LifeStance To Close 70 Centers by End of the Year, Pays $50M in Lawsuit Settlement

While LifeStance Health (NASDAQ: LFST) has increased its revenue year over year, it is still taking a measured approach to growth.

The provider continued its M&A pause in Q3. Instead, it is looking at de novo growth and organizing its assets–at least for now.

“We’ve been very clear that we’re really going to hold off on tuck-in acquisitions until we have solidified our platform and can move acquired practices onto that solid, stable and high-performing platform,” Ken Burdick, CEO of LifeStance, said during the company’s earnings call. “We also look to do that when we can fund it out of free cash. So that is on the horizon but not on the near-term horizon.”


LifeStance has opened 8 de novo facilities in Q3 and 23 this year. Meanwhile, it had no new acquisitions in Q3 and no plans for the rest of the year.

Photo credit: LifeStance

But M&A is just one place the company plans to pull back on this year. It previously announced that it would close 35 centers. However, during the earnings call the provider announced that that number will be closer to 70 centers by the end of 2023. LifeStance conducts roughly 73% of its visits virtually.

“This consolidation project is largely complete, and we feel that our real estate footprint is now better to optimize our ability to deliver in-person care across more than 500 locations,” Danish Qureshi, president and COO of LifeStance, said during the call.


One potential tailwind for the organization is its improvements in the workforce. It also grew its total number of clinicians by 6,418, an 18% increase year over year. This boost in clinicians could help drive overall revenue growth over the next few years.

“We continue to expect mid-teens… revenue growth driven primarily by growth in clinician counts and higher rates per visit,” Burdick said. “As with the initial 2023 Full-year guidance, the mid-teens growth does not include any assumptions for improved clinician productivity. We expect to see margin expansion from operating leverage and contribution from rate improvement.

Overall, the company reported $262.9 million in Q3 revenue, a 21% increase year over year. As a result it is narrowing its full-year revenue range and raising the midpoint by $10 million to $1.04 billion, which puts the company at 20% revenue growth.

Photo credit: LifeStance

Cashflow issues 

But the organization faces a number of challenges as well. LifeStance no longer plans to end the year cash flow positive, as it digs out of a shareholder class action lawsuit settlement.

The outpatient mental health provider has forked over roughly $50 million in settlement money.

While LifeStance continues to deny the claims alleged in the lawsuit, Ken Burdick, CEO of LifeStance, said the organization decided to enter into the settlement to avoid incurring additional legal expenses and management distraction from continued litigation.

“We will be able to fund this settlement with our existing financial capacity without raising capital,” Burdick said during the company’s Q3 earnings call. “This will not impair our ability to make the necessary investments to build a great business. We believe that putting this matter behind us is in the company’s best interest and will ensure that we remain focused on our core mission of caring for patients and building a business that addresses one of the greatest needs in our country today: affordable and accessible mental health care.”

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