10-Q 1 lfst-20220930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40478

 

LifeStance Health Group, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

86-1832801

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

4800 N. Scottsdale Road Suite 6000

Scottsdale, Arizona

85251

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (602) 767-2100

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

LFST

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of November 1, 2022, the registrant had 375,986,406 shares of common stock, $0.01 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Consolidated Balance Sheets

2

 

Consolidated Statements of Operations and Comprehensive Loss

3

 

Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statement of Changes in Redeemable Units and Stockholders'/Members' Equity

4

 

Consolidated Statements of Cash Flows

6

 

Notes to Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

32

Item 4.

Controls and Procedures

32

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signatures

38

 

 

i


 

 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. For example, all statements we make relating to: our ability to grow our business, expand access to our patients and our payors and invest in our platform; our plan to partner with additional hospital systems, large primary care groups and other specialist groups; our expectation that we will continue to open de novo center and acquire new centers; our growth rates and financial results; our plans and objectives for future operations, growth or initiatives; and strategies are forward-looking statements.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, factors and assumptions described in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the "SEC") on March 17, 2022, including, among other things:

we may not grow at the rates we historically have achieved or at all, even if our key metrics may imply future growth, including if we are unable to successfully execute on our growth initiatives and business strategies;
if we fail to manage our growth effectively, our expenses could increase more than expected, our revenue may not increase proportionally or at all, and we may be unable to execute on our business strategy;
our ability to recruit new clinicians and retain existing clinicians;
if reimbursement rates paid by third-party payors are reduced or if third-party payors otherwise restrain our ability to obtain or deliver care to patients, our business could be harmed;
we conduct business in a heavily regulated industry and if we fail to comply with these laws and government regulations, we could incur penalties or be required to make significant changes to our operations or experience adverse publicity, which could have a material adverse effect on our business, results of operations and financial condition;
we are dependent on our relationships with affiliated practices, which we do not own, to provide health care services, and our business would be harmed if those relationships were disrupted or if our arrangements with these entities became subject to legal challenges;
we operate in a competitive industry, and if we are not able to compete effectively, our business, results of operations and financial condition would be harmed;
the impact of health care reform legislation and other changes in the healthcare industry and in health care spending on us is currently unknown, but may harm our business;
if our or our vendors’ security measures fail or are breached and unauthorized access to our employees’, patients’ or partners’ data is obtained, our systems may be perceived as insecure, we may incur significant liabilities, including through private litigation or regulatory action, our reputation may be harmed, and we could lose patients and partners;
our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;
our existing indebtedness could adversely affect our business and growth prospects; and
the other factors set forth under “Risk Factors.”

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this report. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise, except as required by law.

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

 

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED FINANCIAL STATEMENTS

For the quarterly period ended September 30, 2022

 

 

1


 

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except for par value)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

90,336

 

 

$

148,029

 

Patient accounts receivable, net

 

 

113,284

 

 

 

76,078

 

Prepaid expenses and other current assets

 

 

48,967

 

 

 

42,413

 

Total current assets

 

 

252,587

 

 

 

266,520

 

NONCURRENT ASSETS

 

 

 

 

 

 

Property and equipment, net

 

 

193,393

 

 

 

152,242

 

Intangible assets, net

 

 

272,473

 

 

 

300,355

 

Goodwill

 

 

1,249,793

 

 

 

1,204,544

 

Other noncurrent assets

 

 

11,416

 

 

 

3,448

 

Total noncurrent assets

 

 

1,727,075

 

 

 

1,660,589

 

Total assets

 

$

1,979,662

 

 

$

1,927,109

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

$

7,947

 

 

$

14,152

 

Accrued payroll expenses

 

 

61,576

 

 

 

60,002

 

Other accrued expenses

 

 

29,303

 

 

 

26,510

 

Current portion of contingent consideration

 

 

10,816

 

 

 

14,123

 

Other current liabilities

 

 

2,630

 

 

 

1,965

 

Total current liabilities

 

 

112,272

 

 

 

116,752

 

NONCURRENT LIABILITIES

 

 

 

 

 

 

Long-term debt, net

 

 

212,042

 

 

 

157,416

 

Other noncurrent liabilities

 

 

66,956

 

 

 

50,325

 

Contingent consideration, net of current portion

 

 

1,481

 

 

 

3,307

 

Deferred tax liability, net

 

 

55,408

 

 

 

54,281

 

Total noncurrent liabilities

 

 

335,887

 

 

 

265,329

 

Total liabilities

 

$

448,159

 

 

$

382,081

 

COMMITMENTS AND CONTINGENCIES (see Note 14)

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Preferred stock – par value $0.01 per share; 25,000 shares authorized as of
   September 30, 2022 and December 31, 2021;
0 shares issued and outstanding as
   of September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock – par value $0.01 per share; 800,000 shares authorized as of
   September 30, 2022 and December 31, 2021;
376,042 and 374,255 shares
   issued and outstanding as of September 30, 2022 and December 31, 2021,
   respectively

 

 

3,761

 

 

 

3,743

 

Additional paid-in capital

 

 

2,050,537

 

 

 

1,898,357

 

Accumulated other comprehensive income

 

 

3,185

 

 

 

 

Accumulated deficit

 

 

(525,980

)

 

 

(357,072

)

Total stockholders' equity

 

 

1,531,503

 

 

 

1,545,028

 

Total liabilities and stockholders’ equity

 

$

1,979,662

 

 

$

1,927,109

 

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

 

2


 

LIFESTANCE HEALTH GROUP, INC.

consolidated statements of operations and comprehensive loss

(unaudited)

(In thousands, except for Net Loss per Share)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

TOTAL REVENUE

 

$

217,560

 

 

$

173,835

 

 

$

630,182

 

 

$

477,516

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Center costs, excluding depreciation and
   amortization shown separately below

 

 

157,267

 

 

 

121,783

 

 

 

455,857

 

 

 

330,258

 

General and administrative expenses

 

 

81,248

 

 

 

162,943

 

 

 

288,176

 

 

 

281,073

 

Depreciation and amortization

 

 

17,884

 

 

 

13,777

 

 

 

50,311

 

 

 

38,779

 

Total operating expenses

 

$

256,399

 

 

$

298,503

 

 

$

794,344

 

 

$

650,110

 

LOSS FROM OPERATIONS

 

$

(38,839

)

 

$

(124,668

)

 

$

(164,162

)

 

$

(172,594

)

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on remeasurement of contingent
   consideration

 

 

1,176

 

 

 

(906

)

 

 

562

 

 

 

(1,463

)

Transaction costs

 

 

(210

)

 

 

(126

)

 

 

(507

)

 

 

(3,656

)

Interest expense

 

 

(4,189

)

 

 

(3,503

)

 

 

(14,763

)

 

 

(35,309

)

Other expense

 

 

(144

)

 

 

 

 

 

(144

)

 

 

(1,445

)

Total other expense

 

$

(3,367

)

 

$

(4,535

)

 

$

(14,852

)

 

$

(41,873

)

LOSS BEFORE INCOME TAXES

 

 

(42,206

)

 

 

(129,203

)

 

 

(179,014

)

 

 

(214,467

)

INCOME TAX BENEFIT

 

 

4,353

 

 

 

8,751

 

 

 

10,106

 

 

 

15,300

 

NET LOSS

 

$

(37,853

)

 

$

(120,452

)

 

$

(168,908

)

 

$

(199,167

)

Accretion of Redeemable Class A units

 

 

 

 

 

 

 

 

 

 

 

(36,750

)

NET LOSS AVAILABLE TO COMMON
   STOCKHOLDERS/MEMBERS

 

$

(37,853

)

 

$

(120,452

)

 

$

(168,908

)

 

$

(235,917

)

NET LOSS PER SHARE, BASIC AND DILUTED

 

 

(0.11

)

 

 

(0.35

)

 

 

(0.48

)

 

 

(0.73

)

Weighted-average shares used to compute basic and
   diluted net loss per share

 

 

357,520

 

 

 

343,394

 

 

 

354,057

 

 

 

321,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(37,853

)

 

$

(120,452

)

 

$

(168,908

)

 

$

(199,167

)

OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on cash flow hedge, net of tax

 

 

3,185

 

 

 

 

 

 

3,185

 

 

 

 

COMPREHENSIVE LOSS

 

$

(34,668

)

 

$

(120,452

)

 

$

(165,723

)

 

$

(199,167

)

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

 

3


 

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited)

(In thousands)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated Other Comprehensive

 

 

Accumulated

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2022

 

 

376,181

 

 

$

3,763

 

 

$

2,015,665

 

 

$

 

 

$

(488,127

)

 

$

1,531,301

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,853

)

 

 

(37,853

)

Issuance of common stock upon
   vesting of restricted stock units

 

 

46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeitures

 

 

(185

)

 

 

(2

)

 

 

(863

)

 

 

 

 

 

 

 

 

(865

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

3,185

 

 

 

 

 

 

3,185

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

35,735

 

 

 

 

 

 

 

 

 

35,735

 

Balances at September 30, 2022

 

 

376,042

 

 

$

3,761

 

 

$

2,050,537

 

 

$

3,185

 

 

$

(525,980

)

 

$

1,531,503

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at June 30, 2021

 

 

374,149

 

 

$

3,742

 

 

$

1,669,480

 

 

$

(128,590

)

 

$

1,544,632

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(120,452

)

 

 

(120,452

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

120,689

 

 

 

 

 

 

120,689

 

Balances at September 30, 2021

 

 

374,149

 

 

$

3,742

 

 

$

1,790,169

 

 

$

(249,042

)

 

$

1,544,869

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated Other Comprehensive

 

 

Accumulated

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2021

 

 

374,255

 

 

$

3,743

 

 

$

1,898,357

 

 

$

 

 

$

(357,072

)

 

$

1,545,028

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(168,908

)

 

 

(168,908

)

Issuance of common stock upon
   vesting of restricted stock units

 

 

2,000

 

 

 

20

 

 

 

(57

)

 

 

 

 

 

 

 

 

(37

)

Forfeitures

 

 

(213

)

 

 

(2

)

 

 

(1,048

)

 

 

 

 

 

 

 

 

(1,050

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

3,185

 

 

 

 

 

 

3,185

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

153,285

 

 

 

 

 

 

 

 

 

153,285

 

Balances at September 30, 2022

 

 

376,042

 

 

$

3,761

 

 

$

2,050,537

 

 

$

3,185

 

 

$

(525,980

)

 

$

1,531,503

 

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

 

4


LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE UNITS AND STOCKHOLDERS'/MEMBERS’ EQUITY

(unaudited)

(In thousands)

 

 

Class A Redeemable Units

 

 

 

Class A-1 Common Units

 

Class A-2 Common Units

 

Class B Common Units

 

Common Stock

 

Additional
Paid-in

 

Accumulated

 

Total Stockholders'/
Members'

 

 

Units

 

Amount

 

 

 

Units

 

Amount

 

Units

 

Amount

 

Units

 

Amount

 

Units

 

Amount

 

Capital

 

Deficit

 

Equity

 

Balances at December 31, 2020

 

35,000

 

$

35,000

 

 

 

 

959,563

 

$

959,563

 

 

49,946

 

$

49,946

 

 

 

$

 

 

 

$

 

$

1,452

 

$

(13,125

)

$

997,836

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(199,167

)

 

(199,167

)

Issuance of common units

 

 

 

 

 

 

 

 

 

 

 

962

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,000

 

Accretion of Redeemable Class A
   Units

 

 

 

36,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,750

)

 

(36,750

)

Issuance of common units for
   acquisitions of businesses

 

 

 

 

 

 

 

 

 

 

 

725

 

 

1,486