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United States securities and exchange commission logo
March 16, 2021
Michael K. Lester
President and Chief Executive Officer
LifeStance Health Group, Inc.
4800 N. Scottsdale Road, Suite 6000
Scottsdale, AZ 85251
Re: LifeStance Health
Group, Inc.
Draft Registration
Statement on Form S-1
Submitted February
16, 2021
CIK No. 0001845257
Dear Mr. Lester:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 submitted February 16, 2021
Industry and Market Data, page ii
1. Your statement that
investors are cautioned not to give undue weight to information from
third party sources as
well as your own estimates, research and surveys may imply an
inappropriate
disclaimer of responsibility with respect to such information. Please either
delete this statement
or specifically state that you are liable for such information.
Summary, page 1
2. Please revise your
Summary to eliminate repetitive disclosure and to focus on the material
aspects of your
offering. Please note that the Summary should not include a lengthy
description of your
industry, competitive strengths and strategies for growth. We note that
Michael K. Lester
FirstName
LifeStance LastNameMichael
Health Group, Inc.K. Lester
Comapany
March NameLifeStance Health Group, Inc.
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this detailed information is better suited for the body of the
prospectus and that your
Business discussion already contains substantially the same
presentation. Additionally,
please consider revising your summary to include a brief overview of
the material aspects
of your care model, including the nature of your arrangements with
payors and affiliated
professional entities, as well as a brief discussion of the outpatient
behavioral health
services you provide, including your treatment services and assessment
services.
3. The prospectus summary should include a balanced presentation of your
business,
including your competitive position in the industry. In the
presentation of your business,
you present multiple performance claims on pages 2-7. Please revise to
state the basis for
your performance claims or revise to state such claims are
management's belief.
Additionally, please balance your summary presentation by providing
equally prominent
disclosure about the competitive, regulatory and technical challenges
you face.
4. To facilitate an understanding of your business, please revise to
explain what you mean by
"employing over 3,000 licensed behavioral health clinicians" and
"unique employment
model." In this regard, we note the disclosure on page 32 indicating
that you enter into
management services contracts with professional entities to provide a
wide range of
administrative services to "their practices."
We Have an Opportunity to Transform Health Care as a Whole, page 3
5. Please revise to quantify the amount of debt outstanding.
We Have a Significant Opportunity, page 4
6. Please revise to clarify how you determined that the outpatient
behavioral health market is
approximately $115 billion, disclosing and quantifying any assumptions
underlying the
calculation.
TPG Acquisition, page 10
7. With reference to the "Basis of Presentation" that you include prior
to the Summary,
please revise the "TPG Acquisition" section of the Summary to include
the consideration
paid and the debt issued. Please also explain briefly the purpose and
effect of the
reorganization.
8. Please file the agreements associated with the TPG acquisition as an
exhibit to the
registration statement. Refer to Item 601(b)(2) of Regulation S-K.
Alternatively, please
explain to us why such disclosure is not required.
Our Sponsors; Controlled Company, page 11
9. Please tell us why it is appropriate to identify TPG, Summit and
Silversmith as your
Sponsors. In this regard, please clarify whether TPG, Summit and
Silversmith have any
duties, obligations or roles beyond that of controlling shareholders.
Michael K. Lester
LifeStance Health Group, Inc.
March 16, 2021
Page 3
Summary Consolidated Financial Data, page 14
10. We note your disclosure on page iii that LifeStance TopCo, L.P. was
formed on April 13,
2020 and that the acquisition of LifeStance TopCo, L.P. was completed
May 14, 2020.
Please explain to us why your Successor period begins April 13, 2020
and the periods
overlap in the financial information you have provided in the filing.
Use of Proceeds, page 26
11. We note your disclosure of intended uses of proceeds is limited to
general corporate
purposes, including working capital, operating expenses and capital
expenditures. Please
revise to provide more meaningful and specific disclosure of the
intended use of proceeds,
as well as the approximate amounts intended to be used for each such
purpose. In this
regard, consider disclosing the amount of proceeds that you plan to
use for the identified
purposes as well as any additional plans for growth as referenced on
page 17.
Additionally, to the extent proceeds will be used to service debt,
please specify the interest
rates and maturity of the debt. Refer to Instruction 4 to Item 504 of
Regulation S-K.
Risks Related to Common Stock and This Offering , page 44
12. We refer to your discussion of the material weaknesses identified that
resulted in material
misstatements and the restatement of previously issued financial
statements. Please revise
to disclose the specific errors that resulted in the material
misstatements.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Factors Affecting Our Results , page 61
13. We note that as of December 31, 2020, you employed over 3,000
psychiatrists, APNs,
psychologists and therapists. Please tell us whether these employed
clinicians relate only
to your wholly-owned subsidiaries or if any of these are clinicians at
variable interest
entities discussed on page F-12.
Covid-19 Impact, page 66
14. We note your disclosure that existing trends in mental health care have
worsened
dramatically since the beginning of the COVID-19 pandemic and that
quarantining and
lockdown measures have resulted in furloughs and layoffs, dramatically
increasing
stressors and leading to poorer overall mental and physical health. We
also note your
FirstName LastNameMichael K. Lester
disclosure that total patient visits increased to 2,290,728 in 2020.
Please clarify whether
Comapany NameLifeStance
the COVID-19 Health
pandemic hasGroup,
impactedInc.the Company's patient visits
or related revenue
March during 2020.
16, 2021 Page 3
FirstName LastName
Michael K. Lester
FirstName
LifeStance LastNameMichael
Health Group, Inc.K. Lester
Comapany
March NameLifeStance Health Group, Inc.
16, 2021
March4 16, 2021 Page 4
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FirstName LastName
Key Metrics and Non-GAAP Financial Measures, page 68
15. Your financial metrics of Organic Revenue Growth, Adjusted Gross
Profit, and Center
Contribution appear to be non-GAAP measures as defined in Item
10(e)(2) of Regulation
S-K rather than financial metrics. Please revise to address the
following:
Provide the disclosures required by Item 10(e)(1)(i) of
Regulation S-K.
Expand disclosures in footnotes (1) and (3) on page 69 to
quantify the items that
make up the respective adjustments and clarify where these
amounts are reflected in
your financial statements.
Explain why you include gross profit here when this is not
presented in your financial
statements.
Explain why you believe the adjustment of $27,777 for certain
center general and
administrative expenses in your Center Contribution measure
complies with the
guidance in Item 10(e)(1)(ii) of Regulation S-K and Question
100.01 of the Non-
GAAP Compliance and Disclosure Interpretations dated April 4,
2018.
16. With regards to your non-GAAP measure of Adjusted EBITDA on page 70,
please
explain to us why you believe the adjustments for De novo center
opening costs and De
novo center operating losses comply with the guidance in Item 100(b)
of Regulation G
and Question 100.01 of the Non-GAAP Compliance and Disclosure
Interpretations dated
April 4, 2018. In addition, expand your disclosure to quantify the
items that make up the
adjustment of Other Expenses in footnote (5), and tell us why you
believe the non-
recurring items in the adjustment comply with the guidance in Item
10(e)(1)(ii)(B) of
Regulation S-K and Question 102.03 of the Non-GAAP Compliance and
Disclosure
Interpretations dated April 4, 2018.
Results of Operations
Total Revenue , page 73
17. Please revise to separately disclose and discuss revenue related to
wholly-owned entities
and revenue related to consolidated variable interest entities
discussed on page F-12.
Liquidity and Capital Resources, page 74
18. Please revise footnotes (1), (2), and (3) on page 76 to clarify how
you computed the
adjustments for credit agreement consolidated EBITDA.
Michael K. Lester
FirstName
LifeStance LastNameMichael
Health Group, Inc.K. Lester
Comapany
March NameLifeStance Health Group, Inc.
16, 2021
March5 16, 2021 Page 5
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FirstName LastName
Comprehensive Clinical Capabilities with Improved Outcomes, page 89
19. We note your disclosure that your clinical approach delivers validated
outcomes and that
you see that after two visits to treat such conditions, 81% of your
patients report a
decrease in their suicidal ideation, 53% of patients report
improvement with their
symptoms of depression and 54% of patients report an improvement in
their symptoms of
anxiety. Please revise your disclosure to clarify how many patients
were surveyed and
how improvement in symptoms was measured.
Our Patient Acquisition Strategy, page 95
20. We note your disclosure that in certain states that have adopted the
corporate practice of
medicine doctrine, you enter into management services contracts with
affiliated
professional entities to provide administrative and operations support
services in exchange
for scheduled fees at the fair market value of your services provided
to each outpatient
behavioral health practice. Please also include a discussion regarding
your relationships
with affiliated professional entities, including the proportion of
your care centers that are
affiliated professional entities.
Our Payor Relationships, page 95
21. We note your disclosure on page 20 that during the year ended December
31, 2019, in the
aggregate, two commercial third-party payors each accounted for 15% or
more of total
revenues across multiple contracts in the period. Please disclose the
commercial third
party payors and the percentage that each payor contributed to your
revenue during the
year ended December 31, 2019. Please also explain the reason why you
have multiple
contracts with such payors during the period. To the extent you are
substantially
dependent on any single payor contract, please file such agreement as
an exhibit to the
registration statement.
22. Please expand your disclosure to include a discussion of the material
terms, including the
nature of the reimbursement arrangements, you have negotiated under
your payor
contracts. Please also include in your disclosure a discussion of
those contracts that
provide for incremental payments tied to the attainment of quality or
performance metrics.
Financial Statements
Note 7- Fair Value Measurements, page F-21
23. Please expand to disclose the specific assumptions used to estimate
the fair value of your
contingent consideration liability of $25,536 at December 31, 2019.
Item 15. Recent Sales of Unregistered Securities, page II-2
24. Please expand your disclosure to name the persons or identify the
class of persons to
whom the securities were sold. See Item 701(b) of Regulation S-K.
Michael K. Lester
LifeStance Health Group, Inc.
March 16, 2021
Page 6
General
25. Please provide us with copies of all written communications, as defined
in Rule 405 under
the Securities Act, that you, or anyone authorized to do so on your
behalf, present to
potential investors in reliance on Section 5(d) of the Securities Act,
whether or not they
retain copies of the communications.
You may contact Tracie Mariner at 202-551-3744 or Brian Cascio at
202-551-3676 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Deanna Virginio at 202-551-4530 or Jeffrey Gabor at 202-551-2544 with
any other
questions.
Sincerely,
FirstName LastNameMichael K. Lester
Division of
Corporation Finance
Comapany NameLifeStance Health Group, Inc.
Office of Life
Sciences
March 16, 2021 Page 6
cc: Thomas Fraser, Esq.
FirstName LastName