LifeStance Health Group, Inc. [LFST] Filings

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10-Q 1 lfst-20230930.htm 10-Q 10-Q

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, 2023


☐	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 2300 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.

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, 2023, the registrant had 378,607,491 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	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	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		34

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; and our expected market opportunity 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, our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the "SEC") on March 9, 2023 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed with the SEC on August 9, 2023, 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.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED FINANCIAL STATEMENTS

For the quarterly period ended September 30, 2023

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except for par value)


	September 30, 2023			December 31, 2022
CURRENT ASSETS
Cash and cash equivalents	$	42,605		$	108,621
Patient accounts receivable, net		149,716			100,868
Prepaid expenses and other current assets		71,929			23,734
Total current assets		264,250			233,223
NONCURRENT ASSETS
Property and equipment, net		190,067			194,189
Right-of-use assets		180,685			199,431
Intangible assets, net		233,615			263,294
Goodwill		1,293,426			1,272,939
Other noncurrent assets		13,023			10,795
Total noncurrent assets		1,910,816			1,940,648
Total assets	$	2,175,066		$	2,173,871
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	10,400		$	12,285
Accrued payroll expenses		83,618			75,650
Other accrued expenses		91,030			30,428
Current portion of contingent consideration		8,964			15,876
Operating lease liabilities, current		43,604			38,824
Other current liabilities		3,258			2,936
Total current liabilities		240,874			175,999
NONCURRENT LIABILITIES
Long-term debt, net		248,371			225,079
Operating lease liabilities, noncurrent		191,515			212,586
Deferred tax liability, net		38,403			38,701
Other noncurrent liabilities		855			2,783
Total noncurrent liabilities		479,144			479,149
Total liabilities	$	720,018		$	655,148
COMMITMENTS AND CONTINGENCIES (see Note 12)
STOCKHOLDERS’ EQUITY
Preferred stock – par value $0.01 per share; 25,000 shares authorized as of September 30, 2023 and December 31, 2022; 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022		—			—
Common stock – par value $0.01 per share; 800,000 shares authorized as of September 30, 2023 and December 31, 2022; 378,607 and 375,964 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		3,788			3,761
Additional paid-in capital		2,162,766			2,084,324
Accumulated other comprehensive income		4,381			3,274
Accumulated deficit		(715,887	)		(572,636	)
Total stockholders' equity		1,455,048			1,518,723
Total liabilities and stockholders’ equity	$	2,175,066		$	2,173,871

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

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,
	2023			2022			2023			2022
TOTAL REVENUE	$	262,895		$	217,560		$	775,062		$	630,182
OPERATING EXPENSES
Center costs, excluding depreciation and amortization shown separately below		186,686			157,267			556,280			455,857
General and administrative expenses		130,945			81,248			317,425			288,176
Depreciation and amortization		19,621			17,884			58,220			50,311
Total operating expenses	$	337,252		$	256,399		$	931,925		$	794,344
LOSS FROM OPERATIONS	$	(74,357	)	$	(38,839	)	$	(156,863	)	$	(164,162	)
OTHER INCOME (EXPENSE)
Gain on remeasurement of contingent consideration		1,867			1,176			4,443			562
Transaction costs		—			(210	)		(89	)		(507	)
Interest expense, net		(5,477	)		(4,189	)		(15,688	)		(14,763	)
Other expense		(1	)		(144	)		(70	)		(144	)
Total other expense	$	(3,611	)	$	(3,367	)	$	(11,404	)	$	(14,852	)
LOSS BEFORE INCOME TAXES		(77,968	)		(42,206	)		(168,267	)		(179,014	)
INCOME TAX BENEFIT		16,385			4,353			26,964			10,106
NET LOSS	$	(61,583	)	$	(37,853	)	$	(141,303	)	$	(168,908	)
NET LOSS PER SHARE, BASIC AND DILUTED		(0.17	)		(0.11	)		(0.39	)		(0.48	)
Weighted-average shares used to compute basic and diluted net loss per share		372,476			357,520			365,556			354,057

NET LOSS	$	(61,583	)	$	(37,853	)	$	(141,303	)	$	(168,908	)
OTHER COMPREHENSIVE INCOME
Unrealized gains on cash flow hedge, net of tax		230			3,185			1,107			3,185
COMPREHENSIVE LOSS	$	(61,353	)	$	(34,668	)	$	(140,196	)	$	(165,723	)

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

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, 2023		378,005		$	3,782		$	2,141,247		$	4,151	$	(654,304	)	$	1,494,876
Net loss		—			—			—			—		(61,583	)		(61,583	)
Issuance of common stock upon vesting of restricted stock units		707			7			(7	)		—		—			—
Forfeitures		(105	)		(1	)		1			—		—			—
Other comprehensive income		—			—			—			230		—			230
Stock-based compensation expense		—			—			21,525			—		—			21,525
Balances at September 30, 2023		378,607		$	3,788		$	2,162,766		$	4,381	$	(715,887	)	$	1,455,048


	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

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

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 December 31, 2022		375,964		$	3,761		$	2,084,324		$	3,274	$	(572,636	)	$	1,518,723
Net loss		—			—			—			—		(141,303	)		(141,303	)
Adoption of ASU 2016-13		—			—			—			—		(1,948	)		(1,948	)
Issuance of common stock upon vesting of restricted stock units		4,713			47			(47	)		—		—			—
Forfeitures		(2,070	)		(20	)		(3,379	)		—		—			(3,399	)
Other comprehensive income		—			—			—			1,107		—			1,107
Stock-based compensation expense		—			—			81,868			—		—			81,868
Balances at September 30, 2023		378,607		$	3,788		$	2,162,766		$	4,381	$	(715,887	)	$	1,455,048


	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.

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)


	Nine Months Ended September 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(141,303	)	$	(168,908	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		58,220			50,311
Non-cash operating lease costs		30,225			—
Stock-based compensation		78,469			152,235
Loss on debt extinguishment		—			3,380
Amortization of discount and debt issue costs		1,592			1,351
Gain on remeasurement of contingent consideration		(4,443	)		(562	)
Other, net		5,105			144
Change in operating assets and liabilities, net of businesses acquired:
Patient accounts receivable, net		(48,484	)		(34,606	)
Prepaid expenses and other current assets		(52,293	)		(5,811	)
Accounts payable		(3,848	)		1,109
Accrued payroll expenses		7,622			(588	)
Operating lease liabilities		(30,109	)		—
Other accrued expenses		65,568			18,816
Net cash (used in) provided by operating activities	$	(33,679	)	$	16,871
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(29,106	)		(68,871	)
Acquisitions of businesses, net of cash acquired		(19,820	)		(40,294	)
Net cash used in investing activities	$	(48,926	)	$	(109,165	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt, net of discount		25,000			237,474
Payments of debt issue costs		(188	)		(7,266	)
Payments of long-term debt		(1,821	)		(181,230	)
Prepayment for debt paydown		—			(1,609	)
Payments of contingent consideration		(6,402	)		(12,290	)
Taxes related to net share settlement of equity awards		—			(478	)
Net cash provided by financing activities	$	16,589		$	34,601
NET DECREASE IN CASH AND CASH EQUIVALENTS		(66,016	)		(57,693	)
Cash and Cash Equivalents - Beginning of period		108,621			148,029
CASH AND CASH EQUIVALENTS – END OF PERIOD	$	42,605		$	90,336
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net	$	15,424		$	9,518
Cash paid for taxes, net of refunds	$	416		$	1,780
SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND FINANCING ACTIVITIES
Equipment financed through finance leases	$	—		$	264
Contingent consideration incurred in acquisitions of businesses	$

LifeStance Health Group, Inc. [LFST] Filings
10-Q	[2023-11-08]
10-Q	[2023-08-09]
10-Q	[2023-05-10]
10-K	[2023-03-09]
10-Q	[2022-11-09]
10-Q	[2022-08-10]
10-Q	[2022-05-11]
10-K	[2022-03-17]
10-Q	[2021-11-10]
10-Q	[2021-08-12]
S-1	[2021-05-17]