LifeStance Health (LFST) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) LifeStance reported $678.3 million in revenue for H1 2025, an 11% increase, significantly narrowing its net loss to $3.1 million from $44.4 million, while operating cash flow improved to $61.3 million Consolidated Balance Sheets Total assets increased to $2.15 billion as of June 30, 2025, driven by a $34.4 million rise in cash, while liabilities remained stable and equity grew to $1.47 billion Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $188,929 | $154,571 | | Total current assets | $358,849 | $312,510 | | Goodwill | $1,293,346 | $1,293,346 | | Total assets | $2,146,804 | $2,118,298 | | Liabilities & Equity | | | | Total current liabilities | $242,285 | $228,886 | | Long-term debt, net | $272,856 | $279,790 | | Total liabilities | $672,883 | $672,013 | | Total stockholders' equity | $1,473,921 | $1,446,285 | Consolidated Statements of Operations and Comprehensive Loss Q2 2025 revenue grew 11% to $345.3 million, with loss from operations significantly narrowed to $3.0 million and net loss reduced to $3.8 million, or ($0.01) per share Q2 and H1 2025 vs 2024 Performance (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $345,311 | $312,331 | $678,281 | $612,768 | | Loss from Operations | $(2,950) | $(15,947) | $(1,346) | $(32,719) | | Net Loss | $(3,791) | $(23,277) | $(3,082) | $(44,374) | | Diluted Loss Per Share | $(0.01) | $(0.06) | $(0.01) | $(0.12) | Consolidated Statements of Cash Flows Net cash from operations significantly increased to $61.3 million for H1 2025, with $14.9 million used in investing and $12.0 million in financing, resulting in a $34.4 million increase in cash Six Months Ended June 30, Cash Flow Summary (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $61,304 | $22,222 | | Net cash used in investing activities | $(14,923) | $(10,214) | | Net cash used in financing activities | $(12,023) | $(3,863) | | Net increase in cash and cash equivalents | $34,358 | $8,145 | Notes to Consolidated Financial Statements Notes detail accounting policies, revenue composition, and debt structure, highlighting 90% revenue from commercial payors, $1.29 billion in goodwill, and $286.4 million in outstanding debt - The company operates as a single reportable segment: mental health services[32] Revenue by Payor Mix (Six Months Ended June 30) | Payor | 2025 % of Revenue | 2024 % of Revenue | | :--- | :--- | :--- | | Commercial | 90% | 91% | | Government | 5% | 5% | | Self-pay | 4% | 3% | - As of June 30, 2025, Goodwill remained unchanged from year-end 2024 at $1.293 billion[49] - The company entered into a new credit agreement in December 2024, consisting of a $290 million term loan and a $100 million revolving facility. The company was in compliance with all debt covenants as of June 30, 2025[56][57] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 11% H1 2025 revenue growth to increased patient visits from clinician hiring, with Center Margin improving to $218.2 million and Adjusted EBITDA to $68.7 million, ensuring sufficient liquidity - The company's growth strategy is centered on expanding its clinician base, increasing patient visits, opening de novo centers, and leveraging relationships with payors and physicians[87][93][98] - As of June 30, 2025, the company employed 7,708 licensed mental health clinicians, who conducted 2.2 million patient visits in Q2 2025[88][91] Key Metrics and Non-GAAP Measures (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue | $678,281 | $612,768 | | Loss from operations | $(1,346) | $(32,719) | | Center Margin | $218,222 | $192,532 | | Adjusted EBITDA | $68,651 | $56,256 | - Revenue growth of 11% for H1 2025 was primarily driven by an 11% increase in patient visits resulting from a net increase of 748 clinicians. This was partially offset by a decrease in Total Revenue Per Visit (TRPV) due to a single payor rate decrease[115] Quantitative and Qualitative Disclosures about Market Risk The company manages interest rate risk on variable-rate debt through an interest rate swap, deeming a 100 basis point change immaterial to financial results - The company utilizes an interest rate swap to hedge its exposure to interest rate risk on its variable-rate debt, effectively fixing the rate on a notional value of $183.8 million as of June 30, 2025[144][52] - Management does not believe that a 100 basis point increase or decrease in interest rates would materially affect the company's financial condition or results of operations[145] Controls and Procedures Disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in accounting and IT resources, with remediation efforts ongoing but not yet fully resolved - Due to ongoing material weaknesses in internal control over financial reporting, the CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025[147] - The material weaknesses stem from an insufficient complement of resources in accounting/finance and IT, leading to deficiencies in accounting policies, procedures, and IT general controls (e.g., change management, user access)[148] - Remediation actions during the quarter included enhancing controls over prepaid expenses and improving user access controls for financial applications. However, the material weaknesses will not be considered fully remediated until the new controls operate effectively for a sufficient period[149][151] PART II. OTHER INFORMATION Legal Proceedings The company refers to Note 11, 'Commitments and Contingencies,' for details on legal proceedings, which discusses general contingencies - For details on legal proceedings, the company refers to Note 11, "Commitments and Contingencies," in the financial statements[157] Risk Factors No material changes to risk factors were reported since the filing of the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the filing of the Annual Report on Form 10-K for the year ended December 31, 2024[158] Other Items (2, 3, 4, 5, 6) This section covers standard disclosures, including no unregistered sales of equity securities, no defaults on senior securities, and no Rule 10b5-1 trading plan changes by directors or officers - The company reported no unregistered sales of equity securities or defaults on senior securities during the period[159][160] - No directors or officers entered into, modified, or terminated a Rule 10b5-1 trading plan during the fiscal quarter ended June 30, 2025[162]