Yes.
All right. Good.
All right. Awesome. All right. We'll keep this thing rolling. Next up, we've got LifeStance Health Group, and we're pleased to have Ryan McGroarty, Chief Financial Officer, here with us today. Ryan, thanks for coming.
Thanks for having me.
Maybe to jump right in, Q2, obviously, you get to report last month, maybe just walking through sort of state of the union, all the happenings for LifeStance right now.
Yeah, absolutely. I would be happy to do that. First, Jack, thank you for hosting us and Jefferies. This is a great conference. I love this conference because it is my hometown, so got to wake up in my own bed this morning, which is always important when you are on the conference circuit. In reference to Q2, so really strong momentum when you think about the first half of the year and in Q2. A couple highlights, Q2 specifically. Our overall revenue grew 26% YoY, and our Adjusted EBITDA grew 94%. So really strong quarter overall. The strength of the quarter and the momentum that we are seeing allowed us to raise our full year revenue by another $45 million in the quarter. From a cumulative basis, that is $70 million on a year-to-date basis, and also Adjusted EBITDA by another $15 million.
On a cumulative basis, we have grown, or excuse me, increased our guidance on Adjusted EBITDA by $30 million. So really strong momentum coming out of the quarter.
Awesome. It is a good way to tee me up here. I think maybe taking two sides of it, right? Because you have had great momentum in the business. You have some targets heading to 2028 to talk about it, and if we disaggregate between maybe top line and then pulling at the margin story a little differently. But to start with top line, the growth has been really solid. You have seen efficiency gains that are helping aid things. But if I take a step back and look at, because the question I will get sometimes is, the runway as we think about this on a very long-term basis. Q2, I think you guys dropped a little Easter egg of where you think you are from a penetration standpoint, but the pitch has always been, this is a really big market.
As you think about TAM for sort of the core therapy offering, how do you approach that question? Where are we at this point? Would love to hear.
Yeah, no, absolutely. We believe we are operating in a marketplace that has an extremely high TAM. You can think of the TAM, and again, it's always hard to get really good reference points on this, but we believe the TAM to be over $50 billion. When you think about us in the midpoint of our guide at $1.7 billion, obviously we're the largest in the outpatient behavioral space, but that's really low single digits from an overall TAM perspective. When you think about our 8,500 clinicians, again, very large, but it's still very small in relation to the amount of clinicians that are out there in the U.S. You've got that as the overall market. You also have 60 million Americans that need access to mental health, right?
You've got a marketplace that's not only growing in unit demand, but you also have folks converting over from cash pay to using their insurance card. We feel like we're really well-positioned as it relates to continue to take advantage of our place within the market, and then also a tremendous amount of upside room. Jack, you referenced the breadcrumb that we put out in our Q2 call, which was really related to, hey, look, we're only in roughly 50% or half of the top 150 markets in the U.S. We have a tremendous amount of opportunity to not only go deeper within geographies, but to expand out our geographic footprint. We're real excited by that.
Okay. Maybe as I think about it, because I think this is another question that comes up a little more recently, just given the power of the growth vector, there's a bit of a question around competition. I think you guys, it's sort of a late developing, I'm going to call it an MSO type model, right? To your point, cash pay versus insurance pay is a key dynamic there. We're maybe starting to see some, I'll call them, my words, copycat business models. How do you think about the competitive landscape and how that weaves in when you contextualize it against the broader TAM?
Yeah, it's interesting. From a competitive landscape perspective, we say a lot that the folks who we really compete with day in and day out are really the mom and pops out within the market. Obviously, you've got some movement and some folks, like copycat whatever, kind of moving more towards the affordability angle in terms of taking insurance. But I go back to the primary differentiators of us at LifeStance really is our national scale. We have over 8,500 clinicians. We service over 1 million patients. We do over 10 million visits per year. We have what is not easily replicate is our overall hybrid model. We do 30% of our visits in the 575 + centers that we have are done in person, and then the residual being 70% being in the virtual setting.
It is important to think of this as we meet the patient where they are at. We have patients and clinicians that both flex within that model. When you are going to initiate care, you may go and want to establish a relationship with a clinician live, and then it better suits your life when you get to your second, third plus visit to do it virtually. Then you look at the breadth of services that we have. Both from a therapy, from a psychiatric, and then also, I know, Jack, you have written a lot about specialty, right? We also have specialty as it relates to neuropsychological testing, and then also for solutions for treatment-resistant depression. I mentioned this once already, but we also come through the door since our founding around affordability.
Affordability to us means taking insurance. You see some of the folks now migrating to that. That is part of our DNA and part of how we were founded was to take insurance. We have established practices and relationships with the payers to be able to do that.
Okay. Super helpful. As we piece that together, there is that 2028 framework that includes the same sort of mid-teens risk growth you talked about on the top line, margin expansion getting within spitting distance or within the lower end of that bottom end of the long-term range you have talked about at 15%-20% EBITDA. Maybe just looking at the margin side now and thinking about how you get there and where it comes from. Efficiency gains have really helped on the care margin front. Operating leverage is another piece. How do you think about the building blocks as you build towards that?
Yeah, Jack, I appreciate the question. I know we want to go through the margin door, and you have framed out just the overall growth algorithm from revenue. I always think it is helpful to start at the top. It is always good to ground on what we have done just as a business. When you take the midpoint of our guide and take the four-year compounded annual growth rate, we have grown revenue at 19%, right? When you flow that down to Adjusted EBITDA, doing the same period, we are at 44% in terms of compounded annual growth on Adjusted EBITDA. We are a business that has grown and has proven the ability to grow at really high rates, and really, for the most part, that is all organic. Really strong growth. When you look forward, our growth algorithm, we call for mid-teens revenue growth.
And why I start here is because I always think it's important to ground that that would be in low double-digit visit volumes, then low to mid-single digits from a rate perspective. Then, as you go down the P&L to what we call center margins, our long-term guide for center margins is in the mid-30s range. And so you get some benefit from leverage of occupancy costs. Plus, you have the contribution from specialty, which we expect to grow at a higher rate and at ultimate mature margin perspective at a higher margin on a mature basis. So you get some center margin expansion from those dynamics. Then you get into, Jack, where you went with the last part of your question is around operating leverage.
So if you look at 2026 over 2025, we are able to, if you take the midpoint of the guide, expand margins north of 200 basis points on Adjusted EBITDA perspective with 165 basis points of that coming through center margin. As we go forward, we expect more of the margin expansion to come through the G&A line through operating leverage, just based off of the investments that we've made in AI and technology, being able to get scaled growth overall. So we do think you'll get some contribution from center margin, again to the mid-30s, but get more from the G&A line. And we dimensioned in our Q4 call when we set 2026 guidance that our long-term margin profile is 15%-20% on Adjusted EBITDA base. In that Q4 call, we further dimensioned that from a timing perspective to say by full year 2028, we get to mid-teens margins.
And so helpful just to be able to think through the modeling in terms of how it looks.
Totally. No, super helpful. Then maybe, you made reference to specialty. I think it's a key topic for a lot of folks. I've written about a bunch, pretty excited. I guess to level set for everyone here in the room, can you maybe just talk a little bit about what that growth pathway is? Then probably more specific to the TRD treatments, but what that growth pathway is, how you guys are approaching it, and what the deployment looks like.
Yeah. We are real excited about specialty overall. Just to do some framing for the folks in the room. Specialty last year contributed about $50 million of our total revenue and is expected to grow this year to $70 million. That is 40% growth. Specialty for us, as the big chunk of 2025 revenue, is really around neuropsychological testing, and we believe us to be the biggest neuropsych tester in the U.S., where a lot of the growth going forward is from where Jack went around the treatment-resistant depression solution, so between TMS and Spravato. That is where we are seeing a meaningful amount of our growth on a go-forward basis. We are real excited about the ability to have those solutions. If I can just take a moment, elaborate on how we put the solutions into our clinics.
Typically, we organize ourselves in practice groups. You can think of a practice group as being three to five individual centers. Again, I kind of referenced earlier that we have 575 + total centers. What we will do is we will put a chair into a center within that practice group or a Spravato clinic. It is really super capital efficient because what we do is we reutilize some of the space that may have been for a group therapy room, where you do not need in that individual center because you still have it within the practice group. The capital build-out is really small, and then you already have the referral patterns coming in through your clinicians. The cost of acquisition is de minimis because they already are patients that are seeing either a therapist or a psychiatrist. Overall, the setup is good.
Okay. As I look at that from a pacing standpoint, I think you guys, you have got a really good thing going in the core business and I think a pretty measured approach to it. As you look at layering into that ultimate end state of those practice groups and having the capability within each one, what does that pacing look like over the next couple of years?
Yeah. I go to the pacing because we are being very deliberate about the growth and the rate and pace. Right? If you look at through midyear of this year, we have 32 TMS clinics sitting within our portfolio. From a Spravato perspective, we have 21. If you look at what we grew, we grew TMS in the first half, seven clinics, and Spravato, eight in the first half. That is the pacing that we are on right now. The limiters, if you want to go to potentially, we are just being very deliberate around the growth.
It is the being deliberate and then also having the context of you do not need to have it in every center, which is what I already set up, just based off of how the practices are actually organized and run. We feel like we are in good shape to be able to first and foremost, do what is right for the patient. Because when folks are presenting with treatment-resistant depression, it is like the worst possible outcome you can be where you are not responsive to drugs. Your depression level has not remediated. To be able to have these world-class solutions that actually impacts people's lives is really meaningful for us as a practice.
Okay. That is a little bit of a preempting the next question I had here. Because the deliberate approach makes sense and maybe one of the things that you could be solving for is what is the reaction from patients, what is the reaction from clinicians, et cetera. When you think about payers, even the reaction on all three of those key fronts for your business as you are rolling it up, what has the feedback been as it has been deployed?
It is really strong. If you start off with the patient. We produced our first outcome study, and so we will isolate here TMS for a moment, an outcome study based off of a population that we serve. The study is out there on our website, so I recommend anybody go take a look at it. But overall, some of the key highlights are meaningfully clinical reduction in depression-type symptoms and also a reduction in suicidal ideation, so super important for this population. We are really pleased with the outcomes from patients. I got Lisa Miller here, who is our Chief Operating Officer with us. In our last town hall, which was last week, she just went through testimonials from patients that are super powerful and really resonate and hit you in your heart just in terms of how people's lives are being changed through these solutions.
It feeds off, so you go to the next, the clinician level. Depending on when clinicians were trained and how comfortable they are, there is a progression in terms of like, "Oh, this is a viable solution that really works." We are seeing more and more referrals coming in depending on what the clinician background is, exposure to it. So we spend a lot of time making sure that the education is there overall. We are really pleased. The last one, Jack, that you mentioned is payers. Payers are really interested because we have started to, as a company, one thing we did not do prior to this year was really publish outcome studies. I use the TMS study as an example of a really powerful study.
But we've also looked at studies as it relates to depression without a TRD solution, and then you go through the anxiety, and this is really meaningful to the payers that you're having an impact on their population.
Mm-hmm. Okay. Last one here, obviously committing a lot of time to it, and I think it may be worthwhile given the investor focus. But as I think about the frontier expansion in this general area or this general concept, psychedelics are getting a lot of attention. Lilly's purchased AtaiBeckley, some updates coming, they're positive out of COMPASS Pathways, et cetera. As you think about what you're building with the capability and specialty services now, does it feel like that becomes then a platform where as the clinical frontier moves forward in this space, that you can address things through more of these therapies or other pathways?
Yeah, Jack, excellent question and really good point. That's why we really love the structure of our practice, is to be able to, as things come down the proverbial pipe, we're situated and ready, if we so choose, to be able to bring that into our practice. So for further psychedelics, beyond Spravato, and you and I were briefly chatting about this prior, still has to go through the FDA approval. Then for us, the next gate is around that payers reimburse fairly for it, and reimburse. But we are structured and set up from a clinical oversight and the ability to deploy that type of solutions just based off of our footprint and our expertise. Then we also look at specialty a little broader, right?
So we got the neuropsychological testing, TRD, but there are other areas that we always are evaluating that, near adjacencies where you got the right to win, large TAM, you like the margin profile. And obviously, we're not ready to go out publicly with what potentially that could be. But at the end of the day, the space in which we play with the adjacencies that we have a right to win are pretty meaningful for us as a company.
Okay. One other piece, and you mentioned the step-up you have in the guidance thus far this year that's been really impressive. Part of that has been some of the efficiency initiatives you have in terms of getting clinician schedules more full. Maybe the current rate's not what extends all the way forward, but if you can talk about what you've been doing there and why it's been so successful.
Yeah. So from what we term as productivity, we spent a lot of time last year conditioning the market to look at us both through the lens of net clinician adds, but then how we utilize the time for the clinicians through productivity. The key point for us is productivity is not this push down kind of strategy, it's more being responsive to our clinicians as it relates to filling their schedules better, right? A lot of what we do from a pure practice management perspective is really spending time on, okay, when a new clinician comes in, how do we think about optimizing their schedule? How do we make sure we get the match right from matching a patient to a clinician, that there's a nice therapeutic alliance so the higher probability of that relationship enduring through the second and third visit?
How do we think about overall incentives? Last year, we realigned our incentive program to a cash-based program that was implemented that has been very successful as it relates to aligning incentives. I use these as examples, not an exhaustive list of things that we've done to make sure that we're optimizing the productivity, and again, all in response to what our clinician needs are. If you go to the second part of your question, when you look at that in relation to the overall productivity, we had pretty meaningful productivity for the last 12 months, right? So 7% in Q2. We expect productivity from this point forward to be complementary to the net clinician adds so that you won't see the step function type change in productivity, but it'll be a contributing factor, just in a more normalized range.
Okay. That makes a lot of sense. Maybe not the exact same front, but you gave more than enough notice to the market that you're planning a new EHR implementation, that's going to kick off next year. Maybe just thoughts around how you're preparing for that, what that does for your business. How does that sort of complement the other efforts you have on the productivity that are already underway?
Yeah. On the EHR front, we're being very thoughtful in both our planning stage and our implementation stage. We are in the planning stage right now, and this will be a phased rollout. We brought in expertise externally. Also, we've built and brought in talent internally in terms of folks that—sorry about my mic, it keeps going out—folks that have expertise in terms of implementing EHRs, and we'll go through a model office for our first phase in rollout, which will be a total of five phases for the full year 2027. We like to say we've got off-ramps through the process to make sure that we get this right.
But we couldn't be more excited to bring in a top-tier vendor for our EHR solution and be able to use this as the platform for foundational growth going forward. We believe it's got a ton of benefits and upside as it relates to our operating model, the patient experience, the clinician experience, be able to provide more clinician support through the technology, more interoperability across the whole healthcare ecosystem. I could keep going on and on about the benefits of deploying a top-tier vendor into the EHR. There's a lot of excitement internally around this, but I also just want to always make sure anytime I'm talking publicly, this has been a really, really thoughtful approach around how to execute an implementation so that you mitigate any of the potential downsides of implementing new technology at this scale.
Okay. That makes sense. As I think about now the gains you've had on the productivity front, recruitment looks good. It seems like you have a little more control around how much you bring on, right? Maybe tying that into the retention question as well is, what are you looking at from a recruitment and retention standpoint right now? Retention, I think it had been a hot button topic for the stock long predating your time. It seems like it's been more stable, but maybe just talking through those dynamics and how those two things look.
Yeah. Absolutely. When we think about clinician recruiting, we feel we've got a very strong value prop for the clinicians, overall. Jack, you referenced this in the questions. We could be hiring more clinicians than we actually do, just based off of the thoughtful geographic approach we have to both the existing clinicians in a geography and then also the new clinicians that we look to add. When you think about it from an overall retention, it has been stable. We haven't reported retention numbers out to the street in multiple years, with the commitment being that if it was meaningfully different, both positive or negative, that we would kind of come out to the market and give an update.
It has been stable, but we're actually, when you look at it, and you dissect retention, we really like what we're seeing from a momentum perspective on retention. I use examples of the clinician incentive program. We retain that population at a higher rate than what the average is. When we look at folks who are highly productive, we're meaningfully more favorable on that population as a whole, and typically that population lines into the top tier of the incentive program. Where we have opportunities is around the first six, 12 months with new clinicians and making sure that we continue to further optimize their schedule so that, we're a W2 fee for service, so that they make the income around their expectations to be able to retain that population.
We're really pleased with some of what we've seen come out of retention, even though it has been stable from a headline kind of metric perspective.
Okay. You touched on it a little bit earlier as it related to what's a sustainable rate of growth for the business, that rate contribution, low to mid-singles. There's a lot of recent updates coming out for next year and what we're going to see from premium increases, some chatter around this. Every employer seems to be saying this is untenable to commercial plans before they sign another 8%-9% contract. I guess the question here is, looking at the value prop you have, that low to mid-single, you've committed to it, right? Or that seems to be the viewpoint. What makes you feel good about that being the rate at which rate can grow, in the broader context of what's happening in commercial market?
Yeah, I think it's a great question as well. Again, we feel that our dialogue with the payers is very constructive. We have relationship with the payers at the executive level, at the clinical level, the operations level, and obviously at the payer level. We make more of the relationship not always just about the rate component to it, about how do we collaborate and do right for our patients, their members. The backdrop, I come 20 + years on the payer side at one point in my career. The backdrop is always, negotiations are always challenging, right?
But at the same time, when you think about the constructive nature of our relationships, we provide a very valuable service. You can think of us as the primary care of behavioral health, and it's a gateway to a whole bunch of other things that has the potential to reduce costs for them, whether you're talking about people presenting to the ED, talk about further need to make the connection between the mind and body, like in totality. These are constructive conversations that we have for them. Honestly, the market's so fragmented, they don't have a lot of other providers like us that they can actually talk to.
When we think about the strength of TRPV for this year, updating our guidance from low to mid-single digits to mid-single digits, we feel a reasonable expectation for this business is low to mid-single digits in totality, kind of going out in our longer term growth algo.
Okay. Makes sense. A little over 90 seconds left. There's obviously a lot that investors are appreciating about the story, given the run in the stock. If you take a step back and say, what's one thing about LifeStance that, one or two things about LifeStance that you think investors don't appreciate right now that they could come to appreciate in the next one or two years, what do you think?
Yeah. I think that's a great question as well. Again, there is a lot of energy around our business right now, so I think there is a tremendous amount of appreciation for who we are and why we're different all the way from our national scale, hybrid model, affordability and breadth of services. I think there's a lot of really strong recognition there. I also think the market has moved past the productivity being a question mark, which is where a lot of the inquiries were, right, historically, to more around, how do I think about the ceiling on productivity versus if do I think it's a real concept. I think that's really kind of moved through. I think there's a tremendous amount of interest, rightly so, in specialty lines, right, overall.
I think there's a lot of collective learning that the marketplace is looking for from us and plus through biotech, et cetera, trying to triangulate back to like, where could this all go? I think, so I'm not really answering your question directly because I think that we've got a lot of good alignment with investors right now. At the end of the day, and I know I got 12 seconds left, I think there's just a lot of pure understanding about the strength of the flywheel that we've built in our business, from low acquisition costs to bringing in new patients, converting them, and having them seen through the full course of treatment, that I think is really exciting for us, and I think obviously for investors as well.
Awesome. Ryan, thank you so much. Really appreciate it.
Thanks for having me.