Q3 2023 LifeStance Health Group Inc Earnings Call
Speaker 1: Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the Lifestance Health third quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise.
Ladies and gentlemen, thank you for standing by mining is Jerry and I will be your conference operator today.
This time I would like to welcome everyone to the life <unk> Health third quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise.
Speaker 1: After the speakers remarks, there will be a question and answer session.
After the Speakers' remarks, there will be a question and answer session.
Speaker 1: If you would like to ask a question during this time, simply press star followed by the number one on your telephone tip.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker 1: If you would like to withdraw your question, again, press the star 1.
If you would like to withdraw your question again fresh the star one.
Speaker 1: I would now like to turn the conference over to Moni Kapukowski, Vice President of Investor Relations. Please go ahead.
I would now like to turn the conference over to Monty copper Gartzke Vice President of Investor Relations. Please go ahead.
Speaker 2: Good morning, everyone, and welcome to Lifestamps Health's Third Quarter 2023 Earnings Conference Call. I'm Monica Prokosky, Vice President of Investor Relations.
Good morning, everyone and welcome to life <unk> Health third quarter 2023 earnings Conference call I'm, Monica Perkowski, Vice President of Investor Relations joining.
Speaker 2: Joining me today are Ken Burdick, Chief Executive Officer, Dave Borden, Chief Financial Officer, and Danish Qureshi, Chief Operating Officer.
Joining me today are Ken Burdick, Chief Executive Officer, Dave Barden, Chief Financial Officer, and Donald <unk>, Chief operating officer.
Speaker 2: We issued the earnings release and presentation before the market opened this morning. Both are available on the investor relations section of our website, investor.lifestamps.com.
We issued the earnings release and presentation before the market opened this morning, both are available on the Investor Relations section of our website investor <unk> Com and.
Speaker 2: In addition, a replay of this conference call will be available following the call.
In addition, a replay of this conference call will be available following the call.
Speaker 2: Before turning the call over to management for their prepared remarks, please direct your attention to the disclaimers about four working statements included in the earnings press release and FC funding.
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.
Speaker 2: Today's remarks contain forward-looking statements, including statements about our financial performance outlook, business model, and strategy.
Today's remarks contain forward looking statements, including statements about our financial performance outlook business model and strategy.
Speaker 2: Those statements involve risks, uncertainties, and other factors, as noted in our periodic filings with the SEC, that could cause actual results to differ materially.
Those statements involve risks uncertainties and other factors as noted in our periodic filings with the SEC that could cause actual results to differ materially.
Speaker 2: 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 current and past performance.
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 current and past performance a.
Speaker 2: A reconciliation to the most directly comparable GAAP measures is included in the earnings press release tables and presentation appendix.
A reconciliation to the most directly comparable GAAP measure is included in the earnings press release tables and presentation appendix.
Speaker 3: unless otherwise noted, all results are compared to the comparable period in the prior year. At this time, I'll turn the call over to Ken Burdick, CEO of Lifespan. Ken? Thanks, Monica, and thank you all for joining us today. The work that we've been
Unless otherwise noted all results are compared to the comparable period in the prior year.
At this time I'll turn the call over to Ken Burdick CEO of lifespan Okay.
Thanks, Monica and thank you all for joining us today.
The work that we've been doing to invest in the business fortify our foundation.
Speaker 3: and standardize our operations is beginning to bear fruit both operationally and financially.
Standardize our operations is beginning to bear fruit, both operationally and financially.
Speaker 3: This quarter, we met or exceeded our expectations across all key financial metrics.
This quarter, we met or exceeded our expectations across all key financial metrics.
Speaker 3: And for the first time in our young history as a public company.
And for the first time in our young history as a public company, we are raising our guidance for each of these metrics for full year 2023.
Speaker 3: We are raising our guidance for each of these metrics for full year 2023.
Speaker 3: As I reflect on my first year at Lifespans, three themes rise to the top of my list. First...
As I reflect on my first year at lifespan three themes rise to the top of my list first.
Speaker 3: After having spent 40 years on the payers side, I am struck by the degree to which payers have under-invested in mental health. And the access issue...
After having spent 40 years in the payer side I am struck by the degree to which payers have under invested in mental health.
And the access issues that have resulted.
Speaker 3: Far too many individuals are still required to self-pay for their outpatient mental health treat.
Far too many individuals are still required to self pay for their outpatient mental health treatment.
Speaker 3: Despite the headlines, the ever-increasing demand for outpatient mental health treatment
Despite the headlines the ever increasing demand for outpatient mental health treatment.
Speaker 3: and unprecedented levels of depression, anxiety, and suicide.
At unprecedented levels of depression.
And suicide.
Speaker 3: We at the country continue to under-invest in building clinical capacity and funding clinical research for mental health care.
As a country.
<unk> to under invest in building clinical capacity and funding clinical research for mental health care.
Second.
Speaker 3: I feel stronger than ever that the founders of life stands developed the right
I feel stronger than ever that the founders of lifespan.
<unk> developed the right business model.
Speaker 3: in-network mental health care delivered both in-person and virtually by employed clinicians with a broad physical footprint and diverse professional credentials and experience. Third,
In network mental health care delivered both in person and virtually.
<unk> employed clinicians with a broad physical footprint and diverse professional credentials and experience.
Third.
I continue to be incredibly impressed.
Speaker 3: and inspired by the dedication and passion of our employees throughout the organization.
Inspired by the dedication and passion of our employees throughout the organization.
Speaker 3: Their connection to our purpose and commitment to our mission is evidence in every conversation I have had since my first day at Life Sciences.
Their connection to our purpose and commitment to our mission is evidenced in every conversation I've had since my first day at lifespan.
Okay.
Speaker 3: We are resolutely committed to putting patients and clinicians at the forefront of everything we do.
We are resolutely committed.
So putting patients and clinicians at the forefront of everything we do.
Speaker 3: We spent a great deal of time speaking with you about financial metrics, however,
We spent a great deal of time speaking with you about financial metrics. However.
Speaker 3: I assure you that we never lose sight of the reason this business was founded to make outpatient mental health care more accessible, affordable, and safe.
I assure you that we never lose sight of the reason this business was founded to make outpatient mental health care more accessible and affordable.
Speaker 3: and unified with physical health care so individuals are treated holistically.
And unified with physical health care, so individuals are treated holistically.
Speaker 3: While we are focused on initiatives to improve our operational performance.
While we are focused on initiatives to improve our operational performance.
Speaker 3: It's important to recognize that our clinicians' delivery of care to our patients has been and continues.
It's important to recognize that our clinicians delivery of care to our patients has been.
<unk> continues to be exceptional.
Speaker 3: As a result, our patient net promoter score is over 80, and our average reviews for all life-sand centers across Google searches are currently at 4.5 out of five stars. Reflecting the quality of our-
As a result, our patient net promoter score is over 80, and our average reviews for all life science centers across Google searches are currently at four five out of five stars, reflecting the quality of our patient experience.
Speaker 3: In addition to patient satisfaction, now that we are on a single EHR, we are working to aggregate our clinical results and share them to quantify our clinical outcomes and the positive impact on our patients' mental health.
In addition to patient satisfaction.
Now that we are on a single EHR, we are working to aggregate, our clinical results and share them to quantify our clinical outcomes and the positive impact on our patients mental health.
Speaker 3: I'd also like to note the steps that we are taking toward a more deliberate and selective payer engagement model. We are still in the early stages.
I'd also like to note the steps that we're taking toward a more deliberate and selective payer engagement model.
We are still in the early stages of this strategy.
Speaker 3: You'll recall that in the first phase, we focused on eliminating low-volume pair contracts to reduce the administrative burden on the organization.
Youll recall that in the first phase, we focused on eliminating low volume payer contracts to reduce the administrative burden on the organization.
Speaker 3: Earlier this year, we terminated the bottom 30% or so of our hundreds of pay or contracts with minimal to no impact on visit value.
Earlier this year, we terminated the bottom, 30% or so of our hundreds of payer contracts with minimal to no impact on visit volume.
Speaker 3: We will continue to actively evaluate and streamline the number of pair contracts to allow our internal teams to operate more efficiently.
We will continue to actively evaluate and streamline the number of payor contracts to allow our internal teams to operate more efficiently.
Speaker 3: We are also in the midst of a second phase in our payer strategy.
We are also in the midst of a second phase in our payer strategy.
Speaker 3: in which we are becoming more assertive in demanding appropriate reimbursement for our services. We've begun to see...
In which we are becoming more assertive and demanding appropriate reimbursement for our services.
We've begun to see positive early results and are focused on aligning only with payer partners, who share our vision of expanding access to in network mental health care.
Speaker 3: and are focused on aligning only with pair partners who share our vision of expanding access to in-network mental health care, and who invested that vision with rates and terms, commensurate with the value that life-dance clinicians provide.
And who invest in that vision with rates and terms commensurate with the value of that life stance clinicians provide.
Before closing.
Speaker 3: I would like to provide an update on the shareholder lawsuit while we expressly deny the claims alleged in the lawsuit.
I would like to provide an update on the shareholder lawsuit.
While we expressly deny the claims alleged in the lawsuit.
Speaker 3: We've decided to enter into a settlement to avoid incurring additional legal expense and management distraction from continued litigation.
We've decided to enter into a settlement to avoid incurring additional legal expense.
And management distraction from continued litigation.
Speaker 3: we will be able to fund this settlement with our existing financial capacity without raising capital.
We will be able to fund this settlement with our existing financial capacity without raising capital.
Speaker 3: And this will not impair our ability to make the necessary investments to build a great interesting tangos span and bridge. That's what defines our ownult Quandu Line is the biggest
And this will not impair our ability to make the necessary investments to build a great business.
Speaker 3: We believe that putting this matter behind us is in the best interest of the company and we'll ensure that we remain focused on...
We believe that putting this matter behind us is in the best interest of the company.
And we will ensure that we remain focused on our core mission.
Speaker 3: caring for patients and building a business that addresses one of the greatest needs in our country today.
Caring for patients.
And building a business that addresses one of the greatest needs in our country today.
Speaker 3: Affordable and accessible mental health
Affordable and accessible mental health care.
Speaker 3: With that, I will turn it over to Dave to provide additional commentary on our financial performance and health look. Dave.
With that I will turn it over to Dave to provide additional commentary on our financial performance and outlook Dave.
Speaker 4: Thanks Ken. I'd like to hand on please with a team's valid operational and financial performance.
Thanks, Ken like Ken I am pleased with the team's solid op.
Operational and financial performance.
Speaker 4: In the third quarter, we achieved robust performance and our top line results with revenue of $263 million, representing growth of 21% year over year. This outperformance was primarily driven by increased visit volumes as a result of better than expected productivity during the vacations.
In the third quarter, we achieved robust performance in our top line results with revenue of $263 million representing growth of 21% year over year. This outperformance was primarily driven by increased visit volumes as a result of better than expected productivity during the vacation season.
Speaker 4: Visit volumes of 1,714,000 increased 20% year over year, primarily driven by higher clinician count and higher productivity.
Visit volumes of 1.714 million increased 20% year over year, primarily driven by higher clinician count and higher productivity.
Speaker 4: Total revenue per visit increased 1% year-over-year to $153, primarily driven by modest payer rate increases.
Total revenue per visit increased 1% year over year to $153, primarily driven by modest payout rate increases.
Speaker 4: For the full year, rates continue to be aligned with our expectations of a low single digit increase year over year.
For the full year rates continue to be aligned with our expectations of a low single digit increase year over year.
Speaker 4: When it comes to profitability, the outperformance on revenue floats through to center marks.
When it comes to profitability the outperformance on revenue flowed through to center margin dependent.
Speaker 4: Center margin of $76 million in the quarter increased by 26% year over year. Adjusted EBITDA of $15 million was consistent with our expectation.
Margin of $76 million in the quarter increased by 26% year over year.
Adjusted EBITDA of $15 million was consistent with our expectations.
Speaker 4: Turning to liquidity. In the third quarter, free cash flow was negative $35 million. This was primarily driven by approximately $20 million from intentionally holding payer claims and approximately $8 million in legal costs paid related to the shareholder laws.
Turning to liquidity in the third quarter free cash flow was negative $35 million. This was primarily driven by approximately $20 million from intentionally holding payer claims and approximately $8 million in legal costs paid related to the shareholder lawsuit.
Speaker 4: As expected, DSO increased sequentially from 43 days to 52 days.
Sure.
As expected DSO increased sequentially from 43 days to 52 days.
Speaker 4: As announced on our last call, we anticipated an increase in DSO this quarter as we chose the hold claims for several large payers due to positive updates from rate negotiation.
As announced on our last call we anticipated an increase in DSO. This quarter as we chose to hold claims for several large payers due to positive updates from rate negotiations.
Speaker 4: We decided to hold claims until the payers had loaded the new rates into their systems to avoid underpayment and excess rework on over 100,000 claims.
We decided to hold claims until the payers had loaded the new rates into their systems to avoid underpayment and excess rework on over 100000 claims.
Speaker 4: We continue to expect DSO to meaningfully improve in the fourth quarter and have already seen a significant improvement in October as we release the hold claim.
We continue to expect DSO to meaningfully improve in the fourth quarter and have already seen a significant improvement in October as we released the health claims.
Speaker 4: We are now on track to see DSO that is closer to Q2 levels by the end of the year.
We are now on track to see DSO that is closer to Q2 levels by the end of the year.
Speaker 4: We exited the third quarter with cash of $43 million and net long-term debt of $248 million.
We exited the third quarter with cash of $43 million and net long term debt of $248 million.
Speaker 4: At the end of Q3, we had additional debt capacity from a delayed draw term loan of $41 million as well as a $50 million revolving debt facility.
At the end of Q3, we.
We have additional debt capacity from a delayed draw term loan of $41 million as well as a $50 million revolving debt facility.
Speaker 4: As Kent touched on earlier, we recently entered into a settlement of the shareholder lawsuit to put this matter behind us and avoid the cost and the distraction of continued litigation.
As Ken touched on earlier, we recently entered into a settlement of the shareholder lawsuit to put this matter behind us and avoid the cost and the distraction of continued litigation.
Speaker 4: I'll now share the P&L and cash impacts of the litigation and the settlement.
I will now share the P&L and cash impacts of the litigation and the settlement.
Speaker 4: First, the settlement was $50 million, with 20 million of that covered by insurance.
First the settlement was $50 million.
With $20 million of that covered by insurance.
Speaker 4: In addition to the settlement, we expect to have approximately $20 million in legal fees related to the litigation.
In addition to the settlement, we expect to have approximately $20 million in legal fees related to the litigation.
Speaker 4: From a P&L perspective, in the third quarter, this settlement plus legal expenses of $14 million resulted in a $44 million expense for life stamps.
From a P&L perspective in the third quarter. This settlement plus legal expenses of $14 million resulted in a $44 million expense for life stance.
Speaker 4: Prior to this, we incurred approximately $3 million in legal expenses in Q2 and expect around $2 to $3 million more in the fourth quarter.
Prior to this we incurred approximately $3 million in legal expenses in Q2.
And expect around $2 million to $3 million more in the fourth quarter.
Speaker 4: In terms of catch, the total outlay will be $50 million.
In terms of cash the total outlay will be $50 million.
Speaker 4: In the second and third quarters, we paid approximately $8 million in legal.
In the second and third quarters, we paid approximately $8 million in legal fees.
Speaker 4: In the fourth quarter, we expect to pay approximately $17 million, which is comprised of $5 million for the settlement, and $12 million in legal.
In the fourth quarter, we expect to pay approximately $17 million, which is comprised of $5 million for the settlement and $12 million in legal fees.
Speaker 4: Finally, in the first quarter of 2024, we will be responsible for the final $25 million settlement paid.
Finally in the first quarter of 2024, we will be responsible for the final $25 million settlement payment.
Speaker 4: We have sufficient capacity to fund these payments and run the company until we reach positive free cash flow and we do not intend to raise additional debt or equity capital. In terms of our...
We have sufficient capacity to fund these payments and run the company until we reach positive free cash flow and we do not intend to raise additional debt or equity capital.
In terms of our outlook for 2023.
Speaker 4: We are narrowing our full year revenue range and raising it by $10 million at the midpoint to $1 billion 30 to $1 billion 40 million.
We are narrowing our full year revenue range and raising it by $10 million at the midpoint to $1 billion $30 billion to $1 billion $40 million.
Speaker 4: The midpoint of this guidance puts us at approximately 20% revenue growth. This is above our original mid-teens guidance that was driven by the power of our organic growth engine combined with clinician productivity.
The midpoint of this guidance puts us at approximately 20% revenue growth. This is above our original mid teens guidance and was driven by the power of our organic growth engine combined with clinician productivity.
Speaker 4: We are narrowing our full-year center margin range and raising it by $6 million at the midpoint to $292 to $300 million.
We are narrowing our full year center margin range and raising it by $6 million at the midpoint to $292 million to $300 million.
Speaker 4: We are narrowing our full year adjusted EBITDA guidance range and raising it by $2 million at the midpoint to $56 to $60 million.
We are narrowing our full year, adjusted EBITDA guidance range and raising it by $2 million at the midpoint to $56 million to $60 million.
Speaker 4: In the fourth quarter, we expect revenue of $255 to $255 million. Center margin of $73 to $81 million, and adjusted EBITDA of $17 to $21 million. As a reminder, there's see anality reflected in our fourth quarter guidance as a result of the holidays, which has historically resulted in lower total clinician capacity in the quarter. Now I'd like to spend...
In the fourth quarter, we expect revenue of $255 million to $265 million center margin of $73 million to $81 million and adjusted EBITDA of $17 million to $21 million.
As a reminder, there is seasonality reflected in our fourth quarter guidance as a result of the holidays, which has historically resulted in lower total clinician capacity in the quarter.
Now I'd like to spend a minute discussing 2024.
Speaker 4: we are still conducting our business planning process and therefore it is premature to provide specifics on next year's guidance. However, I want to give you some
We are still conducting our business planning process and therefore, it is premature to provide specifics on next year's guidance.
However, I wanted to give you some perspective on our thinking.
Speaker 4: We continue to expect mid-teens organic revenue growth driven primarily by growth in clinician town and higher rates per visit.
We continue to expect mid teens organic revenue growth driven primarily by growth in clinician counts and higher rates per visit.
Speaker 4: As with the initial 2023 full-year guidance, the mid-teens growth does not include any assumptions for improved clinician productivity.
As with the initial 2023 full year guidance. The mid teens growth does not include any assumptions for improved clinician productivity.
Speaker 4: We expect to see margin expansion from operating leverage and modest contribution from rate improvement.
We expect to see margin expansion from operating leverage and modest contribution from rate improvement.
Speaker 4: As I mentioned, the second quarter earnings call, the margin improvement in 2024 and 2025 will not be linear.
As I mentioned in the second quarter earnings call the margin improvement in 2024, and 2025 will not be linear.
Speaker 4: And we anticipate greater margin expansion in 2025, as we will have the benefit of a full year of returns on our foundational investments.
We anticipate greater margin expansion in 2025, as we will have the benefit of a full year of returns on our foundational investments.
Speaker 4: We continue to expect to exit 2025 with double-digit adjusted and give it a mark.
We continue to expect to exit 2025 with double digit adjusted EBITDA margins.
Speaker 4: In regards to free cash flow, even with the $25 million settlement payment in the first quarter next year, we expect to approach positive free cash flow in 2024.
In regards to free cash flow, even with the $25 million settlement payment in the first quarter next year, we expect to approach positive free cash flow in 2024.
Speaker 4: Before I turn it over to Donish, I would like to say that the unprecedented demand for mental health access and affordability will continue to provide a tailwind for life.
Before I turn it over to Don I would like to say that the unprecedented demand for mental health access and affordability will continue to provide a tailwind for life science.
Speaker 4: We look forward to sharing our 2024 guidance with you on our next earnings call. With that, I'll turn it over to Donna for additional power with respect to offering.
We look forward to sharing our 2024 guidance with you on our next earnings call.
With that I'll turn it over to Don for additional color with respect to operations.
Speaker 5: Thank you, Dave. This year we have focused on solidifying the foundation of our business.
Thank you Dave.
This year, we are focused on solidifying the foundation of our business.
Speaker 5: We have made significant upgrades in our senior operations leadership across the country and brought far more focus, prioritization, and data-driven decision-making to the organization in 2023.
We have made significant upgrades in our senior operations leadership across the country.
<unk> brought far more focus prioritization and data driven decision, making to the organization in 2023.
Speaker 5: We've also simplified and streamlined the business, setting us up for operating leverage in 2024 and beyond.
We've also simplified and streamlined the business setting us up for operating leverage in 2024 and beyond.
Speaker 5: As an example, we continue to evaluate the in-person usage levels across our centers to identify where we have opportunities for consolidation.
As an example, we continue to evaluate the in person usage levels across our centers.
Identify where we have opportunities for consolidation.
Speaker 5: On our last series call, we announced that we have consolidated 36 centers with little pheno-discussion to our patient or clinician.
On our last earnings call, we announced that we have consolidated 36 centers with little to no disruption to our patient for clinicians.
Speaker 5: Since then, we identified an additional 35 to 40 centers for consolidation, to bring the total to over 70 centers in 2023.
Since then we identified an additional 35 to 40 centers for consolidation, bringing the total to over 70 centers in 2023.
Speaker 5: This consolidation project is largely complete, and we feel that our real estate footprint is now better off.
This consolidation project is largely complete and.
And we feel that our real estate footprint is now better optimized.
Speaker 5: Our ability to deliver in-person care across more than 500 locations continues to be a key differentiator.
Our ability to deliver in person care across more than 500 locations continues to be a key differentiator.
Speaker 5: In terms of denobos, we also continue to intentionally moderate our pace of both.
In terms of de Novo's.
We also continue to intentionally moderate our pace of openings.
Speaker 5: We remain on track to open no more than 36 this year and expect to open fewer DeNovos next year.
We remain on track to open no more than 36, this year and expect to open fewer de novo's next year.
Speaker 5: Optimizing a real-stage footprint will allow us to drive margin improvement over time as we can see at a scale.
Optimizing our real estate footprint will allow us to drive margin improvement overtime as we continue to scale.
Speaker 5: Turning to growth in terms of net clinician ads.
Turning to growth.
In terms of net clinician adds.
Speaker 5: We grew by 286 in the third quarter.
We grew by 286 in the third quarter.
Speaker 5: Bring our total to 6418 clinicians, an increase of 18%.
Bringing our total to 6418 clinicians.
An increase of 18% year over year.
Speaker 5: Importantly, this growth remains 100% organic.
Importantly, this growth remains 100% organic.
Speaker 5: This is a record number of organic net clinician ads in a single quarter and is a testament to the amazing work performed by our recruiting and operations teams, as well as the strength of our value propositions to clinicians.
This is a record number of organic net clinician adds in a single quarter and is a testament to the amazing work performed by our recruiting and operations teams as well as the strength of our value proposition for clinicians.
Speaker 5: As a reminder, there is variability in clinician starts throughout the year and we do expect a lower number of net clinician ads in Q4.
As a reminder, there is variability in clinician starts throughout the year and we do expect a lower number of net clinician adds in Q4.
In terms of productivity.
Speaker 5: We continue to drive operational discipline to optimize utilization of clinician schedules at the top, middle, and bottom of the patient function.
We continue to drive operational discipline to optimize utilization of clinicians schedules at the top middle and bottom of the patient funnel.
Speaker 5: At the top of the funnel, we are attracting new patients above the growth of our clinician base demonstrated by our growth
At the top of the funnel, we are attracting new patients above the growth of our clinician base.
Demonstrated by our growing waitlist for services.
Speaker 5: Our boots on the ground's primary care referral team continues to expand local relationships.
Our boots on the ground primary care referral team continues to expand local relationships.
Speaker 5: in conjunction with continued growth in online organic patient traffic and increased brand awareness.
In conjunction with continued growth in online organic patient traffic and increased brand awareness.
Next at the middle of the funnel.
Speaker 5: We continue to improve patient matching and scheduling.
We continue to improve patient matching and scheduling.
Speaker 5: Both over the phone and through our online digital capabilities.
Over the phone and through our online digital capabilities.
Speaker 5: leading to a higher number of in-valentation inquiries converting to scheduled appointments.
Leading to a higher number of inbound patient inquiries converting to scheduled appointments.
Finally at the bottom of the funnel.
Speaker 5: A higher number of scheduled appointments are converting to completed visits with our cancellation and no-show rates improving from 10.4% in Q2 to 9.6% in Q3.
A higher number of scheduled appointments are converting to completed visits with our cancellation in no show rates improving from 10, 4% in Q2 to nine 6% in Q3.
Speaker 5: This represents five points of improvement from a year ago, which has had a significant positive impact on the ability of our clinicians to use their time products.
This represents five points of improvement from a year ago.
Which has had a significant positive impact on the ability of our clinicians to use their time productively.
Speaker 5: As a reminder, late cancellations and no-shows are a loss of life stance to clinicians and to patients.
As a reminder, late cancellations and no shows or a loss of life stance to clinicians and the patients.
Speaker 5: The visits that are scheduled but not completed result in lower revenues to life stand.
Visits that are scheduled but not completed result in lower revenue to life stance.
Speaker 5: An unfilled appointment slot and lower compensation to clinicians and reduced access to care for patients who could have received much needed mental health services during that time.
And unfilled appointment slots in lower compensation for clinicians and reduced access to care for patients who could have received much needed mental health services during that time.
Speaker 5: They are a net negative to all parties, and we will continue to focus on reducing patient late cancellations and no show.
They are a net negative to all parties and we will continue to focus on reducing patient late cancellations and no shows.
Speaker 5: Over the last year, our efforts to optimize utilization at the top, middle, and bottom of the patient funnel have been the primary driver of productivity improvement.
Over the last year, our efforts to optimize utilization at the top middle and bottom of the patient funnel have been the primary driver of productivity improvements.
Speaker 5: While we will continue to focus on operational enhancements in this area, we expect benefits to be more incremental going forward, given the progress made so far.
While we will continue to focus on operational enhancements in this area.
We expect benefits to be more incremental going forward given the progress made so far.
Speaker 5: We therefore feel that now we can shift our focus to the other side of the productivity equation, capacity.
We therefore feel that now we can shift our focus to the other side of the productivity equation capacity.
Speaker 5: It is still early, but we are exploring initiatives to grow overall clinician capacity, and we'll share more on this on future earnings calls.
It is still early but we are exploring initiatives to grow overall clinician capacity and.
And we'll share more on this on future earnings calls.
Speaker 5: As we continue to focus on our growth priorities of net clinician ads and productivity.
As we continue to focus on our growth priorities of net clinician adds and productivity.
Speaker 5: Our top priority remains delivering an amazing patient and clinician experience.
Our top priority remains delivering an amazing patients and clinician experience.
Speaker 5: For example, we know how complex understanding health insurance can be for patients.
For example, we know how complex understanding health insurance can be for patients.
Speaker 5: including differentiating between co-pays, deductibles, patient responsibilities, in-network versus out-of-network benefits, and appointment no-show or late cancellation fees.
Including differentiating between co pays deductibles patient responsibilities in network versus out of network benefits and appointment no show or late cancellation fees.
Speaker 5: To that end, we have continued to invest in our Billing Solutions Call Center to improve the overall experience and help patients get answers to their questions faster.
To that end, we have continued to invest in our billing solutions call center to improve the overall experience and help patients get answers to their questions faster.
Speaker 5: Additionally, we are piloting a digital patient check-in tool.
Additionally, we are piloting a digital patient checking tool.
Speaker 5: If successful, this tool will allow to collect and verify patient insurance information upfront.
This successful this tool will allow us to collect and verify patient insurance information upfront.
Speaker 5: as well as allow patients to pay their co-pay and pass through balances more easily.
As well as allow patients to pay their co pay and past due balances more easily.
Speaker 5: This will reduce stress for our patients and manual complexity for our operation teams.
This will reduce stress for our patients and manual complexity for our operations teams delivering an improved patient experience and streamlined operations.
Speaker 5: delivering an improved patient experience and streamlined operation.
Speaker 5: We're also refining our new nationwide phone system and increasing our front-office staffing levels to create better support for our clinicians locally and ensure that our patients have easier access to our staff. In closing,
We're also refining our new nationwide phone system, and increasing our front office staffing levels to create better support for our clinicians locally and to ensure that our patients have easier access to our staff.
In closing.
Im impressed with what our teams have accomplished this year.
Speaker 5: We have made progress in our two-year plan to strengthen and solidify the foundation of our business.
We have made progress in our two year plan to strengthen and solidify the foundation of our business.
Speaker 5: Whether that be through improvements in the utilization of clinician's casuals.
Whether that be through improvements in the utilization of clinician schedules.
Speaker 5: Moving to a single EHR phone system and online booking tool.
Moving to a single EHR phone system and online booking tool <unk>.
Speaker 5: optimization of a real estate footprint, or the myriad of other behind-the-scenes ways that we are driving a more efficient and standardized operating model.
The optimization of our real estate footprints or the myriad of other behind the scenes ways that we are driving a more efficient and standardized operating model.
Speaker 5: All of this is a testament to the hard work of our clinicians and teammates around the country.
All of this is a testament to the hard work of our clinicians and teammates around the country.
Speaker 3: With that, I'll turn it back over to Ken for his closing remarks. Thank you, Don.
With that I'll turn it back over to Ken first closing remarks.
Thank you Josh.
In closing I'm proud of the team's progress this year.
Speaker 3: This is the fourth straight quarter that Lifestance has met or exceeded expectations. With continued disciplined execution, we are well-p-
This is the fourth straight quarter that life stance has met or exceeded expectations.
And with continued disciplined execution.
We are well positioned to deliver on our full year commitments.
Speaker 3: In addition to achieving solid financial results, we also continue to attract high quality clinical and operational talent. The heavy lifting.
In addition to achieving solid financial results. We also continue to attract high quality clinical and operational tapped.
The heavy lifting that we are doing this year and next to streamline and standardize our systems and processes was sorely needed after nearly 100 acquisitions over six years.
Speaker 4: streamline and standardize our systems and processes.
Speaker 3: was sorely needed after nearly 100 acquisitions over six years. I am encouraged by our progress and momentum.
I am encouraged by our progress and momentum.
Yet recognize that our work is far from done.
Speaker 4: I look forward to continuing to demonstrate the tangible benefits of this work when we share our 2024 guidance. We will now take your questions. Up.
I look forward to continuing to demonstrate the tangible benefits of this work.
When we share our 2020 for guidance.
We will now take your questions operator.
Thank you.
The floor is now open for your questions to ask a question at this time. Please press Star then the number one on your telephone keypad.
Speaker 1: To ask a question this time, please press star, then the number one on your telephone keypad. You'll be provided the opportunity to ask one question and one further follow-up question. We'll pause for just a moment.
You will be provided the opportunity to ask one question and one follow up question.
So just a moment to compile the Q&A roster.
Speaker 1: Your first question comes from the line of Craig Hettenbeck with Morgan Stanley . Your line is open.
Your first question comes from the line of Craig handing back.
Morgan Stanley Your line is open.
Speaker 6: Yes, thank you. I have a two-part question on margins. First part is just on center margin improvement. If you can just expand on some of the things you're seeing there, you know, and perhaps it's some of the productivity improvements. And then the second part, just the increased investment that you've driven the business this year, particularly around technology and operating initiatives, how do you expect that to trend into 2024?
Yes. Thank you I have two part question on margins first part is just on Sterno margin improvement. If you can just expand on some of the things you're seeing there.
And perhaps at some of the productivity improvements and then the second part just the increased investments that you've driven in the business. This year, particularly around technology and operating initiatives. How do you expect that to trend into 2024.
Speaker 4: Hey, good morning, Craig. It's Dave. So on the center margins, we did see the increase and we expect that to be, you're stating a stable in the fourth quarter. And that was really driven by two things.
Hey, good morning, Craig It's Dave So on the center margins.
We did see the increase and we expect that to be your statement was stable in the fourth quarter and that was really driven by two things scale. So the higher higher revenue relative to the fixed costs and then the second thing is seeing some efficiencies in areas like the contribution from the real estate consolidation.
Speaker 3: scale, so the higher revenue relative to the fixed costs. And then the second thing is, is seeing some efficiencies in areas like the contribution from the real estate consolidation.
Speaker 7: And then in regards to technology investments in 2024, I would expect that to be a modest increase year over year as we implement things like the virtual check-in for patients and things like that, that Don has represented in his prepared remarks, but not a meaningful increase year over year.
And then in regards to technology investments in 2024, I would expect that to be a modest increase year over year as we.
As we implement things like the virtual.
Check in for our patients and things like that that Donnish represented in his prepared remarks, but not a not a meaningful increase year over year.
Speaker 6: Got, and then just as a follow up for Ken, and any update on some of the partnerships you're driving with companies like Gen-As and how that's influencing the overall opportunity set.
Okay got it and then just as a follow up for Ken any update on some of the partnerships you're driving with companies like Genesis.
And how that's influencing the overall opportunity set.
Speaker 4: Yeah, Craig, thanks for the question. I continue to be encouraged by the discussion.
Yeah, Craig Thanks for the question.
I continue to be encouraged by the discussions.
Speaker 4: but a little frustrated that it's taking longer than we would have expected to sort of close and finalize some of these deals. So there's still good momentum. I look forward to the opportunity in the future to share more specifics, but it's going to continue to be an important part of our strategy going forward. And we are not daunted.
But a little frustrated that.
It's taking longer than we would've expected to sort of close and finalize some of these deals so theres still good momentum.
I look forward to the opportunity in the future to share more.
Civics, but it's going to continue to be an important part of our strategy going forward and we are not daunted.
Just a little impatient.
Got it thank you.
Speaker 1: Next question comes from the line of Lisa Gill with JPMorgan. Your line is open.
Next question comes from the line of Theresa Jill with J P. Morgan Your line is open great.
Speaker 2: Great, thanks very much and good morning. I just want to understand two things on the payer side. Ken, I appreciated your opening comments and you talked about payers under-investing in mental health, too much self-pay, et cetera. Are you seeing any changes in plan design for 2024 that's going to drive improvement in that?
Alright, thanks, very much and good morning.
Wanted to understand two things on the payer side, Ken I. Appreciate your opening comments you talked about payers under investing in mental health too much self pay et cetera.
Are you seeing any changes in plan design for 2024 that that's going to drive improvement in that and then secondly, when you talked about 24, you talked about an increase in rate you also talked about an increase in rates for 'twenty. Three is it just simply the rate increased from 23 is carrying forward to 'twenty four are you expecting in.
Speaker 2: And then secondly, when you talked about 24, you talked about an increase in rate. You also talked about an increase in rates for 23. If it's just simply the rate increase when 23 is carrying forward to 24, are you expecting an incremental increase in rates as we move into 24?
Incremental increase in rates as we move into 'twenty four.
Speaker 4: Yeah, we're not really seeing changes in plan design to your question about the rates. We're in the early stages, but we're, we are seeing progress as I mentioned in my prepared remarks in the.
Yes, we're not really seeing changes in plan design.
To your question about the rates were in the early stages, but where we are seeing progress as I mentioned in my prepared remarks in the.
Speaker 3: latter half of 23, and we expect that to continue. So 24 should represent more than just the annualization of 23 contract negotiations. We're going to have a concerted effort to make sure that as we deliver a great experience.
Latter half of 'twenty, three and we expect that to continue so 24 should represent more than just the annualized nation of 'twenty three.
Contract negotiations.
We just we're going to have a concerted effort to make sure that as we deliver a great experience.
Speaker 3: to our patients and the insured members that we receive reimbursement that's commensurate with that. And commensurate, frankly, with the...
To our patients and the insured members.
That.
We receive reimbursement, that's commensurate with that and commensurate frankly with the.
Stepped up in demand.
Speaker 3: that we've seen for outpatient mental health services now for several years.
That we've seen for outpatient mental health services now for several years.
Speaker 2: create. And then this is a quick follow up I know in the past you've given us virtual versus in person can you just update us on the percentage of each for the quarter.
Okay, Great and then just as a quick follow up I know in the past you've given us.
Virtual versus in person can you just update us on the percentage of each for the quarter.
Speaker 5: Hey Lisa, this is Donna. I can, I can provide that update. So virtual visits in Q3, represented approximately 70 to 3% of our total visits. I was relatively in line with the previous quarter. Obviously as we've mentioned prior to that, prior to Q2, we have seen a slow shift back towards in person.
Hey, Lisa this is Don if I can I can provide that update so virtual visits in Q3 represented approximately 73% of our total visits that was relatively in line with the previous quarter.
Obviously as we are.
Mentioned prior to that.
Prior to Q2, we have seen.
Slow shift back towards in person.
Speaker 5: And so, like we've mentioned before,
And so.
Like we mentioned before.
Speaker 5: We'll see where this eventually plaques those. We don't believe that we're at a plateau. When you look at the number of...
We'll see where this eventually plateaus, we don't believe that we're at a plateau.
When you look at the number of.
Speaker 5: Inbound inquiries from prospective patients looking for in person, that continues to grow, which gives us an indication that we will continue to see our mix shift more towards in person over time.
Inbound inquiries from prospective patients looking for in person that continues to grow which gives us an indication that we will continue to see our mix shifts more towards in person overtime.
Okay, great. Thank you.
Speaker 1: Our next question comes from the line of Ryan D'Agnel's with William Blair. Your line is open.
Our next question comes from the line of Ryan Daniels with William Blair. Your line is open.
Speaker 8: Yeah, hey, this is Jack. I'm done for Ryan Daniel. Thanks for taking my question. Looking at cash flows, it looks like free cash flow took a pretty significant step down sequentially. And I think in prior calls, you suggested that free cash flow should be positive in second half 2023. So first, is this still the expectation given where it came in this quarter? And then two, can you just talk about the impact of the payer contracts you terminated earlier this year and the early findings of how that has impacted the RCM functions and, and free cash flow as of late?
Yeah, Hey, this is Jack <unk> on for Ryan Daniels. Thanks for taking my question looking at cash flows it looks like free cash flow took a pretty significant step down sequentially and I think in prior calls you've suggested that free cash flow should be positive in second half 2023. So first is this still the expectation given where it came in this quarter and then two can you just talk about the impact of the payer contracts mature.
Emanated earlier this year and the early findings of how that has impacted the RCM functions and free cash flow as of late.
Speaker 7: There's a couple of things there. First, let's talk about free cash flow. When we gave guidance at the beginning of the year, we did say that we expected free cash flow to be positive in the second half of the year. That's
Sure Jack.
<unk> gave us a couple of things there. So first let's talk about free cash flow. So when we gave guidance at the beginning of the year. We did we did say that we expected free cash flow will be positive in the second half of the year.
Speaker 7: no longer going to happen. And it's the result of two things. The first is the settlement and the legal costs associated with the shareholder litigation. And then the second is, as you pointed out in the third quarter, we had negative free cash flow. And that was the result of us choosing to hold claims.
No longer going to happen.
It's the result of two things the first is.
The settlement and the legal costs associated associated with the shareholder litigation and then the second is as you pointed out in the third quarter.
We had negative free cash flow and that was the result of us choosing to hold claims.
Speaker 7: for payers where we were getting rate increases until they uploaded those new rates in their system. And that's just taking a little while to work through. So the combination of that impacted us in the third quarter. And as a result, I do not expect free cashflow positive for the second half of the year.
For payers, where we were getting rate increases until they uploaded those new rates in their system.
And Thats, just taking a little while to work through so the combination of that impacted us in the third quarter and as a result.
I do not expect free cash flow positive for the second half of the year.
Speaker 7: in regards to payer.
In regards to.
Payer.
Speaker 7: Our initiative that we did this year was around more of an efficiency play rather than an improvement in rates. We called the lowest 30% payer contracts from a volume perspective to be able to become more efficient for our billing, credentialing those the payer teams, those areas rather than looking for rate improvements.
Our initiative that we did this year was around more of unofficial efficiency play rather than.
An improvement in rates, we called the the lowest 30% payer contracts from a volume perspective.
To be able to become more efficient for our billing credentialing.
Those payer teams those areas rather than looking for rate improvement.
Speaker 7: And we are seeing the benefits of that. So it's played out as we expected. And I would expect another tranche similar to that of reducing our payer contracts in 2020.
And we are seeing the benefits of that so it has played out as we expected and I would expect another tranche similar to that.
Reducing our payer contracts in 2024.
Speaker 8: Okay, great. Thanks. Just a quick follow-up then, too. How should we think about net clinician ads going forward, given that you're 100% organic now? Do you have a baseline target per quarter on organic hires? And then, given you are adding all these clinicians and onboarding them, can you just talk about the ramp for these clinicians and kind of how that ramp has trended and improved over time?
Okay. Great. Thanks, just a quick follow up into how should we think about net clinician adds going forward given that you're 100% organic now do you have a baseline target per quarter on organic hires and then given you are adding all of these conditions and onboarding them can you just talk about the ramp for these clinicians and kind of how that ramp has trended and improved <unk>.
At the time.
Speaker 5: Sure, this is Donesh, I can comment on that. So, as we mentioned in our prepared remarks, we had a very strong quarter of 286 NET Clinician ads, which was 100% organic and the strongest organic quarter that we have had to date in terms of NET Clinician ads.
Sure. This is Don if I can comment on that so as we mentioned in our prepared remarks, we had a very strong quarter of 286 net commission ads, which was 100% organic in the strongest organic quarter that we've had to date in terms of that clinician adds.
Speaker 5: You will see quarter to quarter variability there and indicated in the prepared remarks that you should expect a lower number in queue for.
You will see quarter to quarter variability, there and I indicated in the prepared remarks that you should expect.
A lower number in Q4.
Speaker 9: As Dave mentioned, as well, we are not at a point in providing specific guidance on 2024. We will do that on our next call, and we typically do not guide on clinician ads. But as Dave did mention, we expect to see mid-teens organic revenue growth next year. Obviously, a significant component of that will be our growth in our clinician base.
As Dave mentioned as well.
We are not at a point in providing specific guidance on 2024, we will do that on our next call and we typically do not guide on clinician adds.
But.
Dave did mention we expect to see mid teens organic revenue growth next year, obviously, a significant component of that will be.
Our growth in our clinician base.
Jack in terms of.
Ramping.
Speaker 5: I'm sorry, in terms of ramping, you know, as we talked about.
Sorry in terms of ramping as we talked about.
Speaker 9: optimization of our patient funnel or just optimization of utilization that continues to play out in terms of overall improvements in productivity and particularly plays out in the speed to be able to ramp new clinicians.
Optimization of our.
Patient funnel or just optimization of utilization that continues to play out in terms of overall improvements in productivity and particularly plays out in.
The speeds to be able to ramp new clinicians.
Speaker 9: We continue to see overall new patient demand exceed our supply of clinicians, as indicated by our grown wait list.
We continue to see overall, new patient demand exceed our supply of clinicians as indicated by our growing wait lists.
Speaker 9: And that will continue to be a positive as it comes to both ramping new clinicians as well as keeping existing clinician schedules filled to the case of the day desire.
And that will we will continue to be a positive.
As it comes to book ramping new clinicians as well as keeping existing clinician schedules filled to the case loads that they desire.
Speaker 1: Our next question comes from the line of Kevin Caliendo with UBS. Your line is open. Thanks. Thanks for taking my call.
Our next question comes from the line of Kevin Caliendo with UBS. Your line is open.
Thanks, Thanks for taking my question.
Speaker 10: I think the math on the fourth quarter would suggest a little bit of a step down in productivity per doc. And now there's a bunch of new ads and you also called out the holiday season. I'm just wondering what the net impact is of the calendar in 4Q in terms of days. And also was there any calendar impact in Q3?
I think the math on the fourth quarter, which suggests a little bit of a step down in productivity per Doc I know, there's a bunch of new adds and you also called out the.
The holiday season, I'm, just wondering what the net impact is of the calendar <unk>.
In terms of days and also was there any calendar impact in Q3.
Year over year.
Speaker 7: Kevin, it's Dave. Good morning. Thanks for the question in regards to the 4th quarter. I think you nailed it around. The reason for the step down sequentially and revenue, it is the result of.
Yes, Kevin it's Dave Good morning, Thanks for the question.
In regards to the fourth quarter I think you've nailed it around the reason for the step down sequentially in revenue. It is the result of less.
Speaker 7: less become effective. We think of them as effective business days because of the holiday vacation season for our clinicians.
Yes become effective we think of them as effective business days because of the holiday vacation season for our clinicians. So as a result, we do expect to see a step down and productivity or visits per clinician in the quarter, that's partially offset by the pick up the pickup in rates, which is what.
Speaker 7: So as a result, we do expect to see a step down in productivity or visits per clinician in the quarter. That's partially offset by the pickup in rates, which is what's driving, you know, adjusted EBITDA almost doubling when you think about fourth quarter this year versus last year. So that's the primary dynamic of what's happening.
Driving.
Adjusted.
Adjusted EBITDA almost doubling.
When you think about fourth quarter this year versus last year. So that's the that's the primary dynamic of what's happening.
Speaker 10: Okay, that's helpful. And again, these rates are really just kind of kicking in now. This is what you're holding the claims back for. That gets added back. That's the Delta. Is there any way to quantify the rate increase or the net rate increase?
Okay. That's helpful and again these rates are really just kind of kicking in now this is what youre holding the claims back or that gets added back that's the that's the delta.
Is there any way to quantify the rate increase or the net rate increase I know thats a.
Speaker 7: Difficult question. Yeah, we're, we're not going to, yeah, we're not going to mention that, but it's it. What you said is accurate, which is the rates came in or kicked in in the middle of the quarter. So we're going to get the full effect of those in the 4th quarter. And we also have some additional contracts that are being updated for improved rates in the 4th quarter as well, which also.
Difficult question, Yes, we're not going to we're not going to dimension that but.
What you said is accurate which is the rates came in.
<unk> kicked in in the middle of the quarter. So we're going to get the full effect of those in the fourth quarter and we also have some additional contracts.
That are being updated for improved rates in the fourth quarter as well, which also helps.
Speaker 10: Great. This is a little bit more sensitive perhaps, but when you have a compensation model, sort of class action suit, how does that impact?
Great.
This is a little bit more sensitive, perhaps but when you have a compensation model.
A class action suit.
How does that impact.
Speaker 10: How has that impacted internally your turn rate or anything else? Has it had any impact? Now you gave us the net number, which was fantastic. I'm just wondering if there was, if you saw any increase in turn because of these headlines that you have to deal with and just wondering what it does internally, operationally, how do you manage something like that? Because obviously it can be challenging.
How has that impacted internally your turn rate or anything else has it had any impact on you gave us the net number which was fantastic I'm. Just wondering if there was if you saw any increase in churn because of these headlines that you have to deal with and just wondering what it what it does internally operationally, how do you manage something like that because it obviously.
It can be challenging.
Speaker 9: Yeah, this is Josh. I can speak to that. So, you know, our clinician retention continues to remain stable our ability to attract. New clinicians.
Yes. This is Don and I can speak to that so our clinician retention continues to remain stable our ability to attract.
New clinicians.
Speaker 9: Continues to be strong is indicated by our 286 and that clinician adds in the quarter. So, though there will always be, you know, background noise and anything. And this has always been a competitive or a highly competitive market. We still believe strongly that our value proposition continues to resonate in both our ability to attract and retain clinicians.
Continues to be strong as indicated by our 286 net clinician adds in the quarter. So.
So there will always be background noise than anything.
And this has always been a competitive or a highly competitive market. We still believe strongly that our value proposition continues to resonate and both our ability to attract and retain clinicians.
Speaker 11: Great, thanks, and thanks for all the color on the litigation stuff. Super helpful. Thanks, guys. <expletive> my shits.
Great. Thanks, and thanks for all the color on the on the litigation stuff Super helpful. Thanks, guys.
Next question comes from the line of Jami.
With Goldman Sachs. Your line is open.
Speaker 12: Hey, thank you, good morning. I wanted to go back just to center level margins and don't just comments around another 30 centers that can be consolidated over.
Hey, Thank you good morning.
I wanted to go back just to the center.
Center level margins and Thomas' comments around.
30 centers that can be consolidated over.
Speaker 12: over the near term, should we think about the progress you guys have made on center margin and as you consolidate those incremental centers, a similar type of benefit or just any color on how to think about the contribution from consolidating those on gross margin?
Over the near term should we think about the progress you guys have made on on center margin.
As you consolidate those incremental centers, a similar type of benefit or just any color on how to think about the contribution from consolidating those on on gross margins.
Speaker 7: Good morning, Jamie. It's Dave. Thanks for the question.
Hey, good morning, Good morning, Jamie It's Dave Thanks for the question.
Speaker 7: So we're gonna, as Donas mentioned in his prepared remarks, we're gonna close.
So we're going to as Don just mentioned in his prepared remarks, we're going to close.
Speaker 7: approximately 70 centers this year. The financial benefit, you know, we're only getting a partial, partial this year is a think of that in the 2 to 3 million range for favorability or favorability to our expenses this year. In regards to 2024, that run rate is more in the over $5 million. So that's what's, that's what we think of in the contribution to improved center costs for 2024.
Approximately 70 centers this year.
The financial benefit.
Getting a partial partial this year so think of that in.
$2 million to $3 million range for favorability favorability to our expenses. This year in regards to 2020 for that run rate is more in the over $5 million. So thats whats thats, what we think of and the contribution to improved center cost for 2024.
Speaker 12: Okay, perfect. And then just going back to, I guess the initial kind of strategy for the company a few years ago, and going into new state. So I wanted to ask about that if that's still an opportunity for you guys as you're shifted away from M&A, or if you feel like you have enough opportunity and existing states to continue to grow.
Okay, Perfect and then just going back to I guess, the initial kind of strategy for the company a few years ago in <unk>.
And into new state I wanted to ask about that if that's still an opportunity for you guys as youre shifted away from M&A or if you feel like you have enough opportunity in existing states to continue to grow.
Speaker 3: Jamie, this is Ken. We think we have tremendous opportunity within our existing footprint. It doesn't mean we will not expand into greater states, but more emphasis for the foreseeable future is going to be building out our presence in the 33 states that we...
Yes, Jamie this is Ken we think we have tremendous opportunity with our within our existing footprint. It doesn't mean, we will not expand into.
Greater states, but more emphasis for.
For the foreseeable future is going to be building out our presence.
And the 33 states that we already reside.
Speaker 4: And as it relates to M&A, I'm glad you asked. We've been very clear that we're really going to hold off on tuck-in acquisitions until we have solidified our platform and can move acquired practices onto that solid stable and high-performing platform. Kill me once more and issue thets where I will go.
And as it relates to M&A.
Glad you asked we've been very clear that.
We're really going to hold off on tuck in acquisitions until we have solidified our platform and can move acquired practices onto that solid stable and high performing platform. We.
Speaker 3: We also look to do that when we can fund it out of free cash.
We also look to do that when we can funded out of.
Free cash.
Speaker 3: So that is on the horizon, but not on the near term horizon.
So that is on the horizon, but not on the near term horizon.
Okay, great. Thank you.
Speaker 1: Next question comes from the line of Brian Tanquilute with Jeffreys. Your line is open.
Next question comes from the line of Brian. Thank you.
Jeffrey Your line is open.
Speaker 13: Hey, good morning, guys. Congrats on the quarter. I guess my first question, I know in your prepared remarks you touched on NPS and some of the things that you're doing to improve the patient experience. Maybe if you could just elaborate on some of those things and what you're doing to address some of the concerns that are out there in the market on cancellation fees and things like that that patients are having to face as they approach your clinics and try to get.
Hey, good morning, guys congrats on the quarter I.
I guess my first question I know in your prepared remarks, you touched on NPS and some of the things that you're doing to improve patient and the patient experience. Maybe if you could just elaborate on some of those things and what youre doing to address the concerns that are out there in the market on canceled.
Cancellation fees things like that patients are having to face as Dave.
Approach your clinics I'm trying to get the care.
Speaker 3: Yeah, Brian , I'm going to give you, you know, my thoughts and then I'd love for Danish to weigh in. We're certainly aware of some of the noise that's out there. We're not going to dignify it with a direct rebuttal. But what I can tell you.
Yes, Brian hub, let us give you.
My thoughts and then I'd love for Donnish to weigh in.
We're certainly aware of the <unk>.
Some of the noise that's out there, we're not going to dignify, it with a direct rebuttal, but.
What I can tell you is.
That.
Speaker 4: The thought that somehow we are inducing cancellations and no-shows is absolutely nonsense.
The the <unk>.
That somehow we are inducing cancellations that no shows as absolutely nonsense.
Speaker 3: As Donesh has reported every quarter, it's been a priority for us to reduce cancellations and no-shows, and we've done that in a meaningful way over this past year.
As Donnish has reported every quarter.
It's been a priority for us to reduce cancellations and no shows and we've done that in a meaningful way.
Over this past year so.
Speaker 4: The way I would describe it is, we have been in a hypergrowth mode since our founding. We're now...
The way I would.
Describe it is we.
We have been in a hyper growth mode. Since our founding we are now.
Speaker 3: conducting approximately six million patient visits a year. As we share in these calls, our operations are not as buttoned up as we will be going forward.
Conducting approximately 6 million patient visits a year.
As we shared in these calls.
Our operations are not as buttoned up as we.
We'll be going forward.
Speaker 3: So I'm not going to say that every patient experience meets our standard. But what I will absolutely say is there is no strategy or systematic approach to try to...
So I'm not going to say that every patient experience meets our standards, but what I will absolutely say is there is no strategy or.
Systematic.
<unk> to try to make the patient experience anything other than exceptional.
Speaker 3: the patient experience anything other than exceptional.
And frankly.
Speaker 3: were offended when somebody suggests otherwise.
We're offended when somebody suggests otherwise.
Speaker 9: Yeah, I think that's very well said, Ken. The only thing I would add is.
Yes.
<unk>, Ken the only thing I would add is.
Speaker 9: As we look at continuing to improve the overall experience for our patients, we're very proud of the NPS that we're delivering today of 80. But.
As we look at continuing to improve the overall experience for our patients.
We're very proud of the NPS that we're delivering today is of 80.
But.
Speaker 9: We will remain focused on any patients or clinician experience that is not positive to looking to mitigate that and improve that overall.
We will remain focus on any patients or clinician experience that is not positive to looking to mitigate that and improve that overall.
Speaker 9: feeling where and when we can. I think some of our very direct investments in increasing staffing and service levels on our billing solution centers to be able to ensure that.
Feeling where and when we can I think some of our very direct investments and increasing staffing and service levels on a billing solution centers to be able to ensure that.
Speaker 9: Patients when they do have questions, have the easy and quick access to someone who can help them understand their bill or any concerns they may have as related to as well as it's a fees, as well as our increases in frontline staffing so that at the center level, our patients and our clinicians feel a more direct level of support in their local market rather than trying to navigate a call center.
Patients when they do have questions have easy and quick access to someone who can help them understand their bill or.
Any concerns they may have as it related to.
That's related to fees as well as our increases in frontline staffing so that at the center level, our patients and our clinicians feel a more direct level support in their local market.
Rather than trying to navigate a call center.
Speaker 13: Understand appreciate the comments. Maybe if I could flip the question to the other side any color you can share on clinician or employee satisfaction and any efforts you're putting in there to drive that further up.
Thanks, Dan I appreciate the comments, maybe if I could flip the question to the other side any color you can share on clinician or employee satisfaction and any efforts you are.
Putting in there to drive that further up.
Speaker 5: So both clinician and play satisfaction is always top of mind for us. It is something that we track on a regular basis through multiple engagement surveys throughout the course of the year. You know, as the.
So both clinician and employee satisfaction is always top of mind for us. It is something that we track on a regular basis through.
Multiple engagement surveys throughout the course of the year.
Speaker 9: As a direct indication of that, again, we talked about, at least from the clinician standpoint, so retention remaining stable, which we believe is the most direct indication that we have.
As a direct indication of that again, we talked about at least from the clinician standpoints our retention remaining stable.
Which we believe is the most direct indication that we have.
Speaker 9: a positive level of engagement in our clinician-based and similarly in our non-clinician-based. However, as Ken said, we do not rest on our hands. We believe that there is always room for improvement and we'll continue to put our patient and clinician experience as well as all employee experience and engagement at the top of our priority list.
A positive level of engagement.
In our clinician base and similarly on our non clinician base. However, as Ken said, we do not rest on our hands.
We believe that there is always room for improvement and we will continue to put our patient and the clinician experience as well as all employee experience and engagement.
Top of our priority list.
Speaker 3: And just a quick add on, we talk an awful lot about standardization, simplification and automation.
Yes, just a quick add on we talk an awful lot about standardization simplification and automation.
Speaker 3: Obviously for the purposes of our learnings called
Obviously for the purposes of our earnings call.
Hi.
Speaker 3: It tends to focus on the operating leverage that we can achieve, but make no mistake, as we make these investments in running a better business, the clinician's experience will directly benefit from these investments.
It tends to focus on the operating leverage that we can achieve but make no mistake as we make these investments and running a better business.
Clinicians experience will directly.
Benefit from these investments.
Also I appreciate it thanks for the color guys.
Speaker 1: And we do have our, we do have our last question comes from the line of Gary Taylor with PD Cohen. Your line is open.
And did you have or would you have our last question comes from the line of Gary Taylor with TD Cowen Your line is open.
Speaker 12: Hey, good morning. Two clarifications in one question. I just wanted to clarify when you talked about 2024.
Hi, good morning.
Two clarifications and one question I just wanted to clarify.
When you talked about 2024.
Speaker 12: Cash flow, approaching break even, you mean free cash flow, correct?
Cash flow.
Approaching breakeven you mean free cash flow correct.
Not just cash from ops.
Speaker 7: Good morning. It's Dave. That's correct. Free cash flow.
Yes. Good morning, it's David that's correct free cash free cash flow.
Speaker 12: And then just on the legal settlement, I think this is clear, I just want to confirm, since I think only the securities class action was in the 2Q, but you're saying today all three of those class actions have now been settled, correct? That's the full $50 million for all three of those, right?
Got it.
And then just on the legal settlement that I think this is clear I just wanted to confirm.
Since I think only the securities class action was in the <unk>, but you are saying today all three of those class actions have now been settled correct. That's the full that's.
That's the full $50 million for all three of those right.
Speaker 4: No, Gary, we're referencing today the settlement relative to that, um, shareholder.
No Gary where rep.
<unk> zinc today that settlement relative to that.
Shareholder litigation.
Litigation.
Speaker 12: Okay, so in the press release, yeah, there was a privacy and then a compensation class action, so
Okay. So in the press release lease yes, there was the privacy and then a compensation class action. So.
Speaker 12: There's no, there's no reserve or estimated amount for those at this point.
There is no there is no reserve or estimated amount for those at this point.
Speaker 7: That's correct. Those are those are an early stage and are ongoing.
That's correct.
Those are in early stage and are ongoing.
Speaker 12: got it. And then my last one would be, I think I understand this, but I just want to make sure. So when we look at
Got it.
And then my last one would be.
I think I understand this but I just want to make sure. So when we look at.
Speaker 12: you know, year-to-year growth in the revenue per visit and the first quarter was up about $6 and the second quarter was up about $4 and then the this quarter was up about $1 a year over year and you're achieving these better low single-digit rates underlying. Is that, you know, cosmetic deceleration? Is that just the, in any given quarter, that's the mix of clinicians, that's the mix of...
Year to year growth in the revenue per visit in the first quarter was up about $6 in the second quarter was up about four and then this quarter it was up about $1 year over year.
Youre achieving these these better low single digit rates underlying.
Is that cosmetic deceleration is that just the in any given quarter thats the mix of clinicians that's the mix of <unk>.
Speaker 12: acquisition, divestitures, all of that's impacting that. And if so, when we think about 24, do we get back to a place where we're kind of just sort of modeling the low single digit on that revenue per treatment line?
Acquisition.
Divestitures all of that's impacting that and if so when we think about 'twenty four do we do.
Can we get back to a place where we're kind of just sort of modeling the low single digit on that revenue per treatment line.
Speaker 3: Well, Gary, you know, we're not going to give specific guidance relative to 24, but you're on the right track. There's a lot of moving parts and a lot of influences on that revenue per visit. A couple that you didn't mention is obviously we have geographic differences. So we have different rates across different geographies. So our growth can influence that. And we have some payer rate differentials, which will also play into the mix. So there's a lot of moving parts, but.
Well, Gary we're not going to give specific guidance relative to 'twenty four but youre on the right track. There is a lot of moving parts and a lot of.
Influences on that revenue per visit couple that you didn't mention is obviously we have.
Geographic differences, so we have different rates across different geographies. So our growth can.
Can influence that.
And we have some payor rate differentials, which will also play into the mix.
So theres a lot of moving parts, but.
Speaker 4: Share with you the 24 specifics when we provide guidance.
I prefer to <unk>.
Share with you that 'twenty four specifics when we get.
Provide guidance in our next earnings call.
Speaker 7: Yeah, that's right, and just just a pile on is that in my prepared remarks, I did say for twenty twenty four, we drive mid teens revenue growth and that would come from both clinician growth as well as rate per visit growth. We just didn't dimension that yet and that that's what we'll do on the next earnings call.
Yes, Thats right, Ken and just just to pile on is that in my prepared remarks, I did say for 2024 wheel drive mid teens revenue growth and that would come from both clinician growth as well as rate per visit growth. We just didn't dimension that yet and that's what we'll do on the next earnings call.
Yeah.
Okay. Thank you.
Speaker 1: There are no further questions at this time. I would like to turn the call back over to Ken Birdie, CEO for closing remarks.
There are no further questions at this time I would like to turn the call back over to Ken Burdick.
CEO for closing remarks.
Speaker 4: Thank you, operator. I want to just take a moment to to thank you for your continued interest in life stance. For those of you that have been following this story since we went public, there's no question that the first six quarters we were on our heels and it was a challenge. Hopefully, what you're seeing now is that we are.
Thank you operator, I wanted to just take a moment to.
Thank you for your continued interest in life stance.
For those of you that have been following this story since we went public.
No question that the first six quarters.
We were on our heels.
And.
It was a challenge hopefully what you are seeing now is that we are.
Speaker 3: focused on standardizing, simplifying, and stabilizing this high-growth business. We have now had four quarters where, in fact, we have delivered on our commitments.
Focused on standardizing simplifying and stabilizing this high growth business.
We have now had four quarters, where in fact, we have delivered on our commitments and.
And we very much look forward to.
Speaker 4: to the day where in the very near future, where we're really on our toes instead of on our heels.
To the day, where.
In the very near future, we're really on our toes instead of on our heels.
Speaker 4: And with that, I want to take a moment to thank all the employees of life stands for their hard work and for the contribution they've made to the progress. As I've said before, Donish, Dave and I have the privilege of sharing these results, but we're not confused about how these results are generated.
And with that I want to take a moment to thank all the employees of life stance for their hard work and for the contribution they've made to the progress as I've said before Donnish, Dave and I.
Have the privilege of sharing these results, but we're not confused about how these results are generated and it's through the collaboration of <unk>.
Speaker 3: And it's through the collaboration of thousands of our employees across.
Our employees across.
Speaker 3: many, many geographies, and we are very thankful for their dedication and hard work.
Many many geographies.
<unk> and we are very thankful for their dedication and hard work.
Speaker 3: With that, I wish you all a happy Thanksgiving and a safe and healthy holiday season.
With that.
I wish you, all a happy Thanksgiving and a safe and healthy holiday season.
Concludes today's conference call you may now disconnect.
[music].
Yes.
Yes.