Q1 2024 LifeStance Health Group Inc Earnings Call

Alex: Thank you for standing by. My name is Alex, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lifestance Health First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is Alex and I will be conference operator today at this time I would like to welcome everyone to the live stands how first quarter 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be.

Alex: 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 star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Monica Prokocki, Vice President of Investor Relations. Please go ahead.

A question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star One again I would now like to turn the call over to Monty copper Koskey, Vice President of Investor Relations. Please.

Monty Koskey: Go ahead.

Monica Prokocki: Thank you, operator. Good morning, everyone, and welcome to Lifestance Health's first quarter 2024 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

Monty Koskey: Thank you operator, good morning, everyone and welcome to lifestyle Health first quarter 2024 earnings Conference call I'm, Monica Perkowski, Vice President of Investor Relations.

Monty Koskey: Joining me today are Ken Burdick, Chief Executive Officer, David Gordon, Chief Financial Officer, and Donna <unk>, Chief Operating Officer, we issued the earnings release for a presentation before the market opened this morning.

Monty Koskey: They're available on the Investor Relations section of our website Investor got Mike <unk> Dot com.

Monty Koskey: In addition, a replay of this conference call will be available following the call.

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 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.

Monty Koskey: 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.

Monty Koskey: Today's remarks contain forward looking statements.

Monty Koskey: Statements about our financial performance outlook business model and strategy.

Monty Koskey: Those statements involve risks uncertainties and other factors.

Monty Koskey: And 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?

Monty Koskey: 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.

Monty Koskey: A reconciliation to the most directly comparable GAAP measures is included in the earnings press release tables and presentation appendix.

Monty Koskey: Unless otherwise noted all results are compared to the comparable period in the prior year.

Monty Koskey: At this time I will turn the call over to Ken Burdick CEO of waste here Ken.

Kenneth Alan Burdick: Thanks, Monica, and thank you all for joining us today. In the first quarter.

Kenneth Alan Burdick: Thanks, a lot I.

Kenneth Alan Burdick: And thank you all for joining us today.

Kenneth Alan Burdick: In the first quarter.

Kenneth Alan Burdick: We will once again be on all our guided targets, making this the sixth executive quarter that Lifestance has met or exceeded expectations. We deliver strong financial performance, with revenue growth of 19% to $300 million and adjusted EBITDA up 174% to $28 million. We are also raising full year adjusted EBITDA guidance based on the strength of the quarter. Our clinician value proposition continues to resonate, with 221 net clinician ads in the quarter, representing 15% entirely organic growth in our clinicians. Our patient experience continues to receive outstanding scores, with a patient net promoter score of 84 and average Google reviews across Lifespans centers at 4.5 out of 5 stars, before covering our strategic and operational highlights.

Kenneth Alan Burdick: We once again beat on all our guided metrics, making this the sixth consecutive quarter.

Kenneth Alan Burdick: <unk> has met or exceeded expectations.

Kenneth Alan Burdick: We delivered strong financial performance with revenue growth of 19% to.

Kenneth Alan Burdick: The $300 million and adjusted EBITDA up 174% to $28 million.

Kenneth Alan Burdick: We are also raising full year adjusted EBITDA guidance based on the strength of the quarter.

Kenneth Alan Burdick: Our clinician value proposition continues to resonate with 221 that clinician hedge in the quarter.

Kenneth Alan Burdick: Presenting 15% entirely organic growth and our clinician base.

Kenneth Alan Burdick: Our patient experience continues to receive outstanding scores with a patient net promoter score of 84 and average Google reviews across life stance centers at four five.

Kenneth Alan Burdick: Five stars.

Kenneth Alan Burdick: Before covering our strategic and operational highlights.

Kenneth Alan Burdick: I would like to share the news that Danish has reached the difficult decision to leave Lifestance Health. Knowing this was not an easy decision, I'd like to give Danish the opportunity to directly share his thoughts with all of you. Thank you, Ken. In March, we celebrated the seven-year anniversary of the founding of Lifestance Health.

Speaker Change: I'd like to share the news that <unk> has reached the difficult decision to leave lifespan.

Kenneth Alan Burdick: Knowing this was not an easy decision I'd like to give donnish the opportunity to directly share his thoughts with all of you.

Donnish: Thank you Ken.

Speaker Change: In March we celebrated the seven year anniversary of the founding of lifespan.

Danish J. Qureshi: That's given me the chance to reflect on all that we have achieved over the years in service of our mission of increasing access to affordable mental health. As one of the founders of Lifestance, it's been a remarkable journey as we've grown the company from our first practice group of approximately 100 clinicians in Ohio to almost 7,000 clinicians across 33 states. Touching the lives of millions of patients for the better along the way.

Donnish: That's giving me the chance to reflect on all that we have achieved over the years in service of our mission of increasing access to affordable mental health care.

Donnish: As one of the founders of Blackstone's, it's been a remarkable journey as we've grown the company from our first practice group of approximately 100, clinicians and Ohio to almost 7000 clinicians across 33 states touching.

Speaker Change: Touching the lives of millions of patients for the better all along the way.

Danish J. Qureshi: It's been one of the great joys of my life to have contributed to those achievements. Two years ago, it became clear that we needed to make the shift from a high-growth startup to a scalable public company. At that time, I stepped into the role of President and COO with a goal of solidifying the foundation of the business, rebuilding and upskilling our operations leadership team, and moving us to a performance-driven organization. I am so proud of all that we've accomplished since then.

Speaker Change: It's been one of the great joys of my life to have contributed to those achievements.

Speaker Change: Two years ago, it became clear that we needed to make the shift from our high growth startup to a scale public company.

Speaker Change: At that time I stepped into the role of President and COO with a goal of solidifying the foundation of the business.

Speaker Change: Rebuilding and Upskilling their operations leadership team and moving us to a performance driven organization.

Speaker Change: So proud of all that we've accomplished since then.

Danish J. Qureshi: And I'm particularly proud of the strength of the operations leadership team we've built. No better demonstrated than by our delivering six consecutive quarters of meeting and exceeding our financial commitment. Having enjoyed the privilege of building Lifestance since its founding and having spent the last two years turning Lifestance into a high-performing and stable public company, for me, now is the right time to step away and take on my next challenge. As an entrepreneur and builder at heart, I have the desire and drive to make a similar impact on other parts of the healthcare ecosystem, as I have had the privilege of doing so here at Lifestance. This has not been an easy decision, and I want to thank all of those who have helped me as I thought this through over the past month.

Speaker Change: And I'm, particularly proud of the strength of the operations leadership team we've built.

Speaker Change: No better demonstrated than by our delivery six sequential quarters of meeting and exceeding our financial commitments.

Speaker Change: Having enjoyed the privilege of building lifespan since its founding and having spent the last two years starting lifespan into a high performing stable public company for me now is the right time to step away and take on my next challenge.

Speaker Change: As an entrepreneur and builder apart.

Speaker Change: Desire and drive to make a similar impact on other parts of the health care ecosystem as I've had the privilege of doing so here at lifespan.

Speaker Change: This has not been an easy decision and I want to thank all of those who have helped me as I thought this through over the previous months.

Danish J. Qureshi: I will continue to operate in my current role through the end of June, however, many of the changes needed to ensure a smooth transition have been put into place over the course of the last two years as we have built out our leadership bench strength and worked together to solidify our foundation. While I'm excited about my next chapter, I have never felt more confident in the future of Lifestance, and I look forward to seeing all that the team achieves over the coming years. With that, I'll pass it back to Ken.

Speaker Change: I will continue to operate in my current role through the end of June. However, many of the changes needed to ensure a smooth transition have been put into place over the course of the last two years as we've built out our leadership bench strength and work together to solidify our foundation.

Speaker Change: While I'm excited about my next chapter I have never felt more confident in the future of wide stance and I look forward to seeing all of that the team machines over the coming years.

Speaker Change: With that I'll pass it back to Ken.

Kenneth Alan Burdick: Thank you, guys. I've appreciated Danish's contributions and have enjoyed the partnership that we've developed. He has made an extraordinary impact on the organization over the past seven years. I am grateful that he has engaged in these conversations with me and the board to ensure a smooth transition on his final day. I know that I speak for the entire leadership team when I express profound appreciation for his contribution to Lifestance and a genuine desire for his continued success in the next chapter of his career.

Kenneth Alan Burdick: Thank you Josh.

Kenneth Alan Burdick: I appreciate it <unk> contributions and have enjoyed the partnership that we've developed.

Kenneth Alan Burdick: It has made an extraordinary impact on the organization over the past seven years.

Kenneth Alan Burdick: I am grateful that he is engaged in these conversations with myself and the board to ensure a smooth transition to his final day.

Kenneth Alan Burdick: I know that I speak for the entire leadership team when I express profound appreciation for.

Kenneth Alan Burdick: His contribution to life science.

Kenneth Alan Burdick: A genuine desire for his continued success in the next chapter of his career.

Kenneth Alan Burdick: As Danish mentioned, Lifestance is well-positioned to continue our exciting journey of expanding access to high-quality, affordable mental health care. We have made strong progress on approving our operations and strengthening our team. To ensure a smooth transition, several of our leaders have already stepped into increased responsibility, for which they are well prepared and most deserving.

Kenneth Alan Burdick: As Dennis referenced life stance is well positioned to continue our exciting journey of expanding access to high quality affordable mental health care.

Kenneth Alan Burdick: We have made strong progress on improving our operations and strengthening our team.

Kenneth Alan Burdick: To ensure a smooth transition several of our leaders have already stepped into increased responsibility.

Kenneth Alan Burdick: Which they are well prepared and most deserve.

Kenneth Alan Burdick: My conviction is stronger than ever regarding the ability of Lifestance's unique business model to address the challenges that have long existed within the industry. We see the benefits of our model play out through an exceptional patient experience, continued clinician growth, and our ability to navigate industry challenges in ways that positively differentiate us from other mental health companies. The recent cyber attack on changed health care offers a tangible proof point of Lifestances Differentiation and Resilience.

Kenneth Alan Burdick: My conviction is stronger than ever.

Kenneth Alan Burdick: Regarding the ability of life stances unique business model.

Kenneth Alan Burdick: To address the challenges that have long existed within the industry.

Kenneth Alan Burdick: We see the benefits of our model play out through an exceptional patient experience.

Kenneth Alan Burdick: <unk> clinician growth.

Kenneth Alan Burdick: Our ability to navigate industry challenges and ways that positively differentiate us from other mental health companies.

Kenneth Alan Burdick: The recent cyber attacks on change healthcare offers a tangible proof point.

Kenneth Alan Burdick: Wildlife stances differentiation and resilience.

Kenneth Alan Burdick: While Change Healthcare's systems were down, many mental health provider groups experienced unprecedented financial distress due to their inability to process claims and receive reimbursement, which in many cases affected their ability to pay their clinicians for the services they provided.

Kenneth Alan Burdick: While change healthcare systems were down.

Kenneth Alan Burdick: Many mental health provider groups experienced unprecedented financial distress.

Kenneth Alan Burdick: Due to their inability to process claims and received reimbursement.

Kenneth Alan Burdick: Which in many cases affected their ability to pay their clinicians for the services they provide.

Kenneth Alan Burdick: Our clinicians are W-2 employed and paid on a fee-for-service basis with guaranteed rate schedules. Thanks to our scale and flexibility, we have been able to absorb 100% of the impact of reimbursement delays, without financial disruption, to our finish.

Kenneth Alan Burdick: Our clinicians are W. Two employees and paid on a fee for service basis with guaranteed rate schedules.

Kenneth Alan Burdick: Thanks to our scale and flexibility.

Kenneth Alan Burdick: We have been able to absorb 100% of the impact of reimbursement delays without financial disruption.

Kenneth Alan Burdick: So our clinicians.

Kenneth Alan Burdick: Additionally, we have been able to achieve this without the need to raise debt or equity capital. And, as Dave will touch on shortly, we remain on track to be free cash flow positive for the full year of 2024. Shifting to Payer Strategy. We have previously stated that we are becoming more assertive in demanding appropriate reimbursement and terms for our services. Overall, we've been successful in these efforts, as evidenced by the 4% year-over-year increase.

Kenneth Alan Burdick: Additionally.

Kenneth Alan Burdick: We have been able to achieve this without the need to raise debt or equity capital and as Dave will touch on shortly.

Kenneth Alan Burdick: We remain on track to be free cash flow positive.

Kenneth Alan Burdick: For the full year of 2024.

Kenneth Alan Burdick: Shifting to payer strategy.

Kenneth Alan Burdick: We have previously stated that we are becoming more assertive and demanding appropriate reimbursement and terms for our services overall, we've been successful in these efforts.

Kenneth Alan Burdick: As evidenced by the 4% year over year increase we saw in total revenue per visit in the first quarter.

Kenneth Alan Burdick: We saw an increase in total revenue per visit in the first quarter. This was driven by the positive outcomes of several contract negotiations in late 2023 and early 2024. Our increased engagement has translated into improved reimbursement from payers. However, we had a single outlier with historically above market rates for negotiated reimbursement that will now bring them in line with our overall book of business. This will create short-term downward pressure on total revenue per visit for the back half of 2024 and the first part of 2025.

Kenneth Alan Burdick: This was driven by the positive outcomes of several contract negotiations in late 2023 in early 2024.

Kenneth Alan Burdick: Our increased engagement has translated into improved reimbursement from payers.

Kenneth Alan Burdick: Ever.

Kenneth Alan Burdick: We had a single outlier with historically above market rates with negotiated reimbursement that will now bring them in line with our overall book of business.

Kenneth Alan Burdick: This will create short term downward pressure on total revenue per visit for the back half of 2024 and the first part of 2025.

Kenneth Alan Burdick: Importantly.

Kenneth Alan Burdick: This book de-risks our overall portfolio, and has already been contemplated in our 2024 guidance grade. This is another demonstration of our resilience and Ability to Deliver on our committee. We continue to expect total revenue per visit to increase by low single digits for the year.

Kenneth Alan Burdick: This both de risks our overall portfolio.

Kenneth Alan Burdick: That has already been contemplated in our 2024 guidance raise.

Kenneth Alan Burdick: This is another demonstration of our resilience and ability to deliver on our commitments.

Kenneth Alan Burdick: We continue to expect total revenue per visit to increase by low single digits for the year end.

Kenneth Alan Burdick: And in the medium and longer term, we continue to see meaningful upside opportunities to increase the level of reimbursement with payers, with our unique outpatient and in-network business model. We provide both patients and our payer partners with an affordable option for increasing access to much needed mental health care services. Before closing, I am pleased to announce that we have welcomed Dr. Teresa DeLuca to our Board of Directors. She is a psychiatrist and accomplished physician executive with over 20 years of leadership experience in healthcare operations and clinical management. I am confident that Teresa will be a great addition to the Lifestance board. With that, I'll turn it over to Dave to provide additional commentary on our financial performance and outlook. Dave

Kenneth Alan Burdick: And in the medium and longer term, we continue to see meaningful upside opportunity to increase the level of reimbursement with payers.

Kenneth Alan Burdick: With our unique outpatient and in network business model.

Kenneth Alan Burdick: We provide both patients and our payer partners with an affordable option for increasing access to much needed mental health care services.

Kenneth Alan Burdick: Before closing I am pleased to announce that we welcomed Dr. Theresa Deluca to our board of directors.

Kenneth Alan Burdick: She had a psychiatrist and accomplished physician executive with over 20 years of leadership experience in health care operations and clinical management.

Kenneth Alan Burdick: I am confident that Teresa will be a great addition to the life stands for.

Kenneth Alan Burdick: With that I'll turn it over to Dave to provide additional commentary on our financial performance and outlook, Dave Hey, Thanks, Ken.

David Patrick Bourdon: Hey, thanks, Ken. Like Ken, I'm pleased with the team's operational and financial performance in the first quarter. We delivered solid top-line results with revenue of $300 million, representing growth of 19% year over year. The outperformance was primarily driven by higher total revenue per visit and increased visit volume; both were modestly above our expectations. Visit volumes of 1.9 million increased 15% year over year, primarily driven by higher organic clinician growth. In the first quarter, we added 221 net clinicians, which was above our expectations. This brings our total clinician base to 6,866 clinicians, representing growth of 15% year over year.

Dave: Like Ken I am pleased with the team's operational and financial performance in the first quarter.

Dave: We delivered solid topline results with revenue of $300 million.

Dave: Representing growth of 19% year over year.

Dave: The outperformance was primarily driven by higher total revenue per visit and increased visit volumes.

Dave: We're modestly above our expectations.

Dave: Visit volumes of $1 9 million increased 15% year over year, primarily driven by higher organic clinician growth.

Kenneth Alan Burdick: In the first quarter, we added 221, net clinicians which was above our expectations.

Kenneth Alan Burdick: This brings our total clinician base to 6866, clinicians representing growth of 15% year over year.

David Patrick Bourdon: While we do not guide on clinician count, I want to highlight that we expect net clinician additions in the second quarter to be meaningfully lower than the first quarter, which is similar to the dynamic we saw last year with the trend reversing later in the year. Clinician productivity was in line with our expectations in the first quarter with the timing of holidays and spring breaks impacting clinician capacity. Total revenue per visit increased by 4% year-over-year to $157, primarily driven by payer ratings regarding profitability.

Speaker Change: While we do not guide on clinician count I want to highlight that we expect net clinician adds in the second quarter to be meaningfully lower than the first quarter, which is similar to the dynamic we saw last year with the trend reversing later in the year.

Kenneth Alan Burdick: Clinician productivity was in line with our expectations in the first quarter with the timing of holidays and spring breaks impacting clinician capacity.

Kenneth Alan Burdick: Total revenue per visit increased by 4% year over year to $157, primarily driven by payer rate increases.

Kenneth Alan Burdick: Regarding profitability.

David Patrick Bourdon: The better-than-expected top-line results flowed through to CenterMarket. Center margin of $95 million in the quarter increased by 36% year over year, and center margin as a percentage of revenue grew nearly four points to 31.5%. The year-over-year improvement was primarily due to higher total revenue per visit and operating leverage and center costs, mainly driven by real estate optimization. Outperformance in the quarter was driven by favorable spending and, to a lesser extent, higher total revenue per visit. Adjusted EBITDA of $28 million in the quarter was very strong and outperformed our expectations, increasing 174% year over year. Adjusted EBITDA as a percentage of revenue grew over five points to 9.2%.

Kenneth Alan Burdick: The better than expected topline results flowed through to center margin.

Kenneth Alan Burdick: Center margin of $95 million in the quarter increased by 36% year over year and center margin as a percentage of revenue grew nearly four points to 31, 5%.

Kenneth Alan Burdick: The year over year improvement was primarily due to higher total revenue per visit and operating leverage and center costs, mainly driven by real estate optimization.

Kenneth Alan Burdick: Our performance in the quarter was driven by favorable spending and to a lesser extent higher total revenue per visit.

Kenneth Alan Burdick: Adjusted EBITDA of $28 million in the quarter was very strong and outperformed our expectations, increasing 174% year over year.

Kenneth Alan Burdick: Adjusted EBITDA as a percentage of revenue grew over five points to nine 2%.

David Patrick Bourdon: The outperformance in adjusted EBITDA is attributable to the improvement in center margin. Turning to liquidity, in the first quarter, free cash flow was negative $27 million.

Kenneth Alan Burdick: The outperformance in adjusted EBITDA is attributable to the improvement in center margin.

Kenneth Alan Burdick: Turning to liquidity.

Kenneth Alan Burdick: In the first quarter free cash flow was negative $27 million, we exited the quarter with $49 million in cash and net long term debt of $280 million.

David Patrick Bourdon: We exited the quarter with $49 million in cash and net long-term debt of $280 million. As Ken touched on, we did see a temporary disruption to our cash collections from the cyber attack on Change Healthcare. This resulted in a net impact of approximately $18 million, comprised of delayed cash collections, partially offset by stronger cash management. DSO increased to 53 days in the quarter, with the impact from Change being approximately nine days.

Kenneth Alan Burdick: As Ken touched on.

Kenneth Alan Burdick: We did see a temporary disruption to our cash collections from the cyber attack on change healthcare.

Kenneth Alan Burdick: This resulted in a net impact of approximately $18 million comprised of delayed cash collections, partially offset by stronger cash management.

Kenneth Alan Burdick: DSO increased to 53 days in the quarter with the impact from change being approximately nine days.

David Patrick Bourdon: The impact of the change is expected to be a timing issue that will largely resolve itself in the second quarter. We are already seeing progress with improved DSO in April and anticipate that DSO will revert back to normal later this year. As a result of this, we remain confident in our commitment to deliver positive free cash flow in 2024. We also 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. We have no intention of raising additional debt or equity.

Kenneth Alan Burdick: The impact from change is expected to be a timing issue that will largely resolve itself in the second quarter.

Kenneth Alan Burdick: We are already seeing progress with improved DSO in April and anticipate that DSO will revert back to normal later this year.

Kenneth Alan Burdick: As a result of this we remain confident in our commitment to deliver positive free cash flow in 2024.

Kenneth Alan Burdick: We also 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 and have no intention of raising additional debt or equity.

David Patrick Bourdon: We continue to see improvement in our leverage ratios, with net leverage improving sequentially by over 40 basis points to 3.1 times. We remain confident that we will finish the year with net leverage below two and a half. In terms of our outlook for 2024, we are maintaining our full year revenue range of $1,190,000,000 to $1,240,000,000. We feel good about the improved margin performance of the business and are raising the center margin range by $8 million at the midpoint to $353 to $373 million and the adjusted EBITDA range by $8 million at the midpoint to $88 to $98 million.

Kenneth Alan Burdick: We continue to see improvement in our leverage ratios with net leverage improving sequentially over 40 basis points to three one times.

Kenneth Alan Burdick: We remain confident that we will finish the year with net leverage below two five times.

Kenneth Alan Burdick: In terms of our outlook for 2024.

Kenneth Alan Burdick: We are maintaining our full year revenue range of $1 billion $190 million to $1 billion $240 million we.

Kenneth Alan Burdick: We feel good about the improved margin performance of the business and are raising the center margin range by $8 million at the midpoint to $353 million to $373 million and the adjusted EBITDA range by $8 million at the midpoint to 88 to 98.

Kenneth Alan Burdick: Yeah.

David Patrick Bourdon: We continue to expect earnings to have a different quarterly progression compared to 2023, which was more weighted to the back half, whereas this year, we will be more weighted to the front half. As Ken noted, we will see a negative impact on total revenue per visit in the second half as a result of a rate decrease from one payer, partially offset by increases from others. We continue to expect total revenue per visit to increase by low single digits for the year.

Kenneth Alan Burdick: We continue to expect the earnings to have a different quarterly progression compared to 2023.

Kenneth Alan Burdick: Which was more weighted to the back half.

Kenneth Alan Burdick: Or is this year, we will be more weighted to the front half of the year.

Kenneth Alan Burdick: As Ken noted, we will see a negative impact on total revenue per visit in the second half as a result of a rate decrease from one payer.

Kenneth Alan Burdick: We offset by increases from others.

Kenneth Alan Burdick: We continue to expect total revenue per visit to increase by low single digits for the year.

David Patrick Bourdon: In the medium and longer term, we continue to see meaningful upside opportunities to increase the level of reimbursement with payers and remain confident in our commitment to exit 2025 at double-digit margins. For the second quarter, we expect revenue of $297 to $315 million.

Kenneth Alan Burdick: In the medium and longer term, we continue to see meaningful upside opportunity to increase the level of reimbursement with payers and remain confident in our commitment to exit 2025 at double digit margins.

Kenneth Alan Burdick: For the second quarter, we expect revenue of $297 million to $315 million.

David Patrick Bourdon: Center margin of $85 to $97 million and adjusted EBITDA of $20 to $26 million. With that, I'll turn it back to Ken for his closing remarks. Thank you, Dave. In closing, I'm proud of the results achieved by our clinicians and team members this quarter. We delivered strong organic revenue growth while executing on our commitment to deliver year over year operating leverage and margin expansion. I'd like to once again thank Danish for his contributions to Lifestance and wish him well on his career journey.

Kenneth Alan Burdick: Center margin of $85 million to $97 million.

Kenneth Alan Burdick: And adjusted EBITDA of $20 million to $26 million.

Kenneth Alan Burdick: With that I'll turn it back to Ken for his closing remarks.

Kenneth Alan Burdick: Thank you Dave in closing I am proud of the results achieved by our clinicians and team members this quarter.

Kenneth Alan Burdick: We delivered strong organic revenue growth, while executing on our commitment to deliver year over year operating leverage and margin expansion.

Kenneth Alan Burdick: I'd like to once again, thank Don for his contributions to life stance and wish him well on his career journey.

Kenneth Alan Burdick: While we are sad to see him go, we are well positioned to continue delivering on our mission of expanding access to high-quality, affordable mental health. But, I recognize that we still have a great deal of work ahead in 2024 and beyond. I am encouraged by the momentum we are building toward our stated commitment of positive free cash flow in 2024, growing revenue at mid teams through 2025, and exiting 2025 with double digit margin across the country. We have underfunded mental health care and underserved millions of individuals for far too long.

Kenneth Alan Burdick: While we have SaaS is even though we are well positioned to continue delivering on our mission of expanding access to high quality affordable mental health care.

Kenneth Alan Burdick: While I recognize that we still have a great deal of work ahead in.

Kenneth Alan Burdick: In 2024 and beyond.

Kenneth Alan Burdick: Im encouraged by the momentum we are building toward our stated commitments.

Kenneth Alan Burdick: Positive free cash flow in 2024.

Kenneth Alan Burdick: Growing revenue at mid teens through 2025.

Kenneth Alan Burdick: And exiting 2025 with double digit margins.

Kenneth Alan Burdick: As a country.

Kenneth Alan Burdick: We have underfunded natural healthcare and underserved millions of individuals for far too long.

Operator: Our team at Lifestance will continue to work tirelessly to address these challenges until mental health parity is a reality. Operator, we're now ready for questions. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Kenneth Alan Burdick: Our team at life stance will continue to work tirelessly to address these challenges until mental health parity is a reality.

Speaker Change: Operator, we're now ready for questions.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and I would like to ask a question. Please press star one on your telephone keypad to raise your hand in China Q. If you would like to withdraw your question simply press Star. One again, if you are called upon to ask your question.

Kenneth Alan Burdick: And our listening via loud speaker in your device Lee speak up your handset and ensure that your phone is not on mute when asking a question.

Craig Matthew Hettenbach: Again, press star 1 to join the queue, and your first question comes from the line of Craig Hettenbach with Morgan Stanley. Please go ahead. Yes, thank you. I want to touch on the better than expected Center Margin EBITDA. Ken, when you joined, there was a focus and an increased emphasis on kind of building a foundation, increased investments in the business, and it looks like that's starting to translate. So we'd love to get your take on just operating leverage in the model as you see it and kind of how you see that path to 10% margins exiting next year. Thanks for the question, Craig. You're right.

Kenneth Alan Burdick: Again.

Kenneth Alan Burdick: Star one to join the queue and your first question comes from the line of Craig <unk> with Morgan Stanley. Please go ahead.

Craig: Yes. Thank you I wanted to touch on the better than expected Santa margin EBITDA, Ken When you joined there was a focus and increased emphasis on kind of building a foundation increased investments in the business and it looks like thats starting to translate so we'd love to get your take and just operating leverage in the model as you see it and kind of how you see that path.

Craig: 10% to 10% margins exiting next year.

Kenneth Alan Burdick: I think we are encouraged by the operating leverage that we're beginning to experience. I would also highlight that we had some delayed expenses that contributed to outperformance and also that, As I've shared before, this is sort of a two-year journey of rebuilding and strengthening the foundation and improving the processes. So I would view this as initial progress and some demonstration of the benefit. My view is we're sort of 5 quarters into what's likely going to be an 8 or 9 quarter improvement in our operating efficiency and, therefore, operating leverage. I got it.

Kenneth Alan Burdick: Sure. Thanks for the question Greg.

Kenneth Alan Burdick: I think we are encouraged by the operating leverage that we are beginning to experience I would also highlight that we had some delayed expense that.

Speaker Change: <unk> contributed to an outperformance and also debt.

Kenneth Alan Burdick: As I've shared before this is sort of a two year journey of rebuilding and strengthening the foundation improving the processes. So.

Kenneth Alan Burdick: I would view this as initial progress and some demonstration of the benefit but.

Kenneth Alan Burdick: My view is were sort of five quarters into what's likely going to be an eight or nine quarter.

Kenneth Alan Burdick: The improvement in our operating efficiency and therefore operating leverage.

Kenneth Alan Burdick: Okay.

Danish J. Qureshi: And then just as a follow-up, I wanted to touch on just capacity and just any update. There are efforts to, you know, improve capacity by moving clinicians more towards full-time arrangements. So kind of where things stand there and what that could mean, you know, over the next 12, Yeah, Craig, this is Danish. I can answer that.

Speaker Change: Got it and then just as a follow up I wanted to touch on just capacity and just any update there is FX.

Kenneth Alan Burdick: Improved capacity by moving clinicians more towards full time arrangements, so kind of where things stand there and what that could mean over the next 12 to 18 months.

Danish J. Qureshi: So, like we discussed on last quarter's earnings call, because of all the work that we put into on the utilization side of the productivity equation, we have begun our shift towards the capacity side. A lot of those plans have just started to get underway in Q1, so it's early days, and we're hoping that that will start to play out in a more meaningful way throughout the course of the year. But as a reminder, we have not, in our guidance, included any assumptions around improvements in productivity.

Kenneth Alan Burdick: Yeah, Hey, Craig This is Don this I can answer that so like we discussed on last quarter's earnings call because of all the work that we've put into on the utilization side of the productivity equation, we have begun our shifts towards the capacity side a lot of those plan suggests.

Don: To get underway in Q1, so it's early days.

Speaker Change: And we're hoping that that will start to play out in a more meaningful way throughout the course of the year, but as a reminder, we have not in our guidance included any assumptions around improvements.

Danish J. Qureshi: So, again, early days around capacity, and we'll continue to provide updates as they make sense. For everyone who's here, we do request for today's session that you please limit to one question and one follow-up. Your next question comes from the line of Lisa Gill with JP Morgan. Please go ahead.

Speaker Change: In productivity. So again early days around capacity and will continue to provide updates as that makes sense.

Speaker Change: Got it thank you.

Lisa Christine Gill: First off, Danish, I want to say I wish you the best in your next endeavor. It was nice getting to know you. And for my question, Ken, I want to understand when we think about the payer strategy, you talked about the single outlier that's now in line. Can you maybe just talk about was that a really unusual contract that was signed? I just want to better understand why it was an outlier.

Kenneth Alan Burdick: And secondly, when we think about the new contracts that are being signed, is there anything that's changing in the contracting? I agree with you how important mental health is and the lack of mental health providers we have. So I was just a little surprised to hear that there is this one outlier. I just want to better understand that. Thanks so much.

Speaker Change: Better understand that thanks, so much.

Kenneth Alan Burdick: Sure. Thanks for the question. It really was.

Speaker Change: Sure. Thanks for the question. It really was it was a historic outlier and meaningfully higher than.

Kenneth Alan Burdick: It was a historic outlier and meaningfully higher than sort of the portfolio of contracts that we had, and it goes back several years. We would have loved for it to continue, but we always knew that there was a possibility that, through negotiations, it would come back to sort of where the overall market is for us. So it truly was unique.

Speaker Change: Sort of a portfolio of of contracts that we had and it goes back several years.

Speaker Change: We would have loved for it to continue.

Speaker Change: But we always knew that there was a possibility.

Speaker Change: <unk> that through.

Speaker Change: Negotiations it would come back to sort of where where the the overall.

Speaker Change: Market is for.

Speaker Change: For us so it truly was.

Speaker Change: Unique.

Kenneth Alan Burdick: And we are being paid, as I say, consistent with the rest of our payer community. We will continue to look for upgrades because it's not identical. One of the things that we feel is that everyone should pay their fair share. And so we continue to work on that as it relates to sort of the demand and supply. What's really important to remember is that employers are really demanding better access for their employees and their employees' dependents.

Speaker Change: And.

Speaker Change: We are being paid as I say consistent with.

Speaker Change: The rest of our payer community, we will continue to look for upgrades because it's not identical one of the things that we feel is that everyone should pay their fair share and so we continue to work on that as it relates to sort of the demand supply.

Speaker Change: What's really important to remember is that employers.

Speaker Change: Are really demanding better access for their employees and their employees dependents.

Kenneth Alan Burdick: And because of that fact, we have constructive discussions and negotiations with payers. And while I would love to see us move into more value-based contracting, I would say right now we're in the very, very early stages of that. And you'll see and hear more about that in the years to come. But there's really no major change other than the drumbeat from employers for greater access. Great, thank you. The next question comes from the line of Ryan Daniels with William Blair. Please go ahead. Hey guys, this is Jack Senft. I'm for Ryan Daniels.

Speaker Change: And because of that fact.

Speaker Change: We have constructive discussions and negotiations with payers and while I would love to see us move into more value based contracting I would say right now we're in the very very early stages.

Speaker Change: Of that and you'll see and hear more about that.

Speaker Change: In the years to come but there's really no.

Speaker Change: A major change other than.

Speaker Change: The drumbeat from employers for greater access.

Speaker Change: Great. Thank you.

Speaker Change: Next question comes from the line of Ryan Daniels with William Blair. Please go ahead.

Jack A. Senft: Thanks for taking the question. Congratulations on the quarter. I just want to go back to the basically same line of question for the payer outlier that had the above market rates. Can you just talk just a little bit more about that? I'm assuming that this is a pair that had significant volume given the near-term impact. So is there any way to kind of quantify the impact, or I guess how we should think about the impact? I understand that the downward pressure is just curious if you can dive a little bit deeper into that.

Speaker Change: Hey, guys. This is Jack on for Ryan Daniels. Thanks for taking my question and congrats on the quarter.

Jack: I'm sorry to go back to the same line of question for the payer outliers that have the above market rate can you just talk just a little bit more about it.

Jack: I'm assuming that this is a pair that had significant volume given the near term impacts or is there any way to kind of quantify the impact or I guess, how we should think about the impact I understand that the downward pressure, but just curious if you can dive a little bit deeper into that.

Kenneth Alan Burdick: Thanks. Yeah, we're going to resist the temptation to get very specific about any one single payer negotiation, as you can appreciate, whether it's, in this case, going down or, in many and most other cases, going up. It doesn't behoove us to get into the specific details of any single negotiation, but I can confirm that yes, this is a national payer with significant volume, which is why we thought it was important on this call to share that while we had an outstanding first quarter, we want to be sure people, as they do their modeling, don't just extrapolate from the first quarter, multiply it by four, and say, OK, you're on your We had a great beat in the first quarter.

Speaker Change: We're going to we're going to resist.

Speaker Change: The temptation to get very specific about any one single payer negotiation as you can appreciate whether it's in this case.

Jack: Going down or in many in most other cases going up it doesn't behoove us to get into the specific details of any one single negotiation. So I can confirm that yes. This.

Jack: A national payer with significant volume, which is why we thought it was important in this call to share that.

Jack: While we had an outstanding first quarter, we want to be sure people as they do their modeling don't just extrapolate from the first quarter multiplied by four and say, okay, you're on your way to that.

Jack: An unbelievable B, we had a great beat in the first quarter and what we're trying to project in both our prepared remarks and during the Q&A is.

Jack A. Senft: And what we're trying to project in both our prepared remarks and during the Q&A is that we expect that the rest of the year will play out in line with our original commitments and the budget that we have committed. Okay, understood. Thanks. Thanks for the color.

Jack: We expect that the rest of the year will play out and consistent with our original commitments and the budget that we have committed to.

Jack A. Senft: And just a quick follow-up to, I think it was an answer to a previous question, but you mentioned a delayed expense that led to outperformance this quarter. So can you just talk a little bit more about that as well? I mean, maybe I missed it in the prepared remarks, but what exactly was that? And maybe how much and then, like, will this be delayed, then kind of feeding into the second quarter. How should we think about that? Hey, good morning, Jack. It's Dave.

Speaker Change: Okay understood. Thanks, Thanks for the color.

Speaker Change: And just a quick follow up to I think it was an answer to a previous question, but you mentioned the delayed expense that led to outperformance. This quarter. So can you just talk a little bit more about this as well I mean, maybe I missed it in the prepared remarks, but what exactly was that and maybe how much and then two will this be delayed then to kind of feeding into the second quarter and kind of how we should think about that thanks.

David Patrick Bourdon: I'll take that one. So the beat in the first quarter primarily came through in performance in center margin, and it was spent within that center margin bucket. And a lot of that was, you know, delayed in the sense that we expected it to happen in the first quarter. And a lot of it is pushing into the second quarter.

Speaker Change: Hey, good morning, Jack It's Dave I'll take that one.

David Patrick Bourdon: Beat in the first quarter primarily came through.

David Patrick Bourdon: Performance in center margin and it was spend within that center margin bucket.

David Patrick Bourdon: And a lot of that was delayed.

Dave: Delayed in the sense of we expected it to happen in the first quarter and a lot of it is pushing into the second quarter.

David Patrick Bourdon: And it's things like the investment we're making in the patient, the digital patient check-in tool, as well as investments that we're making in our front office of our centers, which we talked about in our last earnings call. So those were all investments that we were planning on making throughout the year. They're just getting off the ramp a little bit slower than we thought.

David Patrick Bourdon: And it's things like the investment, we're making in the patient digital patient check in tool as well as <unk>.

David Patrick Bourdon: Investments that were making in our in the front office of our centers, we've talked about in our last earnings call. So those were all investments that we're planning on making throughout the year, they're just getting off the ramp a little bit slower than we thought and thats what <unk>.

David Patrick Bourdon: And that's what primarily contributed to Q1B and why that's now not flowing through to the remaining quarter. Alright, your next question comes from the line of Kevin Caliendo with UBS. Please go ahead.

David Patrick Bourdon: Primarily contributed to the Q1 beat and why that's not flowing through to the remaining quarters.

Kevin Caliendo: Thank you. And thanks for taking my question. Danish, congrats on all your achievements at Lifestance and best of luck going forward. It was a pleasure getting to know you. I just want to go back to the payment stuff again.

David Patrick Bourdon: Your next question comes from the line of Kevin Caliendo with UBS. Please go ahead.

Kevin Caliendo: Thank you and thanks for taking my question Tarnish Congrats on all your achievements at life stance and best of luck going forward. It was a pleasure getting to know you.

Kevin Caliendo: I just want to understand that a little bit better. Does the new sort of rates kick in on July 1? Is that why the cadence in the second half is not as great or not the normal seasonality?

Kevin Caliendo: And I just wanted to go back to the payer stuff again, I just want to understand a little bit better.

Kevin Caliendo: This does the new sort of rates kick in on July one is that why the cadences and second half is not.

Kevin Caliendo: As great or not the normal seasonality.

Kenneth Alan Burdick: And two, maybe just to provide a little bit of comfort around this more, how often are these payer rates negotiated, and can you talk about any negotiations that would have started one-one on a same-store basis? Like typically, what do you normally see when you redo or renew a payer relationship? Yeah, it's not quite as structured and organized as you know. On January one of every year, we renegotiate all of our contracts

Kevin Caliendo: And two maybe just provide a little bit of comfort around this more.

Kenneth Alan Burdick: How often are these payer rates negotiated in and can you talk about any negotiations that would've started one one on a same store basis like typically when do you normally see when you when you redo of renew our payer relationships.

Kenneth Alan Burdick: Yeah, its not quite as structured and organized as of January one of every year, we renegotiated all of our contracts. This is.

Kenneth Alan Burdick:

Kenneth Alan Burdick: This is, really, as we engage in a much more wholesome, comprehensive fashion. We're talking about rates, we're talking about sort of the terms, we're talking about delegated credentialing, et cetera. So these are pretty comprehensive discussions. Historically, it's been sort of a non-event that, you know, maybe there was a 1% add-on for future years.

Kenneth Alan Burdick: Really as we engage.

Kenneth Alan Burdick: And a much more wholesome comprehensive fashion.

Kenneth Alan Burdick: We're talking about rates, we're talking about sort of the terms, we're talking about delegated credentialing et cetera. So these are pretty comprehensive discussions.

Kenneth Alan Burdick: Historically, it's been sort of a non event that you know maybe there was a 1%.

Kenneth Alan Burdick: And we've changed that. So now we're having these deeper, more strategic discussions about what the relationship is going to look like. And in some cases, there are multi-year contracts. And in others, they are annual, but they happen throughout the year. And so I would describe it as lumpy.

Kenneth Alan Burdick: Add on for future years, and we've we've changed that so now we're having these deeper more strategic discussions about what the relationship is going to look like.

Kenneth Alan Burdick: And in some cases, there are multiyear contracts.

Kenneth Alan Burdick: And in others, they are annual but they happened throughout the year and so it's I would describe it is as lumpy.

Kenneth Alan Burdick: Even this particular contract renegotiation.

Kenneth Alan Burdick: Even in this particular contract renegotiation, there are different lines of business that come into effect at different times. So I can't even tell you that, you know, everything happens on July one. There's, there's sort of a phase-in, and it's a little bit more nuanced than just sort of one single change in rate on one given date. It may be just a Kevin pile on Ken Ken's comments.

Kenneth Alan Burdick: Theres different lines of business that come into effect at different times, So I can't even.

Kenneth Alan Burdick: Tell you that everything happens on July one, there's there's sort of a phase in and it's.

Kenneth Alan Burdick: A little bit more nuanced than just sort of one single change in rate on one given day.

Kenneth Alan Burdick: And maybe just Kevin just to pile on to Ken Ken's comments.

David Patrick Bourdon: From a modeling perspective, if you're thinking about TRPV, what you're saying is generally accurate, which is we would expect TRPV in the first half of the year to be higher than the back half of the year to answer that specific question. Okay, thank you. Next question comes from the line of Ryan Tanquilli with Jefferies. Please go ahead. Thank you for taking my question. You have Taji Phillips on for Brian.

Kenneth Alan Burdick: From a modeling perspective, if youre thinking about TRP V. What youre, saying, what Youre, saying is general generally accurate, which is we would expect CRP V. In the first half of the year to be higher than the back then the back half of the year.

Ryan Scott Daniels: So that.

Ryan Scott Daniels: Answer that specific question.

Ryan Scott Daniels: Okay. Thank you.

David Patrick Bourdon: Yes.

David Patrick Bourdon: Yeah.

Ryan Scott Daniels: Next question comes from the line of Brian <unk> with Jefferies. Please go ahead.

Ryan Tanquilut: So first, Danish, I want to say congratulations to you. It was wonderful working with you. And so my first question is going to be on clinician ads in the quarter. I know that you guys had mentioned that they had exceeded your expectations. So maybe you can just provide an update on, you know, several different KPIs, retention, recruitment, and turnover, within your clinician base. And then I have a follow-up from there. Hey, Tashi, this is Danish.

Ryan Scott Daniels: Thank you for taking my question you have Tashi Phillips on for Brian. So first Don I wanted to say congratulations to you. It was wonderful working with you and so my first question is going to be on clinician adds in the quarter. I know that you guys had mentioned that they had exceeded your expectations. So maybe you can just provide an update on several different <unk>.

Danish: P is retention recruitment turnover right within your clinician base and then I have a follow up from there.

Danish J. Qureshi: Thanks for the comment. And I can address the question around NET Clinician ads and some of the drivers. So, yes, we're very pleased with our NET Clinician ads in Q1 that exceeded our expectations. Again, that was 100% organic, which is something that we remain very proud of. Retention continues to remain stable.

Danish: Yeah, Hey, Hitachi. This is Donna said thanks for that.

Danish J. Qureshi: Comments and I can address the question around net clinician adds and some of the drivers. So yes, we're very pleased with our net clinician adds in Q1 that exceeded our expectations again that was 100% organic which is something that we remain very proud of.

Danish J. Qureshi: Retention continues to remain stable our recruiting engine continues to be well.

Danish J. Qureshi: Our recruiting engine continues to be what we characterize as best in class. Our value proposition to our clinicians, both those that are here as well as new ones that we're trying to attract, continues to remain strong. And so we feel good about our ability to continue to deliver strong NET Clinician ads throughout the year. Dave did mention in his prepared remarks the dynamic that we see around Q2, where you typically see a lower number that reverses later in the year, just due to seasonality and the fact that because we are delivering this on a 100% organic basis now, the seasonality is more visible than in previous years where we had M&A as a component on top of So hopefully, that provides some additional color on what we're seeing there.

Danish J. Qureshi: Characterizes the best in class our value proposition to our clinicians both those that are here as well as new ones that we're trying to attract continues.

Danish J. Qureshi: <unk> continues to remain strong.

Danish J. Qureshi: And so we feel good about our ability to continue to.

Danish J. Qureshi: Deliver a strong net clinician adds throughout the year, Dave did mention in the prepared remarks, the dynamic that we see around Q2, where do you typically see.

Danish J. Qureshi: A lower number that reverses later in the year.

Danish J. Qureshi: Just due to seasonality and the fact that.

Danish J. Qureshi: Cause we are delivering this on a 100% organic basis now the seasonality is more visible than in previous years, where we had M&A is a component on top of organic.

Danish J. Qureshi: So hopefully that provides some additional color on what we're seeing there.

Taji Phillips: Thank you, Danish. And then there will be another follow up there. I know this is more recent news, and obviously still, you know, preliminary, and there's been some pushback on this. But thinking about the FTC's potential non-compete ban, you know, how are you thinking about the impact on your business, right? You know, and just the general recruiting environment for clinicians in the behavioral health space? Yeah, I can take that as well. So, you know, for us, we do, in states that, at least today, allow for non-competes, have that in our contracts, but not all states, even today, allow for them, and in those states, we do not. Though we have included that in contracts, we have never built the value proposition around non-competes.

Speaker Change: No that was great. Thank you tarnish and then another follow up there I know this is more recent news and obviously still.

Taji Phillips: Preliminary and there's been some pushback on this but thinking about the FTC's potential noncompete ban.

Speaker Change: How are you thinking about the impact to your business right.

Speaker Change: And just the general recruiting environment for clinicians and behavioral health space.

Speaker Change: Yes, I can take that as well so.

Speaker Change: For us.

Speaker Change: We do in states that at least today allow for non competes have that in our contracts, but not all states even today allow for it and in those states we do not.

Danish J. Qureshi: For us, it's about what we provide to our clinicians to both not just attract but retain them and making sure that we're constantly solidifying and bolstering that value proposition. So, for us, this is not something where it's a particular worry. If anything, we'd be hopeful that it creates more movement on the recruiting side and our ability to attract clinicians from other practice groups where they may currently feel restricted from exploring other opportunities. Thank you. Your next question comes from the line of Stephanie Davis with Barclays. Please go ahead.

Speaker Change: Though we have included that in contracts, we have never built the value proposition around non competes for us. It's about what are we providing sort clinicians to both not just attract but retain them and making sure that we're constantly solidifying and bolstering that value proposition so for us.

Danish J. Qureshi: This is not something where.

Stephanie Davis: It's a particular worry if anything.

Danish J. Qureshi: We'd be hopeful that it creates.

Stephanie Davis: More movement on the recruiting side and our ability to attract clinicians from other practice groups, where they currently may feel restricted to explore other opportunities.

Danish J. Qureshi: Okay.

Danish J. Qureshi: <unk>.

Danish J. Qureshi: Your next question comes from the line of Stephanie Davis with Barclays. Please go ahead.

Stephanie Davis: Hey guys, congratulations on the quarter and congratulations on the accomplishments to date. Best of luck in the next week. I want to ask a little bit about the CLO transition. Is there any sort of succession plan?

Stephanie Davis: Hey, guys congrats from Macquarie and congrats on the accomplishments to date.

Stephanie Davis: And the next day.

Stephanie Davis: I wanted to ask a little bit about.

Stephanie Davis: Transmission is there any sort of secession plan. It is the role you're expecting.

Stephanie Davis: Is this the role you're expecting to keep? And then I guess the follow-up related to that would be, is there a read through considering there's been a bit of a turnaround in the back end for the past year that maybe a lot of this is already accomplished?

Stephanie Davis: And then I guess that the follow up related to that will be there.

Stephanie Davis: Their read through considering there's been a bit of a turnaround in the backend paths here that maybe a lot of it is already.

Stephanie Davis: Accomplished.

Stephanie Davis: I'll speak to the first part. You might have to elaborate on the second part. I wasn't sure about the second half of the year comment.

Speaker Change: I'll speak to the first part you might have to elaborate on the second part I wasn't sure about the second half of the year comment but.

Kenneth Alan Burdick: But, One of the things that Danish has done so well over the past couple of years is recruit great talent into the organization. And so I do not have an immediate plan to replace Danish. As he mentioned in his prepared remarks, we've already elevated our leader of shared services and our leader of practice operations to the executive team, and my initial thinking is that they are ready to step up, and the rest of us on the ELT will step up. So at this juncture, I'm not in a position to communicate that we're going to do an external search or we're going to promote somebody from within to replace Danish in kind.

Stephanie Davis: One of the things that <unk> has done so well over the past couple of years.

Kenneth Alan Burdick: Is recruit great talent to the organization and so.

Kenneth Alan Burdick: I do not have an immediate plan.

Kenneth Alan Burdick: To replace Donnish, we as he mentioned in his prepared remarks, we've already elevated or later of shared services and our leader of practice apps to the executive team.

Kenneth Alan Burdick: And.

Kenneth Alan Burdick: My initial thinking is that they are ready to step up and the rest of us the ELT will step up so at this juncture.

Kenneth Alan Burdick: I am not in a position to communicate that we're gonna do an external search or we're going to promote somebody from within to replace Donnish in kind and I think it really is a tribute to the strength of the team that we've all built over the last couple of years, we're in a dramatically different place.

Kenneth Alan Burdick: And I think it really is a tribute to the strength of the team that we've all built over the last couple of years. We're in a dramatically different place. One of the things that encourages me that I didn't say in my prepared remarks, I think whether we're talking about changing healthcare, we're talking about the departure of a founder. This hard work, which I've told you before, is not sexy, and it doesn't show up immediately.

Kenneth Alan Burdick: One of the things that encourages me that I didn't say in my prepared remarks, I think whether we're talking about change healthcare, we are talking about the departure of our founder.

Kenneth Alan Burdick: This this hard work, which I've told you before is not sexy and it doesn't show up immediately it's it's created a resilience.

Kenneth Alan Burdick: It's created a resilience, a stability, and a predictability that we simply didn't have a couple of years ago. And so while I know we will have other surprises thrown at us from time to time, I continue to gain more and more conviction that we are more than prepared to navigate through them. Do you want to elaborate on the second part of your question? It's just, I think about how much back-end turnaround has been going on and how that's probably often in a COO's purview. So it's the realization that a lot of the groundwork has already been laid for the back-end. Operations Update, and that there's less going forward?

Kenneth Alan Burdick: A stability and.

Kenneth Alan Burdick: Predictability that we simply didn't have a couple of years ago and so while I know we will have other surprises thrown at us from time to time I continue to gain more and more conviction that we are.

Kenneth Alan Burdick: More than prepared to to navigate through it.

Speaker Change: And to clarify.

Speaker Change: Can you elaborate on your the second part of your question exactly.

Kenneth Alan Burdick: I think about how much turnaround has been going on and how that's operating a kilo per view it was the.

Kenneth Alan Burdick: The read through that a lot of the groundwork has already been made for the back end.

Stephanie Davis: Or is it more just that you feel like there's a lot of talent that can handle it and leverage it? Yeah, no, thank you. Now I understand.

Kenneth Alan Burdick: Operations update.

Kenneth Alan Burdick: Good luck going forward or is at Morgan Stanley.

Speaker Change: A lot of talent that can handle it.

Speaker Change: Thank you and now I would now I get it and I'm happy to speak to that.

Kenneth Alan Burdick: And I'm happy to speak about that. There is a lot of talent. But one of the things that we have done, and I would say Denmark is leading the way, we've created a great deal of clarity around expectations and KPIs and built a culture of accountability. So, both the processes and the culture are very different now than they were a couple of years ago.

Kenneth Alan Burdick: <unk>.

Kenneth Alan Burdick: There is a lot of talent, but the one of the things that we have done and I would say donnish, leading the way we.

Kenneth Alan Burdick: We've created a great deal of clarity around expectations, and Kpis and building a culture of accountability. So.

Kenneth Alan Burdick: Both the processes and the culture are very different now than they were a couple of years ago and so that's part of what.

Kenneth Alan Burdick: And so that's part of what I consider Danish's legacy as a COO. And so I'm just so appreciative that he hung in, you know, many founders would depart when the company went public, and this would be Danish's second very successful startup. So, you know, I look at this as, thank goodness he hung with us for a couple years because the work that he did, as he transitioned from head of business development and chief growth officer to COO, has been incredibly powerful and sets us up for success.

Kenneth Alan Burdick: What I consider donnish his legacy as a COO and so I'm just so appreciative that that he hung in you know many founders would depart.

Kenneth Alan Burdick: When the company went public and this will be Donnish as second very successful startup so I.

Kenneth Alan Burdick: Look at this is thank goodness, he hung with us for a couple of years because of the work that he did as he transitioned from head of business development and Chief growth officer to COO has been.

Kenneth Alan Burdick: To your point, while there's still way more work to be done, we have made a major pivot. And I think, I won't speak for Danish, but based on all of our one-on-one conversations, it is a big part of the reason why he feels like now is the right time.

Kenneth Alan Burdick: Credibly.

Kenneth Alan Burdick: Powerful and sets us up for success to your point, while there is still way more work to be done we have made a major pivot and I think I won't speak for Donnish, but based on all of our one on one conversations.

Kenneth Alan Burdick: It is a big part of the reason why he feels like now is the right time.

Stephanie Davis: Helpful. Thank you. That concludes our Q&A session. I will now turn the conference back over to Ken Burdick, Chief Executive Officer, for closing remarks.

Speaker Change: Helpful. Thank you.

Stephanie Davis: That concludes our Q&A session I will now turn the conference back over to Ken Burdick, Chief Executive Officer for closing remarks.

Kenneth Alan Burdick: Thank you, operator. I want to thank everybody for participating in today's call. I want to also thank the approximately 9,500 employees who have such a deep sense of purpose and commitment to what we are doing, which is trying to increase access to high-quality, affordable mental health care. And you've heard me say multiple times that, you know, this is an underserved population. And I just want to put a couple of statistics around that. Mental health clinicians currently are reimbursed 22% less than their counterparts on the med-surg side of the business.

Kenneth Alan Burdick: Thank you operator, I want to thank everybody for participating on today's call.

Kenneth Alan Burdick: Want to also thank.

Kenneth Alan Burdick: Approximately 9500 employees, who have such a deep sense of purpose and commitment to what we are doing which is trying to increase access to high quality affordable mental health care and you've heard me say multiple times that this is a <unk>.

Kenneth Alan Burdick: <unk> population and I just want to put a couple of statistics around that mental health conditions. Currently are reimbursed, 22% less than their counterparts on the med surge side of the business and patients go out of network three and a half times more often so in addition to the struggles at <unk>.

Kenneth Alan Burdick: And patients go out of network three and a half times more often. So in addition to the struggles that folks have, even developing and coming up with the courage to seek care, there is a financial burden when they have to go out of network and incur those out-of-pocket costs, which I just don't think is the country that we want to live in. So, we have tens of millions of individuals across this country who do not have access to services that they need.

Kenneth Alan Burdick: <unk> have even developing and coming up with the courage to seek care. There is a financial burden when they have to go.

Kenneth Alan Burdick: Out of network and incur those out of pocket costs, which I. Just don't think is the country that we want to live and so we have tens of millions of individuals across this country, who do not have access to services that they need and as I said in my closing I couldnt be more proud and more.

Kenneth Alan Burdick: And as I said in my closing, I couldn't be more proud and more committed to the mission of Lifestance, which is to address that. And because of our size and scale, we think we can have a meaningful impact on the trajectory for years to come.

Kenneth Alan Burdick: Added to the mission of life stance wishes to address that and because of our size and scale. We think we can have a meaningful impact on the trajectory for years to come so I want to thank all of our employees and I want to thank all of you for your interest and lifestyles.

Operator: So I want to thank all of our employees, and I want to thank all of you for your interest in Lifestance. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change: Gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Operator: [music].

Operator: Okay.

Operator: [music].