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SCOTTSDALE, Ariz., Nov. 08, 2022 (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 quarter ended September 30, 2022.
(All results compared to prior-year comparative period, unless otherwise noted)
Q3 2022 Highlights and FY 2022 Outlook
“While we are not yet fulfilling our potential, I am confident in our ability to better execute against the tremendous market opportunity in front of us,” said Ken Burdick, Chairman and CEO of LifeStance. “As our team establishes a strategic multi-year roadmap, we are focused on continuing our shift to organic growth, investing in strategic initiatives to build scalable infrastructure, and driving operating leverage and profitability.”Financial Highlights Q3 2022 Q3 2021 Y/Y (in millions) Total revenue $217.6 $173.8 25%Loss from operations (38.8) (124.7) (69%)Center Margin 60.3 52.1 16%Net loss (37.9) (120.5) (69%)Adjusted EBITDA 15.4 10.7 44%As % of Total revenue: Loss from operations (17.8%) (71.7%) Center Margin 27.7% 29.9% Net loss (17.4%) (69.3%) Adjusted EBITDA 7.1% 6.2%
(All results compared to prior-year period, unless otherwise noted)
Strategy and Key Developments
During the third quarter, LifeStance took several actions to support the company’s strategy to expand into new markets, build market density and offer a technology-enabled experience for patients and clinicians, including:
Balance Sheet, Cash Flow and Capital Allocation
For the nine months ended September 30, 2022, LifeStance provided $16.9 million cash flow from operations, including $5.7 million during the third quarter of 2022. The company ended the third quarter with cash of $90.3 million and net long-term debt of $212.0 million.
2022 Guidance1
LifeStance now expects full year 2022 revenue of $845 to $850 million, Center Margin of $229 to $232 million, and Adjusted EBITDA of $50 to $53 million. The lower guidance ranges relative to prior expectations were primarily driven by lower than expected visit volume and higher than expected costs associated with the company’s employee health benefits program.
For the fourth quarter of 2022, the company expects revenue of $215 million to $220 million, Center Margin of $55 million to $58 million, and Adjusted EBITDA of $7.5 million to $10.5 million.
Footnotes:
(1) Guidance for the fourth quarter of 2022 and full year 2022 assumes no further COVID-related impacts or changes in the labor market environment.
Conference Call, Webcast Information, and Presentation
LifeStance will hold a conference call today, November 8, at 4:30 p.m. Eastern Time to discuss third quarter 2022 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 6691997 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 employs approximately 5,400 psychiatrists, advanced practice nurses, psychologists and therapists and operates across 32 states and approximately 600 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 full-year and fourth-quarter guidance and management's related assumptions, statements about the company’s financial position; business plans and objectives; general economic and industry trends; operating results; and working capital and liquidity and other statements contained in this presentation 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 affiliated 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, 2021. 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. 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 fourth quarter of 2022 and full year 2022 are calculated in a manner consistent with the historical presentation of these measures at the end of this release. Reconciliation for the forward-looking fourth quarter of 2022 and full year 2022 Center Margin and Adjusted EBITDA guidance 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) September 30, 2022 December 31, 2021 CURRENT ASSETS Cash and cash equivalents $90,336 $148,029 Patient accounts receivable, net 113,284 76,078 Prepaid expenses and other current assets 48,967 42,413 Total current assets 252,587 266,520 NONCURRENT ASSETS Property and equipment, net 193,393 152,242 Intangible assets, net 272,473 300,355 Goodwill 1,249,793 1,204,544 Other noncurrent assets 11,416 3,448 Total noncurrent assets 1,727,075 1,660,589 Total assets $1,979,662 $1,927,109 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $7,947 $14,152 Accrued payroll expenses 61,576 60,002 Other accrued expenses 29,303 26,510 Current portion of contingent consideration 10,816 14,123 Other current liabilities 2,630 1,965 Total current liabilities 112,272 116,752 NONCURRENT LIABILITIES Long-term debt, net 212,042 157,416 Other noncurrent liabilities 66,956 50,325 Contingent consideration, net of current portion 1,481 3,307 Deferred tax liability, net 55,408 54,281 Total noncurrent liabilities 335,887 265,329 Total liabilities $448,159 $382,081 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY Preferred stock – par value $0.01 per share; 25,000 shares authorized as of September 30, 2022 and December 31, 2021; 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021 — — Common stock – par value $0.01 per share; 800,000 shares authorized as of September 30, 2022 and December 31, 2021; 376,042 and 374,255 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 3,761 3,743 Additional paid-in capital 2,050,537 1,898,357 Accumulated other comprehensive income 3,185 — Accumulated deficit (525,980) (357,072)Total stockholders' equity 1,531,503 1,545,028 Total liabilities and stockholders’ equity $1,979,662 $1,927,109
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(In thousands, except for Net Loss per Share) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 TOTAL REVENUE $217,560 $173,835 $630,182 $477,516 OPERATING EXPENSES Center costs, excluding depreciation and amortization shown separately below 157,267 121,783 455,857 330,258 General and administrative expenses 81,248 162,943 288,176 281,073 Depreciation and amortization 17,884 13,777 50,311 38,779 Total operating expenses $256,399 $298,503 $794,344 $650,110 LOSS FROM OPERATIONS $(38,839) $(124,668) $(164,162) $(172,594)OTHER INCOME (EXPENSE) Gain (loss) on remeasurement of contingent consideration 1,176 (906) 562 (1,463)Transaction costs (210) (126) (507) (3,656)Interest expense (4,189) (3,503) (14,763) (35,309)Other expense (144) — (144) (1,445)Total other expense $(3,367) $(4,535) $(14,852) $(41,873)LOSS BEFORE INCOME TAXES (42,206) (129,203) (179,014) (214,467)INCOME TAX BENEFIT 4,353 8,751 10,106 15,300 NET LOSS $(37,853) $(120,452) $(168,908) $(199,167)Accretion of Redeemable Class A units — — — (36,750)NET LOSS AVAILABLE TO COMMON STOCKHOLDERS/MEMBERS $(37,853) $(120,452) $(168,908) $(235,917)NET LOSS PER SHARE, BASIC AND DILUTED (0.11) (0.35) (0.48) (0.73)Weighted-average shares used to compute basic and diluted net loss per share 357,520 343,394 354,057 321,283 NET LOSS $(37,853) $(120,452) $(168,908) $(199,167)OTHER COMPREHENSIVE INCOME Unrealized gains on cash flow hedge, net of tax 3,185 — 3,185 — COMPREHENSIVE LOSS $(34,668) $(120,452) $(165,723) $(199,167)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands) Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(168,908) $(199,167)Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 50,311 38,779 Stock and unit-based compensation 152,235 150,809 Loss on debt extinguishment 3,380 5,620 Amortization of discount and debt issue costs 1,351 1,498 (Gain) loss on remeasurement of contingent consideration (562) 1,463 Loss on disposal of assets 144 — Endowment of shares to LifeStance Health Foundation — 9,000 Change in operating assets and liabilities, net of businesses acquired: Patient accounts receivable, net (34,606) (20,711)Prepaid expenses and other current assets (5,811) (32,888)Accounts payable 1,109 (4,613)Accrued payroll expenses (588) 15,910 Other accrued expenses 18,816 13,085 Net cash provided by (used in) operating activities $16,871 $(21,215)CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (68,871) (55,815)Acquisitions of businesses, net of cash acquired (40,294) (58,699)Net cash used in investing activities $(109,165) $(114,514)CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from initial public offering, net of underwriters discounts and commissions and deferred offering costs — 548,905 Issuance of common units to new investors — 1,000 Proceeds from long-term debt, net of discount 237,474 98,800 Payments of debt issue costs (7,266) (2,360)Payments of long-term debt (181,230) (311,060)Prepayment for debt paydown (1,609) — Payments of contingent consideration (12,290) (6,262)Taxes related to net share settlement of equity awards (478) — Net cash provided by financing activities $34,601 $329,023 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (57,693) 193,294 Cash and Cash Equivalents - Beginning of period 148,029 18,829 CASH AND CASH EQUIVALENTS – END OF PERIOD $90,336 $212,123 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest $9,518 $28,217 Cash paid for taxes, net of refunds $1,780 $908 SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND FINANCING ACTIVITIES Equipment financed through capital leases $264 $14 Contingent consideration incurred in acquisitions of businesses $7,719 $5,514 Acquisition of property and equipment included in liabilities $8,607 $8,936 Issuance of common units for acquisitions of businesses $— $1,486
RECONCILIATION OF LOSS FROM OPERATIONS TO CENTER MARGIN
(unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) Loss from operations $(38,839) $(124,668) $(164,162) $(172,594)Adjusted for: Depreciation and amortization 17,884 13,777 50,311 38,779 General and administrative expenses (1) 81,248 162,943 288,176 281,073 Center Margin $60,293 $52,052 $174,325 $147,258
(1) Represents salaries, wages and employee benefits for our executive leadership, finance, human resources, marketing, billing and credentialing support and technology infrastructure and stock and unit-based compensation for all employees.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) Net loss $(37,853) $(120,452) $(168,908) $(199,167)Adjusted for: Interest expense 4,189 3,503 14,763 35,309 Depreciation and amortization 17,884 13,777 50,311 38,779 Income tax benefit (4,353) (8,751) (10,106) (15,300)(Gain) loss on remeasurement of contingent consideration (1,176) 906 (562) 1,463 Stock and unit-based compensation expense 34,870 120,689 152,235 150,809 Management fees (1) — — — 1,445 Loss on disposal of assets 144 — 144 — Transaction costs (2) 210 126 507 3,656 Offering related costs (3) — — — 8,747 Endowment to the LifeStance Health Foundation — — — 10,000 CEO transition costs 494 — 494 — Litigation costs (4) 104 — 104 — Other expenses (5) 866 896 3,511 2,072 Adjusted EBITDA $15,379 $10,694 $42,493 $37,813
(1) Represents management fees paid to certain of our executive officers and affiliates of our Principal Stockholders pursuant to the management services agreement entered into in connection with the TPG Acquisition. The management services agreement terminated in connection with the IPO.
(2) Primarily includes capital markets advisory, consulting, accounting and legal expenses related to our acquisitions.
(3) Primarily includes non-recurring incremental professional services, such as accounting and legal, and directors' and officers' insurance incurred in connection with the IPO.
(4) 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, (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.
(5) Primarily includes costs incurred to consummate or integrate acquired centers, certain of which are wholly-owned and certain of which are affiliated practices, in addition to the fees 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.
Investor Relations Contact Monica Prokocki VP of Investor Relations 602-767-2100 investor.relations@lifestance.com