Earnings Call Transcript - LFST Q1 2026

Mark, Operator / Conference Operator

Hello, and thank you for standing by. My name is Mark, and I will be your conference operator for today. Operator provided instructions. Thank you. And I would now like to turn the call over to Monica Prokocki. Please go ahead.

Monica Prokocki, Vice President, Finance and Investor Relations

Thank you, operator. Good morning, everyone, and welcome to LifeStance Health's First Quarter 2026 Earnings Conference Call. I'm Monica Prokocki, Vice President of Finance and Investor Relations. Joining me today are Dave Bourdon, Chief Executive Officer; and Ryan McGroarty, Chief Financial Officer. We issued the earnings release and presentation before the market opened this morning. Both are available on the Investor Relations section of our website, investor.lifestance.com. In addition, a replay will be available following the call. Before turning 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, business model and strategy. Those statements involve risks, uncertainties and other factors as noted in our periodic filings with the SEC that could cause actual results to differ materially. Please note that we report results using non-GAAP financial measures, which we believe provide additional information for investors to help facilitate comparison of current 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 comparable period in the prior year. At this time, I'll turn the call over to Dave Bourdon, CEO of LifeStance. Dave?

David Bourdon, Chief Executive Officer

Thanks, Monica, and thank you all for joining us today. We had an exceptional start to the year at LifeStance. We exceeded each of our guided metrics with strong revenue growth of over 21% and more than $50 million in adjusted EBITDA, a 48% increase over last year. We grew our clinician base by more than 300 in the quarter to over 8,300 clinicians. We also delivered meaningful year-over-year improvements in clinician productivity, reflecting the continued impact of the initiatives we implemented last year. Given the outperformance in the quarter, we are raising our full year guidance across all metrics. And later, Ryan will provide the details on our improved view of 2026. From a macro environment perspective, we continue to see a growing demand for high-quality mental healthcare, as well as patients seeking more affordable solutions, driving a shift from cash pay to insurance coverage. LifeStance is uniquely positioned to meet these needs. We're seeing this through our success in growing our clinician base, attracting new patients and driving clinical and operational excellence. Regarding operational execution, the momentum we established in 2025 with strong visit growth and clinician productivity carried into the first quarter. These efforts centered around enhancements to new patient conversion and engagement. Importantly, these initiatives are embedded in our operating model and supported by clinician level visibility, education and incentives, giving us confidence in their durability as we continue to scale our clinician base. Turning to technology. We continue to apply digital and AI tools in focused, practical ways to improve patient access, clinician experience and operational efficiency. Across the organization, digital and AI tools, including digital patient check-in, AI-driven workflows and robotic process automation support operational excellence, particularly in areas with heavy manual processes such as revenue cycle management. In addition, AI-enabled scheduling tools support our new patient telephone booking process, resulting in converting more calls to appointments. We are also rolling out AI-assisted clinical documentation to reduce administrative burden and cognitive load for clinicians, enabling them to spend more time with patients, which should improve patient and clinician satisfaction. As per our new EHR, last quarter, we announced the selection of a best-in-class vendor with implementation expected to begin this year and the transition occurring during 2027. Our focus has now shifted to organizational readiness and early clinician engagement. The transition to the new EHR will support our ability to scale efficiently, integrate AI more seamlessly and improve the consistency of both the clinician and patient experience, while delivering clinical excellence. There remains a tremendous opportunity for technology to further enable the business. We will remain focused on prioritizing use cases with clear clinical and operational impact as we deploy these tools more broadly across the organization. This approach to technology strengthens LifeStance's leadership position, while reinforcing clinician trust and the quality of care we deliver to patients. Turning to geographic expansion. We see a significant opportunity ahead to increase both density within our existing markets and to expand our geographic footprint. As we've discussed, tuck-in acquisitions are our preferred way of entering new MSAs. And after three years, we're back to executing on M&A, with a disciplined and targeted approach. We have established a strong pipeline of potential acquisitions and expect tuck-ins going forward to be a meaningful part of our geographic expansion strategy. We're pleased that during the first quarter, we opened two new markets through acquisitions, adding high-quality practices that align well with our model and our culture. While these deals will contribute a nonmaterial amount of revenue this year, they establish new market entry points to support future growth in 2027 and beyond. Where attractive tuck-in opportunities are not available to us, we'll continue to enter new geographies with a de novo approach. Finally, I'd like to highlight our progress on clinical excellence. Our clinicians and the positive impact we're having on patients is the foundation of everything we do at LifeStance. Measuring how we're improving patient outcomes at scale is critical to ensuring our care is effective, and we also use these findings to identify opportunities to improve that care. In April, we published new clinical outcomes data from nearly 180,000 LifeStance patients that showed roughly three-quarters benefited from clinically significant improvements in their anxiety and depression, further validating our commitment to clinical excellence. These clinical outcomes, combined with strong patient satisfaction as reflected in our over 4.7 out of 5 Google Stars rating for our over 575 centers, reinforce that our model is working. And importantly, these strong patient outcomes and high satisfaction scores are the direct result of the dedication of our clinicians and our ongoing commitment to enable our clinicians to deliver high-quality care to patients. With that, I'll turn it over to Ryan to provide additional commentary on our financial performance and outlook.

Ryan McGroarty, Chief Financial Officer

Thanks, Dave. I am pleased with the team's operational and financial performance in the first quarter, which exceeded our expectations. For the quarter, revenue grew 21% to $403 million. Revenue surpassed our expectations from both better-than-expected total revenue per visit and visit volumes. Visit volumes of 2.5 million increased 18%. The outperformance was driven by a combination of better-than-expected clinician productivity and net clinician adds. Total revenue per visit of $163 increased 3% and was modestly ahead of our expectations. Our visits per average clinician were strong once again, increasing 7% year-over-year for the second consecutive quarter. This was achieved while at the same time adding 309 clinicians in the first quarter, bringing our total clinician base to 8,349, representing growth of 11%. Turning to profitability. Center Margin of $136 million in the quarter increased 24% and was 33.7% as a percentage of revenue. This came in ahead of our expectations, primarily due to the revenue beat as well as lower spending in center costs. Adjusted EBITDA increased 48% to $51 million in the quarter, which was very strong and exceeded our expectations. This resulted in a margin as a percentage of revenue of 12.7%. The outperformance in the quarter was attributable to favorable Center Margin. We also finished with positive net income of $14 million in the quarter as compared to $1 million last year. Turning to liquidity. We generated robust free cash flow of $22 million in the first quarter, which was an improvement of $32 million from the first quarter of last year. We exited the quarter with a strong balance sheet, including a cash position of $195 million and net long-term debt of $263 million. Importantly, that cash balance reflects $49 million deployed towards share repurchases during the quarter following the Board's $100 million authorization in February. With net leverage of 0.5x and gross leverage of 1.6x, we believe we are well positioned with significant financial flexibility to support the business and execute on our strategic priorities. In terms of our outlook for the full year, we are raising our revenue range by $25 million at the midpoint to $1.64 billion to $1.68 billion. The midpoint of the revenue guidance implies a growth rate of 17%. We are also raising our Center Margin range by $21 million at the midpoint to $547 million to $571 million and raising our adjusted EBITDA range by $15 million at the midpoint to $200 million to $220 million. The midpoint of the adjusted EBITDA guidance implies a margin as a percentage of revenue of 12.7%, which is over 150 basis points of margin expansion year-over-year. As we previously communicated, our annual guidance assumes year-over-year revenue growth driven primarily by higher visit volume, combined with low to mid-single-digit increases to our total revenue per visit. Additionally, we continue to expect stock-based compensation of approximately $60 million to $70 million this year. For the second quarter, we expect revenue of $405 million to $425 million; Center Margin of $135 million to $147 million; and adjusted EBITDA of $50 million to $60 million. As we look beyond 2026, we continue to expect annual revenue growth in the mid-teens and to achieve mid-teens adjusted EBITDA margins by full year 2028. The macro trends we're seeing across mental healthcare, along with the momentum in our performance, reinforce our confidence in that outlook. With that, I'll turn it back to Dave for his closing comments.

David Bourdon, Chief Executive Officer

Thanks, Ryan. This is an exciting time for LifeStance. Demand for mental healthcare is growing while affordability is increasingly important for patients. Our model is differentiated and delivers high-quality outcomes. This combination gives us confidence to meet the needs of patients and provide a compelling place to practice for clinicians. Operator, we will now take questions.

Operator, Operator

Operator provided instructions. So your first question comes from the line of Craig Hettenbach from Morgan Stanley.

Craig Hettenbach, Analyst, Morgan Stanley

Clinician growth was a bit above expectations in the quarter. So any tailwinds you would call out in the quarter? And then more broadly, just some of the things you're doing to kind of attract and retain clinicians to the platform.

David Bourdon, Chief Executive Officer

Craig, this is Dave. I'll take that one. We had very strong results around clinicians in the first quarter, as you noted, not just in the clinician adds, which were over 300, but we also saw the third quarter in a row of strong productivity improvements. We grew productivity about 7% year-over-year. Regarding the clinician growth that we saw, nothing new to point to there; it was primarily driven by the strength of our recruiting along with stable retention.

Craig Hettenbach, Analyst, Morgan Stanley

Got it. And then when I think through on the margin front, so delivering some good operating leverage here, the 15% to 20% longer-term EBITDA margins, how are you thinking about all the things you're doing from a technology perspective? I know you touched on the EHR investment. But just how do you envision kind of some of the efficiencies in AI kind of layering into kind of that path to the longer-term margins?

Ryan McGroarty, Chief Financial Officer

Yes, Craig. So overall, technology is a key lever in terms of being able to deliver the long-term margins. You framed it exactly right. When we've talked about long-term margins in the 15% to 20% range, and hitting adjusted EBITDA margins of mid-teens by 2028, technology plays a critical role. To get to those margins, we expect continued expansion around Center Margin and continued leveraging through G&A, which will come from items such as AI enablement and technological initiatives that make us more efficient as we scale. So it is a key component of the long-term margin profile of the business.

Operator, Operator

Your next question comes from the line of Ryan Daniels from William Blair.

Matthew Mardula, Analyst, William Blair (on behalf of Ryan Daniels)

This is Matthew Mardula on for Ryan. Congrats on a great quarter. It's great to hear about all the productivity initiatives continuing to work well. But when we look ahead, are there still new productivity initiatives planned by the company to be released in the upcoming quarters that are in the company's pipeline? Or is the strategy more focused to work on the current productivity initiatives that are already established and going well instead of maybe adding new ones?

David Bourdon, Chief Executive Officer

Matthew, it's David. Thanks for the congrats on the quarter. We're really pleased with the strong start to the year. Regarding clinician productivity, we have numerous initiatives underway. The thing I always start with is remember, this is about visit growth. We're intentionally balancing using the available capacity of our existing clinicians versus hiring new clinicians. Higher productivity benefits both the clinician as well as LifeStance. We're going to continue to look for new opportunities to improve productivity, while also executing on the initiatives we've described over the last half year. Those initiatives are durable and are continuing to show results. But I always come back to the point that our long-term growth algorithm is primarily driven by net clinician adds, with productivity being complementary.

Matthew Mardula, Analyst, William Blair (on behalf of Ryan Daniels)

Great. And then regarding visits, with that coming in strong at roughly 18% growth in Q1, and then given the last two quarters before Q1, we've seen visit growth around that 16% to 18% growth. When we think about your guidance of that low double-digit visit growth going forward, should we maybe be expecting visits not to accelerate as seen in the past quarters in the back half? And that might just be because of the productivity initiatives that were established and gaining maturity in the second half of last year. But if you could help me understand what you're thinking about visit growth for the rest of the year and any color into that given what we've seen in the past couple of quarters, that would be great.

Ryan McGroarty, Chief Financial Officer

Perfect. I'll jump in there. First and foremost, we're very pleased with the guide. At the midpoint, top-line revenue growth is 17%. When you think about revenue, we raised guidance by $25 million and the 17% year-over-year growth takes on a more normal shape consistent with our historical patterns — approximately 50/50 first half versus second half, with the second half modestly higher. As you get into the second half of the year, you do lap some of last year's productivity initiatives. As Dave mentioned, our growth will always be primarily from net clinician adds complemented by productivity. You should therefore expect more of that dynamic in the second half versus the larger productivity gains we saw in the back half of last year and in the first half of this year.

Operator, Operator

Your next question comes from the line of Richard Close from Canaccord.

John Granville Pinney, Analyst, Canaccord (on behalf of Richard Close)

Yes, John Pinney on for Richard. Congrats on the quarter. First, on the clinician adds, do you have any sense of where a majority of the strong quarter, 309 adds sequentially, where a majority of them are coming from? And how many are attributable to the tuck-in acquisitions? Are they mostly new adds? Are they moving from private practice? Or just any other sense of the source?

David Bourdon, Chief Executive Officer

John, I'll take that. M&A did contribute to net clinician adds in the quarter, but very modestly. As mentioned in our prepared remarks, M&A is immaterial to the two tuck-ins from a contribution perspective. So the net clinician growth is primarily driven by organic hiring, with stable retention. Regarding where those clinicians are coming from, we continue to see clinicians coming from three buckets. The largest bucket is clinicians from small practices who are looking for more support and a stronger connection to our practice. The second bucket is salaried clinicians at hospital systems or similar practices who are looking for more flexibility while retaining some W-2 benefits like healthcare and 401(k) matching. The third bucket is new graduates getting licensed and coming to work at LifeStance. We continue to have a strong pipeline across all three categories, and I wouldn't point to anything new in the first quarter.

John Granville Pinney, Analyst, Canaccord (on behalf of Richard Close)

All right. And then on the EBITDA guidance, it looks like margin at the midpoint steps up with the 2Q guidance. And for the full year, it stays pretty consistent with what was achieved in first quarter. Is there anything to keep in mind when modeling in the second half of the year?

Ryan McGroarty, Chief Financial Officer

I'll jump in on that. You are right on that overall. One thing to keep in mind is that G&A does step up about $6 million from our previous guidance. We're thoughtful about investments that support growth. As it relates to G&A, there's nothing singular to call out beyond continued investment in AI and technology and in patient acquisition and business development. In terms of sequencing and phasing second half versus first half, that's a notable difference when you're modeling the year.

Operator, Operator

Your next question comes from the line of David Larsen from BTIG.

David Larsen, Analyst, BTIG

Congrats on another great quarter. Can you talk a little bit about the technology infrastructure and basically the conversion from inbound inquiries from prospective patients to first visit? Maybe just talk about how that process is evolving or improving or how it's changed over the years and what your expectations are for it going forward?

David Bourdon, Chief Executive Officer

I'll take that one. In regards to conversion of patients seeking care to a booked appointment, one of our big focus areas for online booking is Care Matching 2.0. We piloted the new solution — a new algorithm with updated technology in the back half of last year and early this year — and that went really well. We're seeing about a 5% improvement in conversion of patients seeking care to a booked appointment. As a result, we're rolling out that new Care Matching algorithm and online tool nationwide and expect rollout completion in the next couple of months. We won't stop there; it's a journey. We'll also be looking at the patient experience online to reduce friction and will explore that further in the back half of this year.

David Larsen, Analyst, BTIG

Great. And then can you talk a little bit about how you measure results like functionality of the patient themselves and performance with activities of daily living? Are you tracking health improvement metrics? Do you have an app where members can correspond with clinicians in real time and track and measure habits so that you can see and track how patients are doing and if they're improving? If so, by how much?

David Bourdon, Chief Executive Officer

There are a couple of things. First, from a measurement perspective, as I discussed in my prepared remarks, the study we published was based on data from nearly 180,000 patients from last year. Going forward, on a regular basis — monthly — we check in with patients, and they complete surveys primarily around anxiety and depression, allowing us to track their progress. If progress is good, we stay the course; if not, we explore alternative care pathways clinicians could provide to improve health. That survey is completed in our digital patient check-in tool. Regarding an app, we do not have one today. We are exploring that capability. We think about it as a continuum of care and how we can interact with and support patients between visits. More to come on that. We believe such capabilities could improve outcomes and potentially get patients healthier faster, but that is currently in exploration.

Operator, Operator

Your next question comes from the line of Sean Dodge from BMO Capital Markets.

Sean Dodge, Analyst, BMO Capital Markets

Maybe staying on that outcome study, Dave, how do you leverage those findings now? Is this more of a tool that helps with negotiations and coverage and rates from managed care? Or is this something that helps with competitive positioning and driving more referral volumes from primary care? Or is it kind of all of the above? How do you operationalize this now?

David Bourdon, Chief Executive Officer

You nailed it — it's all of the above. First, it's a rich dataset clinicians can use in the treatment of their patients and to understand how health is improving or not. Second, it becomes a proof point when working with referral partners or prospective partners; it's part of establishing trust. Regarding payers, today most are focused on access for their members, but we believe demonstrating quality outcomes will become increasingly important. That's why we have a big focus on clinical excellence and will put more emphasis on it this year and beyond. We believe there's significant opportunity to differentiate ourselves versus other practices.

Sean Dodge, Analyst, BMO Capital Markets

Okay. Great. And then maybe going back to the clinician productivity enhancements — you mentioned one indirect benefit being improved clinician satisfaction and potentially less turnover since clinicians are getting the hours they want as they're seeing more patients. With a couple of quarters of those improvements behind you now, have you seen any change in clinician retention or churn, or is it still a little too early to tell?

David Bourdon, Chief Executive Officer

I think it's too early to tell. What we're seeing is continued stable retention. We are getting very positive anecdotal feedback from clinicians about better filling their calendars and the new cash incentive program tied to both productivity and quality. But we have not yet seen anything meaningfully move in terms of retention.

Operator, Operator

Your next question comes from the line of Jack Slevin from Jefferies.

Jack Slevin, Analyst, Jefferies

Congrats on the really strong quarter. Maybe I'll combine two into one here. Looking at the guidance stack and your commentary on productivity initiatives, maybe more granularly thinking about Care Margin, it assumes a higher year-over-year step-up based on how that trended last year. Can you talk a bit about what drives that or what in the baseline from last year may not be the right thing to comp against as you think about the Care Margin performance implied in the new guidance? Second, we noticed over the last five or six months that payers have been broadening access for TMS or some of the higher acuity services that you provide. Can you talk a bit about how that's trending for you and if you see potential for that to accelerate? For example, Optum recently allowed NPs to bill for that service in some states. Thoughts on both?

Ryan McGroarty, Chief Financial Officer

I'll start on Care Margin. Year-over-year, Center Margin improved roughly 130 basis points, from about 32.4% last year to 33.7% implied in our guide this year. The components of that favorability include rate, operating leverage from volume, which includes productivity initiatives, and some favorable spending within the center cost bucket. There's nothing singular to point to on spending; it's a combination of factors. We're pleased with the progression of Center Margin expansion, which, together with G&A leveraging, supports our long-term growth algorithm.

David Bourdon, Chief Executive Officer

On specialty services, last year we did about $50 million in revenue from specialty services, and we expect that to grow to roughly $70 million this year, about a 40% year-over-year increase. The majority of the $50 million is neuropsych testing, where we're the national leader. The higher growth rate in 2026 is driven by TMS and Spravato services, which are early in rollout; we're adding new TMS chairs and Spravato sites every quarter and will continue to do so. We're well set up for specialty services because we have over 575 centers, making these services relatively low capital intensity; we can leverage existing centers. That works well for our model and for providing holistic treatment, especially for patients needing these services.

Operator, Operator

Your next question comes from the line of Peter Warndorff from Barclays.

Peter Warendorf, Analyst, Barclays

You opened six centers this quarter and had two tuck-in acquisitions. What might the cadence look like for the rest of the year? And when it comes to M&A, you've discussed how larger businesses in that $200 million to $250 million range may have higher valuations than private markets. Are you seeing anything different there?

David Bourdon, Chief Executive Officer

In the first quarter we opened six centers and completed two tuck-in acquisitions. For the full year, we've said we plan to open 20 to 30 centers, and we're still on pace for that. On M&A, we have a strong pipeline of tuck-in opportunities under evaluation, and while there's a lot of moving pieces, we expect tuck-ins to be a meaningful part of our geographic expansion strategy going forward and intend to pursue them regularly. As for the broader M&A environment, no change from last quarter: we see meaningful opportunity in tuck-ins and the down market, but not in acquiring larger competitors with $200 million-plus in revenue where there's significant geographic overlap and limited synergy. It's generally more financially effective for us to grow organically than to acquire a large overlapping practice.

Peter Warendorf, Analyst, Barclays

Got it. And then on the visit rate side, you had a nice bump in first quarter, up about 3% year-over-year. Last year, the last customer pricing impact came through in March, so maybe there was still a headwind in Q1. How should we think about the cadence over the remainder of the year?

Ryan McGroarty, Chief Financial Officer

We are pleased with total revenue per visit (TRPV). TRPV was $163 in the quarter, up $3.80 sequentially and 3% year-over-year. One reason we raised our revenue and EBITDA guidance was on the strength of rate increases. For the balance of the year, we're guiding to low to mid-single-digit rate increases. We still have work to do on executing rate and payer negotiations, but overall the environment is constructive and we're getting good responses from payers. Rate remains a critical component of our long-term growth algorithm.

Operator, Operator

Your next question comes from the line of Scott Schoenhaus from KeyBanc Capital Markets.

Scott Schoenhaus, Analyst, KeyBanc Capital Markets

Congrats on the strong start to the year. My question is a follow-up on the six de novo adds. Historically you've talked about building density in metropolitan areas. Is that how we should think about those adds? And when you're starting a de novo clinic, can you talk about the productivity ramp up? It seems your technology investments have caused your productivity ramp to be quite quick. Walk us through your de novo strategy and the productivity on these de novo adds.

David Bourdon, Chief Executive Officer

Regarding de novos or building new centers, they come in different flavors. Some centers open in adjacent towns where we already have an existing center and referral partnerships; those ramp very quickly. The majority of the 20 to 30 centers we plan to build this year fall into that category. We also place some de novos in brand-new geographies when attractive tuck-in opportunities are not available; those are a minority and have a slower ramp, more like 12 to 24 months to breakeven. Those are important beachheads for future growth.

Scott Schoenhaus, Analyst, KeyBanc Capital Markets

That's helpful. And then more broadly, as the industry experiences changes such as D2C behavioral health companies seeking payer relationships or large provider networks acquiring behavioral health businesses, are you seeing impacts on recruitment, patient perspective, or payer rates? How is the competitive landscape changing and does it impact LifeStance?

David Bourdon, Chief Executive Officer

Start with the framing that the industry is still highly fragmented, so expect consolidation over time and we're in the early days of that consolidation. I believe LifeStance is well positioned to take advantage of those trends. Given fragmentation and unmet patient demand, we're not seeing changes in new patient volumes, clinician hiring, or similar dynamics. You can see that in our strong first quarter results across many aspects of the business.

Operator, Operator

That will conclude our question-and-answer session. And I will now turn the call back over to Dave Bourdon, Chief Executive Officer, for closing remarks. Please go ahead.

David Bourdon, Chief Executive Officer

Thank you. I want to take a moment to recognize our nearly 11,000 mission-driven teammates. Every day, you show up for our patients, often at some of the hardest moments in their lives, and you do it with extraordinary compassion, professionalism and resilience. I'm deeply grateful for what you do. Mental healthcare has never been more essential. We're proud of the difference LifeStance is making today, and we're even more committed to expanding our reach so we can help millions more people get the high-quality care they deserve. Thank you for joining us today. Operator, that will conclude our call. Thank you.

Operator, Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.