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LifeStance Reports Third Quarter 2024 Results
Globe Newswire 7-Nov-2024 6:00 AM
SCOTTSDALE, Ariz., Nov. 07, 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 third quarter ended September 30, 2024.
(All results compared to prior-year comparative period, unless otherwise noted) Q32024 Highlights and FY 2024 Outlook
Revenue of $312.7 million increased 19% compared to revenue of $262.9 million
Clinician base increased 13% to 7,269 clinicians, a sequential net increase of 285 in the third quarter
Third quarter visit volumes increased 15% to 2.0 million
Net loss of $6.0 million compared to net loss of $61.6 million
Adjusted EBITDA of positive $30.7 million compared to Adjusted EBITDA of positive $14.6 million
For full year 2024, raising revenue expectations to $1.228 billion to $1.248 billion; raising Center Margin expectations to $382 million to $398 million; raising Adjusted EBITDA expectations to $105 million to $115 million; and reiterating expectations for positive Free Cash Flow
"Thanks to the great work and resilience of the LifeStance team, we mitigated much of the rate pressure that was expected in the third quarter. This enabled us to surpass our expectations for the quarter and raise guidance for the full year," said Ken Burdick, Chairman and CEO of LifeStance. "We are pleased with the performance thus far in 2024 and, as we look to 2025, will continue striving to meet our commitments as we have done for the past eight consecutive quarters."
Financial Highlights
Q3 2024
Q3 2023
Y/Y
(in millions)
Total revenue
$
312.7
$
262.9
19
%
Income (loss) from operations
0.0
(74.4
)
(100
%)
Center Margin
100.4
76.2
32
%
Net loss
(6.0
)
(61.6
)
(90
%)
Adjusted EBITDA
30.7
14.6
110
%
As % of Total revenue:
Income (loss) from operations
0.0
%
(28.3
%)
Center Margin
32.1
%
29.0
%
Net loss
(1.9
%)
(23.4
%)
Adjusted EBITDA
9.8
%
5.6
%
(All results compared to prior-year period, unless otherwise noted)
Revenue grew 19% to $312.7 million. Strong revenue growth in the third quarter was driven primarily by improvements in total revenue per visit and higher visit volumes from net clinician growth.
Income from operations was $47 thousand. Net loss was $6.0 million.
Center Margin grew 32% to $100.4 million, or 32.1% of total revenue.
Adjusted EBITDA increased 110% to $30.7 million, or 9.8% of total revenue. Adjusted EBITDA as a percentage of revenue increased in the third 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 nine months ended September 30, 2024, LifeStance provided $44.9 million cash flow from operations, including $22.7 million during the third quarter of 2024. The Company ended the third quarter with cash of $102.6 million and net long-term debt of $279.1 million.
2024 Guidance
LifeStance is providing the following outlook for 2024:
The Company is raising full year revenue to $1.228 billion to $1.248 billion; raising Center Margin to $382 million to $398 million; and raising Adjusted EBITDA to $105 million to $115 million. Additionally, the Company continues to expect to generate positive Free Cash Flow for the full year.
For the fourth quarter of 2024, the Company expects total revenue of $302.5 million to $322.5 million, Center Margin of $89 million to $105 million, and Adjusted EBITDA of $18 million to $28 million.
Conference Call, Webcast Information, and Presentations
LifeStance will hold a conference call today, November 7, 2024 at 8:30 a.m. Eastern Time to discuss the third 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 2787723 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 healthcare 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 approximately 7,200 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 fourth 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 healthcare 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 income (loss) from operations.
Center Margin and Adjusted EBITDA anticipated for the fourth 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 fourth 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)
September 30, 2024
December 31, 2023
CURRENT ASSETS
Cash and cash equivalents
$
102,615
$
78,824
Patient accounts receivable, net
158,161
125,405
Prepaid expenses and other current assets
26,244
21,502
Total current assets
287,020
225,731
NONCURRENT ASSETS
Property and equipment, net
169,974
188,222
Right-of-use assets
154,835
170,703
Intangible assets, net
195,352
221,072
Goodwill
1,293,346
1,293,346
Other noncurrent assets
7,414
10,895
Total noncurrent assets
1,820,921
1,884,238
Total assets
$
2,107,941
$
2,109,969
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
$
7,282
$
7,051
Accrued payroll expenses
111,858
102,478
Other accrued expenses
43,291
35,012
Contingent consideration
2,500
8,169
Operating lease liabilities, current
48,959
46,475
Other current liabilities
3,624
3,688
Total current liabilities
217,514
202,873
NONCURRENT LIABILITIES
Long-term debt, net
279,055
280,285
Operating lease liabilities, noncurrent
158,679
181,357
Deferred tax liability, net
15,219
15,572
Other noncurrent liabilities
381
952
Total noncurrent liabilities
453,334
478,166
Total liabilities
$
670,848
$
681,039
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock – par value $0.01 per share; 25,000 shares authorized as of September 30, 2024 and December 31, 2023; 0 shares issued and outstanding as of September 30, 2024 and December 31, 2023
—
—
Common stock – par value $0.01 per share; 800,000 shares authorized as of September 30, 2024 and December 31, 2023; 382,640 and 378,725 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
3,826
3,789
Additional paid-in capital
2,243,673
2,183,684
Accumulated other comprehensive income
771
2,303
Accumulated deficit
(811,177
)
(760,846
)
Total stockholders' equity
1,437,093
1,428,930
Total liabilities and stockholders' equity
$
2,107,941
$
2,109,969
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,
2024
2023
2024
2023
TOTAL REVENUE
$
312,722
$
262,895
$
925,490
$
775,062
OPERATING EXPENSES
Center costs, excluding depreciation and amortization shown separately below
212,291
186,686
632,527
556,280
General and administrative expenses
85,269
130,945
269,356
317,425
Depreciation and amortization
15,115
19,621
56,279
58,220
Total operating expenses
$
312,675
$
337,252
$
958,162
$
931,925
INCOME (LOSS) FROM OPERATIONS
$
47
$
(74,357
)
$
(32,672
)
$
(156,863
)
OTHER EXPENSE
Gain on remeasurement of contingent consideration
15
1,867
1,975
4,443
Transaction costs
(29
)
—
(821
)
(89
)
Interest expense, net
(5,413
)
(5,477
)
(17,139
)
(15,688
)
Other expense
(2
)
(1
)
(80
)
(70
)
Total other expense
$
(5,429
)
$
(3,611
)
$
(16,065
)
$
(11,404
)
LOSS BEFORE INCOME TAXES
(5,382
)
(77,968
)
(48,737
)
(168,267
)
INCOME TAX (PROVISION) BENEFIT
(575
)
16,385
(1,594
)
26,964
NET LOSS
$
(5,957
)
$
(61,583
)
$
(50,331
)
$
(141,303
)
NET LOSS PER SHARE, BASIC AND DILUTED
(0.02
)
(0.17
)
(0.13
)
(0.39
)
Weighted-average shares used to compute basic and diluted net loss per share
380,359
372,476
378,713
365,556
NET LOSS
$
(5,957
)
$
(61,583
)
$
(50,331
)
$
(141,303
)
OTHER COMPREHENSIVE (LOSS) INCOME
Unrealized (losses) gains on cash flow hedge, net of tax
(1,872
)
230
(1,532
)
1,107
COMPREHENSIVE LOSS
$
(7,829
)
$
(61,353
)
$
(51,863
)
$
(140,196
)
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands)
Nine Months Ended September 30,
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
(50,331
)
$
(141,303
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
56,279
58,220
Non-cash operating lease costs
29,431
30,225
Stock-based compensation
60,026
78,469
Amortization of discount and debt issue costs
1,264
1,592
Gain on remeasurement of contingent consideration
(1,975
)
(4,443
)
Other, net
998
5,105
Change in operating assets and liabilities, net of businesses acquired:
Patient accounts receivable, net
(32,757
)
(48,484
)
Prepaid expenses and other current assets
(3,924
)
(52,293
)
Accounts payable
620
(3,848
)
Accrued payroll expenses
9,381
7,622
Operating lease liabilities
(34,300
)
(30,109
)
Other accrued expenses
10,232
65,568
Net cash provided by (used in) operating activities
$
44,944
$
(33,679
)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
(15,265
)
(29,106
)
Acquisitions of businesses, net of cash acquired
—
(19,820
)
Net cash used in investing activities
$
(15,265
)
$
(48,926
)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt
—
25,000
Payments of debt issue costs
—
(188
)
Payments of long-term debt
(2,194
)
(1,821
)
Payments of contingent consideration
(3,694
)
(6,402
)
Net cash (used in) provided by financing activities
$
(5,888
)
$
16,589
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
23,791
(66,016
)
Cash and Cash Equivalents - Beginning of period
78,824
108,621
CASH AND CASH EQUIVALENTS – END OF PERIOD
$
102,615
$
42,605
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net
$
19,023
$
15,424
Cash paid for taxes, net of refunds
$
59
$
416
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
$
1,203
$
5,303
RECONCILIATION OF INCOME (LOSS) FROM OPERATIONS TO CENTER MARGIN
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(in thousands)
Income (loss) from operations
$
47
$
(74,357
)
$
(32,672
)
$
(156,863
)
Adjusted for:
Depreciation and amortization
15,115
19,621
56,279
58,220
General and administrative expenses (1)
85,269
130,945
269,356
317,425
Center Margin
$
100,431
$
76,209
$
292,963
$
218,782
(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 September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(in thousands)
Net loss
$
(5,957
)
$
(61,583
)
$
(50,331
)
$
(141,303
)
Adjusted for:
Interest expense, net
5,413
5,477
17,139
15,688
Depreciation and amortization
15,115
19,621
56,279
58,220
Income tax provision (benefit)
575
(16,385
)
1,594
(26,964
)
Gain on remeasurement of contingent consideration
(15
)
(1,867
)
(1,975
)
(4,443
)
Stock-based compensation expense
14,895
21,525
60,026
78,469
Loss on disposal of assets
2
1
80
70
Transaction costs (1)
29
—
821
89
Executive transition costs
—
114
591
636
Litigation costs (2)
224
45,418
1,053
49,267
Strategic initiatives (3)
134
790
1,292
3,242
Real estate optimization and restructuring charges (4)
—
1,257
(250
)
4,977
Amortization of cloud-based software implementation costs (5)
298
—
478
—
Other expenses (6)
—
214
172
803
Adjusted EBITDA
$
30,713
$
14,582
$
86,969
$
38,751
(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 nine months ended September 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 nine months ended September 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 nine months ended September 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 nine months ended September 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 nine months ended September 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.
