LifeStance Health Group, Inc.

Good afternoon, my name is Lauren and I will be your operator for today. At this time, I would like to welcome everyone to the Life Stance Health second quarter 2022 earnings call. 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 that time, simply press star followed by the number one on your telephone keypad. In the interest of time, please limit yourself to one question and one follow-up per analyst. If you would like to withdraw your question, again, press star one. Thank you. I would now like to turn the call over to Monica Prokoczki, Vice President of Investor Relations. You may begin your conference.

Thank you. Good afternoon, everyone, and welcome to LifeStamps Health second quarter 2022 earnings conference call. I'm Monica Prokoczki, Vice President of Investor Relations. Joining me today are Mike Lester, Chief Executive Officer, Dhanush Qureshi, Chief Operating Officer, and Mike Brough, Chief Financial Officer. We issued the earnings release and presentation after the market closed today. Both are available on the investor relations section of our website, investor.lifestance.com. In addition, a replay of this conference call will be available following the call. Before turning the call over to management for their prepared remarks, please direct your attention to the disclaimers about forward-looking statements included in the earnings press release and SEC filings. Today's remarks contain forward-looking statements, including statements about our financial performance outlook. Those statements involve risks, uncertainties, and other factors, including the possible future impact of the COVID-19 pandemic on our business that could cause actual results to differ materially. In addition, please note that we report results using non-GAAP financial measures, which we believe provide additional information for investors to help facilitate comparison of prior and past performance. A reconciliation to the most directly comparable GAAP measures is included in the earnings press release table and presentation appendix. Unless otherwise noted, all results are compared to the prior year comparative period. At this time, I'll turn the call over to Mike Lester CEO of Lifespan. Mike?

Thank you, Monica, and thanks to all of you for joining us today. To begin, I would like to emphasize the importance of our mission of improving access to trusted, affordable, and personalized mental health care. We are playing an integral role in the expansion of access to and delivery of personalized mental health care. In the rapidly changing U.S. health care environment, we have demonstrated that we can provide solutions at scale to meet individual needs in person or via telehealth. Fundamentally, we serve patients where they are and when they need us. That is a key driver of our success in the continued expansion of demand we are seeing. LifeStance is committed to helping people lead healthier or fulfilling lives as one of the country's largest outpatient providers of in-person and virtual mental health care. In recent weeks, we've seen strong market validation of our hybrid business model through the acquisition of one of our primary care counterparts in the tech-enabled multi-site provider space. This event highlighted the value and importance of innovative, patient-focused healthcare businesses to enhance the speed and efficacy of healthcare delivery relative to traditional providers while delivering a differentiated value proposition to payers, clinicians, and patients. The hybrid tech-enabled patient-focused model is at the heart of what we do at LifeStance in the behavioral health space and continues to resonate with the market. We often refer to LifeStance as primary care for your mind. We're focused on building the company for the long term to deliver on our mission of providing access to affordable, high-quality care through our hybrid delivery model. We are laser-focused on delivering the best care for our patients through our network of over 5,000 W-2-employed clinicians and a technology platform focused on providing clinicians and patients with a seamless experience. Innovative industry leaders and disruptors have recognized the fundamental value of our mission, our model, and our team. We are continuously engaged in discussions with potential business partners to expand access to high-quality mental health services, which is so critical now as our country faces a growing mental health crisis. The need for access to mental health care has reached unprecedented levels, as depression and anxiety have increased by fourfold in the last two years, and every 11 minutes, an American dies by suicide. We focus on our mission every day to meet the patient demand in the marketplace and to provide desperately needed mental health care services to patients across the country. Turning to results, this was a solid quarter for LifeStamps. We continue to see strong demand for our services and consistent execution by the team, which was reflected in our results. Revenues for the second quarter was $210 million, representing growth of 31%. As we've noted previously, revenue growth is primarily driven by our total clinician growth. In the second quarter, we grew our net clinician base to 5,226, representing growth of 31% compared with prior year and in line with our expectations. We continue to focus on balancing growth, profitability, and liquidity considerations. We aim to consistently generate the profitability necessary to fund our growth for the long term. In the second quarter, we grew center margin to $60 million, or 28.5% of revenue, and adjusted EBITDA to $15 million, or 7% of revenue, reflective of our focus on long-term margin expansion. By remaining disciplined in scaling our cost, we will improve leverage in our operating expenses while continuing to make key investments in scalable infrastructure. Turning to the full year, we now expect 2022 revenue and center margin toward the bottom end of our previously guided ranges of $865 to $885 million and $240 to $255 million, respectively. Due to removing slightly more than one business day from each June, July, and August, as a result of incremental clinician time off with no other changes to our guidance assumptions. Given pent-up demand for travel as pandemic restrictions relaxed, we found that clinicians took more time off in June relative to our planning expectations. We believe this impacted revenue by approximately $4 million in the second quarter. As a result, we've decided to carry that seasonality assumption forward into July and August to account for additional summer vacations. We believe the impact of this adjustment represents approximately $8 million in the back half of the year. For 2022 adjusted EBITDA, we are reaffirming our original guidance range of $63 to $67 million. We continue to focus our planned investments to grow and optimize our clinician base while continuing to drive leverage in our operating cost. Turning to the recent COO transition, we announced in the second quarter that Gwen Booth retired from her role as Chief Operating Officer here at LifeStance, and that Dhanush Qureshi, our Chief Growth Officer, would succeed her in that role. First, I would like to thank Gwen, who co-founded the company in 2017 with Dhanush and me, and who served as our COO since then. Gwen played an integral role in building our organization to what it is today. When Gwen retired from her position as the COO, I was delighted that she agreed to become the inaugural Executive Director of the LifeStance Health Foundation, which is focused on awarding grants and scholarships to nonprofit partners that improve mental health access for underrepresented groups. Danish was appointed as our next COO effective July the 1st, and has already begun a nationwide review of our operations. Many of you know Dhanush, a founding member of the LifeStance leadership team, who is highly qualified as we transition beyond the entrepreneurial growth stage to scale the company and optimize our overall operational and financial performance. Dhanush has an exceptional track record of translating differentiated strategy into strong operating results, and I'm confident in his leadership abilities to execute on our mission. He will be sharing some of his initial observations about the areas of opportunity in a few minutes. Dhanush is also playing a key role in updating our long-range strategic plan over the coming months. Turning to the foundation, the LifeStance Health Foundation was established in 2021 to award grants and scholarships to our organizations that share LifeStance's vision to improve mental health access. In the second quarter, we granted an award to the Trevor Project as part of our celebration of Pride Month in June. as a matching donation for local team fundraising for the organization. The Trevor Project is the world's largest suicide prevention and crisis intervention organization for LGBTQIA plus youth. Also, through the foundation, we're working with the American Foundation for Suicide Prevention to increase support for the new 988 crisis response line. In closing, we have positive momentum in the marketplace, driven by a compelling patient value proposition, a steadily expanding clinician population, and solid execution of our business. I am confident in the long-term trajectory of the business, given our sustainable competitive advantages and the team that we have in place. Donish?