LifeStance (LFST) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Vice President of Finance and Investor Relations - Monica Prokocki
• Chief Executive Officer - David Bourdon
• Chief Financial Officer - Ryan McGroarty

TAKEAWAYS

• Revenue -- $455.9 million, representing 25% year-over-year growth driven by higher visit volumes and increased revenue per visit.
• Clinician Count -- 8,863, an 11% increase from the prior year following 321 net clinician additions during the third quarter.
• Visit Volume -- 2.7 million, growing 17% year over year due to improved clinician productivity and higher headcount.
• Total Revenue per Visit -- $170, a 7% increase reflecting successful payer rate increases and specialty service contributions.
• Adjusted EBITDA -- $68.4 million, representing a 70% increase and a 15.0% margin as a percentage of revenue.
• Net Income -- $22.4 million, a significant improvement from $1.1 million in the third quarter of the prior year.
• Center Margin -- $161.4 million, representing 35.4% of revenue driven by top-line growth and improved operating leverage.
• Visits per Clinician -- Increased 5% year over year, supported by focused efforts on early patient engagement and care connectivity.
• Spravato Outcomes -- 74% of patients experienced a clinically meaningful reduction in depression severity after 12 weeks of treatment.
• TMS Outcomes -- 61% of patients experienced a clinically meaningful reduction in depression severity after completing at least 30 treatment sessions.
• 2026 Revenue Guidance -- $1.741 billion to $1.761 billion, raised from previous expectations to reflect strong business trajectory.
• 2026 Adjusted EBITDA Guidance -- $242 million to $250 million, implying a full-year margin of approximately 14%.
• 2026 Center Margin Guidance -- $599 million to $613 million, updated following third quarter outperformance.
• Specialty Services Revenue -- On track to reach $70 million in 2026, representing 40% growth led by the expansion of TMS and Spravato offerings.
• EHR Implementation Impact -- A projected one to two percentage point headwind to 2027 revenue growth as the company transitions to a new platform.
• Cash and Cash Equivalents -- $218.8 million at quarter-end, following $25 million in share repurchases during the period.
• Net Leverage -- 0.2x, reflecting a strong balance sheet with net long-term debt of $255.5 million.
• Free Cash Flow -- $22.4 million, representing solid conversion despite lumpy timing impacts from payroll and benefits.
• New Center Openings -- Eight new centers opened in the third quarter, bringing the year-to-date total to 20 de novo sites.
• Specialty Service Footprint -- 37 centers now offering TMS and 25 offering Spravato, with nine total site additions in the third quarter.
• Diluted EPS -- $0.06 per share, compared to $0.00 per share in the same quarter of the prior year.

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RISKS

• McGroarty warned that the company expects a temporary impact from the implementation of a new EHR, stating it is estimated "to impact 2027 revenue growth by approximately 1 to 2 percentage points."

SUMMARY

LifeStance Health Group, Inc. (NASDAQ:LFST) reported revenue growth of 25% and reached a 15.0% adjusted EBITDA margin for the second consecutive quarter as management raised its full-year financial outlook across all core metrics. The company expanded its clinician base to more than 8,800 providers and reported improved clinical outcome data for its specialty services targeting treatment-resistant depression. Management detailed a multiyear technology strategy involving the phased rollout of a new electronic health record system in 2027, which is expected to enhance long-term scalability despite causing a temporary reduction in near-term revenue growth rates. Capital allocation remains focused on internal investments, tuck-in acquisitions to enter new markets like Iowa, and share repurchases supported by a net leverage position of 0.2x.

• CEO Bourdon noted that specialty services can be truly life-changing for high-acuity patients, stating, "These results reinforce our excitement around specialty services and the opportunity we see to broaden their reach across our platform."
• Management reported that clinician retention remains stable, with the highest-producing clinicians exhibiting retention rates meaningfully higher than the broader clinician population.
• The company entered the Iowa market during the third quarter via a tuck-in acquisition and plans to maintain a cadence of one to two acquisitions per quarter through 2027.
• McGroarty indicated that margins are expected to keep expanding in 2027 and beyond, noting that "durable revenue growth and continued margin expansion positions us to deliver sustained earnings growth over the long term."
• The electronic health record transition will begin early in 2027 with a phased rollout starting in a single state to minimize disruption to the company's 8,800 clinicians.
• Management identified value-based contracting as a growing opportunity, with several payers already focusing on quality and outcomes in their reimbursement models.

INDUSTRY GLOSSARY

• TMS: Transcranial Magnetic Stimulation, a non-invasive procedure that uses magnetic fields to stimulate nerve cells in the brain to improve symptoms of depression.
• Spravato: An FDA-approved nasal spray containing esketamine, used for adults with treatment-resistant depression.
• EHR: Electronic Health Record, a digital version of a patient's paper chart that is used by clinicians to manage care and document visits.
• TRPV: Total Revenue Per Visit, a financial metric calculated by dividing total revenue by the total number of patient visits.
• Center Margin: A non-GAAP financial measure representing total revenue less center costs, which include clinician compensation and center-level operating expenses.
• De novo: A new outpatient center built and opened from the ground up rather than acquired through M&A.

Full Conference Call Transcript

Operator: Thank you for standing by. My name is Ben, and I will be your conference operator for today. At this time, I would like to welcome everyone to the LifeStance Health Inc. -- LifeStance Health Third Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Monica Prokocki, VP of Finance and Investor Relations. Please go ahead.

Monica Prokocki: Thank you, operator. Good morning, everyone, and welcome to LifeStance Health's third 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 Gordon, CEO of LifeStance. Dave?

David Bourdon: Thanks, Monica, and thank you all for joining us today. This was a tremendous quarter for LifeStance with momentum across all areas of the business. For the second consecutive quarter, we had revenue growth of 25% or more and adjusted EBITDA margins of 15%. We are once again raising our full year guidance across all metrics, reflecting our confidence in the trajectory of the business. Ryan will provide additional detail on our updated outlook shortly. We continue to make great progress in increasing access to high-quality affordable mental health care, growing our clinician base to more than 8,800 as the value proposition continues to resonate.

Clinician productivity also remains very strong, building on last year's improvements and underscoring the strength and the scalability of LifeStance's model. Turning to technology. We continue to deploy digital tools, AI capabilities and workflow automation to improve patient access, enhance the clinician experience and drive greater efficiency across the organization. Regarding the EHR, we are making progress in preparing for the transition to the new vendor, which will occur throughout next year. We are advancing readiness efforts through workflow improvement and change management planning, positioning us for a successful phased rollout while minimizing disruption to clinicians and patients.

In regards to geographic expansion, we remain excited about the significant opportunity to increase density in existing markets while also expanding into new geographies. Tuck-in acquisitions remain our preferred approach for entering new geographies, supported by a strong pipeline of opportunities. During the third quarter, we completed one tuck-in acquisition, which expanded our physical footprint into the state of Iowa. In addition, we are leveraging our proven de novo model to enter new markets and increase density in existing markets with the opening of 8 new centers in the quarter and 20 year-to-date. I'd also like to provide an update on our clinical excellence journey.

Delivering high-quality care and improving patient outcomes remains central to our mission and is a key differentiator for LifeStance. We recently published new outcomes data, highlighting the positive impact of our growing specialty services offering for patients with treatment-resistant depression. As a reminder, these are some of the highest acuity patients we serve as they have not responded successfully to other treatments before receiving TMS or Spravato. For Spravato, 74% of the patients experienced a clinically meaningful reduction in depression severity after 12 weeks of treatment. And for TMS, 61% experienced a clinically meaningful reduction after completing at least 30 treatment sessions. We also saw improvements in suicidal ideation across both services.

These results reinforce our excitement around specialty services and the opportunity we see to broaden their reach across our platform as they can be truly life-changing for our highest acuity patients. During the quarter, we added TMS at 5 additional sites and Spravato at 4, bringing our total footprint to 37 centers offering TMS and 25 with Spravato. We will remain disciplined in the rollout of these services to meet patient demand while maintaining a high standard of clinical care. This has been an exceptional year for LifeStance, and I am incredibly proud of what our team has accomplished.

As we strengthen the core business, expand capabilities and extend patient reach, we believe we are better positioned than ever to deliver excellent care at scale and create sustainable long-term value. The momentum we are seeing across the business reinforces our conviction in the strategy and the significant opportunity ahead. With that, I'll turn it over to Ryan to provide additional commentary on our financial performance and outlook. Ryan?

Ryan McGroarty: Thanks, Dave. I'm pleased with the team's excellent operational and financial performance in the third quarter. For the quarter, revenue grew 25% to $456 million. Revenue surpassed our expectations, reflecting strength in both visit volumes and total revenue per visit. Visit volumes of 2.7 million increased 17%. The outperformance was driven by a combination of higher productivity and net clinician adds. Total revenue per visit of $170 increased 7% and was better than anticipated, primarily driven by payer rate increases. Our visits per average clinician were impressive once again, increasing 5% year-over-year even after strong improvements in Q3 of last year.

This was supported by continued gains in early patient engagement as we focus on keeping patients connected throughout their course of care. This was achieved while at the same time, adding 321 clinicians in the third quarter, bringing our total clinician base to 8,863, representing growth of 11%. Turning to profitability. Center margin of $161 million in the quarter increased 38% and was 35.4% as a percentage of revenue. The outperformance was primarily driven by the revenue beat. Adjusted EBITDA increased 70% to $68 million in the quarter, representing another excellent result with the outperformance driven by favorable revenue and center margin. This resulted in a margin as a percentage of revenue of 15%.

As Dave mentioned, this is the second consecutive quarter in which we have achieved margins of 15%. We also finished with positive net income of $22 million in the quarter, which was an improvement of $21 million from the third quarter of last year. Turning to liquidity. We generated solid free cash flow of $22 million in the quarter as compared to $17 million in the third quarter of last year. We exited the quarter with a strong balance sheet, including a cash position of $219 million and net long-term debt of $256 million. Notably, that cash balance is post the $25 million in share repurchases during the quarter.

As a result, our net leverage is currently 0.2x and gross leverage is 1.2x. In terms of our outlook for the full year, we are raising our revenue range by $46 million at the midpoint to $1.741 billion to $1.761 billion. The midpoint of the range implies a growth rate of 23% for the full year. We are also raising our center margin range by $24 million at the midpoint to $599 million to $613 million and raising our adjusted EBITDA range by $21 million at the midpoint to $242 million to $250 million.

The midpoint of the range implies an adjusted EBITDA margin as a percentage of revenue of 14%, which is roughly 3 percentage points of margin expansion year-over-year. Our updated annual guidance assumes year-over-year revenue growth driven primarily by higher visit volume, combined with mid-single-digit increases to our total revenue per visit. As a reminder, on our Q2 call, we noted that given our adjusted EBITDA outperformance so far this year, we plan to reinvest a portion of that upside during the second half of the year across several strategic priorities to support our long-term growth objectives. We made progress on these investments during the third quarter and expect to continue making disciplined investments through the remainder of this year.

Additionally, we continue to expect stock-based compensation of approximately $60 million to $70 million this year. For the fourth quarter, we expect revenue of $446 million to $466 million, center margin of $149 million to $163 million and adjusted EBITDA of $56 million to $64 million. Looking ahead to 2027, we remain encouraged by the momentum in the business and our long-term growth algorithm remains firmly intact. As we think about next year, we see several meaningful tailwinds supporting growth, including increased demand for affordable mental health care, the attractiveness of our clinician value proposition and a growing contribution from specialty services.

From a headwind perspective, we expect a temporary impact from the implementation of a new EHR, which we estimate will impact 2027 revenue growth by approximately 1 to 2 percentage points. As a result, we expect revenue growth to be towards the lower end of our long-term mid-teens range due to the EHR implementation. Importantly, we view the EHR impact as temporary and believe the new platform will become a meaningful unlock for sustained long-term growth by improving patient access, clinician efficiency, referral pathways and the overall patient experience. Once fully implemented, we remain confident that the new EHR will allow us better interoperability and flexibility as we further scale the business.

We expect margins to keep expanding in 2027 and beyond, driven by operating leverage and disciplined execution. We believe the combination of durable revenue growth and continued margin expansion positions us to deliver sustained earnings growth over the long term. With that, I'll turn it back to Dave for his closing comments.

David Bourdon: Thanks, Ryan. In closing, we are incredibly proud of the progress we have made and are even more excited about what lies ahead. We believe LifeStance is uniquely positioned to build on the momentum across our business, expand our impact and improve the standard for high-quality outpatient mental health care. We remain focused on executing against the significant opportunity ahead and building an even stronger LifeStance for the future. Operator, we will now take questions.

Operator: [Operator Instructions] Our first question comes from the line of Craig Hettenbach from Morgan Stanley.

Craig Hettenbach: Yes. Dave, on specialty services in the back on the papers you published last week on Spravato and TMS, how are you thinking about any kind of gating factors? So as you're ramping up this business, anything to be mindful of in terms of that ramp? And then how are you thinking about the business scaling over the next 1 or 2 years?

David Bourdon: Craig, it's Dave. Thanks for the question on specialty. So first of all, to start with, we're really pleased with what we've seen for outcomes on these treatment-resistant depression services. As I mentioned in my prepared remarks, some of the testimonials from the patients, I mean, these are truly life-changing services for them. So we're excited to be including those and expanding those as we broaden our services across our portfolio. From a gating perspective, how we're rolling these out is we cluster our almost 600 centers into practice groups of 3 to 5 centers each. And then what we're doing is we're putting a TMS chair or a Spravato center -- a Spravato site in each of those clusters.

And so -- and we're doing that, as I mentioned, with a very deliberate, thoughtful rollout so that we can support the local teams and ensure that those rollouts are successful. We're doing that today at about a handful a quarter. We did 5 -- excuse me, 5 TMS in the quarter and 4 Spravato. I would expect that, that will be the pace that we will continue at for the foreseeable future. Having said that, we are monitoring the new psychedelics, new therapies that are coming out and we have the ability to move faster if that's appropriate.

Craig Hettenbach: Got it. And then just as my follow-up, I appreciate the early look into 2027. How are you thinking about kind of de novos and CapEx into next year? And then on the M&A front, is kind of a 1 to 2 tuck-in per quarter still the right way to think about your approach there?

David Bourdon: Craig, it's Dave. I'll take that one as well. So first of all, from a de novo perspective, we're guiding to 20 to 30 this year. I would use that as an approximation for what we're thinking about for next year and we'll certainly come back and update you all if that assumption should change. And then as far as M&A, we're still in that cadence of roughly 1 to 2 a quarter and I expect that will continue throughout 2027.

Operator: Our next question comes from the line of Ryan Daniels -- sorry, from Jack Slevin from Jefferies.

David Bourdon: Yes, we can hear you. Ryan, we can hear you.

Operator: I'm sorry for that. Mr. Jack Slevin is on the line.

Jack Slevin: This is Jack here. Can you guys hear me?

David Bourdon: Yes, Jack.

Jack Slevin: Congrats on the really strong results. The margin is clearly really impressive. And you guys put out sort of the '28 framework of how top line is going to move. I appreciate a little bit of the early commentary that sort of puts a conservative angle on what the EHR might impact on the top line next year. But if I just think about the margin and sort of where you sit versus some of those goals that you're trying to get to by '28, I guess the question I want to ask is like why can't it continue to go higher?

Or are you considering that, that margin expansion from this level could be sustainable, maybe not necessarily on a on a quarter-to-quarter basis. But as we look out to the next couple of years, I guess, it feels like you're pacing ahead of that. Is that a fair assessment? Or how can you think about maybe potentially redrawing expectations around some of those targets given how strong things have been recently?

Ryan McGroarty: Jack, it's Ryan. Thanks for the question. So to your point on margins, really strong profile overall. We're extremely pleased with the momentum. And so I'll frame it from like our long-term margin expectations that you're very clear of, right, is the 15% to 20% of adjusted EBITDA on a long-term basis, but really with the 20% not representing a ceiling. To your question around -- we just recently gave you the mid-teens by full year 2028 on our Q4 call. And obviously, there's a range around mid-teens as it relates to results. We continue to invest in the business for long-term growth. We're extremely pleased with the progress that we've made.

But at this time, we're not going to further refine the long-term kind of growth algorithm. We obviously gave a little bit of guide for '27 on our Q4 call -- we'll give '27 guide on our Q4 call. Our thinking is we'll come back at the beginning of 2028 with an updated long-term perspective. But again, I don't want to lose sight of how pleased we are with the progression in the margins that we've seen.

Jack Slevin: Got it. Okay. That's helpful, Ryan. I appreciate it. And then as a follow-up, maybe to just touch on the EHR point. I guess you guys have been very clear and early with the messaging around rolling that out. But maybe just if you can go a click lower on the things you're doing now that are sort of getting you prepared to sort of minimize the impact from that next year and how you feel about positioning around that?

David Bourdon: Jack, it's Dave. I'll take that. So a lot of energy being expended by the organization and with the vendor that we're moving to and preparing. And it's everything from standardizing and enhancing our workflows in advance of moving to the new technology to the conversion of data to the connecting of the various point solutions that will continue from the current EHR to the next EHR, there's a lot going on. We will be testing the new solution through the remainder of the year.

And then early next year, we'll begin a very thoughtful and phased rollout where we're going to start with one state, which is a couple of hundred clinicians and we'll ensure that the new EHR is working as designed. We'll make any adjustments we need to. And then we will -- again, on a phased basis, we will roll that out throughout the calendar year next year because it is no small undertaking to roll out a new EHR to over 8,800 clinicians.

Jack Slevin: Got it. Really helpful. Congrats again on a strong results.

Operator: Our next question comes from the line of Ryan Daniels from William Blair.

Ryan Daniels: Can you hear me now?

David Bourdon: We can, Ryan.

Ryan Daniels: All right. Perfect. Congrats on the strong results. Dave, maybe a continuation of questions for you on the specialty services. Obviously, data on treatment-resistant depression was great. I'm curious if that can create more opportunity for you to go back to payers and negotiate to ensure either that you're getting reimbursed for those services in all your markets or potentially to improve pricing or accessibility for patients to access those services. So is that somewhat of a catalyst for you? Or am I reading into that too much?

David Bourdon: Yes, Ryan, you're thinking about it the right way, and I appreciate how you're approaching that. When you think about a therapy like Spravato, we're still in a relatively early days of that compared to TMS, which has been around a little bit longer. And we see a lot of variability in the reimbursement approach from payers in regards to the level of reimbursement and even some payers not even accepting Spravato as an approved therapy. And outcomes like this enables our payer engagement team to go out and work with the payers and explain to them the benefits of a solution like that.

And it helps us either getting it included in the reimbursement schedule or getting the reimbursement level to where we believe it would be appropriate to be able to expand that service. So we're really excited about the early read on the outcomes.

Ryan Daniels: Okay. Perfect. And then I guess as a follow-up, Ryan, one for you. I don't know if you've modeled out the cadence this much of the EHR rollout, and I appreciate that, that can impact productivity. But if it starts out light and then kind of increases through the year, should we expect more of the revenue growth hit in the back half of the year and into early 2028? Or will it be constrained to 2027 and kind of even throughout the year? Just any thoughts on how we should initially be thinking about that impact?

Ryan McGroarty: Yes, I appreciate, Ryan that question. So the way how we kind of think about it, first and foremost, we wanted to make sure that we got out the revenue impact out to the market just in terms of like our view of the 1% to 2%. The way you can think about it, it is a phased rollout. So the first phase is probably our smallest rollout that we had through the year. And part of that is to make sure that you're executing against a model office, right, to be able to implement across the rest of your portfolio. But then it's pretty steady with the full implementation completed by year-end in '27.

So there is no carryover into '28 just as it relates to the implementation time line. And again, I just kind of want to reiterate our enthusiasm for being able to implement a best-in-class EHR in totality. So the team is really excited to get going through the implementation phase.

Operator: Our next question comes from the line of Kevin Caliendo from UBS.

Brett Gasaway: This is Brett on for Kevin. Congratulations on the great quarter. Just wanted to double-click a little bit on that revenue per clinician. Obviously, this year has been really strong. And I know you're not giving formal guidance for '27, but just kind of looking at the drivers of that, can you just kind of break out how much of that growth we've seen is from productivity versus maybe Spravato contributing there, market growth, all the above? Just help me understand the drivers and kind of how you're thinking about the durability in the next year.

Ryan McGroarty: Yes. So when you think about TRPV, so we're really pleased with the 7% that we achieved in Q3, which, again, in Q2, we highlighted that we upped our range to mid-single digits just as it relates to overall kind of rate. When you think about what's driving the rate, you can primarily think of it from payer contracting, but there is some support as it relates to specialty contribution in totality.

As you get in and you think about a good place to start as you're thinking about 2027 each year when we go into a year is going back to thinking that the range that we think is the right range in terms of what the expectation should be is low to mid-single digits, like overall from a rate perspective.

Brett Gasaway: Understood. That's super helpful. And as a follow-up, on the specialty side with Spravato, how are you tracking versus the $70 million target that you had this year, the 40% growth? Is that still on track? And again, going to next year, how should we be thinking about that contribution to growth?

David Bourdon: Brett, this is Dave. I'll take that one. So just for grounding, all of our specialty service comprised of about $50 million of revenue last year. It's going to grow 40% this year to roughly $70 million. I think that's the $70 million of revenue you're referencing. And we are on track to deliver that. The majority of the $50 million from last year was neuropsych testing, which we're the national leader in. The 40% growth, so that higher than our overall book growth rate this year in specialty services is being driven by the TMS and the Spravato rollout.

And we're in the early stages of that, as I mentioned earlier, this deliberate rollout of about a handful of each Spravato and TMS each quarter. And I would expect the growth rate for next year to be similar to this year to be meaningfully above our overall book of business.

Operator: Our next question comes from the line of John Pinney from Canaccord.

John Granville Pinney: John Pinney on for Richard Close. Congrats on the quarter. I guess just touching on these clinician adds, again, very strong. I guess it's just like what gives you the confidence that you can continue to add at this kind of clip going forward? Is there any like improvement in, I guess, clinician retention? Or just what are you seeing on the recruitment side?

David Bourdon: John, this is Dave. I will take that. So first of all, what we saw in the quarter, as you mentioned, a net add of 321 clinicians, strong result. We're happy with that. What's driving it is a consistent theme that we have seen now for quite a while, which is very strong recruiting combined with stable retention. We're always working on the clinician value prop and trying to enhance it and make it more attractive. So that will be -- that's a never-ending initiative for us. And so we're always doing that with an eye towards improving the overall retention level.

Now what gives us confidence about being able to continue to do this is just a reminder, the mental health outpatient space is a highly fragmented industry. While we're the market leader, we still have low single-digit market share of the total clinician population. So we believe we have a tremendous amount of room to run on being able to add clinicians in the future.

John Granville Pinney: Okay. And then a quick follow-up for Ryan, I guess. Just I guess, the free cash flow conversion was a little bit lower on this quarter. Can you just -- is this mostly just timing? And what can we expect like normalized free cash flow conversion to be on like a yearly basis?

Ryan McGroarty: Yes. So I appreciate the question. So as it relates to free cash flow for the quarter, I'll take you back to the Q2 call where we kind of highlighted that we had a couple of timing impacts going into Q3, and one would be just timing of payroll, so just how payroll fell. And then two is just the annual contribution as it relates to our 401(k) plan. So those are kind of 2 payments that kind of impacted Q3. When you look at free cash flow and overall, we've really improved the free cash flow conversion.

Free cash flow can be very lumpy due to -- I just went through a couple of timing impacts to it from an overall working capital and timing items. And so right now, like we're not kind of guiding to like how to think about the free cash flow conversion. But again, the recent past is kind of a decent indicator when you look at it kind of like on an annualized basis, again, with the strong high-quality earnings that we're delivering. But again, we're not specifically guiding to that metric.

Operator: Our next question comes from the line of David Larsen from BTIG.

David Larsen: Congratulations on another very good quarter. Can you maybe just talk a little bit about your managed care contracting efforts? Any sort of updates there? Are you expanding into new states? Just your thoughts on how value-based care discussions are progressing and the general sort of reimbursement views for next year?

David Bourdon: Dave, this is Dave. I'll take that one. There's a few pieces there, so I'll try to hit them all. First of all, for the overall contracting environment, so obviously happy with what we're seeing for the results this year with our total revenue per visit up 7% year-over-year, which is very strong, considering we always enter the year with a low to mid-single-digit target. The overall payer environment, I wouldn't point to any material change. The payers, while it appears their financial results are improving, they're still under financial pressure. At the same time, they are also under pressure from their clients, their corporate clients as well as their members around providing access to outpatient mental health care.

So there's a bounce there. And then a few of them are starting to focus on quality and outcomes, which obviously we welcome that, which goes to your -- I think the third part of your question, which is around when we think about measurement-based contracting, value-based contracting, again, we have a few payers that are doing that and with that focus around quality, but I would view those as the thought leading ones. I do anticipate in the coming years that more and more payers will migrate to that. And again, we welcome that.

That's what we're all about, delivering high-quality care and you're seeing that in these white papers that we've been publishing throughout this year on the outcomes that LifeStance is delivering. And then the third part of your question was just expansion into new states. We're now in 34 states. So we added a state this quarter with our tuck-in acquisition in the state of Iowa. You should expect that we will continue to do 1 to 2 tuck-ins a quarter for the foreseeable future. Some of those will be to open new states. Some of those will be to enter into a new geography or a new MSA within an existing state.

But we will continue to be doing that as we believe we have tremendous geographic opportunity in front of us.

David Larsen: That's very helpful. And then I know you talked about this a little bit earlier, but growth in providers was -- continues to be really good. In my mind, that's really the most important metric because you got to make sure your doctors are happy on your platform because they're driving all the volumes. Just any more color you can provide would be great. For example, like do you have like a Chief Medical Officer who the doctors can collaborate with for the billing and AR when the docs go to like submit the claims? Or have there been any enhancements there that make their administrative and cash collections efforts a little bit easier?

I think you have nice office space. Just any color would be very helpful.

David Bourdon: This is Dave. I appreciate the question. We are continuing to make enhancements to our clinician value proposition. There's a number of different dimensions to that. So like one you mentioned was revenue cycle management. Our clinicians, for the most part, are not involved in that. We have a tremendous revenue cycle team. As a matter of fact, when you look at our DSO and the cash collection results, it's one of the reasons why our free cash flow this year is strong because there's the advancements that we've been making in that. We've talked about on previous calls. We have some new AI tools and process improvements and things like that, that we've put in, in the revenue cycle.

But for the most part, our clinicians, they don't have to worry about that. If they do a visit based on the service they provide, they get paid and then LifeStance is then on the risk to go and collect from either the patient or the provider or both, depending on the situation. So we're doing a lot around improving our value proposition to our clinicians. One of the differentiators for us versus some practices is that we have a very strong and robust clinical leadership team. So we have both a corporate Chief Medical Officer organization that is setting strategy and vision for the organization.

And then we also, within our practice operations, we have nearly 100 clinical leaders that are supporting all of the local sites and the clinicians if they need a sounding board for a case consult or if they're early in career and they need help in just best practices for dealing with a certain patient or whatever the case may be, we provide a lot of clinical support to our clinicians in addition to the operational support.

David Larsen: Congrats on another great quarter.

Operator: Our next call comes from the line of Sean Dodge from BMO Capital Markets.

Sean Dodge: Just on the Q4 guidance, so that has EBITDA -- it's kind of showing EBITDA to be down quite a bit sequentially. Ryan, I know you mentioned, again, some investments you're making in the business. Are you expecting some kind of new investments or a lot of like incremental investing to come through in Q4? Is there just any seasonality in costs we need to keep in mind? Just if you could kind of unpack a little bit more the -- just expected kind of EBITDA cadence from Q3 to Q4?

Ryan McGroarty: Yes, Sean, I appreciate the question. And first and foremost, kind of when you're looking at the EBITDA, I think it's important to kind of start off with just the overall kind of the context of the full year guide and the growth that we did versus last year, right? So like the midpoint of our guide is $246 million on the full year basis and that's growth of 56%. Specific to the fourth quarter and investments, like we highlighted this in our last call just in terms of that second half of the year that we believe that we've earned the right to kind of step up investment that sets us up for continued long-term success.

And so the areas that I pointed to in that call are very similar to the investments that we're seeing kind of seen between Q3 and then within the guide in Q4. And so the areas that I highlighted were really around patient acquisition. So think about our business development team, technological solutions through AI, our clinical excellence teams, right? So the ability -- we've reported a couple of different outcome studies. And so we've made investments in that team and then also some advancements in like comp and benefits for the clinicians and center support.

In addition, in Q4, what you'll see coming through the center margin line is really an opportunity that we took to kind of refresh some of our centers that needed. So as you recall, we have over 575 centers. And so we took the opportunity to make some improvements. So we're going to take the opportunity to make some improvements in Q4. But overall, those are kind of the categories of investment, but we still feel obviously really good about the margin profile of the business, both from what we've been able to put our full year guide, expand margins on center margin and also just on the adjusted EBITDA line by approximately 300 bps.

So we really feel great about the momentum going into Q4.

Sean Dodge: Okay. Good. And then maybe going back to the new EHR again. So you gave us the expected impact to revenue. But Dave, to your point, it sounds like there's also going to be a lot of costs associated with the rollout, too, just in terms of the kind of the data standardization and the migration. How much headcount have you added? Or are you going to have to add as part of that? Is that support going to be temporary? You guys run duplicate systems for a period of time? Just anything else kind of on the cost side that kind of you can quantify and maybe give us a time line on the cost piece of the EHR.

Ryan McGroarty: Yes, Sean, this is Ryan again. And so overall, if you recall in our prior calls, we've kind of headlined that the expectation around EHR implementation will be roughly between $20 million and $30 million, which would be either an adjustment to EBITDA or capitalized. So we expect -- we'll come out with more thoughts around this in our Q4 kind of guidance call overall. And so again, so we'll continue that conversation as we get into the Q4 results for '27.

Operator: Our next questions come from the line of Peter Warendorf from Barclays.

Peter Warendorf: I just wanted to follow up on the fourth quarter margin question from before. I understand that it's down a little bit sequentially, but I was curious how to think about the cadence of fiscal '27 and whether some of those investments kind of bleed into next year? And maybe we should -- I guess the question is, should we think about 4Q being a reasonable starting point as we start to think about early next year?

Ryan McGroarty: Yes. The way -- I appreciate the question. This is Ryan again. And so the way I have you think about it, so in my prepared comments, obviously, we talked about the impact of EHR to the long-term revenue guidance and also that our intention is to continue to expand margins when we look at '27 and beyond. So I would kind of look at it more in the context of the full year, right, versus like me providing guidance as it relates to how to think about the calendarization at this point of the margin profile. But again, I go back to the strength of just the margin expansion that we've demonstrated in '26 over '25.

So we really, really like the momentum kind of heading into '27.

Peter Warendorf: Awesome. And then just a quick follow-up on the clinician retention. Obviously, clinician growth has been really strong this year. You guys have already talked about that. And as we start to lap some of the cash pay incentives and some of those productivity initiatives that you guys have put in place, can you just give us an update on where you are relative to your retention targets and maybe if we've seen retention tick up here?

David Bourdon: Peter, this is Dave. I'll take that one. So retention has been stable. So we have not seen an uptick or downtick. So no movement in either direction. It has continued to be stable. And as a result, the growth that we have seen in our net clinician numbers over the past year has been driven by the strength of the recruiting. We still believe there's opportunity to improve the clinician retention level by 5-plus percent over the long run and that's what our goals are and what we're marching towards.

Now having said that, as we get more sophisticated in drilling into the various clinician cohorts and understanding the retention dynamics within those cohorts, what we are happy to see is that we have improved the retention of our highest producing clinicians. So that -- the retention level for that cohort is meaningfully higher than the rest of our -- the rest of the clinician population. And the area where we have the most work to do, which isn't a surprise, would be our new clinicians to LifeStance. And that's our area with our lowest retention levels. And so we're focused there. We're putting in some initiatives related to improve that.

And again, but this is a never-ending process for us. We're always going to be focused on how can we improve our clinician value proposition, how can we make it easier for them to practice for them to be able to deliver better outcomes for the patients. It's just where we are in the journey right now is what we're talking about.

Operator: Our last question comes from the line of Scott Schoenhaus from KeyBanc.

Scott Schoenhaus: I just wanted to ask one last question on specialty here. If Compass Pathways psilocybin drug is commercialized next year, what are your steps to getting that into your clinics as a treatment? And how should we think about that opportunity in specialty?

David Bourdon: This is Dave. I'll take that. So I won't speak to any specific new therapy. It's still early with all of these. We're monitoring them. And certainly, the early signs are exciting as far as being able to improve patient outcomes. But there's still regulatory payer and reimbursement and adoption hurdles that remain unresolved. So again, we're monitoring, but there's still a lot to play out. Now having said all of that, we'll be able to move fast if appropriate, and we're going to be able to leverage both our current center footprint as well as the foundation that we're building for Spravato. So we'll be able to move fast if appropriate.

But at this stage, it's still too early to be talking about if something is going to be -- something new would be impacting 2027.

Operator: There are no further questions. I will now turn the call back over to Dave Bourdon, Chief Executive Officer, for closing remarks.

David Bourdon: Thank you, operator. Now before we end, I want to say a few words to our nearly 11,000 teammates. As I reflect on everything we've accomplished, what stands out most is your commitment. And whether you're caring directly for patients or supporting the teams that make that care possible, each of you plays an important role in moving LifeStance forward. I just want to thank you for your energy, dedication and sense of purpose you bring every day. Mental health care has never been more essential. We're proud of the difference LifeStance is making today and we remain even more committed to expanding access so we can help millions more people get the care they deserve.

Operator, that will conclude our call. Thank you.

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

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