Q1 2025 LifeStance Health Group Inc Earnings Call
Speaker Change: Thanks for joining us on this edition of The History Initiative For the Perseverance
RG: Today everyone and thank you for standing by. My name is Argy and I will be your conference operator today.
At this time,
RG: I would like to welcome everyone to Lifestance Health 1st quarter 2025 earnings call. All lines have been placed in mute to prevent any background noise.
RG: After the speakers remarks, there will be a question and answer session. If you would like to ask question during this time, simply press Tsar followed by the number one on your telephone keypad. If you would like to withdraw your question, press Tsar one again. Thank you.
RG: I would now like to turn the call over to Monica Prokocki. Please go ahead.
Monica Prokocki: Thank you operator. Good morning everyone and welcome to Lifestance Healt's first quarter of 2025 earnings conference call.
Monica Prokocki: I'm Monica Prokocki, Vice President of Finance and Investor Relations. Joining me today are Dave Bourdon, Chief Executive Officer, and Ryan McGurdy, Chief Financial Officer. In addition, Ken Burdick, our Executive Chairman, is also with us.
Monica Prokocki: We issued the earnings release and presentation before the market opened this morning. Both are available on the investor relations section of our website, investorsdownlifestands.com. In addition, a replay of this conference call will be available following the call.
Monica Prokocki: Before turning the call over to management for the prepared remarks, please direct your attention to the disclaimers about forward looking statements included in the earnings press release and SEC filings.
Monica Prokocki: Today's remarks contain forward-looking statements, including statements about our financial performance outlook, business model and strategy.
Monica Prokocki: Those statements involve risks and certainties and other factors, as noted in our periodic filings with the SEC that could cause actual results to different materially.
Monica Prokocki: In addition, please note that we report results using non-GAF financial measures, which we believe provide additional information for investors to help facilitate comparison of current and past performance.
Monica Prokocki: A reconciliation to the most directly comparable GAAP measures is included in the earnings press release tables and presentation appendix.
Monica Prokocki: 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 Dave Bourdon, CEO of Lifestance, Dave.
Thanks, Monica, and thank you all for joining us today.
Monica Prokocki: I'm pleased to report a solid quarter to start the year.
Monica Prokocki: We exceeded each of our guided metrics and remain confident in delivering on the full year for guidance ranges that we previously provided.
Monica Prokocki: I'd also like to officially welcome our new Chief Financial Officer, Ryan Grirty.
Monica Prokocki: He's been on board for two months and has hit the ground running.
Monica Prokocki: His deep financial and healthcare expertise will be invaluable as we continue to build on circumstances position as the leader and how patient mental healthcare.
Monica Prokocki: I'd like to briefly address the macro environment and this time of uncertainty for the broader economy as it relates to tariffs and a potential recession.
Monica Prokocki: First, as a US-based service business, we are not directly impacted by tariffs.
Second.
Monica Prokocki: Regarding the impact of a potential recession, we believe that our model is resilient to economic cycles.
Monica Prokocki: In fact, depending on what transpires, there are factors which can potentially mitigate headwinds in a challenging environment and could even be a benefit to Lifestance.
Monica Prokocki: For example, in a period of economic uncertainty, one individual's experience greater stress
Monica Prokocki: They may benefit from mental health care and this could result in increased demand for services.
Monica Prokocki: In addition, as consumers tighten up on spending, we believe the impact may be disproportionately felt by clinicians and practices that operate in a cash pay environment.
Monica Prokocki: Our commercially-insured model provides greater stability for clinicians and greater affordability for patients.
Monica Prokocki: which could drive both clinician growth and patient demand for Lifestance.
Monica Prokocki: In regard to our long-term view of the industry, we continue to expect increasing demand for mental health services as well as a migration from cash pay to utilizing insurance.
Monica Prokocki: Lifestance is well positioned to benefit from both of these trends.
Now, turning to our quarterly results [inaudible]
We delivered solid performance on multiple fronts.
First, double-digit adjusted EBITDA margins of 10.4% exceeded our expectations.
Additionally
Monica Prokocki: We achieved positive net income for the first quarter and Lifestance history as a public company and enhancing our confidence in achieving full-year positive net income in 2026.
Monica Prokocki: And we generated strong year-over-year improvement in free cash flow driven by stronger than expected earnings and the dedicated efforts of our collections team.
Turing to Operational Execution
Monica Prokocki: We continue to make progress in the first quarter toward streamlining and standardizing our operations and improving the underlying performance of the business.
Monica Prokocki: On the clinician front, our value proposition continues to resonate as our teen grew by over 150 in the quarter to more than seven and a half thousand clinicians.
Monica Prokocki: We continue to refine our value proposition to better align with clinician preferences and to create a sustainable economic model.
Monica Prokocki: We implemented a cash bonus incentive program for clinicians that's based on quality and productivity.
Monica Prokocki: This program, which became effective in May, is better aligned with the feedback from our clinicians and places greater emphasis on quality and access for our patients.
In conjunction, we sunset our stop based clinician incentive program.
as for the patient experience.
Monica Prokocki: This is driven by the fantastic work of our clinicians who continue to demonstrate an unparalleled commitment to our patients.
I'd like to briefly share an example of this.
Monica Prokocki: In the aftermath of the tragic wildfires in Los Angeles County, we saw increased demand for our services and our clinicians ensured that patients were able to quickly access the compassionate quality care for which Lifestance is known.
Monica Prokocki: Art Lifestance clinicians created a group therapy program for survivors of the fires and provided hybrid care to patients who had to relocate.
Monica Prokocki: The resilience and dedication of our Lifestance team during this crisis truly exemplifies our commitment to patients during the most challenging times in their lives.
Monica Prokocki: As for the operational strategic initiatives, we made progress on several fronts.
Monica Prokocki: For example, we have now completed the rollout of our digital patient checking tool, which is driving higher patient satisfaction, operational efficiencies, and significant improvements in patient collections.
Additionally, we continue to advance our focus on clinical excellence.
For example,
Monica Prokocki: We are working to increase access to additional services like TMS and Spravado for patients with treatment resistant depression
Monica Prokocki: In addition, to facilitate the comprehensive treatment of our patients, we have implemented an enhanced referral tool and process to improve access to these and other services.
Monica Prokocki: Finally, in 2023, we embarked on an EHR discovery process to evaluate options for enhancing our capabilities.
Monica Prokocki: We paused in 2024 to prioritize other initiatives like the Digital Patient Check-in Tool and are now picking the EHR initiative back up. We expect to complete our evaluation this year.
Enclosing
Monica Prokocki: Since stepping into the CEO role in March, I have been conducting listening sessions throughout the organization.
Monica Prokocki: One thing that has stood out in these sessions has been the immense passion and dedication the team has for our mission.
Monica Prokocki: Their tireless commitment along with their incredible capabilities make me more confident than ever that we have the right ingredients that Lifestance to continue expanding upon our existing leadership in delivering high quality, affordable mental health services.
Monica Prokocki: With that, I'll turn it over to Ryan to provide additional commentary on our financial performance and outlook. Brian .
Ryan McGroarty: Sixty, I'm excited to participate in my first Lifestance R&S call.
Ryan McGroarty: I join the company because of its compelling mission, significant growth opportunity, and unique market position.
Ryan McGroarty: Constarting in March, I've been very impressed with the talent of the organization.
Ryan McGroarty: The team's strong execution, financial discipline, and share passion for our mission.
Ryan McGroarty: I look forward to building on the track record of recent years of delivering under commitments and feel that the company is well positioned for long-term success in industry leadership.
Now, turning to our first quarter-performed
Ryan McGroarty: We delivered solid top line results with revenue of $333 million, representing growth of 11% year over year.
Ryan McGroarty: The mod of belt performance was driven by slightly better than expected clinician productivity in total revenue per visit.
Ryan McGroarty: Visit volumes of 2.1 million, increase 10% year-over-year, driven primarily by clinician growth.
Ryan McGroarty: On the clinician front, we grew our clinician base by 152 clinicians, or 10% year over year, bringing our total to 7,535 clinicians.
as part of our ongoing standardization efforts.
Ryan McGroarty: We refine our clinician definition, resulting in a small downward adjustment to clinician count.
Ryan McGroarty: We have provided the revised figures for each quarter of 2024 in our earnings presentation for comparison purposes.
Ryan McGroarty: Relative expectations, clinician productivity came in slightly ahead in the first quarter and was favorable to last year after normalizing for business days.
Total revenue per unit increased 1% year-over-year to 159.
Primarily driven by modest pay-a-rate increases.
This performance, which was slightly ahead of our expectation,
Ryan McGroarty: Includes the absorption of last year's rate decreases related to a single outlier pair.
Ryan McGroarty: It also includes the partial impact from the final rate decreased associated with this unique situation, which took effect on March 1st.
Turning the profitability
Ryan McGroarty: Centro margin of 110 million increased 16% year-over-year and was 33% as a percentage of revenue.
Ryan McGroarty: The Outperformance Recording was driven by the modest Revenue B as well as slightly lower
Ryan McGroarty: Adjected even of 35 million in the quarter exceeded our expectation in free from 25% year over year.
Ryan McGroarty: Adjusted even as a percentage of revenue was 10.4%, making this the second consecutive quarter in which we achieved double digit margin.
Ryan McGroarty: The outperformance recorder was primarily attributable to favorable center margin in G&A spending.
Ryan McGroarty: As Dave mentioned, we also achieved another milestone in the first quarter, finishing with net income of $700,000.
Ryan McGroarty: This is the first quarter in our history as a public company that we achieved positive in that income.
Ryan McGroarty: We view this as a key possibility metric for our business and increases our confidence in delivering positive net income and earnings per share for the full year in 2026.
Ryan McGroarty: Turning to liquidity in the first quarter, free cash flow with negative 10 million, which was an improvement of 17 million from the first quarter last year.
Ryan McGroarty: We exited the quarter with cash of $134 million and net long-term bet of $276 million.
Ryan McGroarty: We had additional capacity from an undrawn resolver of 100 million.
Ryan McGroarty: DFO for the quarter was 38 days and we remain confident in our ability to generate meaningful positive free cash flow for the full year.
Ryan McGroarty: Our leverage ratios continue to remain strong, with net and growth leverage of 1.2 and 2.3 times respectively.
Ryan McGroarty: This represents a significant improvement from the 3.1 net in 3.8 times gross leveraging Q1 of last year.
Ryan McGroarty: We have sufficient financial flexibility to run the business and execute on our strategy, including potential acquisition.
Ryan McGroarty: In terms of our outlook for the full year, we are maintaining our guidance ranges of 1.4 to 1.44 billion for revenue.
440 to 464 million for center margin.
and 130 to 150 million for Justice EBITDA.
Ryan McGroarty: We feel good about the outperformance in the first quarter, but it's still early in the year, and there's a great deal of work in front of us to execute on our commitments.
and the Justice Auditor of 28 to 34 million.
Ryan McGroarty: As we previously communicated, our annual guidance assumes you're over your revenue growth driven primarily by higher visit volumes with total revenue per visit being roughly flat.
Ryan McGroarty: The third and final rate decrease from the single outlier payer became effective in March.
Ryan McGroarty: We had disclosed that this would result in downward pressure on rates in the first part of 2025.
Ryan McGroarty: The second quarter is the first full quarter in which we will be absorbing this impact.
Ryan McGroarty: We believe that sequentially this will result in lower total revenue per visit, as well as lower Spencer and adjusted EBITDA margins as a percentage of revenue.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Ryan McGroarty: Consisting with our prior messaging, our guidance contemplates a ready split of roughly 50-50 in the first and second half of the year, with a second half slightly higher.
Ryan McGroarty: We anticipate that in addition to modest rate improvements from other players and continued growth in clinicians, we are also focused on better-filling existing clinician calendars, which should result in improved productivity.
Ryan McGroarty: The combination of these three drivers will lead to higher revenue in the back half of the year.
Ryan McGroarty: Similar to revenue, we expect earnings to build in the back half of the year driven by modest rate improvement along with higher visits and specialty revenue.
Ryan McGroarty: We continue to expect stock-based compensation of approximately 70 to 85 million in 2025.
Ryan McGroarty: As Dave mentioned, we are some setting our stop based incentive program for clinicians and replacing it with a cash bonus incentive program.
Ryan McGroarty: The annual grant provided in early 2025 were the last clinician grants for the program.
Ryan McGroarty: As a result of this change, we expect our stock-based compensation to decrease roughly 10 million per year beginning in 2026, the continuing over the next four years as the existing tranches of
Ryan McGroarty: These updates reflect their continued emphasis on proximal growth in discipline capital deployment. With that, I'll turn this back to Dave for his closing comments.
Thanks, Ryan.
Speaker Change: To summarize, we've had a solid start to 2025 and feel well positioned to deliver on our full-year commitments with work still to be done.
Speaker Change: The strength and dedication of the team gives us confidence in meeting these candidates while also setting the organization a first success in 2026 and beyond.
Operator, we'll now take questions.
Speaker Change: At this time, I would like to remind everyone in order to ask a question, press TARD and the number one on your telephone keypad, and to ensure we can take as many as possible, please limit your question into one at a follow-up.
Speaker Change: We will pause for just a moment to compile the Q&A roster
Speaker Change: Your first question comes from the line of Craig Hettenbach of Morgan Stanley . Peace go ahead.
Craig Head: Great, thanks and appreciate the commentary on the macro Dave to start. Can you just touch on just the backdrop for a clinician recruitment and retention, kind of what you're seeing in the marketplace and what your expectations are for this year?
Craig Head: Yeah, good morning, Craig. Thanks for the question. So first of all, from a macro perspective it remains a very competitive environment for attracting and retaining clinicians. I mean they have choices.
Craig Head: At the same time, the Lifestance Value Prop continues to resonate and you see that in the continued clinician growth that we've been delivering in recent years.
So specifically around turnover and retention continues to be stable.
Craig Head: This is obviously a big focus for us and it's been a big focus for the last couple of years and obviously we'd like to get retention to a higher level.
Craig Head: And we referenced a few things in the call and they're really driven by listening to our clinicians on the areas where we could improve the value prop for them.
Craig Head: And an example that are we want to better balance the filling of our existing clinician calendars and the hiring of new clinicians.
Craig Head: And then the second is what Ryan talked about is the cash-based quality and productivity program we just implemented and again both of those were in response to our clinician feedback.
[inaudible]
Speaker Change: Got it. And then just as a follow up on a total revenue per visit, continue to expect to be, you know, flatish this year, as you cycle through that one pay rate reduction, can you talk about just the underlying trends at other payers and, you know, what your expectation would be kind of heading into next year from a rate perspective.
Ryan McGroarty: Yeah, hey, Craig. This is Brian . I appreciate the question. So as stayed on the call, I'll do a run-through just in terms of our expectations as it relates to a total revenue per visit.
Ryan McGroarty: Overall, you kind of hit it that we expect it to be sufficiently lower in Q2 over Q1 due to the third final rate decrease from a single outlier pair.
Ryan McGroarty: In the back half, we expect rates to grow sequentially which will be driven by additional rate increases from other payers and also from specialty services.
Ryan McGroarty: So, as you stated as well, and we stayed on our Q4 call, no changes because we expect your PV to be roughly flat for the year, and then overall to your last question just in terms of what we're expecting kind of in the future.
Ryan McGroarty: We expect this is just temporary dislocation, as we cycle through 2026 and beyond, we expect to get back to load in mid-single digits.
helpful. Thank you.
Speaker Change: Your next question comes from the line, or Jamie Perse, of Goldman Sachs, please go ahead.
Jamie Perse: Hey, thanks. Good morning. Dave, maybe I'll start where you did just on, you know, the recession backdrop or, you know, potential for slower growth environment. Can you remind us what your typical out-of-pocket expenses look like and how that compares to other platforms or independent clinicians? And then more broadly, just, you know, if you were to face pressure, how would you, you know, navigate that type of situation? Would you invest through it? Would you, you know, are there cuts that you would
May just, you know, high level. How would you plan to navigate through that type of environment?
That you should appreciate the question.
Jamie Perse: First of all, from an out-of-pocket perspective for the patient, we don't view that typically as a barrier to care. It's very comparable to what a patient would pay out of pocket at a primary care physician office.
Jamie Perse: So, you're thinking of it as a minimal co-pay co-insurance. So, that's that's the first thing that's in your second question around the economy or potential recession and how we would navigate that.
Jamie Perse: with the hybrid and being in the insurance environment rather than cash pay, is that it gives us the flexibility to be able to navigate that environment and respond in a dynamic way.
Jamie Perse: Example I mentioned on the call is, it could actually increase.
The demand for our services, rather than decrease
It could also result
Jamie Perse: in patients and clinicians migrating from cash pay into the insurance environment.
Jamie Perse: because of the affordability challenges. So again, we would just need to react to depending on what's happening in the environment, but we feel really good about our model and being able to deal with whatever the economic environment is.
Speaker Change: Okay, thanks for that. I guess next on center costs and center costs per visit, they continue to be on a downward trajectory really over the last seven quarters. So I think I asked you about this last quarter and you said it was in the rear view mirror and wouldn't really repeat in 25. I hear your commentary on the payer update in QQ and all that, but can you help us think through what it's been.
Speaker Change: Driving the, you know, leverage your getting at the center level, you know, to what extent that the underlying drivers would continue even with the, you know, the pay or headwind starting into Q and just help think through fixed and variable costs there and that being a sustainable driver of the profitability improvement you've seen.
Ryan McGroarty: Yeah, perfect. So this is Brian again, so appreciate the question. So it just doesn't relate to center margins, but some very similar themes to what Dave went through in the last call, just in terms of that, you know, at this point, you know, we're expecting, you know, what is typical. Okay.
Ryan McGroarty: as it relates to increases and expected to carry forward to the remainder of the year. You know, additionally, and Dave mentioned this, and I mentioned a prepared comment just in terms of we have put a clinician and center plan in place as well. That's cash phase.
Ryan McGroarty: So when you think about the progression of Center Margin, and you kind of hit this in one of your talk points just in terms of, you know, TRPV, is it going to be relatively flat this year?
Ryan McGroarty: So we expect this to put some pressure on center margin for the full year as a percentage of revenue. I imagine that we expect you to step up and you kind of run that trend through the balance of the year. And then you run the trend but you get some improvement through the balance of the year.
Ryan McGroarty: And then you get the improvement as it relates to in the back half of the year, higher rates and specialty services and then to the other point that you want to just, you know,
Ryan McGroarty: And, you know, as I mentioned in the last response, you know, once we get through the rate dining index this year, we feel good about being able to continue to expand center margins in a meaningful way kind of going forward.
Okay, that's helpful. Thank you.
Moderator: Your next question comes from the line of Ryan Daniels of William Blair. Please go ahead.
Ryan Daniels: Obviously a lot of progress rolling out different digital initiatives for both your providers and your patients.
Ryan Daniels: I'm curious about the next phase. You mentioned the EHRs back after being put on the burner for a bit. Can you go into a little bit more detail about what the duration of that rollout might look like, what the cost might be, and then maybe most important, what are some of the key clinical operational benefits you think you can garner with a new EHR?
Ryan, this is Steve.
Ryan Daniels: It's really early days on the EHR. At a macro level, what we're trying to achieve with that is
Ryan Daniels: We're looking out three to five years and we need a platform that is going to allow us to continue to improve the clinician experience, the patient experience.
and Generate Operational Efficiency.
Ryan Daniels: So that's really what we're trying to achieve when we think about what we need.
Ryan Daniels: in the future for the EHR. We're in the early days of the discovery, so it's just premature to be commenting on...
Ryan Daniels: Costs, and I think of those as net costs because while you could have an increased cost for the EHR, you also have operational efficiencies as well as timing of rollout and impacts and things like that, but we will come back to you as we get further down the path.
Speaker Change: Okay, yeah, I appreciate that it's early. And then on the digital intake platforms, I'm curious you mentioned it's helping with kind of patient collections.
Speaker Change: Is that really just, you know, credit card on file so you're getting copays? Is it copay at the point of care? Is it insurance verification? It's probably a little bit of everything but I'm just curious, you know, how big of a benefit that's been and then what are some of the key drivers that's improving collections because of that system? Thanks.
[inaudible]
Yeah, appreciate the question.
Speaker Change: In regards to the digital patient check-in tool, as a reminder, we have almost 70% of our visits are virtual today. And prior to the check-in tool, we didn't have a automated way of collecting patient, patient cost share.
Speaker Change: Insurance cards, things like that. So this has been a real game changer for us in regards to not just the collecting of co-pays or co-insurance, but also the necessary information we need to be able to do the billing.
Speaker Change: 38 days, so that is a driver of one of the primary drivers of the better DSO performance.
Brian Tankilat: Here next question comes from the line of Brian Tanquilut of Jeffries, Pete Goethe
Thank you.
Brian Tankilat: Just curious how you're thinking about what that does in terms of retention and even recruitment. Obviously historically that was viewed as a differentiating factor in the recruitment process. So just curious how you're thinking about that part.
Yeah Brian , this is Dave, I'll take that one.
Brian Tankilat: So, first of all, it was a differentiator, but at the same time,
Brian Tankilat: It wasn't as appreciated as you would think in regards to our clinicians and as we talked to them about what they really want from a value proposition
Brian Tankilat: They, what they came back to us with was they wanted it to be an annual cash-based.
Brian Tankilat: Incentive program based on quality and improving access to patients rather than a multi-year stock-based program and so that really drove the change that we made. Again, it was just listening to our clinicians and what they want.
So we've... No, don't make me watch that. I'm sorry.
Yeah.
Brian Tankilat: Yeah, I gotcha, and then maybe Dave may follow up as I think about your comments in the macro environment.
Brian Tankilat: If we're thinking that maybe people get laid off and whatnot, and they end up in exchange plans, just curious what your exposure is to exchange plans or if you have contracts with most of the exchange plans in your markets and if that will be one of the levers or the tools.
Brian Tankilat: to kind of like protect you from the downside in a macro, in a decline in macro environment.
Sure, so...
Brian Tankilat: First of all, think of it as we have contracts with pretty much every major payer in the country for the markets that we play in.
Brian Tankilat: and that would include the various lines of business of which exchange would be one of those. So we do have coverage from that perspective. At the same time,
Brian Tankilat: I'd say we have limited exposure today to exchange and manage Medicaid. It's a total of about five to ten percent of our total revenue.
Speaker Change: Your next question comes from the line of Richard's close of Kenneth Gordon's newety. Please go ahead.
Richard Close: Congratulations on the results. Thanks for the question. In terms of the specialty services, how are you thinking about rolling that out throughout this system? Maybe an update of where you are now? And what are the hurdles to roll in those programs out? And how do you think about the contribution going forward? Well, that's a great question. Thank you very much. Thank you very much for the question. Thank you very much.
Richard, it's Dave. Thanks for the question.
Richard Close: First of all, from a specialty services perspective, we're really excited about it as an opportunity because it increases the services that we can provide to patients and that will result in improved care for them.
Richard Close: We're focusing primarily on neuropsych testing and treatment resistant depression services specifically there would be spravato and TMS. Now we have these services today but on a much smaller scale. I think of it as roughly about $50 million of our current revenue.
Richard Close: What we're doing is we're rolling those out to new markets.
Richard Close: Or expanding in the existing markets where we're doing it today, and I would expect this as you're looking out the next two to three years to grow at a much higher rate than our core business. Let's get started.
and over the long run we'll also have higher margins.
All right, thanks.
Speaker Change: Your next question comes from the line of Kevin Caliendo of UBS, please go ahead.
Dylan Finleon: Thank you very much in congrats on the quarter. This is Dylan Finley on for Kevin.
Dylan Finleon: Just starting off with a housekeeping question. I know you mentioned 70% of visits are virtual today. I just wanted to clarify, you know, if that's stable on a change on a year-to-year sequential basis. And then just confirm that reimbursement is largely the same between these types of visits.
Dylan Finleon: Dad, Dylan, this is Dave. I'll take that. So, first of all,
The exact number for virtual is 71 percent.
Speaker Change: in the first quarter. That is stable from the fourth quarter of last year, but is lower than than the prior year, same quarter. So that...
Speaker Change: It's been the in person has been slowly increasing as a general statement quarter to quarter, but again, this first quarter it was stable.
Speaker Change: Another thing to point out when we think about virtual versus in-person is that typically the first appointment for a new patient is at a higher percentage. It's typically about 8-10% higher in-person rate than our overall book of business.
Speaker Change: So that's the first part of your question. The second part of your question around reimbursement, we generally have parody language in our contracts and we get reimbursed at the same rate regardless of whether it's in person or virtual.
Speaker Change: Thank you. That's helpful. And then just as a follow-up here, you know, I know there's no consideration in your guide for M&A, but perhaps just an update on, you know, what kind of assets you would consider are there any particular state that would be more or less appealing to you, you know, from a reimbursement standpoint or from a supply demand standpoint, anything around timing or that would be appreciated.
Yes, this is Dave, I'll take that one
Speaker Change: So in regards to M&A, the first thing that I'd want to reinforce is that our primary growth driver is organic and I think of M&A as complimentary.
Speaker Change: and we've mentioned on previous calls, we're going to be very disciplined and it's got to make sense financially.
No.
is a tuck-in practice and a part of your question.
we would be using that from a geographic perspective.
New States
Speaker Change: Now, I'm not going to comment on specific metros at this point, but we certainly have opportunities throughout the country. Again, in states, we're already in today, we're in 33 states, but there are major cities in those states where we don't have practices, as well as there's some states of density that we do not.
Speaker Change: Have businesses in today. So that's the first bucket and then the second bucket would be around capabilities as we look out three to five years and the kinds of capabilities that we believe will need.
Speaker Change: Digital Therapeutics, things like that, or especially services being another example, we will consider doing acquisitions if we feel that would further accelerate our strategy, and again, we'd be disciplined and the math has to work.
Speaker Change: Again, if you would like to ask question, press star one on your telephone keypad. Your next question comes from the line of Stephen Ditchert of Keyband Capital Markets. Please go ahead.
Stephen Dichert: Hey guys, thanks for the question. Can you talk about how the expiration of virtually prescribing scheduled two through five or four control sentences at the end of this year?
Speaker Change: Good Benefit, Lifestance, and then as a follow-up, with your plan to open 25 to 30 de Novos this year, what's the thought process and deciding where to open to use geographically? Thanks.
Speaker Change: says you mentioned there's the potential that the relaxation from the public health emergency that allowed the prescribing of controlled substances virtually that that may expire at the end of this year.
Speaker Change: for a push to at least see a patient that's getting controlled substances once a year in person so that so we so we welcome this change.
Speaker Change: seeing 70 to 80 percent of our current patients that are getting controlled substance in person once a year. So it's not a major lift for us to make this change and again, we'd welcome it.
In regards to the Denovo expansion,
Speaker Change: Have you think about these new builds and two buckets? So, the first is a replacement of an existing center. So, as a reminder, we grew through 100 acquisitions, and we have a lot of acquired centers that as they come up for renewal. So, let's move on.
Speaker Change: Don't fit us for the purpose that we need for the future for a lifestance. And this just doesn't fit our model. So as a result we will replace those
Speaker Change: Those old centers are acquired centers with the Lifestance Dennovo models. That's the first bucket and then the second bucket, which I think more where you are going is from a growth perspective.
Speaker Change: and they can be a couple of flavors. The first is, it could be a new suburb, a new city where we're establishing a presence because we believe the ingredients are there from both patient demand as well as our ability to recruit.
Speaker Change: Or the second is it's an existing geography and what we're doing is evaluating the usage of our existing centers.
Speaker Change: And as we look out 12, 24 months, we can see that we're going to start being space constrained, and so then we'll add additional new centers.
Great. Thank you.
Speaker Change: That's all for our Q&A session and we appreciate your participation. I will now turn the call back over to David Bourdon, CAO, please go ahead.
Dave Bourdon: Hey, thanks, operator. I'd like to thank our 10,000 mission-driven teammates who make sure that our patients get the quality care that they need and deserve.
Dave Bourdon: I continue to be inspired by the passion and the resilience that you all bring to work every day.
Dave Bourdon: But this is a challenging time for many in our country and in this environment our services are needed more than ever.
Dave Bourdon: We look forward to furthering the positive impact that we can have on the millions of Americans whose lives can be improved by the mental health care services that Lifestance provides.
Dave Bourdon: I want to thank you all for your time this morning and your interest in Lifestance, operator
Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining, you may now disconnect.