Q4 2023 LifeStance Health Group Inc Earnings Call
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Operator: Good morning, my name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lifestance Health 4th Quarter 2023 Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.
Good morning, My name is Audrey and I will be your conference operator today at this time I would like to welcome everyone to the lifestyle health fourth quarter 2023 earnings call.
Today's conference is being recorded.
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 this time simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. At this time, I would like to turn the conference over to Monica Prokocki, Vice President of Investor Relations. Thank you, operator.
At this time I would like to turn the conference over to Monica Procacci, Vice President of investors relations.
Thank you operator.
Monica Prokocki: Good morning, everyone, and welcome to Lifestance Health's fourth quarter 2023 earnings conference call. I'm Monica Prokocki, Vice President of Investor Relations. Joining me today are Ken Burdick, Chief Executive Officer, Dave Bourdon, Chief Financial Officer, and Danish Qureshi, Chief Operating Officer. 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.lifestance.com
Good morning, everyone and welcome to the Lifetime Health fourth quarter 2023 earnings Conference call.
Monica Perkowski, Vice President of Investor Relations. Joining me today are Ken Burdick, Chief Executive Officer, Dave <unk>, Chief Financial Officer, and Donnish correct, She chief operating officer.
The earnings release and presentation before the market opened this morning.
These are available on the Investor Relations section of our website investor Lifespans Dot com.
Monica Prokocki: 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 filing. Today's remarks contain forward-looking statements, including statements about our financial performance outlook, business model, and strategy. Those statements involve risks, uncertainties, and other factors, as noted in our periodic filings with the FEC, that could cause actual results to differ materially.
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 disclaimer 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 business model and strategy. 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.
Monica Prokocki: 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 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 comparable period in the prior year. At this time, I'll turn the call over to Ken Burdick, CEO of Lifestance. Ken?
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 reconciliation to the most directly comparable GAAP measures is included in the earnings press release tables and presentation appendix.
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.
Kenneth Alan Burdick: Thanks, Monica, and thank you all for joining us today. I'd like to begin by highlighting what we stand for here at Vice. Every day, we are focused on three foundational pillars: the patient experience, clinical quality, and Developing an Inclusive, Purpose-Driven Culture. First.
Thanks, Monica and thank you all for joining us today.
I'd like to begin by highlighting what we stand for Garrett lifespan.
Every day, we are focused on three foundational pillars.
The patient experience.
<unk> quality and developing an inclusive purpose driven culture.
First.
Kenneth Alan Burdick: We're committed to putting the patient experience at the forefront of everything we do. Since the start of the pandemic, the country has experienced an alarming increase in the rates of anxiety and depression, as well as deaths resulting from overdose and suicide. More than 150 million people live in an area with a shortage of mental health professionals, and only 56% of psychiatrists accept commercial insurance. Tens of millions of Americans are unable to access mental health care treatment, with devastating effects on families and communities.
We are committed to putting the patient experience at the forefront of everything we do.
Since the start of the pandemic the country has experienced an alarming increase in the rates of anxiety and depression as well as guests, resulting from overdose suicide.
More than 150 million people living in an area, where the shortage of mental health professionals.
And only 56% of psychiatrist except commercial insurance.
Ken of millions of Americans are unable to access mental health care treatment with.
With devastating effects on families and communities.
Kenneth Alan Burdick: In 2023, Lifestance's team of over 6,600 clinicians helped address these access challenges by providing mental health services to over 880,000 patients who depend on our care. With our differentiated hybrid model of in-person and virtual visits, we meet patients where they are, by accepting insurance. We provide patients with affordable access to mental health care, whereas much of the market is cash-paid and therefore out of reach for the majority of Americans.
In 2023 life stances team of over 6600 clinicians.
Helped address these access challenges by providing mental health services to over 880000 patients.
Japan on our care.
With our differentiated hybrid model of in person and virtual visits we meet patients where they are.
By accepting insurance.
We provide patients with affordable access to mental health care.
Whereas much of the market is cash pay and therefore out of reach for the majority of Americans.
Kenneth Alan Burdick: The exceptional care provided by our clinicians is reflected in the feedback we receive from our patients. In 2023, Lifestance received a patient net promoter score of 82, and our average Google review score across all Lifestance centers stood at 4.5 out of 5 stars. As you will hear in our prepared remarks, we continue to focus on Enhancing the End-to-End Experience for Our Patients. Second, we're dedicated to clinical quality. Lifestance and our team of multidisciplinary clinicians are committed to providing patients with personalized, high-quality care with clinical integrity.
The exceptional care provided by our clinicians.
As reflected in the feedback we receive from our patients and.
In 2023 life stance received a patient net promoter score of 82.
And our average Google review score across all lifestyle centers.
A four five out of five stars.
As youll hear in our prepared remarks.
We continue to focus on enhancing the end to end experience for our patients.
Second we are dedicated to clinical quality.
Life staffs and our team of multi disciplinary clinicians are committed to providing patients with personalized high quality care with clinical integrity.
Kenneth Alan Burdick: We provide training programs for our clinicians and conduct clinical audits to conform with best practice guidelines, which also afford an opportunity for our clinical leaders to collaborate with and mentor our clinicians. Our focus is on delivering the most appropriate treatment for each patient's individual needs based on informed clinical judgment. [inaudible] as we enhance our capabilities around clinical quality. I am excited to announce the appointment of Dr. Gujwal Ramthakar as Chief Medical Officer. He joined Lifestance in January and is off to a great start. Ujwal is board-certified in pediatric and adult psychiatry and has held multiple senior clinical leadership roles in our industry. Last but not least,
We provide training programs for our clinicians and conduct clinical audits to conform with best practice guidelines.
Which also afforded opportunities for our clinical leaders.
Collaborate with Investor our clinicians.
Our focus is on delivering the most appropriate treatment for each patient's individual needs based on informed clinical judgment.
As we enhanced our capabilities around clinical quality I am excited to announce the appointment of Dr. <unk> as Chief Medical Officer.
He joined <unk> in January and is off to a great start.
Well as board certified in pediatric and adult psychiatry and.
And has held multiple senior clinical leadership roles.
Our industry.
Last but not least.
Kenneth Alan Burdick: We're evolving from an entrepreneurial company focused almost exclusively on growth to one that is more balanced and disciplined when it comes to prioritization and execution. And while we continue to grow as a company. We're also growing up to ensure that as a company we have the people, systems, processes, and culture to deliver on our mission at scale. As a leadership team, we are committed to developing a sustainable, inclusive, and purpose-driven culture that keeps our organization aligned with our vision, mission, and values.
We are evolving from an entrepreneurial company focused almost exclusively on growth.
To one that is more balanced and disciplined when it comes to prioritization and execution.
While we continue to grow as a company.
We are also growing up.
To ensure that as a company we have the people systems processes and culture to deliver on our mission at scale.
As a leadership team we are committed to developing a sustainable inclusive and purpose driven culture that keeps our organization aligned with our vision mission and values.
Kenneth Alan Burdick: 2024 represents the second year of our two-year plan to invest in the business, fortify our foundation, and standardize our operation. At the one-year mark, we're beginning to see some tangible benefits.
2024 represents the second year of our two year plan to invest in the business.
Fortify our foundation and standardize our operations.
At the one year, Mark we're beginning to see some tangible benefits first.
Kenneth Alan Burdick: We beat on all guided metrics for the full year 2023. This quarter represents the fifth consecutive quarter that Lifestance has met or exceeded expectations across all financial metrics. [inaudible] We are making solid progress on our three strategic investments. We remain on track to launch both our human resource information system and our new credentialing and clinician onboarding system by this summer. For the third initiative, the electronic health record, we completed the initial discovery process, where we identified incremental opportunities for improvement with our existing platform. For 2024, we are focused on those improvements and enhancing related processes. We will further evaluate our long-term VHR solution in 2025.
We beat on all guided metrics for the full year 2023.
This quarter represents the fifth consecutive quarter.
Life stance has met or exceeded expectations across all financial metrics second.
We are making solid progress on our three strategic investments.
We remain on track to launch both our human resource information system, and our new Credentialing and clinician Onboarding system by this summer.
For the third initiative the electronic health record, we completed the initial discovery process, where we identified incremental opportunities for improvement with our existing platform.
For 2024, we are focused on those improvements and enhancing related processes.
As a result, we will further evaluate our long term EHR solution in 2025.
Kenneth Alan Burdick: One example of the improvements we are making is a digital patient check-in tool that we believe will enhance the patient, clinician, and front office staff experience while reducing our administrative costs. While it is still early, we have seen encouraging results in our initial line, and Thurr We've become much more strategic when it comes to our payer strategy. In 2023, we terminated roughly 30% of our 440 payer contracts. In 2024, we will continue to evaluate our payer relationships and focus on aligning with payer partners who share our vision of expanding access to mental health care.
One example of the improvements we are making is a digital patient check in tool that we believe will enhance the patient clinician and front office staff experience, while reducing our administrative costs.
While it is still early we have seen encouraging results in our initial launch.
And third.
We've become much more strategic when it comes to our payer strategy.
In 2023, we terminated roughly 30% of our 440 payor contracts.
In 2024, we will continue to evaluate our payer relationships and focus on aligning with payer partners, who share our vision of expanding access to mental health care.
And finally.
Kenneth Alan Burdick: We continue to remain laser focused on profitability while making the near-term investments needed for the long-term success of the business. This was the first time in recent quarters where our revenue grew faster than our adjusted G&A. We expect operating leverage and margin expansion to be the norm. This year, we will continue to strengthen our operational processes by streamlining, standardizing, and automating end-to-end work. Well, we have made meaningful progress. However, there is plenty of work remaining to improve our operational and financial performance. Said differently, We have steadied the ship, but we have not yet come close to optimizing the potential of our business. With that, I'll turn it over to Dave to provide additional commentary on our fourth quarter and full year financial performance, as well as our 2024 guide. [inaudible] Thanks, Ken.
We continue to remain laser focused on profitability.
While making the near term investments needed for the long term success of the business.
This was the first time in recent quarters, where our revenue grew faster than our adjusted G&A.
Going forward.
We expect operating leverage and margin expansion to be the norm.
<unk>.
This year, we will continue to strengthen our operational processes.
Streamlining standardizing and automating end to end workflows.
While we have made meaningful progress.
There is plenty of work remaining to improve our operational and financial performance.
Said differently.
We have steadied the ship.
But we have not yet come close.
To optimizing the potential of our business.
With that I will.
I'll turn it over to Dave to provide additional commentary on our fourth quarter and full year financial performance as well as our 2024 guidance Dave.
Thanks, Ken.
David Patrick Bourdon: Like Ken, I'm pleased with the team's operational and financial performance in 2023, exceeding our expectations for the full year. In the fourth quarter, we achieved strong top-line results with revenue of $281 million, representing growth of 22% year over year, with outperformance in the quarter driven primarily by positive visit volumes as our clinicians delivered more visits during the holiday season than expected. Visit volumes of 1.8 million increased 20% year over year, primarily driven by organic clinician growth and modest productivity improvement. Total revenue per visit increased by 2% year-over-year to $157, primarily driven by payer rate increases.
Ken I am pleased with the team's operational and financial performance in 2023 exceeding our expectations for the full year.
In the fourth quarter, we achieved strong topline results with revenue of $281 million representing growth of 22% year over year.
With outperformance in the quarter, driven primarily by positive visit volumes as our clinicians delivered more visits during the holiday season than expected.
Visit volumes of $1 8 million incur.
Increased 20% year over year, primarily driven by organic clinician growth and modest productivity improvement.
Total revenue per visit increased by 2% year over year to $157 primarily.
Driven by payer rate increases.
David Patrick Bourdon: For the full year, we delivered revenue of $1,056,000,000, 23% year over year, regarding profitability. The better than expected top line results flowed through to center margin; center margin of $83 million in the quarter increased by 33% year over year, and full year center margin of $302 million grew 27% year over year. Adjusted EBITDA of $20 million in the quarter was strong and consistent with our expectation. Our fourth quarter adjusted EBITDA increased 99% year over year. For the full year, adjusted EBITDA was $59 million, representing 5.6% of revenue.
For the full year, we delivered revenue of $1.056 billion up 23% year over year.
Regarding profitability.
The better than expected topline results flowed through to center margin.
Center margin of $83 million in linked quarter increased by 33% year over year.
Full year center margin of $302 million grew 27% year over year.
Adjusted EBITDA of $20 million in the quarter was strong and consistent with our expectations.
Our fourth quarter, adjusted EBITDA increased 99% year over year.
For the full year, adjusted EBITDA was $59 million, representing five 6% of revenue.
David Patrick Bourdon: Turning to liquidity, in the fourth quarter, we generated a positive free cash flow of $5 million, and $17 million in cash from operating activities. These improvements in cash flow were driven by higher collection, with DSL improvement of 11 days from 52 in Q3 to 41 in Q4. Each one of these days represents approximately $3 million in cash. Each one of these days represents approximately $3 million in cash. As expected, DSO improved in Q4 as we released claims that we had intentionally held in Q3 due to positive updates from rate negotiations with several large payers. Free cash flow and cash from operating activities were negatively impacted in the quarter due to the shareholder litigation settlement.
Turning to liquidity in the fourth quarter, we generated positive free cash flow of $5 million and $17 million in cash from operating activities.
These improvements in cash flow were driven by higher collections with DSO improvement of 11 days from 52 in Q3 to <unk> 41 in Q4.
Each one of these days represents approximately $3 million in cash.
As expected DSO improved in Q4, as we released claims that we have intentionally held in Q3 due to positive updates from rate negotiations with several large payers.
Free cash flow and cash from operating activities were negatively impacted in the quarter due to the shareholder litigation settlement.
David Patrick Bourdon: As disclosed in an 8K filing earlier this month, we have now fulfilled our obligations related to this settlement, which we discussed in our last earnings call. This included intentionally accelerating into Q4 the final $25 million payment that was due in Q1. For the full year 2023, free cash flow was negative $57 million, which includes shareholder litigation expenses of approximately $50 million.
As disclosed in an 8-K filing earlier this month, we have now fulfilled our obligations related to this settlement, which we discussed in our last earnings call.
This included intentionally accelerating into Q4, the final $25 million payment that was due in Q1.
For the full year 2023 free cash flow was negative $57 million, which includes shareholder litigation expenses of approximately $50 million.
David Patrick Bourdon: We exited the quarter with $79 million in cash and net long-term debt of $280 million. We have additional debt capacity from a delayed draw term loan of $8 million, as well as a $50 million revolving debt facility, providing us with sufficient financial flexibility. In terms of our outlook for 2024, we expect full-year revenue of $1,190,000,000 to $1,240,000,000, center margin of $345 to $365 million, and Adjusted EBITDA of $80 to $90 million. Our annual guidance assumes year-over-year revenue growth driven primarily by higher visits from clinician growth combined with a low single-digit increase in total revenue per visit. Otherwise, we're assuming generally consistent operational performance year over year. Our guidance also contemplates a revenue split of roughly 50-50 in the first and second half of the year due to seasonality. Regarding earnings, as compared to 2023, where they were weighted to the second half, we expect this year's earnings to be more balanced throughout the year. This is due to the timing of investments and variation in rates, which is the result of pair rate changes and other mixed components like geography and services.
We exited the quarter with $79 million in cash and net long term debt of $280 million, we have additional debt capacity from a delayed draw term loan of $8 million as well as the $50 million revolving debt facility, providing us with sufficient.
Flexibility.
In terms of our outlook for 2024, we.
We expect full year revenue of $1 billion $190 million to $1.240 billion.
Center margin of $345 million to $365 million in.
And adjusted EBITDA of $80 million to $90 million.
Our annual guidance assumes year over year revenue growth driven primarily by higher visits from clinician growth combined with a low single digit increase in the total revenue per visit.
Otherwise, we're assuming generally consistent operational performance year over year.
Our guidance also contemplates a revenue split of roughly 50 50 in the first and second half of the year due to seasonality.
Regarding earnings as compared to 2023, where they were weighted to the second half. We expect this year's earnings to be more balanced throughout the year.
This is due to the timing of investments and.
And variation in rates, which are the result of payer rate changes and other mixed components like geography and services.
David Patrick Bourdon: For the first quarter, we expect revenue of $287 to $307 million, center margin of $81 to $93 million, and Adjusted EBITDA of $17-$23 million. Additionally, we expect stock-based compensation of approximately $80 to $95 million in 2024, including approximately $20 to $25 million from new 2024 grants. Consistent with our prior messaging on pausing M&A, we are not planning to pursue any acquisitions in 2024.
For the first quarter, we expect revenue of $287 million to $307 million.
Center margin of $81 million to $93 million and adjusted EBITDA of $17 million to $23 million.
Additionally, we expect stock based compensation of approximately $80 million to $95 million in 2024 <unk>.
Including approximately $20 million to $25 million.
From new 2020 for grants.
Consistent with our prior messaging on pausing M&A we.
We are not planning to pursue any acquisitions in 2024.
David Patrick Bourdon: I am excited to announce that we expect to achieve a company milestone by generating positive free cash flow for full year 2024. This will be driven by improved profitability and lower capital expenditures as we continue to strategically moderate the opening of De Novo Center. We expect leverage to come down significantly this year.
I am excited to announce that we expect to achieve a company milestone by generating positive free cash flow for full year 2024.
This will be driven by improved profitability and lower capital expenditures as we continue to strategically moderate the opening of de Novo centers.
We expect leverage to come down significantly this year anticipate net leverage to be below two five times by the end of the year.
David Patrick Bourdon: We anticipate net leverage to be below two and a half times by the end of the year. We continue to have sufficient financial capacity to run the business, and we do not intend to raise additional debt or equity in 2024 related to strategic initiatives. In 2023, we recognize a total of approximately $5.5 million of costs for the HRIS and credentialing and onboarding platform. Of this, $3 million were recognized as G&A expenses with the remainder in CAPEX.
We continue to have sufficient financial capacity to run the business and we do not intend to raise additional debt or equity in 2024.
Related to strategic initiatives in 2023, we recognized a total of approximately $5 5 million of costs for the HRS and Credentialing and Onboarding platform.
Of this $3 million were recognized as G&A expenses with the remainder in Capex.
David Patrick Bourdon: As Ken stated, for the EHR, we are focused on improving our existing platform and related processes in 2024, and therefore will not incur any costs in the current year. In closing, we are pleased with the progress we made in 2023, and we are confident as we look ahead to 2024. Now we'll turn it over to Danish to share the work done in 2023 and the priority areas for 2024 that will position us to achieve our commitment. Thanks, Dave.
As Ken stated for the EHR, we are focused on improving our existing platform and related processes in 2024, and therefore, we will not incur any costs in the current year.
In closing we are pleased with the progress we made in 2023 and we are confident as we look ahead to 2024 now.
Now I'll turn it over to Don ish to share the work done in 2023, and the priority areas for 2024 that will position us to achieve our commitments.
Thanks, Dave.
Danish J. Qureshi: We continue to align our teams around two growth priorities: Net Clinician Ads and Clinician Productivity. We grew by 227 net clinician ads in the fourth quarter and 1,014 for the full year, bringing our total clinicians to 6,645, an increase of 18% year over year. Importantly, our growth in Q4 remains 100% organic for the third consecutive quarter.
We continue to align our teams around to growth priorities net.
Net clinician adds and clinician productivity.
We grew by 227 net clinician adds in the fourth quarter and 1014 for the full year.
Bringing our total clinicians to 6645, an increase of 18% year over year.
Accordingly, our growth in Q4 remained 100% organic for the third consecutive quarter.
Danish J. Qureshi: Our clinician value proposition remains strong, and we are proud of our clinician recruiting and operations teams' great work in delivering clinician growth in 2023. Turn to Clinical Productivity For 2023, on a visits per average clinician basis, we saw productivity increase by 2%, driven by many of the operational actions we took throughout the year. As a reminder, productivity is a function of two components: clinician capacity, or the time clinicians give us, and utilization, our ability to fill that time with patients.
Our condition value proposition remains strong and we are proud of our clinician recruiting and operations teams great work in delivering clinician growth in 2023.
Turning to clinician productivity.
For 2023 on a visits per average clinician basis, we saw productivity increased by 2%.
Driven by many of the operational actions, we took throughout the year.
As a reminder, productivity is a function of two components clinician capacity or the time clinicians give us and utilization our ability to fill clinician time with patients.
Danish J. Qureshi: In 2023, we put our focus on utilization, delivering on our core commitment to our clinicians to fill their schedules by driving operational discipline throughout the patient's follow-up. At the top of the funnel, we made enhancements to our primary care referral team, organic search traffic, internal clinician referrals, and enterprise referral partnerships. These actions delivered improvements in attracting new patients above the growth of our clinician base. As demonstrated by our growing waitlist for services, I will note that our cost per new patient acquisition continues to decline year over year, and we spend a de minimis amount on paid advertising as part of our top of funnel strategy. Second, at the middle of the funnel, in terms of converting patients to scheduled appointments.
In 2023, we put our focus towards utilization.
Delivering on our core commitments of our clinicians to fill their schedules by driving operational discipline throughout the patient funnel.
At the top of the funnel, we made enhancements to our primary care referral team organic search traffic internal clinician referrals and enterprise referral partnerships.
The actions delivered improvements in attracting new patients above the growth of our clinician base demonstrated by our growing waitlist for services.
I will note that our cost per new patient acquisition continued to decline year over year, and we spend a de minimis amount on paid advertising as part of our top of funnel strategy.
Second at the middle of the funnel.
In terms of converting patients to scheduled appointments, we continue to leverage our digital capabilities to improve patient matching via our online booking experience Obi, which we rolled out nationwide.
Danish J. Qureshi: We continue to leverage our digital capabilities to improve patient matching via our online booking experience, OB, which we rolled out nationwide. Additionally, we enhance the patient experience with better online clinician profiles, reduced scheduling complexity, and enhancements to our phone intake processes, which is a key area for 2024. Finally, at the bottom of the funnel, in terms of scheduled appointments converting to completed visits, our cancellation and no-show rates have now stabilized in the 9 to 10 percent range, which is a significant improvement from this previous 15 percent level when we set this as the focus area for improvement.
Additionally, we enhanced the patient experience with better online clinician profiles reduced schedule and complexity and enhancements our phone intake processes, which is a key area for 2024.
Finally at the bottom of the funnel in terms of scheduled appointments converting two completed visits or cancellation in no show rates have now stabilized in the 9% to 10% range, which is a significant improvement from the previous 15% level. When we set this is the focus area for improvement.
Danish J. Qureshi: As we head into 2024, we are shifting our attention to the other side of the productivity equation, clinician capacity. We have early initiatives in place to grow overall clinician capacity with a goal to reward and incentivize those clinicians offering full-time hours. For example, we are using tiered benefits to provide incentives, such as medical coverage and a 401k match, to full-time clinicians. Additionally, our recruiting team is focused on attracting clinicians who desire full-time employment.
As we head into 2024, we are shifting our attention to the other side of the productivity equation clinician capacity.
We have early initiatives in place to grow overall clinician capacity with the goal to reward and incentivize those clinicians offering full time hours.
For example, we are using tiered benefits to provide incentives such as medical coverage and four one K match to fulltime clinicians.
Additionally, our recruiting team is focused on attracting clinicians who desire full time employment and finally, we offer equity ownership through our long term incentive program to attract and retain our highest contributing clinicians.
Danish J. Qureshi: And finally, we offer equity ownership through our long-term incentive program to attract and retain our highest contributing clinicians. In addition to improving clinician productivity, we made notable strides in other areas during the past year. First, in terms of leadership, we reorganized and upgraded our practice operations senior leadership team.
In addition to improving clinician productivity, we made notable strides in other areas during the past year.
First in terms of leadership, we reorganized and upgraded our practice operations senior leadership team.
Danish J. Qureshi: We made significant changes, streamlining the number of senior leaders, promoting top performers, and bringing in new external talent with the appropriate skill sets to guide an organization of Lifestance's current and future scale. Second, in terms of KPIs, we reoriented our operations teams around a metrics-driven approach to managing the business and instituted a new reporting suite of KPIs to bring focus, prioritization, and data-driven decision-making to the organization while continuing to emphasize the patient and clinician experience. Third, in terms of culture, we centered the company around supporting local operations and clinician needs while emphasizing belonging and connection. For example, we prioritize increased teammate engagement via social gatherings, recognition and appreciation, and participation in community volunteer events. Fourth, in terms of cost efficiency, we completed our real estate optimization project.
We made significant changes streamlining the number of senior leaders promoting top performers and bringing in new external talent with the appropriate skill sets. The guide an organization of life stances current and future scale.
Second in terms of Kpis, we reoriented our operations teams around the metrics driven approach to managing the business.
And instituted a new reporting suite of Kpis to bring focus prioritization and data driven decision, making to the organization, while continuing to emphasize the patient and clinician experience.
Third in terms of culture, we restructured the company around supporting local operations and clinician needs, while emphasizing belonging and connection for.
For example, we prioritize increased teammate engagement via social gatherings recognition and appreciation and purchase of patients and community volunteer events.
Fourth in terms of cost efficiency, we completed our real estate optimization project.
Danish J. Qureshi: In total, we consolidated 82 centers in 2023 with little to no disruption to our patients and clinicians. We opened 35 DeNovo centers and will continue to intentionally moderate our pace of openings with an expectation of no more than 20 DeNovos in 2024. Finally, we made tangible progress in standardizing and streamlining the business, including moving to a single EHR, phone system, KPI suite, and online booking tool, as well as creating a single operating model for our regional support teams. Looking ahead to 2024, there is no shortage of opportunities for improvement, with many new initiatives unlocked by the work done in 2023. Delivering an amazing patient and clinician experience remains a top priority for us. I'd like to take a moment to discuss three tangible examples of how we are going to do this while also generating operating leverage.
In total we consolidated 82 centers in 2023 with little to no disruption to our patients and clinicians.
We opened 35 de Novo centers and will continue to intentionally moderate our pace of openings with an expectation of no more than <unk> in 2024.
Finally, we made tangible progress in standardizing and streamlining the business, including moving to a single EHR phone system, Kpis suite and online booking tool as well as creating a single operating model for our regional support teams.
Looking ahead to 2024, there is no shortage of opportunities for improvement with many new initiatives unlocked by the work done in 2023.
Delivering an amazing patient and clinician experience remains a top priority for us.
I'd like to take a moment to discuss three tangible examples of how we are going to do this while also generating operating leverage.
Danish J. Qureshi: First, we are continuing to invest in the front office of our centers, focusing our resources on those areas of support that most directly impact the experience of our patients and clinicians. We are increasing our center staffing levels by over 25% by year end and redesigning our processes to better support our patients, clinicians, and administrative support teams. Second, we are making improvements for new patients booking by the phone. We are rolling out a new phone booking tool that leverages the matching capabilities of OB, our online booking tool.
First we are continuing to invest in the front office of our centers focusing our resources on those areas of support that most directly impact the experience of our patients and clinicians.
We are increasing our center staffing levels over 25% by year end and redesigning our processes to better support our patients clinicians and administrative support teams.
Second we are making improvements for new patients booking by the phone.
We are rolling out a new phone booking tool that leverages, the matching capabilities of Ob our online booking tool.
This will further enhance the patient matching experience, while significantly reducing complexity and increasing the speed of scheduling over the phone for in 2014.
Danish J. Qureshi: This will further enhance the patient matching experience while significantly reducing the complexity and increasing the speed of scheduling over the phone for our intake team. Third, we are piloting a new digital patient check-in tool that will allow us to collect and verify patient information up front, as well as allow patients to pay their balances more easily. This will reduce stress for our patients and manual complexity for our operations and billing teams. We are doing all three of these things while also meeting our commitments to margin expansion in 2024, demonstrating that delivering improved patient and clinician experiences while also delivering improved operating leverage can be accomplished simultaneously. I'm proud of what our teams have accomplished over the past year, and I'm equally excited about the opportunities in front of us in 2024 and beyond. I'm also particularly proud of the strength of the leadership bench that we have built, which delivered on our commitments for the full year 2023 and will be instrumental in leading the long-term profitable growth of the business. With that, I'll turn it back to Ken for his closing remarks. Thanks, Danish.
Third we are piloting a new digital patient checking tool that will allow us to collect and verify patient information upfront as well as allow patients to pay their balances more easily.
This will reduce stress for our patients and manual complexity for our operations and billing team.
We are doing all three of these things while also meeting our commitments to margin expansion in 2020 for demonstrating that delivering improved patient and clinician experiences. While also delivering improved operating leverage can be accomplished simultaneously.
I am proud of what our teams have accomplished over the past year and I'm equally excited about the opportunities in front of us in 2024 and beyond.
I'm also particularly proud of the strength of the leadership bench that we have built which delivered on our commitments for the full year 2023 and will be instrumental in leading the long term profitable growth of the business.
With that I'll turn it back to Ken for his closing remarks.
Thanks Dennis.
In closing I am encouraged by the progress made in 2023.
We remain focused on operational improvements profitable growth.
And disciplined capital deployment.
Our 2024 guidance reflects the strong positive momentum of the organization and.
And we look forward to continuing to invest in the patient and clinician experience while at the same time delivering margin expansion.
In particular I am thrilled.
We expect to achieve the important milestone of positive free cash flow for 2024.
Kenneth Alan Burdick: In closing, I am encouraged by the progress made in 2023. We remain focused on operational improvements, profitable growth, and disciplined capital deployment. Our 2024 guidance reflects the strong positive momentum of the organization, and we look forward to continuing to invest in the patient and clinician experience while at the same time delivering margin expansion. In particular, I am thrilled that we expect to achieve the important milestone of positive pre-cash flow in 2024.
Along with Dave and Don ish I offer my thanks, and appreciation to our 9000.
500 colleagues, who demonstrate their dedication to our vision mission and values and the work they do every day.
It is due to their collective efforts that we have made significant strides toward realizing life stances potential.
Operator, please open up the line for Q&A.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
That you please limit yourself to one question and one follow up to allow everyone an opportunity to ask a question.
Operator: Along with Dave and Danish, I offer my thanks and appreciation to our $9,500 staff who demonstrate their dedication to our vision, mission, and values in the work they do every day. It is due to their collective efforts that we have made significant strides toward realizing lifestance potential. Operator, please open up the line for Q&A. Thank you. At this time, I would like to remind everyone that in order to ask a question, press star, then number one on your telephone keypad.
We'll go first to Craig hat Mark at Morgan Stanley.
Great. Thank you Ken despite the comments of the crew track record that you've seen in the last five quarters.
Some noise out there in terms of clinician turnover and growth. So I'd love to get your take in terms of things you've done to kind of steady the ship.
And expectations going forward on those metrics.
Sure.
<unk> bought to the clinician turnover.
Operator: We ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask a question. We'll go first to Craig Hettenbach at Morgan Stanley. Great, thank you.
Generally what I would say is.
Well, obviously, we posted a strong fourth quarter and.
Yes.
As Don as Dave and I have all said in our prepared remarks.
Plenty of work.
That remains to do.
Kenneth Alan Burdick: Ken, despite the comments about the improved track record that you've seen in the last five quarters, there's still some noise out there in terms of clinician turnover and growth, so I'd love to get your take in terms of things you've done to kind of steady the ship and expectations going forward on those metrics. I'm going to let Danish respond to the clinician turnover. Generally, what I would say is, Obviously, we've posted a strong fourth quarter and, As Danish, Dave, and I have all said in our prepared remarks, and there's plenty of work that remains to do, and Allah Dhanush. Perhaps elaborate on some of his comments as it relates to clinician growth and retention. Sure. Hey Craig,
I'll, let Don ish.
Perhaps I'll elaborate on some of his comments as it relates to clinician growth and retention.
Sure Hey, Craig.
In terms of clinician retention it continues to remain stable.
When does that throughout 2023 and feel really good about what we've been able to accomplish there, but as I indicated in my prepared remarks, we are continuing to focus on enhancing our value proposition to our clinicians.
Through the way that we're investing in the practice group things like I mentioned around increasing our front office staffing to have a very tangible and.
In direct feeling of support for conditions across the country as one specific example.
Danish J. Qureshi: So in terms of clinician retention, it continues to remain stable. We have witnessed that throughout 2023 and feel really good about what we've been able to accomplish there. But, as I indicated in my prepared remarks, we are continuing to focus on enhancing our value proposition to our clinicians through the way that we are investing in the practice group. Things like I mentioned around increasing our front office staffing to have a very tangible and direct feeling of support for our clinicians across the country is one specific example. But, as indicated by our net clinician ads of over a thousand, which we're very proud of, our ability to both attract and We continue to be able to do that despite moving to what has essentially been for the last three quarters 100% organic and delivered net clinician ads above 2022 while moving towards a 100% organic strategy. So all in all, we feel great about where we're at today. Thank you guys, and this is all the questions for today. Foundation. Foundation, and a number of others. Who did you hear of for Tanquilut?
But as indicated by our net clinician to add over 1000, which we're very proud of.
Our ability to both attract and retain conditions remained strong.
We continue to be able to do that despite move into what is essentially been for the last three quarters of 100% organic.
Delivered.
Acquisition adds above the 2022, while moving towards a 100% organic strategy. So all in all we feel great about where we're at today.
Got it.
Great.
It's a pretty consolidated.
Take care Foundation, and a number of things.
And play.
<unk> in particular is there any single out in terms of activity in core strategic deliver operating leverage and then maybe as you go into 2025 and look the same or different.
Different things.
On the call.
Craig It's Dave I think I got to just of your question, which was focused on operating leverage you were you were cutting out.
Pretty bad.
Far as the operating leverage yes, we're guiding to.
Improvements in operating leverage in 2020 for one of the ways. We're doing that is is if you. If you look at our Q1 guide and our full year guide on G&A, it's pretty flat throughout the year and we are exploring that as in the first quarter youre going to get a pop up in G&A as a result of the resumption of <unk>.
Unknown Speaker: Liver. Operating. Live. Bye. Craig, it's Dave.
David Patrick Bourdon: I think I got the gist of your question, which was focused on operating leverage you were cutting out pretty badly. As far as operating leverage is concerned, yes, we're guiding to improvements in operating leverage in 2024. I mean, one of the ways we're doing that is if you look at our Q1 guide and our full year guide on GNA, it's pretty flat throughout the year. And the way I explain that is in the first quarter, you're going to get a pop-up in GNA as a result of the resumption of payroll taxes. And then as that goes away in the subsequent quarters, it's being replaced by some of the investments that Don has talked about, such as the digital check-in tool and things like that.
Payroll taxes and.
And then as that goes away in the subsequent quarters, it's being replaced by the.
The investments that Dan has talked about digital check in tool.
And things like that but having said that we're able to keep G&A spend relatively flat because of the efficiencies that we've been we've been working on as we have been strengthening and fortifying the business. So we feel feel really good about the margin expansion that we're seeing both in the bottom.
Line as well as in center margin for 2024.
Okay.
Okay. Thanks for that.
We will move to our next question is from Lisa Gill at Jpmorgan.
Alcon core lab for mining.
Ken I was wondering if you could give us an update on where you are on the managed care payer contracting strategy.
David Patrick Bourdon: But having said that, we're able to keep G&A spent relatively flat because of the efficiencies that we've been working on as we've been strengthening and fortifying the business. So we feel really good about the margin expansion that we're seeing both in the bottom line as well as in center margin for 2024. Thanks for that. We'll move to our next question from Lisa Gill at JP Morgan. Thanks very much, and good morning.
How much of it is what can be done here in 2024, and then when I look at the revenue <unk> I think you talked about rates getting better and that the fourth quarter on and holding some claims until the fourth quarter. How do we think about that progression of revenue per clinician going on too.
2024.
Sure. Thanks, I'll take the first part of that and let <unk> speak to the revenue per clinician, our payer strategy really is going to continue.
The work that we started in 2023 wishes.
Kenneth Alan Burdick: Ken, I was wondering if you could give us an update on where you are on the managed care payer contracting strategy. How much is left to be done here in 2024? And then when I look at revenue per clinician, I think you talked about rates getting better in the fourth quarter and holding some claims until the fourth quarter. What do I think about that progression of revenue per clinician going into 2024? Sure, Lisa, I'll take the first part of that and let Danish speak to revenue per clinician. Our payer strategy really is going to continue the work that we started in 2023, which is, I was very surprised to see the number of payer contracts we have. It was well in excess of 400.
All right.
I was very surprised to see the number of Payor contracts, we had it was well in excess of 400.
Reduced that by about 30% last year.
We will do an additional reduction this year.
Probably not quite as large but.
I think what's most important is <unk>.
Sharon the underlying rationale of why we're doing it so when we think about our payer contracts first and foremost we found that we had many many where there was such a little volume it just didn't make sense.
Administratively to maintain the work to reload the rates to do the Credentialing et cetera. So that's an important beyond volume we look at the administrative terms that we have with a payer and looked.
Look to try to make them.
Our simple and straightforward and not overly complex and owners. We also look at whether or not we have delegated credentialing. Because we have found there is a dramatic reduction in the time it takes to onboard a clinician when they grant us delegation.
Kenneth Alan Burdick: We reduced that by about 30% last year. We will do an additional reduction this year, probably not quite as large, but I think what's most important is sharing the underlying rationale for why we're doing it. So when we think about our payer contracts, first and foremost, we found that we had many, many where there was such little volume. It just didn't make sense.
And then the last two things are we certainly look at the reimbursement that we're paid and their desire and willingness to partner with us with strategic initiatives, such as value based care and integrated care between physical physical and mental health.
Kenneth Alan Burdick: Administratively, to maintain the work, to reload the rates, to do the credentialing, etc., so that's important. Beyond volume, we look at the administrative Terms that we have with a payer and look to try to make them simple and straightforward and not overly complex and onerous. We also look at whether or not we have delegated credentialing because we have found there's a dramatic reduction in the time it takes to onboard a clinician when they grant us delegation. And then the last two things are, we certainly look at the reimbursement that we're paid and their desire and willingness to partner with us on strategic initiatives such as value-based care and integrated care between physical and mental health. At least this is Dave, I'll take your kind of TRPV growth question.
At least this is Dave I'll take that the TRP. The growth question. So in the fourth quarter. As you noted we had a material step up in our <unk>.
And our rates are or the revenue we were collecting per clinician.
The <unk>.
Primary drivers of our TRP vision improvement in the fourth quarter were driven by the higher increase in the higher margin higher revenue services, we've talked about.
Neuroscience testing and services like that.
In addition, we did get some nice increases in per payer rates in the fourth quarter and how do you think about that as largely we were getting increases for 2024 and just a few months a few months earlier. So that's what drove the increase in the <unk>.
Total rate per visit in the fourth quarter.
Kenneth Alan Burdick: So in the fourth quarter, as you noted, we had a material step up in our in our rates or, you know, the revenue we were collecting per clinician. The primary drivers of a TRPV improvement in the fourth quarter were driven by an increase in higher margin, higher revenue services. We've talked about neuropsych testing and services like that.
You mentioned the holding of claims that was more of a cash phenomenon.
That impacted our cash we were still booking.
Appropriate levels of revenue, so that didnt impact our TRP EV. It was really more of an impact on DSO and as you noted we did release those claims and you saw TRP or you saw DSO come down significantly in the fourth quarter as we expected.
David Patrick Bourdon: In addition, we did get some nice increases in payer rates in the fourth quarter. I'd have you think about that as largely we were getting increases for 2024 just a few months earlier. That's what drove the increase in the total rate per visit in the fourth quarter. You mentioned the holding of claims. That was more of a cash phenomenon.
And if I can just squeeze in a quick follow up.
You talked about full time employees in any capacity opportunity. There can you talk about how many of your clinicians are full time today and with the ultimate goal would be.
Yes.
So.
David Patrick Bourdon: That impacted our cash, but we were still booking to appropriate levels of revenue, so that didn't impact our TRPV.
Our long term goal is to always make sure that we.
We're creating an environment, where clinicians feel like they can dedicate their fall caseload and time to life and we continue to enhance our benefits create incentives and rewards for clinicians to do that however.
Danish J. Qureshi: It was really more an impact on DSO. As you noted, we did release those claims. You saw DSO come down significantly in the fourth quarter as we, And if I can just squeeze in a quick follow-up, you talked about full-time employees and the capacity opportunity there. Can you talk about how many of your clinicians are full-time today? And what the ultimate goal would be? Yes, this is Danish.
We do have both clinicians that are providing would you consider on a full time at the higher end of ours and we have ones that are more part time and our value proposition to differentiate each continues to resonate for both.
Danish J. Qureshi: So, our long-term goal is to always make sure that we're creating an environment where clinicians feel like they can dedicate their full caseload and time to Lifestance, and we continue to enhance our benefits, and create incentives and rewards for clinicians to do that. However, we do have both clinicians that are providing what you consider a full-time and a higher end of hours, and we have ones that are more part-time, and our value proposition, though different for each, continues to resonate for both. The point in our prepared remarks was that we continue to focus our energies around incentivizing and rewarding clinicians to really build their careers here and have this be their primary or only source of income. Okay, thanks for the comment. We'll go next to Ryan Daniels at William Blair. Yeah, hey guys, this is Jack Senft. I'm for Ryan Daniels.
The point in our prepared remarks was that we continue to focus our energies around incentivizing and rewarding conditions to build.
Build their careers here and have this be.
They are primarily or only source.
Any comments.
Okay. Thanks for the comments.
We will go next to Ryan Daniels at William Blair.
Yeah, Hey, guys. This is Jack on for Ryan Daniels, Congrats on the quarter and thanks for taking the question just for a clarification for 2024, I know you aren't expecting to open more than 20 clinic.
I guess, just what is your expectation for consolidating clinics. This year are you completely pass that hurdle now or is this kind of an ongoing.
Situations.
Yeah, Hey, this is down so I can talk about that so again as we mentioned in the prepared remarks, we consolidated 82 centers in 2023 at this point kind of a broad scale consolidation.
Danish J. Qureshi: Congratulations on the quarter. And thanks for taking the question. Just for clarification on 2024. I know you aren't expecting to open more than 20 clinics. I guess just what is your expectation for consolidating clinics this year? Are you completely past that hurdle now? Or is this kind of an ongoing situation?
Consider complete and behind us on a go forward basis as leases come up for renewal every year, we will continue to evaluate each and renew or close as it makes sense, but it will not be a large scale effort like what we saw in 2023.
Danish J. Qureshi: Yeah, hey, this is Danish, so I can talk about that. So, again, as we mentioned in the prepared remarks, we consolidated 82 centers in 2023. At this point, kind of a broad-scale consolidation like that would consider complete and behind us on a go forward basis, as leases come up for renewal every year, we will continue to evaluate each and renew or close, as it makes sense, but it will not be on a large scale. I would note that in-person continues to be a very important part of our overall hybrid strategy and is a significant differentiator for us versus others that are out Okay, perfect.
Will.
Drive further optimization, primarily through a moderating the pace of our de Novo then.
Placing build in markets, where in person demand continues to increase beyond the footprint, we have in any of those markets as well as building further commission density within the existing 575 centers that we have today.
I would note that in.
In person.
<unk> to be a very important part of our overall hybrid strategy and is a significant differentiator for <unk> versus <unk>.
Others that are out there.
And we continue to build.
I believe firmly in the hybrid model and that we are done.
The large lift and optimizing our footprint in 2023.
Okay perfect. Thanks, a quick follow up to Lisa's question.
Danish J. Qureshi: Thanks. As a quick follow-up to Lisa's question, in the preparative mark, you did mention shifting your focus towards clinician capacity, you know, that you want to reward and incentivize clinicians offering full time hours. Can you just dive a bit deeper on this a little bit more?
In the prepared remarks, you did mention the shifting your focus towards clinician capacity.
You want to reward and incentivize clinicians offering full time off of our hours can you just have a bit deeper on this a little bit more our clinicians coming from private practices or competitors desiring. These type of benefits more or is there anything you've learned with incoming hires.
Danish J. Qureshi: Are clinicians coming from private practices or, you know, competitors desiring these types of benefits more? Or, you know, is there anything you've learned with incoming hires that you can kind of talk about with these incentives? Sure. Yeah, this is Josh.
You can kind of talk about with.
These incentives.
Sure Yes.
So I can talk to that so.
Yes, as we look at where we attract clinicians tends to fall into three areas. One is conditions that are looking for improved lifestyle.
Danish J. Qureshi: I can cover that. So, as we look at where we attract clinicians, it tends to fall into three areas. One is clinicians that are looking for an improved lifestyle and are moving away from the typical inpatient positions or hospital-based positions that would have a case load, and they are looking to have benefits as part of that transition because that's typically what they're receiving in the other environment. The other area you see is new grads coming out of training that are looking for someone that can provide overall employment inclusive of benefits as they begin to start their careers. And then there are clinicians that are coming either out of solo practice or other small group practices that are typically 1099 in nature and do not offer benefits.
And are moving away from.
But typically inpatient physicians our hospital based physicians with heavy case loads.
And they are looking to have benefits.
Part of that transition because thats typically what the receiving of the other environment.
Other areas you see as new grads coming out of training that are looking.
Or to start their careers.
We're looking for someone that can provide overall employee models and inclusive of benefits as they.
Begins to start operating.
A practicing clinician and then the third.
Clinicians that are coming either out of solo practice or other small group practices that are typically 10 $99 in nature.
Do not offer benefits and so particularly for that group, but across all three it resonates, but particularly for that group of clinicians.
Danish J. Qureshi: And so, particularly for that group, though across all three it resonates, but particularly for that group of clinicians, being able to incentivize and reward them through benefits like healthcare, 401k match, etc., is something that is unique that we offer and continues to be a differentiator for our value proposition. We'll take our next question from Kevin Caliendo at UBS. Thank you very much. This is actually Dylan Finleon playing for Kevin Caliendo.
Being able to incentivize and reward blend to benefits like health care for all and can't match et cetera is something that is unique.
That we offer and continue to be a differentiator for our value proposition.
We'll take our next question from Kevin Caliendo at UBS.
Thank you very much this is actually diligently on for Kevin Caliendo.
Unknown Speaker: As you guys are, you know, approaching 25 and your prior comments on exiting that year with double-digit margins, I guess, first of all, is this still a reasonable objective as of today? And then, secondly, based on the improvement indicated in 24, it seems like 25 might... The year was a little more of a heavier lift.
As you guys are approaching 25 and your prior comments on exiting that year with double digit margins.
I guess first of all is this still a REIT.
Usable.
Objective as of today, and then secondly, based off the improvements indicated in 'twenty four it seems like 25.
Yeah. It was a little more of a heavier lift and just wondering if you could break out.
Unknown Speaker: And I was wondering if you could break out the sources of that margin expansion. Does that contemplate further center margin improvement versus a reduction in certain operating expenses? Thank you. Yes, we look at the guidance for 24 and our previous comments relative to exiting 25 at double-digit margins. I would describe this as right on track. As we've said in the past, it wouldn't necessarily be completely linear.
The sources of that margin expansion.
Does that contemplate further center margin improvement versus the reduction in certain operating expenses. Thank you.
Okay.
Yes, we look at the guidance for 'twenty for in our previous comments relative to exiting 'twenty five at double digit margins I would describe this is right on track.
We've said in the past it wouldn't necessarily be completely linear.
Unknown Speaker: We're really pleased that as compared to our sort of long-term comments, where we were projecting and committing to free cash flow for full year 2025, in this call this morning, we're announcing that a year early, such that in 2024, we are now expecting a full year that will generate 3,000. Great. Thank you. No fault.
Linear.
And.
We're really pleased that as compared to our sort of.
Long term comments.
Where we were.
Projecting and committing to free cash flow for full year 2025.
In this call. This morning, we're announcing that a year early.
2024, we are now expecting a full year.
We will generate free cash.
Great. Thank you my follow ups from me.
Unknown Speaker: We'll move to our next question from Brian Tanquilut at Jeff. Hey, good morning, guys. Maybe just to Danish's point on increasing incentive offers to clinicians, how should we be thinking about the impact of that unnecessarily? Unknown Speaker, on SLEB.
We will move to our next question from Brian tackle it at.
Jeffrey.
Hey, good morning, guys.
Just Dennis just point on increasing incentives.
Offers clinicians how should we be thinking about the impact of that unnecessarily.
Zero that out.
Unknown Speaker: We didn't catch the last part of your question. Yeah, just the impact of rolling out a new incentive program on the salaries, wages, and benefits line. Oh, so this won't be a new benefits program.
As the OLED.
We did not get that last part of your question.
Yes.
The impact of rolling out a new incentive program under salaries wages and benefits line.
So this will be a new benefits program. This is just simply shaping b.
Danish J. Qureshi: This is just simply shaping the overall benefits program that we administer to help lean heavier towards incentivizing clinicians that are offering full-time hours versus those that remain part-time or very part-time. So there's not a growth in the overall cost structure as it relates to the benefits, just again, shaping how we align that between part-time and full-time.
The overall benefits program that we administered to help.
Lean heavier towards incentivizing clinicians that are.
Offering full time hours versus those that remain are part time or.
Barry part time, so there is not a.
Our growth in the overall cost structure as it relates to.
So benefits just again to the shaping of how we are.
Aligning that between part time and full time clinicians.
Kenneth Alan Burdick: Okay. And then maybe Ken, just any thoughts that you can share with us on the fundamental trends within behavioral health and your patient population, because as we look at your growth rate, right? I mean, you've seen it in the high teens, the low 20% range, just your thoughts on the sustainability of that level of volume growth, especially given the backdrop that we see in the mental health space. Thanks.
Got it Okay and then maybe you can just any thoughts that you can share with us.
Your view on the fundamental trends within behavioral health and your patient population because as we look at your growth rate right.
In the high teens to low 20% range.
Your thoughts on the sustainability of that level of volume growth, especially given the backdrop that we see in the mental health space.
Kenneth Alan Burdick: Yeah, certainly on a macro basis, the demand for outpatient mental health services has not subsided at all. So we have a very significant long-term, [inaudible] Specifically to Lifestance, obviously, as we continue to go larger and larger, the days of 75% and 100% year-over-year growth are behind us. We continue to feel strong conviction around our estimates around mid-team organic growth that, obviously, when we go back to pursuing acquisitions, that will drive it beyond the mid teens. So we think there's plenty of opportunity for continued growth in the business even as we sort of double down and focus on margin expansion and profitability and efficient capital deployment. Awesome, Thank you.
Yes, certainly on a macro basis the demand for outpatient mental health services has not subsided at all.
So we have a very significant long term.
Tailwind there.
Specifically for light stats, obviously as we continue to grow larger and larger the days of 75% to 100% year over year growth are behind us.
We continue to field strong conviction around our.
Our estimates around mid teen organic growth and then <unk>.
When we do.
Go back to pursuing.
Acquisitions that will drive it beyond the mid teens. So we think there's plenty of opportunity for continued growth in the business even ads.
And then sort of double down and focus on margin expansion and profitability and efficient capital deployment.
Awesome. Thank you.
Danish J. Qureshi: We'll move next to Stephanie Davis at Barclays. Hey guys, I'm Garrison LaCroix, and thanks for taking my questions. First, Danish, we've seen some pretty rapidly changing trends over the past few years around patient acquisition, efficiency, and cost, so I was hoping we could dig in a little more to that patient acquisition strategy you touched on in your comments. Talk to me about the top of the funnel versus the middle of the funnel versus the bottom of the funnel and kind of how much mind share each is taking and maybe what areas you could be focusing less on versus some of the Sure, Stephanie.
We'll move next to Stephanie Davis at Barclays.
Hello, Washington gas Macquarie and thanks for taking my question.
First and as we've seen some pretty rapidly changing trend in the past.
Patient acquisition efficiency and cost so I was hoping to get a little more to that patient acquisition strategy and touch on your comments.
Talk to me about top of funnel versus middle funnel, the bottom of funnel and kind of how much mind share aegis, taking and maybe what areas you could be focusing less on <unk> versus prior years.
Sure Stephanie Thanks for the question so as.
Danish J. Qureshi: Thanks for the question. As I mentioned in our prepared remarks, you know, we continue to be focused on all three, the top, middle, and bottom of the funnel. However, as I think back to 2023, a considerable amount of our effort went into improvements in the bottom of the funnel, which we talked about each quarter in the improvements we saw in our no-show and cancellation rates by approximately five to six points over the kind of year plus that we've been talking about that. And so though there remains some additional opportunity there over time, I largely view the work in optimizing the bottom of the funnel as complete and stable. And so we will continue to shift our attention towards, particularly the middle of the funnel, where we are improving our matching capabilities both online through the rollout of OB and through improving our phone intake and matching experience by leveraging a lot of the capabilities first developed for OB.
As I mentioned in our prepared remarks.
We continue to be focused on all three top middle and bottom of the funnel. However, as I think back to 2023.
Suitable amount of our effort went into.
Improvements in the bottom of the funnel, which we.
<unk> talked about each quarter in the improvements we saw in our no show in cancellation rates by approximately five to six points over the kind of year plus that we've been talking about that and so though there remains some additional opportunity there over time largely view.
The work in optimizing the bottom of the funnel as complete and stable and so we will continue to shift our attention towards Patil.
Particularly the middle of the funnel, where we are improving our matching capabilities both online through the rollout of Ob and through improving.
Our phone intake and matching experience by leveraging a lot of big capabilities <unk> developed for Ob.
Danish J. Qureshi: And then at the top of the funnel, though it will always be a focus, we have been able to demonstrate not just patient acquisition in terms of volume above the pace of growth of our clinician base, but we've also been able to deliver that while bringing down the cost of acquisition for each new visit over time. And so it will, by the nature of the business, require us to remain focused there, but, over the last year, and what we would expect, at least for 2024, and likely beyond, patient demand will continue to outstrip supply. So an area of focus, but the middle of the funnel between the three is going to be the most focused on area for 2024.
And then top of the funnel.
So it will always be a focus we have been able to demonstrate.
Not just pace.
Patient acquisition in terms of volume above the.
The pace of growth of our clinician base.
But we use also been able to deliver that while bringing down the cost.
Of acquisition for each new visits over time.
And so it will by the nature of the business requirements remain focused there but.
Over the last year, and what we would view at least for 2024 and beat.
Likely beyond this patient demand will continue to outstrip supply.
So an area of focus but middle of the funnel between the three is going to be the.
The most.
Focus on area for 2024.
Danish J. Qureshi: And when I think about the forward and Acquisition Strategy. Is this something where it's being tweaked and you're making some of these, you know, last year was bottom of the funnel, now you're doing middle and top of the funnel more, and then it's kind of a more stable process in the out years? Or is this something that has to be continuously improved?
And when I think about the <unk>.
Our extra paying attention acquisition strategy is this something where it's been tweaking and Nathan Sandeep last year was bought in the final <unk> metal top of funnel more and then it's kind of a more stable process in the out years or is this something that has to be continuously improved upon.
Danish J. Qureshi: I mean, I view anything as you continue to scale as a business that you are forever optimizing. And so whether there's significant, whether there's significant room for improvement over a longer trajectory will remain to be seen. But I mean, we will always be optimizing around the edges for both top, middle, and bottom of the funnel.
I mean, I view anything as you continue to scale as the business that you're you're forever optimizing and so.
Whether there are significant whether there is significant room for improvement.
Over a longer trajectory will remain to be seen but I mean, we will always be.
Optimizing around the edges for both top middle and bottom of the funnel.
Kenneth Alan Burdick: But at least as it pertains to the bottom, the heavy lift is done. I think 24 will be a focus in the middle of the funnel. And then, at that point, just optimization as the business continues to scale over the coming years. I'll just add that I think one of the most powerful things that Don has shared in his remarks. The extent to which we are able to rely on referrals from physicians and such that are paid advertising to acquire new patients is quite. Super helpful.
But at least as it pertains to the bottom of the heavy lifting is done I think 24 will be middle of the funnel focus and then at that point just optimization as the business continues to scale over the coming years.
I'll just add that I think one of the most powerful things.
Donna shared in his remarks.
The extent to which we are able to rely on referrals from physicians and such that are paid advertising to acquire.
New patients as well.
Quite.
Tiny frankly compared to some others in our space.
Unknown Speaker: Thank you, guys. And there are no further questions at this time. I would like to turn the conference over to Ken Burdick for closing remarks. Thank you.
Okay very helpful. Thank you guys.
And there are no further questions at this time I would like to turn the conference over to Ken Burdick for closing remarks.
Thank you.
Kenneth Alan Burdick: As I've shared previously, the founders of Lifestance designed a great model, achieved exceptional growth, and have given newcomers like myself and Dave an opportunity to evolve and scale a great business. But I want to remind everyone we are still in the early stages. We are a young business. We have grown through both acquisition, acquiring approximately 100 acquired independent practices, and thousands of clinicians hired one by one.
Shared previously the founders of lifespans designed a great model achieved exceptional growth on a given newcomers like myself and Dave an opportunity.
<unk> scale, a great business.
I want to remind everyone. We are still in the early stages. We are a young business. We have grown through both acquisition approximately 100 acquired independent practices on thousands of clinicians higher.
One by one.
Kenneth Alan Burdick: And as we continue to emphasize these phrases like operational improvement and plenty of work to do, I want you to understand that is not false humility. That is a realistic acknowledgement of where we are on our multi-year journey. We have more work to do. We continue to improve our focus on execution, prioritization, and standardization so that we can run a more efficient business. Recognizing that there's more work to do, I do want to be sure to call out that I could not be more proud of my teammates across life. The passion that they demonstrate, and the work ethic that they display is not only that. Key to Our Past Accomplishments, but it's going to be the source of Our Future Achievements as we continue to realize the potential of our business. Thank you for your interest in lifespans and thanks for joining us today. And this does conclude today's conference call. Thank you for your participation. You may now disconnect.
And as we continue to emphasize.
Phrases like operational improvement and plenty of work to do.
I want you to understand that is not false humility that as a realistic acknowledgment of where we are in a multiyear journey.
We have more work to do.
We continue to improve our focus on execution prioritization standardization, so that we can run.
A more efficient business.
Recognizing that theres more work to do I do want to be sure to call out while I could not be more proud.
All of my teammates across life stages, the passion that they demonstrate the work ethic with a display is not only but.
Key to our past accomplishments.
It's going to be the source of our future achievements as we continue to.
To realize the potential of our business.
Thank you for your interest in life stance and thanks for joining us today.
Okay.
And this does.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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