjusted EBITDA margin of 17, 4%.

Heather Dixon: We expect to begin to comp over this headwind to volumes in the 4th quarter of 2025. We continue to expect Medicaid supplemental payments to be flat to up $15 million in 2025 on a net basis, inclusive of the new Tennessee program once approved. We continue to expect $50 million to $55 million in startup losses for full year 2025, of which we anticipate approximately $15 million in the second quarter.

Chris Hunter: To cite one example, supplemental payment programs have been a key enabling force behind not only our ability to serve high acuity behavioral health patients.

Speaker Change: As reflected in our prior guidance. These quarterly results included an approximate $5 million year on year EBITDA impact due to the decision to close the facility in the first quarter as a part of our ongoing portfolio management efforts.

Chris Hunter: But also patients and many other essential parts of the health care system, including rural hospitals children's hospitals and nursing homes.

Speaker Change: Also included in our results were startup losses related to new facilities, which were higher on both a year over year basis, and a sequential basis, reflecting a step up in the number of newly constructed facilities.

Chris Hunter: With this in mind, we expect these programs to remain an important funding mechanism for Medicaid populations.

Heather Dixon: Before we move to Q&A, I would like to offer some additional color on our bed additions and growth plan. Since last quarter, some of you have asked us questions about our long-term EBITDA growth guidance, so we want to take a moment to clarify some of the assumptions that are contemplated in that guidance range. The previously announced expected revenue growth of 7-9% and EBITDA growth of 8-10% over 2026-2028 is underpinned by annual bed additions of 600-800 beds beginning in 2026. as well as the roughly 1600 to 1800 beds being added over 2024 and 2025. First, we want to highlight that most of these bed additions come in the form of brand-new facilities, which, on average, typically ramp to run-rate occupancy and EBITDA margins within a five-year period.

Chris Hunter: We remain focused on providing programs and facilities that provide these patients with the best possible care.

Speaker Change: On a same facility basis, adjusted EBITDA was $191 6 million and adjusted EBITDA margin was 25, 2% in the first quarter of this year.

Chris Hunter: We will provide updates to the investment community as we receive clarity on any potential policy related impacts to our business.

Speaker Change: Our same facility results continued to be affected by a small group of underperforming facilities that you will recall started to have a material impact on our results near the end of the third quarter of 2024.

Chris Hunter: With that I would now like to turn the call over to Heather to discuss our financial results for the quarter.

Heather Dixon: Thanks, Chris and good morning, everyone, our first quarter financial performance for both revenue and adjusted EBITDA fell within our guidance ranges with adjusted EBITDA performing at the high end of the range.

Speaker Change: Today. These facilities have performed in line with our expectations. While we continue to work diligently to improve performance at these facilities, we acknowledge that it will take time and our 2025 guidance continues to reflect no material improvement at these underperforming facilities as we move throughout the year.

Heather Dixon: We reported $775 million in revenue for the quarter, representing a slight increase over the first quarter of last year.

Speaker Change: We continue to maintain a strong financial position, providing us the ability to make the right strategic investments to enhance our operations and support our growth strategy.

Heather Dixon: Recall, we had expected Medicaid supplemental payments to be down $10 million to $15 million year over year in Q1, and these came in near the midpoint of that range.

Heather Dixon: As a result, we expect to recognize incremental EBITDA for a majority of this cohort beyond 2028, as these beds continue to ramp to mature occupancy and margin levels. Keep in mind our three-year outlook also contemplates the inherent uncertainty that always exists with regards to construction timing, licensing timing, and time to ramp, and we will remain cognizant of this uncertainty as we continue to execute on the largest expansion of bed capacity in our company's history over the next several years. Accordingly, our three-year outlook assumes that the occupancy and EBITDA ramp for new hospitals will trend towards a five-year ramp period, which is at the upper end of our historical ramp model and leaves a significant amount of inherent earnings power beyond 2028.

Speaker Change: As of March 31, 2025, we had $91 2 million in cash and cash equivalents and approximately $900 million under our $1 billion revolving credit facility with a net leverage ratio of approximately three two times.

Heather Dixon: Same facility revenue grew two 1% compared with the first quarter of 2024, driven by patient day growth of two 2%.

Heather Dixon: As Chris mentioned same facility revenue and patient day growth included an unfavorable impact of approximately 110 basis points from the leap year.

Speaker Change: The company repurchased approximately one 6 million shares during the first quarter for a total of $47 3 million.

Heather Dixon: Q1 same facility revenue per patient day growth was roughly flat on a year on year basis, primarily due to the timing supplemental payments.

Speaker Change: Moving onto our outlook for 2025 as noted in our press release, we are reaffirming our full year guidance ranges for revenue adjusted EBITDA and adjusted earnings per share.

Heather Dixon: Adjusted EBITDA for the first quarter of 2025 with $134 $2 million, reflecting an adjusted EBITDA margin of 17, 4%.

Speaker Change: As a reminder, our 2025 guidance includes the following considerations.

Speaker Change: Our 2025, we expect to add between 801000 total beds.

Heather Dixon: As reflected in our prior guidance. These quarterly results included an approximate $5 million year on year EBITDA impact due to the decision to close the facility in the first quarter as a part of our ongoing portfolio management efforts.

Heather Dixon: Second, with regards to payer rates, we included an element of conservatism in our assumptions as it relates to revenue per patient day and rate growth, given some of the uncertainty surrounding the policy and macro environment. We see embedded upside in these projections if the next few years updates from government and commercial payers more closely resembles that of the last few years versus what is currently contemplated in our three-year outlook. This base of new behavioral health hospitals we are currently building will provide a multi-year runway for growth, not only as occupancy ramps over the next few years, but also as we're able to add expansion beds to these facilities over time.

Speaker Change: As I just mentioned, we expected that a small subset of underperforming facilities would result in an approximate $20 million year over year headwind to our 2025 adjusted EBITDA.

Heather Dixon: Also included in our results were startup losses related to new facilities, which were higher on both a year over year basis, and a sequential basis.

Speaker Change: As I mentioned to date. These facilities have performed in line with our expectations and negatively impacted our same facility patient day growth by approximately 90 basis points in the first quarter we.

Heather Dixon: Reflecting a step up in the number of newly constructed facilities.

Speaker Change: We expect to begin to comp over this headwind to volumes in the fourth quarter of 2025.

Heather Dixon: On a same facility basis, adjusted EBITDA was $191 $6 million and adjusted EBITDA margin was 25, 2% in the first quarter of this year.

Speaker Change: We continue to expect Medicaid supplemental payments to be flat to up $15 million in 2025 on a net basis inclusive of the new Tennessee program once approved.

Heather Dixon: Our same facility results continued to be affected by a small group of underperforming facilities that you will recall started to have a material impact on our results near the end of the third quarter of 2024.

Heather Dixon: As we decrease the accelerated pace of bed additions in 2026 to a rate of 6 to 800 per year, we expect startup losses to ease in the back half of 2026, helping to fuel strong and self-sustaining pre-cash flow generation as we exit 2026. Note that Fed growth is still well above the historical pace prior to 2024, which will contribute meaningfully to our performance in the outer years, including in 2028 and beyond.

Speaker Change: We continue to expect $50 million to $55 million in startup losses for full year 2025.

Heather Dixon: These facilities have performed in line with our expectations, while we continue to work diligently to improve performance at these facilities, we acknowledge that it will take time and our 2025 guidance continues to reflect no material improvement at these underperforming facilities as we move throughout the year.

Speaker Change: Of which we anticipate approximately $15 million in the second quarter.

Speaker Change: Before we move to Q&A I would like to offer some additional color on our bed additions and growth plans.

Speaker Change: Since last quarter. Some of you have asked us questions about our long term EBITDA growth guidance. So we want to take a moment to clarify some of the assumptions that are contemplated in that guidance range.

Heather Dixon: We continue to maintain a strong financial position, providing us the ability to make the right strategic investments to enhance our operations and support our growth strategy.

Unknown Executive: With that, we're ready to open the call for questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. Until we draw a question, you may press star, then two. We ask that you please limit yourself to one question and one follow-up.

Speaker Change: The previously announced expected revenue growth of 7% to 9% and EBITDA growth of 8% to 10% over 2026 to 2028.

Heather Dixon: As of March 31, 2025, we had $91 $2 million in cash and cash equivalents and approximately $900 million under our $1 billion revolving credit facility with a net leverage ratio of approximately three two times.

Speaker Change: Underpinned by annual bed additions of 600 to 800 bed beginning in 2026.

Speaker Change: As well as the roughly 600 to 800 beds being added over 2024 and 2025.

Heather Dixon: The company repurchased approximately one 6 million shares during the first quarter for a total of $47 $3 million.

Unknown Executive: At this time, we will pause just momentarily to assemble our roster.

Speaker Change: First we want to highlight that most of these bed additions come in the form of brand new facilities, which on average typically ramp to run rate occupancy and EBITDA margin within a five year period.

Heather Dixon: Moving onto our outlook for 2025 as noted in our press release, we are reaffirming our full year guidance ranges for revenue adjusted EBITDA and adjusted earnings per share.

A.J. Rice: And our first question here will come from A.J. Rice with UBS. Please go ahead. Hi everybody. Just maybe first, there are a lot of moving parts in this year's numbers. I know you've got the supplemental timing on different supplemental payment programs. You've got the pacing of startup losses on the bed additions and then the annualizing of the Q4 challenges from last year to start to make the comps easier later in the year. Can you just give us some perspective on how you see the progression of EBITDA from here? Maybe a little bit of more color on how to think about the seasonality of the business this year, given some of those dynamics.

Speaker Change: As a result, we expect to recognize incremental EBITDA for a majority of this cohort beyond 2028 as these beds continue to ramp to mature occupancy and margin levels.

Heather Dixon: As a reminder, our 2025 guidance includes the following considerations.

Heather Dixon: Our 2025, we expect to add between 801000 total beds.

Speaker Change: Keep in mind, our three year outlook also contemplates the inherent uncertainty that always exists with regards to construction timing licensing timing and time to ramp and we will remain cognizant of this uncertainty as we continued to execute on the largest expansion of bed capacity in our company's history over the next several years.

As I just mentioned, we expected that a small subset of underperforming facilities would result in an approximate $20 million year over year headwind to our 2025 adjusted EBITDA.

Heather Dixon: As I mentioned to date. These facilities have performed in line with our expectations and negatively impacted our same facility patient day growth by approximately 90 basis points in the first quarter.

Speaker Change: Accordingly, our three year outlook assumes that the occupancy and EBITDA ramp for new hospitals will trend towards a five year ramp period, which is at the upper end of our historical ramp model and significant amount of inherent earnings power beyond 2028.

Heather Dixon: We expect to begin to comp over this headwind to volumes in the fourth quarter of 2025.

Heather Dixon: Yeah, sure.

A.J. Rice: Hi, AJ. Good morning. Thanks for the question. So I'll just kind of walk through a little bit of the phasing. You know, if we, if we think about Q1 versus the rest of the year, you're right. There are several moving parts and we had talked about a few things that will specifically impact Q1 a little bit more predominantly. And to de-factor those in or normalize them, then you can see the normal cadence that we would expect. The first thing I would say is, you know, nothing's changed since, you know, we talked last time and where we, we set our guidance and all of the multiple factors we went through.

Heather Dixon: We continue to expect Medicaid supplemental payments to be flat to up $15 million in 2025 on a net basis inclusive of the new Tennessee program once approved.

Speaker Change: Second with regards to payer rates. We included an element of conservatism in our assumptions as it relates to revenue per patient day and great growth given some of the uncertainties surrounding the policy and macro environment.

Heather Dixon: We continue to expect $50 million to $55 million in startup losses for full year 2025.

Speaker Change: We see embedded upside in these projections if the next few years updates from government and commercial payers more closely resemble that of the last few years versus what it is currently contemplated in our three year outlook.

Heather Dixon: Of which we anticipate approximately $15 million in the second quarter.

Heather Dixon: Before we move to Q&A I would like to offer some additional color on our bed additions and growth plan.

Speaker Change: This base of new behavioral health hospitals. We are currently building will provide a multiyear runway for growth not only as occupancy ramps over the next few years, but also as we're able to add expansion beds to these facilities over time.

Heather Dixon: Since last quarter. Some of you have asked us questions about our long term EBITDA growth guidance. So we wanted to take a moment to clarify some of the assumptions that are contemplated in that guidance range.

Heather Dixon: And I think the most obvious piece is that from a timing perspective, the Tennessee DPP is, is clearly going to be the biggest swing factor thinking about the cadence throughout the balance of the year, AJ, as, as we look at it, depending on which quarter that will be recorded in. I mean, beyond that, there's just, you know, a couple of other things that I would, I would, would talk about that would really lead to the improved EBITDA performance as we move throughout the year. I mean, first, you know, Q1 had the highest level of startup costs and the lowest contribution from the new beds, just because of the timing of when we added them.

Heather Dixon: The previously announced expected revenue growth of 7% to 9% and EBITDA growth of 8% to 10% over 2026 to 2028.

Speaker Change: As we decrease the accelerated pace of bed additions in 2026 to a rate of six to 800 per year <unk>.

Speaker Change: We expect start up losses to ease in the back half of 2026th helping to fuel strong and self sustaining free cash flow generation as we exit 2026.

Heather Dixon: Underpinned by annual bed additions of 600 to 800 beds beginning in 2026.

Heather Dixon: As well as the roughly 600 to 800 beds being added over 2024 and 2025.

Speaker Change: Note. This bed growth is still well above the historical pace prior to 2024, which will contribute meaningfully to our performance in the outer years, including in 2028 and beyond.

Heather Dixon: First we want to highlight that most of these bed additions come in the form of brand new facilities, which on average typically ramp to run rate occupancy and EBITDA margin within a five year period.

Speaker Change: With that we're ready to open the call for questions.

Heather Dixon: And so that alone implies a steeper ramp as we work our way through the year. And then, you know, as we assumed in our guidance, you know, supplemental payments were down year over year in Q1. We had said those would be down 10 to 15 million, and we landed sort of right in the middle of that for Q1. But we expect that those supplemental payments will actually be flat to up 15 million on a net basis for the full year. So that's a pretty big swing between Q1 and the balance of the year. And, you know, as I mentioned, obviously, Tennessee is the largest piece of that.

Heather Dixon: As a result, we expect to recognize incremental EBITDA for a majority of this cohort beyond 2028 as these beds continue to ramp to mature occupancy and margin levels.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys and to withdraw. The question you May Press Star then two.

Heather Dixon: Keep in mind, our three year outlook also contemplates the inherent uncertainty that always success with regards to construction timing licensing timing and time to ramp and we will remain cognizant of this uncertainty as we continued to execute on the largest expansion of that capacity in our company's history over the next several years.

Speaker Change: We ask that you please limit yourself to one question and one follow up.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: And our first question here will come from AJ Rice with UBS. Please go ahead.

Heather Dixon: from, you know, if I think about the other swing factors from a volume perspective. We will have a growing contribution from the new beds as we move throughout the year. And then we're also going to comp over a headwind that we started to see from some of those underperforming facilities as we move into the fourth quarter of the year. So that's another piece as you think about comping last year's fourth quarter. Maybe just one more thing to point out is rates. Again, the timing of the supplemental payments and Medicaid mixed shifts in the specialty business were impacting Q1.

Heather Dixon: Yes.

Heather Dixon: Accordingly, our three year outlook assumes that the occupancy and EBITDA ramp for new hospitals will trend towards the five year ramp period, which is at the upper end of our historical ramp model and significant amount of inherent earnings power beyond 2028.

Speaker Change: Hi, everybody.

Speaker Change: Just maybe first.

Speaker Change: There are a lot of moving parts in this year.

Speaker Change: <unk> I know you got the supplemental timing on different supplemental payment programs, you've got the pacing of startup losses on the bed additions in the annualized <unk> of the Q4.

Heather Dixon: Second with regards to payer rates. We included an element of conservatism in our assumptions as it relates to revenue per patient day and rate growth given some of the uncertainties surrounding the policy and macro environment.

Speaker Change: We're down just from last year start to make the comps easier later in the year.

Speaker Change: Just give us some perspective on how you see the progression.

Heather Dixon: We see embedded upside in these projections if the next few years updates from government and commercial payers more closely resembles that of the last few years versus what it is currently contemplated in our three year outlook.

Speaker Change: EBITDA from here, maybe a little bit of more color on.

A.J. Rice: And those should start to moderate as we head into Q2 and then further on throughout the year. And that means that low single-digit rate growth for the full year really moves throughout the year. And it's there where we expect it to be for the full year versus where it was for Q1 where it was slightly down. So I think that covers the highlights, the big points. Again, I pointed out a lot of different moving parts for the full year guide for EBITDA on the year-end call. But I think those are the highlights, and hopefully that helps.

Speaker Change: On how to think about the seasonality of the business. This year given some of those dynamics.

Heather Dixon: This base of new behavioral health hospitals. We are currently building will provide a multiyear runway for growth not only as occupancy ramps over the next few years, but also as we're able to add expansion exiting facilities over time.

Speaker Change: Yeah sure Hi, AJ. Good morning. Thanks for the question. So I'll, just kind of walk through a little bit of a phasing.

Speaker Change: If we think about Q1 versus the rest of the year you are right. There are several moving parts and we had talked about.

Heather Dixon: As we decrease the accelerated pace of bed additions in 2026 to a rate of six to 800 per year, we expect start up losses to ease in the back half of 2026th helping to fuel strong and self sustaining free cash flow generation as we exit 2026.

Speaker Change: A few things that will specifically impact.

Speaker Change: Q1, a little bit more predominantly entity factor days and are normalized and then you can see the normal cadence that we would expect.

A.J. Rice: Yeah, no, that's very helpful.

A.J. Rice: Maybe just my follow-up question is, I know you've got a cautious view on rates this year, but technically, what are you actually seeing in your Medicaid rate updates? I assume a lot of states updated January 1, and you'll have some more update July 1, and then you probably also got your Medicare rate update, which we pretty much know. But if there's any variance there for you specifically, and then any comment on commercial and what you're seeing there.

Speaker Change: First thing I would say to you that nothing's changed.

Heather Dixon: Note. This pet growth, it's still well above the historical pace prior to 2024, which will contribute meaningfully to our performance in the outer years, including in 2028 and beyond.

Speaker Change: We talked last time, and where we set our guidance at all of the multiple factors. We went through and I think the most obvious pieces that from a timing perspective, the Tennessee <unk>, it's clearly going to be the biggest swing factor in thinking about the cadence throughout the balance of the year.

Heather Dixon: With that we're ready to open the call for questions.

Heather Dixon: We will now begin the question and answer session.

Heather Dixon: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: <unk>.

Speaker Change: Look at it depending on which quarter that will be recorded and.

Heather Dixon: If youre using a speakerphone please pick up your handset before pressing the keys and to withdraw. The question you May Press Star then two.

Christopher Hunter: AJ, this is Chris. I'll go ahead and take that one. You know, I would just say, overall, that we continue to have very good discussions with, you know, our payer partners, and, you know, we remain very optimistic that they're going to continue to recognize our focus on providing high-quality care.

Speaker Change: And then beyond that there's just.

Speaker Change: Couple of other things that I would I would talk about that would really lead to the improved EBITDA performance as we move throughout the year I mean first.

Heather Dixon: We ask that you please limit yourself to one question and one follow up.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Q1 had the highest level of startup costs and the lowest contribution from any bad just because of the timing of when we added them say that alone implies a steeper ramp as we work our way through the year.

A.J. Rice: I wouldn't call anything out with respect to Medicaid versus commercial or Medicare. You know, our outlook, as Heather has discussed, always assumed a low-single-digit, same-facility revenue-per-day growth, and historically, we've talked about that in kind of a low- to mid-single-digit range. We decided, just given the noise on the policy front, that it was prudent to just incorporate a more conservative approach in our thinking about rates, just given the broader environment. But there's nothing specific on the horizon that we see as concerning, and I would say underlying rate growth has been relatively stable and in line with our expectation as we've, you know, gotten into the year.

Speaker Change: And our first question here will come from AJ Rice with UBS. Please go ahead.

AJ Rice: Hi, everybody.

Speaker Change: And then.

Speaker Change: We assumed in our guidance he and supplemental payments were down year over year. In Q1, We had said there was a day down 10% to $15 million related to the right in the middle of that for Q1.

Speaker Change: Just maybe first.

Speaker Change: There are a lot of moving parts in this year.

Speaker Change: Numbers I know you got the supplemental timing on different supplemental payment programs you've got the.

Speaker Change: Pacing of startup losses on the bed additions in the annualized Q4.

Speaker Change: But we expect that the supplemental payments will actually be flat to up $15 million on a net basis for the full year. So that's a pretty big swing between Q1 and the balance of the year and as I mentioned, obviously, Tennessee is the largest piece of that.

Speaker Change: We're down just from last year start to make the comps easier later in the year can you just give us some perspective on how you see the progression.

Speaker Change: Rob.

Speaker Change: EBITDA from here, maybe a little bit of more color on.

Rob: I think about the other swing factors from a volume perspective.

Speaker Change: How to think about the seasonality of the business. This year given some of those dynamics.

Rob: We will have a growing contribution from the new beds, we move throughout the year and then we're also going to comp over a headwind that we started to see from some of those underperforming facilities as we move into the fourth quarter of the year. So that's another piece as you think about Comping last year's fourth quarter.

Unknown Executive: Okay, thanks a lot.

Speaker Change: Yeah sure Hi, Jay Good morning, Thanks for the question.

Speaker Change: I'll, just kind of walk through a little bit of a phasing. If we if we think about Q1 versus the rest of the year Youre right. There are several moving parts and we had talked about.

Brian Tanquilut: And our next question will come from Brian Tanquilut with Jeffries. Please go ahead. Hey, good morning, guys. Chris, maybe take a step back as I think about, you know, obviously, 2% same store volume performance in the quarter, despite some of the headwinds you're facing with the units that are dealing with the headlines.

Rob: Maybe just one more thing to point out is as rates again, the timing of the supplemental payments and Medicaid mix shifts in our specialty business.

Speaker Change: A few things that will specifically impact.

Speaker Change: Q1, a little bit more predominantly entity factor days and are normalized and then you can see the normal cadence that we would expect.

Rob: Or impacting Q1, and those should start to moderate as we head into Q2 and then.

Christopher Hunter: How are you thinking about what the broader demand environment looks like right now? I mean, obviously, you're one of our data points and you're a peer that's public, but outside of that, if you can share with us what the demand environment looks like for behavioral health today. Yeah, I would say, Brian, thanks for the question that, you know, our expectation is that it just continues to be consistent with what we're with what we're seeing. I mean, I think, particularly given our strategy of focusing on the higher acuity patients, when you look across our various lines of business, whether it's, you know, Quantify Outcomes, and we've shared that with our payer partners, and I think all of that has led to a consistent demand environment.

Rob: Further on throughout the year and that means that low single digit rate growth for the full year.

The first thing I would say nothing's changed since.

Speaker Change: Last time, and where we set our guidance and I'll have a bit of multiple factors, we went through and I think the most obvious.

Rob: Really really.

Rob: Moves throughout the year end it.

Rob: They're where we expect it to be for the full year versus where it was for Q1, where it was slightly down.

Speaker Change: Is that from a timing perspective, Tennessee, <unk>, it's clearly going to be the biggest swing factor in thinking about the cadence throughout the balance of the year.

Rob: So I think that covers the highlights the big points again, I pointed out a lot of different moving parts for the full year guide for EBITDA.

Speaker Change: Hey.

Year end call, but I think those are the highlights and hopefully that helps.

Speaker Change: We look at it depending on which quarter that will be recorded and.

Rob: Yes, no thats very helpful.

Speaker Change: And then beyond that there's just.

Speaker Change: Maybe just a follow up question is.

Speaker Change: Couple of other things that I would I would.

Speaker Change: I know you've got a cautious view on rates this year, but technically what are you actually seeing in your.

Speaker Change: Talk about that would really lead to the improved EBITDA performance as we move throughout the year I mean first.

Speaker Change: Medicaid rate updates I assume a lot of states updated January one and you'll have some more date July one.

Speaker Change: Q1 had the highest level of startup costs and the lowest contribution from the new beds, just because of the timing of when we added them say that alone implies a steeper ramp as we work our way through the year.

Speaker Change: Probably also got your Medicare rate update, which we pretty much know, but if there's any variance there for you specifically.

Speaker Change: And then as.

Speaker Change: We assumed in our guidance he and supplemental payments were down year over year. In Q1, We had said there was a day down 10% to $15 million and we let it sort of right in the middle of that for Q1.

Speaker Change: And then any comment on the commercial and what you're seeing there.

Speaker Change: Hi, Jay This is Chris I'll go ahead and take that one I would just say overall that we continue to have very good discussions with our payer partners and we remain very optimistic that they're going to continue to recognize our focus on providing high quality care.

Heather Dixon: I mean, Heather, anything that you would want to add? No, I think that's right. I think, you know, the demand environment remains and we are, you know, doing our part to meet that demand. And we're working hard to look at new facilities and bed additions where those are necessary. So that's nothing to add.

Speaker Change: We expect that the supplemental payments will actually be flat to up $15 million on a net basis for the full year. So that's a pretty big swing between Q1 and the balance of the year and as I mentioned, obviously, Tennessee is the largest piece of that.

Speaker Change: I wouldn't call anything out with respect to Medicaid versus commercial.

Rob if I can.

Speaker Change: Commercial.

Heather Dixon: I appreciate that. And maybe, Heather, you know, thank you for all the color on the five year ramp to maturity. So just curious, as you think about the cohort of beds added in 24 and 25, maybe even into 26, has your view on the path to break even changed? Or is it still the same? You're kind of laying out that five year, you know, kind of like ramp up to mature levels of margins and occupancy. Yeah, thanks for the question. Our view has not changed.

Speaker Change: Think about the other swing factors from a volume perspective.

Speaker Change: Or Medicare.

Chris Hunter: Our outlook as Heather's discussed always assumed a low single digit same facility revenue per day growth.

Speaker Change: We will have a growing contribution from the new beds, we move throughout the year and then we're also going to comp over a headwind that we started to see some of those underperforming facilities as we move into the fourth quarter of the year. So that's another piece as you think about Comping last year's fourth quarter maybe.

Chris Hunter: Historically, we've talked about that in kind of a low to mid single digit range. We decided just given the noise on the policy front that it was prudent to just incorporate a more conservative approach and our thinking about rates just given the broader environment, but there is nothing specific on the horizon that we.

Speaker Change: Maybe just one more thing to point out is as rates again, the timing of the supplemental payments and Medicaid mix shifts in our specialty business.

Heather Dixon: Let me just walk through a little bit of how we're thinking about it and specifically how we thought about it whenever we thought about the long-term guide, the three-year guide that we put out. First of all, you know, you mentioned the three to five year ramp period that we've experienced historically, that's our average. Now, keep in mind, there's multiple factors that impact how those ramp, and we've seen some really good success in recent facilities as they've been ramping. You know, one of the factors that impacts it pretty significantly is whether it's a bed addition to an existing facility or whether it's a newly constructed bed.

Chris Hunter: We see is concerning and I would say underlying rate growth has been relatively stable and in line with our expectation as we've gotten into the year.

Speaker Change: Or impacting Q1, and those should start to moderate as we head into Q2 and then.

Speaker Change: Further on throughout the year and that means that low single digit rate growth for the full year.

Speaker Change: Okay. Thanks, a lot.

Speaker Change: You know really really.

Chris Hunter: Yes.

Speaker Change: It moves throughout the year end it.

Speaker Change: And our next question will come from Brian <unk> with Jefferies. Please go ahead.

Speaker Change: They're where we expect it to be for the full year versus where it was for Q1, where it was slightly down.

Brian Farley: Hey, good morning, guys.

Speaker Change: So I think that covers the highlights the big points again, I pointed out a lot of different moving parts for the full year guide for EBITDA.

Speaker Change: Maybe take a step back as I as I think about obviously, 2% same store volume performance in the quarter. Despite some of the headwinds you are facing with.

Speaker Change: Year end call, but I think those are the highlights that hopefully that helps.

Brian Farley: The units that are.

Speaker Change: Yes, no thats very helpful.

Speaker Change: Dealing with the headlines how are you thinking about what the broader demand environment looks like right now I mean, obviously, you're one of our data points in your peer that's public but outside of that if you can share with us what the demand environment looks like for behavioral health today.

Speaker Change: Maybe just a follow up question is.

Heather Dixon: Obviously, those take much longer to ramp. In our longer-term guide, we have assumed a higher mix of new facilities constructed and new beds from construction than what has historically, over the last few years, been contemplated and what's actually played out. And so that shifts a bit towards the higher end, between the 3 to 5 range. Those obviously would be at the higher end of that range versus others. So that's part of it. And what that means, actually, is that there's incremental EBITDA that's beyond 2028, because those beds, you just mentioned the years that are ramping, all of those would continue to be ramping and really hitting their stride in what we've modeled out post-2028.

Speaker Change: I know you've got a cautious view on rates this year, but technically what are you actually seeing in your.

Speaker Change: Medicaid rate updates I assume a lot of states updated January one and you'll have some more date July one.

Brian Farley: Yes, I would say.

Brian Farley: Brian Thanks for the question that our expectation is that it just continues to be consistent with what we are with what we're seeing I mean, I think particularly given our strategy of focusing on the higher acuity patients.

Speaker Change: Probably also got your Medicare rate update, which we pretty much know, but if there's any variance there for you specifically.

Speaker Change: And then any comment on the commercial and what you're seeing there.

Chris Hunter: Hey, Jay This is Chris I'll go ahead and take that one I would just say overall that we continue to have very good discussions with our payer partners and we remain very optimistic that they're going to continue to recognize our focus on providing high quality care.

Brian Farley: When you look across our various lines of business.

Brian Farley: Whether it's.

Brian Farley: On the acute front CTC specialty RTC, we just continue to see.

Brian Farley: Increasing demand and I think we've done a very good job of pointing out our commitment to quality.

Chris Hunter: I wouldn't call anything out with respect to Medicaid versus commercial.

Heather Dixon: There's a couple of other things that I would think about. There's always uncertainty with construction timing, and that's not just construction, construction licensing timing, how long does it take to ramp, all of those different things. And we're just very cognizant of all of that uncertainty. So as we're executing and continuing to execute on what's clearly the largest expansion that the company's had, we've been in that position for the past several years, and we're going to continue. We're just very cognizant of that, and we want to make sure that we factor that uncertainty inappropriately into the guide.

Brian Farley: Have obviously invested heavily and being able to.

Chris Hunter: Commercial.

Chris Hunter: Or Medicare.

Heather Dixon: Our outlook as Heather has discussed always assumed a low single digit same facility revenue per day growth and historically, we've talked about that in kind of a low to mid single digit range. We decided just given the noise on the policy front that it was prudent to just.

Brian Farley: <unk>.

Brian Farley: Quantify outcomes and we've shared that with our payer partners and I think all of that has led to a consistent demand environment I mean, heather anything that you'd want to add.

Heather Dickson: No I think Thats right I think the demand environment remains and we are doing doing our part to meet that demand and we're working hard to to look at new facilities and bed additions, where those are necessary. So that's nothing to add there.

Heather Dixon: Corporate a more conservative approach and our thinking about rates just given the broader environment, but there is nothing specific on the horizon that we see is concerning and I would say underlying rate growth has been relatively stable and in line with our expectation as we've gotten into the year.

Heather Dickson: I appreciate that and then maybe Heather. Thank you for all the color on the five year ramp to maturity. So just curious as you think about the cohort of debt added in 2025, maybe even into 26 has your view on the path to breakeven changed or is it still the same.

Heather Dixon: If I think about how far our outlook goes, we think about four years from now, effectively, will be when that outlook, when those things are actually happening. And that means the EBITDA growth. that's included in the longer tail of that 28. We haven't even started construction on those beds yet, so we feel like it's more prudent to just assume the higher end of the ramp range between that three to five years just because it's further out into the future.

Speaker Change: Okay. Thanks, a lot.

Heather Dixon: Okay.

Brian Farley: And our next question will come from Brian <unk> with Jefferies. Please go ahead.

Heather Dickson: Kind of laying out that five year, youre kind of like ramp up too much.

Brian <unk>: Hey, good morning, guys.

Speaker Change: Chris maybe take a step back as I as I think about obviously, 2% same store volume performance in the quarter. Despite some of the headwinds you're facing with.

Heather Dickson: Mature levels of margins and occupancy.

Heather Dickson: Yeah. Thanks for the question.

Heather Dixon: And so I talked about on the prior call that that's some conservatism that's built in, so hopefully that helps you understand a little bit of what we're thinking about with conservatism whenever I say that. I mean, again, what that points to is that the occupancy in the Eberdahl ramp for those hospitals, there will be certainly incremental amounts of inherent earnings that are, again, showing up beyond 2028 there. So all that said, we are still experiencing strong performance. I just mentioned that we had some in our recent cohorts, 2023 cohorts specifically that we're watching because of where it is now and sort of the ramp, and we're seeing some really good outcome and results, but we just thought it was more prudent for the reasons I just walked to to assume sort of the higher end of that ramp period.

Heather Dickson: Our view has not changed let me just walk through a little bit of how we're thinking about it and specifically how we thought about it whenever we.

Brian <unk>: The units that are.

Brian <unk>: Dealing with the headlines how are you thinking about what the broader demand environment looks like right now I mean, obviously, you're one of our data points in your peer that's public but outside of that if you can share with us what the demand environment looks like for behavioral health today.

Heather Dickson: Thought about the long term kind of three year guide that we put out.

Speaker Change: First of all you mentioned that three to five year ramp.

Heather Dickson: Ramp period that we've experienced historically.

Heather Dickson: That is that's our average now keep in mind, there's multiple factors that impact how houses those ramp and we've seen some really good success in recent facilities.

Brian <unk>: Yes, I would say Brian. Thanks for the question that our expectation is that it just continues to be consistent with what we are with what we're seeing I mean, I think particularly given our strategy of focusing on the higher acuity patients.

Heather Dickson: <unk> been ramping and one of the factors that impacts it.

Pretty significantly as whether it's a bed addition to an existing facility or whether it's a newly constructed that obviously those take much longer to ramp.

Brian <unk>: When you look across our various lines of business.

Brian <unk>: Whether it's.

Brian <unk>: On the acute fraud CTC specialty RTC, we just continue to see.

Heather Dickson: Our longer term guide, we have assumed a higher mix of new facilities constructed and new beds from construction than what has historically over the last few years been contemplated and what's actually played out and say that shift.

Heather Dixon: But back to your, that was a long-winded answer to your question, but back to your original point, our view hasn't shifted. We've just factored in some conservatism, and hopefully that helps you understand why and how we factored it in. Yeah, very helpful.

Brian <unk>: Increasing demand and I think we've done a very good job of pointing out our commitment to quality.

Brian <unk>: Have obviously invested heavily and being able to.

Heather Dickson: A bit towards the higher end between the three to five range. Those obviously, we would be at the higher end of that range versus others.

Heather Dixon: Quantify outcomes and we've shared that with our payer partners and I think all of that has led to a consistent demand environment I mean, heather anything that you'd want to add.

Whit Mayo: And our next question will come from Whit Mayo with Lyric Partners. Please go ahead. Hey, thanks. Um, anything when you just look at the first quarter and your performance, was there anything better or worse in the quarter versus your original expectations? Just wondering if there was any, you know, favorability on any of the key assumptions or expense items? Thanks.

Heather Dickson: That's part of it and what that means actually is that there is incremental EBITDA that's.

Heather Dixon: No I think Thats right I think the demand environment remains and we.

Heather Dickson: <unk> 2028, because those beds you just mentioned the years that are ramping all of those would continue to be ramping it really hitting their stride.

Heather Dixon: Are doing doing our part to meet that demand and we're working hard to to look at new facilities and bed additions where those are necessary.

Heather Dickson: And what we've modeled out post 2028.

Heather Dixon: Yeah, hi, Whit. Sure, let me, I'll talk about two things. I mean, the first thing I would talk about is labor. We saw, you know, the continuation of those favorable labor trends that we have been seeing, and our base wage inflation continued to trend lower. You know, contract and premium labor expenses both fell year over year and sequentially. So, you know, that's the first thing that I would point to.

Heather Dixon: Nothing to add there.

Heather Dickson: Theres a couple of other things that I would think about it there's always uncertainty with construction timing in that.

Speaker Change: I appreciate that and then maybe Heather. Thank you for all the color on the five year ramp to maturity. So just curious as you think about the cohort of debt added in 2004 and 25, maybe even into 26 has your view on the path to breakeven changed or is it still the same.

Heather Dickson: Not just construction construction licensing timing, how long does it take to ramp it all of those different things and we're just very cognizant of all of that uncertainty. So as we're executing and continuing to execute on what clearly the largest expansion that the company has had.

Heather Dixon: Youre kind of laying out that five year youre kind of like ramp up too.

Heather Dickson: We've been in that position for the past several years and we're going to continue.

Heather Dixon: The second thing I would point to are startup losses. You know, those came in a couple of million dollars better than our expectations for the first quarter, and that's just timing. That's just, you know, all the things I just talked through. In regards to construction and some of the uncertainty, that's just some timing differential, and, you know, we still expect that those will continue to, you know, be in the range of 50 to 55 for the full year, just to be clear, but they were around $16 million in Q1, and that's a little lower than what our expectations were.

Speaker Change: Mature levels of margins and occupancy.

Heather Dickson: We're just very cognizant of that and we want to make sure that we factor that uncertainty and appropriately into the guide.

Speaker Change: Yeah. Thanks for the question.

Speaker Change: Our view has not changed let me just walk through a little bit of how we're thinking about it and specifically how we thought about it whenever we.

Heather Dickson: If I if I think about how far our outlook goes you know we think about four years from now effectively will be when that outlook.

Speaker Change: <unk> thought about the long term kind of three year guide that we put out.

Heather Dickson: When those things are actually happening and that means the EBITDA growth.

Speaker Change: First of all you mentioned that three to five year.

Heather Dickson: This included and the and sort of the longer tail of that 2008, we havent even started construction on that yet so we feel like it's more prudent to just assume the higher end of the ramp range between that three to five years, just because it's further out into the future and so I talked about on the prior call.

Speaker Change: <unk> period that we've experienced historically that is.

Heather Dixon: But that's really the, I think, the only two things that I would point out from a quarterly perspective. Okay, so a couple million dollars of favorability on the expense side, and you were still within the range that you targeted. Is that, I mean, is that the way that you're looking at the performance? I'm just trying to figure out, like, how you perform versus the internal plan versus the guidance that you provided. Yeah, I mean, we were up, you know, towards the higher end of our guide, and that is, you know, very, you know, the things I just walked through, I think, you know, specifically the startup losses, those were what contributed to us being at the high end of the guide, but we were, you know, performing right in line with our internal plan.

Speaker Change: Our average now keep in mind there.

Speaker Change: Multiple factors that impact how housings those ramp and we've seen some really good success in recent facilities as they've been ramping you know one of the factors that impacts it.

Heather Dickson: That some conservatism that's built and so hopefully that helps you understand.

Speaker Change: Pretty significantly as whether it's a bed addition to an existing facility or whether it's a newly constructed bad obviously those take much longer to ramp.

Heather Dickson: A little bit of what we're thinking about with conservatism whenever I say that I mean again, what that points to is that occupancy and EBITDA ramp for those hospitals are will be certainly.

Speaker Change: And our longer term guide, we have assumed a higher mix.

Heather Dickson: Incremental amounts of inherent earnings that are again showing up beyond 2028.

Speaker Change: New facilities constructed and new beds from construction than what has historically over the last few years been contemplated and what's actually played out and say that shift.

Heather Dickson: There so.

Heather Dickson: That all that said we are still experiencing strong performance I just mentioned that we had.

Speaker Change: Get toward the higher end between the three to five range that is obviously, we would be at the higher end of that range versus others.

Heather Dixon: I know this isn't a metric that you talk about, but when I look at the revenue per average CTC, it's been declining for several quarters now, and I'm just trying to maybe better understand why that metric would look like that. You know, I'll start and Chris, you may want to jump in, but from a revenue perspective for CTC, I mean, as you know, the CTC business has experienced just, you know, significant growth. I'm very, very pleased with the growth over the past few years. There was a lot that we could do to apply some muscle behind it and really, really get the most out of that business.

Heather Dickson: And our recent cohort 2023 cohorts, specifically that we're watching because of where it is now in the ramp and we're seeing some really good outcome and results that we just thought it was more prudent for the reasons I just want to you to assume that's sort of the higher end of that ramp period, but last year. There was a long winded answer to your question, but back to your original.

Speaker Change: So that's part of it and what that means actually is that there is incremental EBITDA.

Speaker Change: <unk> 2028, because those beds you just mentioned the years that are ramping all of those would continue to be ramping it really hitting their stride.

Heather Dickson: Our view hasn't shifted we've just factored in.

Speaker Change: And what we've modeled out post 2028.

Heather Dickson: Services and hopefully that helps you understand why and how we factored it in.

Speaker Change: There's a couple of other things that I would think about it there's always uncertainty with construction timing and thats not just construction.

Heather Dickson: Very helpful. Thank you.

Speaker Change: Construction licensing timing, how long does it take to ramp it all of those different things and we're just very cognizant of all of that uncertainty. So as we are.

Whit Mayo: And our next question will come from Whit Mayo with Leerink partners. Please go ahead.

Whit Mayo: Hey, thanks.

Christopher Hunter: The other thing that I would point out is, if you look at the CTC business, we have found a very capital friendly way to add facilities to the lineup and those are effectively acquiring subscale, you know, sort of ramping CTC facilities that we can buy for a very good price. And then we can put those in, you know, put those in, apply the Acadia methodology for running the operations and really ramp those pretty quickly. So, as we add those in, and they are in, you know, similarly in the ramp position, you'll see that those will kind of pull down the average overall as we're ramping them.

Speaker Change: Anything when you just look at the first quarter and your performance was there anything better or worse in the quarter versus your original expectations. Just wondering if there was any favor.

Speaker Change: Executing and continuing to execute on what clearly the largest expansion that the company has had.

Speaker Change: We've been in that position for the past several years and we're going to continue.

Speaker Change: Favorability on any of the key assumptions or expense items. Thanks.

Speaker Change: Cognizant of that and we want to make sure that we factor.

Speaker Change: That uncertainty and appropriately into the guide.

Speaker Change: Yes, hi.

Speaker Change: Sure Let me I'll talk about two things I mean, the first thing I would talk about is labor.

Speaker Change: If I if I think about how far our outlook goes you know we think about four years from now effectively will be when that outlook.

Speaker Change: We saw.

Speaker Change: The continuation of those favorable labor trends that we have been saying and our base wage inflation continued to trend lower contract in premium labor expenses, both fell year over year and sequentially. So that's.

Speaker Change: When those things are actually happening and that means to EBITDA growth.

Speaker Change: Included in that and sort of the longer tail of that 2008, we haven't even started construction on that yet so we feel like it's more prudent to just assume the higher end of the ramp range between that three to five years, just because it's further out into the future and so I talked about on the prior call that some conservatism that's built and so hopefully that helps.

Speaker Change: That's the first thing that I would point to.

Christopher Hunter: In the first quarter, we opened three new CTCs, and then we acquired an additional four, excuse me, that would fall into that category that I just mentioned. And so, when you think about that, that really is part of the timing of what you're seeing impact the revenue per clinic. I think, you know, just generally speaking, the revenue can clearly vary based on the size of the clinic, maturity, all those things. But I think what you're seeing with, and to your question, is those different nuances I just walked through.

Speaker Change: One thing I would point to our startup losses, you know those came in a couple of million dollars better than our expectations for the first quarter and Thats just timing of things.

Speaker Change: Martin and.

Speaker Change: You understand that.

Speaker Change: In regards to construction and some of the uncertainty that's just some timing differential and we still expect that those will continue to be in the range of 50 to 55 for the full year just to be clear, but they were around $16 million in Q1, and that's that's a little lower than what our expectations were so that's really the I think the only two.

Speaker Change: A little bit of what we're thinking about with conservatism whenever I say that I mean again, what that points to is that occupancy and EBITDA ramp for those hospitals are will be certainly.

Speaker Change: Incremental <unk>.

Speaker Change: <unk> are inherent earnings that are again showing up beyond 2028.

Speaker Change: Things that I would point out from a quarterly perspective.

Speaker Change: There so.

Christopher Hunter: Yeah, I would just add one thing, Heather, and I think that's that so frequently, the CTC market continues to be highly fragmented. And so as a result, when we do find these subscale acquisition opportunities that we can tuck in, they have frequently under-invested across the board, and they very, very frequently have a limited digital presence, frequently don't even have a website, and they certainly have not invested in the capabilities that we're able to bring in. So all of that enables us to buy these subscale assets and ramp them more quickly. And I think that ties into your question in terms of the revenue per average CTC.

Speaker Change: That all that said we are still experiencing strong performance I just mentioned that we had.

Speaker Change: Okay. So a couple of million dollars of favorability.

Speaker Change: On the expense side and you were still within the range that you targeted is that I mean is that the way that youre looking at the performance I'm just trying to figure out like how you performed versus the internal.

Speaker Change: And our recent cohorts 2023 cohorts, specifically that we're watching because of where it is now.

Speaker Change: The ramp and we're seeing some really good outcome and results that we just thought it was more prudent for the reasons I just talked to you to assume that's sort of the higher end of that ramp period, but last year. It was a long winded answer to your question, but back to your original point, our view Hasnt shifted we've just factored in.

Speaker Change: Plan versus the guidance that you provided.

Speaker Change: Yes, I mean, we were up towards the higher end of our guide with and that is.

Speaker Change: Ari.

Speaker Change: The things I, just walked through I think specifically.

Speaker Change: Start up losses.

Speaker Change: Conservatism and hopefully that helps you understand why and how we factored it in.

Speaker Change: Those were what contributed us being at the high end of the guide, but we were performing right in line with our internal plan okay.

Speaker Change: Very helpful. Thank you.

Speaker Change: Okay.

Unknown Executive: Okay, thanks.

Speaker Change: This isn't a metric that you talk about but when I look at the revenue per average CTC.

Speaker Change: And our next question will come from Whit Mayo with Leerink partners. Please go ahead.

John Ransom: And our next question will come from John Ransom with Raymond James. Please go ahead. Hey, good. Good morning. I'm just wondering, on the New Facilities, not the bed ads for the new facilities. What sort of return target do you look at once the facility is fully ramped? And maybe it'd be helpful to kind of put that as an EBITDA, as a numerator, and total investment as a denominator. And kind of as a car layer, are you sharpening your pencil on new opportunities to try to drive higher returns, or are you still kind of sticking with the historical?

Whit Mayo: Hey, thanks.

Speaker Change: Been declining for several quarters now and just trying to maybe better understand why that metric would look like that.

Whit Mayo: Anything when you just look at the first quarter and your performance was there anything better or worse in the quarter versus your original expectations. Just wondering if there was any favor.

Whit Mayo: Favorability on any of the key assumptions or expense items. Thanks.

Chris Hunter: I'll start and Chris you may want to jump in but from a revenue perspective for CTC.

Speaker Change: Yeah, Hi.

Speaker Change: As you know.

Speaker Change: Sure Let me I'll talk about two things I mean, the first thing I would talk about is labor.

Speaker Change: The CTC business has experienced just cigna.

Speaker Change: Significant growth I am very very pleased with the growth over the past few years. There was a lot that we can do to apply some muscle behind it and really really get to get the most out of that business.

Speaker Change: We saw.

Speaker Change: The continuation of those favorable labor trends that we have been saying and our base wage inflation continued to trend lower contract in premium labor expenses, both fell year over year and sequentially. So that's.

Heather Dixon: Thanks.

Speaker Change: Other thing that I would point out is if you. If you look at the CTC business, we have found a very capital friendly way.

Heather Dixon: Hi, John, thanks for the question. You know, if I think about, just in general, the first part of your question, you know, what do we do? We look at typically, as you can imagine, we look at our cost capital and we make sure that we understand all the moving parts. We also then ensure that we are applying sort of a margin or a cushion on top of that to make sure that we have returns that are, you know, well above that cost of capital. And that, you know, one of the primary measures, obviously, that we use is return on invested capital.

Speaker Change: That's the first thing that I would point to.

Speaker Change: <unk> to add facilities to the lineup and there with our.

Speaker Change: One thing I would point to our startup losses at those came in a couple of million dollars better than our expectations for the first quarter and that's just timing that's 15 I'll take that.

Effectively acquiring sub scale.

Speaker Change: Sort of ramping CTC facilities that we can buy it for very good price and then we can put those in and put their then acquire the Acadia methodology for running the operations and really ramp that up pretty quickly to as we add those in and they are in the ramp position you'll see that those.

Speaker Change: Mike.

Speaker Change: In regards to construction and some of the uncertainty that's just some timing differential and we still expect that those will continue to be in the range of 50 to 55 for the full year just to be clear, but they were around $16 million in Q1, and that's a little lower than what our expectations were and that's really the I think the only two.

Speaker Change: What kind of pull down the average overall as we're ramping them in the first quarter, we opened three new.

Heather Dixon: And we typically look at that on a very detailed basis for every project consistently, whether it's, you know, a bed addition, an M&A, a potential transaction, etc. So, we look at all those in the same way and just sort of apply a very disciplined approach across the board from a capital perspective. And so, that is certainly something that we look at. Sort of to the second part of your question, you know, what are we doing now? And sort of, you know, are we, I think you asked for rethinking what we have done. I'll just, a little bit of detail on the process.

Speaker Change: Things that I would point out from a quarterly perspective.

Speaker Change: Okay. So a couple of million dollars of favorability.

Speaker Change: News TTC and then we acquired an additional four excuse me that would fall into that category that I just mentioned and so when you think about that that really is part of the timing of what you are seeing impact the revenue.

Speaker Change: On the expense side and you were still within the range that you targeted is that I mean is that the way that youre looking at the performance I'm just trying to figure out like how you performed versus the internal.

Speaker Change: At the clinic I think.

Speaker Change: Plan versus the guidance that you provided.

Speaker Change: Generally speaking the revenue can Ken clearly.

Speaker Change: Yes, I mean, we were up towards the higher end of our guide with and that is.

Speaker Change: Based on the size of the clinic maturity, all those things, but I think what you're seeing.

Speaker Change: Ari.

Speaker Change: And to your question is is the different nuances I just walked through.

Speaker Change: The things I just walked through I think.

Speaker Change: Okay.

Speaker Change: Startup losses.

Heather Dixon: You know, first, we have multiple check-in points as we go throughout any project. As you can imagine, it's quite a large undertaking to make sure that we have all of the right pieces in place before we move forward with the decision. We check in multiple times before we ultimately move forward as we gather more information. And so, those checkpoints have always been there. Very disciplined approach we have. Second, you know, we've gone through a couple of pieces. First, everything that we had currently had in our pipeline, we've gone back and we have made sure that when we rerun sensitivities and we look at, you know, any perspectives that we think we need to have a different lens on, that those still meet the thresholds.

Speaker Change: Those were what contributed us being at the high end of the guide, but we were performing right in line with our internal plan okay.

Speaker Change: I would just add one thing Heather and I think thats. The so frequently the CTC market continues to be highly fragmented and so as a result.

Speaker Change: Okay.

Speaker Change: This isn't a metric that you talked about but when I look at the revenue per average CTC.

Speaker Change: When we do find these subscale acquisition opportunities that we can tuck in and they have frequently underinvested.

Speaker Change: Been declining for several quarters now and just trying to maybe better understand why that metric would look like that.

Speaker Change: Across the board in a very very frequently have even limited digital presence frequently don't even have a website and they certainly have not invested in the capabilities that we're able to bring in so all of that enables us to buy these subscale assets and ramp them more quickly and I think that ties into your question in turn.

Chris Hunter: I'll start and Chris you may want to jump in but from a revenue perspective for CTC.

Chris Hunter: As you know.

Chris Hunter: The CTC business has experienced just cigna.

Chris Hunter: Significant growth I am very very pleased with the growth over the past few years. There was a lot that we can do to apply some muscle behind it and really really get to get the most out of that business.

Speaker Change: Or the revenue per average CTC.

Heather Dixon: That we originally set out to meet whenever we think about capital deployment and ensure that those are still sort of all viable projects that we would like to do. You know, fortunately, we have a lot of different opportunities to deploy capital. And so, if we find something that, you know, no longer meets, you know, what we think we should have as a required return, then we can move to the next thing. The maybe the other thing that I would point out is for future projects, we have obviously incorporated some sensitivity analysis, both on a rate and a construction cost side so that we can ensure we have a flexible view and we can sensitize those and ensure that we have the right perspective as we move forward.

Speaker Change: Okay. Thanks.

John Ransom: And our next question will come from John Ransom with Raymond James. Please go ahead.

Chris Hunter: Other thing that I would point out is if you. If you look at the CTC business, we have found a very capital friendly way.

John Ransom: Hey, good morning.

Just wondering on the.

Chris Hunter: <unk> to add facilities to <unk>.

Speaker Change: New facilities, not that bad as to the new facilities, what sort of return target.

Chris Hunter: Lineups and there with our.

Chris Hunter: Effectively acquiring sub scale.

Speaker Change: Look at once the facility is fully ramped and maybe it'd be helpful to kind of put that as the EBITDA is the numerator in total investment as the denominator and kind of as a corollary of you.

Chris Hunter: Sort of ramping CTC facilities that we can buy it for very good price and then we can put those in and put their then apply the Acadia methodology for running the operations and really ramp that up pretty quickly to as we add those in and they are in the.

Speaker Change: Sharpening your pencil on new opportunities to try to drive higher returns or are you still kind of sticking with the historical thanks.

Heather Dixon: So, you know, maybe if I just sum all that up, I think we would we would say very, very disciplined approach. We're very careful with how we select investments. We have a very thorough conversation over multiple periods.

Speaker Change: Hi, John Thanks for the question question.

Chris Hunter: The ramp position, you'll see that those will kind of pull down the average overall as we're ramping them in the first quarter, we opened three new CTC and we acquired an additional.

Speaker Change: If I think about.

Speaker Change: Just in general the first part of your question what do we do we look at typically.

Speaker Change: In closing as you can imagine we look at our cost of capital and we make sure that we understand all the moving parts. We also then ensure that we are applying sort of a margin or a cushion on top of that to make sure that we have.

John Ransom: Second question is When we think about the future, you had a pretty sizable legal accrual in the first quarter.

Heather Dixon: How do we think about... Is that the high water mark or how should we think about that number for the rest of the year?

Chris Hunter: Yes.

Chris Hunter: [music].

Speaker Change: Returns that are well above that cost of capital.

Heather Dixon: Thank you. Yeah, I would hear that. I think you're referring to the legal costs and not a legal accrual, I'm assuming. Yeah, okay, good. Just want to make sure I'm answering the right question. So if I think about that, you know, we have Obviously, we're working through multiple things right now. We have the DOJ and the FCC that we are working very cooperatively and diligently with. We have engaged an excellent law firm to help us with this so that we can continue to work and participate with them. We've undertaken significant efforts to respond as quickly as possible to all of the inquiries that we have and what you're seeing.

Speaker Change: And that one of the primary measures obviously that we use it is return on invested capital and we typically look at that on a very detailed basis for every project consistently whether it's good to know.

Chris Hunter: Yeah.

Emma: So at that addition, Emma.

Emma: And M&A potential transaction et cetera. So we look at all of those in the same way and just sort of apply very disciplined approach across the board from a capital perspective, and so that is that is certainly something that we look at sort of to the second part of your question. What are we doing now and sort of are.

Chris Hunter: Yes.

Chris Hunter: Yeah.

Emma: I think you asked for rethinking what we have done just a little bit of detail on the process. You know first with multiple check endpoints as we go throughout any project as you can imagine it's quite a large undertaking to make sure that we have all of the right pieces in place before we move forward with the decision, we check and multiple times before.

Chris Hunter: Okay.

Chris Hunter: Okay.

Heather Dixon: I think John is the bullet of work that's being done in order to respond to and participate with all of those questions. So, that is really what's driving that. From a cadence perspective, it's hard to say and to predict the future, but certainly what I would say is that at the earlier stages of the investigation, certainly there is a lot of preliminary work to do and certainly a large amount of work that needs to get done. And again, working as quickly as we possibly can. Hopefully, that's helpful.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: [music].

Emma: We ultimately move forward as we gather more information and so those checkpoints have always been they're very disciplined approach. We have second we've gone through a couple of pieces first everything that we had currently have in our pipeline. We've gone back and we have made sure that when we run sensitivities and we'd look at any perspectives that.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: [music].

Emma: We think we.

Emma: We need to have a different lens on that they would still meet the thresholds that we originally set out.

Unknown Executive: Thank you.

Peter Chickering: Our next question will come from Peter Chickering with Deutsche Bank. Please go ahead.

Chris Hunter: Okay.

Emma: To me whenever we think about capital deployment and ensure that those are still <unk>.

Chris Hunter: [music].

Heather Dixon: Hey guys, thanks for taking the questions, and I can confirm that the webcast is down, getting about a dozen reports of that right now, so people are unable to join right now. It follows to AJ's question, just can you give us some guidance on how we should think about sort of 2Qs, percentage of annual guidance, and bridges for how you can get to that number. I believe that, you know, like you talked about, $15 million beneficial supplemental payment coming into 2Q, but any bridge would be helpful as you think about the ramp from the first quarter results.

Emma: Viable projects that we would like to David Unfortunately, we have a lot of different opportunities to deploy capital and so if we find something that no longer meets.

Chris Hunter: Yes.

Chris Hunter: [music].

Emma: But we think we should have as a required return that we can move to the next thing.

Emma: But the maybe the other thing that I would point out is for future products we have.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: [music].

Emma: <unk> incorporated some sensitivity analysis, both on a rate and a construction cost side. So that we can ensure we have.

Emma: For the year and we can sensitize those in nature that we have the right perspective as we move forward. So maybe if I just.

Chris Hunter: Yes.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Thanks.

Chris Hunter: Sure.

Chris Hunter: [music].

Heather Dixon: Yeah, sure.

Heather Dixon: Hi, Peter. You know, I'll start by saying I'm not going to get into Q2 guidance, but let me just, you know, point out a couple of things. I mean, Very clearly, the biggest swing factor is the supplemental payments and specifically the Tennessee program. So that is certainly one that we're watching and thinking about timing. To the extent that that is approved, there would be a significant impact to whichever quarter that that is approved in. From our perspective, we pointed this out in the fourth quarter call. And just to reiterate for our perspective, we've assumed that that comes in the second half of the year.

Emma: All that up I think we would we would say very very disciplined approach, we're very careful with how we select investments we have a very thorough conversation.

Chris Hunter: Yes.

Chris Hunter: [music].

Yeah.

Emma: There are multiple periods.

Chris Hunter: Okay.

Chris Hunter: [music].

Speaker Change: Second question is.

Chris Hunter: Thanks.

Speaker Change: When we think about the future of you had a pretty sizable legal accrual in the first quarter. How do we think about is that the high watermark or how should we think about that number for the rest of the year. Thank you.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Okay.

Speaker Change: Yes, I would.

Chris Hunter: [music].

Speaker Change: <unk>.

Speaker Change: I think you are referring to the legal costs.

Chris Hunter: Please proceed.

Speaker Change: Not a legal accrual I'm assuming.

Okay.

Speaker Change: Yes.

[music].

Speaker Change: Yeah, Okay. Good I, just want to make sure I'm answering the right question.

Speaker Change: Think about that.

Heather Dixon: And so to the extent that that comes in earlier in Q2, that would be a swing factor for what we have thought through. And the rest of the things that I talked through a little bit earlier in regards to how you can think about the ramping, there's the bed additions and the new again, supplemental, very much the largest swing factor here. And just thinking about how we move throughout the balance of the year, Q4 is when we're going to lap things. And so if you think about the balance of Q1 versus Q2, Q3, Q4, there will be some significant differences between Q4 and the rest of the year.

We have.

Chris Hunter: Yes.

Speaker Change: Obviously, we're working through multiple things right now we have.

Chris Hunter: Okay.

Speaker Change: The Doj and the SEC that we are working very cooperatively and diligently Lewis.

Chris Hunter: Okay.

Chris Hunter: [music].

Speaker Change: We have engaged.

Chris Hunter: Right.

Speaker Change: Excellent law firm.

Chris Hunter: Yes.

Chris Hunter: Sure.

Speaker Change: To help us with this so that we can continue to work and participate with them we've undertaken significant efforts to respond as quickly as possible.

Chris Hunter: Yes.

Chris Hunter: [music].

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Yes.

Speaker Change: All of the inquiries that we have and what Youre seeing I think John is the bolus.

Chris Hunter: [music].

Chris Hunter: Yes.

Speaker Change: Work, that's being done in.

Chris Hunter: Yes.

Chris Hunter: Yes.

Speaker Change: In order to respond to and participate with all of those questions. So that is really what's driving that from a cadence perspective.

Chris Hunter: Okay.

Chris Hunter: [music].

Heather Dixon: That's probably the best guidance I can give you. I talked about a little bit earlier that we expect startup losses still to be in the 50 to 55 range for the full year. I think Q2 will look fairly similar to Q1, maybe a little bit less.

Chris Hunter: Yes.

Chris Hunter: Okay.

It's hard to say and to predict the future, but certainly what I would say is that.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Yes.

Speaker Change: Earlier stages.

Chris Hunter: Okay.

Chris Hunter: Sure.

Speaker Change: The investigation certainly there is a lot of.

Chris Hunter: Yes.

Yes.

Chris Hunter: Okay.

Heather Dixon: But that's probably about the only things that I could point to. Okay, fair enough.

Speaker Change: Preliminary work to do and certainly a large amount of work that needs to get done and again working as quickly as we possibly can.

Chris Hunter: Okay.

Chris Hunter: Thanks.

Chris Hunter: [music].

Peter Chickering: And then if I'll follow up to which question on CDC would ask a different direction. CDC revenues were flat sequentially. The number of patients grew I think it looks like 2,000 or almost 3%. So, can you talk about what you're seeing on CDCs from a pricing perspective? Just I'm trying to sort of look at the flat revenues, what pages are growing to figure out is pricing under pressure or what are you seeing there? Thanks so much.

Speaker Change: Hopefully that's helpful.

Speaker Change: Thank you.

Speaker Change: Our next question will come from <unk> Chickering with Deutsche Bank. Please go ahead.

Chris Hunter: Okay.

Chris Hunter: Sure.

Chris Hunter: Yes.

Chris Hunter: [music].

Speaker Change: Hey, guys.

Speaker Change: Taking my questions.

Yes.

Speaker Change: Confirm that the webcast is down getting that doesn't reports of that right now as people are unable to join us join her now.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Okay.

Bob: Hey, Bob.

Chris Hunter: [music].

Speaker Change: T. J's question, just can you give us your guidance how would you think about sort of <unk> as a percentage of annual guidance.

Chris Hunter: Alright.

Christopher Hunter: Yeah, Peter, this is Chris. Let me take that one. You know, I would say CTC revenue grew 3.6% year over year in Q1. And that was generally in line with the growth rate that we reported in the second half of 24. The service line as we've discussed before, it's stepping over some pretty tough comps from the first half of 24. And there was also some modest unfavorable impact from weather that we also saw in Q1. But, you know, as we discussed in the first quarter, we opened the three new facilities, the three new CTCs, we acquired an additional four, as Heather said earlier, and those are progressing well.

Chris Hunter: Yeah.

Chris Hunter: Yes.

Speaker Change: And just sort of how you can get to that number.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Sure.

Speaker Change: I believe you talked about $50 million beneficial couple of payment coming into Q.

Chris Hunter: Sure.

Chris Hunter: Yes.

Chris Hunter: Yeah.

Chris Hunter: Okay.

Speaker Change: Sandy bridge would be helpful. As you think about the ramp from the first quarter results.

[music].

Speaker Change: Yes sure.

Speaker Change: I'll start by saying I'm not going to get into Q2 guidance, but let me just.

Speaker Change: Point out a couple of things I mean.

Chris Hunter: Okay.

Speaker Change: Very clearly the biggest swing factor is that.

Chris Hunter: Okay.

Chris Hunter: [music].

Speaker Change: The supplemental payments and statistically the Tennessee program. So that is certainly one that we are that we're watching and thinking about timing to the extent that that is approved there with.

Chris Hunter: Okay.

Chris Hunter: Yes.

Peter Chickering: There isn't anything that we would call out with respect to pricing, though, on CTCs. So, I mean, just to follow up there, you know, because you're disclosing the patients to the CDC, you know, you know, the end of December is $72,000, now it's $74,000. that implies you have 2,000 more patients, but revenues are flat sequentially. So, yes, how would. growing census by 2000 from 4Q to 1Q not impact revenues increasing sequentially. Thank you. Let me just understand your question. You're saying how if we grew the volume of patients, why did revenue not grow sequentially? Is that your question?

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: [music].

Speaker Change: It would be a significant impact to whichever quarter that that is approved and from our perspective, we have we pointed this out in the fourth quarter.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: [music].

Speaker Change: And just to reiterate for perspective, we've assumed that that comes in the second half of the year and so to the extent that that comes in earlier in Q2 that would be a swing factor for what we have for what we thought through the rest of the things you know that.

Chris Hunter: Yes.

Chris Hunter: Yes.

Chris Hunter: Yes.

Chris Hunter: [music].

Speaker Change: I talked through a little bit earlier.

Regards to how you can think about the ramping there's the bed additions and the new beds. You know those are going to continue to steadily.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Okay.

Christopher Hunter: Correct. You know, I think I think there's some timing factors in there. From a payment perspective, they're, you know, not not nearly to the extent of the acute side of the business, but there can be some supplemental payment streams much, much smaller that can that can that can really impact some of the timing of the revenue. You know, we have different rates in different states, and as those rate updates come through, that can add a little bit of what seems like supplemental lumpiness, but that's really just rate changes that come through. You know, we closed a few facilities as well, and so that will affect, those are obviously, we're not gonna close them if they're high volume facilities, but they could have been facilities that were contributing some revenue, but really on a scale basis, weren't the right mix for our business on an EBITDA contribution perspective, and so that can certainly affect the revenue and the top line, but would not impact the EBITDA contribution.

Chris Hunter: Yes.

Speaker Change: Peru again supplemental very much the largest swing factor here and just thinking about how we move throughout the balance of the year Q4 is when we're going to lap things and so if you think about the balance of Q1 versus Q2 Q3 Q4, there will be some.

Chris Hunter: [music].

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Yes.

Difficult differences between Q4, and the rest of the air.

Chris Hunter: Okay.

Chris Hunter: [music].

Speaker Change: That's probably the best guidance I can give you I talked about a little bit earlier that we expect start up losses still to be in the $50 to 55 range for the full year I think Q2 will look fairly similar to Q1, maybe a little bit less.

Chris Hunter: Yes.

Chris Hunter: Yes.

Okay.

Speaker Change: But that's probably that's about the only thing that I could point to.

Chris Hunter: [music].

Speaker Change: Okay, Okay fair enough and then.

Chris Hunter: Yes.

Speaker Change: A follow up to <unk> question on CBC, you would ask a different direction.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: [music].

Speaker Change: <unk> revenues were flat sequentially.

Speaker Change: <unk> grew.

Speaker Change: Hey, let's say 2000 or almost 3%. So can you talk about what you see.

Chris Hunter: Okay.

Speaker Change: Cvc's from a pricing perspective.

Chris Hunter: Okay.

Speaker Change: Just I'm trying to sort of look at the flat revenues what pieces are growing to figure out.

Chris Hunter: [music].

Christopher Hunter: So that's probably the only couple of things that I would point to. Hopefully that helps a little bit.

Speaker Change: Pricing under pressure or what are you seeing there. Thanks so much.

Chris Hunter: Okay.

Speaker Change: Yes.

Chris Hunter: Yes.

Unknown Executive: Great, thanks so much. No problem.

Speaker Change: Yes, Peter this is Chris let me take that one I would say CTC revenue grew three 6% year over year in Q1 and that was generally in line with the growth rate that we reported in the second half of 'twenty four.

Chris Hunter: Okay.

Matthew Gillmor: And our next question will come from Matthew Gillmor of KeyBank. Please go ahead with your question. Hey, thanks for the question. I wanted to follow up on some of the policy comments and ask about work requirements. I know there's normally exceptions for people with substance abuse and psychiatric issues, but I just wanted to get your thinking in terms of that proposal and if that would have any impact on Acadia. Yeah, thanks, Matt.

Chris Hunter: Yes.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Okay.

Speaker Change: The service line.

Chris Hunter: Sure.

Chris Hunter: [music].

Speaker Change: As we've discussed before it's stepping over some pretty tough comps from the first half of 'twenty four.

Speaker Change: And there was also some modest unfavorable impact from weather that we also saw in Q1, but.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Yes.

Heather Dickson: As we discussed in the first quarter, we opened three new facilities. The three new Ctc's, we acquired an additional four as Heather said earlier.

Christopher Hunter: This is Chris. I'll take that one. You know, I would say, overall, we're, we're still from have far from having a clear view of what potential Medicaid adjustments will be. Obviously, the Energy and Commerce draft, we have been scrutinizing and it's over 100 pages and a lot of nuanced language in there. But overall, I think we continue to believe that the patient populations that we serve, including some of the highest acuity mental health issues in the country are going to be relatively less impacted in terms of the risk of losing Medicaid access. I would say, is it.

Okay.

Chris Hunter: Okay.

Chris Hunter: Okay.

Chris Hunter: Right.

Chris Hunter: Yes.

Chris Hunter: Yes.

Heather Dickson: And those are progressing well there isn't anything that we would call out with respect to pricing so on CTC Jeremy.

Chris Hunter: Okay.

Chris Hunter: Sure.

Chris Hunter: Sure.

Chris Hunter: Yes.

Chris Hunter: Yes.

Chris Hunter: Yes.

Heather Dickson: So let me just I mean, just to follow up there because youre disclosing the pieces the CDC.

Chris Hunter: [music].

Heather Dickson: At the end of December 72000, now at 74000.

Chris Hunter: Okay.

Heather Dickson: <unk> 2000 more patients for revenues are flat sequentially.

Chris Hunter: Yes.

Chris Hunter: [music].

Chris Hunter: Yes.

Chris Hunter: Okay.

Howard: Yes Howard.

Chris Hunter: Okay.

Speaker Change: <unk> centers by 2000 from <unk> to <unk> not <unk>.

Chris Hunter: Yes.

Chris Hunter: [music].

Howard: Impact of revenues increasing sequentially. Thank you.

Howard: Sure.

Chris Hunter: Okay.

Christopher Hunter: refers to work requirements specifically. I would just iterate that while the language may change, we remain really optimistic that a good portion of our population could be exempt, both based on existing structures that are in place and based on our initial interpretation of what we're seeing there. We have just seen in the past that if you remove access to high acuity mental health care for these populations, you tend to get exploding costs in other parts of the system. And we've seen examples of that in the past where the populations have been carved out of things like work requirements.

Chris Hunter: Yes.

Howard: Please send your question, you're saying how if we grew the volume of patients why did revenue not growth sequentially is that your question correct.

Chris Hunter: Thank you.

Chris Hunter: Great.

Chris Hunter: Yes.

Chris Hunter: [music].

Chris Hunter: Okay.

Chris Hunter: Okay.

Howard: Yes.

Howard: I think I think there is some timing factors in there.

Chris Hunter: Okay.

Chris Hunter: Okay.

Howard: From a payment perspective there.

Howard: Nearly to the extent as the acute side of the business, but there can be some.

Howard: Supplemental payment streams much much smaller that can that can.

Chris Hunter: Yeah.

Chris Hunter: [music].

Howard: It can really impact some of the timing of the revenue we have different rates in different states and as those rate updates come through that can can add a little bit of what seems like supplemental lumpiness, but that's really just rate changes that come through.

Yes.

Chris Hunter: Sure.

Chris Hunter: Okay.

Christopher Hunter: And I think what you're seeing in the bill appears to have some significant carve outs related, but we're just going to have to continue to work through it and obviously continue to lobby with the broader NABH and broader industry groups.

Chris Hunter: Okay.

Howard: We closed a few facilities as well and so that will affect those are obviously, we're not going to close them, but they're high volume.

Howard: Facilities that they could've been facilities that were contributing some revenue, but really on a scale basis werent the rate, what's the right mix for our business on an EBITDA contribution perspective, and so that can certainly affect the revenue and the top line.

Matthew Gillmor: Got it.

Chris Hunter: Okay.

Heather Dixon: And then I wanted to see if Heather had any comments on the cash flow from operations in the quarter. I think the legal expenses probably had an impact there, but were there any other sort of timing things to think through and when those were normalized? Yeah, the only thing I would point to is, obviously, as we've talked about, we are clearly at the peak from a CAPEX perspective, as we are in the middle of the highest number of new beds that the company has experienced, you know, both with the end of last year, the significant number of beds coming on.

Chris Hunter: Okay.

Howard: It would not impact the EBITDA contribution so that's.

Chris Hunter: Okay.

Howard: Probably the only a couple of things that I would point to hopefully that helps a little bit great. Thanks, so much.

Chris Hunter: Okay.

Chris Hunter: [music].

Howard: No problem.

Chris Hunter: Yes.

Chris Hunter: Okay.

Speaker Change: And our next question will come from Matthew Gillmor with Keybanc. Please go ahead with your question.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Okay.

Speaker Change: Alright. Thanks for the question I wanted to follow up on some of the policy comments and ask you about work requirements I know theres normally exceptions for people with substance abuse and psychiatric issues, but I just wanted to get your thinking in terms of that proposal and if that would have any impact on acadia.

Chris Hunter: Okay.

Heather Dixon: You know, some of those costs continue to flow through related to those in Q1. CAPEX and, you know, cash is obviously cash-based, it's not accrual, so even though we opened the beds in Q4, the costs are still going to come through in Q1, so that's part of it. And, you know, incrementally, just to add on to that, you know, obviously, we have added a large number of beds already this year. With Q1, we've added, you know, almost 400 new beds already, so that's a piece of it as well. Keep in mind that startup losses are also part of that, and those are clearly at a peak in Q1 of what we expect for the full year, as we've talked about, as we move through the year, you know, 50 to 55 million for the year, but there was a predominance in Q1, and so that's also a piece of what you're seeing.

Chris Hunter: Yes.

Chris Hunter: [music].

Chris Hunter: Yeah. Thanks, Matt This is Chris I'll take that one.

Chris Hunter: Yes.

Speaker Change: I would say.

Chris Hunter: [music].

Speaker Change: Overall were.

Speaker Change: We're still from have far from having a clear view of what potential Medicaid adjustments will be.

Chris Hunter: Okay.

Chris Hunter: [music].

Speaker Change: Obviously, the energy and Commerce draft, we have been scrutinizing in.

Speaker Change: Several hundred pages and a lot of nuance language in there, but overall I think we continue to believe that the patient populations that we serve including some of the highest acuity mental health issues in the country, we're going to be relatively less impacted.

Chris Hunter: Yes.

Chris Hunter: [music].

Speaker Change: In terms of the risk of losing Medicare.

Speaker Change: Medicaid access I would say is it is.

Heather Dixon: You're correct, you know, obviously, the legal costs, you know, those come through, and that's part of what is coming through from a legal perspective and impacting cash flow. I think, you know, those are the primary moving parts. I hope that's helpful and answers your question. Got it.

Chris Hunter: Okay.

Speaker Change: As it.

Chris Hunter: Yes.

Speaker Change: <unk>.

Chris Hunter: Yes.

Speaker Change: The first two work requirements specifically.

Chris Hunter: [music].

Speaker Change: I would just iterate that while the language may change.

Speaker Change: We remain really optimistic that a good portion of our population could be exempt both based on existing structures that are in place and based on our initial interpretation of what we're seeing there we have just seen in the past that if you.

Chris Hunter: Yeah.

Chris Hunter: Okay.

Chris Hunter: Okay.

Andrew Mok: and our next question will come from Andrew Mok with Barclays. Please go ahead. Hi, good morning. There's been a year over year decline in specialty revenue looks like for five quarters in a row now, which has contributed to the broader deceleration in same store revenue. Can you help us understand what's going on with that line specifically? And when you expect to get back on track for growth? Thanks.

Chris Hunter: Thanks.

Chris Hunter: [music].

Speaker Change: You remove access to high acuity mental health care for these populations you tend to get exploding costs in other parts of the system and we've seen examples of that in the past where the populations have been carved out and things like work requirements.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Yes.

Christopher Hunter: Uh, yeah, yeah, I'll jump in. Hi, Andrew. So a couple of things I would point to, you know, 1st is we've, we have closed some specialty facilities over the past several quarters. And obviously we closed 1 in Q1 of this year, and then there were a few others that we've closed over the past handful of quarters. And so that's part of what is contributing to that. It was, it was about 5% down in the 1st quarter, and that's really mostly driven by the facility closures. You know, over the past, I would say, a year and a half, we've wound down 4 specialty facilities and that includes the 1 that I just mentioned in the 4th quarter.

Speaker Change: And I think what youre seeing in the bill.

Chris Hunter: [music].

Speaker Change: Appears to have some significant carve outs related but we're just going to have to continue to work through it and obviously continue to to to lobby with the broader <unk>.

Chris Hunter: Thank you.

Chris Hunter: [music].

Speaker Change: H and.

Speaker Change: Broader industry groups.

Speaker Change: Got it.

Speaker Change: I wanted to see if Heather had any comments on the cash.

Speaker Change: Cash flow from operations in the quarter I think the legal expenses, probably had an impact there but was there any other sort of timing things to think through when those would normalize.

Chris Hunter: Yes.

Speaker Change: Yes.

Chris Hunter: Yes.

Speaker Change: Yes, the only thing I would point to is obviously as we've talked about we are clearly at the peak from a capex perspective, as we are in the middle of the highest number of new beds that the company has experienced both.

Chris Hunter: [music].

Christopher Hunter: So that's part of it. The other part is, if you think about just from a revenue perspective, we have seen some nice growth in the Medicaid specialty inpatient business. Obviously, that has a differential from just a year over year perspective on the overall revenue contribution for that, depending on the type of, the type of, treatment that those patients need. But really, I think it's mostly driven by the closure.

Chris Hunter: Okay.

Chris Hunter: Okay.

Speaker Change: With the end of last year, the significant number of beds coming on some of those.

Chris Hunter: [music].

Speaker Change: Cost to continue to flow through related to those in Q1 Capex.

Speaker Change: Capex and cash is obviously cash basis not accrual so even though we opened the beds in Q4 the costs are still going to come through in Q1. So that's part of it and incrementally just to add on to that you know obviously, we have added.

Chris Hunter: Thank you.

Chris Hunter: [music].

Andrew Mok: Got it. That's helpful.

Heather Dixon: And as we contemplate the recognition of state supplemental payments from Tennessee, is that mostly an acute inpatient item? It would hit that revenue line? Yes. Okay, understood. Thank you. Thanks to all the colleagues. Thank you.

Speaker Change: A large number of beds already this year.

Chris Hunter: Okay.

Chris Hunter: Yes.

Speaker Change: Q1, we've added.

Chris Hunter: Yes.

Speaker Change: Almost 400, new beds already said, that's a piece of it as well.

Chris Hunter: Sure.

Chris Hunter: Yes.

Chris Hunter: [music].

Speaker Change: Keep in mind that.

Speaker Change: Startup losses are also part of that and those are clearly at a peak in Q1.

Gabby: And our next question will come from Sarah James, Cantor Fitzgerald. Please go ahead. Hi guys, this is Gabby on for Sarah, I have a quick one.

Speaker Change: Of what we expect for the full year as we've talked about as we move through the area of $50 to $55 million for the year, but there was a predominance in Q1.

Heather Dixon: Could you elaborate if there was any weather impact on your facilities in the southeastern states when your peers had seen that? And then maybe if you could just elaborate on how trends are going on some of the underperforming facilities spoken to last quarter. Yeah, I'll start.

That's also a piece of what Youre, saying Youre correct. You know obviously the legal cost that's come through and that's part of what.

Chris Hunter: Yeah.

Chris Hunter: Okay.

Chris Hunter: [music].

Speaker Change: Is coming through from a legal perspective.

Speaker Change: And impacting cash flow I think those are the primary moving parts hopefully that's helpful and answered your question.

Christopher Hunter: And then Chris, if you I'm sure you want to, you want to say some things about some of the operations of the facilities, you know, from a weather perspective, nothing material for us to call out, you know, obviously, it's season one every year, we see some some sorts of weather in different parts of the business, but but nothing I would really call out and point to. Chris, do you want to you want to get some color on on those facilities, the underperforming facilities? Sure.

Speaker Change: Got it thank you.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Great.

Chris Hunter: Yes.

Andrew Mok: And our next question will come from Andrew Mok with Barclays. Please go ahead.

Chris Hunter: Yes.

Chris Hunter: Okay.

Chris Hunter: Okay.

Andrew Mok: Hi, good morning, there's been a year over year decline in specialty revenue it looks like for five quarters in a row now which has contributed to the broader deceleration in same store revenue can you help us understand what's going on with that line, specifically and when you expect to get back on track for growth.

Chris Hunter: Okay.

Speaker Change: System and we've seen examples of that in the past where the populations have been carved out and things like work requirements.

Christopher Hunter: And thanks for the question, Sarah. You know, as we discussed in the prepared remarks, you know, our 25 guidance has assumed a roughly $20 million EBITDA headwind for the full year from this group of underperforming facilities that we had first called out in the fourth quarter, which you're asking about. And so I would say those facilities have performed overall in line with our expectations. They had a negative impact on our same facility patient growth of about 90 basis points in the first quarter. And we'd expect to begin to comp over that headwind of volumes in the fourth quarter of 25.

Speaker Change: Think what youre seeing in the bill.

Speaker Change: Hi, Yes, yes, I'll jump in Hi, Andrew.

Speaker Change: Appears to have some significant carve outs related but we're just going to have to continue to work through it and obviously continue to to to lobby with the broader.

Speaker Change: A couple of things I would point to first is we have.

Speaker Change: We have closed some specialty facilities.

Speaker Change: For the past several quarters and obviously, we closed one in Q1 of this year and then there were.

Speaker Change: H and broader industry groups.

Speaker Change: A few others that we've closed over the past handful of quarters and so that's part of what is contributing to that it was.

Speaker Change: Got it and then I wanted to see if Heather had any comments on the.

Speaker Change: If the cash flow from operations in the quarter I think the legal expenses, probably had an impact there but was there any other sort of timing things to think through when those would normalize.

Speaker Change: It was about 5% down in the first quarter and that really.

Christopher Hunter: So, you know, the underperformances tended to be correlated more with local media coverage that's more intensive. Healthcare is obviously local rather than any news at the national level. And it's just, it's difficult to put an estimate on the timing. But, you know, we continue, as we had said at the outset, to be prudent and taking a more conservative approach when we set guidance. And I think this is an example of that. We continue to execute and, you know, just feel very good about the path that we're on.

Speaker Change: Mostly driven by the facility closure.

Yes.

Speaker Change: Yes, the only thing I would point to is obviously as we've talked about we are alright.

Speaker Change: Over the past I would say in a.

Speaker Change: A year and a half we've wound down for specialty facilities and that includes the one that I just mentioned in the fourth quarter. So that's part of it.

Speaker Change: Clearly at the peak from a Capex perspective, as we are in the middle of the highest number of new beds that the company has experienced.

Speaker Change: The other part is if you think about just from a revenue perspective.

Speaker Change: We have seen some nice growth in the Medicaid specialty in patient business.

Speaker Change: With the end of last year, the significant number of beds coming on some of the.

Speaker Change: Obviously that has a differential from just a year over year perspective on the overall revenue contribution.

Unknown Executive: But nothing additional that I would call.

Speaker Change: Costs continue to flow through related to those in Q1.

Unknown Executive: Okay, great.

Unknown Executive: Thank you, guys.

Speaker Change: Capex and cash is obviously cash basis not accrual so even though we opened the beds in Q4 the costs are still going to come through in Q1, So that's part of it.

Speaker Change: For that depending on the type.

Joanna Gajuk: And our next question will come from Joanna Gajuk with Bank of America. Please go ahead. Hi, good morning. Thanks for thanking questions. So I guess first follow up on the Tennessee DTP that I missed it. I know you said that you assume, you know, second half of this year, but did you say how much you expect from that program?

Speaker Change: The types of.

Speaker Change: Treatment those patients need, but really I think it's mostly driven by the closures.

Speaker Change: Incrementally just to add on to that obviously, we have added.

Speaker Change: Got it that's helpful and as we contemplate the recognition of state supplemental.

Speaker Change: A large number of beds already this year.

Speaker Change: Global payments from Tennessee is that mostly an acute inpatient item it.

Speaker Change: With Q1, we've added.

Speaker Change: Almost 400, new beds already so that's a piece of it as well.

Speaker Change: It would hit that revenue line.

Heather Dixon: Hi there. No, we did not say how much we expect from that program in particular. We have said historically, since our earnings call for Q4, we said that we expect total supplemental payments on a net basis to be flat to up $15 million for the full year inclusive of Tennessee, but we haven't called out any numbers for Tennessee specifically or for any other states for that Okay. And I guess, would you remind us, was there any out-of-period payments last year in 24? So, when we think about the numbers flat to up 15, is there something we should adjust out from last year?

Speaker Change: Yes.

Speaker Change: Okay understood. Thank you.

Speaker Change: Keep in mind that.

Speaker Change: Thanks for all the color.

Speaker Change: Startup losses are also part of that and those are clearly at a peak in Q1.

Speaker Change: And our next question will come from Sarah James with Cantor Fitzgerald. Please go ahead.

Speaker Change: What we expect for the full year as we've talked about as we move through the area of $50 to $55 million for the year, but there was a predominance in Q1.

Speaker Change: Hi, guys. This is caveat for Sarah I, just have a quick one could you elaborate if there was any weather impact on your facilities in the south Eastern States. One of your peers has seen that and then maybe if you could just elaborate on how trends are going on some of the underperforming facilities spoken to you last quarter.

Speaker Change: And to that vessel.

Speaker Change: So what youre, saying Youre correct, obviously, the legal costs, that's come through and that's part of what.

Speaker Change: Is coming through from a legal perspective.

Speaker Change: Impacting cash flow I think those are the primary moving parts hopefully that's helpful and answered your question.

Speaker Change: Yes, I'll start and then Chris if he I'm sure you want to you want to say some things about some of the operations of the facilities.

Speaker Change: Got it thank you.

Speaker Change: From a weather perspective, nothing material for us to call out.

Heather Dixon: Yeah, no, that's a great question. And thanks for the reminder. We did call out last year, 10 million, approximately 10 million payments that that we saw predominantly in Q1, about 7 million of those were in Q1. And then the rest were in the balance of the year. But yes, we did.

Speaker Change: Obviously, it's seasonal and every year, we see some some sorts of weather in different parts of the business, but nothing I would really call out and point to Chris.

Andrew Mok: And our next question will come from Andrew Mok with Barclays. Please go ahead.

Andrew Mok: Hi, good morning, there's been a year over year decline in specialty revenue it looks like for five quarters in a row now which has contributed to the broader deceleration in same store revenue can you help us understand what's going on with that line, specifically and when you expect to get back on track for growth.

Chris Hunter: Chris do you want to you want to add.

Chris Hunter: Give some color on those facilities the underperforming facilities.

Chris Hunter: Sure and thanks for the question Sarah as we discussed in the prepared remarks.

Joanna Gajuk: All right, thank you.

Christopher Hunter: And if I may, another follow up on a different topic on these handful problem facilities. So I understand you're saying, you know, thanks to former inlander, but is there anything you continue to do there to try to improve the situation as in, like, you know, can you give us an update on these referral sources, you know, outreach that you've had and, you know, any, any traction, I guess, you're getting there. Thank you. Yeah, I would say there's a number of things that we can continue to do. I mean, obviously, we have been very deliberate about meeting with our referral sources, particularly in person, and also inviting them to these facilities, as well, which we, you know, do all the time, but we've tried to be, you know, even more intentional about making that happen since the fourth quarter.

Chris Hunter: 25 guidance had assumed a roughly $20 million EBITDA headwind for the full year from this group of underperforming facilities that we had first called out in the in the fourth quarter, which you're asking about and so I would say those facilities performed overall in line with our expectations.

Andrew Mok: Hi, Yes, yes, I'll jump in Hi, Andrew.

Andrew Mok: A couple of things I would point to first is we have we have closed some specialty facilities.

Andrew Mok: For the past several quarters and obviously, we closed one in Q1 of this year and then there were.

Chris Hunter: They had a negative impact on our same facility patient growth of about 90 basis points in the first quarter and we'd expect to begin to comp over that headwind to volumes in the fourth quarter of 2005. So.

Andrew Mok: A few others that we've closed over the past handful of quarters and so that's part of what is contributing to that it was.

Andrew Mok: It was about 5% down in the first quarter and that really.

Chris Hunter: The underperformance has tended to be correlated more with.

Andrew Mok: Mostly driven by the facility closure.

Chris Hunter: Local media coverage this more intensive healthcare is obviously local.

Andrew Mok: Over the past I would say in a.

Andrew Mok: A year and a half we've wound down for specialty facilities and that includes the one that I just mentioned in the fourth quarter. So thats part of it.

Christopher Hunter: You know, we've obviously done everything from talent reviews and taking a look at the existing staffing, making sure that we don't have key positions that are unfilled, working with our talent acquisition team very closely on that, and then, obviously, working with our other corporate functions, including our quality team, to make sure that, you know, we have everything in place that we need to continue to provide high-quality services. And so, we're just, we're looking at a range of things at any given facility. There isn't one step that I would call out, but just in totality, you know, we're just very, very much cognizant of making sure that we're continuing to deliver high-quality care, and that we have the right staffing in place, and that we're continuing to focus on the right referral sources, and that we're able to provide, you know, a great patient experience when the opportunity avails itself, and we'll continue executing on that plan.

Chris Hunter: Rather than any news at the national level.

Chris Hunter: It's difficult to put an estimate on the timing, but we continue.

Chris Hunter: As we had said at the outset to be prudent.

Andrew Mok: The other part is if you think about just from a revenue perspective.

Chris Hunter: And taking a more conservative approach when we set guidance and I think this is an example of that we continue to execute in.

Andrew Mok: We have seen.

Andrew Mok: Nice growth in the Medicaid specialty in patient business.

Chris Hunter: Just feel very good about the path that we're on but nothing additional that I would call out.

Andrew Mok: Obviously that has a differential from just a year over year perspective on the overall revenue contribution.

Speaker Change: Okay, great. Thank you guys.

Andrew Mok: With that depending on the type.

Speaker Change: And our next question will come from Joanna <unk> with Bank of America. Please go ahead.

Andrew Mok: The types of.

Andrew Mok: Treatment those patients need, but really I think it's mostly driven by.

Speaker Change: Hi, good morning, Thanks for taking our questions. So I guess the first follow up on.

Andrew Mok: The closures.

Speaker Change: The Tennessee DPP did I missed it.

Andrew Mok: Got it that's helpful and as we contemplate the recognition of state supplemental.

Speaker Change: I know you said that you expect to assume.

Speaker Change: Second half of this year, but did you say how much you expect from that program.

Andrew Mok: Local payments from Tennessee is that mostly an acute inpatient item.

Andrew Mok: It would hit that revenue line.

Speaker Change: Hi, there no we didn't we did not say how much we expect from that program in particular, we have said historically.

Andrew Mok: Yes.

Andrew Mok: Okay understood. Thank you.

Andrew Mok: Thanks for all the color.

Speaker Change: Since June <unk> of.

Speaker Change: Our earnings call for Q4, we said that we expect total supplemental payment on a net basis should be.

Speaker Change: And our next question will come from Sarah James with Cantor Fitzgerald. Please go ahead.

Christopher Hunter: This concludes our question and answer session.

Christopher Hunter: I'd like to turn the conference back over to Chris Hunter for any closing remarks. Thank you. In closing, I just want to again thank our committed facility leaders, clinicians, and approximately 26,000 dedicated employees across the country who've continued to work tirelessly to meet the needs of our patients in a safe and effective manner. We are together doing incredibly important work for our patients across the country and remain committed to serving them with care, compassion, and expertise. Thank you all for being with us this morning and for your interest in Acadia.

Speaker Change: Hi, guys. This is gaby on for Sarah I, just have a quick one could you elaborate if there was any weather impact on your facilities in the south Eastern States. One of your peers have seen that and then maybe if you could just elaborate on how trends are going on some of the underperforming facilities spoken to you last quarter.

Speaker Change: That to up $15 million for the full year inclusive of Tennessee, but we haven't called out any numbers for Tennessee, specifically or for any other states for that matter.

Speaker Change: Okay, and I guess would you remind us was there any.

Speaker Change: Out of periods payments last year.

Speaker Change: Yes, I'll start and then Chris I'm sure you want to you want to say some things about some of the operations of the facilities from a weather perspective, nothing material for us to call out.

Speaker Change: Four so when we think about the numbers flat to up 15 is there something we should adjust out from last year.

Speaker Change: Yes, that's a great question and thanks for the reminder, we did call out last year $10 million approximately $10 million payment.

Speaker Change: Obviously, its seasonal what every year, we see some some sorts of weather in different parts of the business, but nothing I would really call out and point to Chris.

Unknown Executive: Have a great day.

Speaker Change: That we saw predominantly in Q1 about $7 billion of those were in Q1 and then the rest are in the balance of the year, but yes, we did.

Chris Hunter: Chris do you want to.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation.

Give some color on those facilities the underperforming facilities.

Unknown Executive: You may now disconnect your line.

Sure and thanks for the question Sarah.

Speaker Change: Alright, Thank you and if I may another follow up on different topic on these handful problem facility. So I understand you're saying things are performing in line there.

Chris Hunter: As discussed in the prepared remarks.

Chris Hunter: Our 25 guidance that assumed a roughly $20 million EBITDA headwind for the full year from this group of underperforming facilities that we had first called out in the in the fourth quarter, which youre asking about and so I would say those facilities performed overall in line with our expectations.

Speaker Change: But is there anything you continue to do there to try to improve the situation doesn't muck you know can you give us an update on this referral sources.

Speaker Change: I appreciate that you've had and any any traction I guess, you're getting there. Thank you.

Chris Hunter: They had a negative impact on our same facility patient growth of about 90 basis points in the first quarter and we'd expect to begin to comp over that headwind to volumes in the fourth quarter of 2005. So.

Yes, I would say there is a number of things that we can continue to do I mean, obviously, we have been very deliberate about meeting with our referral sources, particularly in person and also inviting them to these facilities.

Chris Hunter: The underperformance has tended to be correlated more with.

Speaker Change: As well, which we do all the time, but we've tried to be.

Local media coverage, that's more intensive healthcare is obviously local.

Speaker Change: Even more intentional about making that happen since the fourth quarter.

Chris Hunter: Rather than any news at the national level.

Speaker Change: We've obviously done everything from talent reviews, and taking a look at the existing staffing making sure that.

Chris Hunter: It's difficult to put an estimate on the timing, but we continue.

Chris Hunter: As we had said at the outset to be prudent.

Speaker Change: We don't have key positions that are that are unfilled working with our talent acquisition team very closely on that and then obviously working with our other corporate functions, including our quality team to make sure that we have.

Chris Hunter: And taking a more conservative approach when we set guidance and I think this is an example of that we continue to execute in.

Just feel very good about the path, we're on but nothing additional that I would call it.

Speaker Change: Have everything in place that we need to continue to provide high quality services and so we're just we're looking at a range of things in any given facility there isn't one.

Speaker Change: Okay, great. Thank you guys.

Chris Hunter: Okay.

Chris Hunter: And our next question will come from Joanna <unk> with Bank of America. Please go ahead.

Speaker Change: Step that I would call out, but just in totality. We're just very very much cognizant of making sure that we're continuing to deliver high quality care and that we have the right staffing in place and that we're continuing to focus on the right referral sources and that we're able to provide.

Chris Hunter: Hi, Good morning, Thanks for taking my question. So I guess the first follow up.

Chris Hunter: On the Tennessee, DPP did I missed it I know.

Chris Hunter: You said that you assume.

Chris Hunter: Second half of tissue, but did you say how much you expect from that program.

Speaker Change: Hi, there no. We did we did not say how much we expect from that program in particular, we have said historically.

Speaker Change: <unk> provided a great patient experience when the opportunity avails itself and we will continue executing on that plan.

Chris Hunter: Since our.

Chris Hunter: Our earnings call for Q4, we said that we expect total supplemental payments on a net basis to be at.

Speaker Change: Yeah.

Speaker Change: And this concludes our question and answer session I would like to turn the conference back over to Chris Hunter for any closing remarks.

Chris Hunter: Flat to up $15 million for the full year inclusive of Tennessee, but we haven't called out any numbers for Tennessee, specifically or for any other states for that matter.

Chris Hunter: Thank you in closing I just wanted to again, thank our committed facility leaders clinicians and approximately 26000 dedicated employees across the country, who have continued to work tirelessly to meet the needs of our patients in a safe and effective manner. We are together doing incredibly important work.

Speaker Change: Okay, and I guess would you remind us was there any.

Chris Hunter: Out of periods payments last year.

Chris Hunter: <unk> four so when we think about the numbers flat to up 15, just something we should adjust out from last year.

Chris Hunter: For patients across the country and remain committed to serving them with care compassion and excellence. Thank you all for being with US This morning and for your interest in Acadia have a great day.

Speaker Change: Yes, that's a great question and thanks for the reminder, we did call out last year $10 million approximately $10 million in payments.

Chris Hunter: Yes.

Speaker Change: That we saw predominantly in Q1 about $7 billion of those were in Q1 and then the rest are in the balance of the year.

Chris Hunter: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Speaker Change: Yes, we did.

Speaker Change: Alright, Thank you and if I may another follow up on different topic on this.

Speaker Change: Problem facility, so I understand you're saying things are performing in line there.

Speaker Change: But is there anything you continue to do there to try to improve the situation as it.

Speaker Change: Can you give us an update on this referral sources.

Speaker Change: I appreciate that you've had and.

Speaker Change: Any any traction I guess youre getting there. Thank you.

Speaker Change: Yes, I would say Theres a number of things that we can continue to do I mean, obviously, we have been very deliberate about meeting with our referral sources, particularly in person and also inviting them to these facilities.

Speaker Change: As well, which we do all the time, but we've tried to be.

Speaker Change: Even more intentional about making that happen since the fourth quarter.

Speaker Change: We've obviously done everything from talent reviews, and taking a look at the existing staffing making sure that we.

Speaker Change: We don't have key positions that are that are unfilled working with our talent acquisition team very closely on that and then obviously working with our other corporate functions, including our quality team to make sure that.

Speaker Change: We have everything in place that we need to continue to provide high quality services and so we're just we're looking at a range of things in any given facility there isn't one.

Speaker Change: Step that I would call out, but just in totality. We're just very very much cognizant of making sure that we're continuing to deliver high quality care and that we have the right staffing in place and that we're continuing to focus on the right referral sources and that we're able to.

Speaker Change: Providing a great patient experience when the opportunity avails itself and we will continue executing on that plan.

Speaker Change: And this concludes our question and answer session I would like to turn the conference back over to Chris Hunter for any closing remarks.

Chris Hunter: Thank you in closing I just wanted to again, thank our committed facility leaders clinicians and approximately 26000 dedicated employees across the country, who have continued to work tirelessly to meet the needs of our patients in a safe and effective manner.

Chris Hunter: We are together doing incredibly important work for our patients across the country and remain committed to serving them with care compassion and excellence. Thank you all for being with US This morning and for your interest in Acadia have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.