LifeStance Reports Second Quarter 2024 Results

Source: GlobeNewswire
LifeStance Reports Second Quarter 2024 Results

SCOTTSDALE, Ariz., Aug. 08, 2024 (GLOBE NEWSWIRE) -- LifeStance Health Group, Inc. (Nasdaq: LFST), one of the nation’s largest providers of outpatient mental healthcare, today announced financial results for the second quarter ended June 30, 2024.

(All results compared to prior-year comparative period, unless otherwise noted)
Q2 2024 Highlights and FY 2024 Outlook

  • Revenue of $312.3 million increased 20% compared to revenue of $259.6 million
  • Clinician base increased 14% to 6,984 clinicians, a sequential net increase of 118 in the second quarter
  • Second quarter visit volumes increased 15% to 2.0 million
  • Net loss of $23.3 million, primarily driven by stock-based compensation, compared to net loss of $45.5 million
  • Adjusted EBITDA of positive $28.6 million compared to Adjusted EBITDA of positive $14.1 million
  • For full year 2024, raising revenue expectations to $1.2 billion to $1.242 billion; raising Center Margin expectations to $363 million to $383 million; raising Adjusted EBITDA expectations to $90 million to $100 million; and reiterating expectations for positive Free Cash Flow

“We continue to execute on our plan. In the first half of 2024, we achieved revenue growth of 20%, delivered operating leverage, and generated positive free cash flow,” said Ken Burdick, Chairman and CEO of LifeStance. “We are raising full year 2024 expectations and remain confident in our ability to deliver on our financial commitments while continuing to improve operational performance.”

Financial Highlights         
  Q2 2024  Q2 2023  Y/Y 
(in millions)         
Total revenue $312.3  $259.6   20%
Loss from operations  (15.9)  (48.4)  (67%)
Center Margin  97.8   73.0   34%
Net loss  (23.3)  (45.5)  (49%)
Adjusted EBITDA  28.6   14.1   103%
As % of Total revenue:         
Loss from operations  (5.1%)  (18.6%)   
Center Margin  31.3%  28.1%   
Net loss  (7.5%)  (17.5%)   
Adjusted EBITDA  9.2%  5.4%   

(All results compared to prior-year period, unless otherwise noted)

  • Revenue grew 20% to $312.3 million. Strong revenue growth in the second quarter was driven primarily by higher visit volumes from net clinician growth and improvements in total revenue per visit.
  • Loss from operations was $15.9 million, primarily driven by stock-based compensation. Net loss was $23.3 million.
  • Center Margin grew 34% to $97.8 million, or 31.3% of total revenue.
  • Adjusted EBITDA increased 103% to $28.6 million, or 9.2% of total revenue. Adjusted EBITDA as a percentage of revenue increased in the second quarter as a result of higher total revenue per visit, lower center costs as a percentage of revenue, and improved operating leverage from revenue growing faster than general and administrative expenses.

Balance Sheet, Cash Flow and Capital Allocation

For the six months ended June 30, 2024, LifeStance provided $22.2 million cash flow from operations, including $44.1 million during the second quarter of 2024. The Company ended the second quarter with cash of $87.0 million and net long-term debt of $279.5 million.

2024 Guidance

LifeStance is providing the following outlook for 2024:

  • The Company is raising full year revenue to $1.2 billion to $1.242 billion; raising Center Margin to $363 million to $383 million; and raising Adjusted EBITDA to $90 million to $100 million. Additionally, the Company continues to expect to generate positive Free Cash Flow for the full year.
  • For the third quarter of 2024, the Company expects total revenue of $290 million to $310 million, Center Margin of $83 million to $95 million, and Adjusted EBITDA of $15 million to $21 million.

Conference Call, Webcast Information, and Presentations

LifeStance will hold a conference call today, August 8, 2024 at 8:30 a.m. Eastern Time to discuss the second quarter 2024 results. Investors who wish to participate in the call should dial 1-800-715-9871, domestically, or 1-646-307-1963, internationally, approximately 10 minutes before the call begins and provide conference ID number 1488997 or ask to be joined into the LifeStance call. A real-time audio webcast can be accessed via the Events and Presentations section of the LifeStance Investor Relations website (https://investor.lifestance.com), where related materials will be posted prior to the conference call.

About LifeStance Health Group, Inc.

Founded in 2017, LifeStance (Nasdaq: LFST) is reimagining mental health. We are one of the nation’s largest providers of virtual and in-person outpatient mental health care for children, adolescents and adults experiencing a variety of mental health conditions. Our mission is to help people lead healthier, more fulfilling lives by improving access to trusted, affordable, and personalized mental healthcare. LifeStance and its supported practices employ nearly 7,000 psychiatrists, advanced practice nurses, psychologists and therapists and operates across 33 states and more than 550 centers. To learn more, please visit www.LifeStance.com.

We routinely post information that may be important to investors on the “Investor Relations” section of our website at investor.lifestance.com. We encourage investors and potential investors to consult our website regularly for important information about us.

Forward-Looking Statements

Statements in this press release and on the related teleconference that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements. These statements include, but are not limited to, statements with respect to: full year and third quarter guidance and management's related assumptions; the Company’s financial position; business plans and objectives; operating results; working capital and liquidity; and other statements contained in this press release that are not historical facts. When used in this press release and on the related teleconference, words such as “may,” “will,” “should,” “could,” “intend,” “potential,” “continue,” “anticipate,” “believe,” “estimate,” “expect,” “plan,” “target,” “predict,” “project,” “seek” and similar expressions as they relate to us are intended to identify forward-looking statements. They involve a number of risks and uncertainties that may cause actual events and results to differ materially from such forward-looking statements. These risks and uncertainties include, but are not limited to: we may not grow at the rates we historically have achieved or at all, even if our key metrics may imply future growth, including if we are unable to successfully execute on our growth initiatives and business strategies; if we fail to manage our growth effectively, our expenses could increase more than expected, our revenue may not increase proportionally or at all, and we may be unable to execute on our business strategy; our ability to recruit new clinicians and retain existing clinicians; if reimbursement rates paid by third-party payors are reduced or if third-party payors otherwise restrain our ability to obtain or deliver care to patients, our business could be harmed; we conduct business in a heavily regulated industry and if we fail to comply with these laws and government regulations, we could incur penalties or be required to make significant changes to our operations or experience adverse publicity, which could have a material adverse effect on our business, results of operations and financial condition; we are dependent on our relationships with supported practices, which we do not own, to provide health care services, and our business would be harmed if those relationships were disrupted or if our arrangements with these entities became subject to legal challenges; we operate in a competitive industry, and if we are not able to compete effectively, our business, results of operations and financial condition would be harmed; the impact of health care reform legislation and other changes in the healthcare industry and in health care spending on us is currently unknown, but may harm our business; if our or our vendors’ security measures fail or are breached and unauthorized access to our employees’, patients’ or partners’ data is obtained, our systems may be perceived as insecure, we may incur significant liabilities, including through private litigation or regulatory action, our reputation may be harmed, and we could lose patients and partners; our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems; actual or anticipated changes or fluctuations in our results of operations; our existing indebtedness could adversely affect our business and growth prospects; and other risks and uncertainties set forth under “Risk Factors” included in the reports we have filed or will file with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent filings made with the Securities and Exchange Commission. LifeStance does not undertake to update any forward-looking statements made in this press release to reflect any change in management's expectations or any change in the assumptions or circumstances on which such statements are based, except as otherwise required by law.

Non-GAAP Financial Information

This press release contains certain non-GAAP financial measures, including Center Margin, Adjusted EBITDA, and Adjusted EBITDA margin. Tables showing the reconciliation of these non-GAAP financial measures to the comparable GAAP measures are included at the end of this release. Management believes these non-GAAP financial measures are useful in evaluating the Company’s operating performance, and may be helpful to securities analysts, institutional investors and other interested parties in understanding the Company’s operating performance and prospects. This press release also refers to Free Cash Flow, which is calculated as net cash provided by (used in) operating activities less purchases of property and equipment. Management believes Free Cash Flow is a useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our operations that, after investments in property and equipment, can be used for future growth. These non-GAAP financial measures, as calculated, may not be comparable to companies in other industries or within the same industry with similarly titled measures of performance. Therefore, the Company’s non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP, such as net loss or loss from operations.

Center Margin and Adjusted EBITDA anticipated for the third quarter of 2024 and full year 2024 are calculated in a manner consistent with the historical presentation of these measures at the end of this release. Reconciliation for the forward-looking third quarter of 2024 and full year 2024 Center Margin, Adjusted EBITDA guidance and Free Cash Flow is not being provided, as LifeStance does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliation. As such, LifeStance management cannot estimate on a forward-looking basis without unreasonable effort the impact these variables and individual adjustments will have on its reported results.

Management acknowledges that there are many items that impact a company’s reported results and the adjustments reflected in these non-GAAP measures are not intended to present all items that may have impacted these results.

Consolidated Financial Information and Reconciliations


CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except for par value)
 
  June 30, 2024  December 31, 2023 
CURRENT ASSETS      
Cash and cash equivalents $86,969  $78,824 
Patient accounts receivable, net  167,220   125,405 
Prepaid expenses and other current assets  23,559   21,502 
Total current assets  277,748   225,731 
NONCURRENT ASSETS      
Property and equipment, net  175,941   188,222 
Right-of-use assets  160,214   170,703 
Intangible assets, net  200,058   221,072 
Goodwill  1,293,346   1,293,346 
Other noncurrent assets  12,044   10,895 
Total noncurrent assets  1,841,603   1,884,238 
Total assets $2,119,351  $2,109,969 
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES      
Accounts payable $9,973  $7,051 
Accrued payroll expenses  122,578   102,478 
Other accrued expenses  38,488   35,012 
Contingent consideration  3,809   8,169 
Operating lease liabilities, current  49,187   46,475 
Other current liabilities  3,624   3,688 
Total current liabilities  227,659   202,873 
NONCURRENT LIABILITIES      
Long-term debt, net  279,459   280,285 
Operating lease liabilities, noncurrent  165,751   181,357 
Deferred tax liability, net  15,884   15,572 
Other noncurrent liabilities  571   952 
Total noncurrent liabilities  461,665   478,166 
Total liabilities $689,324  $681,039 
COMMITMENTS AND CONTINGENCIES      
STOCKHOLDERS’ EQUITY      
Preferred stock – par value $0.01 per share; 25,000 shares authorized as of
June 30, 2024 and December 31, 2023; 0 shares issued and outstanding as
of June 30, 2024 and December 31, 2023
      
Common stock – par value $0.01 per share; 800,000 shares authorized as of
June 30, 2024 and December 31, 2023; 383,314 and 378,725 shares
issued and outstanding as of June 30, 2024 and December 31, 2023,
respectively
  3,833   3,789 
Additional paid-in capital  2,228,771   2,183,684 
Accumulated other comprehensive income  2,643   2,303 
Accumulated deficit  (805,220)  (760,846)
Total stockholders' equity  1,430,027   1,428,930 
Total liabilities and stockholders’ equity $2,119,351  $2,109,969 
         


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(In thousands, except for Net Loss per Share)
 
  Three Months Ended June 30,  Six Months Ended June 30, 
  2024  2023  2024  2023 
TOTAL REVENUE $312,331  $259,578  $612,768  $512,167 
OPERATING EXPENSES            
Center costs, excluding depreciation and amortization
shown separately below
  214,525   186,607   420,236   369,594 
General and administrative expenses  95,153   101,854   184,087   186,480 
Depreciation and amortization  18,600   19,530   41,164   38,599 
Total operating expenses $328,278  $307,991  $645,487  $594,673 
LOSS FROM OPERATIONS $(15,947) $(48,413) $(32,719) $(82,506)
OTHER EXPENSE            
(Loss) gain on remeasurement of
contingent consideration
  (55)  1,539   1,960   2,576 
Transaction costs  (792)  (3)  (792)  (89)
Interest expense, net  (5,823)  (5,119)  (11,726)  (10,211)
Other expense  (4)  (24)  (78)  (69)
Total other expense $(6,674) $(3,607) $(10,636) $(7,793)
LOSS BEFORE INCOME TAXES  (22,621)  (52,020)  (43,355)  (90,299)
INCOME TAX (PROVISION) BENEFIT  (656)  6,542   (1,019)  10,579 
NET LOSS $(23,277) $(45,478) $(44,374) $(79,720)
NET LOSS PER SHARE, BASIC AND DILUTED  (0.06)  (0.13)  (0.12)  (0.22)
Weighted-average shares used to compute basic and
diluted net loss per share
  379,427   363,161   377,880   362,039 
             
NET LOSS $(23,277) $(45,478) $(44,374) $(79,720)
OTHER COMPREHENSIVE (LOSS) INCOME            
Unrealized (losses) gains on cash flow hedge, net
of tax
  (243)  2,147   340   877 
COMPREHENSIVE LOSS $(23,520) $(43,331) $(44,034) $(78,843)
                 


CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
 
  Six Months Ended June 30, 
  2024  2023 
CASH FLOWS FROM OPERATING ACTIVITIES      
Net loss $(44,374) $(79,720)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
      
Depreciation and amortization  41,164   38,599 
Non-cash operating lease costs  19,476   20,263 
Stock-based compensation  45,131   56,944 
Amortization of discount and debt issue costs  844   1,076 
Gain on remeasurement of contingent consideration  (1,960)  (2,576)
Other, net  191   2,708 
Change in operating assets and liabilities, net of businesses acquired:      
Patient accounts receivable, net  (41,815)  (20,558)
Prepaid expenses and other current assets  (2,762)  (15,176)
Accounts payable  3,208   (5,395)
Accrued payroll expenses  20,100   5,158 
Operating lease liabilities  (22,082)  (16,929)
Other accrued expenses  5,101   7,282 
Net cash provided by (used in) operating activities $22,222  $(8,324)
CASH FLOWS FROM INVESTING ACTIVITIES      
Purchases of property and equipment  (10,214)  (19,310)
Acquisitions of businesses, net of cash acquired     (19,820)
Net cash used in investing activities $(10,214) $(39,130)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from long-term debt     25,000 
Payments of debt issue costs     (188)
Payments of long-term debt  (1,463)  (1,173)
Payments of contingent consideration  (2,400)  (5,201)
Net cash (used in) provided by financing activities $(3,863) $18,438 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  8,145   (29,016)
Cash and Cash Equivalents - Beginning of period  78,824   108,621 
CASH AND CASH EQUIVALENTS – END OF PERIOD $86,969  $79,605 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION      
Cash paid for interest, net $12,626  $9,830 
Cash paid for taxes, net of refunds $(154) $313 
SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND
FINANCING ACTIVITIES
      
Contingent consideration incurred in acquisitions of businesses $  $1,985 
Acquisition of property and equipment included in liabilities $1,726  $6,238 
         


RECONCILIATION OF LOSS FROM OPERATIONS TO CENTER MARGIN
 
  Three Months Ended June 30,  Six Months Ended June 30, 
  2024  2023  2024  2023 
(in thousands)            
Loss from operations $(15,947) $(48,413) $(32,719) $(82,506)
Adjusted for:            
Depreciation and amortization  18,600   19,530   41,164   38,599 
General and administrative expenses (1)  95,153   101,854   184,087   186,480 
Center Margin $97,806  $72,971  $192,532  $142,573 
                 

(1) Represents salaries, wages and employee benefits for our executive leadership, finance, human resources, marketing, billing and credentialing support and technology infrastructure and stock-based compensation for all employees.


RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
 
  Three Months Ended June 30,  Six Months Ended June 30, 
  2024  2023  2024  2023 
(in thousands)            
Net loss $(23,277) $(45,478) $(44,374) $(79,720)
Adjusted for:            
Interest expense, net  5,823   5,119   11,726   10,211 
Depreciation and amortization  18,600   19,530   41,164   38,599 
Income tax provision (benefit)  656   (6,542)  1,019   (10,579)
Loss (gain) on remeasurement of contingent
consideration
  55   (1,539)  (1,960)  (2,576)
Stock-based compensation expense  24,550   33,078   45,131   56,944 
Loss on disposal of assets  4   24   78   69 
Transaction costs (1)  792   3   792   89 
Executive transition costs  560   362   591   522 
Litigation costs (2)  292   3,446   829   3,849 
Strategic initiatives (3)  407   2,045   1,158   2,452 
Real estate optimization and restructuring
charges (4)
  (103)  3,720   (250)  3,720 
Amortization of cloud-based software
implementation costs (5)
  169      180    
Other expenses (6)  77   297   172   589 
Adjusted EBITDA $28,605  $14,065  $56,256  $24,169 
                 

(1) Primarily includes capital markets advisory, consulting, accounting and legal expenses related to our acquisitions and to the secondary offering completed in the second quarter of 2024.
(2) Litigation costs include only those costs which are considered non-recurring and outside of the ordinary course of business based on the following considerations, which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) the complexity of the case (e.g., complex class action litigation), (iii) the nature of the remedy(ies) sought, including the size of any monetary damages sought, (iv) the counterparty involved, and (v) our overall litigation strategy. During the three and six months ended June 30, 2024 and 2023, litigation costs included cash expenses related to three distinct litigation matters, including (x) a securities class action litigation, (y) a privacy class action litigation and (z) a compensation model class action litigation.
(3) Strategic initiatives consist of expenses directly related to a multi-phase system upgrade in connection with our recent and significant expansion. During each of the three and six months ended June 30, 2024 and 2023, we continued a process of evaluating and adopting critical enterprise-wide systems for (i) human resources management, (ii) clinician credentialing and onboarding process, and for the three and six months ended June 30, 2023, (iii) a scalable electronic health resources system. Strategic initiatives represents costs, such as third-party consulting costs and one-time costs, that are not part of our ongoing operations related to these enterprise-wide systems. We considered the frequency and scale of this multi-part enterprise upgrade when determining that the expenses were not normal, recurring operating expenses.
(4) Real estate optimization and restructuring charges consist of cash expenses and non-cash charges related to our real estate optimization initiative, which include certain asset impairment and disposal costs, certain gains and losses related to early lease terminations, and exit and disposal costs related to our real estate optimization initiative to consolidate our physical footprint during the three and six months ended June 30, 2023. As the decision to close these centers was part of a significant strategic project driven by a historic shift in behavior, the magnitude of center closures has been and is expected to be greater than what would be expected as part of ordinary business operations and do not constitute normal recurring operating activities. During the three and six months ended June 30, 2024, real estate optimization and restructuring charges consisted of certain gains and losses related to early lease terminations of previously abandoned real estate leases in 2023.
(5) Represents amortization of capitalized implementation costs related to cloud-based software arrangements that are included within general and administrative expenses included in our unaudited consolidated statements of operations and comprehensive loss.
(6) Primarily includes costs incurred to consummate or integrate acquired centers, certain of which are wholly-owned and certain of which are supported practices, in addition to the compensation paid to former owners of acquired centers and related expenses that are not reflective of the ongoing operating expenses of our centers. Acquired center integration and other are components of general and administrative expenses included in our unaudited consolidated statements of operations and comprehensive loss. Former owner fees is a component of center costs, excluding depreciation and amortization included in our unaudited consolidated statements of operations and comprehensive loss.