After a year and a half of scale-backs and tempered growth, LifeStance Health (Nasdaq: LFST) is planning a return to M&A. The target for that comeback: 2026.

LifeStance is still completing processes designed to improve efficiency, David Bourdon, the company’s chief financial officer, said at the 22nd Annual Morgan Stanley Healthcare Conference on Wednesday. Along those lines, LifeStance maintains its plans to exit 2025 with double-digit margins, he added.

“In the last 18 months, our growth algorithm is primarily a little bit of rate, a lot of clinician growth, which drives the visit volume, and then … some modest productivity improvements,” Bourdon said. “We expect that to continue in 2025 in a low single-digit-rate increase, and then we’ll get the majority of our visit growth from clinician growth. Anything we get in productivity would be on top of that.”

In 2023, LifeStance closed 82 locations and announced plans to abstain from acquisitions in 2023 and 2024. The company also limited organic growth, planning to open no more than 10 de novo facilities by the end of 2024. 

New centers are only built if necessary to replace inefficient facilities or in cases where in-office usage is high enough that the building is running out of space and limiting recruitment potential, Bourdon said. Reductions in geographic footprint have resulted in some rent savings in 2024, leading to margin improvements.

The pause in inorganic growth was used to standardize and simplify LifeStance’s operations. The company was streamlined to operate on a single electronic medical record (EMR) and one phone system. It also strategically reduced its number of payer contracts and installed a new credentialing onboarding system for clinicians.

LifeStance is still undergoing some of the implementation of these updates and is in the process of rolling out a new digital patient check-in tool.

“[It’s] not sexy cool stuff,” Bourdon said. “They’re things that, to run a good business, we needed to do.”

LifeStance’s downsizing and measured approach to growth  paid off with increased revenue. In its second quarter 2024 earnings call, the company reported $312 million in revenue, a 20% increase year over year. 

After two years of scaling back growth and seeking to improve efficiency, LifeStance plans to chart a more aggressive growth course.

“We’ll start becoming more acquisitive next year,” Bourdon said. “We’ve become free cash flow positive this year, and we’ve strengthened the balance sheet. You could see us starting to get some additional growth from an inorganic perspective.”

M&A is a topic of key interest to investors, Bourdon said, as well as EBITDA margins.

LifeStance previously committed to exiting 2025 with double-digit margins, a goal which Bourdon said the company still has “work to do” to achieve.

“Coming into this year, the big question was, ‘Can you expand margins?’” Bourdon said. “Because we didn’t expand margins last year. This year, we have expanded margins attractively in the first half of the year, and our full-year guide is between about 7.5% and 8%, so a nice step up over last year. Now we get into 2025, we still have a ways to go to be able to exit next year with double-digit margins.”

Looking past 2025, LifeStance expects to grow per visit revenue by mid-single digits, in part through expanding specialty service lines.

“There’s nothing in the coming years that we see as a cap or a ceiling on margin expansion,” Bourdon said. 

Scottsdale, Arizona-based LifeStance operates more than 550 centers in 33 states. Just over 70% of its visits are virtual, placing some of the company’s virtual prescribing practices at risk if the DEA allows COVID-era telehealth flexibilities to expire. In that case, more of the company’s business would move to in-person, Bourdon said.

Dr. Ujjwal Ramtekkar, chief medical officer of LifeStance, previously told Behavioral Health Business that it was preparing for a potential complete rollback of these flexibilities. The company aims to ensure all patients who may require an annual in-person visit were seen in person by that time.