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xx

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40478

 

LifeStance Health Group, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

86-1832801

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

4800 N. Scottsdale Road Suite 6000

Scottsdale, Arizona

85251

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (425) 279-8500

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

LFST

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☐    No  ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  ☒

As of August 12, 2021, the registrant had 374,148,648 shares of common stock, $0.01 par value per share, outstanding.

 

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

2

Consolidated Balance Sheets

3

Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)

4

 

Consolidated Statements of Changes in Redeemable Units and Stockholders'/Members' Equity and Consolidated Statements of Changes in Redeemable Convertible Preferred Units and Members' Deficit

5

Consolidated Statements of Cash Flows

9

Notes to Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

46

Item 4.

Controls and Procedures

47

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.

Defaults Upon Senior Securities

49

Item 4.

Mine Safety Disclosures

49

Item 5.

Other Information

49

Item 6.

Exhibits

50

Signatures

52

 

 

i


 

 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. For example, all statements we make relating: to our ability to grow our business, expand access to our patients and our payors and invest in our platform; our plan to partner with additional hospital systems, large primary care groups and other specialist groups; our expectation that we will continue to open de novo center and acquire new centers; our growth rates and financial results; our plans and objectives for future operations, growth or initiatives; and strategies are forward-looking statements.

 

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, factors and assumptions described in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, including, among other things:

we may not grow at the rates we historically have achieved or at all, even if our key metrics may imply future growth, including if we are unable to successfully execute on our growth initiatives and business strategies;
if we fail to manage our growth effectively, our expenses could increase more than expected, our revenue may not increase proportionally or at all, and we may be unable to execute on our business strategy;
if reimbursement rates paid by third-party payors are reduced or if third-party payors otherwise restrain our ability to obtain or deliver care to patients, our business could be harmed;
we conduct business in a heavily regulated industry and if we fail to comply with these laws and government regulations, we could incur penalties or be required to make significant changes to our operations or experience adverse publicity, which could have a material adverse effect on our business, results of operations and financial condition;
we are dependent on our relationships with affiliated practices, which we do not own, to provide health care services, and our business would be harmed if those relationships were disrupted or if our arrangements with these entities became subject to legal challenges;
we operate in a competitive industry, and if we are not able to compete effectively, our business, results of operations and financial condition would be harmed;
the impact of health care reform legislation and other changes in the healthcare industry and in health care spending on us is currently unknown, but may harm our business;
if our or our vendors’ security measures fail or are breached and unauthorized access to our employees’, patients’ or partners’ data is obtained, our systems may be perceived as insecure, we may incur significant liabilities, including through private litigation or regulatory action, our reputation may be harmed, and we could lose patients and partners;
our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;
our existing indebtedness could adversely affect our business and growth prospects; and
the other factors set forth under “Risk Factors.”

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this report. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise, except as required by law.

 

1


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

 

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED FINANCIAL STATEMENTS

For the quarterly period ended June 30, 2021

 

 

2


 

 

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2021 (SUCCESSOR) AND DECEMBER 31, 2020 (SUCCESSOR)

(unaudited)

(In thousands, except for par value)

 

 

 

 

Successor

 

 

 

June 30, 2021

 

 

December 31, 2020

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

276,187

 

 

$

18,829

 

Patient accounts receivable

 

 

60,069

 

 

 

43,706

 

Prepaid expenses and other current assets

 

 

27,804

 

 

 

13,745

 

Total current assets

 

 

364,060

 

 

 

76,280

 

NONCURRENT ASSETS

 

 

 

 

 

 

Property and equipment, net

 

 

91,799

 

 

 

59,349

 

Intangible assets, net

 

 

316,534

 

 

 

332,796

 

Goodwill

 

 

1,138,734

 

 

 

1,098,659

 

Deposits

 

 

3,300

 

 

 

2,647

 

Total noncurrent assets

 

 

1,550,367

 

 

 

1,493,451

 

Total assets

 

$

1,914,427

 

 

$

1,569,731

 

LIABILITIES, REDEEMABLE UNITS AND STOCKHOLDERS'/MEMBERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

$

9,958

 

 

$

7,688

 

Accrued payroll expenses

 

 

50,380

 

 

 

38,024

 

Other accrued expenses

 

 

38,783

 

 

 

14,685

 

Current portion of contingent consideration

 

 

10,876

 

 

 

10,563

 

Other current liabilities

 

 

2,561

 

 

 

4,961

 

Total current liabilities

 

 

112,558

 

 

 

75,921

 

NONCURRENT LIABILITIES

 

 

 

 

 

 

Long-term debt, net

 

 

157,067

 

 

 

362,534

 

Other noncurrent liabilities

 

 

15,704

 

 

 

11,363

 

Contingent consideration, net of current portion

 

 

3,247

 

 

 

5,851

 

Deferred tax liability, net

 

 

81,219

 

 

 

81,226

 

Total noncurrent liabilities

 

 

257,237

 

 

 

460,974

 

Total liabilities

 

$

369,795

 

 

$

536,895

 

COMMITMENT AND CONTINGENCIES (see Note 16)

 

 

 

 

 

 

REDEEMABLE UNITS

 

 

 

 

 

 

Redeemable Class A units – 0 and 35,000 units authorized, issued and outstanding as of June 30, 2021
   and December 31, 2020, respectively

 

 

 

 

 

35,000

 

STOCKHOLDERS’/MEMBERS’ EQUITY

 

 

 

 

 

 

Common units A-1 – 0 and 959,563 units authorized, issued and outstanding as of June 30, 2021 and
   December 31, 2020, respectively

 

 

 

 

 

959,563

 

Common units A-2 – 0 and 49,946 units authorized, issued and outstanding as of June 30, 2021 and
   December 31, 2020, respectively

 

 

 

 

 

49,946

 

Common units B – 0 and 179,000 units authorized as of June 30, 2021 and December 31, 2020,
   respectively;
no units issued and outstanding as of June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Preferred stock – par value $0.01 per share; 25,000 and 0 shares authorized as of June 30, 2021 and
   December 31, 2020, respectively;
no shares issued and outstanding as of June 30, 2021 and
   December 31, 2020

 

 

 

 

 

 

Common stock – par value $0.01 per share; 800,000 and 0 shares authorized as of June 30, 2021 and
   December 31, 2020, respectively;
374,149 and 0 shares issued and outstanding as of June 30, 2021
   and December 31, 2020, respectively

 

 

3,742

 

 

 

 

Additional paid-in capital

 

 

1,669,480

 

 

 

1,452

 

Accumulated deficit

 

 

(128,590

)

 

 

(13,125

)

Total stockholders'/members’ equity

 

 

1,544,632

 

 

 

997,836

 

Total liabilities, redeemable units and stockholders’/members’ equity

 

$

1,914,427

 

 

$

1,569,731

 

 

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

 

3


 

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME/(LOSS) AND COMPREHENSIVE INCOME/(LOSS) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 (SUCCESSOR), THE PERIOD FROM APRIL 13, 2020 TO JUNE 30, 2020 (SUCCESSOR), THE PERIOD FROM APRIL 1, 2020 TO MAY 14, 2020 (PREDECESSOR) AND THE PERIOD FROM JANUARY 1, 2020 TO MAY 14, 2020 (PREDECESSOR)

(unaudited)

(In thousands, except for Net Loss per Share)

 

 

 

Successor

 

 

 

Predecessor

 

 

 

Three months ended
June 30, 2021

 

 

Six months ended
June 30, 2021

 

 

April 13 to
June 30, 2020

 

 

 

April 1 to
May 14, 2020

 

 

January 1 to
May 14, 2020

 

TOTAL REVENUE

 

$

160,549

 

 

$

303,681

 

 

$

45,453

 

 

 

$

38,555

 

 

$

111,661

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Center costs, excluding
   depreciation and amortization
   shown separately below

 

 

109,341

 

 

 

208,475

 

 

 

31,275

 

 

 

 

27,143

 

 

 

78,777

 

General and administrative
   expenses

 

 

85,479

 

 

 

118,130

 

 

 

8,642

 

 

 

 

7,192

 

 

 

20,854

 

Depreciation and amortization

 

 

12,774

 

 

 

25,002

 

 

 

5,432

 

 

 

 

1,160

 

 

 

3,335

 

Total operating expenses

 

$

207,594

 

 

$

351,607

 

 

$

45,349

 

 

 

$

35,495

 

 

$

102,966

 

(LOSS) INCOME FROM OPERATIONS

 

$

(47,045

)

 

$

(47,926

)

 

$

104

 

 

 

$

3,060

 

 

$

8,695

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) gain on remeasurement
   of contingent consideration

 

 

(250

)

 

 

(557

)

 

 

(51

)

 

 

 

(32

)

 

 

322

 

Transaction costs

 

 

(1,996

)

 

 

(3,530

)

 

 

(181

)

 

 

 

(32,294

)

 

 

(33,247

)

Interest expense

 

 

(23,174

)

 

 

(31,806

)

 

 

(5,562

)

 

 

 

(1,340

)

 

 

(3,020

)

Other expense

 

 

(1,356

)

 

 

(1,445

)

 

 

(22

)

 

 

 

(14

)

 

 

(14

)

Total other expense

 

$

(26,776

)

 

$

(37,338

)

 

$

(5,816

)

 

 

$

(33,680

)

 

$

(35,959

)

LOSS BEFORE INCOME TAXES

 

 

(73,821

)

 

 

(85,264

)

 

 

(5,712

)

 

 

 

(30,620

)

 

 

(27,264

)

INCOME TAX BENEFIT

 

 

3,788

 

 

 

6,549

 

 

 

1,370

 

 

 

 

3,022

 

 

 

2,319

 

NET LOSS AND
   COMPREHENSIVE LOSS

 

$

(70,033

)

 

$

(78,715

)

 

$

(4,342

)

 

 

$

(27,598

)

 

$

(24,945

)

Accretion of Redeemable Class
   A units

 

 

 

 

 

(36,750

)

 

 

 

 

 

 

 

 

 

 

Accretion of Series A-1
   redeemable convertible
   preferred units (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

(272,582

)

 

 

(272,582

)

Cumulative dividend on Series
   A redeemable convertible
   preferred units (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

(217

)

 

 

(662

)

NET LOSS AVAILABLE TO
   COMMON
   STOCKHOLDERS/MEMBERS

 

$

(70,033

)

 

$

(115,465

)

 

$

(4,342

)

 

 

$

(300,397

)

 

$

(298,189

)

NET LOSS PER SHARE, BASIC
   AND DILUTED

 

 

(0.22

)

 

 

(0.37

)

 

 

(0.01

)

 

 

 

 

 

 

 

Weighted-average shares used to
   compute basic and diluted net
   loss per share

 

 

313,536

 

 

 

309,559

 

 

 

297,237

 

 

 

 

 

 

 

 

 

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

 

4


 

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE UNITS AND STOCKHOLDERS’/MEMBERS’ EQUITY FOR

THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 (SUCCESSOR) AND THE PERIOD FROM APRIL 13, 2020 TO JUNE 30, 2020

(SUCCESSOR) AND CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE

CONVERTIBLE PREFERRED UNITS AND MEMBERS’ DEFICIT FOR THE PERIOD FROM

APRIL 1, 2020 TO MAY 14, 2020 (PREDECESSOR) AND FOR THE PERIOD FROM JANUARY 1, 2020 TO MAY 14, 2020 (PREDECESSOR)

(unaudited)

(In thousands)

 

 

Class A

 

 

 

Class A-1

 

 

Class A-2

 

 

Class B

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

Redeemable Units

 

 

 

Common Units

 

 

Common Units

 

 

Common Units

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'/

 

Successor

Units

 

 

Amount

 

 

 

Units

 

Amount

 

 

Units

 

Amount

 

 

Units

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Members' Equity

 

Balances at March 31, 2021

 

35,000

 

 

$

71,750

 

 

 

 

959,563

 

$

959,563

 

 

 

50,908

 

$

50,946

 

 

 

 

$

 

 

 

 

 

$

 

 

$

2,057

 

 

$

(58,557

)

 

$

954,009

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(70,033

)

 

 

(70,033

)

Issuance of common units for
   acquisitions of businesses

 

 

 

 

 

 

 

 

 

 

 

 

 

725

 

 

1,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,486

 

Vested Class B Profits Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Redeemable
   Class A Units into common
   stock upon closing of initial
   public offering

 

(35,000

)

 

 

(71,750

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,234

 

 

 

102

 

 

 

71,648

 

 

 

 

 

 

71,750

 

Conversion of common units into
   common stock upon closing of
   initial public offering

 

 

 

 

 

 

 

 

(959,563

)

 

(959,563

)

 

 

(51,633

)

 

(52,432

)

 

 

 

 

 

 

 

295,663

 

 

 

2,957

 

 

 

1,009,038

 

 

 

 

 

 

 

Conversion of vested Class B
  Profits Interests to common stock
   upon closing of initial public offering

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,920

)

 

 

 

 

4,186

 

 

 

42

 

 

 

(42

)

 

 

 

 

 

 

Conversion of unvested Class B
   Profits Interests to restricted stock
   upon closing of initial public offering

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,766

 

 

 

308

 

 

 

(308

)

 

 

 

 

 

 

Issuance of common stock upon
   closing of initial public
   offering, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,800

 

 

 

328

 

 

 

548,577

 

 

 

 

 

 

548,905

 

Endowment of shares to the LifeStance
   Health Foundation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500

 

 

 

5

 

 

 

8,995

 

 

 

 

 

 

9,000

 

Stock and unit-based
   compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,515

 

 

 

 

 

 

29,515

 

Balances at June 30, 2021

 

 

 

$

 

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

374,149

 

 

$

3,742

 

 

$

1,669,480

 

 

$

(128,590

)

 

$

1,544,632

 

 

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

 

 

5


LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE UNITS AND STOCKHOLDERS’/MEMBERS’ EQUITY FOR

THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 (SUCCESSOR) AND THE PERIOD FROM APRIL 13, 2020 TO JUNE 30, 2020

(SUCCESSOR) AND CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE

CONVERTIBLE PREFERRED UNITS AND MEMBERS’ DEFICIT FOR THE PERIOD FROM

APRIL 1, 2020 TO MAY 14, 2020 (PREDECCESSOR) AND FOR THE PERIOD JANUARY 1, 2020 TO MAY 14, 2020 (PREDECESSOR)

(unaudited)

(In thousands)

 

 

Class A

 

 

 

Class A-1

 

 

Class A-2

 

 

Class B

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

Redeemable Units

 

 

 

Common Units

 

 

Common Units

 

 

Common Units

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'/

 

Successor

Units

 

 

Amount

 

 

 

Units

 

Amount

 

 

Units

 

Amount

 

 

Units

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Members' Equity

 

Balances at December 31, 2020

 

35,000

 

 

$

35,000

 

 

 

 

959,563

 

$

959,563

 

 

 

49,946

 

$

49,946

 

 

 

 

$

 

 

 

 

 

$

 

 

$

1,452

 

 

$

(13,125

)

 

$

997,836

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(78,715

)

 

 

(78,715

)

Issuance of common units

 

 

 

 

 

 

 

 

 

 

 

 

 

962

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,000

 

Accretion of Redeemable
   Class A Units

 

 

 

 

36,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,750

)

 

 

(36,750

)

Issuance of common units for
   acquisitions of businesses