Q4 2021 Lifestance Health Group Inc Earnings Call
Good day, and thank you for standing by welcome to the Alaska Life's dance Health's fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one please.
Advisor today's conference maybe recorded.
Any further assistance. Please press Star then zero I would now like to hand, the conference over to your host today Monica Perkowski, Vice President of Investor Relations. Please go ahead.
Hi, everyone and welcome to lifespan health fourth quarter 2021 earnings call I'm Monica Perkowski, Vice President of Investor Relations. Joining me today are Mike Lister, Chief Executive Officer, Mike <unk>, Chief Financial Officer, and Don is correct Sheehy Chief.
Growth Officer, we issued the earnings release and presentation. After the market closed today, both are available on the Investor Relations section of our website at Investor <unk> Com. In addition, a replay of this conference call will be available following the call.
Before turning the call over to management for their prepared remarks. Please direct your attention to the disclaimers about forward looking statements included in the earnings press release and SEC filings.
Today's remarks contain forward looking statements, including statements about our financial performance outlook.
Those statements involve risks uncertainties and other factors, including the possible future impact of the COVID-19 pandemic on our business that could cause actual results to differ materially.
In addition, please note that we report results using non-GAAP financial measures, which we believe provide additional information for investors to help facilitate comparison of prior and past performance.
A reconciliation to the most directly comparable GAAP measures is included in the earnings press release tables and presentation appendix.
Unless otherwise noted all results are compared to the prior year comparative period at this time I'll turn the call over to Mike <unk> CEO of lifespan, Mike. Thank you Monica and good afternoon, everyone and thank you for joining us today.
Let's start by covering our performance and our outlook upfront.
2021 was a milestone year for life science, because we made the transition from a private to public company.
We delivered revenue of $668 million and positive adjusted EBITDA of $49 million.
We grew our clinician base to 4790 and had a net add of 1693 clinicians in the year.
We demonstrated strong performance and are well positioned as we continue to build the nation's leading outpatient mental health platform.
We grew our revenue by over 75% in 2021, which we're incredibly proud of.
For 2022, we are reaffirming our preliminary outlook of revenue growth rate in the low <unk> for the year.
With adjusted EBITDA dollar growth right on pace with or slightly greater than revenue.
We expect full year revenue to be in the range of $865 million to $885 million.
On a positive adjusted EBITDA in the range of $63 million to $67 million.
Our unique hybrid model provides competitive advantages and meeting patient and clinician needs as well as operational flexibility.
While we believe the long term mix of virtual versus in person visits will be around $50 50.
Our mix of Telehealth visits is currently over 80%.
Therefore, we plan to strategically moderate our de Novo center openings in the second half of 2022 to improve profitability.
Given the flexibility of our hybrid model, we can flex the pace of physical location expansion based on current and projected patient and clinician demand for in person visits.
While continuing to aggressively grow our total clinician base, which is the primary driver of revenue growth.
<unk> is uniquely positioned to support patients both in person and virtually and we believe that this is a significant advantage for our patients for our clinicians and for our shareholders.
Our 2022 guidance reflects our continued confidence in our ability to execute on our profitable growth strategy significantly.
Significantly expand our clinician population and deliver best in class patient mental health services.
Mike <unk> will go into more detail about our financial performance and outlook in his section.
Turning to the market.
Because our country or countries are in the middle of a significant mental health crisis, and our work has never been more needed or more critical.
At life stance, we remain deeply committed to our company vision of a truly healthy society for mental and physical health care, a unified to make lives better.
Similarly, as many of you heard the president highlighted in his state of the Union last week, the nation's imperative to get all Americans the mental health services they need.
And achieve full parity between physical and mental health care.
Demand for our services remains at record levels nationwide and continues to grow.
Today, there are over 50 million Americans, who require mental health services.
One in five adults and 106 children have a mental health issue and untreated mental health creates a significant burden on patient health and the entire health system.
This represents a total addressable market at over $100 billion growing at double digit rates to over 200 billion 2025.
<unk> operates what we believe is the largest provider of outpatient mental health services in the country. We currently represent only 1% of that large and growing total addressable market demonstrating a long runway of growth and white space.
While there are many players in the mental health care market last chance is differentiated by our profitable hybrid model of care meeting patients, where they are whether in person or via telehealth when they need it most.
According to a recent survey nearly 8000 patients conducted by rock health and the Stanford University School of medicine, 75% of patients prefer in person mental health visits and 25% preferred telehealth visits.
Patient seeking mental health care, we want to build a close relationship with their provider and for many the convention is developed by meeting face to face.
While telehealth has played an important role during the pandemic our ability to support our patients both at home and in our physical locations has solidified our position as a mental health care leader providing.
Providing high quality care across multiple care settings.
Combined with the fact that we've negotiated telehealth rate parity and the majority of our payer contracts left stance has an unparalleled ability to seamlessly transition both the business and individual patient care back and forth between in person and virtual settings.
When Covid first emerged in 2020, our patient visits moved from 5% virtual to over 90% virtual within weeks.
Through 2021, our telehealth mix trended downward to the low <unk> and we expect that mix to be approximately 50 50 virtual versus in person over the long term.
We have found that our clinicians, having a personal and meaningful connection with our patients makes a tremendous difference.
We are confident that our hybrid model is the future of mental health care delivery.
And we are well positioned to win in this space.
Regardless of the Covid environment, and patient and clinician preferences, we can seamlessly transition with our hybrid model and provide a mix of in person and virtual visits to provide patients with very best care.
Turning to the labor market dynamics 2021 has seen a record number of resignations across all industries in the country, especially in healthcare the healthcare industry.
Even in this environment, we have demonstrated that last answer is positioned as a best in class employer with the culture value proposition and technology to attract and retain clinicians.
We've continued to experience significant rates of clinician growth.
Which powers our growth engine and retention has continued to be stable.
As an example of our focus on continuing to build a destination of choice for clinicians last stance was recently recognized as a great place to work based on direct employee feedback.
When asked what makes <unk> a great place to work our team members most valued our flexibility carrying people management support staff and inclusion.
We were honored to be recognized by the global authority on workplace culture employee experience and leadership behaviors and intend to continue making improvements to build quality experience for our clinicians and all employees.
Our employees are deeply compassionate dedicated advocates for mental health and overall well being.
Over the last year, we've implemented a number of initiatives to support our employees health and wellbeing, including improving communication channels.
Developing a long term equity incentive program that includes our clinicians.
Enhancing medical benefits and wellness plans.
Offering peer to peer support and developing a robust national diversity equity and inclusion networks.
At last stance over 70% of our clinicians 50% of our executive leadership team and 40% of our board of directors are diverse by gender or race and ethnicity.
Another attribute of happiness and wellbeing is participation in the community and giving back.
In support of this and further increase in access to affordable mental health care last stance and down to lifestyle Health Foundation in June of 2021.
The Foundation was developed award grants and scholarships to support organizations that share our mission with a focus on especially vulnerable patients including youth in adolescence.
Underrepresented minority communities and the underemployed and uninsured.
To date, the life <unk> Health Foundation has awarded more than $400000 to both national and regional nonprofits working to Destigmatize access to mental health care.
Including the mental health coalition and the U S Olympic and Paralympic Foundation.
We're very proud to support our employees and their commitment to our mission, which improves the health and well being of patients across the communities we serve.
While world events over the last few years have destigmatize mental health in important ways.
Our clinicians and team members chose a career in mental health long before it was in the spotlight.
Their compassion expertise and advocacy for making a difference.
Our company values of delivering compassion building relationships and celebrating difference underlying everything we do on a daily basis, and we believe will allow us to continue to attract the best talent nationwide.
Turning to the payer environment, our payer partnerships are critical to our success in improving patient access.
In the highly fragmented mental health space, our scale is unmatched as we provide payers with thousands of clinicians working within a single integrated organization to deliver mental health care to their broad membership base and our low cost outpatient care setting.
Providing in network care for patients, whether they alternatives, where the alternatives are largely cash pay or out of network options with limited patient affordability combined.
Combined with the depth breadth and geographic reach of our payer partnerships is a key competitive advantage for lifespan.
Success with our payer partners speaks for itself since 2017, we've grown to over 250 national and regional regional payer relationships and have never lost a payer contract.
<unk>, 90% of our business is in network reimbursed by commercial insurers.
We are differentiated in providing in network care and improving access and affordability for patients.
Turning back to execution, our strong results in 2021 show that both our growth strategy and business model are working.
We are revolutionizing how patients receive easy access to affordable mental health care to.
To deliver on that goal, we continue to focus on our three growth strategy on our growth strategy on three core pillars.
First expand into new markets.
<unk> build market density and third deploy our tech enabled services.
In 2021, we delivered strong progress against each of these pillars.
First in terms of expanding into new markets.
2021 represented another banner year of geographic expansion in the fourth quarter, we expanded into Rhode Island, our sixth new state entry for the year, bringing our nationwide totaled to 32 states served.
Each new state brings us access to a greater pool of clinicians the ability to reach patients with our hybrid model and new markets and contributes to delivering on our mission of improving access.
Long term, we remain committed to delivering care to all 50 states through either in person or virtual care and we won't stop until every person in the U S is one click our call away from a lifestyle health clinician.
Second in terms of building market density clinicians remain our primary growth driver in 2021, we grew our clinician base nationwide.
We added 415 net clinicians in the fourth quarter, bringing our total to 4790, an increase of 1693 or approximately 55% year over year.
This strong growth, especially in the current labor market environment demonstrates that our value proposition is resonating as we continued tremendous net clinician growth quarter after quarter after quarter.
When we founded last stands creating a new model for mental health clinicians was a central foundation of our mission.
To achieve this we set out to solve key clinician pain points, which we call our six points of value, including a mission driven culture collegial and collaborative environment.
<unk> work life balance enhanced digital tools robust support services and competitive compensation.
Most recently in Q4 of 2021, we announced the addition of a seventh point of value, which is creating an ownership mentality among our clinicians by including them in our employee long term equity incentive program.
Our clinician growth was driven by our organic recruiting engine as well as practice acquisition engine with 24 acquisitions closed in 2021, 7% in the fourth quarter.
In 2021, we also opened 106, new de Novo centers are 14 in the fourth quarter to bolster our physical presence. In addition to our virtual service offering.
In total we now have over 500 centers nationwide.
Growing our clinician base supports our mission of improving access to affordable high quality mental health care.
In 2021, we cared for over 570000 unique patients versus 357000 in 2020 representing growth of approximately 60%.
And we grew visit volume last year.
Reported to two 9 million visits for 2020, which excluded approximately 240000 visits from pre integrated acquisitions for a total of $2 $5 3 million visits.
Our 2021 visit volume grew to $4 $5 7 million, including approximately 530000 visits from pre integrated acquisitions.
This represents growth of over 80% year over year.
Going forward, we will continue to provide the total volume of visits on an annual basis.
Third in terms of deploying our tech enabled services as we announced earlier this year.
We are rolling out a new improved matching bookings and intake experience for new patients to better set up our patients and clinicians for success and that first visit.
This new interface has been designed by our in house experts with strong backgrounds.
Improving the match between patient and clinician from the very start and seamlessly collecting necessary patient information upfront leads to higher satisfaction for both.
Patients can more easily find the right care, while clinicians can better be prepared for the first visit based.
Based on our earlier experience. The reception has been extremely positive and we have seen a reduction in the number of cancellations and rebooking related to clinician patient matching.
This enhancement will be rolled out state by state throughout 2022 and into early 2023 as well as receive additional product improvements over time as we continue to invest in innovation around the booking experience for our patients.
Additionally, we are in the process of designing similar user friendly tools for our customer care teams to make their workflows more efficient.
While offering an improved patient experience over the phone.
This investment will allow us to deliver a consistent and unified patient experience both on and offline.
Looking beyond our three core growth pillars, we remain excited about our next growth horizon of integrated care models, including value based care.
We currently have over 10 partnership programs in place, including Medicare advantage plans large dialysis provider and others. So this is not just a goal we are innovating in this space today and are at the forefront of integrated care and the mental health industry.
Our stance is truly cutting edge in this space, while we expect it will take several years for the market to build the capabilities to fully support integrated care. We believe it is critical to maximizing the impact mental health care can have an improving outcomes and reducing overall medical cost for Americans.
While we lead the industry in these new models of care. It is important to understand that the runway and growth opportunity. We have in our core outpatient market is enormous with significant white space left to capture.
We are laser focused on executing against that core market opportunity and maintain our strong focus on growth and profitability.
Over the last year, we delivered on the three pillars of our growth strategy. We've also deepened our focus on the patient working to expand access and improve the end to end experience through tech enabled services.
And creating future growth options through integrated care model programs.
In closing, we're starting 2022 with strong momentum following our third consecutive quarter of strong profitable growth as a public company.
I am confident in our future and our ability to help our people on their path to better mental health care.
Now I'll turn it over to Mike <unk>, Chief Financial officer to provide more detail on our financial performance and outlook.
Thanks, Mike.
Today and going forward I will frame my comments in the context of our long term growth strategy, which includes balancing growth profitability and liquidity.
Let me start with growth.
<unk> continued to deliver solid growth in the fourth quarter with revenue of $190 million.
Up 61% year over year.
This included an estimated impact of approximately $1 million to $2 million from an uptick in patient and clinician cancellations in late December caused by the Omicron Covid.
For the full year, we delivered revenue of $668 million up 77% year over year.
Turning to profitability in the fourth quarter center margin of $54 million increased 39% over the same period last year driven by strong revenue growth.
Full year center margin of $202 million grew 69% year over year.
We generated adjusted EBITDA of $11 million in the fourth quarter or 6% of revenue.
For the full year, adjusted EBITDA was $49 million or seven 4% of revenue.
Slightly down year over year.
Driven by strong clinician and revenue growth.
Set by the impact from a shift in labor market dynamics.
And investments in future growth and scalable infrastructure.
Turning to liquidity like Steve continues to be supported by a strong balance sheet.
Exited the year with cash of 148 million and debt of $157 million.
Additionally, the company ended the year with an undrawn revolver of $20 million.
We have no material debt payments due until 2026.
In 2021, we generated $9 million of cash from operations, including IPO related payments and interest payments on long term debt.
Turning to 2022 guidance, we expect another year of strong profitable growth with revenue of $865 million to $885 million.
Center margin of $240 million to $255 million and adjusted EBITDA of $63 million to $67 million.
For the first quarter, we expect revenue of $195 million to $200 million.
Better margin of $50 million to $54 million and adjusted EBITDA of $7 million to $10 million.
This guidance includes approximately $3 million to $7 million in revenue impact from omicron.
We expect improvements in profitability in the second half of 2022 based on the resolution of the omicron impact in the first quarter continued.
Continued growth in our clinician base and leverage in the second half of the year driven by our strategic decision to moderate de Novo center openings as well as scaling and G&A costs.
Our planning assumptions include.
80 to 90 de Novo center openings this year.
Heavily weighted towards the first half with 70% to 75 openings.
M&A spend of $50 million to $70 million.
And no further COVID-19 related impacts or changes in the current labor market environment.
Additionally, we expect stock based compensation expense of approximately $190 million in 2022.
Including approximately $30 million from new 2022 grants.
We expect stock based compensation expense to continue to decrease as the pre IPO Awards vest.
To summarize we remain focused on delivering long term growth by balancing growth profitability and liquidity.
With that I'll turn it back to Mike, Let's turn for a few words before going to Q&A.
Thank you Mike before we transition to the Q&A portion of the call I hope you've already taken away the strong sense of confidence I and my team have and the growth potential of this company. So here's what you can expect from us that we will deliver strong sustainable growth and profitability, coupled with strategic and disciplined.
Capital deployment.
And continued investment and focus on a sustainable business and employee development and wellbeing.
Which is our pathway to our topline and bottom line goals over time.
My confidence in our potential is shaped by our strong performance in 2021 that we are carrying into 2022.
<unk> by highly differentiated profitable hybrid platform strong market demand and digital innovation that is driving patient and clinician preference for life science.
As we enter 2022 I have significant confidence in our ability to execute upon our objectives and I'm excited about our next growth horizons.
Our ability to positively impact the lives and mental health of the millions of people nationwide that are in need of our services is unparalleled.
<unk> drive is what motivates each of our over 6500 team members every day as.
As we execute on our mission of helping people lead healthier more fulfilling lives by improving access to trusted affordable and personalized mental health care.
Mike <unk> will now take your questions operator.
Thank you if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
And our first question comes from the line of Ricky Goldwasser with Morgan Stanley . Your line is open. Please go ahead.
Yeah, Hi, good afternoon.
So.
Couple of questions here first of all Mike in the prepared comments you talked about the current mix being 80 20.
We're still getting person instead of long term stabilizing at around 50 50.
When you think about your infrastructure to center infrastructure, when Youre slowing down the opening of the.
The centers, but how do you think about sort of the total.
Number of centers are you also think you have to potentially over time.
And some of the existing centers to really kind of like.
Be in line with that kind of like.
Supply balance that you see over the long term.
Sure. Thank you Ricky we don't have any intention of closing any centers brick and mortar is still important to us.
We quoted a study that 75% of patients want to be seen in person. So we think that thats.
It remains to be very important but if you just do the simple math. If we're correct on this 50 50 assumption that thats going to be the mix.
Mathematically we could go double the number of clinicians today that that we have and not open up a single New center, we're going to continue to open centers, but we just feel like we can modulate that and.
As we've stated a couple of times, we remain focused on profitability while at the same time. It has zero impact I mean, the number of centers has zero impact on our ability to grow its all about the number of clinicians and the.
The conversion to the big conversion over the last two years to telemedicine is unable to do that and again, we're agnostic because we have rate parity.
And then when we think about it.
Our mission.
You touched a little bit about that but maybe if you can give us a little bit more color on what youre seeing out there in the hiring environment.
So a lot of focus a lot of questions that we're getting at that.
Wage inflation.
Sure Darren would you like to talk about the clinician hiring environment, and maybe Mike can take wage inflation or.
Yes, you can take wage inflation as well sure happy to Hi. This is Don ish, so on the clinician environment and our ability to continue to attract and net.
Growth of new clinician adds every quarter, we see the environment to continue to be very favorable for life. Since our sixth now seven points of value continue to resonate in the market in both our ability to attract clinicians through organic recruiting engine as well as our ability to identify practices for.
Acquisition through our M&A team.
So we feel highly confident in.
And our ability to again attract clinicians through through either one of those.
Levers.
And then in terms of wage inflation. So we continue to say see wage inflation as we always have which is that our clinicians have remains in high demand.
Over the years and continue to be in very high demand.
Continue to plan for Merit increases every year in line with what we believe the market to be.
And all of those increases remain as part of our current planning assumptions and what we provided in our ranges.
Okay and just one last question can.
Can you just give us an update on the.
And the retention rate.
Got it.
<unk> was 480%.
So how should we think about 'twenty two.
Sure. So retention is stable and we are using the same planning assumptions.
The assumptions.
For 2022, as we did on the back half of 2021.
Okay. Thank you.
Yes.
Thank you and our next question comes from the line of Lisa Gill with Jpmorgan. Your line is open. Please go ahead great.
Great Good afternoon, and thank you.
My question I just wanted to go back to your comments as you talked about telehealth versus in person and you talked about 70% of the demand being in person, but your thought is that youre going to get back to 50 50. My first question would be what are your expectations pre COVID-19 and as we think about getting back to that 50 50 versus say.
70, 30, where there is the demand from the patient to be in person.
That driven based on the clinicians.
<unk> preference to cannot be in person, how do we think about that.
Sure so the it.
It was a 75% number that was quoted in the study. So it was an 8000 patient study that standard did.
75% of patients prefer to see their mental health clinician in person.
Back to your original part of your question pre Covid less than 5% of our visits were virtual and then that accelerated to 90% over the course of just a couple of weeks and has started to tick down it's in the low <unk> now installed out around in the low <unk> because of <unk> and I suspect.
For the remainder of the year I suspect, it's going to continue to tick down.
Again, we think that for us and if you just think about mental health as a clinical specialty it lends itself more to a telemedicine environment than let's say going in senior dermatologist or Youre a cardiologist.
So I think other specialties, but will be far below 50%, but we think 50 50 is the right mix for us and.
Particularly as the right mix from a patient care perspective, and at this point, it's the clinician and the patient better communicating with each other and they decide together what's best for them do they want to be seen in person or do they want to be seen virtually.
Patients were sort of forced due to the pandemic to.
Experienced the virtual visit and patient focused.
This is kind of convenient but I don't want to do it all the time.
And clinicians are seeing the same thing clinicians see things.
When the patient is being seen at home that they wouldn't normally see and it gives them some advantage, but it still isn't the same as an in person visit so we think of mix as the right.
And then my second question would just really be around clinician adds you talked about seven acquisitions in the quarter can you talk about the number of clinicians that were added via an acquisition.
Then secondly, you talk about retention of those via an acquisition and.
What the steps are to get to productivity is it different between an acquisition and just outright hiring a clinician.
Yes, so we haven't seen and we've stated this before we haven't seen any difference in retention from an acquisition standpoint, a hard standpoint, we slice and dice. This every way you can there's just not any difference it's equal across the board. So we're not making acquisitions in.
Cause of integrations, we're losing more clinicians and acquired business versus hard so its just equal across the board.
Mike do you want to comment on it at.
What I would say you asked about the mix.
The mix of clinicians.
Added organically versus acquired and that's that's not something that we are going to disclose.
But I do think it's worth noting that.
In 2020 and in 2021 greater than half.
Greg clinician adds.
We have come from the organic.
Recruiting side and that's been something that we've been.
Trending in that direction, and it's something that we expect.
And hopefully as noted within some of the assumptions around our guidance and we intend to.
<unk>.
Allocate $50 million to $70 million towards M&A in 2022, which is back to what we would consider a normal pace.
Versus what was elevated in 2020 in 2021.
Thank you and our next question comes from the line of Ryan Daniels with William Blair. Your line is open. Please go ahead.
Hey, guys, Nick speaking on for Ryan Thanks for taking my questions.
So sorry could you guys talk a little bit about clinicians productivity and how that sort of progressing versus your expectations. As you are bringing on these new.
You were a little bit less productive clinicians and training them and getting them kind of up to up to standard.
Do you want to take that.
Sure.
Individual clinician productivity perspective.
We haven't assumed.
Any difference.
From.
Our prior models.
The ramp rate perspective, the number of visits.
By clinician type.
Better.
Does remain relatively.
<unk>.
However from a clinician base productivity perspective, we certainly saw a.
Downtick when the labor market dynamics change mid last year, and I think that's pretty simple to look at when you look at the revenue per average clinicians on a quarterly basis I think it's down roughly.
1000.
And each the second pardon me, the third and fourth quarter relative to.
The first part of the year, but as I said the <unk>.
The economics of the NIM.
Individual clinician really haven't changed.
Okay. Thanks, and then you guys kind of talked about a lot about some of the COVID-19 related fatigue and pressure is a lot of questions have been facing in that.
It is being not the only reason, but one of the reasons that some of your questions are dropping off I'm wondering if maybe even anecdotally you guys are seeing any alleviation on that front.
Yeah.
The current quarter has gone on for years.
Going on.
I would say that things are stable.
Anecdotally.
We think it's getting slightly better I would say.
I'm not sure what inflation is going to do to the to the workforce, but you have to think that people would want to ensure that they have income necessary to keep up with the rising cost. So I would say anecdotally. It's it's about the same or maybe slightly improved and we are.
Haven't made any changes in our planning assumptions relative to the assumptions that we had in the back half and that was one of those.
Things that we.
Called out our third quarter earnings call is that we aren't going to make that assumption and with.
What we've seen between then and now I think that assumption is.
It's very stable as well.
Thank you and our next question comes from the line of Kevin Kelly <unk> with UBS. Your line is open. Please go ahead. Please go ahead hi.
Alright. Thanks.
I was just looking through the <unk>.
It's a little bit our center margin.
Just a little bit.
Yes.
Dissipated the EBITDA.
Alright.
Okay.
Sure.
Okay.
The slowdown in the.
Center growth.
That would be impacting that is there anything with mix that we should be thinking about.
At all.
Kevin is that is that.
To clarify this is Mike.
And.
Kevin you might have to go into your annual Barbara.
Mine going on new but I guess I'll get an answer this.
From two perspectives, one is the first quarter and one is the full year I think from a full year perspective.
The only impact.
Matt that we've noted versus prior models as the impact of labor market dynamics on the overall clinician base.
There is.
In the first quarter, an incremental impact.
Let me kind of go through the first quarter and what perhaps is normal versus not normal in.
In the first quarter, what's normally as you typically see pressure on center margin, because the payroll taxes coming back in versus the fourth quarter.
It typically has a one point negative impact.
To center margins, just moving from the fourth quarter to the first quarter, we've seen that in prior years.
Our normal planning assumption that we make.
And as we roll through the first quarter, we will continue to open.
Centers that we had planned a year in advance so thats a fixed cost that's going to be in our centers.
And our margins.
Again, we normally plan for clinician growth.
Visit growth, which is the positive impact to margin rate and what I'd say is what's incremental to the normal planning assumptions.
Is the <unk> impact.
On that third item the visit growth, which we believe is isolated to the first quarter and as Mike mentioned, we believe it's in the range of a $3 million to $7 million revenue impact, which certainly has.
We put pressure on center margins.
But as I said, we believe it's isolated to the first quarter and it's incorporated in our full year guidance.
Okay, that's helpful and I apologize for being garbled before.
Sure.
The next next question just the stock based comp number was a little bit bigger than expected is it reflective of the lower stock price is it reflective of maybe.
Incentives are higher incentives for retention.
And you said that you expect it to trend down over time can you just maybe explain why.
Sure.
As we said just to remind everybody we were estimating.
Stock based expense for next year of $190 million, which is $160 million from the pre IPO grants and $30 million from the 2022.
Equity Awards.
We do expect stock based expense to come down year over year as the pre IPO grants vest or amortized.
In terms of the value of the 2022 grants.
That's four year value of which.
One fourth of that is investing across 2022, the four year value is very much in line with our peer group.
And comparable public company.
The company that's been validated by our independent compensation consultant. So we feel very good about that.
And.
We've made certain assumptions around.
Having.
Retention rates around that.
Rich.
There's a lot of assumptions baked into that number.
Which may may play out differently over time, and we'll give updates if there's something that changes, but I guess at the end of the day, we feel like the value that we put out there over the four years for this grant is very much in line with peer groups.
Thank you and our next question comes from the line of Gary Taylor with Cowen. Your line is open. Please go ahead.
Hey, good afternoon.
I wanted to confirm one thing on the $50 million to $70 million of M&A for 'twenty, two that's M&A spend rate not.
Our revenue acquired.
Yes that is correct.
And.
How should we be modeling that spend in terms of revenue multiple.
Pro forma EBITDA multiple like where would you.
Point us to.
I'm not going to point you anywhere Unfortunately, that's something that we don't disclose.
Okay.
The other question I had was thinking about.
The 30% revenue growth.
That you're reiterating.
How do we think about the concept of clinicians that have been sort of the same store concept clinicians that have been employed.
For more than a year are centers that have been inside of life stands for more than a year versus.
The de Novo openings and acquisition contribution is there is there any way to help us sort of break down how you think about what drives that 30%.
Yes.
We don't really think about.
<unk>.
Those types of breakdown same store.
Want to know is are.
The de Novo is very much a secondary metric we don't even consider same store as an operational metric our primary focus is.
Clinician growth.
And the overall productivity.
Our clinician base.
And as I mentioned earlier, the individual clinician productivity.
That is within this guidance.
As assume normal.
What I would consider normal clinician productivity that we've that we've experienced the only difference is.
Having a higher.
Turnover rate on a quarterly basis.
Yes.
Consistent with what we saw in the back half of last year.
So the way I'd have you.
Think about this is in focus on the clinician and not try to break this down by stores or centers just focus on the clinician.
Clinician growth.
Thank you and our next question comes from the line of Jeremy <unk> with Goldman Sachs. Your line is open. Please go ahead.
Yeah.
Hey, good afternoon guys.
I just wanted to go back to your expectation for clinicians to happen in 2022.
I'll give that explicitly but.
Just on the guidance.
Our guidance range for revenue and any experiencing 2021, it looks like an implied slowdown.
Just wondering if you can give a little bit of color.
If theres anything thats changing in terms of the environment for adding clinicians are at.
Has some conservatism.
Thank you.
Got it.
Yes, so in terms of.
Clinician growth. So we don't guide on the number of clinicians.
However.
We mentioned before we still have very high confidence in the ability to both attract.
New clinicians through our organic recruiting engine as well as our ability through our practice acquisition engine to bring on in that a number of of additional clinicians and feel very confidence and be have a lot of confidence in the cadence on both the organic hiring in the.
And the inorganic acquisitions.
Okay. So no real change Chris 'twenty, one in terms of the environment.
No.
Phil the environment going into this year.
We don't feel any material change versus last year.
Okay.
Okay, Great and then.
Just on margins and just curious if you can comment on.
This new growth strategy.
Yes more focused on.
Yes.
On clinicians that will not be.
Person.
Peak.
What's the margin difference it sounded like you expect the margin ramp in the second half of the year. If you can give us.
Some quantification of how youre thinking about that or if that's more of a 2023 event.
And then Relatedly you guys that back in 2021 talked about all the investments you had planned for this year.
The infrastructure it seems like this is Andy.
An investment year.
How should we think about leverage.
Going into 2023 or just on a longer term basis.
But two margin questions probably for like Ralph Thank you.
Thanks for calling me out already.
Sure.
Sure.
I think that.
We wanted to give the first quarter guidance.
Very specifically because we know that there is an impact from omicron.
Embedded within the first quarter, we believe it's isolated there.
But even prior to that.
Jamie we've known that.
Number one growing our clinician base is the primary driver of revenue growth.
It's also the driver of our profitability.
And.
We're going to execute on growing our key initiatives.
Now, having an eye on on profitability because.
Last year in the.
Second half.
We had pressure on profitability with the change in the labor.
Labor market dynamics.
So as we are moving into our planning process for 2022, we certainly had an eye on profitability.
And.
Noting that.
With the recent Covid variance of Delta and Omicron had kind of stalled the movement back toward what we would think is a 50 50 mix of telehealth and in person and so we believe that we would see a higher telehealth mix in.
2022 than perhaps we had originally thought we were able to leverage a hybrid model, which gives us a lot of operational flexibility in terms of cost and profitability without impacting two very important metrics, which is first the most important is patient and clinicians.
Thats faction and two it doesn't impact clinician on revenue growth.
So having that operational flexibility and being able to look at the demand for in person versus virtual just allows us to modulate the pace of that.
<unk> center openings, we're still going to open them, but we're able to modulate the pace to improve profitability here in the in the near term and so that will set us up.
I think.
Very nicely coming out of.
Of the year.
But this is something that we'll be monitoring more closely as we continue to balance considerations of growth profitability and liquidity and then I think the last piece you asked about just to be complete is around the G&A scaling.
We have made very focused investments around.
Areas, where we believe we can get scale and get it more quickly we're going to continue with our standardization efforts within our operating models, whether it's out in the division or within our corporate space.
We will continue to focus on back office processes and systems and at the same time, we're going to make the digital investments necessary align with our current roadmap.
All of those things being very disciplined and very focused.
In the back half of the year, our G&A will be growing at less than our revenue pace and again. This is where how we think we'll start to get better leverage in the P&L.
Thank you and our final question comes from the line of Chris Neiman Nancy with <unk>.
Jeffrey Your line is open. Please go ahead.
Hey, hi, everyone and thanks for squeezing me in.
Just wanted to clarify on the guidance can you confirm you're still using that 80% clinician retention number I'm just kind of thinking right just given some of the improvement you mentioned.
As well as kind of the employee retention initiatives.
Kind of undertaken is it maybe fair to think about that 80% shaking out to be more of an initial floor as you kind of trend back towards that 87% or do you see that 80% is more of a kind.
Structural rates in the business.
Yes.
Seen that annualized rate within the within the quarter it would be fairly stable through the back half of the year and we think it's a prudent planning assumption for 2022.
If something changes, we'll certainly let you know but.
I think it's a very prudent planning assumption for 2022, which is the guidance that we've given.
Got it.
I guess, it's by a lot of my other question would be if.
If youre seeing any changes maybe in the demand backdrop, you feel like you, maybe you're gaining any incremental patient referral share and then maybe any color on the trajectory or maybe I guess.
Good dynamics relative to patient wait times to see a clinician.
Yes.
Patient demand continues.
<unk> continues to be incredibly robust.
We don't.
We spend a lot of time thinking about the patient experience.
<unk> spent a lot of time thinking about patient acquisition because the demand is so robust we're focused on.
Adding clinicians as fast as we had clinicians and we're confident that there is a supply of patients for the clinicians that we hire.
Thank you. This does conclude today's question and answer session.
Ladies and gentlemen. This also does conclude today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Goodbye.
Yes.
Yes.
Yes.
Yes.
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