Q2 2022 Lifestance Health Group Inc Earnings Call
Good afternoon, My name is Lauren and I will be your operator for today.
At this time I would like to welcome everyone to the life stamps help second quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad and.
In the interest of time, please limit yourself to one question and one follow up per analyst. If he would like to withdraw your question again press Star one. Thank you I would now like to turn the call over to Monica.
Klatsky Vice President of Investor Relations you May begin your conference.
Thank you good afternoon, everyone and welcome to lifestyle Health second quarter 2022 earnings conference call I'm Monica Borkowski, Vice President of Investor Relations. Joining me today are Mike Lister, Chief Executive Officer, Don his career, she chief operating officer, and Mike Breath.
Chief Financial Officer.
We issued the earnings release and presentation after the market closed today.
Both are available on the Investor Relations section of our website Investor got life stands Dot 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 cluster.
T O of lifestyle Mike.
Your monitor and thanks to all of you for joining us today.
To begin I would like to emphasize the importance of our mission of improving access to trusted affordable and personalized mental health care.
We are playing an integral role in the expansion of access to the delivery of personalized mental health care and the rapidly changing health care environment. We have demonstrated that we can provide solutions at scale to meet individual needs in person or via telehealth.
Mentally we serve patients where they are and when they need us. So that is a key driver of our success and the continued expansion of demand we're seeing.
<unk> is committed to helping people lead healthier more fulfilling lives is one of the country's largest outpatient providers of in person and virtual mental health care.
In recent weeks, we've seen strong market validation of our hybrid business model through the acquisition of one of our primary care counterparts in the tech enabled multi site provider space.
This event highlighted the value and importance of innovative patient focused health care businesses to enhance the speed and efficacy of healthcare delivery relative to traditional providers, while delivering a differentiated value proposition to payers clinicians and patients.
The hybrid check enabled patient focused model is at the heart of what we do at life stance in the behavioral health space and continues to resonate with the margin.
We often refer to last chance as primary care for your mind.
We're focused on building the company for the long term to deliver on our mission.
Providing access to affordable high quality care through our hybrid delivery model.
We are laser focused on delivering the best care for our patients through our network of over 5000 W. Two important foundations.
And our technology platform focused on providing clinicians and patients with a seamless experience.
Innovative industry leaders and Disrupters have recognized the fundamental value of our mission our model and our team.
We are continuously engaged in discussions with potential business partners to expand access to high quality mental health services, which is so critical to al as our country faces a growing mental health crisis.
The need for access to mental health care has reached unprecedented levels as depression and anxiety have increased by four fold in the last two years and every 11 minutes and American dies by suicide.
We focus on our mission every day to meet patient demand in the marketplace and to provide desperately needed mental health care services to patients across the country.
Turning to results. This was a solid quarter for livestreams, we continue to see strong demand for our services and consistent execution by the team which was reflected in our results revenues for the second quarter was $210 million representing growth of 31%.
As we've noted previously revenue growth is primarily driven by our turtle clinician groups.
In the second quarter, we grew our net clinician base to 5226, representing growth of 31% compared with prior year and in line with our expectations.
We continue to focus on balancing growth profitability and liquidity considerations.
Aim to consistently generate the profitability necessary to fund our growth for the long term.
In the second quarter, we grew center margin to $60 million or 28, 5% of revenue.
And adjusted EBITDA to $15 million or 7% of revenue.
Reflective of our focus on long term margin expansion.
By remaining disciplined and scaling our cost we will improve leverage in our operating expenses, while continuing to make key investments in scalable infrastructure.
Turning to the full year, we now expect 2000, 22022 revenue and center margin toward the bottom end of our previously guided ranges of 865% to $885 million and $240 million to $255 million respectively.
Due to removing slightly more than one business day from each June July and August .
As a result of the incremental clinician time off with no other changes to our guidance assumptions.
Given pent up demand for travel is pandemic restrictions are relaxed. We found that clinicians took more time off in June relative to our planning expectations.
We believe this impacted revenue by approximately $4 million in the second quarter.
As a result, we have decided to carry that seasonality assumption forward into July and August to account for additional summer vacations.
We believe the impact of this adjustment represents approximately $8 million in the back half of the year.
For 2022, adjusted EBITDA, we are reaffirming our original guidance range of $63 million to $67 million.
We continue to focus our planned investments to grow and optimize our clinician base, while continuing to drive leverage in our operating costs.
Turning to the recent CEO transition, we announced in the second quarter that Guang booths retired from her role as Chief operating officer here at <unk>.
And $1 <unk>, our chief growth officer will succeed her in that role.
First I would like to thank Glenn who co founded the company in 2017 with Donaldson me and who served as our CFO since there.
<unk> played an integral role in building our organization to what it is today.
When Gwen returned from a position of the CRO I was delighted that she agreed to determine the inaugural executive director of blood stem cell Foundation.
Which is focused on awarding grants and scholarships to nonprofit partners at improved levels helped access for under represented groups.
<unk> was appointed as our next CEO effective July one and has already become.
And has already begun a nationwide review of our operations.
Many of you know Donnish, a founding member of <unk> leadership team.
It was highly qualified as we transition beyond the entrepreneurial growth stage to scale, the company and optimize our overall operational and financial performance.
<unk> has an exceptional track record of translating and differentiated strategy and our strong operating results and I am confident in his leadership abilities to execute on our mission.
You will be sharing some of his initial observations about the areas of opportunity in a few minutes.
<unk> is also playing a key role in updating our long range strategic plan over the coming months.
Turning to the Foundation last handheld Foundation was established in 2021 to award grants and scholarships to organizations that share last answers vision to improve mental health access.
In the second quarter, we granted an award to the Trevor project as part of our celebration of Pride month in June as.
Is it matching donation for local team fund raising for the organization.
So Trevor project is the world's largest suicide prevention and crisis intervention organization for LGBTQ plus use.
Also through the foundation, we are working with the American Foundation for suicide prevention to increase support for the New 98, eight crisis response line.
In closing we have positive momentum in the marketplace driven by our compelling patient value proposition are steadily expanding clinician population.
Solid execution of our business.
I am confident in the long term trajectory of the business given our sustainable competitive advantages and the team that we have in place.
Don ish.
Thank you Mike.
In my new role as COO I saw my first few weeks doing three things first meeting with our clinicians to learn how we can improve the support we provide to them.
Second meeting with our operations teams to identify areas of opportunity as we continue to grow in scale and third diving deeper into our operational data to understand key trends and use that information to better drive our business going forward.
These activities are energized me around the immense opportunity we have in front of us as well as reminded me of the critical role <unk> plays as a leader in bringing mental health solutions to our patients nationwide.
Let me first start by providing a quick update on our second quarter operating results as well as our core planning assumptions for the back half of 2022.
In the second quarter, we continue continued our intentional focus on deepening our presence in our existing 32 states.
So we will continue to selectively evaluate entry into new states in the back half of 2022, and currently anticipate one to two new state entries.
We plan to focus the majority of our attention on building density in our existing markets to further enjoying the benefits of scale and begin driving operational leverage.
As we've stated previously clinicians remain our primary growth driver.
The second quarter, we grew our clinician base nationwide to 5226.
An increase of 237 net clinicians.
Importantly, we achieved this result, while continuing to shift our focus towards more organic growth.
Year to date over 70% of our gross clinician adds have been brought on board via our industry, leading recruiting engine and we expect that mix to continue to shift more organic in the back half of the year.
In terms of de Novo's, we opened 27 de novo centers in the second quarter to bolster our physical presence, bringing our total year to date, 68, and allowing us to pass a new milestone over 600 centers operating nationwide.
While we remain committed to opening additional de Novo centers as part of our differentiated hybrid model as previously communicated we plan to moderate the pace of openings in the back half of 2022 with approximately 20 planned.
Importantly, this has no impact on our ability to grow clinician counts and revenue.
This operating flexibility is one of the key areas. We will continue to look at as we balanced growth profitability and liquidity going forward.
In terms of M&A, we completed four new acquisitions in the second quarter, bringing the total since inception to 83.
We remain on pace to deploy $50 million to $70 million of capital for the full year against our M&A activities.
And we continue to have a robust pipeline of acquisition opportunities.
As for Tech enabled services, our digital team is working to enhance our platform on multiple fronts to develop the best end to end experience for patients clinicians and team members.
We've now rolled out obi or online booking and intake experience platform to nine states through the end of the second quarter and have seen a substantial improvement in cancellation rates of online bookings in those markets.
Driven in part by better patient and clinician matching.
We remain on track to roll <unk> out across the country throughout 2022 and into early 2023 with five additional states already completed in July .
Now, let me take a moment to discuss the key areas of learnings I've had in my new role as CFO over the past few weeks and how that's going to shape. Our go forward action plan as well as unlock future areas of opportunity.
As I met with our clinicians and operations team members, what's clear to me is that our teams have been focused on too many priorities each competing for their attention.
Dress. This we are aligning our teams on a focused set of narrow priorities that can drive the highest impact on the business.
First net clinician growth and second clinician productivity.
Both of these areas represent significant areas of additional upside opportunity as we look forward to 2023.
In terms of net clinicians to accelerate the pace of growth we are continuing to invest in our recruiting teams in the second half of 2022.
Which will give us organic hiring momentum going into 2023.
This includes enhancing our teams with additional outbound focused resources to increase our pipeline of candidates further enhancements to our inbound funnel and more focus from our operations teams on time allocated to interviewing.
Additionally, the retention has remained stabilized across the past year, we are investing in key areas of clinician satisfaction that we believe will drive incremental improvements to our retention numbers going into 2023.
For example, our clinicians have made it clear that we have two acute areas they want us to address immediately.
First patient billing customer service and second frontline team staffing.
We've already begun addressing both by building out a call center dedicated to patient billing customer care and redeploying our planned practice operations investments to the front lines, our front office coordinators and medical services teams.
We believe that investing in the further acceleration of our organic recruiting and incremental improvements or clinician retention both represent upside to our current pace of net clinician adds as we go into 2023.
Turning to our second area of focus clinician productivity as we all know there is no lack of patient demand in the market for mental health services.
However, we believe there are still further opportunities to incrementally improve the conversion rate through every part of life sciences patient funnel via greater operational discipline.
Oliver on this we're taking the following actions first at the top of the funnel, we are adding to our boots on the ground primary care referral team through a redeployment of planned investments towards this initiative as well as focusing on enhancing our internal referrals between our clinicians to ensure patients have access to the full suite of special.
Satellite.
Second at the middle of the funnel, we're leveraging the capabilities of our digital team to improve patients patient matching via Ob enhance our overall provider profile systems to create a better user experience.
And reduce the complexity of our scheduling system to open up hidden capacity.
Additionally, our operations teams are focused on enhancing our phone intake customer care teams and reducing our credentialing timelines to drive better conversions and faster ramps.
Finally at the bottom of the funnel, we have seen that our patient cancellation in no show rates are running at approximately 15%.
So this number has been consistent for the past two years. We believe there is an opportunity to improve these rates further via digital enhancements to an appointment reminders and the patient re booking experience and improved customer service and operational performance by our front office teams.
With early signs of cancellation and no show rate improvement in states, where we're piloting action plans.
All of these top middle and bottom funnel areas represent further upside to the clinician productivity as we look to the future and we believe will give us strong momentum going into 2023.
With an enhanced focus on operational excellence target are key areas of incremental opportunity.
I am now more than ever excited about the future of our business.
We will remain disciplined on our approach to driving improvements to our existing processes as well as accelerating growth in net clinician adds and productivity.
I am looking forward to providing updates in future quarters about the progress we make against these initiatives.
With that I'll turn it over to Mike Bruff, Mike.
Thanks Tarnish.
As usual I'll frame my comments in the context of our long term strategy, which includes balancing growth profitability and liquidity considerations.
In terms of growth the company delivered solid growth in the second quarter with revenue of $210 million up 31% year over year driven by growth in our clinician base.
Turning to profitability in the second quarter center margin of $60 million increased 17% over the same period last year driven by revenue growth.
Sequentially Center margin as a percentage of revenue expanded 187 basis points, primarily driven by timing of payroll taxes in the first quarter and expected operational expansion in the second quarter.
Adjusted EBITDA grew slightly year over year at $15 million or 7% of revenue.
Sequentially adjusted EBITDA as a percentage of revenue improved 84 basis points.
Driven by the improvement in center margin and continued operating expense discipline.
Turning to liquidity lifestyles continues to be supported by a solid balance sheet.
We exited the quarter with cash of $97 million and net long term debt of $203 million.
In the second quarter, we generated positive $8 million of cash from operations compared with $3 million in the first quarter.
Our free cash flow of negative $18 million improved by approximately $7 million quarter over quarter.
We expect to continue to improve free cash flow in the back half of the year.
Operationally, we are continuing with planned investments to improve our days sales outstanding which slightly increased by one day quarter over quarter.
After transitioning the revenue cycle management team to report to me at the end of the first quarter, we hired a seasoned chief revenue officer with a track record of delivering results and the scaling company.
Our priorities include improving our billing and collections performance through scaling the team appropriately and driving productivity enhancements through process efficiency technology and automation.
With cash on the balance sheet access to our new credit facility, our focus on capital efficiency and the underlying unit economics of the hybrid model. We feel that we are in a strong position to drive the long term growth and value creation of the company.
Turning to guidance, Mike has already covered the full year.
As for the third quarter, we expect revenue of 216 to 221 million.
<unk> margin of $61 million to $65 million and adjusted EBITDA of $16 million to $19 million.
With that I'll turn it back to Mike Lester for a few words before going to Q&A.
Thanks, Mike.
I would like to recognize the continued efforts of our approximately 7000 colleagues, who remain focused on delivering high quality affordable and accessible.
Mental health care to our patients across the country.
Their unwavering dedication and support inspire all of us on behalf of the team.
Like to extend my gratitude for all they do as well on.
I am proud of what we've achieved as a company to date, but there is so much more opportunity in front of us.
<unk> I will now take your questions Lauren.
Thank you at this time I would like to remind everyone to ask a question. Please press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Our first question comes from Craig <unk> with Morgan Stanley .
Yes. Thank you can you provide an update on clinician retention and any changes you're seeing.
<unk> inflation front.
How much.
Sure, Yes, so on the retention front, we continue to maintain our prior planning assumptions for retention through year end, which is 80%.
Quarterly excuse me, 80% annualized within the quarter.
And thats been consistent in the first half of the year as well.
And wage inflation.
Sorry on the wage inflation fronts.
We're not seeing anything unusual on the wage inflation side.
Our clinicians have always remains in high demand and we have always planned appropriately compensate them in line with the competitiveness of the market.
All of the wage inflation that we've witnessed stays within our existing guidance assumptions.
Got it and if I could follow up Don I, just want don't want to think about the long range planning that you're embarking on.
Certainly there's been a lot of cross currents in the market.
<unk> dropped the last couple of years, so at a high level anything you guys are thinking about in terms of how that might change that the mid to longer term trajectory of the business or our margin profile.
Right now.
Heads down on making sure that we put in place action plans that we need to start to position us for the long term growth that we see.
That we see in front of us.
What I know is that we are right now putting our attention against all of the right action plans. So again as you think back to my.
My remarks here a minute ago.
We are very focused on not clinician adds impacting that through.
Our organic recruiting team continuing to shift that more organic as well as <unk>.
Getting under retention and controlling what we can control outside of any market dynamics.
And then further driving clinician productivity.
At this point I think it's.
All the question of timing and the ultimate effectiveness of those actions, but we've got our focus on the right areas.
We will take our next question is from Lisa Gill with Jpmorgan.
Hi, Thanks, very much good afternoon first Dennis congratulations on the new role.
I just want to go back to your comments around removing one business day for June July and August and just really understand how youre thinking about the fourth quarter I remember when we talked last January .
Things were a little bit slower in December because of people taking vacation around the holidays et cetera that one just wanted to confirm that <unk>.
We've accounted for that in the full year and have something there in the fall.
Quarter, and then secondly.
We think about the clinicians I think one of the other issues. We've talked about historically is the fact that they like working virtually so I was wondering if you could maybe talk about some of the new clinicians are bringing on.
Are they center focus and then if you could just give us an update on virtual car specific person.
Sure Yeah happy to so in terms of Q4 seasonality, yes, we witness that last year, we've carried for those assumptions.
Q4 for this year and we believe that we've appropriately accounted for any.
Any.
Winter or holiday time off in Q4, so again, feeling pretty good and confident about where we're at with those assumptions in terms of our new clinician adds as well as where our existing clinicians are looking to focus their time.
If you look at where our actual visits meaning online versus in person are taking place right now the visits still remain at about 80%.
Online. However, when you look at our clinicians they are shifting more of their time back into the office and so a clinician may be working out of an office, but throughout the day. Some of those visits are going to be in person. Some of them are going to be online. Even if the clinician is based out of the office. So we are seeing starting to see that trend.
<unk>.
But overall the total mix of where the actual appointments are delivered or where the actual.
Our care is being delivered it's still remains heavily online and I think that is why we continue to moderate our number of de novo openings to make sure that we drive that additional operational flexibility.
And if I could just understand one of the things like does that have any impact on the margin I know you talked about patient billing in frontline opex. So if people are doing more things online does that mean that you have less people at the right of your facility and therefore, you have left cards or is there more of an opportunity as you bring.
More people into the office to lever some of those costs like how do I think about that going forward.
Yes, so on a go forward basis, the right way to think about it is that we will continue to have.
And have a positive effect on our capital deployment because.
Do not have the need to open up as many de novo as we used to where we may have.
Historically rebuilt de Novo to make sure. There is one exam room for every clinician now we can expand the four walls of our physical sites by sharing office space and again getting more leverage out of that so you'll see some positive effects over the long term around capital deployment against de novo's. The other piece will be.
Again over the long term you should see some improvements in center margin related to better leveraging.
Rents.
And some of the frontline support that would otherwise is only required for in person visits.
We'll take our next question from Stephanie Schindler with <unk> with Jefferies.
Yes.
Thank you good afternoon, everyone wanted to follow up on your comments on productivity per clinician. If you could talk a little bit about some of the strategies, you're putting in place, whether it's using technology or eliminating some of the administrative burden accelerating some of the processing and billing anything you can share with us on productivity would be great. Thank you.
Sure Yeah happy to so.
Really the way that we think about clinician productivity.
Is around how can we ensure that the capacity, they're giving us meaning the time that they are providing to us to see patients is fully utilized we.
We are not right now going to our clinicians and asking them to give us more time, but focus very narrowly on ensuring the time they've already given us is filled to the to the capacity.
Which ensures that they're happy with their workload they continue to maintain flexibility.
And we're able to drive both their incomes to the levels that they are hoping to achieve as well as drive revenue for the company.
As we look to how to impact that above and beyond what we have historically done we're really taking actions across what I characterize as the top middle and bottom of the funnel and so at the top of the funnel it's all around.
Additional.
Boots on the ground marketing efforts to ensure that we shore up and continue to grow our primary referral source, which are primary care physicians as well as local hospital systems and other community referrals.
At the.
Middle of the funnel we are.
Continuing to invest on the digital side to make sure that we take advantage of all of the Tech enabled services that we have at our fingertips, primarily through our online booking experience, which we term internally as obi.
Further investments in our clinician profiles to improve the overall.
Experience for both patients and ultimate <unk>.
<unk> for the clinicians.
And improvements on our Credentialing and phone intake systems and then the bottom of the funnel, that's all about cancellation and no show rates and ensuring that when you have an appointment booked on the calendar that is taking up time.
That those patients actually come through and eventually convert into a visit and.
So we believe that there is significant opportunity in unlocking that.
Taking that number from the 15%. It is today to kind of more of a best in class number and we've already seen.
Some improvements in the pilot states, where we're taking action.
Very helpful.
Well thank you.
Our.
Question comes from Ryan Daniels with William Blair.
Hey, guys. This is Jackson I'm done for Ryan Daniels. Thanks for taking my question just to start off. So you added 237 clinicians during the quarter, which is up modestly compared to the number of clinician adds.
In the first quarter of this year, but it doesn't seem to be quite to 400 clinicians you added.
It doesn't seem to be quite the 400 clinician adds you saw at the end of last year in the third and fourth quarter. So just curious how we should kind of think about the cadence of clinician adds for the second half of the year. If you can comment.
And then for a second part here are you finding that you have to change your recruiting and retention strategy as a result of the increased competition in the market.
And maybe are you finding that you are a safe haven for clinicians just kind of curious how that may impact recruitment for clinicians.
Sure Yeah happy to cover that so in terms of the first part of your question.
Again, we don't guide on specific clinician count, but we do expect continue to continue our strong growth of the clinician base.
<unk> made investments in the first half of the year around our organic recruiting team.
Thats.
We believe well.
Allow for continued incremental improvement in the number of net clinician add sequentially as you look through the remainder of the year.
And as I mentioned in the prepared remarks that clinician ads as the top priority that all of our teams are focused on.
Whether that is the actual organic recruiting side of it or.
Looking at areas, where we can incrementally improve retention.
Feeling really good about.
Where we're at and the trajectory here for the back half of the year going into 2023.
In terms of the second part of your question around are we seeing any changes in either retention or the ability to crude based on competitiveness of the market.
We are really not the market from the very beginning has been competitive there are clinician type has always been in short supply as compared with the patient demand that exists in the marketplace and so this isn't a new dynamic for us and we have built both a best in class recruiting engine as well as.
Our best in class M&A team that is able to bring on board new clinicians at the pace that we planned for.
And we see no no risk there same with the retention.
Our retention rates have remained stabilized for the past year.
And we haven't seen any impact as it relates specifically to competition and again is if you think back to my prepared remarks. This is the one of the key areas that will be focused on to see are there ways to incrementally improve.
Improve retention.
And what we've seen here for the last year.
Great color. Thank you just as a quick follow up then when it comes to the one to one to two new states in the second half of the year.
Obi be rolled out automatically in these new states or is this something that will be implemented over time in these states and then two if this is rolled out in the new States do you see an immediate reduction in cancellations or does it take some time for the clinicians patients users to get used to the new implementation.
Yes, so when we enter a new state we enter through an acquisition.
Any acquisition, regardless of whether it's a new state or an existing state goes through an integration period of typically a 120 days during which we move them over to our systems.
And that includes our electronic medical record or HR as et cetera. So.
There's not an immediate changeover to our systems. There does there is that period of approximately four months, where you see that.
The question, specifically around Ob and whether we would flip.
New state entries directly onto Obi or not I don't think we've we've decided that.
We are right now have our work plan around rolling that out to all of our existing states in our existing groups.
Through the end of 2022 into 2023, but we will need to make a decision depending on the timing of any additional states.
Where we prioritize that and the overall plan.
To move people if you fast forward beyond 2023, once all of our existing states already onto Ob then, yes, the answer would be everyone within those four months would flip to utilizing obi.
The immediate impact.
Yes, when we.
I mean in general when we move over to our systems, we do see an impact.
<unk>.
To productivity, we also see an impact on <unk>.
Synergies related to.
Rates that kind of flow through at the end of that integration again kind of that four months time period.
We will take our next question from Kevin Caliendo with UBS.
Great. Thanks for taking my question.
Two.
The second half guidance does imply a little bit better EBITDA margin, just given the revenue guidance and the sustained EBITDA guidance is that.
Is that something we should expect going forward was there any flex spending there.
That you had that maybe prompted this is this the impact of <unk> already in the role in finding a finding savings Thats My first question.
Or how to think about that and then the second one is.
It doesn't sound like it but have you seen any impact yet on demand for behavioral from from the economy. I know most of your customers are fully insured and so the out of pocket might not be that meaningful just wondering if youre seeing anything at all whether it's in certain geographies or demographics or even in your cash pay.
If youre seeing any any demand impact from inflation in the broader macro economy.
Thank you I will take the first one I'll take the second sure.
Hey, Kevin how are you.
From an adjusted EBITDA perspective.
It has been part of our.
Guidance assumptions for this year to improve adjusted EBITDA through the year.
Our our strategy around that has been to moderate de Novo center openings in the back half of the year, which we're doing and then from a G&A perspective.
Just be very disciplined around our deployment of.
G&A around.
The critical few priorities that Don ish.
I spoke about in his prepared remarks.
I will say that we're starting to find some efficiency in the G&A.
That we were deploying last year, so that's playing out in the P&L as well.
But there is there is nothing that we're doing are naturally in G&A to drive adjusted EBITDA and this is really around operational discipline and.
And investing in the right areas.
Great.
The one comment I will add there is.
From a a headspace perspective.
That is exactly how we're looking at <unk>.
Driving the business going forward, meaning that continuous incremental EBITDA margin expansion over time is an underlying principle that we will continue to be part of kind of a life story here going forward.
As far as patient demand, we haven't seen any decrease whatsoever in patient demand I mean, it continue the demand continues to far outstrip the supply.
As you know were essentially.
Commercial insured network model. So we don't really see cash base of that really hasnt affected us at all but the demand the mental health crisis continues to be exacerbated and we just see.
Continued strong patient demand.
Great. Thank you so much.
And we will take our final question from Jamie Pierce with Goldman Sachs.
Hey, Good afternoon, guys just I wanted to go back to the comments on focusing on productivity. We've seen that go from 444 45, K range to 41 K per quarter per clinician over the last year as you annualize some of the retention headwinds and implement.
This new focus on productivity is that a level you think you can get back to and win.
Okay.
So we're not going to guide on productivity because there is there is a lot of different variables that can drive revenue per average clinicians for example, the timing of M&A, our geo mix the number of business days.
In any given period.
Example, in the second half of 2022.
Several fewer business days and in the first half.
Driven by the summer vacations in the Q4 holiday season.
So.
What I what I can tell you is that we are.
Our focus on the right areas head down on driving and improving clinician productivity.
And making sure that we are filling out their open time, where they want to see patients.
So right now it's purely a question of.
How much of an impact those action plans have and the timing that they take effect.
But again, we are right now heads down focus on the right things.
Okay.
And then just on center center level costs, they were up sequentially pretty flat in the quarter Street seems to be modeling a big step up in <unk> and for Q. There, maybe just some perspective on what that that trend might look like particularly as you slow the de novo ramp in the second half.
Yes, I think from a cost perspective.
We do expect those costs.
The rate of increase in those costs to decline as we moderate the de Novo centers.
Openings in the third and fourth quarter.
The overall cost we will continue to increase as we bring on clinicians but.
But that'll be offset by by the revenue that they bring in as well so all told here.
We expect to drive.
Improvement in <unk> margin in the back half of the year as we expected too.
Early in the year.
Plan remains intact and in motion.
The only.
Mild effect will be.
The impact of the $8 million.
In the second half on revenue.
But from a cost perspective, Jamie yes, we would expect to slow the rate of increase.
And we have no further questions at this time. This does conclude today's conference call you may now disconnect.
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Okay.
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Sure.
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Okay.