What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-28 · 88 added, 105 removed, 332 unchanged (37% of the section changed)

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wholly-owns the equity interest of LifeStance TopCo and operates and controls all of the business and affairs and consolidates the financial results of LifeStance TopCo and its wholly owned subsidiaries and supported practices.

Unless the context otherwise indicates or requires, the terms "we", "us", "our business", "LifeStance" and "our Company" and similar references refer to LifeStance Health Group, Inc.

Unless stated otherwise or the context otherwise requires, the terms "we", "us", "our business", "LifeStance" and "our Company" and similar references refer to LifeStance Health Group, Inc.

and its consolidated subsidiaries and supported practices.

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We partner with primary care physicians and specialist physician groups across the country to provide a mental healthcare network for referrals and, in certain instances, through virtual and physical co-location to improve the diagnosis and treatment of their patients.

COVID-19 Impact

We believe the COVID-19 pandemic represented a paradigm shift in the importance of and focus on mental healthcare.

We saw a significant increase in patient demand as well as payor and employer adoption of mental health coverage options during the pandemic.

However, as the pandemic surged and waned, we believe there has been some impact on our operations, including due to patient and clinician illness, which resulted in cancellations of appointments, deferrals and fewer appointments initially scheduled.

Key Factors Affecting Our Results

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We generate lower revenue and experience lower clinician productivity in periods that have fewer business days than other periods.

We measure productivity by the number of visits that are performed by a clinician, which is driven by the time clinicians make available to see patients and our ability to fill clinician's schedules by attracting new patients, scheduling patients, and converting scheduled appointments to completed visits also impacts our ability to generate revenue.

Further, clinician productivity also impacts clinician compensation, as clinician compensation is primarily driven by the number of visits provided by each clinician.

Clinician productivity impacts our ability to generate revenue and also impacts clinician compensation, as clinician compensation is primarily driven by the number of visits provided by each clinician.

Recruiting new clinicians and retaining existing clinicians enables us to see more patients by expanding our patient visit capacity.

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Our in-network payor relationships allow our patients to access affordable care without significant out-of-pocket cost or delays in receiving treatment.

We treat mental health conditions across the outpatient spectrum through a clinical approach that delivers improved patient outcomes.

We treat mental health conditions across the outpatient spectrum through a clinical approach that focuses on improved patient outcomes.

We support our patients throughout their care continuum with purpose-built technological capabilities, including online assessments, digital provider communication, and seamless internal referral and follow-up capabilities.

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Within our markets, we partner with primary care practice groups, specialists, health systems and academic institutions to refer patients to our centers and clinicians.

Our local marketing teams build and maintain relationships with our referring partner networks to create awareness of our platform and services, including the opening of new centers and the introduction of newly hired clinicians with appointment availability.

Our local referral marketing teams build and maintain relationships with our referring partner networks to create awareness of our platform and services, including the opening of new centers and the introduction of newly hired clinicians with appointment availability.

We also use online marketing to develop our national brand to increase brand awareness and promote additional channels of patient recruitment.

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Our vision over time is to further integrate our mental healthcare services with those of our medical provider partners.

By co-locating and driving towards integration with primary care and specialty providers, we can enhance our clinicians' access to patients.

We anticipate that we will continue to grow these relationships while evolving our offering toward a fully-integrated care model in which primary care and our mental health

clinicians work together to develop and provide personalized treatment plans for shared patients.

By co-locating and driving toward integration with primary care and specialty providers, we can enhance our clinicians' access to patients.

We anticipate that we will continue to grow these relationships while evolving our offering toward a fully-integrated care model in which primary care and our mental health clinicians work together to develop and provide personalized treatment plans for shared patients.

We believe these efforts will help to further align our model with that of other healthcare providers, increasing our value to them and driving new opportunities to partner to grow our patient base and revenue opportunities.

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Our de novo center strategy is a central component of our organic growth engine to build our capacity and increase density in our existing metropolitan statistical areas.

From our inception in 2017 through December 31, 2023, we have successfully opened 351 de novo centers, including 35 de novo centers in 2023, 90 de novo centers in 2022 and 106 de novo centers in 2021.

We believe there is a significant opportunity to use de novo center openings to address potential patient need in our existing markets and new markets that we have determined are attractive to enter.

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We continue to utilize a more sustainable design for all new de novo centers that reimagines the mental healthcare experience for both patients and clinicians while reinforcing our commitment to sustainability.

We believe the highly fragmented nature of the mental health market provides us with a meaningful opportunity to execute on our acquisition playbook.

We seek to acquire select practices that meet our standards of high-quality clinical care and align with our mission.

We believe the highly fragmented nature of the mental health market provides us with a meaningful opportunity to selectively pursue acquisitions that meet our standards of high-quality clinical care and align with our mission.

We believe our guiding principle of creating a national platform built with a patient and clinician focus makes us a partner of choice for smaller, independent practices.

Our acquisition strategy is deployed both to enter new markets and in our existing markets.

In new markets, acquisitions allow us to establish a presence with high-quality practices with a track record of clinical excellence and in-network payor relationships that can be integrated into our national platform.

In existing markets, acquisitions allow us to grow our geographic reach and clinician base to expand patient access.

As of December 31, 2023, we had completed 93 acquisitions of existing practices, since our inception.

Our acquisition strategy has been deployed both to enter new markets and in our existing markets.

In new markets, acquisitions have allowed us to establish a presence with high-quality practices with a track record of clinical excellence and in-network payor relationships that can be integrated into our national platform.

In existing markets, acquisitions have allowed us to grow our geographic reach and clinician base to expand patient access.

Real Estate Optimization

In connection with our expansion through de novo centers and acquisitions, in 2023, we announced a strategic re-focus, to prioritize resources and close certain centers as a direct result of changes to our business model driven by a shift to more virtual visits initiated by the COVID-19 pandemic.

As a result, we have completed a significant reduction in physical space and exited several underoccupied offices by both negotiating terminations of and abandoning certain real estate leases, and plan to continue to optimize our real estate footprint in 2024.

In connection with our expansion through de novo builds and acquisitions, in 2023, we announced a strategic re-focus, to prioritize resources and close certain centers as a direct result of changes to our business model driven by a shift to more virtual visits.

As a result, we completed a significant reduction in physical space and exited several underoccupied offices by both negotiating terminations of and abandoning certain real estate leases during 2023.

We plan to continue to optimize our real estate footprint on a go-forward basis as part of our recurring operations.

Center Margin

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We believe this metric best reflects the economics of our model as it includes all direct expenses associated with our patients’ care.

We seek to grow our Center Margin through a combination of (i) growing revenue through clinician hiring and retention, patient growth and engagement, hybrid virtual and in-person care, existing office expansion, and in-network reimbursement levels, and (ii) leveraging on our fixed cost base at each center.

our fixed cost base at each center.

For acquired centers, we also seek to realize operational, technology and reimbursement synergies to drive Center Margin growth.

Investments in Growth

We will continue to focus on long-term growth through investments in our centers and technology.

In addition, we expect our general and administrative expenses to increase in the foreseeable future due to our planned investments in growth initiatives including our strategic initiatives and public company infrastructure.

Key Metrics and Non-GAAP Financial Measures

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Adjusted EBITDA

* Denotes not meaningful due to lack of comparability between the prior year period as a result of the acquisition of the predecessor of LifeStance TopCo by affiliates of TPG Inc.

(the "TPG Acquisition").

Center Margin and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles ("GAAP") and are not intended to be substitutes for any GAAP financial measures, including revenue, loss from operations or net loss, and, as calculated, may not be comparable to companies in other industries or within the same industry with similarly titled measures of performance.

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Center Margin

(1) Represents salaries, wages and employee benefits for our executive leadership, finance, human resources, marketing, billing and credentialing support and technology infrastructure and stock and unit-based compensation for all employees.

Adjusted EBITDA

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We believe Adjusted EBITDA is useful in evaluating our operating performance, and may be helpful to securities analysts, institutional investors and other interested parties in understanding our operating performance and prospects.

Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to companies in other industries or within the same industry with similarly titled measures of performance.

Therefore, our Adjusted EBITDA should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP, such as net income or loss.

We define Adjusted EBITDA as net loss excluding interest expense, depreciation and amortization, income tax benefit, (gain) loss on remeasurement of contingent consideration, stock and unit-based compensation, management fees, loss on disposal of assets, transaction costs, offering related costs, executive transition costs, litigation costs, strategic initiatives, real estate optimization and restructuring charges, and other expenses.

We define Adjusted EBITDA as net loss excluding interest expense, depreciation and amortization, income tax benefit, (gain) loss on remeasurement of contingent consideration, stock-based compensation, loss on disposal of assets, transaction costs, executive transition costs, litigation costs, strategic initiatives, real estate optimization and restructuring charges, amortization of cloud-based software implementation costs, and other expenses.

We include Adjusted EBITDA in this Annual Report because it is an important measure upon which our management assesses, and believes investors should assess, our operating performance.

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Income tax benefit

(Gain) loss on remeasurement of contingent consideration

Stock and unit-based compensation expense

Management fees (1)

(Gain) loss on remeasurement of contingent

consideration

Stock-based compensation expense

Loss on disposal of assets

Transaction costs (1)

Offering related costs (3)

Endowment to the LifeStance Health Foundation

Executive transition costs

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Strategic initiatives (3)

Real estate optimization and restructuring charges (6)

Real estate optimization and restructuring

Amortization of cloud-based software

implementation costs (5)

Other expenses (6)

Adjusted EBITDA

(1) Represents management fees paid to certain of our executive officers and affiliates of our Principal Stockholders pursuant to the management services agreement entered into in connection with the TPG Acquisition.

During the year ended December 31, 2021, the management services agreement terminated in connection with the IPO and we were required to pay a one-time fee of $1.2 million to such parties.

(2) Primarily includes capital markets advisory, consulting, accounting and legal expenses related to our acquisitions.

(3) Primarily includes non-recurring incremental professional services, such as accounting and legal, and directors' and officers' insurance incurred in connection with the IPO.

(1) Primarily includes capital markets advisory, consulting, accounting and legal expenses related to our acquisitions and to our underwritten public offering completed in the second quarter of 2024.

(2) Litigation costs include only those costs which are considered non-recurring and outside of the ordinary course of business based on the following considerations, which we assess regularly:

(i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) the complexity of the case (e.g., complex class action litigation), (iii) the nature of the remedy(ies) sought, including the size of any monetary damages sought, (iv) the counterparty involved, and (v) our overall litigation strategy.

During the year ended December 31, 2023, litigation costs included cash expenses related to three distinct litigation matters, including (x) a securities class action litigation, (y) a privacy class action litigation and (z) a compensation model class action litigation.

During the years ended December 31, 2024, 2023 and 2022, litigation costs included cash expenses related to three distinct litigation matters, including (x) a securities class action litigation, (y) a privacy class action litigation and (z) a compensation model class action litigation.

For a discussion of certain legal proceedings in which we are involved, please read Note 13, Commitments and Contingencies, to our consolidated financial statements included in Part IV, Item 15, of this Annual Report on Form 10-K.

(3) Strategic initiatives consist of expenses directly related to a multi-phase system upgrade in connection with our recent and significant expansion.

During the year ended December 31, 2023, we continued a process of evaluating and adopting three critical enterprise-wide systems for (i) human resources management, (ii) clinician credentialing and onboarding process and (iii) a scalable electronic health resources system.

During the years ended December 31, 2024 and 2023, we continued a process of evaluating and adopting critical enterprise-wide systems for (i) human resources management, (ii) clinician credentialing and onboarding process, and for the year ended December 31, 2023, (iii) a scalable electronic health resources system.

Strategic initiatives represents costs, such as third-party consulting costs and one-time costs, that are not part of our ongoing operations related to these enterprise-wide systems.

We considered the frequency and scale of this multi-part enterprise upgrade when determining that the expenses were not normal, recurring operating expenses.

(6) Real estate optimization and restructuring charges consist of cash expenses and non-cash charges related to our real estate optimization initiative, which include certain asset impairment and disposal costs, certain gains and losses related to early lease terminations, and exit and disposal costs related to our real estate optimization initiative to consolidate our physical footprint.

As the decision to close these centers was part of a significant strategic project driven by a historic shift in behavior, the magnitude of center closures has been and is expected to be greater than what would be expected as part of ordinary business operations and do not constitute normal recurring operating activities.

(4) Real estate optimization and restructuring charges consist of cash expenses and non-cash charges related to our real estate optimization initiative, which include certain asset impairment and disposal costs, certain gains and losses related to early lease terminations, and exit and disposal costs related to our real estate optimization initiative to consolidate our physical footprint for the year ended December 31, 2023.

As the decision to close these centers was part of a significant strategic project driven by a historic shift in behavior, the magnitude of center closures was greater than what would be expected as part of ordinary business operations and did not constitute normal recurring operating activities.

During the year ended December 31, 2024, real estate optimization and restructuring charges consisted of certain gains and losses related to early lease terminations of previously abandoned real estate leases in 2023.

For a discussion of our real estate optimization initiative, please read Note 5, Leases, to our consolidated financial statements included in Part IV, Item 15, of this Annual Report on Form 10-K.

(5) Represents amortization of capitalized implementation costs related to cloud-based software arrangements that are included within general and administrative expenses included in our consolidated statements of operations and comprehensive loss.

(6) Primarily includes costs incurred to consummate or integrate acquired centers, certain of which are wholly-owned and certain of which are supported practices, in addition to the compensation paid to former owners of acquired centers and related expenses that are not reflective of the ongoing operating expenses of our centers.

Acquired center integration and other are components of general and administrative expenses included in our consolidated statements of operations and comprehensive loss.

owner fees is a component of center costs, excluding depreciation and amortization included in our consolidated statements of operations and comprehensive loss.

Former owner fees is a component of center costs, excluding depreciation and amortization included in our consolidated statements of operations and comprehensive loss.

These costs are summarized for each period in the table below:

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Revenue is recognized as performance obligations are satisfied.

Performance obligations are determined based on the nature of the services provided, and generally each individual counselling session is a performance obligation.

Performance obligations are determined based on the nature of the services provided, and generally each individual counseling session is a performance obligation.

We have relationships with third-party payors.

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Our payor relationships generally operate across multiple independent regional contracts.

We have patients covered by third-party payors, which include commercial health insurers and governmental payors under programs such as Medicare, and uninsured patients.

We have patients covered by

third-party payors, which include commercial health insurers and governmental payors under programs such as Medicare, and uninsured patients.

Governmental payors and uninsured patients account for a small portion of our total revenue.

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General and administrative expenses

General and administrative expenses consist primarily of salaries, wages and employee benefits for our executive leadership, finance, human resources, marketing, billing and credentialing support and technology infrastructure and stock and unit-based compensation for all employees.

In addition, general and administrative expenses include insurance and corporate occupancy costs.

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Other Expense

Other expense consists primarily of gains and losses on remeasurement of a contingent consideration liability where the performance condition was not met or likelihood of payment increases, transaction costs related to legal, consulting and other expenses, related party management fees, interest expense on our credit facilities and amortization of discount and debt issue costs.

Other expense consists primarily of gains and losses on remeasurement of a contingent consideration liability where the performance condition was not met or likelihood of payment increases, transaction costs related to legal, consulting and other expenses, interest expense on our credit facilities and amortization of discount and debt issue costs.

Income Tax Benefit

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We also consider the expected reversal of deferred tax liabilities and analyze the period in which these would be expected to reverse to determine whether the taxable temporary difference amounts serve as an adequate source of future taxable income to support the realizability of the deferred tax assets.

Future acquisitions or divestitures may impact jurisdictions in which the Company operates which may impact the jurisdictions in which the Company is subject to income tax.

Results of Operations

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OTHER EXPENSE

Gain (loss) on remeasurement of contingent consideration

Gain (loss) on remeasurement of contingent

consideration

Transaction costs

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This was primarily due to an increase of $194.1 million of patient service revenue and $1.2 million of nonpatient revenue.

The increase in patient service revenue was mainly due to a net increase of 1,014 in total clinicians primarily from organic hiring, an increase in average clinician productivity and the inclusion of prior acquisitions for the full year, resulting in an increase in patient visits of 1.1 million, or 20%.

The increase in patient service revenue was mainly due to a net increase of 779 in total clinicians from organic hiring, resulting in an increase in patient visits of 1.0 million, or 15%.

Additionally, TRPV increased year-over-year primarily driven by modest payor rate increases.

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Center costs, excluding depreciation and amortization increased $95.0 million, or 13%, to $848.6 million for the year ended December 31, 2024 from $753.6 million for the year ended December 31, 2023.

This was primarily due to a $125.3 million increase in center-based compensation due to the increase in the total number of clinicians primarily from organic hiring and including from the

prior acquisitions for the full year, and an increase in average clinician productivity, resulting in an overall increase in patient visits of 1.1 million.

In addition, occupancy costs consisting of center rent and utilities and other center operating expenses consisting of office supplies and insurance attributed to the increase of $5.8 million primarily due to our new centers.

This was primarily due to a $91.8 million increase in center-based compensation due to the increase in patient visits of 1.0 million from the increase in the total number of clinicians from organic hiring.

In addition, occupancy costs consisting of center rent and utilities and other center operating expenses consisting of office supplies and insurance contributed to the increase of $3.2 million.

We expect our center costs, excluding depreciation and amortization to continue to increase in the short- to medium-term as we strategically invest to expand our business through our in-house clinician recruiting and de novo strategies and to potentially capture more of our market opportunity.

General and administrative expenses

General and administrative expenses increased $32.8 million, or 9%, to $410.8 million for the year ended December 31, 2023 from $378.0 million for the year ended December 31, 2022.

This was primarily due to an increase of $58.0 million in other operating expenses, including professional services and legal expenses for ongoing litigation, including, primarily the approved settlement of our shareholder class action lawsuit (see Note 13, Commitments and Contingencies, to our consolidated financial statements included in Part IV, Item 15, of this Annual Report on Form 10-K).

In addition, the increase was attributable to an increase of $17.0 million in occupancy costs, of which $11.0 million is related to our real estate optimization and restructuring charges (see Note 5, Leases, to our consolidated financial statements included in Part IV, Item 15, of this Annual Report on Form 10-K).

This increase was offset by a decrease of $88.0 million in stock-based compensation expense primarily relating to RSAs and RSUs granted at the time of IPO without a similar expense in 2023, and the decrease was offset by an increase in salaries, wages and employee benefits of $41.9 million.

Further, the increase is also partially attributable to the third-party consulting costs and one-time costs associated with our strategic initiatives of $3.9 million related to the multi-phase system upgrade in connection with our recent and significant expansion.

General and administrative expenses decreased $47.7 million, or 12%, to $363.1 million for the year ended December 31, 2024 from $410.8 million for the year ended December 31, 2023.

This was primarily due to a decrease of $36.0 million in other operating expenses primarily as a result of professional fees and legal expenses related to the settlement of our shareholder class action lawsuit during the year ended December 31, 2023 with no similar expense during the year ended December 31, 2024.

In addition, there was a decrease of $23.2 million in stock-based compensation expense primarily relating to RSAs and RSUs granted at the time of IPO without a similar expense in 2024, which was offset by an increase in salaries, wages and employee benefits of $22.4 million.

Further, there was a decrease in third-party consulting costs and one-time costs associated with our strategic initiatives of $2.6 million related to the multi-phase system upgrade in connection with our recent and significant expansion and a decrease of $8.3 million in

occupancy costs primarily related to our real estate optimization and restructuring charges during the year ended December 31, 2023 with no similar expense during the year ended December 31, 2024.

We expect our general and administrative expenses to increase in the foreseeable future due to our planned investments to support company growth.

Depreciation and amortization

Depreciation and amortization expense increased $11.2 million to $80.4 million for the year ended December 31, 2023 from $69.2 million for the year ended December 31, 2022.

Depreciation and amortization expense decreased $9.4 million to $71.0 million for the year ended December 31, 2024 from $80.4 million for the year ended December 31, 2023.

This was primarily due to the amortization of intangibles and depreciation during the periods.

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Interest expense increased $5.3 million to $26.5 million for the year ended December 31, 2024 from $21.2 million for the year ended December 31, 2023.

This increase was primarily due to higher borrowings outstanding during the period.

This increase was primarily due to an extinguishment of debt charge of $5.0 million related to the termination of the 2022 Credit Agreement (as defined below).

Income Tax Benefit

Income tax benefit increased $3.1 million to $20.3 million for the year ended December 31, 2023 from $17.2 million for the year ended December 31, 2022.

The increase was primarily due to the decrease in non-deductible equity awards offset by an increase in the valuation allowance activity for the year ended December 31, 2023.

Income tax benefit decreased $20.1 million to $0.2 million for the year ended December 31, 2024 from $20.3 million for the year ended December 31, 2023 primarily due to being in a taxable income position and non-deductible equity awards for the year ended December 31, 2024.

Comparison of the Years Ended December 31, 2023 and 2022

See discussion of the comparison of the years ended December 31, 2022 and 2021 in the Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 9, 2023, Part II - Item 7.

See discussion of the comparison of the years ended December 31, 2023 and 2022 in the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 28, 2024, Part II - Item 7.

“—Management's Discussion and Analysis of Financial Condition—Results of Operations”.

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We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital needs, capital expenditures, including to execute on our de novo strategy, contractual obligations, debt service, acquisitions, settlement of contingent considerations obligations, and other commitments with cash flows from operations and other sources of funding.

Our principal sources of liquidity to date have included cash from operating activities, cash on hand and amounts available under that certain credit agreement among by the Company, LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto, dated May 4, 2022, as amended (the "2022 Credit Agreement").

Our principal sources of liquidity to date have included cash from operating activities, cash on hand and amounts available under that certain credit agreement entered into on December 19, 2024, by the Company, LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto (the "2024 Credit Agreement").

We had cash and cash equivalents of $154.6 million and $78.8 million as of December 31, 2024 and 2023, respectively.

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In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all.

If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on

our business opportunities because we lack sufficient capital, our business, results of operations and financial condition would be adversely affected.

If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations and financial condition would be adversely affected.

Our future obligations primarily consist of our debt and lease obligations.

We expect our cash generation from operations and future ability to refinance or secure additional financing facilities to be sufficient to repay our outstanding debt obligations and lease payment obligations.

As of December 31, 2023 and 2022, there was an aggregate principal amount of $289.5 million and $234.0 million outstanding under the 2022 Credit Agreement, respectively.

As of December 31, 2024 and 2023, there was an aggregate principal amount of $290.0 million outstanding under the 2024 Credit Agreement and $289.5 million outstanding under the 2022 Credit Agreement, respectively.

As of December 31, 2024, our non-cancellable future minimum operating lease payments totaled $231.8 million.

May 2020 Credit Agreement

On May 14, 2020 and in connection with the TPG Acquisition, LifeStance Health Holdings, Inc., one of our subsidiaries, entered into the May 2020 Credit Agreement.

The May 2020 Credit Agreement provides for senior secured credit facilities (the “Credit Facilities”) in the form of (i) $37.5 million original and delayed draw principal amount of Closing Date Term B-1 Loans and $222.5 million original and delayed draw principal amount of Closing Date Term B-2 Loans (“Closing Date Term Loans”), and (ii) $20.0 million of Revolving Commitments.

On November 4, 2020, we entered into the First Amendment to the May 2020 Credit Agreement which, among other things, provided for incremental Credit Facilities in the form of $16.6 million original principal amount of First Amendment Term B-1 Loans and $98.4 million original principal amount of First Amendment Term B-2 Loans (“First Amendment Term Loans”).

On February 1, 2021, we entered into the Second Amendment to the Credit Agreement (“Second Amendment”).

The Second Amendment provides for incremental delayed draw term loans in the aggregate principal amount of $50.0 million.

The Second Amendment delayed draw term loans are subject to the same terms and conditions set forth in the May 2020 Credit Agreement.

On April 30, 2021, we entered into the Third Amendment to the Credit Agreement, which provided for incremental delayed draw term loans in the aggregate principal amount of $70.0 million.

On May 16, 2022, in connection with the closing of the 2022 Credit Agreement, the outstanding debt on the May 2020 Credit Agreement was repaid in full.

Borrowings under the May 2020 Credit Agreement were subject to variable interest rates determined at LIBOR plus 3.00% to 7.09%.

We were required to make quarterly principal and interest payments through May 14, 2026.

Under the terms of the May 2020 Credit Agreement, we were subject to a requirement to maintain a Total Net Leverage Ratio as of the last day of each fiscal quarter to not exceed 8.00:1.00, which maximum level steps down to 7.25:1.00 beginning with the fiscal quarter ending June 30, 2022 and to 7.00:1.00 beginning with the fiscal quarter ending June 30, 2023.

We were in compliance with the financial covenants since the inception of the May 2020 Credit Agreement through payoff.

2022 Credit Agreement

On May 4, 2022, LifeStance Health Holdings, Inc., one of our subsidiaries, entered into the 2022 Credit Agreement.

The 2022 Credit Agreement establishes commitments in respect of a senior secured term loan facility of $200.0 million (the “Term Loan Facility”), a senior secured revolving loan facility of up to $50.0 million (the “Revolving Facility”) and a senior secured delayed draw term loan facility of up to $100.0 million (the “Delayed Draw Term Loan Facility”).

The loans under the Term Loan Facility and the Delayed Draw Term Loan Facility bear interest at a rate per annum equal to (x) adjusted term SOFR (which adjusted term SOFR is subject to a minimum of 0.75%) plus an applicable margin of 4.50% or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50% above the federal funds effective rate and (iii) one-month adjusted term SOFR (which adjusted term SOFR is subject to a minimum of 0.75%) plus 1.00%) plus an applicable margin of 3.50%.

The loans under the Revolving Facility bear interest at a rate per annum equal to (x) adjusted term SOFR plus an applicable margin of 3.25% or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50% above the federal funds effective rate and (iii) one-month adjusted term SOFR plus 1.00%) plus an applicable margin of 2.25%.

The 2022 Credit Agreement also contains a maximum first lien net leverage ratio financial maintenance covenant that requires the First Lien Net Leverage Ratio as of the last day of each fiscal quarter to not exceed 8.50:1.00.

We were previously party to a Credit Agreement, dated May 4, 2022, among the Company, Lynnwood Intermediate Holdings, Inc.

and Capital One, National Association (as amended, the "2022 Credit Agreement").

The 2022 Credit Agreement established commitments in respect of a senior secured term loan facility of $200.0 million, a senior secured revolving loan facility of up to $50.0

million and a senior secured delayed draw term loan facility of up to $100.0 million.

On December 19, 2024, in connection with the closing of the 2024 Credit Agreement, the outstanding debt on the 2022 Credit Agreement was repaid in full.

Borrowings under the 2022 Credit Agreement were subject to variable interest at a rate per annum equal to (x) adjusted term SOFR (which adjusted term SOFR is subject to a minimum of 0.75%) plus an applicable margin of 4.50% or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50% above the federal funds effective rate and (iii) one-month adjusted term SOFR (which adjusted term SOFR is subject to a minimum of 0.75%) plus 1.00%) plus an applicable margin of 3.50%.

The 2022 Credit Agreement also contained a maximum first lien net leverage ratio financial maintenance covenant that required the First Lien Net Leverage Ratio as of the last day of each fiscal quarter to not exceed 8.50:1.00.

First Lien Net Leverage Ratio means the ratio of (a) Consolidated First Lien Secured Debt outstanding as of the last day of the test period, minus the Unrestricted Cash Amount on such last day, to (b) Consolidated EBITDA for such test period, in each case on a pro forma basis.

We were in compliance with the financial covenants since the inception of the 2022 Credit Agreement through payoff.

2024 Credit Agreement

On December 19, 2024, we and our subsidiary, Lynnwood Intermediate Holdings, Inc., entered into the 2024 Credit Agreement.

The 2024 Credit Agreement establishes commitments in respect of a senior secured term loan facility (the “Term Loan Facility”) and a senior secured revolving loan facility of up to $100.0 million (the “Revolving Facility”).

The loans under the Term Loan Facility and the Revolving Facility bear interest at a rate per annum equal to (x) term Secured Overnight Financing Rate (“SOFR”) (which term SOFR is subject to a minimum of 0.00%) plus an applicable margin of 3.00% subject to stepdowns based on leverage-based metrics or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50% above the federal funds effective rate and (iii) one-month adjusted term SOFR (which term SOFR is subject to a minimum of 0.00%) plus 1.00%) plus an applicable margin of 2.00% subject to stepdowns based on leverage-based metrics.

The 2024 Credit Agreement also contains a maximum Total Net Leverage Ratio financial maintenance covenant that requires the Total Net Leverage Ratio as of the last day of each fiscal quarter to not exceed 4.50:1.00.

Additionally, the 2024 Credit Agreement also contains a maximum Interest Coverage Ratio financial maintenance covenant that requires the Interest Coverage Ratio as of the last day of each fiscal quarter to not be less than 3.00:1.00.

As of December 31, 2024, we were in compliance with all financial covenants under the 2024 Credit Agreement.

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(in thousands)

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Cash Flows (Used In) Provided By Operating Activities

Cash Flows Provided By (Used In) Operating Activities

During the year ended December 31, 2024, operating activities provided $107.3 million of cash, primarily impacted by our $57.4 million net loss, net cash used by changes in operating assets and liabilities of $27.4 million and offset by non-cash charges of $192.1 million.

During the year ended December 31, 2023, operating activities used $16.9 million of cash, primarily impacted by our $186.3 million net loss and $203.1 million in non-cash charges.

This was partially offset by net cash used by changes in our operating assets and liabilities of $33.7 million primarily driven by the payments for the shareholder class action settlement and substantially all of the related legal costs during the second half of the year.

During the year ended December 31, 2022, operating activities provided $52.8 million of cash, primarily impacted by our $215.6 million net loss and $285.3 million in non-cash charges.

This was partially offset by net cash used by changes in our operating assets and liabilities of $16.9 million.

Cash Flows Used In Investing Activities

During the year ended December 31, 2023, investing activities used $60.3 million, primarily resulting from our business acquisitions totaling $19.8 million and purchases of property and equipment of $40.5 million.

During the year ended December 31, 2024, investing activities used $21.6 million of cash resulting from our purchases of property and equipment.

During the year ended December 31, 2023, investing activities used $60.3 million of cash, primarily resulting from our business acquisitions totaling $19.8 million and purchases of property and equipment of $40.5 million.

Cash Flows Provided By Financing Activities

During the year ended December 31, 2023, financing activities provided $47.4 million of cash, resulting primarily of borrowings of $57.8 million under the 2022 Credit Agreement, partially offset by payments of loan obligations of $2.5 million, payments of debt issue costs of $0.2 million and payments of contingent consideration of $7.7 million.

During the year ended December 31, 2022, financing activities provided $47.3 million of cash, resulting primarily from borrowings of $257.3 million under the 2022 Credit Agreement, partially offset by payments of long-term debt of $187.8 million, payments of debt issue costs of $7.3 million, a prepayment for the debt paydown of $1.6 million and payments of contingent consideration of $12.5 million.

Cash Flows (Used In) Provided By Financing Activities

During the year ended December 31, 2024, financing activities used $9.9 million of cash, resulting primarily from borrowings of $287.8 million under the 2024 Credit Agreement, partially offset by payments of loan obligations of $289.5 million, payments of debt issue costs of $1.8 million and payments of contingent consideration of $6.4 million.

During the year ended December 31, 2023, financing activities provided $47.4 million of cash, resulting primarily from borrowings of $57.8 million under the 2022 Credit

Agreement, partially offset by payments of long-term debt of $2.5 million, payments of debt issue costs of $0.2 million and payments of contingent consideration of $7.7 million.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP.

The consolidated financial statements included elsewhere in this Annual Report include the results of (i) LifeStance TopCo, L.P., its wholly-owned subsidiaries and variable interest entities consolidated by LifeStance TopCo, L.P.

in which LifeStance TopCo, L.P.

has an interest and is the primary beneficiary and (ii) LifeStance Health Group, Inc., its wholly-owned subsidiaries and variable interest entities consolidated by LifeStance Health Group, Inc.

The consolidated financial statements included elsewhere in this Annual Report include the results of LifeStance Health Group, Inc., its wholly-owned subsidiaries and variable interest entities consolidated by LifeStance Health Group, Inc.

in which LifeStance Health Group, Inc.

has an interest and is the primary beneficiary for the periods subsequent to the completion of the IPO and related transactions.

has an interest and is the primary beneficiary for the years ended December 31, 2024, 2023 and 2022.

Preparation of the consolidated financial statements requires our management to make judgments, estimates and assumptions that impact the reported amount of total revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities.

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Performance obligations are determined based on the nature of the services we provide.

Generally, our performance obligations are satisfied over time and relate to counselling sessions that are discrete in nature and commence and terminate at the discretion of the patient and thus each individual counselling session is a performance obligation.

Generally, our performance obligations are satisfied over time and relate to counseling sessions that are discrete in nature and commence and terminate at the discretion of the patient and thus each individual counseling session is a performance obligation.

Revenue for performance obligations satisfied over time is recognized when the services are rendered based on the amount to which we expect to be entitled for the services provided to the patient.

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Therefore, we have recognized implicit price concessions to patients who may be in need of financial assistance.

The implicit price concessions included in estimating the transaction price represent the difference between amounts billed to patients and the amounts we expect to collect based on its collection history with those patients.

The implicit price concessions included in estimating the transaction price represent the difference between amounts billed to patients and the amounts we expect to collect based on its

collection history with those patients.

Patients who meet our criteria for discounted pricing are provided care at amounts less than established rates.

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Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.

Stock and Unit-Based Compensation

ASC 718, Compensation—Stock Compensation (“ASC 718”) requires the measurement of the cost of the employee services received in exchange for an award of equity instruments based on the grant-date fair value or, in certain circumstances, the calculated

value of the award.

Stock-Based Compensation

We account for stock-based compensation awards approved by our Board of Directors based on their estimated grant date fair value.

17 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis