ACHC 10-K & 10-Q changes, risk factors and insider trading

We are subject to volatility in the global capital and credit markets as well as significant developments in macroeconomic and political conditions that are out of our control.control, including any effects that a U.S. government shutdown, tariffs or trade disputes may have on financial markets and macroeconomic conditions.

Increased inflationary pressure and rising interest rates may adversely impact our business, financial condition and results of operations.

An increase in uninsured or underinsured patientspatients, from healthcare policy changes or otherwise, or the deterioration in the collectability of patient accounts receivables could harm our results of operations.

Our stock price has been, and may continue to be, volatile. Fluctuations in our operating results, quarter to quarter earnings and other factors, including factors outside of our control, may result in significant decreases in the price of our common stock.

Future sales of common stock by us or our existing stockholders may cause our stock price to fall.

For example, on July 7, 2023, in connection with one of the lawsuits in our Desert Hills Litigation (as described in more detail in Note 11 — Commitments and Contingencies in the accompanying notes to our consolidated financial statements, on July 7, 2023, in connection with one of the lawsuits in our Desert Hills Litigation,statements), a jury awarded the plaintiff compensatory damages of $80.0 million and punitive damages of $405.0 million. We subsequently paid an aggregate amount of $400.0 million in exchange for the release and discharge of all claims arising from, relating to, concerning or with respect to this lawsuit, as well as two other related cases. An additional lawsuit based on similar facts has been filed and we could incur substantial damage awards or settlements in connection with this lawsuit or any future claims.

We have been in the past and will continue in the future to be subject to medical malpractice lawsuits and other legal actions in the ordinary course of business. Some of these actions, such as the Desert Hills Litigation, may involve large claims, as well as significant defense costs. We cannot predict the outcome of these lawsuits or the effect that findings in such lawsuits may have on us. We maintain liability insurance intended to cover service user, third-party and employee personal injury claims. Due to the structure of our insurance program under which we carry a large self-insured retention, there may be substantial claims in respect of which the liability for damages and costs falls to us before being met by any insurance underwriter. As was the case with the Desert Hills Litigation, there may also be claims in excess of our insurance coverage or claims which are not covered by our insurance due to other policy limitations or exclusions or where we have failed to comply with the terms of the policy. Furthermore, there can be no assurance that we will be able to obtain liability insurance coverage in the future on acceptable terms, or without substantial premium increases or at all, particularly if there is a deterioration in our claim experience history. A successful claim against us not covered by or in excess of our insurance coverage could have a material adverse effect on our business, results of operations and financial condition. In addition, our commercial insurance coverage for the period commencing in September 2025 contains less favorable terms than previous years, including coverage exclusions for incidents involving sexual molestation or abuse, higher premiums and potentially lower aggregate limitations.

Property owners and local authorities have attempted, and may in the future attempt, to use or enact zoning ordinances to eliminate our ability to operate a given treatment facility or program. Local governmental authorities in some cases also have attempted to use litigation and the threat of prosecution to force the closure of certain comprehensive treatment facilities.CTCs. If any of these attempts were to succeed or if their frequency were to increase, our revenue would be adversely affected and our operating results might be harmed. In addition, such actions may require us to litigate which would increase our costs.

In addition to HIPAA, we are subject to similar, and in some cases more restrictive, state and federal privacy regulations. For example, the federal government and some states impose laws governing the use and disclosure of health information pertaining to mental health and/or substance abuse treatment that are more stringent than the rules that apply to healthcare information generally. Part 2 regulations mandate strict confidentiality for SUD Records, permitting disclosure only as expressly authorized under the regulations. As public attention is drawn to the issues of the privacy and security of medical information, states may revise or expand their laws concerning the use and disclosure of health information, or may adopt new laws addressing these subjects.

Violations of the privacy and security regulationsregulations, including HIPAA or the Part 2 regulations, could subject our operations to substantial civil monetary penalties and substantial other costs and penalties associated with a breach of data security, including criminal penalties. We may also be subject to substantial reputational harm if we experience a substantial security breach involving PHI.

Changes in these government programs in recent years have resulted in limitations on reimbursement and, in some cases, reduced levels of reimbursement for healthcare services. Payments from federal and state government healthcare programs are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations, requirements for utilization review, and federal and state funding restrictions, all of which could materially increase or decrease program payments, as well as affect the cost of providing service to patients and the timing of payments to facilities. We are unable to predict the effect of recent and future policy changes on our operations. In addition, since most states operate with balanced budgets and since the Medicaid program is often a state’s largest program, some states can be expected to enact or consider enacting legislation formulated to reduce their Medicaid expenditures. If the rates paid or the scope of services covered by government payors are reduced, there could be a material adverse effect on our business, financial condition and results of operations.

At December 31, 2024,2025, we had approximately $2.0$2.5 billion of total debt (net of debt issuance costs, discounts and premiums of $8.9$16.8 million), which included approximately $1.0 billion of debt under the Credit Facility, $450.0 million of debt under the 5.500% Senior Notes (as defined below) and, $475.0 million of debt under the 5.000% Senior Notes (as defined below)., and $550.0 million of debt under the 7.375% Senior Notes. See “Item 1. Business — Financing Transactions” for additional details regarding our outstanding indebtedness.

InOn JanuaryFebruary 2024,28, 2025, we entered into the SecondCredit Amendment,Agreement which provides for thea incurrence$1.0 ofbillion $350.0Revolving Facility and a $650.0 million of Incremental Term Loans.Loan Facility, each maturing on February 28, 2030. We may incur substantial additional debt, including additional notes and other debt, in the future. Although the indentures governing the Senior Notes (as defined below) and the Credit Facility contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of debt that could be incurred in compliance with these restrictions could be substantial. If new debt is added to our existing debt levels, the related risks that we now face would intensify and we may not be able to meet all our debt obligations.

We are required under U.S. generally accepted accounting principles (“GAAP”) to review our goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events indicate the carrying value of a reporting unit may not be recoverable. For the year ended December 31, 2025, we recorded non-cash impairment charges of $1,007.9 million, which is recorded in loss on impairment in our consolidated statement of operations. The non-cash impairment charges included goodwill impairment of $996.2 million, indefinite-lived asset impairments of $0.3 million, property impairments of $10.4 million and operating lease right-of-use asset impairments of $1.0 million. For the year ended December 31, 2024, we recorded non-cash impairment charges of $17.3 million related to the closure of certain facilities, which is recorded in loss on impairment in our consolidated statement of operations. The non-cash impairment charges included indefinite-lived asset impairments of $3.5 million, property impairments of $12.4 million and operating lease right-of-use asset impairments of $1.4 million. For the year ended December 31, 2023, we recorded non-cash impairment charges of $9.8 million related to the closure of certain facilities, which is recorded on our consolidated statement of operations. The non-cash impairment charges included indefinite-lived asset impairments of $5.4 million, property impairments of $2.0 million and operating lease right-of-use asset impairments of $2.4 million. Our evaluation of goodwill and the need for any further impairment in subsequent periods is sensitive to revisions to our current projections. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Property and Equipment and otherOther Long-Lived Assets” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Goodwill and Indefinite-Lived Intangible Assets” for additional information.

We are subject to volatility in the global capital and credit markets as well as significant developments in macroeconomic and political conditions that are out of our control.control, including any effects that a U.S. government shutdown, tariffs or trade disputes may have on financial markets and macroeconomic conditions.

Our business has in the past been, and may continue to be, affected by a number of factors that are beyond our control, such as general macroeconomic conditions, conditions in the financial services markets, geopolitical conditions and other general political and economic developments,developments (including a U.S. government shutdown or the imposition of tariffs or trade disputes), and can continue to be affected by such factors in the future. In particular, we have historically financed acquisitions, the development of de novo and joint venture facilities and the modification of our existing facilities through a variety of sources, including our own cash reserves and debt financing. While we intend to seek to finance acquisitions and new and existing developments from similar sources in the future, there may be insufficient cash reserves to fund the budgeted capital expenditure and market conditions and other factors may prevent us from obtaining debt financing on appropriate terms or at all. In addition, market conditions may limit the number of financial institutions that are willing to provide financing to landlords with whom we wish to contract to build new healthcare facilities which can then be made available to us under a long-term operating lease. If conditions in the global economy remain uncertain or weaken further, this could materially adversely impact our average daily census (“ADC”), which would have a corresponding negative impact on our business, results of operations and financial condition.

A sizable portion of our revenue from certain residential recovery, eating disorder facilities, CTCs and youth programs is from self-payors. Accordingly, a sustained downturn in the U.S. economy could restrain the ability of our patients and the families of our studentspatients to pay for services.

Increased inflationary pressure and rising interest rates may adversely impact our business, financial condition and results of operations.

We have experienced, and may continue to experience, increased inflationary pressure on our business, including increased personnelpersonnel, construction and supply chain costs. Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability, including the ongoing conflicts between Ukraine and Russia and in Israel and Gaza.instability. Continuing inflationary pressure, has in the past, and could in the future, impact our costs of labor and services and the margins we are able to realize on the operation of our facilities and services, all of which could have an adverse impact on our business, financial position, results of operations and cash flows. InflationIn hasaddition, alsosustained resultedperiods of elevated inflation may result in higher interest rates, which in turn willwould result in higher costs of debt borrowing and could limit our growth strategy.

An increase in uninsured or underinsured patientspatients, from healthcare policy changes or otherwise, or the deterioration in the collectability of patient accounts receivables could harm our results of operations.

Significant changes in business office operations, payor mix, economic conditions or trends in federal and state governmental health coverage could affect our collection of accounts receivable, cash flow and results of operations. If we experience unexpected increases in the growth of uninsured and underinsured patients or in bad debt expenses, our results of operations will be harmed.

Delays caused by difficulties in respect of any of the above factors may lead to cost overruns and longer periods before a return is generated on an investment, if at all. We may incur significant capital expenditure but due to a regulatory, planning or other reason, may find that we are prevented from opening a de novo or joint venture facility or modifying an existing facility. Moreover, even when incurring such development capital expenditure, there is no guarantee that we can fill beds when they become available. Upon operational commencement of a de novo or joint venture facility, we typically expect that it will take 10 to 12 months, on average, to reach break-even results. Any delays or stoppages in our projects, the unsatisfactory completion or construction of such projects or the failure of such projects to increase our occupancy levels could have a material adverse effect on our ADC, which would have a corresponding negative impact on our business, results of operations and financial condition.

Our future growth will partly depend on our ability to maintain our reputation for providing quality patient care and, through new programs and marketing activities, increased demand for our services. Factors such as increased acuity of our patients, health and safety incidents at our facilities, regulatory enforcement actions, negative press, civil liability or general customerpatient dissatisfaction could lead to deterioration in the level of our quality ratings or the public perception of the quality of our services (including as a result of negative publicity about our industry generally), which in turn could lead to a loss of patient placements, referrals and self-pay patients or service users. Any impairment of our reputation, loss of goodwill or damage to the value of our brand name could have a material adverse effect on our business, results of operations and financial condition.

Revenue from Pennsylvania, CaliforniaTennessee, and TennesseeCalifornia represented approximately 13%, 8%10% and 7%8% of our total revenue for the year ended December 31, 2024,2025, respectively. This concentration makes us particularly sensitive to legislative, regulatory, economic, environmental and competition changes in those states. Any material change in the current payment programs or regulatory, economic, environmental or competitive conditions in these locations could have a disproportionate effect on our overall business results. Several of our facilities in these states serve patients from neighboring states and receive payments from their Medicaid programs. Therefore, any legislative or regulatory changes occurring in bordering states that restrict out-of-state Medicaid coverage could significantly impact our revenue. If our facilities in these locations are adversely affected by changes in regulatory and economic conditions, our business, financial condition or results of operations could be adversely affected.

A shortage of nurses, qualified addiction counselors and other medical and care support personnel, combined with low unemployment rates for such personnel and intense competition from other healthcare facilities, has been a significant operating issue facing us and other healthcare providers. We may be required to enhance wages and benefits to hire nurses, qualified addiction counselors and other medical and care support personnel, hire more expensive temporary personnel or increase our recruiting and marketing costs relating to labor. We have resorted to using more expensive contract labor at certain of our facilities, and the use of temporary or agency staff could heighten the risk one of our facilities experiences an adverse patient incident. Further, because we generally recruit our personnel from the local area where the relevant facility is located, the availability in certain areas of suitably qualified personnel can be limited, particularly care home management, qualified teaching personnel and nurses. In addition, certain of our facilities are required to maintain specified staffing levels.levels, including minimum staff- or nurse-to-patient staffing ratios applicable to our facilities located in California, which increases our labor costs. To the extent we cannot meet those levels, we may be required to limit the services provided by these facilities, which would have a corresponding adverse effect on our net operating revenue. Certain of our treatment facilities are located in remote geographical areas, far from population centers, which increases this risk.

Increased labor union activity could adversely affect our labor costs. At December 31, 2024,2025, a labor union represented approximately 131130 of our full-time employees at one of our facilities. We cannot assure you that employee relations will remain stable. Furthermore, there is a possibility that work stoppages could occur as a result of union activity, which could increase our labor costs and adversely affect our business, financial condition or results of operations. To the extent that a greater portion of our employee base unionizes and the terms of any collective bargaining agreements are significantly different from our current compensation arrangements, it is possible that our labor costs could increase materially and our business, financial condition or results of operations could be adversely affected.

We depend on key management personnel, and the departurefailure ofto attract and retain one or more of our key executivesexecutives, including our Chief Executive Officer, or a significant portion of our local facility management personnel could harm our business.

The expertise and efforts of our senior executivesexecutives, including our Chief Executive Officer and theChief chiefFinancial executive officer, chief financial officer,Officer, medical directors, physicians and other key members of our facility management personnel are important to the success of our business. ItWe have experienced significant turnover among our executive officers, including the departure of our Chief Executive Officer in January 2026 and the resignations of our Chief Financial Officer and our Chief Operating Officer effective in August 2025 and November 2025, respectively. We are actively recruiting new executive officers and may not be able to identify or hire such executives in a timely manner. If hired, it may take time for new officers to be integrated into our business. In addition, the loss of the services of one or more of our senior executives or our facility management personnel could significantly undermine our management expertise and our ability to provide efficient, quality healthcare services at our facilities, which could have a material adverse effect on our business, results of operations and financial condition.

You should read theThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

the impact of volatility in the global capital and credit markets, as well as significant developments in macroeconomic and political conditions that are out of our controlcontrol, including any effects that a U.S. government shutdown, tariffs or trade disputes may have on financial markets and macroeconomic conditions;

the impact of class action and other claims brought against us or our facilities including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations, tort and employee related claims;

the impact of fluctuations in our operating results, quarter to quarter earnings and other factors on the price of our securities; and those risks and uncertainties described from time to time in our filings with the SEC.

Our business strategy is to become the indispensable behavioral healthcare provider for the high-acuity and complex needs patient population. We are committed to providing the communities we serve with high-quality, cost-effective behavioral healthcare services, while growing our business, increasing profitability and creating long-term value for our stockholders. This strategy includes five growth pathways: expansions of existing facilities, joint venture partnerships, de novo facilities, acquisitions and expansion across our continuum of care. At December 31, 2024,2025, we operated 262277 behavioral healthcare facilities with approximatelyover 11,85012,500 beds in 3940 states and Puerto Rico. During the year ended December 31, 2024,2025, we added 7761,089 beds, consisting of 312311 added to existing facilities and 464778 added through the opening of fourone wholly-owned facilitiesfacility and onefive joint venture facility,facilities, and we closed five facilities totaling 382 beds. The five joint venture facilities opened nineduring the year ended December 31, 2025, were through partnerships with Henry Ford Health, Geisinger Health, Ascension Seton, Fairview Health Services, and ECU Health. During the year ended December 31, 2025, we opened 15 CTCs.

Revenue. Revenue increased $225.3 million, or 7.7%, to $3,154.0 million for the year ended December 31, 2024 from $2,928.7 million for the year ended December 31, 2023. Same facility revenue increased by $220.7$220.8 million, or 7.7%, to $3,100.0 million for the year ended December 31, 2024 compared to $2,879.2 million for the year ended December 31, 2023, resulting from same facility growth in patient days of 3.2%, an increase in same facility revenue per patient day of 4.3% and an increase in same facility admissions of 1.3%. Consistent with the same facility patient day growth in 2023, the growth in same facility patient days for the year ended December 31, 2024 compared to the year ended December 31, 2023 resulted from the addition of beds to our existing facilities and ongoing demand for our services.

Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $1,691.0 million for the year ended December 31, 2024 compared to $1,572.3 million for the year ended December 31, 2023, an increase of $118.7 million. SWB expense included $37.1 million and $32.3 million of equity-based compensation expense for the years ended December 31, 2024 and 2023, respectively. Excluding equity-based compensation expense, SWB expense was $1,653.9 million, or 52.4% of revenue, for the year ended December 31, 2024, compared to $1,540.0 million, or 52.6% of revenue, for the year ended December 31, 2023. Same facility SWB expense was $1,491.9 million for the year ended December 31, 2024, or 48.1% of revenue, compared to $1,393.6 million for the year ended December 31, 2023, or 48.4% of revenue.

Other operating expenses. Other operating expenses consisted primarily of purchased services, utilities, insurance, provider taxes, travel and repairs and maintenance expenses. Other operating expenses were $440.8 million for the year ended December 31, 2024, or 14.0% of revenue, compared to $388.9 million for the year ended December 31, 2023, or 13.3% of revenue. Same facility other operating expenses were $408.3 million for the year ended December 31, 2024, or 13.2% of revenue, compared to $361.8 million for the year ended December 31, 2023, or 12.6% of revenue.

Loss on impairment. During the year ended December 31, 2024, we recorded non-cash impairment charges totaling $17.3 million related to the closure of certain facilities. The 2024 non-cash impairment charges included indefinite-lived intangible asset impairments of $3.5 million, property impairments of $12.4 million and operating lease right-of-use asset impairments of $1.4 million. During the year ended December 31, 2023, we recorded non-cash impairment charges totaling $9.8 million related to the closure of certain facilities. The 2023 non-cash impairment charges included indefinite-lived intangible asset impairments of $5.4 million, property impairments of $2.0 million and operating lease right-of-use asset impairments of $2.4 million.

Government investigations include legal fees and settlement costs related to certain litigation, including the matters referenced in Note 11 — Commitments and Contingencies.Contingencies in the accompanying notes to our consolidated financial statements. Termination and restructuring costs include costs, net of gains, incurred related to workforce reductions, contract amendments, and the closure and disposition of certain facilities, including related lease terminations. Legal, accounting and other acquisition-related costs include costs incurred for the development of new facilities ($5.0 million and $2.9 million for the years ended December 31, 2024 and 2023, respectively); legal and settlement costs incurred related to certain litigation not included in government investigations ($4.8 million and $8.8 million for the years ended December 31, 2024 and 2023, respectively); and direct costs associated with acquisitions ($1.4 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively). Management transition costs include certain costs associated with the transition of the leadership team, including the design and implementation of the revised organizational structure. Management transition costs incurred with the transition of our Chief Executive Officer from Debra K. Osteen to Christopher H. Hunter beginning in the first quarter of 2022 haveconcluded concluded.in Terminationthe andfourth restructuring costs include costs, netquarter of gains, incurred related to the closure and disposition of certain facilities or contract amendments.2024.

Cash provided by operating activities for the year ended December 31, 20242025 was $129.7$131.9 million compared to $462.3$129.7 million for the year ended December 31, 2023.2024. The decline inOperating cash providedflows by operating activities was primarily due to the Desert Hills Litigation payments made duringfor the year ended December 31, 2025 were impacted by a decrease in earnings, an increase in cash paid for transaction, legal and other costs and $147.5 million of legal settlements expense for the 2019 Securities Litigation. Operating cash flows for the year ended December 31, 2024 were impacted by Desert Hills Litigation payments of $400.0 million in January 2024. Days sales outstanding at December 31, 20242025 was 4349 compared to 4543 at December 31, 2023.2024 due primarily to new facilities that continue to ramp up during the start up period, as well as identifiable payor delays, with targeted actions underway to accelerate collections.

Cash provided by financing activities for the year ended December 31, 20242025 was $583.0$481.3 million compared to cash used in financing activities of $62.7$583.0 million for the year ended December 31, 2023.2024. Cash provided by financing activities for the year ended December 31, 2025 primarily consisted of borrowings on long-term debt of $1,200.0 million, borrowings on revolving credit facility of $1,069.0 million and contributions from noncontrolling partners in joint ventures of $8.6 million, offset by principal payments on long-term debt of $12.2 million, principal payments on revolving credit facility of $1,035.0 million, distributions to noncontrolling partners in joint ventures of $3.9 million, repayment of long-term debt of $670.9 million, payment of debt issuance costs of $18.6 million, repurchase of common stock of $50.0 million, repurchase of shares for payroll tax withholdings, net of proceeds from stock option exercises, of $4.2 million, and cash consideration paid of $1.5 million. Cash provided by financing activities for the year ended December 31, 2024 primarily consisted of borrowings on long-termlong term debt of $350.0 million, borrowings on revolving credit facility of $305.0 million and contributions from noncontrolling partners in joint ventures of $5.2 million, offset by principal payments on long-term debt of $56.3 million, principal payments on revolving credit facility of $15.0 million, distributions to noncontrolling partners in joint ventures of $3.0$2.9 million, payment of debt issuance costs of $1.5 million and repurchase of shares for payroll tax withholdings, net of proceeds from stock option exercisesexercises, of $1.3 million. Cash used in financing activities for the year ended December 31, 2023 primarily consisted of repurchase of shares for payroll tax withholdings, net of proceeds from stock option exercises of $44.3 million, principal payments on revolving credit facility of $35.0 million, principal payments on long-term debt of $21.3 million and distributions to noncontrolling partners in joint ventures of $5.1 million, offset by borrowing on revolving credit facility of $40.0 million and contributions from noncontrolling partners in joint ventures of $3.0 million.

We actively manage our capital structure and regularly evaluate the availability of capital in the public and private markets that could strengthen our long-term financial profile. As such, we may opportunistically engage in financing transactions from time to time when we believe that conditions are favorable. Such transactions may include borrowings under credit facilities, the issuance of debt, equity or hybrid securities, the incurrence of term loans, or the refinancing or extinguishment of existing indebtedness. There can be no assurance any such financing opportunities will be available to us on terms and conditions acceptable to us or at all. Although we cannot provide any assurance, we believe that we will have sufficient capital available to fund requirements through the 12 month period following the filing of this Annual Report on Form 10-K, and based on current expectations, the long term.

On February 25, 2025, our board of directors authorized the shareShare repurchaseRepurchase programProgram pursuant to which we may, from time to time, acquire up to $300.0 million of outstanding shares of our common stock, exclusive of any fees, commissions, or other expenses related to such repurchases. Repurchases made pursuant to the shareShare repurchaseRepurchase programProgram will be made in accordance with applicable securities laws and may be made at management’s discretion from time to time in the open market, in privately negotiated transactions, or through block trades, derivatives transactions, or purchases made in accordance with Rule 10b-18 and Rule 10b5-1 of the Exchange Act. The shareShare repurchaseRepurchase programProgram has no termination date and may be modified, suspended or discontinued by our board of directors at any time. The authorization does not obligate us to repurchase any shares. During the year ended December 31, 2025, we repurchased 1,706,625 shares of our common stock under the Share Repurchase Program that were each cancelled at the time of repurchase for a total of $50.4 million (inclusive of $0.4 million in expenses related thereto). As of December 31, 2025, there was $250.0 million remaining under the Share Repurchase Program.

On MarchFebruary 17,28, 2021,2025, we entered into the Credit Facility,Agreement, which providedprovides for athe $600.0$1.0 millionbillion Revolving Facility and(including a Term Loan Facility in an initial principal amount of $425.0 million, each maturing on March 17, 2026. The Revolving Facility further provides for a $20.0$50.0 million subfacilitysublimit for the issuance of letters of credit.credit and a $50.0 million swingline subfacility) and a $650.0 million Term Loan Facility, each maturing on February 28, 2030.

On March 30, 2023, we entered into the First Amendment, which replaced LIBOR as the reference rate applicable to borrowingsBorrowings under the Credit Facility with Adjusted Term SOFR. After giving effect to the First Amendment, borrowings under the Credit FacilityAgreement bear interest at a floating rate equal to, at our option, either (i) Adjusteda TermSOFR-based SOFRrate plus a margin ranging from 1.375% to 2.250% or (ii) a base rate plus a margin ranging from 0.375% to 1.250%, in each case, depending on our Consolidated Total Net Leverage Ratio (as defined in the Credit FacilityAgreement). In addition, an unused fee that varies according to our Consolidated Total Net Leverage Ratio ranging from 0.200% to 0.350% is payable quarterly in arrears based on the average daily undrawn portion of the commitments in respect of the Revolving Facility. The interestTerm ratesLoan Facility requires quarterly principal repayments of $4.1 million through March 31, 2026, $8.1 million from June 30, 2026 to March 31, 2028, $12.2 million from June 30, 2028 to March 31, 2029 and $16.3 million from June 30, 2029 to December 31, 2029, with the unusedremaining lineoutstanding feeprincipal balance of the Term Loan Facility due on unused commitments related to the Creditmaturity Facilitydate areof basedFebruary upon28, the following pricing tiers:2030.

the impact of volatility in the global capital and credit markets, as well as significant developments in macroeconomic and political conditions that are out of our control, including any effects that ongoing global conflicts, tariffstariffs, or trade disputes may have on financial markets and macroeconomic conditions;

the impact of class action and other claims brought against us or our facilities including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations andviolations, tort and employee related claims;

Our business strategy is to become the indispensable behavioral healthcare provider for the high-acuity and complex needs patient population. We are committed to providing the communities we serve with high-quality,quality, cost-effective behavioral healthcare services, while growing our business, increasing profitability and creating long-term value for our stockholders. This strategy includes five growth pathways: expansions of existing facilities, joint venture partnerships, de novo facilities, acquisitions and expansion across our continuum of care. At MarchJune 31,30, 2026, we operated 275279 behavioral healthcare facilities with approximately 12,40012,600 beds in 40 states and Puerto Rico. During the threesix months ended MarchJune 31,30, 2026, we added 82322 beds, consisting of 42 beds added to existing facilities and 40280 beds added through the opening of one wholly-owned facility and onethree joint venture facilityfacilities. The three joint venture facilities opened during the six months ended June 30, 2026, were through partnerships with Tufts Medicine.Medicine, Orlando Heath, and Methodist Jennie Edmundson. During the threesix months ended MarchJune 31,30, 2026, we closedopened fourtwo facilities with an aggregate of 251 beds.CTCs.

In addition, the OBBBA includes significant changes to Medicaid funding mechanisms by restricting federal matching funds received by state Medicaid programs. The law prohibits states from establishing new provider assessments or taxes, or increasing the rates of existing provider assessments, for state fiscal years beginning after October 1, 2026, while also limiting the structure and application of such assessments. Pursuant to the OBBBA, the HHSU.S. Department of Health and Human Services revised regulations governing state directed payment program arrangements to cap total payment rates paid by Medicaid managed care organizations for certain services at Medicare payment rates instead of average commercial rates and imposed lower caps in Medicaid expansion states, which impacts Medicaid payment rates for services rendered in our hospital facilities. The revised regulations apply to state directed payment programs established on or after July 4, 2025 unless the program meets certain grandfathering criteria. The OBBBA provides that payments under grandfathered programs will be reduced beginning January 1, 2028.

We believe that we are well positioned to help meet the growing demand for behavioral healthcare services and recorded revenue growth of 7.6%3.3% for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. Similar to many other healthcare providers and other industries across the country, we have been navigating a tight labor market. While we experienced higher wage inflation compared to historical averages in recent years, we continue to see stability in our labor costs and our proactive focus helps us manage through this environment. We remain focused on ensuring that we have the level of staff to meet the demand in our markets across 40 states and Puerto Rico.

The following table sets forth percent changes in same facility operating data for the three and six months ended MarchJune 31,30, 2026 compared to the same periodperiods in 2025:

Same facility results include operating results only for facilities and services operated in both the current and prior year periods.year. These metrics exclude the operating results associated with facilities under operation for less than one year and facilities acquired during the current or prior year, as well as facilities divested or removed from service, and also exclude general and administrative costs related to our corporate functions. Such costs related to our corporate functions include, amongst others, costs for accounting and finance, information systems, human resources, legal and operational and executive leadership. General and administrative costs directly related to the facilities are included in same facility results. Such costs directly related to our facilities include, amongst others, labor at the facility level, insurance, including property, professional, legal and general liability insurance, hospital supplies, including medication, utilities and food service, and general maintenance costs for the facility. We determine which general and administrative costs to exclude and include in same facility results by ensuring those costs directly associated with facility operations are captured at the facility level for reporting.

Three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025

Revenue. Revenue increaseddecreased $58.3$3.4 million, or 7.6%,0.4%, to $828.8$865.8 million for the three months ended MarchJune 31,30, 2026 from $770.5$869.2 million for the three months ended MarchJune 31,30, 2025. The three months ended June 30, 2026, included $22.3 million of revenue from one state government program based on timing of program approval, all of which related to services rendered in prior periods. The three months ended June 30, 2025, included $65.6 million of revenue from one state government program based on timing of program approval, $48.7 million of which related to services rendered in prior periods. Same facility revenue increaseddecreased $55.0$0.4 million, or $7.3%,0.1%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, resulting from same facility growthdecline in revenue per day of 5.6%;0.8%, partially offset by same facility growth in patient days of 1.6%;0.8% and same facility growth in admissions of 6.5%.6.4%. Consistent with same facility revenue growth in 2025, the growth in same facility patient days for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 resulted from the addition of beds to our existing facilities and ongoing demand for our services.

Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $467.0$474.1 million for the three months ended MarchJune 31,30, 2026 compared to $445.3$452.4 million for the three months ended MarchJune 31,30, 2025, an increase of $21.7 million. SWB expense included $8.0$11.0 million and $8.7$10.5 million of equity-based compensation expense for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Excluding equity-based compensation expense, SWB expense was $459.0$463.1 million, or 55.4%53.5% of revenue, for the three months ended MarchJune 31,30, 2026, compared to $436.6$441.9 million, or 56.7%50.8% of revenue, for the three months ended MarchJune 31,30, 2025. Same facility SWB expense was $411.0$421.2 million for the three months ended MarchJune 31,30, 2026, or 50.5%49.2% of revenue, compared to $396.5$403.4 million for the three months ended MarchJune 31,30, 2025, or 52.3%47.1% of revenue.

Supplies.Professional Suppliesfees. expenseProfessional wasfees $29.5were $55.8 million for the three months ended MarchJune 31,30, 2026, or 3.6%6.4% of revenue, compared to $28.3$50.0 million for the three months ended MarchJune 31,30, 2025, or 3.7%5.7% of revenue. Same facility suppliesprofessional expensefees waswere $28.5$48.2 million for the three months ended MarchJune 31,30, 2026, or 3.5%5.6% of revenue, compared to $27.6$43.8 million for the three months ended MarchJune 31,30, 2025, or 3.6%5.1% of revenue.

RentsSupplies. andSupplies leases.expense Rentswas and leases were $11.7$30.2 million for the three months ended MarchJune 31,30, 2026, or 1.4%3.5% of revenue, compared to $11.7$28.5 million for the three months ended MarchJune 31,30, 2025, or 1.5%3.3% of revenue. Same facility rentssupplies andexpense leaseswas were $10.0$29.5 million for the three months ended MarchJune 31,30, 2026, or 1.2%3.4% of revenue, compared to $10.3$27.9 million for the three months ended MarchJune 31,30, 2025, or 1.4%3.3% of revenue.

Other operating expenses. Other operating expenses consisted primarily of purchased services, utilities, insurance, provider taxes, travelRents and repairsleases. Rents and maintenance expenses. Other operating expensesleases were $131.1$11.8 million for the three months ended MarchJune 31,30, 2026, or 15.8%1.4% of revenue, compared to $114.0$12.6 million for the three months ended MarchJune 31,30, 2025, or 14.8%1.5% of revenue. Same facility otherrents operatingand expensesleases were $120.0$10.2 million for the three months ended MarchJune 31,30, 2026, or 14.7%1.2% of revenue, compared to $105.3$11.2 million for the three months ended MarchJune 31,30, 2025, or 13.9%1.3% of revenue.

Depreciation and amortization. Depreciation and amortization expense was $52.4$50.4 million for the three months ended MarchJune 31,30, 2026, or 6.3%5.8% of revenue, compared to $47.0$49.0 million for the three months ended MarchJune 31,30, 2025, or 6.1%5.6% of revenue. The increase in depreciation and amortization was primarily due to the opening of new facilities and expansion of existing facilities.

Interest expense. Interest expense was $38.3$38.2 million for the three months ended MarchJune 31,30, 2026 compared to $29.2$35.1 million for the three months ended MarchJune 31,30, 2025. The increase in interest expense was primarily the result of increased borrowings.

Transaction, legal and other costs. Transaction, legal and other costs were $22.0$22.6 million for the three months ended MarchJune 31,30, 2026, compared to $31.1$64.4 million for the three months ended MarchJune 31,30, 2025. Transaction, legal and other costs represent legal, accounting, government investigation, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective period, as summarized below (in thousands).

Provision for income taxes. For the three months ended MarchJune 31,30, 2026, the provision for income taxes was $6.5$9.7 million, reflecting an effective tax rate of 59.3%,44.3%, compared to $4.4$12.1 million, reflecting an effective tax rate of 32.7%,24.1%, for the three months ended MarchJune 31,30, 2025. The increase in the effective tax rate for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was primarily attributable to an increase in nondeductible executivelegal compensationsettlements and an increase in valuation allowances against certain state deferred tax assets in the current year.

The followingtable tablebelow presents revenue by payor type and as a percentage of revenue (dollars in thousands) and includes an immaterial revision of amounts for the three months ended MarchJune 31,30, 2025, and the six months ended June 30, 2026 and 20252025, (dollarsto incorrect thousands):the classification of certain revenue among payors.

The following tables present a summary of our aging of accounts receivable at MarchJune 31,30, 2026 and December 31, 2025:

Cash provided by operating activities for the threesix months ended MarchJune 31,30, 2026 was $61.5$223.6 million compared to $11.5$145.0 million for the threesix months ended MarchJune 31,30, 2025. The increase in operating cash flows for the threesix months ended MarchJune 31,30, 2026 was primarily related to collection of the insurance proceeds for the 2019 Securities Litigation andLitigation, an increase in funds received from certain state supplemental payment programs,programs offsetand by unfavorablefavorable changes in working capital and other liabilities. Days sales outstanding at March 31, 2026 was 51 days compared towere 49 days at both June 30, 2026 and December 31, 2025 due primarily to new facilities that continue to ramp up during the start-up period, as well as identifiable payor delays with targeted actions underway to accelerate collections.2025.

Cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 was $60.2$92.9 million compared to $183.2$334.0 million for the threesix months ended MarchJune 31,30, 2025. Cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 primarily consisted of $76.6$115.1 million of cash paid for capital expenditures,expenditures and $4.3 million of other, offset by $16.4$26.5 million of proceeds from the sale of property and equipment. Cash paid for capital expenditures for the threesix months ended MarchJune 31,30, 2026 was $76.6$115.1 million, consisting of routine or maintenance capital expenditures of $25.1$34.9 million and expansion capital expenditures of $51.5$80.2 million. We define expansion capital expenditures as those that increase the capacity of our facilities or otherwise enhance revenue. Routine or maintenance capital expenditures, including information technology capital expenditures, were approximately 3%2% of revenue for the threesix months ended MarchJune 31,30, 2026. Cash used in investing activities for the threesix months ended MarchJune 31,30, 2025 primarily consisted of $174.6$342.4 million of cash paid for capital expendituresexpenditures, and $8.6$8.2 million of cash paid for acquisitions.acquisitions and $0.1 million of other, offset by $16.6 million of proceeds from sales of property and equipment. Cash paid for capital expenditures for the threesix months ended MarchJune 31,30, 2025 was $174.6$342.4 million, consisting of routine or maintenance capital expenditures of $22.2$51.2 million and expansion capital expenditures of $152.4$291.2 million.

Cash used in financing activities for the six months ended June 30, 2026 was $92.7 million compared to cash provided by financing activities forof the three months ended March 31, 2026 was $23.9 million compared to $186.7$244.2 million for the threesix months ended MarchJune 31,30, 2025. Cash providedused byin financing activities for the threesix months ended MarchJune 31,30, 2026 consisted of principal payments on revolving credit facility of $160.0 million, principal payments on long-term debt of $12.2 million, repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises, of $3.8 million, distributions to noncontrolling partners in joint ventures of $2.6 million and $0.1 million of other, offset by borrowings on revolving credit facility of $85.0 million and contributions from noncontrolling partners in joint ventures of $0.7 million, offset by principal payments on revolving credit facility of $55.0 million, principal payments on long-term debt of $4.1 million and repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises, of $2.7$1.0 million. Cash provided by financing activities for the threesix months ended MarchJune 31,30, 2025 consisted of borrowings on long-term debt of $1,200.0 million and borrowings on revolving credit facility of $760.0$830.0 million, offset by principal payments on revolving credit facility of $1,035.0 million, repayment of long termlong-term debt of $670.9 million, repurchase of common stock of $50.0 million, payment of debt issuance costs of $18.6 million, repurchaseprincipal payments on long-term debt of common$4.1 stock of $46.9 million andmillion, repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises, of $1.9$3.7 million.million, distributions to noncontrolling partners in joint ventures of $2.0 million, cash paid for contingent consideration of $1.5 million and $0.1 million of other.

We had total available cash and cash equivalents of $158.5$171.3 million and $133.2 million at MarchJune 31,30, 2026 and December 31, 2025, respectively, of which approximately $9.6$12.4 million and $8.0 million was held by our foreign subsidiaries, respectively. Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S.

On Februarythe 28,Credit 2025,Facility Closing Date, we entered into the Credit Agreement, which provides for the $1.0 billion Revolving Facility (including a $50.0 million sublimit for the issuance of letters of credit and a $50.0 million swingline subfacility) and the $650.0 million Term Loan Facility, each maturing on February 28, 2030.

Borrowings under the Credit Agreement bear interest at a floating rate equal to, at our option, either (i) a SOFR-based rate plus a margin ranging from 1.375% to 2.250% or (ii) a base rate plus a margin ranging from 0.375% to 1.250%, in each case, depending on our Consolidated Total Net Leverage Ratio. In addition, an unused fee that varies according to our Consolidated Total Net Leverage Ratio ranging from 0.200% to 0.350% is payable quarterly in arrears based on the average daily undrawn portion of the commitments in respect of the Revolving Facility. The Term Loan Facility requires quarterly principal repayments of $8.1 million from June 30, 2026 tothrough March 31, 2028, $12.2 million from June 30, 2028 to March 31, 2029 and $16.3 million from June 30, 2029 to December 31, 2029, with the remaining outstanding principal balance of the Term Loan Facility due on the maturity date of February 28, 2030.

The Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including limitations on the ability of us and our subsidiaries to: (i) incur debt; (ii) permit additional liens; (iii) make investments and acquisitions; (iv) merge or consolidate with others; (v) dispose of assets; (vi) pay dividends and distributions; (vii) pay junior indebtedness; and (viii) enter into affiliate transactions, in each case, subject to customary exceptions. In addition, the Credit Agreement contains financial covenants requiring us to maintain, on a consolidated basis as of the last day of each quarterly period, a Consolidated Total Net Leverage Ratio of not more than 5.0 to 1.0 (which may be increased in connection with a material acquisition to 5.5 to 1.0 for a four quarter period up to three times during the term of the Credit Agreement) and a Consolidated Interest Coverage Ratio of at least 3.0 to 1.0. The Credit Agreement also includes events of default customary for facilities of this type and upon the occurrence of such events of default, among other things, all outstanding loans under the Credit Agreement may be accelerated, lenders commitments terminated, and/or lenders may exercise collateral remedies. At MarchJune 31,30, 2026, our Consolidated Total Net Leverage Ratio was 3.9x,4.1x, and we were in compliance with all financial covenants. Consolidated Total Net Leverage Ratio is being reported as calculated under the Credit Agreement and not pursuant to GAAP. Investors should refer to the agreements governing the Credit Agreement attached as exhibits to our periodic reports for further information related to the calculation thereof and should not consider Consolidated Total Net Leverage Ratio as an alternative for any measures derived in accordance with GAAP. For risks related to our indebtedness and compliance with these covenants, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

During the threesix months ended MarchJune 31,30, 2026, we borrowed $85.0 million on the Revolving Facility and repaid $55.0$160.0 million of the balance outstanding.

At MarchJune 31,30, 2026, we had $564.8$669.8 million of availability under the Revolving Facility and had standby letters of credit outstanding of $1.2 million related to security for multiple development projects.

ForDuring the threesix months ended MarchJune 31,30, 2025, we borrowed $115.0 million on the Prior Revolving Facility and repaid $485.0 million of the balance outstanding prior to February 28, 2025, when the Prior Credit Facility was refinanced in connection with entering into the Credit Facility.

The Senior Notes issued by us are guaranteed by each of our subsidiaries that guarantee our obligations under the Credit Facility.Agreement. The guarantees are full and unconditional and joint and several.

We conduct all of our business through our subsidiaries. The Senior Notes are jointly and severally guaranteed on an unsecured senior basis by all of our subsidiaries that guarantee our obligations under the Credit Facility. The summarized financial information presented below is consistent with our condensed consolidated financial statements, except transactions between combining entities have been eliminated. Financial information for our combined non-guarantor entities has been excluded pursuant to SEC Regulation S-X Rule 13-01. Presented below is condensed financial information for our combined wholly-owned subsidiary guarantors at MarchJune 31,30, 2026 and December 31, 2025, and for the threesix months ended MarchJune 31,30, 2026. The information presented below as of December 31, 2025 has been revised to correct an immaterial error included in the Supplemental Guarantor Financial Information in Part I, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

The following table presents a summary of contractual obligations at MarchJune 31,30, 2026 (in thousands):

Amounts include required principal and interest payments. The projected interest payments reflect the interest rates in place on our variable-rate debt at MarchJune 31,30, 2026.

There have been no material changes in our critical accounting policies at MarchJune 31,30, 2026 from those described in our Annual Report on Form 10-K for the year ended December 31, 2025.