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United States securities and exchange commission logo
April 30, 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.
Amendment No. 1 to
Draft Registration Statement on Form S-1
Submitted April 12,
2021
CIK No. 0001845257
Dear Mr. Lester:
We have reviewed your amended 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.
Amendment No. 1 to Draft Registration Statement on Form S-1 Submitted
April 12, 2021
Overview, page 1
1. We note your response
to prior comment 2. Please revise your summary to move the
discussion of your care
model prior to the discussion of your strengths, opportunities and
growth strategies.
Given the current presentation, we note that it is difficult for an investor
to understand the
platform and model that you are highlighting or to assess statements in
this section concerning
how this model is disruptive and transformative. In your revised
disclosure, state
succinctly and in plain-English your business structure and operating
model. In this
discussion, specifically state what products and services you provide and
how they generate
revenue.
Michael K. Lester
FirstName
LifeStance LastNameMichael
Health Group, Inc.K. Lester
Comapany
April NameLifeStance Health Group, Inc.
30, 2021
April 230, 2021 Page 2
Page
FirstName LastName
2. Please provide a organizational chart of your operations. In this
chart, please indicate what
entities (or group of entities) you own and those with which you have
a contractual
relationship.
3. We note your response to prior comment 3. Please revise to state the
basis for your
performance claims or revise to state such claims are management s
belief. For example,
we note your statements that your mental health treatment services and
experience are
"best-in-class," that payors are able to offer their members a
"superior product," and that
your collaborative care model leads "to improved quality outcomes and
lower costs."
TPG Acquisition, page 10
4. We note your response to prior comment 7. Please revise to quantify
the consideration
paid in the TPG Acquisition.
5. We note your response to prior comment 8. Please provide us
supplementally with a copy
of the agreements associated with the TPG acquisition.
Key Factors Affecting Our Results, page 72
6. We reference your response to prior comment 13. Please explain to us
why you have not
separately disclosed the number of your employees and those employed
at affiliated
practices and the reason you do not believe that this disclosure would
be useful to
investors. We also reference the discussion on page 5 that you employ
clinicians as W-2
employees rather than independent contractors. Please clarify how
employees of the
affiliated practices could be your W-2 employees.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Metrics and Non-GAAP Financial Measures, page 78
7. We have read your response to prior comment 15 and have the following
additional
comments:
We note you have replaced Adjusted Gross Profit with Clinician
Contribution and
reconcile it to total revenue and income from operations.
However, based on your
definition of Clinician Contribution on page 80, it appears that
the reconciliation
should start with gross profit, the most directly comparable GAAP
measure, which
would include revenue and all costs of revenue. Please revise
accordingly.
Please separate your reconciliation of Center Contribution from
Clinician
Contribution, and revise the reconciliation of Center
Contribution to begin with
income from operations, the most directly comparable GAAP
financial measure to
comply with the guidance in Item 10(e)(1)(i)(A) of Regulation
S-K.
Michael K. Lester
FirstName
LifeStance LastNameMichael
Health Group, Inc.K. Lester
Comapany
April NameLifeStance Health Group, Inc.
30, 2021
April 330, 2021 Page 3
Page
FirstName LastName
Please revise the title of your non-GAAP measure, Center
Contribution, to more
clearly indicate the type of profit measure it is (e.g. operating
profit) so that it is not
confused with other contribution-type measures.
Please remove the adjustment that has the effect of excluding
de novo center opening
losses from your non-GAAP measure Center Contribution.
With regard to footnote (4), please tell us in more detail
about the regional-level
overhead excluded from Center Contribution. Further, tell us
about the expenses
related to marketing activities excluded from the measure and at
what level they are
performed. For all regional and corporate overhead excluded from
the measure, tell
us why you believe it is appropriate and how you considered the
guidance in Item
100(b) of Regulation G and Question 100.01 of the Non-GAAP
Compliance and
Disclosure Interpretations.
Please revise the accompanying disclosures of Center
Contribution to address the
limitations of the non-GAAP center-level performance measure, and
include
disclosure emphasizing that the costs excluded, such as corporate
overhead, opening
costs, etc., are essential to support the operation and
development of the centers.
8. We have read your response to prior comment 16 and have the following
additional
comments:
Please tell us how you considered Question 100.01 of the
Non-GAAP Compliance
and Disclosure Interpretations in your decision to exclude
opening costs from your
measure of consolidated Adjusted EBITDA. In your response, please
address your
growth strategy and the number of centers opened for the periods
presented.
Please revise to remove the adjustment that has the effect of
excluding de novo center
opening losses from your non-GAAP measure, Adjusted EBITDA.
Please expand your disclosure in footnote (5) to quantify the
items that make up the
adjustments of Other Expenses, and clarify where the items are
reflected in your
financial statements. Additionally, if material, tell us why you
believe excluding
bonuses and compensation paid to former owners of acquired
centers is appropriate.
Results of Operations, page 84
9. We have read your response to prior comment 17. Given the disclosure,
on pages iv and
104, stating that, as of December 31, 2020, 249 of your 370 centers
were operated through
affiliated practices, please tell us in further detail why you do not
believe separately
discussing the results of operations of your wholly-owned entities and
affiliated practices
would be meaningful to investors, as it would appear that the majority
of your revenue is
generated through your affiliated practices. In your response, explain
the differences and
similarities between how the two are managed, including any
differences in fees/revenues,
Michael K. Lester
LifeStance Health Group, Inc.
April 30, 2021
Page 4
cost structure, medical claims/expenses, and contingencies. Please
tell us the amount of
revenues that relate to medical services from affiliated practices.
Business, page 95
10. Please revise to disclose details of your relationship with the
affiliated practices, including
the significant terms, obligations and responsibilities of the
management services
agreements you enter into with affiliated practices. Clarify whether
the specific fees for
medical services and payments to clinicians of affiliated entities are
outlined in these
agreements.
11. Please discuss the terms of the agreements and arrangements referenced
on pages 33, 104,
and F-15. If the material terms of these arrangements vary, please
describe the range of
such terms. To the extent that these agreements are standard in
format, please file
a form of the agreement as an exhibit.
Our Payor Relationships, page 108
12. We note your response to prior comment 21 and re-issue in part. Please
disclose the
identity of the commercial third party payors that comprised 23%, 19%,
and 11% of your
total revenue during the year ended December 31, 2020. If you do not
believe the
identification of these payors is material to an understanding of your
business taken as a
whole, please provide a detailed analysis.
13. We note your response to prior comment 22. Please expand your
disclosure to discuss the
material terms of the fee-for-service contracts you have entered into
with your payors. We
also note your disclosure that only a nominal number of the contracts
provide for
incremental payments tied to the attainment of quality or performance
metrics. Please
revise to clarify whether such contracts also represent a nominal
portion of your revenue.
LifeStance TopCo, L.P. Financial Statements
Consolidated Statements of Income/ (Loss) and Comprehensive Income/ (Loss),
page F-5
14. Please tell us how you considered the guidance in Rule 5-03(b)(2) of
Regulation S-X,
including separately presenting costs and expenses applicable to
revenues, medical claims
expense, selling, general and administrative expenses, etc.
Total Revenue, page F-11
15. We note your disclosure stating that implicit price concessions relating
to services
provided to patients with a reduced ability to pay for their care and
who may be in need of
FirstName LastNameMichael K. Lester
financial assistance are not reported as revenue. Please revise to
clarify how these implicit
Comapany
priceNameLifeStance
concessions are Health
recordedGroup, Inc.
in your financial statements. In your
response, include the
guidance
April 30, to which
2021 Page 4 are relying to support your position.
FirstName LastName
Michael K. Lester
FirstName
LifeStance LastNameMichael
Health Group, Inc.K. Lester
Comapany
April NameLifeStance Health Group, Inc.
30, 2021
April 530, 2021 Page 5
Page
FirstName LastName
16. Please explain to us how you considered the guidance in ASC
606-10-50-5 and 6 with
regard to disaggregated revenues related to owned clinics and those
operated through
affiliated practices.
Note 2- Summary of Significant Accounting Policies
Variable Interest Entities, page F-16
17. We note the disclosure on page 104 that at December 31, 2020 249 of
your 370 clinics
were operated through affiliated practices. Since a majority of the
clinics are operated
through affiliated practices please explain to us why assets of your
VIEs are not
significant related to the consolidated amounts in your financial
statements.
Note 4- Acquisitions, page F-23
18. We note your disclosure stating that during the period from April 13,
2020 to December
31, 2020 (Successor) and the period from January 1, 2020 to May 14,
2020 (Predecessor)
you completed the acquisitions of 17 and 6, respectively, outpatient
mental health
practices for total consideration of $204,175. Please tell us how you
considered providing
audited financial statements and pro forma financial information of
the acquirees,
individually and in the aggregate, pursuant to the guidance in Rule
3-05 and Article 11 of
Regulation S-X.
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,
Division of
Corporation Finance
Office of Life
Sciences
cc: Thomas Fraser, Esq.