Good day, and welcome to the LifeStance Health First Quarter 2022 Earnings call. At this time all participants are in listen-only mode. After the speakers presentation, there will be a question-and-answer session. . We ask that you please limit yourself to one question and a follow-up. . As a reminder, this call may be recorded. I would now like to turn the call over to Monica Prokocki, Vice President Investor Relations. You may begin.  Monica Prokocki: Thank you. Good afternoon everyone and welcome to LifeStance Health First Quarter 2022, Earnings Conference Call. I'm Monica Prokocki, Vice President of Investor Relations. Joining me today are Mike Lester, Chief Executive Officer, Mike Bruff, Chief Financial Officer, and Danish Qureshi, Chief Growth 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 our earnings press release and SEC Filing. 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 the report results using non-GAAP financial measures, which we believe provide additional information for investors and help facilitate comparison of prior and past performance. A reconciliation to the most directly comparable GAAP measures is included in the earnings press release tables 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 LifeCam. 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 note care. As you may know, May as Mental Health Awareness Month, a time when we as a country raise the awareness about the importance of our society's mental health. Now, on always LifeStance is committed to helping people lead healthier, more fulfilling lives as the country's largest outpatient provider of in-person and virtual mental health care. Turning to results, we're pleased with the team's disciplined execution of our strategy, which drove solid performance in the first quarter, even through the recent pandemic surge and ongoing labor market dynamics. We continue to see strong demand for our services and consistent execution by the team, which was reflected in our results. Revenue for the first quarter was $203 million, representing growth of 42% and adjusted EBITDA was positive $12 million. As we've noted previously, revenue growth is primarily driven by our total clinician count. In the first quarter, we grew our net clinician base to 4,989, representing growth of 51% compared with the prior year and in line with our expectations, we believe that our first quarter performance positions us well for the balance of the year. As a result, we are reaffirming Full-Year guidance for revenue in the range of $865 to $885 million, Center Margin of $240 million to $255 million, and positive adjusted EBITDA in the range of $63 million to $67 million. Mike Bruff will provide additional detail about our financial performance in his section of our prepared remarks. Before turning to execution, I would like to remind everyone about what differentiates LifeStance's business model from pure play Telehealth companies in the market.…

Thanks Mike. Today going forward, I will frame my comments in the context of our long-term strategy, which includes balancing growth, profitability, and liquidity consider issues. But let me start with growth. LifeStance continue to deliver solid growth in the first quarter with revenue of $203 million at 42% year-over-year. We believe that first quarter revenue over achieved our expectations primarily due to Omicron having less of an impact in February and March relative to our initial estimates. Turning to profitability. In the first quarter, Center Margin $54 million increased 23% over the same period last year, driven by strong revenue growth. Adjusted EBITDA remained relatively flat year-over-year at $12 million or 6.2% of revenue. Adjusted EBITDA as a percentage of revenue declined due to the decrease in Center Margin as a percentage of revenue partially offset by improved average in G&A expenses. First quarter adjusted EBITDA exceeded our initial expectations primarily due to the flight revenue favorability, and delayed G&A expenses, which we expect will be utilized across the remainder of the year on planned investments. Turning to liquidity, LifeStance continues to be supported by a solid balance sheet. We exited the quarter with cash of $114 million, and a net debt of $177 million. In the first quarter, we generated positive $3 million of cash from operations. As we announced this afternoon with our earnings release, we entered into a new credit facility in early May. This facility will be used to repay our existing net long-term debt at a more favorable cost of debt in the existing credit facility. And at the close, we'll provide access to incremental capital to fund growth through up to $100 million in delayed draw loans, and $50 million in revolving loans both undrawn at close. Turning to guidance, as Mike mentioned, we are reaffirming our guidance for the Full Year. For the second quarter, we expect revenue of $209 million to $214 million. Center margin of $57 million to $61 million, and adjusted EBITDA of $12 million to $15 million. As we noted last quarter, we expect improvements in profitability in the second half of 2022 based on continued growth in our clinician base, and in leverage in the second half of the year, driven by our strategic decision to moderate our de novo center openings and scale our G&A. To summarize, we remain focused on delivering on our long-term strategy through balancing growth, profitability, and liquidity considerations. With that, I'll turn it back to Mike Lester for a few words before going to Q&A.

Thank you Mike. Our financial performance, execution, and differentiated strategy create strong momentum going into the balance of 2022, and for our path to achieve our goals. We have solidified our leadership role in the behavioral health delivery as a trusted partner to patients. As we build upon this trust, we will continue to drive meaningful improvements in the cost of care, access, and engagement across our flexible hybrid model. But also like to take a moment to recognize the continued contribution of all of our colleagues at LifeStance, who've played a vital role during the pandemic and are now looking forward to continue to build our best-in-class platform. We're proud of what they do every day in the lives of our patients. Mike, Danish and I will now take your questions, Operator.

Our first question comes from Ricky Goldwasser with Morgan Stanley. Your line is open.

Hi. Good evening. Just wanted to get a sense, how is retention -- clinician retention in the quarter and what are you seeing in terms of wage inflation and hiring?

I would say that our clinician retention has remained stable over the last couple of quarters. So we feel good about the value proposition that we have for clinicians and we haven't seen that change.

And then in terms of wage inflation and hiring?

I'm Sorry, could you say that again Ricky? Oh, wage inflation?

Yeah. Wage inflation and just the overall cost inflation.

Sure. Go ahead Danish. Do you want to answer that?

Sure. Happy to. We continue to see wage increase year-over-year as we always have. Our clinician type has always been in high demand and we have always recognized that in the way that we -- that our compensation structure, and build and plan for wage increases over time for all of our clinicians. Those increases have always been well received by our clinicians, and they all remain within our planning assumptions. So we feel good about where we're at in the year and having work.

Thank you.

Our next question comes from Lisa Gill with JP Morgan. Your line is open.

Thanks very much, and thanks for taking the question. I just want to understand how we should think about the progression of the year. And I think, Mike I heard you say that the clinicians coming in at 199, was in line with your expectation, but if I look back, it's been averaging like 400 a quarter. So as we think about the back half of the year, do you expect an acceleration in the number of clinicians that you bring in, or are there more things on the productivity side? I know you've talked to us about technology and some of the opportunities there and then also as we think about the clinicians, you talked about the acquisitions that you made. Can you talk about those 10 acquisitions? Did you bring clinicians and with that, and what level of productivity have you seen there?

Thank you Lisa. So, I guess I would start off by reminding everybody that there are 650,000 clinicians in the country today, and we're still less than 1% of that. So we don't guide for specific clinician count but expect to see a continued strong growth of our clinician base. And again, I think that reflects the value proposition and that that continues to resonate in the market.

Sure. Yeah in terms of Q1 our clinician enjoy the point with our internal expectation. We're going to experienced quarter-to-quarter fluctuation. As you pointed out, last year in Q1, we also had approximately 200 net ads, but from where we stand right now, we have a solid cadence on organic hiring. We continue to have a strong M&A pipeline that we feel good about and retention remains stabilized.

And so if we just think about dynasty, do you expect that the productivity gains to come as we move? I'm just looking at first half of you just gave us the guidance for the second quarter and you obviously reported the first quarter, and as I think about that acceleration into the back half of the year, I'm just trying to understand what the key drivers are going to be there, so much of the model is driving based on clinician. So is it really that they become that much more productive? Or do you think we're going to see an acceleration of incremental clinicians in the second quarter that will be productive in the back half of the year? Just see if you can help us to think that through in anyway?

We haven't guided on productivity. There are many variables to productivity, so timing of our M&A, there's a geo mix as we expand into newer states, as generally have a lower rate until we build that density and go renegotiate rates with payers. There's a variation in the number of business days in any given period. As we reach sort of a scale like we're in today, we see that our performance is becoming more subject to seasonality based on business days. A good example of that being second half of the year has less business days just due to the number of holidays in Q4 alone. So we still feel good about the way we hire and recruit. Mike would you like to add to that?

I think from a productivity perspective, when we think about our individual clinician, we haven't made any changes to our ramp assumptions, onboarding, et cetera. The general productivity of a clinician is still within the range of expectations that we've had, but as Mike said, if you look at the overall base, you want a quarter-to-quarter perspective, you will see come fluctuation just dependent on, again, the timing of certain things or where the timing of an M&A, or where in the country we made higher depending on the rates there. You can see this in some of our history as well, but at the individual clinician-based they're certainly within the range of our expectations.

Our next question comes from Chris Neamonitis with Jefferies, your line is open.

Great. Thanks everyone, and congrats on a nice quarter. So we recognized the in-person is always going to be equal to the offering, I will be the main dispute to the merits of the hybrid offering because the way you build the model out, at least with the KPIs, you provide publicly, it all comes down clinician count. So at what point should we think about clinician growth, maybe necessitating more real estate? How should we think about the leverage you can get out of your current physical footprint? Would you need to modify existing centers? And if you don't need to modify your footprint, how does that change the long-term outlook for Center Margin?

So our guidance assumes a very intentional moderation of de novo openings, and we've talked about this in the past. Pre –COVID-19, we were less and 5% of our visits were virtual. That's backed up into the high 90s and then tended to take down about a point amount. It's -- I would say it's stalled out a little bit in November, December, January because of Omicron and has continued to take down. We're about 79% in April actually. And we've -- we spend quite a bit of time talking with payers and we believe, as well as the payers believe that in the mental health space, this is going to shake out around 50-50. Does that take a year to get to 50-50? Does it take 2 years? We really don't know. But again, we're really agnostic to that because we have negotiated rate parity in the vast majority of our contracts. So we're just trying to be very, very prudent with our capital even those costs 79% today, we were all going to go to 50-50. If you believe 50-50 is the right answer, we can mathematically double the number of clinicians that we have today and not expand our physical footprint at all. So we feel really good about that, we feel good about the leverage that gives us in the market.

Got it. And then I appreciate the commentary on the differentiation versus pure-play Telehealth, but can you talk a bit about how your model is different versus those offerings in terms of patient acquisition and prescribing practices? And when you think about the visits that are driven off of referral,s what are you hearing from your referral base in terms of their preferences, in terms of where they redirect patients to? Thanks.

I can handle that. So, in terms of patient acquisition, our patient demand for service has never been stronger. Our hybrid model and diverse mix of prescribers and therapists is very comprehensive and we continue to believe in the marketplace. Our patient acquisition costs remain very low, because the majority of our agents come directly from three organic levers, one being sticky primary care referrals. So these are established relationships with PCP networks across the country that remain very healthy. Our in-network relationship would pair that drug membership our way, as well as organic online self referrals. So if you look at it in terms of the totality of spend, we're -- last year, we've spent less than 2% of revenue on marketing. This year, we're trending through less than 1%. So again, we are not -- this is not an acquisition model that is heavily based on bidding on key words, or non-sustainable referral patterns.

Our next question comes from Kevin Caliendo with UBS. Your line is open. Q - Kevin Caliendo: Thanks. I just want to -- you alluded to this, but I'm going to ask it this way. Just want to frame the 200 certain net adds. Is this a good organic number right now in certain terms of how we should think about the business going forward, businesses steady-state. I'm asking in the context of the long-term planning for the business. Interest rates are higher, inflation's higher, it feels like the job market's a little bit steadier now than it was before, people's net income or net-worth is probably not as high as it was a year ago broadly speaking, at least relative, is this fairway to frame your opportunity or is this just sort of a one data point?

Well, I'm think it's -- I'll let Danish jump in here. I think it's kind of one data point, I mean, in a kind of a perverted sense inflation could be viewed as our friend, and that from a labor market dynamics I think people are going to have to go to work, go back to work that chose to sit out for a while when they are paying a $8 a gallon for milk and gasoline. But historically we have a guided two clinician counts for the year. We still feel good about our ability to hire and retain clinicians. Danish do you have anything to add?

No, I just add that our overall mix of net clinician ads continue to skew heavier and heavier towards organic overtime. However, M&A is also the pipeline that we have remained robust. And well -- between those we're going to continue to see quarter-to-quarter fluctuations in the number of net adds. So I won't -- again, I won't read too much into single data points of 499 ads and what that indicates. Again, we feel very confident in the ability on our organic recruiting engine to continue to increase the number of ads and for M&A to be a meaningful contributor as well. Q - Kevin Caliendo: If I can ask one follow-up, for your Center Margin targets, can you take me through what are the pushes and pulls that get you to either side of the range? What would matter the most in terms of a margin at the high-end or low-end of your range?

Kevin we got nothing on Full Year, I assume. The main driver on that is going to be revenue growth. So we have already planned were our fixed costs in terms of the number of de novo adds therein with our centers, fixed cost of on-site, admin, very important administrative staff there, and so this really gets down to driving top-line growth. And with the unit economics of the clinician who's driving that -- those economic can be -- the growth in those economics over those fixed costs, and that will drive the high and the low end there. It's really about top-line growth.

Our next question comes from Jamie Perse with Goldman Sachs. Your line is open.

Hey, good afternoon guys. I wanted to follow-up on the clinician productivity question from earlier. Are there any stats you can provide just in terms of what percent of your clinicians are fully ramped and fully productive? Obviously, new clinicians are dilutive to that, so just trying to get a sense of where you are in clinicians ramping to productivity, and how that might impact how we think about gross margins for the rest of the year?

Sure, this is Danish. I can cover that in terms of how this plays out at the individual clinician level. So, we endured the ramp period we've talked about in previous call, there's a ramp period for clinicians regardless of whether they're coming in through organic recruiting or through M&A. On the organic side, there's typically afforded six month ramp from start to maturity, which is essentially at the point they have a full caseload. And then for M&A it's more of a step-function, but it is also four to six month time period from when we get to launch our platform and you start to enjoy the full benefits of them being on our contracts and the revenue's uplift from that. You see the same kind of time period on both. And then obviously you can play through the fact that retentions remain stabilized as the same level that we witnessed in previous quarters, kind of the net effect there.

Okay thanks. And then just maybe a follow-up on the contribution to growth from M&A. You guys previously guided to $50 to $70 million for the year. Looks like you did about $23 or so million in the first quarter so a good chunk of that already done. Any change in the cadence of M&A you expect this year, or if that $50 to $70 million is still the right number. Should we expect contribution from M&A to come down throughout the rest of the year?

No. We feel very comfortable with the 50 to 70 guidance that we've given out there. That just -- the ads are closed throughout the year. It's little bit harder controlling, it's just not linear, but we have are very robust pipeline and that will be -- we think that will be really in our control on how we decide to moderate that? But we feel comfortable with 50 to 70.

Our next question comes from Ryan Daniels of William Blair. Your line is open. Q - Nicholas Spiekhout: Hey guys. Nick Spiekhout for Ryan. Thanks for taking my questions. I guess going on that inflationary front, I'm just wondering how able are you guys to pass off things like wage inflation onto the payers? And is there a -- what's the amount of time that we typically take the work that through with contracts?

I'll let Danish talk about wage inflation from the clinician standpoint to begin with, but I'll start off by saying inflation has given us permission to pick up the phone and call every single one of the payers. And so you can rest assured that we're doing that. There is a lot of pressure on everybody from an inflation standpoint, and we will be using the market power that we have to have those discussions. Danish do you have anything --

No. That's exactly right, and we continue to engage in consistent conversations with all of the payers that we're in network with about this exact topic. They're very receptive and acknowlede the fact that this is something that everyone in healthcare needs to be focused on. But again, we've always planned for this, and we feel very comfortable that our planning assumptions savings account this year, any expected wage inflation, and that we've been prepped, we've passed appropriate increases launch to our clinicians, and that we have an appropriate pipeline of increases coming from payers to keep them in a good side. Q - Nicholas Spiekhout: Regarding you already made comment that those pressures are going to push a couple of people that back in the workforce which I can definitely appreciate, I'm just wondering if you guys seen any providers that might have left LifeStance a year or so ago, now reassessing where they're at and actually coming back to LifeStance. Basically trying to think it will be now, are we just getting clinicians back in the workforce, or we're getting specifically former LifeStance clinicians, back in?

I recently haven't seen that, there are lots of little anecdotes out there, but we haven't seen that in any significant way yet.

Our last question comes from Gary Taylor with Cowen, your line is open.

Good evening. Wanted to ask about DSO, which has been creeping up for about four quarters in a row and just see what was driving that, what would help bring that back down. And then just secondly, to put a finer point on Lisa's question, if you're doing $26 million EBITDA in the first half for your guidance, you've got to do $39 million in the second half to get to the midpoint of guidance, which means quarterly EBITDA has to move up towards almost $20 million a quarter, and just wanted to understand better what you thought the drivers of that were going to be, a little bit of that is revenue, but it really does look like the margin estimates or expectations have to be a fair amount higher in the second half.

Hey Gary, this is Mike Bruff. For the first question around DSO, accurate observation there. Our DSO has sort of crept up and immediately so often in the first quarter, and this has to do mostly with the increase pace of M&A that we saw toward the end of last year. And when we bring in that M&A and we work through integrations, we will at times intentionally hold claims until we work through the integration process, and move that clinics and those clinicians onto our rates. If we don't do that, then we might be reprocessing a lot of claims. So this has a little bit to do, actually quite a bit to do with the timing of some of our acquisitions. A large driver of the increase in accounts receivable here in the first quarter. So this is more to do about the timing of acquisitions, and we would expect relative to last year, this to be a little bit more tempered this year, and our expectations is to acquire between 50 and 70, or deploy $50 million to $70 million in capital for acquisitions this year. The second question with respect to adjusted EBITDA significantly increasing half-over-half, it is really two things. One as we said, the growth expectation in half-over-half in terms of revenue. And our decreasing or slowing the ramp -- or not ramp, pardon me. Slowing the pace of de novo center openings. But we will get a profitability boost by doing that in the back half of the year, and as I mentioned already in the prepared statements, in the first quarter, we had leverage in our G&A expenses which were about a 150 basis points lower than the first quarter last year in terms of a percentage of revenue. So those two things, driving increasing revenue over fixed center costs, and slowing fixed center costs, and then continuing to be maniacally focused on driving leverage in our operating expenses. And that's what we believe we'll get to our Full-Year guidance range. Q - Gary Taylor: That's helpful. Thank you.

Thank you. This concludes today's conference call. Thank you for participating, you may now disconnect. Everyone have a great day.