LifeStance Health Group, Inc. earnings

Management highlights

- Technology use: Digital and AI tools support operational excellence, e.g., digital patient check-in, AI-driven workflows, robotic process automation. New EHR selection with implementation in 2027, focus on organizational readiness and clinician engagement. - Geographic expansion: Tuck-in acquisitions preferred for new markets, opened two new markets in first quarter, pipeline of potential acquisitions. Also enter new geographies de novo. - Clinical excellence: Published clinical outcomes data showing three-quarters of patients benefited from improvements in anxiety and depression, over 4.7 out of 5 Google Stars rating for centers, clinicians' dedication key.

Guidance

- Raised full-year revenue range by $25 million at midpoint to $1.64 to $1.68 billion. - Raised center margin range by $21 million at midpoint to $547 to $571 million. - Raised adjusted EBITDA range by $15 million at midpoint to $200 to $220 million. - Second quarter expected revenue $405 to $425 million, center margin $135 to $147 million, adjusted EBITDA $50 to $60 million. - Long-term expects mid-teens revenue growth and mid-teens adjusted EBITDA margins by 2028.

Segment performance

For the first quarter, revenue grew 21% to $403 million. Visit volumes of $2.5 million increased 18%. Total revenue per visit was $163, up 3%. Center margin was $136 million, a 24% increase and 33.7% of revenue. Adjusted EBITDA was $51 million, a 48% increase. Free cash flow was $22 million. For the full year, revenue range is raised to $1.64 to $1.68 billion, center margin range to $547 to $571 million, and adjusted EBITDA range to $200 to $220 million. Second quarter expected revenue $405 to $425 million, center margin $135 to $147 million, adjusted EBITDA $50 to $60 million. Long-term expects mid-teens revenue growth and mid-teens adjusted EBITDA margins by 2028.

Analyst Q&A

• Q: Clinician growth was a bit above expectations in the quarter. Any tailwinds in the quarter and things to attract and retain clinicians?

  A: Strong clinician results, 300+ clinician adds, third quarter of strong productivity improvements, driven by recruiting and stable retention.

• Q: On margin front, how thinking about technology for longer-term margins?

  A: Technology is key lever, AI enablement and technological initiatives make us more efficient for scale growth.

• Q: Any new productivity initiatives planned?

  A: Numerous initiatives underway, continue to look for new opportunities to improve productivity while executing on existing ones.

• Q: Visit growth going forward?

  A: Revenue growth at midpoint 17%, revenue more normal shape, second half lap productivity initiatives, growth primarily from clinician adds complemented by productivity.

• Q: Clinician ads source and M&A contribution?

  A: Net clinician growth primarily organic hiring with stable retention, M&A contribution to net clinician ads modest. Clinicians from 1099 small practice, salaried at hospital systems, new graduates.

• Q: EBITDA guidance, what to keep in mind for second half?

  A: G&A steps up, investments support growth, key difference between first half and second half.

• Q: Technology infrastructure and patient conversion?

  A: Care Matching 2.0 rolled out, improved patient conversion by 5%, rolling out across country, exploring reducing friction in patient experience.

• Q: Leveraging outcome study?

  A: All of the above, helps with treatment, referral partners, payer dynamic.

• Q: Clinician productivity enhancements and retention?

  A: Continued stable retention, anecdotally positive feedback from clinicians but no meaningful change in retention yet.

• Q: Care margin and specialty services?

  A: Center margin improvement from rate, operating leverage from volume and spending. Specialty services expected to grow, TMS and Spravato services with new sites added.

• Q: Cadence of centers and M&A, M&A environment?

  A: On pace to open 20-30 centers, strong pipeline of tuck-in acquisitions, no opportunity in larger competitors' tier due to geographic overlap.

• Q: Visit rate cadence?

  A: Pleased with TRPV, guiding low to mid single digit for remainder of year, environment constructive.

• Q: De novo clinics and productivity ramp?

  A: Majority de novos in adjacent towns with existing centers ramp quickly, minority in new geographies with slower ramp.

• Q: Industry changes impact?

  A: Industry fragmented, no changes seen in new patient volumes, clinician hiring, etc., LifeStance positioned to take advantage of consolidation trends.