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LifeStance Reports Fourth Quarter and Full Year 2022 Results

SCOTTSDALE, Ariz., March 08, 2023 (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 fourth quarter and full year ended December 31, 2022.

(All results compared to prior-year comparative period, unless otherwise noted)
2022 Highlights and 2023 Outlook

  • Fourth quarter revenue increased 21% to $229.4 million and full year revenue of $859.5 million increased $192.0 million or 29% compared to revenue of $667.5 million
  • Clinician base increased 18% to 5,631 clinicians, including 200 net clinician adds in the fourth quarter and 841 for the full year
  • Net loss of $46.7 million in the fourth quarter and $215.6 million for the full year, primarily driven by stock and unit-based compensation
  • Adjusted EBITDA of positive $10.2 million in the fourth quarter and positive $52.7 million for the full year
  • Expecting full year 2023 revenue of $980 million to $1.02 billion, Center Margin of $270 to $290 million, and Adjusted EBITDA of $50 to $62 million

“The fourth quarter and full year of 2022 concluded on a positive note. We are encouraged by the early signs of improvement but fully recognize that we have much work ahead,” said Ken Burdick, Chairman and CEO of LifeStance. “Our focus remains on streamlining and standardizing our business over the next two years, which will pave the way for profitable and sustainable growth, and long-term value creation for our shareholders.”

Financial Highlights                  
  Q4 2022  Q4 2021  Y/Y  FY 2022  FY 2021  Y/Y 
(in millions)                  
Total revenue $229.4  $190.1   21% $859.5  $667.5   29%
Loss from operations  (46.0)  (113.8)  (60%)  (210.2)  (286.4)  (27%)
Center Margin  62.7   54.2   16%  237.0   201.5   18%
Net loss  (46.7)  (108.0)  (57%)  (215.6)  (307.2)  (30%)
Adjusted EBITDA  10.2   11.4   (11%)  52.7   49.2   7%
As % of Total revenue:                  
Loss from operations  (20.1%)  (59.9%)     (24.5%)  (42.9%)   
Center Margin  27.3%  28.5%     27.6%  30.2%   
Net loss  (20.4%)  (56.8%)     (25.1%)  (46.0%)   
Adjusted EBITDA  4.4%  6.0%     6.1%  7.4%   

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

  • In the fourth quarter, total revenue grew 21% to $229.4 million, and for the full year, total revenue grew $192.0 million or 29% to $859.5 million compared to revenue of $667.5 million. Strong revenue growth in the fourth quarter was driven primarily by increased visit volumes.
  • In the fourth quarter, loss from operations was $46.0 million, and for the full year, loss from operations was $210.2 million, primarily driven by stock and unit-based compensation. In the fourth quarter, net loss was $46.7 million and for the full year, net loss was $215.6 million.
  • In the fourth quarter, Center Margin grew 16% to $62.7 million, or 27.3% of total revenue. For the full year, Center Margin grew 18% to $237.0 million, or 27.6% of total revenue.
  • In the fourth quarter, Adjusted EBITDA declined 11% to $10.2 million, or 4.4% of total revenue. For the full year, Adjusted EBITDA grew 7% to $52.7 million, or 6.1% of total revenue. Adjusted EBITDA as a percentage of revenue decreased as a result of higher-than-expected G&A expenses in the fourth quarter, due to investments in the business that were accelerated.

Strategy and Key Developments

In 2022, LifeStance took the following actions to support the Company's strategy to expand into new markets, build market density and offer a technology-enabled experience for our patients and clinicians:

  • Drove 18% year-over-year growth in the clinician base to 5,631 with the addition of 200 net clinicians in the fourth quarter and 841 net clinicians for the full year, demonstrating that the Company’s value proposition continues to resonate in the market
  • Opened 9 de novo centers in the fourth quarter and 90 for the full year, bringing total centers to over 600
  • Completed four acquisitions in the fourth quarter and 13 during the full year, bringing the total since inception to 90 as the Company continues to expand into new markets, build market density and grow its clinician base
  • Continued to deploy proprietary online booking and intake experience ("OBIE") across the country, which is now live in 20 states
  • Strengthened management team by hiring Ken Burdick as Chief Executive Officer, David Bourdon as Chief Financial Officer, and appointing Danish Qureshi to President and Chief Operating Officer
  • Certified by Great Place to Work®, the global authority on workplace culture, employee experience and leadership behaviors proven to deliver market-leading revenue, employee retention and increased innovation, for the second straight year

Balance Sheet, Cash Flow and Capital Allocation

For the year ended December 31, 2022, LifeStance provided $52.8 million cash flow from operations, including $36.0 million during the fourth quarter of 2022. The Company ended the fourth quarter with cash of $108.6 million and net long-term debt of $225.1 million.

2023 Guidance

LifeStance is providing the following initial outlook for 2023:

  • The Company expects full year revenue of $980 million to $1.02 billion, Center Margin of $270 to $290 million, and Adjusted EBITDA of $50 to $62 million.
  • For the first quarter of 2023, the Company expects total revenue of $242 to $252 million, Center Margin of $62 to $69 million, and Adjusted EBITDA of $7 to $12 million.

Conference Call, Webcast Information, and Presentations

LifeStance will hold a conference call today, March 8, at 8:30 a.m. Eastern Time to discuss the fourth quarter and full year 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 4226236 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 5,600 psychiatrists, advanced practice nurses, psychologists and therapists and operates across 34 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 first-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 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. 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) income from operations.

Center Margin and Adjusted EBITDA anticipated for the first quarter of 2023 and full year 2023 are calculated in a manner consistent with the historical presentation of these measures at the end of this release. Reconciliation for the forward-looking first quarter of 2023 and full year 2023 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
(In thousands, except for par value)
 
  Successor 
  December 31, 2022  December 31, 2021 
CURRENT ASSETS      
Cash and cash equivalents $108,621  $148,029 
Patient accounts receivable, net  100,868   76,078 
Prepaid expenses and other current assets  23,734   42,413 
Total current assets  233,223   266,520 
NONCURRENT ASSETS      
Property and equipment, net  194,189   152,242 
Right-of-use assets  199,431    
Intangible assets, net  263,294   300,355 
Goodwill  1,272,939   1,204,544 
Other noncurrent assets  10,795   3,448 
Total noncurrent assets  1,940,648   1,660,589 
Total assets $2,173,871  $1,927,109 
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES      
Accounts payable $12,285  $14,152 
Accrued payroll expenses  75,650   60,002 
Other accrued expenses  30,428   26,510 
Current portion of contingent consideration  15,876   14,123 
Operating lease liabilities, current  38,824    
Other current liabilities  2,936   1,965 
Total current liabilities  175,999   116,752 
NONCURRENT LIABILITIES      
Long-term debt, net  225,079   157,416 
Operating lease liabilities, noncurrent  212,586    
Deferred tax liability, net  38,701   54,281 
Other noncurrent liabilities  2,783   53,632 
Total noncurrent liabilities  479,149   265,329 
Total liabilities $655,148  $382,081 
COMMITMENTS AND CONTINGENCIES      
STOCKHOLDERS’ EQUITY      
Preferred stock – par value $0.01 per share; 25,000 shares authorized as of
   December 31, 2022 and December 31, 2021; 0 shares issued and outstanding as
   of December 31, 2022 and December 31, 2021
      
Common stock – par value $0.01 per share; 800,000 shares authorized as of
   December 31, 2022 and December 31, 2021; 375,964 and 374,255 shares
   issued and outstanding as of December 31, 2022 and December 31, 2021,
   respectively
  3,761   3,743 
Additional paid-in capital  2,084,324   1,898,357 
Accumulated other comprehensive income  3,274    
Accumulated deficit  (572,636)  (357,072)
Total stockholders' equity  1,518,723   1,545,028 
Total liabilities and stockholders’ equity $2,173,871  $1,927,109 



CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except for Net Loss per Share)
 
  Successor   Predecessor 
  Year Ended
December 31, 2022
  Year Ended
December 31, 2021
  April 13 to
December 31, 2020*
   January 1 to
May 14, 2020
 
TOTAL REVENUE $859,542  $667,511  $265,556   $111,661 
OPERATING EXPENSES             
Center costs, excluding depreciation and
   amortization shown separately below
  622,525   466,003   179,264    78,777 
General and administrative expenses  377,993   433,725   51,841    20,854 
Depreciation and amortization  69,198   54,136   27,710    3,335 
Total operating expenses $1,069,716  $953,864  $258,815   $102,966 
(LOSS) INCOME FROM OPERATIONS $(210,174) $(286,353) $6,741   $8,695 
OTHER (EXPENSE) INCOME             
(Loss) gain on remeasurement of
   contingent consideration
  (1,688)  (2,610)  (576)   322 
Transaction costs  (722)  (3,762)  (3,937)   (33,247)
Interest expense  (19,928)  (38,911)  (19,112)   (3,020)
Other expense  (218)  (1,469)  (263)   (14)
Total other expense $(22,556) $(46,752) $(23,888)  $(35,959)
LOSS BEFORE INCOME TAXES  (232,730)  (333,105)  (17,147)   (27,264)
INCOME TAX BENEFIT  17,166   25,908   4,022    2,319 
NET LOSS $(215,564) $(307,197) $(13,125)  $(24,945)
Accretion of Redeemable Class A units     (36,750)       
Accretion of Series A-1 redeemable
   convertible preferred units
            (272,582)
Cumulative dividend on Series A
   redeemable convertible preferred
   units
            (662)
NET LOSS AVAILABLE TO COMMON
   STOCKHOLDERS/MEMBERS
 $(215,564) $(343,947) $(13,125)  $(298,189)
NET LOSS PER SHARE, BASIC AND
   DILUTED
  (0.61)  (1.05)  (0.04)    
Weighted-average shares used to compute
   basic and diluted net loss per share
  355,278   327,523   302,335     
              
NET LOSS $(215,564) $(307,197) $(13,125)  $(24,945)
OTHER COMPREHENSIVE INCOME             
Unrealized gains on cash flow hedge, net
   of tax
  3,274           
COMPREHENSIVE LOSS $(212,290) $(307,197) $(13,125)  $(24,945)

* For the period from April 13, 2020 through May 14, 2020, the operations of LifeStance TopCo, L.P. (Successor) were limited to those incident to its formation and the acquisition of LifeStance Health, LLC by affiliates of TPG Inc. (the "TPG Acquisition"), which were not significant. Earnings from April 13 to May 14 were reflected in the Predecessor 2020 Period.



CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
  Successor   Predecessor 
  Year Ended
December 31, 2022
  Year Ended
December 31, 2021
  April 13 to
December 31, 2020*
   January 1 to
May 14, 2020
 
CASH FLOWS FROM OPERATING ACTIVITIES             
Net loss $(215,564) $(307,197) $(13,125)  $(24,945)
Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
             
Depreciation and amortization  69,198   54,136   27,710    3,335 
Non-cash operating lease costs  38,161           
Stock and unit-based compensation  187,430   259,439   1,452     
Deferred income taxes  (16,733)  (26,945)  (4,156)   (2,345)
Loss on debt extinguishment  3,380   14,440   3,066     
Amortization of discount and debt issue costs  1,949   1,797   759    215 
Loss (gain) on remeasurement of contingent consideration  1,688   2,610   576    (322)
Loss on disposal of assets  218           
Endowment of shares to LifeStance Health Foundation     9,000        
Change in operating assets and liabilities, net of businesses
   acquired:
             
Patient accounts receivable  (21,663)  (24,213)  (8,183)   (5,122)
Prepaid expenses and other current assets  (3,431)  (29,121)  (1,101)   (4,526)
Accounts payable  7,667   623   2,467    (1,638)
Accrued payroll expenses  12,100   15,265   58    8,753 
Operating lease liabilities  (13,169)          
Other accrued expenses  1,558   39,586   (31,492)   40,031 
Net cash provided by (used in) operating activities  52,789   9,420   (21,969)   13,436 
CASH FLOWS FROM INVESTING ACTIVITIES             
Purchases of property and equipment  (79,255)  (94,492)  (25,262)   (12,804)
Acquisition of Predecessor, net of cash acquired        (646,694)    
Acquisitions of businesses, net of cash acquired  (60,206)  (99,584)  (164,135)   (12,274)
Net cash used in investing activities  (139,461)  (194,076)  (836,091)   (25,078)
CASH FLOWS FROM FINANCING ACTIVITIES             
Proceeds from initial public offering, net of underwriters
   discounts and commissions and deferred offering costs
     548,905        
Contributions from Members related to acquisition of
   Predecessor
        633,585     
Issuance of common units to new investors     1,000   21,000     
Repurchase of Series A redeemable convertible preferred
   units
            (1,000)
Proceeds from long-term debt, net of discount  257,324   98,800   392,064    74,350 
Payments of debt issue costs  (7,266)  (2,360)  (8,684)   (650)
Payments of long-term debt  (187,766)  (311,390)  (156,785)   (18,222)
Prepayment for debt paydown  (1,609)  (8,820)       
Payments of contingent consideration  (12,515)  (12,279)  (4,291)   (19,093)
Taxes related to net share settlement of equity awards  (904)          
Net cash provided by financing activities  47,264   313,856   876,889    35,385 
NET (DECREASE) INCREASE IN CASH AND CASH
   EQUIVALENTS
  (39,408)  129,200   18,829    23,743 
Cash and Cash Equivalents - Beginning of period  148,029   18,829       3,481 
CASH AND CASH EQUIVALENTS – END OF PERIOD $108,621  $148,029  $18,829   $27,224 

* For the period from April 13, 2020 through May 14, 2020, the operations of LifeStance TopCo, L.P. (Successor) were limited to those incident to its formation and the TPG Acquisition, which were not significant. Earnings from April 13 to May 14 were reflected in the Predecessor 2020 Period.



CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
  Successor   Predecessor 
  Year Ended
December 31, 2022
  Year Ended
December 31, 2021
  April 13 to
December 31, 2020*
   January 1 to
May 14, 2020
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION
             
Cash paid for interest $14,365  $22,415  $14,292   $2,857 
Cash paid for taxes, net of refunds $2,237  $1,093  $221   $25 
SUPPLEMENTAL DISCLOSURES OF NON CASH
   INVESTING AND FINANCING ACTIVITIES
             
Equipment financed through finance leases $363  $1,438  $109   $415 
Contingent consideration incurred in acquisitions of
   businesses
 $11,221  $10,685  $10,220   $3,788 
Acquisition of property and equipment included in liabilities $7,891  $15,845  $4,465   $2,718 
Surrender of common stock $982  $  $   $ 
Issuance of common units for convertible promissory
   note conversion
 $  $  $511   $ 
Issuance of common units for acquisitions of businesses $  $1,486  $7,590   $ 
Taxes related to net share settlement of equity awards
   included in liabilities
 $  $441  $   $ 

* For the period from April 13, 2020 through May 14, 2020, the operations of LifeStance TopCo, L.P. (Successor) were limited to those incident to its formation and the TPG Acquisition, which were not significant. Earnings from April 13 to May 14 were reflected in the Predecessor 2020 Period.



RECONCILIATION OF (LOSS) INCOME FROM OPERATIONS TO CENTER MARGIN
 
  Successor   Predecessor 
  Year Ended
December 31, 2022
  Year Ended
December 31, 2021
  April 13 to
December 31, 2020
   January 1 to
May 14, 2020
 
(in thousands)             
(Loss) income from operations $(210,174) $(286,353) $6,741   $8,695 
Adjusted for:             
Depreciation and amortization  69,198   54,136   27,710    3,335 
General and administrative expenses (1)  377,993   433,725   51,841    20,854 
Center Margin $237,017  $201,508  $86,292   $32,884 

(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
 
  Successor   Predecessor 
  Year Ended
December 31, 2022
  Year Ended
December 31, 2021
  April 13 to
December 31, 2020
   January 1 to
May 14, 2020
 
(in thousands)             
Net loss $(215,564) $(307,197) $(13,125)  $(24,945)
Adjusted for:             
Interest expense  19,928   38,911   19,112    3,020 
Depreciation and amortization  69,198   54,136   27,710    3,335 
Income tax benefit  (17,166)  (25,908)  (4,022)   (2,319)
Loss (gain) on remeasurement of
   contingent consideration
  1,688   2,610   576    (322)
Stock and unit-based compensation
   expense
  187,430   259,439   1,452     
Management fees (1)     1,445   142    14 
Loss on disposal of assets  218   24   121     
Transaction costs (2)  722   3,762   3,937    33,247 
Offering related costs (3)     8,747        
Endowment to the LifeStance Health
   Foundation
     10,000        
Executive transition costs  1,274           
Litigation costs (4)  851           
Other expenses (5)  4,091   3,185   1,567    635 
Adjusted EBITDA $52,670  $49,154  $37,470   $12,665 

(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. During the year ended December 31, 2021, the management services agreement terminated in connection with the IPO and we were required to pay a one-time fee of $1.2 million to such parties.

(2)  Primarily includes capital markets advisory, consulting, accounting and legal expenses related to our acquisitions and costs related to the TPG Acquisition.

(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 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 consolidated statements of operations and comprehensive loss. Former owner fees is a component of center costs, excluding depreciation and amortization included in our consolidated statements of operations and comprehensive loss.


Investor Relations Contact

Monica Prokocki
VP of Investor Relations
602-767-2100
investor.relations@lifestance.com

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