UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of April 30, 2025, the registrant had
Table of Contents
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PART I. |
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Item 1. |
1 |
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2 |
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Consolidated Statements of Operations and Comprehensive Income (Loss) |
3 |
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4 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 |
Item 3. |
23 |
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Item 4. |
23 |
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PART II. |
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Item 1. |
25 |
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Item 1A. |
25 |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
26 |
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27 |
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i
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. For example, all statements we make relating to: our ability to grow our business, expand access to our patients and our payors and invest in our platform; our plan to partner with additional hospital systems, large primary care groups and other specialist groups; our expectation that we will continue to open de novo center and acquire new centers; our growth rates and financial results; our plans and objectives for future operations, growth or initiatives and strategies; and our expected market opportunity are forward-looking statements.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, factors and assumptions described in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") on February 27, 2025, including, among other things:
The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this report. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise, except as required by law.
ii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
LIFESTANCE HEALTH GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the quarterly period ended March 31, 2025
1
LIFESTANCE HEALTH GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except for par value)
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March 31, 2025 |
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December 31, 2024 |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Patient accounts receivable, net |
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Prepaid expenses and other current assets |
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Total current assets |
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NONCURRENT ASSETS |
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Property and equipment, net |
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Right-of-use assets |
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Intangible assets, net |
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Goodwill |
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Other noncurrent assets |
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Total noncurrent assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
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$ |
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Accrued payroll expenses |
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Other accrued expenses |
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Operating lease liabilities, current |
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Other current liabilities |
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Total current liabilities |
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NONCURRENT LIABILITIES |
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Long-term debt, net |
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Operating lease liabilities, noncurrent |
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Deferred tax liability, net |
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Other noncurrent liabilities |
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Total noncurrent liabilities |
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Total liabilities |
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$ |
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$ |
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STOCKHOLDERS’ EQUITY |
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Preferred stock – par value $ |
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Common stock – par value $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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( |
) |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.
2
LIFESTANCE HEALTH GROUP, INC.
consolidated statements of operations and comprehensive income (loss)
(unaudited)
(In thousands, except per share amounts)
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Three Months Ended March 31, |
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2025 |
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2024 |
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TOTAL REVENUE |
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$ |
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$ |
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OPERATING EXPENSES |
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Center costs, excluding depreciation and amortization |
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General and administrative expenses |
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Depreciation and amortization |
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Total operating expenses |
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$ |
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$ |
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INCOME (LOSS) FROM OPERATIONS |
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$ |
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$ |
( |
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OTHER EXPENSE |
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Gain on remeasurement of contingent consideration |
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Interest expense, net |
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( |
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( |
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Other expense |
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( |
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( |
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Total other expense |
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$ |
( |
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$ |
( |
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LOSS BEFORE INCOME TAXES |
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( |
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( |
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INCOME TAX BENEFIT (PROVISION) |
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( |
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NET INCOME (LOSS) |
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$ |
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$ |
( |
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EARNINGS (LOSS) PER SHARE |
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Basic |
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$ |
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$ |
( |
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Diluted |
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$ |
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$ |
( |
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Weighted-average shares outstanding |
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Basic |
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Diluted |
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NET INCOME (LOSS) |
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$ |
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$ |
( |
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OTHER COMPREHENSIVE (LOSS) INCOME |
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Unrealized (losses) gains on cash flow hedge, net |
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( |
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COMPREHENSIVE INCOME (LOSS) |
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$ |
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$ |
( |
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The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.
3
LIFESTANCE HEALTH GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
(In thousands)
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Common Stock |
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Additional |
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Accumulated Other Comprehensive |
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Accumulated |
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Total Stockholders' |
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Shares |
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Amount |
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Capital |
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Income |
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Deficit |
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Equity |
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Balances at December 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Issuance of common stock upon |
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( |
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— |
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— |
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( |
) |
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Forfeitures |
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( |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Balances at March 31, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Additional |
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Accumulated Other Comprehensive |
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Accumulated |
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Total Stockholders' |
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Shares |
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Amount |
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Capital |
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Income |
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Deficit |
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Equity |
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Balances at December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of common stock upon |
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( |
) |
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— |
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— |
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— |
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Forfeitures |
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( |
) |
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( |
) |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Balances at March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.
4
LIFESTANCE HEALTH GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
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Three Months Ended March 31, |
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2025 |
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2024 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income (loss) |
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$ |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash used in operating |
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Depreciation and amortization |
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Non-cash operating lease costs |
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Stock-based compensation |
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Amortization of discount and debt issue costs |
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Gain on remeasurement of contingent consideration |
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( |
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Other, net |
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( |
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Change in operating assets and liabilities, net of businesses acquired: |
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Patient accounts receivable, net |
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( |
) |
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( |
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Prepaid expenses and other current assets |
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( |
) |
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Accounts payable |
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( |
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Accrued payroll expenses |
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( |
) |
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( |
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Operating lease liabilities |
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( |
) |
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( |
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Other accrued expenses |
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( |
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Net cash used in operating activities |
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$ |
( |
) |
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$ |
( |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchases of property and equipment |
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( |
) |
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( |
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Net cash used in investing activities |
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$ |
( |
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$ |
( |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Payments of long-term debt |
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( |
) |
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( |
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Payments of contingent consideration |
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( |
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Taxes related to net share settlement of equity awards |
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( |
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Net cash used in financing activities |
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$ |
( |
) |
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$ |
( |
) |
NET DECREASE IN CASH AND CASH EQUIVALENTS |
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( |
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( |
) |
Cash and Cash Equivalents - Beginning of period |
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CASH AND CASH EQUIVALENTS – END OF PERIOD |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
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Cash paid for interest, net |
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$ |
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$ |
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Cash paid for taxes, net of refunds |
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$ |
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$ |
( |
) |
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SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND |
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Acquisition of property and equipment included in liabilities |
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$ |
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$ |
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The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.
5
LIFESTANCE HEALTH GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(In thousands, except per share amounts)
NOTE 1 NATURE OF THE BUSINESS
Description of Business
LifeStance Health Group, Inc. ("LifeStance" or the "Company") operates as a provider of outpatient mental health services, spanning psychiatric evaluations and treatment, psychological and neuropsychological testing, and individual, family and group therapy.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are discussed in Note 2 "Summary of Significant Accounting Policies" in Item 15 of its Annual Report on Form 10-K for the year ended December 31, 2024. During the three months ended March 31, 2025, there have been no significant changes to these policies.
Basis of Presentation and Principles of Consolidation
The Company has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the SEC regarding interim financial reporting, which include the accounts of LifeStance, its wholly-owned subsidiaries and variable interest entities ("VIEs") in which LifeStance has an interest and is the primary beneficiary. Pursuant to these rules and regulations, the Company has omitted certain information and footnote disclosures it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation. In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly state its consolidated financial condition, results of operations and cash flows. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s audited financial statements for the year ended December 31, 2024 in the Company's Annual Report on Form 10-K.
Use of Accounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Segment Information
The Company has a single operating and reportable segment – mental health services. As the Company operates as one operating segment, all required segment financial information is found in the accompanying unaudited consolidated financial statements.
The chief operating decision maker assesses performance for the mental health services segment and decides how to allocate resources based on net income (loss), which is reported on the accompanying unaudited consolidated statements of operations and comprehensive income (loss) as net income (loss). Net income (loss) is used to monitor budget versus actual results for assessment of segment performance. The chief operating decision maker considers budget-to-actual variances on a monthly basis when making decisions about allocating resources and assessing the performance of the segment. The chief operating decision maker utilizes consolidated expense information regularly provided in the budget-to-actual analysis in order to assist with assessing performance and deciding how to allocate resources, which align with the consolidated expense categories as disclosed on the face of the accompanying unaudited consolidated statements of operations and comprehensive income (loss).
The measure of segment assets is reported on the accompanying consolidated balance sheets as total assets. The chief operating decision maker does not utilize total assets in the assessment of performance and allocation of resource decisions as the assessment and decisions are not made on the basis of total assets.
Variable Interest Entities
The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a VIE. These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available information. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially
6
be significant to the VIE. The Company performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change.
The Company acquires and operates certain care centers which are deemed to be Friendly-Physician Entities (“FPEs”). As part of an FPE acquisition, the Company acquires
The contractual arrangements described above allow the Company to direct the activities that most significantly affect the economic performance of the FPEs. Accordingly, the Company is the primary beneficiary of the FPEs and consolidates the FPEs under the VIE model. Furthermore, as a direct result of nominal initial equity contributions by the physicians, the financial support the Company provides to the FPEs (e.g., loans) and the provisions of the contractual arrangements and nominee shareholder succession arrangements described above, the interests held by noncontrolling interest holders lack economic substance and do not provide them with the ability to participate in the residual profits or losses generated by the FPEs. Therefore, all income and expenses recognized by the FPEs are allocated to the Company. The Company does not hold interests in any VIEs for which the Company is not deemed to be the primary beneficiary.
As noted previously, the Company acquires 100% of the non-medical assets of the VIEs. The aggregate carrying values of the VIEs' total assets and total liabilities not purchased by the Company but included on the consolidated balance sheets were not material at March 31, 2025 and December 31, 2024.
Recent Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 will apply on a prospective basis and retrospective application is permitted. The Company is in process of evaluating the impact of adoption of ASU 2023-09 on the Company's consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"). ASU 2024-03 requires disclosure of additional information about specific expense categories in the notes to the financial statements. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those fiscal years. Early adoption is permitted and should be applied either prospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all periods presented in the financial statements. The Company is in the process of evaluating the impact of the adoption of ASU 2024-03 on the Company's consolidated financial statements and disclosures.
NOTE 3 TOTAL REVENUE
The Company’s total revenue is dependent on a series of contracts with third-party payors, which is typical for providers in the healthcare industry. The Company has determined that the nature, amount, timing and uncertainty of revenue and cash flows are affected by the payor mix with third-party payors, which have different reimbursement rates.
7
The payor mix of fee-for-service revenue from patients and third-party payors consists of the following:
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Three Months Ended March 31, |
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2025 |
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2024 |
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||||||||||
|
|
Amount |
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|
% of Total Revenue |
|
|
Amount |
|
|
% of Total Revenue |
|
||||
Commercial |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Government |
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|
|
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% |
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% |
||||
Self-pay |
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% |
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% |
||||
Total patient service revenue |
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% |
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% |
||||
Nonpatient service revenue |
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% |
|
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|
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|
% |
||||
Total |
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$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Among the commercial payors, the table below represents insurance companies that individually represented
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Three Months Ended March 31, |
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|||||
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2025 |
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2024 |
|
||
Payor A |
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% |
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% |
||
Payor B |
|
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% |
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|
% |
||
NOTE 4 PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
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March 31, 2025 |
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|
December 31, 2024 |
|
||
Leasehold improvements |
|
$ |
|
|
$ |
|
||
Computers and peripherals |
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|
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|
||
Internal-use software |
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Furniture, fixtures and equipment |
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||
Medical equipment |
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|
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|
||
Construction in process |
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|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense consists of the following:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Depreciation expense |
|
$ |
|
|
$ |
|
||
NOTE 5 LEASES
The Company leases its office facilities and office equipment which are accounted for as operating leases. Some leases contain clauses for renewal at the Company's option with renewal terms that generally extend the lease term from to
The components of lease expense for the Company's operating leases in its unaudited consolidated statements of operations and comprehensive income (loss) were as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Operating lease costs |
|
$ |
|
|
$ |
|
||
Variable lease costs and short-term lease costs were
The weighted-average remaining lease term and discount rate for operating lease liabilities included in the consolidated balance sheets are as follows:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Weighted-average remaining lease term (in years) |
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
% |
|
|
% |
||
8
Supplemental cash flow information related to operating leases was as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
Noncash lease activity |
|
|
|
|
|
|
||
Right-of-use lease assets obtained in exchange for new operating lease liabilities |
|
$ |
|
|
$ |
|
||
The future minimum lease payments under noncancellable operating leases as of March 31, 2025 are as follows:
Year Ended December 31, |
|
Amount |
|
|
Remainder of 2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
$ |
|
|
Less: imputed interest |
|
|
( |
) |
Total lease liabilities |
|
$ |
|
|
NOTE 6 GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill was $
Intangible Assets
Intangible assets consist of the following:
March 31, 2025 |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Weighted |
|
||||
Regional trade names |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
LifeStance trade names |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Non-competition agreements |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
December 31, 2024 |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Weighted |
|
||||
Regional trade names |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
LifeStance trade names |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Non-competition agreements |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Gross carrying amount is based on the fair value of the intangible assets determined at the acquisition date. Total intangible asset amortization expense consists of the following:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Amortization expense |
|
$ |
|
|
$ |
|
||
NOTE 7 FAIR VALUE MEASUREMENTS
Hedging Activities
The Company uses derivative financial instruments, including an interest rate swap, for hedging and non-trading purposes to manage its exposure to changes in interest rates. The Company entered into a hedge transaction (interest rate swap) using a derivative financial instrument for the purpose of hedging the Company’s exposure to interest rate risks, which the contractual terms of the hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. The objective of entering
9
into the interest rate swap is to eliminate the variability of cash flows in the Secured Overnight Financing Rate ("SOFR") interest payments associated with the variable-rate loan over the life of the loan. In August 2022, the Company entered into an interest rate swap agreement to pay a fixed rate of
The Company used the income approach to value the derivative for the interest rate swap using observable market data for all significant inputs and standard valuation techniques to convert future amounts to a single present value amount, assuming that participants are motivated but not compelled to transact. This derivative instrument (interest rate swap) is designated and qualifies as a cash flow hedge, with the entire gain or loss on the derivative reported as a component of other comprehensive income. Amounts recorded in accumulated other comprehensive income are released to earnings in the same period that the hedged transaction impacts consolidated earnings within interest expense, net. The cash flows from the derivative treated as a cash flow hedge is classified in the Company’s consolidated statements of cash flows in the same category as the item being hedged.
For the three months ended March 31, 2025 and 2024, the Company included immaterial gains on the hedged instrument (variable-rate borrowings) in the same line item (interest expense, net) as the offsetting gain on the related interest rate swap in the unaudited consolidated statements of operations and comprehensive income (loss).
The following table summarizes the location of the interest rate swap in the unaudited consolidated balance sheets:
|
|
Consolidated balance sheets location |
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Interest rate swap |
|
|
$ |
|
|
$ |
|
|||
The amount of estimated cash flow hedge unrealized gains and losses that are expected to be reclassified to earnings in the next twelve months is not material.
Fair Value Measured on a Recurring Basis
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Assets Measured at Fair Value |
|
|
|
|
|
|
||
Money market funds |
|
$ |
|
|
$ |
|
||
Level 1 |
|
$ |
|
|
$ |
|
||
Interest rate swap asset |
|
$ |
|
|
$ |
|
||
Level 2 |
|
$ |
|
|
$ |
|
||
Total assets measured at fair value |
|
$ |
|
|
$ |
|
||
NOTE 8 LONG-TERM DEBT
On December 19, 2024, the Company entered into a credit agreement (the “2024 Credit Agreement”) among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto. The 2024 Credit Agreement established a senior secured term loan facility of $
The 2024 Credit Agreement requires the Company to maintain compliance with certain restrictive financial covenants related to earnings, leverage ratios, and other financial metrics. The Company was in compliance with all debt covenants at March 31, 2025 and December 31, 2024.
10
Long-term debt consists of the following:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Term loan |
|
$ |
|
|
$ |
|
||
Less: Current portion of long-term debt |
|
|
( |
) |
|
|
( |
) |
Less: Unamortized discount and debt issue costs (1) |
|
|
( |
) |
|
|
( |
) |
Total Long-Term Debt, Net of Current Portion |
|
$ |
|
|
$ |
|
||
The current portion of long-term debt is included within other current liabilities on the unaudited consolidated balance sheets.
Interest expense, net consists of the following:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Interest expense, net |
|
$ |
|
|
$ |
|
||
Future principal payments on long-term debt as of March 31, 2025 are as follows:
Year Ended December 31, |
|
Amount |
|
|
Remainder of 2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Total |
|
$ |
|
|
The fair value of long-term debt is based on the present value of future payments discounted by the market interest rates or the fixed rates based on current rates offered to the Company for debt with similar terms and maturities, which is a Level 2 fair value measurement. Long-term debt is presented at carrying value on the unaudited consolidated balance sheets. The fair value of long-term debt at March 31, 2025 and December 31, 2024 was $
Revolving Loan
Under the 2024 Credit Agreement, the Company has a revolving loan commitment in the amount of $
There are
NOTE 9 STOCK-BASED COMPENSATION
2021 Equity Incentive Plan
Effective June 9, 2021, the Company’s Board of Directors (the "Board") and its stockholders as of that date adopted and approved the LifeStance Health Group, Inc. 2021 Equity Incentive Plan (the “2021 Equity Incentive Plan”). The 2021 Equity Incentive Plan permits the grant of awards or restricted or unrestricted common stock, stock options, stock appreciation rights, restricted stock units, performance awards, and other stock-based awards to employees and directors of, and consultants and advisors to, the Company and its affiliates.
11
Restricted Stock Awards ("RSA")
The following is a summary of RSA transactions as of and for the three months ended March 31, 2025:
|
|
Unvested Shares |
|
|
Weighted-Average |
|
||
Unvested, December 31, 2024 |
|
|
|
|
$ |
|
||
Vested |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
Unvested, March 31, 2025 |
|
|
|
|
$ |
|
||
Restricted Stock Units ("RSU")
The following is a summary of RSU transactions as of and for the three months ended March 31, 2025:
|
|
Unvested Shares |
|
|
Weighted-Average |
|
||
Outstanding, December 31, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Canceled and forfeited |
|
|
( |
) |
|
|
|
|
Outstanding, March 31, 2025 |
|
|
|
|
$ |
|
||
Stock Options
The following is a summary of stock option activity as of and for the three months ended March 31, 2025:
|
|
Number of Options |
|
|
Weighted-Average |
|
|
Weighted-Average |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding, December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canceled and forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding, March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested or expected to vest at March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Stock-Based Compensation Expense
The Company recognized stock-based compensation expense related to RSUs and stock options within general and administrative expenses in the unaudited consolidated statements of operations and comprehensive income (loss) as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Stock-based compensation expense |
|
$ |
|
|
$ |
|
||
As of March 31, 2025, the Company had $
2021 Employee Stock Purchase Plan
Effective June 9, 2021, the Board and its stockholders as of that date adopted and approved the LifeStance Health Group, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP is more fully described in Note 11 in the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
As of March 31, 2025,
NOTE 10 INCOME TAXES
The (benefit) provision for income taxes is as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
(Benefit) provision for income taxes |
|
$ |
( |
) |
|
$ |
|
|
12
The effective tax rates are as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Effective tax rate |
|
|
% |
|
|
( |
)% |
|
The difference between the Company’s effective tax rate and the U.S. statutory tax rate of
NOTE 11 COMMITMENTS AND CONTINGENCIES
Professional Liability Insurance
The Company's medical malpractice insurance coverage is subject to a $
Health Care Industry
The healthcare industry is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, and government healthcare program participation requirements, reimbursement for patient services, and Medicare fraud and abuse. Recently, government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Violation of these laws and regulations could result in expulsion from government healthcare programs together with imposition of significant fines and penalties, as well as significant repayments for patient services billed.
Laws and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation. As a result of investigations by governmental agencies, various healthcare companies have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in companies entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government review and interpretation as well as significant regulatory action, including fines, penalties, and potential exclusion from the related programs. There can be no assurance that regulatory authorities will not challenge the Company’s compliance with these laws and regulations, and it is not possible to determine the impact (if any) such claims or penalties would have upon the Company. In addition, the contracts the Company has with commercial payors also provide for retroactive audit and review of claims.
Management believes that the Company is in substantial compliance with fraud and abuse as well as other applicable government laws and regulations. While no regulatory inquiries have been made, compliance with such laws and regulations is subject to government review and interpretation, as well as regulatory actions unknown or unasserted at this time.
General Contingencies
The Company is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions, injuries to employees, and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. There has been no significant reduction in insurance coverage from the previous year in any of the Company’s policies.
Litigation
The Company may be involved from time-to-time in legal actions relating to the ownership and operations of its business. Liabilities related to loss contingencies are recognized when the Company believes it is probable a liability has occurred and the amount can be reasonably estimated by management.
On April 26, 2023, a class action litigation captioned Strong v. LifeStance Health Group, Inc. was filed in the United States District Court for the District of Arizona against the Company by a putative class representing users of the Company's website who allege various privacy-related claims premised on the Company's use of pixel technologies on its website. The lawsuit seeks unspecified monetary damages. The process of resolving this matter is inherently uncertain and may develop over an extended period of time; therefore, at this time, the ultimate resolution cannot be predicted. The Company has not recorded any material accruals for loss contingencies and in management's opinion no material range of loss is estimable for this matter as of March 31, 2025.
NOTE 12 EARNINGS PER SHARE
Basic earnings per share is computed using the weighted-average number of common shares of the Company outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares of the Company outstanding
13
including the dilutive effect of stock-based awards as determined under the treasury stock method. In periods when the Company has a net loss, stock-based awards are excluded from the calculation of loss per share as their inclusion would have an antidilutive effect.
The following table presents the calculation of basic and diluted earnings (loss) per share for the Company’s common shares:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Numerator |
|
|
|
|
|
|
||
Net income (loss) available to common stockholders' |
|
$ |
|
|
$ |
( |
) |
|
Denominator |
|
|
|
|
|
|
||
Weighted-average shares - basic |
|
|
|
|
|
|
||
Dilutive effect of outstanding stock-based awards |
|
|
|
|
|
|
||
Weighted-average shares - diluted |
|
|
|
|
|
|
||
Earnings (loss) per share |
|
|
|
|
|
|
||
Basic |
|
$ |
|
|
$ |
( |
) |
|
Diluted |
|
$ |
|
|
$ |
( |
) |
|
The Company has issued potentially dilutive instruments in the form of RSAs, RSUs and stock options.
|
|
As of March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
RSAs, RSUs and stock options |
|
|
|
|
|
|
||
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and the accompanying notes as well as "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth under “Risk Factors” Part II, Item 1A in this Quarterly Report on Form 10-Q as well as those discussed in the Annual Report on Form 10-K for the year ended December 31, 2024, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Unless stated otherwise or the context otherwise requires, the terms "we," "us," "our," "our business," "LifeStance" and "our Company" and similar references refer to LifeStance Health Group, Inc. and its consolidated subsidiaries and supported practices. References to "our employees" and "our clinicians" refer collectively to employees and clinicians, respectively, of our subsidiaries and supported practices. References to "our patients" refer to the patients treated by such clinicians.
Our Business
We are reimagining mental health through a tech-enabled care delivery model built to expand access, address affordability, improve outcomes and lower overall healthcare costs. We are one of the nation’s largest outpatient mental health platforms based on the number of clinicians we employ through our subsidiaries and our supported practices and our geographic scale, employing 7,535 licensed mental health clinicians as of March 31, 2025. Our patient-focused platform combines a personalized, digitally-powered patient experience with differentiated clinical capabilities and in-network insurance relationships to fundamentally transform patient access and treatment. By revolutionizing the way mental healthcare is delivered, we believe we have an opportunity to improve the lives and health of millions of individuals.
Our model is built to empower each of the healthcare ecosystem’s key stakeholders—patients, clinicians, payors and primary care and specialist physicians—by aligning around our shared goal of delivering better outcomes for patients and providing high-quality mental healthcare.
Key Factors Affecting Our Results
Expanding Center Capacity and Visits Within Existing Centers
We have built a powerful organic growth engine that enables us to drive growth within our existing footprint.
15
Our Clinicians
As of March 31, 2025, we employed 7,535 psychiatrists, advanced practice nurses, psychologists and therapists through our subsidiaries and supported practices. We generate revenue on a per visit basis (total revenue per visit ("TRPV")) as clinical services are rendered by our clinicians. We generate lower revenue and experience lower clinician productivity in periods that have fewer business days than other periods. We measure productivity by the number of visits that are performed by a clinician, which is driven by the time clinicians make available to see patients and our ability to fill clinicians' schedules by attracting new patients, scheduling patients, and converting scheduled appointments to completed visits. Clinician productivity impacts our ability to generate revenue and also impacts clinician compensation, as clinician compensation is primarily driven by the number of visits provided by each clinician. Recruiting new clinicians and retaining existing clinicians enables us to see more patients by expanding our patient visit capacity.
We believe our dedicated employment model offers a superior value proposition compared to independent practice. Our network relationships provide clinicians with ready access to patients. We also enable clinicians to manage their own patient volumes. Our platform promotes a clinically-driven professional culture and streamlines patient access and care delivery, while optimizing practice administration processes through technology. We believe we are an employer of choice in mental health, allowing us to employ highly qualified clinicians.
We believe we have significant opportunity to grow our employed clinician base from our current base of 7,535 clinicians employed through our subsidiaries and supported practices, as of March 31, 2025. We have developed a rigorous and exclusive in-house national clinician recruiting model that works closely with our regional clinical teams to select the best candidates and expand capacity in a timely manner. As we grow our clinician base, we can grow our business, expand access for our patients and our payors and invest in our platform to further reinforce our differentiated offering to clinicians. We have available physical capacity to add clinicians to our existing centers, as well as an opportunity to add new clinicians with the targeted roll-out of de novo centers. Our virtual care offering also allows clinicians to see more patients without investments in incremental physical space, expanding our patient visit capacity beyond in-person only levels.
Our Patients
We believe our ability to attract and retain patients to drive growth in our visits and meet the availability of our clinician base will enable us to grow our revenue. We believe we have a significant opportunity to increase the number of patients we serve in our existing markets. Our clinicians treated patients through 2.1 million visits in the three months ended March 31, 2025. We believe our ability to deliver more accessible, flexible, affordable and effective mental healthcare is a key driver of our patient growth. We believe we provide a superior and differentiated mental healthcare experience that integrates virtual and in-person care to deliver care in a convenient way for our patients, meeting our patients where they are. Our in-network payor relationships allow our patients to access affordable care without significant out-of-pocket cost or delays in receiving treatment. We treat mental health conditions across the outpatient spectrum through a clinical approach that focuses on improved patient outcomes. We support our patients throughout their care continuum with purpose-built technological capabilities, including online assessments, digital provider communication, and seamless internal referral and follow-up capabilities.
We utilize multiple strategies to add new patients to our platform, including our primary care and specialist physician relationships, internal referrals from our clinicians, our payor relationships and our dedicated marketing efforts. We have established a large network of national, regional and local payors that enables their members to be referred to us as patients. Payors refer patients to our platform to drive improvement in health outcomes for their members, reduction in total medical costs and increased member satisfaction and retention. Within our markets, we partner with primary care practice groups, specialists, health systems and academic institutions to refer patients to our centers and clinicians. Our local referral marketing teams build and maintain relationships with our referring partner networks to create awareness of our platform and services, including the opening of new centers and the introduction of newly hired clinicians with appointment availability. We also use online marketing to develop our national brand to increase brand awareness and promote additional channels of patient recruitment.
Our Primary Care and Specialist Physician Referral Relationships
We have built a powerful patient referral network through partnerships with primary care physicians and specialist physician groups across the country. We deliver value to our provider partners by offering more efficient referral pathways, delivering improved outcomes for our shared patients, and enabling more integrated care and lower total healthcare costs. As we continue to scale nationally, we plan to partner with additional hospital systems, large primary care groups and other specialist groups to help streamline their mental health network needs and drive continued patient growth across our platform. Our vision over time is to further integrate our mental healthcare services with those of our medical provider partners. By co-locating and driving toward integration with primary care and specialty providers, we can enhance our clinicians' access to patients. We anticipate that we will continue to grow these relationships while evolving our offering toward a fully-integrated care model in which primary care and our mental health clinicians work together to develop and provide personalized treatment plans for shared patients. We believe these efforts will help to further align our model with that of other healthcare providers, increasing our value to them and driving new opportunities to partner to grow our patient base and revenue opportunities.
16
Our Payors
Our payor relationships, including national contracts with multiple payors, allow access to our services through in-network coverage for their members. We believe the alignment of our model with our payor partners’ population health objectives encourages third-party payors to partner with us. We believe we deliver value to our payor partners in several ways, including access to a national clinician employee base, lower total medical costs, and stronger member and client value proposition through the offering of in-network mental health services. The strength of our payor relationships and our value proposition has historically allowed us to secure rate parity between in-person and virtual visits, either by contract or payor policy. To expand this network and grow access to covered patients, we continue to evaluate new payor relationships and national contracts where we believe the payor's policies and approach to mental healthcare align with our mission, while also seeking to drive regional rate improvement, including terminating certain of our lower-volume payor contracts to support continued investment in our differentiated model for delivering mental healthcare. We believe our payor relationships differentiate us from our competitors and are a critical factor in our ability to expand our market footprint in new regions by leveraging our existing national payor relationships. As we continue to grow, we believe our scale, breadth and access will continue to be enhanced, further strengthening the value of our platform to payors.
As part of our ongoing business operations, we renegotiate our existing payor contracts and enter into new payor contracts. Our results of operations can fluctuate based on the reimbursement rates resulting from these payor contract negotiations and renegotiations. To the extent that payors, particularly payors comprising a significant portion of our revenue, negotiate lower reimbursement rates or elect not to cover some or all of our services, our business and results of operations could be adversely impacted.
Expand and Optimize our Center Base Within Existing and New Markets
We believe we have built a powerful market growth engine that allows us to rapidly grow our presence within our markets and unlock potential latent demand through our differentiated scale, access and affordability.
De Novo Centers
Our de novo center strategy is a central component of our organic growth engine to build our capacity and increase density in our existing metropolitan statistical areas. We believe there is a significant opportunity to use de novo center openings to address potential patient need in our existing markets and new markets that we have determined are attractive to enter. We systematically locate our centers within a given market to ensure convenient coverage for in-person access to care. We believe our successful de novo program and national clinician recruiting team can support additions of new centers and clinicians.
We continue to utilize a more sustainable design for all new de novo centers that reimagines the mental healthcare experience for both patients and clinicians while reinforcing our commitment to sustainability.
Acquisitions
We believe the highly fragmented nature of the mental health market provides us with a meaningful opportunity to selectively pursue acquisitions that meet our standards of high-quality clinical care and align with our mission. We believe our guiding principle of creating a national platform built with a patient and clinician focus makes us a partner of choice for smaller, independent practices. Our acquisition strategy has been deployed both to enter new markets and to expand within existing markets. In new markets, acquisitions have allowed us to establish a presence with high-quality practices with a track record of clinical excellence and in-network payor relationships that can be integrated into our national platform. In existing markets, acquisitions have allowed us to grow our geographic reach and clinician base to expand patient access.
Center Margin
As we grow our platform, we seek to generate consistent returns on our investments. See “—Key Metrics and Non-GAAP Financial Measures—Center Margin” for our definition of Center Margin and reconciliation to income (loss) from operations. We believe this metric best reflects the economics of our model as it includes all direct expenses associated with our patients’ care. We seek to grow our Center Margin through a combination of (i) growing revenue through clinician hiring and retention, patient growth and engagement, hybrid virtual and in-person care, existing office expansion, and in-network reimbursement levels, and (ii) leveraging on our fixed cost base at each center. For acquired centers, we also seek to realize operational, technology and reimbursement synergies to drive Center Margin growth.
17
Key Metrics and Non-GAAP Financial Measures
We evaluate the growth of our footprint through a variety of metrics and indicators. The following table sets forth a summary of the key financial metrics we review to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
(in thousands) |
|
|
|
|
|
|
||
Total revenue |
|
$ |
332,970 |
|
|
$ |
300,437 |
|
Revenue growth |
|
|
11 |
% |
|
|
19 |
% |
Income (loss) from operations |
|
|
1,604 |
|
|
|
(16,772 |
) |
Center Margin |
|
|
109,791 |
|
|
|
94,726 |
|
Net income (loss) |
|
|
709 |
|
|
|
(21,097 |
) |
Adjusted EBITDA |
|
|
34,646 |
|
|
|
27,651 |
|
Center Margin and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles ("GAAP") and are not intended to be substitutes for any GAAP financial measures, including revenue, income (loss) from operations or net income (loss), and, as calculated, may not be comparable to companies in other industries or within the same industry with similarly titled measures of performance. Therefore, non-GAAP measures should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.
Center Margin
We define Center Margin as income (loss) from operations excluding depreciation and amortization and general and administrative expenses. Therefore, Center Margin is computed by removing from income (loss) from operations the costs that do not directly relate to the delivery of care and only including center costs, excluding depreciation and amortization. We consider Center Margin to be an important measure to monitor our performance relative to the direct costs of delivering care. We believe Center Margin is useful to investors to measure whether we are sufficiently controlling the direct costs of delivering care.
Center Margin is not a financial measure of, nor does it imply, profitability. The relationship of income (loss) from operations to center costs, excluding depreciation and amortization is not necessarily indicative of future profitability from operations. Center Margin excludes certain expenses, such as general and administrative expenses, and depreciation and amortization, which are considered normal, recurring operating expenses and are essential to support the operation and development of our centers. Therefore, this measure may not provide a complete understanding of the operating results of our Company as a whole, and Center Margin should be reviewed in conjunction with our GAAP financial results. Other companies that present Center Margin may calculate it differently and, therefore, similarly titled measures presented by other companies may not be directly comparable to ours. In addition, Center Margin has limitations as an analytical tool, including that it does not reflect depreciation and amortization or other overhead allocations.
The following table provides a reconciliation of income (loss) from operations, the most closely comparable GAAP financial measure, to Center Margin:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
(in thousands) |
|
|
|
|
|
|
||
Income (loss) from operations |
|
$ |
1,604 |
|
|
$ |
(16,772 |
) |
Adjusted for: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
13,756 |
|
|
|
22,564 |
|
General and administrative expenses (1) |
|
|
94,431 |
|
|
|
88,934 |
|
Center Margin |
|
$ |
109,791 |
|
|
$ |
94,726 |
|
Adjusted EBITDA
We present Adjusted EBITDA, a non-GAAP performance measure, to supplement our results of operations presented in accordance with generally accepted accounting principles, or GAAP. We believe Adjusted EBITDA is useful in evaluating our operating performance, and may be helpful to securities analysts, institutional investors and other interested parties in understanding our operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to companies in other industries or within the same industry with similarly titled measures of performance. Therefore, our Adjusted EBITDA should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP, such as net income or loss.
18
We define Adjusted EBITDA as net income (loss) excluding interest expense, depreciation and amortization, income tax (benefit) provision, gain on remeasurement of contingent consideration, stock-based compensation, loss on disposal of assets, executive transition costs, litigation costs, strategic initiatives, real estate optimization and restructuring charges, amortization of cloud-based software implementation costs, and other expenses. We include Adjusted EBITDA in this Quarterly Report because it is an important measure upon which our management assesses, and believes investors should assess, our operating performance. We consider Adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis.
However, Adjusted EBITDA has limitations as an analytical tool, including:
A reconciliation of net income (loss) to Adjusted EBITDA is presented below for the three months ended March 31, 2025 and 2024. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view Adjusted EBITDA in conjunction with net income (loss).
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
(in thousands) |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
709 |
|
|
$ |
(21,097 |
) |
Adjusted for: |
|
|
|
|
|
|
||
Interest expense, net |
|
|
3,073 |
|
|
|
5,903 |
|
Depreciation and amortization |
|
|
13,756 |
|
|
|
22,564 |
|
Income tax (benefit) provision |
|
|
(2,179 |
) |
|
|
363 |
|
Gain on remeasurement of contingent consideration |
|
|
— |
|
|
|
(2,015 |
) |
Stock-based compensation expense |
|
|
18,584 |
|
|
|
20,581 |
|
Loss on disposal of assets |
|
|
1 |
|
|
|
74 |
|
Executive transition costs |
|
|
185 |
|
|
|
31 |
|
Litigation costs (1) |
|
|
205 |
|
|
|
537 |
|
Strategic initiatives (2) |
|
|
— |
|
|
|
751 |
|
Real estate optimization and restructuring |
|
|
(45 |
) |
|
|
(147 |
) |
Amortization of cloud-based software |
|
|
357 |
|
|
|
11 |
|
Other expenses (5) |
|
|
— |
|
|
|
95 |
|
Adjusted EBITDA |
|
$ |
34,646 |
|
|
$ |
27,651 |
|
19
Results of Operations
The following table sets forth a summary of our financial results for the three months ended March 31, 2025 and 2024:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
(in thousands) |
|
|
|
|
|
|
||
TOTAL REVENUE |
|
$ |
332,970 |
|
|
$ |
300,437 |
|
OPERATING EXPENSES |
|
|
|
|
|
|
||
Center costs, excluding depreciation and amortization |
|
|
223,179 |
|
|
|
205,711 |
|
General and administrative expenses |
|
|
94,431 |
|
|
|
88,934 |
|
Depreciation and amortization |
|
|
13,756 |
|
|
|
22,564 |
|
Total operating expenses |
|
$ |
331,366 |
|
|
$ |
317,209 |
|
INCOME (LOSS) FROM OPERATIONS |
|
$ |
1,604 |
|
|
$ |
(16,772 |
) |
OTHER EXPENSE |
|
|
|
|
|
|
||
Gain on remeasurement of contingent consideration |
|
|
— |
|
|
|
2,015 |
|
Interest expense, net |
|
|
(3,073 |
) |
|
|
(5,903 |
) |
Other expense |
|
|
(1 |
) |
|
|
(74 |
) |
Total other expense |
|
$ |
(3,074 |
) |
|
$ |
(3,962 |
) |
LOSS BEFORE INCOME TAXES |
|
|
(1,470 |
) |
|
|
(20,734 |
) |
INCOME TAX BENEFIT (PROVISION) |
|
|
2,179 |
|
|
|
(363 |
) |
NET INCOME (LOSS) |
|
$ |
709 |
|
|
$ |
(21,097 |
) |
Total Revenue
Total revenue increased $32.6 million, or 11%, to $333.0 million for the three months ended March 31, 2025 from $300.4 million for the three months ended March 31, 2024. This was primarily due to an increase of $32.7 million of patient service revenue and slightly offset by a decrease of $0.1 million of nonpatient revenue. The increase in patient service revenue was mainly due to a net increase of 699 in total clinicians from organic hiring, resulting in an increase in patient visits of 0.2 million, or 10%. Additionally, TRPV increased year-over-year primarily driven by modest payor rate increases.
We anticipate revenue growth to continue to be driven by our in-house clinician recruiting and de novo strategies as well as our ability to increase patient visits at existing centers through our ability to accommodate virtual sessions in addition to our in-person visits.
Operating Expenses
Center costs, excluding depreciation and amortization
Center costs, excluding depreciation and amortization increased $17.5 million, or 8%, to $223.2 million for the three months ended March 31, 2025 from $205.7 million for the three months ended March 31, 2024. This was primarily due to a $16.8 million increase in center-based compensation due to the increase in patient visits of 0.2 million from the increase in the total number of clinicians from organic hiring. In addition, occupancy costs consisting of center rent and utilities and other center operating expenses consisting of office supplies and insurance contributed to the increase of $0.7 million.
We expect our center costs, excluding depreciation and amortization to continue to increase in the short- to medium-term as we strategically invest to expand our business through our in-house clinician recruiting and de novo strategies and to potentially capture more of our market opportunity.
20
General and administrative expenses
General and administrative expenses increased $5.5 million, or 6%, to $94.4 million for the three months ended March 31, 2025 from $88.9 million for the three months ended March 31, 2024. This was primarily due to increases in salaries, wages and employee benefits of $2.9 million, other operating expenses of $3.4 million as a result of professional fees and occupancy costs $2.0 million. The increase was offset by decreases in stock-based compensation expense of $2.0 million and third-party consulting costs and one-time costs associated with our strategic initiatives related to the multi-phase system upgrade in connection with our recent and significant expansion of $0.8 million.
We expect our general and administrative expenses to increase in the foreseeable future due to our planned investments to support company growth.
Depreciation and amortization
Depreciation and amortization expense decreased $8.8 million to $13.8 million for the three months ended March 31, 2025 from $22.6 million for the three months ended March 31, 2024. This was primarily due to the amortization of intangibles and depreciation during the periods.
Other Expense
Interest Expense, net
Interest expense, net decreased $2.8 million to $3.1 million for the three months ended March 31, 2025 from $5.9 million for the three months ended March 31, 2024. This decrease was primarily due to lower interest rates on borrowings outstanding during the period.
Income Tax Benefit (Provision)
Income tax benefit (provision) increased $2.6 million to a benefit of $2.2 million for the three months ended March 31, 2025 from a provision of $0.4 million for the three months ended March 31, 2024 primarily due to non-deductible equity awards for the three months ended March 31, 2025.
Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital needs, capital expenditures, including to execute on our de novo strategy, contractual obligations, debt service, acquisitions, settlement of contingent considerations obligations, and other commitments with cash flows from operations and other sources of funding. Our principal sources of liquidity to date have included cash from operating activities, cash on hand and amounts available under that certain credit agreement entered into on December 19, 2024, by the Company, LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto (the "2024 Credit Agreement"). We had cash and cash equivalents of $134.3 million and $154.6 million as of March 31, 2025 and December 31, 2024, respectively.
We believe that our existing cash and cash equivalents will be sufficient to fund our operating and capital needs for at least the next 12 months from the issuance date of our March 31, 2025 unaudited financial statements, without any additional financing. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary because of, and our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to acquire new centers and expand into new markets and the expansion of marketing activities. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations and financial condition would be adversely affected.
Our future obligations primarily consist of our debt and lease obligations. We expect our cash generation from operations and future ability to refinance or secure additional financing facilities to be sufficient to repay our outstanding debt obligations and lease payment obligations. As of March 31, 2025 and December 31, 2024, there was an aggregate principal amount of $288.2 million and $290.0 million outstanding under the 2024 Credit Agreement, respectively. As of March 31, 2025, our non-cancellable future minimum operating lease payments totaled $232.3 million.
Debt
On December 19, 2024, we and our subsidiary, Lynnwood Intermediate Holdings, Inc., entered into the 2024 Credit Agreement. The 2024 Credit Agreement established a senior secured term loan facility (the “Term Loan Facility”) and a senior secured revolving loan facility of up to $100.0 million (the “Revolving Facility”).
21
The loans under the Term Loan Facility and the Revolving Facility bear interest at a rate per annum equal to (x) term Secured Overnight Financing Rate (“SOFR”) (which term SOFR is subject to a minimum of 0.00%) plus an applicable margin of 3.00% subject to stepdowns based on leverage-based metrics or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50% above the federal funds effective rate and (iii) one-month adjusted term SOFR (which term SOFR is subject to a minimum of 0.00%) plus 1.00%) plus an applicable margin of 2.00% subject to stepdowns based on leverage-based metrics.
The 2024 Credit Agreement also contains a maximum Total Net Leverage Ratio (as defined therein) financial maintenance covenant that requires the Total Net Leverage Ratio as of the last day of each fiscal quarter to not exceed 4.50:1.00. Additionally, the 2024 Credit Agreement also contains a maximum Interest Coverage Ratio (as defined therein) financial maintenance covenant that requires the Interest Coverage Ratio as of the last day of each fiscal quarter to not be less than 3.00:1.00. As of March 31, 2025, we were in compliance with all financial covenants under the 2024 Credit Agreement.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
(in thousands) |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
$ |
(3,092 |
) |
|
$ |
(21,838 |
) |
Net cash used in investing activities |
|
|
(7,168 |
) |
|
|
(5,104 |
) |
Net cash used in financing activities |
|
|
(9,975 |
) |
|
|
(2,431 |
) |
Net decrease in cash and cash equivalents |
|
$ |
(20,235 |
) |
|
$ |
(29,373 |
) |
Cash and cash equivalents, beginning of period |
|
|
154,571 |
|
|
|
78,824 |
|
Cash and cash equivalents, end of period |
|
$ |
134,336 |
|
|
$ |
49,451 |
|
Cash Flows Used In Operating Activities
During the three months ended March 31, 2025, operating activities used $3.1 million of cash, primarily impacted by net cash used by changes in operating assets and liabilities of $47.0 million and partially offset by our $0.7 million net income and non-cash charges of $43.2 million. During the three months ended March 31, 2024, operating activities used $21.8 million of cash, primarily impacted by our $21.1 million net loss and $51.2 million in non-cash charges. This was partially offset by changes in our operating assets and liabilities of $51.9 million.
Cash Flows Used In Investing Activities
During the three months ended March 31, 2025, investing activities used $7.2 million of cash resulting from our purchases of property and equipment. During the three months ended March 31, 2024, investing activities used $5.1 million of cash resulting from our purchases of property and equipment.
Cash Flows Used In Financing Activities
During the three months ended March 31, 2025, financing activities used $10.0 million of cash, resulting primarily from payments of loan obligations of $1.8 million and payments of taxes related to net share settlement of equity awards of $8.2 million. During the three months ended March 31, 2024, financing activities used $2.4 million of cash, resulting primarily from payments of loan obligations of $0.7 million and payments of contingent consideration of $1.7 million.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with GAAP. The consolidated financial statements included elsewhere in this Quarterly Report include the results of LifeStance Health Group, Inc., its wholly-owned subsidiaries and VIEs consolidated by LifeStance Health Group, Inc. in which LifeStance Health Group, Inc. has an interest and is the primary beneficiary for the period ended March 31, 2025. Preparation of the consolidated financial statements requires our management to make judgments, estimates and assumptions that impact the reported amount of total revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting estimate to be critical when (1) the estimate made in accordance with GAAP is complex in nature or involves a significant level of estimation uncertainty and (2) the use of different judgments, estimates and assumptions have had or are reasonably likely to have a material impact on the financial condition or results of operations in our consolidated financial statements. Actual results could differ materially from those estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected. For a description of our policies regarding our critical accounting estimates, see “Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes in our critical accounting estimates or methodologies to our consolidated financial statements.
Recently Adopted and Issued Accounting Pronouncements
Recently issued and adopted accounting pronouncements are described in Note 2 to our unaudited consolidated financial statements.
22
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.
Interest Rate Risk
Our primary market risk exposure is changing prime rate-based interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.
As of March 31, 2025, we had an aggregate principal amount of $288.2 million outstanding under our credit facilities. In the current economic environment, we manage interest expense using a combination of variable-rate debt and a fixed-interest-rate swap. In August 2022, we entered into a hedge transaction (interest rate swap) using a derivative financial instrument for the purpose of hedging our exposure to interest rate risks, which the contractual terms of the hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. The objective of entering into the interest rate swap is to eliminate the variability of cash flows in the Secured Overnight Financing Rate interest payments associated with variable-rate loan over the life of the loan under our credit facilities.
We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our business, financial condition or results of operations.
Inflation Risk
Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, as a result of the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2025 due to the material weaknesses described below.
Previously Reported Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. As previously reported in the Annual Report on Form 10-K for the year ended December 31, 2024, in connection with the preparation of our consolidated financial statements as of and for the year ended December 31, 2019, we identified material weaknesses in our internal control over financial reporting, which continue to exist as of March 31, 2025. The material weaknesses we identified were as follows:
We did not design and maintain an effective control environment commensurate with our financial reporting requirements due to an insufficient complement of resources in the accounting/finance and IT functions, with an appropriate level of knowledge, experience and training. This material weakness contributed to the following additional material weaknesses:
These material weaknesses resulted in material misstatements related to the identification and valuation of intangible assets acquired in business combinations that impacted the classification of intangible assets and goodwill, related impacts to amortization and income tax expense, and the restatement of our previously issued annual consolidated financial statements as of and for the years ended December 31, 2019 and 2018 with respect to such intangibles assets acquired in business combinations. Additionally, these material weaknesses could result in a misstatement of substantially all of the financial statement accounts and disclosures that would result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected.
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These IT deficiencies did not result in a material misstatement to our consolidated financial statements; however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Accordingly, we have determined these deficiencies in the aggregate constitute a material weakness.
Actions Taken During the Quarter Ended March 31, 2025
The following remediation efforts were completed during the quarter ended March 31, 2025:
As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2024, we are continuing to enhance our overall control environment and are devoting substantial effort by enhancing our manual or automated controls to remediate the identified material weakness. For a more comprehensive discussion of the remedial measures which are being undertaken to address these material weaknesses, or the Remediation Plan, refer to Part II, Item 9A, “Remediation Plan for Material Weaknesses,” of our Annual Report on Form 10-K for the year ended December 31, 2024.
Status of Remediation Efforts
We believe the measures described above will remediate the control deficiencies for the specific areas we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify, or in appropriate circumstances not complete, certain of the remediation measures described above. These material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
We intend to evaluate current and projected resource needs on a regular basis and hire additional qualified resources as needed. Our ability to maintain qualified and adequate resources to support our business and our projected growth will be a critical component of our internal control environment.
Changes in Internal Control over Financial Reporting
We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting. Other than the changes to our internal control over financial reporting described in "Actions Taken During the Quarter Ended March 31, 2025" above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Disclosure Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
For a discussion of certain legal proceedings in which we are involved, please read Note 11, Commitments and Contingencies, to our unaudited consolidated financial statements in this report, which is incorporated into this item by reference.
Item 1A. Risk Factors.
There have been no material changes to our risk factors as previously disclosed under Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During our fiscal quarter ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended)
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Item 6. Exhibits.
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Description of Exhibit Incorporated Herein by Reference |
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Exhibit Number |
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Description |
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Form |
File No. |
Exhibit |
Filing Date |
Filed Herewith |
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10.1*+ |
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X |
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10.2*+ |
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X |
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10.3*+ |
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X |
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31.1* |
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X |
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31.2* |
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X |
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32.1* |
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X |
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32.2* |
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X |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* Filed herewith.
+ Indicates a management contract or compensatory plan, contract or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
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LifeStance Health Group, Inc. |
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Date: May 7, 2025 |
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By: |
/s/ Ryan McGroarty |
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Ryan McGroarty |
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Chief Financial Officer and Treasurer (principal financial and accounting officer) |
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