Q4 2024 LifeStance Health Group Inc Earnings Call
Danielle: Thank you for standing by my name is Danielle and I will be your conference operator today at this time I would like to welcome everyone to the live
Stan's Help
Fourth Quarter 2024 Earnings Call.
Speaker Change: All lines have been placed on mute to prevent any background noise. 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 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.
Speaker Change: Thank you. I would now like to call over Monica Prokocki. Please go ahead.
Monica Prokocki: Thank you, operator. Good morning, everyone, and welcome to Lifespan Health.
Fourth Quarter 2024 Earnings Conference Call.
I'm Monica Prokocki, Vice President of Finance and Investor Relations.
Speaker Change: Joining me today are Ken Burdick, Chief Executive Officer, and Dave Bourdon, Chief Financial Officer.
Monica Prokocki: We issued the earnings release and presentation before the market opened this morning.
Speaker Change: Both are available on the Investor Relations section of our website, Investor.Lifestamps.com.
Speaker Change: 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 FEC filings.
Speaker Change: Today's remarks contain forward-looking statements, including statements about our financial performance outlook, business model, and strategy.
Speaker Change: 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.
Speaker Change: In addition, please note that we report results using non-GAAP financial measures, which we believe provide additional information for investors to help facilitate comparisons of current and past performance.
Speaker Change: A reconciliation to the most directly comparable gap measures is included in the RU's press release tables and presentation appendix.
Speaker Change: Unless otherwise noted, all results are compared to the comparable period in the prior year.
Speaker Change: At this time, I'll turn the call over to Ken Burdick, Chief Executive Officer of Lifestamps. Ken?
Thanks, Monica, and thank you all for joining us today.
Speaker Change: In the fourth quarter, we once again beat on all of our guided metrics.
Speaker Change: We delivered strong financial performance for the full year, with 19% revenue growth to $1.25 billion.
and Adjusted Ibiza of 103%.
to 120 million dollars.
which represents a 9.6% margin.
Speaker Change: We also feel well positioned to deliver on our 2025 commitments.
Speaker Change: Dave will share more on our financial performance and outlook shortly.
Speaker Change: Before covering our strategic and operational highlights, I'd like to begin by addressing the leadership changes we announced today.
First.
Speaker Change: Dave Bourdon, whom you all know well as Lifestance's CFO, has been appointed by the Board of Directors as the next CEO of Lifestance.
Speaker Change: We are thrilled that Dave will succeed me as CEO effective March 3rd.
Speaker Change: as our CFO for the last two and a half years.
Dave has played an instrumental role.
in Lifestance's Financial and Operational Transformation.
We have worked in partnership during our 10-year life stance.
So I can speak first-hand, today's business acumen.
Deep Healthcare Experience
and collaborative relationships with both internal and external stakeholders.
Speaker Change: He is passionate about executing on our mission to expand access to high quality affordable mental health care.
Speaker Change: and the commitment he brings to both our clinicians and our patients.
Speaker Change: makes him the right leader to guide Life's Dance into the future.
Speaker Change: that Dave will carry LifeStance to even greater heights in our next chapter and over the long term.
Jack.
I will move into the role of Executive Chairman.
Speaker Change: We've made tremendous strides simplifying and streamlining the business, while also meeting or exceeding our financial commitments for the past nine quarters.
Speaker Change: Now is the appropriate time for me to step back away from day-to-day operations.
Speaker Change: As Executive Chairman, I will be involved in setting our long-term strategy, investor engagement, and supporting dates.
Speaker Change: I will continue to serve as Chairman of the Board and Dave has been appointed to serve on our Board of Directors.
Speaker Change: In our new roles, Dave and I will continue to work closely together.
And I have every confidence.
Speaker Change: that this management team will continue to deliver on our commitments to patients, clinicians, teammates, and shareholders.
Third, we have appointed Ryan McGroarty as our new CFO.
Ryan brings over 25 years of healthcare experience.
Speaker Change: having served in multiple CFO roles at Cigna and most recently as the CFO for Help at Home, a multi-billion dollar revenue company providing home care for seniors and people with disabilities.
Speaker Change: Ryan will start on March 17th and we are excited to welcome Ryan and have the utmost confidence in his ability to successfully lead our finance organization.
It is an exciting time here at Lifestance.
Speaker Change: We had an exceptional finish to 2024 and have positive momentum heading into 2025.
Dave Bourdon: Now I'd like to turn it over to Dave for a few brief remarks before we continue with our earnings discussion.
Thanks, Ken.
Dave Bourdon: I am honored to serve as Lifespan's next CEO and to lead such an incredibly dedicated and talented team as we continue to focus on transforming mental health care.
Dave Bourdon: I'm proud of the strong progress we've made and look forward to further driving operational and clinical excellence.
Dave Bourdon: exceptional service for our patients, and in turn, profitable growth for shareholders.
Dave Bourdon: It's been a privilege to work alongside Ken and the management team, and I look forward to our continued collaboration in our new roles as we build on our positive momentum.
Speaker Change: This will be a seamless transition. I share the same vision for Lifestance as Ken, and you should not expect to see any major pivots in our strategy.
Speaker Change: I believe wholeheartedly in the potential of our hybrid, commercially insured business model and look forward to leading life's stance as we continue on our path toward unifying mental and physical health care.
Speaker Change: I'd also like to welcome our new CFO, Ryan Rigori, to the Lifespans team.
Speaker Change: As Ken mentioned, Ryan brings in an extensive amount of experience and knowledge leading large health care organizations.
Speaker Change: I had the pleasure of working alongside Ryan at Cigna for over two decades.
Speaker Change: and can personally attest that his leadership, business acumen, and passion for improving mental health care make him uniquely qualified to take over the reins of our finance organization.
With that, I'll turn it back over to Ken.
Thanks, David.
Turning to our updates for the quarter.
I'm extremely proud of what we have accomplished in 2024.
through our financial, operational, and clinical advancements.
Speaker Change: We have begun to show the true potential of Lifespans as the leader in outpatient mental health care.
The success in 2024 starts and ends.
Speaker Change: with the exceptional care our clinicians provide to our patients every day.
with our team of over 7,400 clinicians.
LifeVance provided nearly 8 million visits
to nearly 1 million patients in 2024.
Speaker Change: The quality of care provided by our clinicians continues to be reflected in the feedback from our patients.
Speaker Change: In 2024, LifeStance received a patient net promoter score of 85.
and our average Google reviews across all Lifestance centers.
stood at 4.6 out of 5 stars.
Speaker Change: Both of these metrics improved modestly from last year's already exceptional scores of 82 and 4.5.
Turning to Operational Execution.
In 2024, we continue to advance our goals of streamlining
The Business and Improving Performance.
First.
Speaker Change: We implemented our new operating model, which standardizes our organization with consistent staffing and processes to better support our clinicians and serve our patients at our hundreds of centers across the country.
Speaker Change: The operating model rollout is built upon the concepts of practice groups.
Speaker Change: which are clusters of centers providing a localized community approach to our operations.
Speaker Change: We are confident that this new operating model, which drives local decision-making and accountability, will enable LifeVance to successfully scale in 2025 and beyond.
Exactly.
We improve the patient experience and administration of virtual visits.
Speaker Change: A great example of this is the rollout of our new digital patient check-in tool.
As of mid-February, we have implemented it successfully across 21
of our 33 states.
Speaker Change: and are on track to complete the national rollout by mid-year.
We continue to see higher patient satisfaction.
Operational Efficiencies
Speaker Change: and significant improvements in patient collections where this tool has been deployed.
care.
Speaker Change: We continue to enhance our value proposition to clinicians with the implementation of a bi-weekly payroll cycle for our clinicians who were previously paid on a monthly basis.
Speaker Change: We've received positive feedback about this change and will continue to focus on initiatives to enhance clinician satisfaction at Lifespan.
In regards to financial performance,
Speaker Change: In 2024, we beat on all guided metrics for the second consecutive year.
We achieved three other notable financial milestones.
Speaker Change: This was the first quarter in our history as a public company in which we delivered double-digit adjusted EBITDA margins.
Second?
For the full year, we more than doubled.
are adjusted yiditah.
And third,
We achieved significant positive free cash flow for the year.
Speaker Change: and are pleased to have reached this goal one full year ahead of our original expectations.
Speaker Change: are focused on operational and financial discipline over the last two years.
have contributed to the positive trajectory of the company.
Speaker Change: with a more standardized operating model, as well as an improved capital position and positive free cash flow generation.
We are now at a stage
both operationally and financially.
Speaker Change: where we are ready to return to acquisitions as early as this year.
Going forward.
Our approach to M&A will be very disciplined.
Speaker Change: We will be selective in pursuing acquisitions that are focused on expanding capabilities, services, or customer status.
Speaker Change: and we'll be strategic in pursuing deals that meet our stringent criteria.
Speaker Change: While there is still work to do, I couldn't be more proud of the progress we have made as a company.
Speaker Change: As we look ahead to 2025, we will continue to enhance the patient and clinician experience
Speaker Change: while delivering on our mission of expanding access to the millions of Americans.
Speaker Change: who seek to improve their lives through the care of Lifestance clinicians.
Speaker Change: With that, I'll turn it over to Dave to provide additional commentary on our financial performance and outlook. Dave? Thanks, Ken.
Dave Bourdon: Like Ken, I'm pleased with the team's operational and financial performance in 2024, which exceeded our expectations.
Dave Bourdon: In the fourth quarter, we delivered strong top-line results with revenue of $325 million, representing growth of 16% year-over-year.
Dave Bourdon: The outperformance was driven by higher total revenue per visit and better-than-expected clinician productivity.
Dave Bourdon: Visit volumes of 2 million increased 14% year-over-year driven primarily by clinician growth.
Dave Bourdon: We grew our net clinicians by 155 in the fourth quarter and 779 for the full year, bringing our total clinician base to 7,424, representing growth of 12% year-over-year.
Dave Bourdon: With regard to clinician productivity, it came in slightly ahead of our expectations in the fourth quarter.
Total revenue per visit increased 2% year-over-year to $160.
primarily driven by modest payer rate increases.
for the full year.
We delivered revenue of $1,251,000,000, up 19%.
Regarding profitability.
The better-than-expected top-line results flowed through to center margin.
Dave Bourdon: Center margin of $109 million in the quarter increased 31% year-over-year.
Dave Bourdon: The outperformance in the quarter was driven by the revenue beat and lower-than-expected spending.
Full year center margin of $402 million grew 33%.
Dave Bourdon: Adjusted EBITDA of $33 million in the quarter was very strong and exceeded our expectations increasing 62% year-over-year.
Adjusted EBITDA as a percentage of revenue was 10.1%.
Dave Bourdon: As Ken mentioned, this is the first time as a public company that Lifestance has achieved double-digit margins in a quarter.
Dave Bourdon: The outperformance in the quarter was primarily attributable to the improvement in center margin.
Dave Bourdon: Additionally, in the fourth quarter, we resolved the labor-related litigation noted in our SEC filings, which had an immaterial impact to our financial results.
Dave Bourdon: For the full year, adjusted EBITDA was $120 million, increasing 103%, with margins increasing 4 points to 9.6%.
Turning to liquidity.
Dave Bourdon: In the fourth quarter, we generated strong free cash flow of $56 million. For the full year, we generated $86 million in positive free cash flow, far exceeding our expectations.
Dave Bourdon: We are proud of the progress that we have made on this front over the last 12 months, especially in light of the industry-wide challenges resulting from the Change Healthcare cyber attack.
Dave Bourdon: We exited the quarter with $155 million in cash and net long-term debt of $280 million.
Dave Bourdon: DSO improved 10 days sequentially to 37 days in the quarter which is a tremendous outcome and the result of the team's dedication and resilience.
Dave Bourdon: We continue to see improvement in our leverage ratios with both our net and gross leverage ratios improving over 50 and 25 basis points sequentially to 1.1 and 2.4 times respectively.
Dave Bourdon: This represents a significant improvement from the 3.6 net and 4.9 times gross leverage in Q4 of last year.
additionally
Dave Bourdon: We are pleased to have announced in December that we refinanced our existing debt with favorable terms.
Dave Bourdon: including a significant improvement in pricing and enhanced flexibility to fund future investments and potential acquisitions.
Dave Bourdon: We estimate that the annualized benefit of lower interest expense from this refinancing is greater than $4 million per year.
Dave Bourdon: We also expanded our capacity by increasing our revolver from $50 million to $100 million.
Dave Bourdon: These better terms and lender interests are a testament to the company's improving visibility, predictability, and positive track record over the past two years.
In terms of our outlook for 2025,
We expect full year revenue of $1,400,000,000 to $1,440,000,000.
Dave Bourdon: Center Margin of $440-$464 million and Adjusted EBITDA of $130-$150 million.
Dave Bourdon: These financials are solely based on organic growth, as we did not contemplate any potential acquisitions in our planning assumptions.
Dave Bourdon: Our annual guidance assumes year-over-year revenue growth primarily driven by higher visit volumes, with total revenue per visit being roughly flat.
Dave Bourdon: Regarding rates, as a reminder, we previously stated we would experience downward pressure in total revenue per visit in the first part of 2025.
Dave Bourdon: due to the last of three rate decreases from a single outlier payer negotiating their reimbursement to be more in line with our overall book of business.
Dave Bourdon: When considering the overall payer rate environment, including the unique payer rate decrease, our guidance contemplates roughly flat rates year over year.
Dave Bourdon: Factoring this in, along with clinician compensation increases, we anticipate pressure on center margin year-over-year, which we expect to offset with GNA operating leverage.
Afro phasing
Dave Bourdon: We expect earnings to build throughout the year as the first quarter is disproportionately impacted by payroll tax expense, and in the back half of the year, we expect modest rate improvement along with higher specialty revenue.
Dave Bourdon: For the first quarter, we expect revenue of $320 to $340 million.
Dave Bourdon: Center Margin of $100-$114 million and Adjusted EBITDA of $27-$33 million.
Dave Bourdon: Additionally, we expect stock-based compensation of approximately $70 to $85 million in 2025.
Regarding free cash flow,
Dave Bourdon: We expect to once again generate meaningful, positive, free cash flow for the full year 2025.
However,
Dave Bourdon: We expect lower free cash flow versus 2024, driven in part by the switch to bi-weekly payroll for clinicians and higher capital expenditures related to opening 25 to 30 de Novos in 2025.
Dave Bourdon: Similar to last year, we expect negative free cash flow in the first quarter due in part to these items, as well as bonus payments for 2024 performance.
As we look to 2026,
Dave Bourdon: We expect a return to low to mid-single-digit annual rate improvement.
Dave Bourdon: With these rate improvements, we will be well-positioned to grow revenue in the mid-teens while expanding margins.
Dave Bourdon: Furthermore, we believe that in 2026, we will achieve positive net income and earnings per share for the full year. This is a key milestone in our journey as a public company.
Ken Burdick: With that, I'll turn it back to Ken for his closing remarks.
Thanks, Dave.
Ken Burdick: In closing, I'd like to thank each Lifestance employee for the passion and dedication they bring to their work every day.
2024 was a fantastic year.
Ken Burdick: And in the face of challenges, we had our best year yet.
We have demonstrated our resilience.
Ken Burdick: And I am confident that we will continue to deliver on our financial commitments while we transform the mental health industry.
And this is my last call as CEO of Lifespan.
I'd also like to thank everyone.
including the board and our shareholders.
Ken Burdick: for allowing me to serve in this role over the past two and a half years.
Ken Burdick: It has been a tremendous honor to lead this dynamic and purpose-driven organization.
Well, I am proud of our accomplishments.
There is still so much runway ahead of us.
Speaker Change: As I transition into my new role as Executive Chairman, I am more confident than ever in the future of Lifespan.
Operator, we will now take questions.
Speaker Change: At this time, I would like to remind everyone that in order to ask a question, press star on the number one on your telephone keypad.
Speaker Change: We will now begin with our question and answer session. Our question comes from Craig Hattenbach of Morgan Stanley. Please go ahead.
Craig Hattenbach: Yes, thanks. Dave, congrats on the new role and Ken for all the hard work in turning the company around. I want to focus first on just margins. Given that you hit the 10% a year ahead of schedule, how are you thinking about the operating leverage and margin profile on a longer term basis?
Thanks, Craig and Steve. Good morning.
Craig Hattenbach: As far as the long-term margins, so first of all, as we step into 2025,
Craig Hattenbach: Our guidance contemplates roughly flat margin year-over-year which is consistent with the comments we had in last quarter's call.
Craig Hattenbach: And that's related to the dynamic of the rate pressure from the one large unique pair with the last of the three rate increases that we're digesting this year.
Craig Hattenbach: And as we move into 2026, as I mentioned in my prepared remarks,
Craig Hattenbach: We do expect to resume margin expansion, and while we're still working through long-range planning, you know, certainly can see a path to mid-to-high teens to 20% EBITDA margins.
Speaker Change: Got it. Thanks for that. And then just as a follow-up on the clinician growth, 12% year-over-year, can you just touch on the backdrop there in terms of your ability to continue to recruit clinicians and also perhaps what you're seeing in the competitive backdrop on that front?
Speaker Change: From a change in the environment that I would point to, it's still a very highly competitive marketplace.
Speaker Change: in regards to recruiting and retaining clinicians. We're very pleased with the
Speaker Change: in 2024, and that's on the back of stable retention along with strong recruiting, and we would expect that to be a similar dynamic in 2025.
Speaker Change: Great. One thing that I would point to, this is Ken, you know, we continue to invest, as we said in the prepared remarks, to enhance the clinician experience.
Speaker Change: But as difficult as that change healthcare disruption was, it actually proved to really reinforce one of our value propositions, which is that when one of our life stance clinicians
conducts a session.
Speaker Change: They get reimbursed whether or not we get reimbursed from the payers.
Speaker Change: And while that was sort of a throwaway perhaps up until this past year, it became very meaningful as there were many in the industry that experienced a significant disruption in their pay because of that change healthcare.
Phenomenon and cyber attack.
Speaker Change: Our next question comes from Lisa Hill of J.P. Morgan. Please go ahead.
Speaker Change: Good morning, it's Lisa Gill. Let me just echo those comments as well. Congratulations to Dave and Ken.
Speaker Change: Ken, you've done a great job of really turning around, especially on the contracting side.
Speaker Change: Just a couple of questions there. Dave, you noted that in 26, you would see rate improvements of low to mid-single digits. Is that because the contracting is done at this point, or is it just your expectation? I'm just curious around the visibility that you have there would be my first question.
Dave Bourdon: Yeah, Lisa, so first of all, I wouldn't, I would not say that we have signed contracts at this point that give us, you know, that we can point to for 2026. So we actually do the majority of our contracting on an annual basis. So we do not lock in typically two, three year type contracts.
Dave Bourdon: We actually feel it's better to engage with the payers on an annual basis rather rather than again lock in something around multi-year. My comment is more of if you if you look at last year
Dave Bourdon: For 2024, we achieved a 3% rate increase, and that's while digesting a significant reduction from that one pair.
Dave Bourdon: This year we have the annualization of that rate decrease from last year and the third and final rate decrease from that pair. So that's why
Dave Bourdon: We're having to overcome that, which is why we're going to be flat rates this year. As we go into 2026, we don't have that dynamic anymore.
Dave Bourdon: And so we would expect to be back to what we saw last year, you know, absent the one rate decrease and being in that low to mid-single-digit rate increase with the payers.
Speaker Change: Okay, great. And then just secondly, you know, you commented on the M&A environment and what you'd be looking for as far as making an acquisition, capabilities, services, customer base, etc. Do you have a specific target? And I know that it's been a pretty competitive environment for mental health assets, especially with PE. Like, has that changed at all? Like, how are you thinking about the current M&A environment?
Yes, Lisa, I'll take that one. So first...
The history of building life stance.
Speaker Change: in part was the history of tuck-in acquisitions. And what we were trying to signal on the call is that while there may be tuck-ins, we will have a more expansive view of ways in which we can strengthen and enhance
Speaker Change: our value proposition to all stakeholders. So it could be, you know, a business that provides a particular service that's going to strengthen the way we do business. It could be a new customer segment. I would say that while
Speaker Change: The valuations are probably still higher than they ought to be. It is...
a better environment than it was.
Speaker Change: two and three years ago to do acquisitions for reasons that everyone on this call understands. At this point, you know, it's not about
Speaker Change: multiples of revenue. It's about earnings and for companies in our space that have not yet been able to demonstrate that they can deliver
Speaker Change: A bottom line result, this is becoming a very difficult macroeconomic environment for them.
Speaker Change: This is a good time for us to sort of resume M&A.
Speaker Change: Your next question comes from Jamie Perse of Goldman Sachs. Please go ahead.
Speaker Change: Yeah, thanks, Jamie. It's Dave, and I'll take that one. So, first of all, as you point out, we did see our cost per visit go down in 2024, which was a great, was a great outcome.
consolidation towards the end of 2023.
Speaker Change: So I would actually view the cost per visit decline phenomenon as more of a 2024, and it will not repeat itself in 2025. And the reason for that is...
Speaker Change: we're gonna increase the compensation for our clinicians, which we do every year, we did that in 24 as well. And so that will always put some upward pressure on that cost per visit.
Speaker Change: And we'll have some mitigation of that through the operating leverage of our center costs that are non-clinician fee-for-service compensation related, but I would expect to see that cost per visit go up in 2025.
Speaker Change: prioritizing investment in the operational infrastructure of the business at the G&A line.
Speaker Change: Yeah, so you're correct in what you're noting as far as the dynamics on G&A spending. So in the fourth quarter, we did have this step up.
Speaker Change: in GNA. As we have been signaling, we were looking for opportunities to invest in the business to better position ourselves for 25 and 26.
Speaker Change: There were two buckets that we were looking at. One was...
Speaker Change: pulling forward spend that we had already identified that we wanted to make investments in in 2025, pulling those into 2024 just to get a jumpstart on this year. An example of that is we hired a number of
Business Development.
Speaker Change: teammates who are out working with the physical health partners around developing referral partnerships.
Speaker Change: So, there's certainly some recurring component of that bump of spend. And then we had the non-recurring, which was just more one-time in nature, where we were clearing the decks on various initiatives. None that I would point out. It was more an accumulation of a number of small things.
The total of that is roughly...
$5 million that we spent in the fourth quarter.
Speaker Change: So, then you step into the first quarter, and you're like, okay, well, if the spending levels for GNA are comparable, but you had 5 million of kind of these special items in the fourth quarter, then why is the level similar in the first quarter of 25, and that's because of
Two things. The first is
Speaker Change: Some of that spend and that increased investment, as I mentioned, is recurring, and so that continues into the first quarter. But really, the bulk of the explanation is payroll taxes. So you have the big increase in payroll taxes in G&A, that's $4 to $5 million in the first quarter by itself.
Speaker Change: And then, let's see, the last part of your question is, as we think about the full year 25, you're going to see relatively flat.
Speaker Change: So what's going to drive that is you'll see a reduction in payroll taxes as we step into the second through fourth quarters.
but that will be replaced with...
Speaker Change: increased compensation from the annual merit, other investments and normal volume-related spend that we're doing as a normal course of business. So that will replace the payroll taxes in the remainder of the year. And again, roughly flat G&A.
Speaker Change: Our next question comes from Brian Twankulat of Jeffries. Please go ahead.
Brian Twankulat: Hey, good morning guys and congrats to both of you and to Ryan as well. Very good pickup on the CFO side. I guess maybe as I think about your answer to an earlier question on the clinician.
Brian Twankulat: and how you mentioned change health care, you know, kind of like driving some dynamics, highlighting the value you bring to the clinicians. Just curious what you're seeing if the trend is starting to move among the clinician population to where the employed model is becoming a viable, if not primary, option.
Brian Twankulat: for practicing versus the independent model that is prevalent in the industry.
Brian Twankulat: Yeah, it's a great question, Brian. I don't know that there's been a massive shift.
Brian Twankulat: I think, you know, from our perspective, it's obviously the preferred model.
Brian Twankulat: because we're trying to create a long-term home for our clinicians and we think that that will absolutely lead to a better experience.
Brian Twankulat: I understand. And then maybe, David, as I think about the de novo, as you're adding 25 to 30 clinics this year, should we think of this as maybe the new trend, especially as we see more return-to-office orders across the economy? Do you think that, you know, we're going to see this level, if not higher level, of de novo openings going forward?
It's a good question
and I will see you next time.
Speaker Change: First of all, I would say that the 25 to 30 for this year is a little bit elevated.
Speaker Change: As far as the return to the office, I actually don't, I don't think, I don't think of that as the driving phenomenon for us.
There's...
Speaker Change: Two things. One is, do the patients want to receive care in person? And that has, again, that modestly increased...
Speaker Change: we went from roughly 71% virtual to 70% virtual in the fourth quarter. So that continues to modestly move and we expect that to continue.
Speaker Change: At the same time, we still have a lot of excess capacity in our centers today. So as we look at each center, we look at the usage.
Speaker Change: from the clinicians and the patients. And we look at our recruiting goals.
Speaker Change: and growth goals for those markets. And then that really is what drives.
whether we're going to add a de novo.
Speaker Change: and rather than, I think, more of the return to office phenomenon. The other reason why we do a de novo
is, you know, again, we did almost 100 acquisitions.
Speaker Change: We have a lot of acquired centers that we have leases with, and as those leases come up...
Speaker Change: We're always evaluating them for whether they're fit for purpose for the future for us. So it might not be the appropriate size. It might be five or seven offices, rather than we'd like it to be, you know, 11 to 14 offices, just to be able to justify that center support and things like that. Or it might not be of the equality.
Speaker Change: that we'd like for the standard for life stance. There's a few things that go into those replacement de novos as well. That's how we're thinking about it with the 25 to 30 this year.
Speaker Change: Next question comes from Kevin Caliendo of UBS. Please go ahead.
Speaker Change: Yes, hi, good morning everyone. It's Andrea Alfonso in for Kevin Caliendo. Thank you so much for taking the question and I'd also like to echo the congratulatory remarks on the new roles. I just wanted to follow up on the high level comments regarding 2026.
Speaker Change: specifically when bridging from 25 to 26 and what that implies for how you're thinking about the magnitude of EBITDA growth versus revenue growth.
Speaker Change: You discussed the rate of improvement, the rate improvements rather, to the center margins. I guess from an expense perspective, just kind of trying to think about the pushes and pulls here.
Speaker Change: whether you know the rate of comp increases remain stable or do they moderate and maybe any 2025 headwinds that you know you would cycle operationally that would drive sort of a greater pace of even dog growth. Thanks so much.
Yeah, so I'll take that the 2026 question.
Speaker Change: As we think about 2026, as I mentioned in the prepared remarks.
Speaker Change: We expect, from a top-line perspective, to be in that mid-teens growth level again.
and we expect to get back to improving margins.
Speaker Change: and I would expect to see that to come through both in the center margin as well as operating leverage on GNA. So you should expect to see that center margin improve.
Speaker Change: and the GNA leverage, which will both drive an improvement in the EBITDA margin. So, therefore, EBITDA will grow at a higher rate than our top line.
Speaker Change: And I wouldn't just say that's for 2026. I really do believe that's for.
Speaker Change: several years to come, which was why, in response to Craig's earlier question, we do see that there is a path to
Speaker Change: 15-20% EBITDA margin in the coming years as a result of being able to move both of those center margin as well as GNA levers.
Speaker Change: And I wouldn't point to any particular components or things like that, just more on the overall business.
Speaker Change: Ladies and gentlemen, that concludes our Q&A session. I will now turn the conference back over to Ken Burdick, CEO of LifeStands, for closing remarks.
Speaker Change: Thank you very much, operator. Just a quick close. I want to express once again my
Speaker Change: My sincere gratitude and appreciation to all of you that have
invested and demonstrated your interest in life stance.
Speaker Change: I am thrilled to be continuing my involvement with Life Stance as the executive chair because I truly believe
Speaker Change: that for all the progress we've made, we're still in the very early innings.
Speaker Change: It's going to be an incredible story as we continue to drive toward achieving our full potential as an organization. So, thank you again to the 10,000 employees that make this happen, and that will conclude our call. Thank you very much.
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