Great. Well, good afternoon, everyone. Welcome to the first day of the conference. My name is Craig Hettenbach. I cover the digital health space for Morgan Stanley. Very pleased to have with us LifeStance today, Chairman CEO Ken Burdick. So Ken, welcome. Thank you. Before we get started, just to read for important disclosures, please see the Morgan Stanley Research Disclosure website, www.morganstanley.com/researchdisclosures. So with that, Ken, we're just past the one-year anniversary of you joining LifeStance. So I thought we'd start with, number one, kind of what led you to the company, and then number two, we can talk about organizational changes that you're helping to improve upon. Sure. So this is about LifeStance, not about Ken Burdick, but I will just give you a little bit of background. I was on the payer side for 40+ years, and was running a company called WellCare, which was acquired by Centene. I sort of did about a year of that transition, and I was retired. I retired for 19 months, and I get this question a lot. The only one I don't get the question from is my wife, because what she observed was, even though I was busy, it didn't seem like I was as fulfilled. And she's right. She knows me pretty well after 37 years. And so I'd say there's three things that brought me to LifeStance. Number one, I really did miss being a part of a team that was just trying to, you know, make progress every day. You know, moving the ball forward, to use a football analogy. Number two, I learned about 10-12 years ago, how critically important mental health is. It's because at, a company that was long since acquired by Aetna, Coventry, they put me in charge of both the behavioral subsidiary and Medicaid. And it just gave me an incredible perspective in terms of how, for many years, my colleagues and I were missing the importance of treating mental health as a comorbidity to physical health. And then the third, I really loved the business model that the founders had created. The notion of using your insurance to access care makes it so much more affordable for so many millions of people, at a time when, as a country, the demand is unprecedented. So those are the reasons. Great. Now, in terms of the second part of the question, the company had phenomenal growth for its first six years, and so I was brought in very specifically to sort of take all that growth and try to bring some large company, sort of, systemic practices. You know, when you grow from nothing to, oh, 7,000 clinicians and 9,000 total employees, you just can't run the business the same way. It can't just be about relationships, it has to be about putting systems and processes in place, so that's what we're doing. I'm biased, but I believe that most of the organization are responding really well because we have more structure than we had before. I think once we roll out a multi-year strategic plan, that's really going to help, because I would say for the first six years, like most entrepreneurial businesses, everyone just ran the hundred-yard dash every day. Yeah. Now what we're trying to do is say, "We are actually running towards something," and that's the desired state. Great. Well, that's a great intro. Maybe just building off of it and just touching more broadly on the behavioral health market. You know, there's many different solutions out there. Some are virtual only, some are out-of-pocket. Can you just touch on what differentiates LifeStance in the marketplace today? Sure. I think so many of the mental health, behavioral health companies that spawned in the last 3 years are virtual only. So the first thing that I would say differentiates us is, we are hybrid, so we will meet the patients wherever they want to be seen. It can be in person. We have over 600 physical locations, and we can talk about that. That made a ton of sense when 95% of our visits were in person. It didn't make a lot of sense when, with COVID, it flipped, and all of a sudden, 5% of our visits were in person. But we've kept that physical footprint because every quarter we're seeing a sort of steady movement back toward in-person as a preference from the patient. So I would say the hybrid approach is number one. Number two, we have multiple license types, so a multidisciplinary approach, which allows us to meet with a patient and then decide what's the appropriate level of care. Is it? Do they need medication? In which case, we're going to use a psychiatrist or a nurse practitioner. If not, then they can meet with a psychologist or a therapist. And so that multidisciplinary approach, I think, is huge. It allows us to refer sort of within the system, to make sure that we've sort of customized the right care for the right diagnosis. Third is, we almost exclusively use commercial insurance, so people, as I mentioned earlier, get to use their benefits, and they're not paying out of pocket. Which I didn't realize until I joined LifeStance, how common it was for people to have to pay for their mental health care, outpatient, out-of-pocket. It's more than 50% of the time, and that puts a real sort of constraint on people's ability to access care. I'd say the last thing, beyond our size, which is certainly a differentiator, but I'd rather talk about the patterns that we use working with primary care to get referrals. So I think one of the challenges that some of the early stage companies have had is the B to C, the amount that's spent on customer acquisition, and we are really fortunate that we have forged these referral relationships all around the country, and so our cost of acquisition is de minimis. Got it. Great. And then when you think about overarching industry trends, you talked about visits are starting to happen more in person again, and so your position there. Are there any other industry trends you're watching that you wanna be on the right side of, you know, the next three to five years? Yeah, certainly, it's a slow trend. It, it was slow in the physical health space, and it's certainly lagging behind in the mental health space. But this whole focus on outcomes and value-based care, having spent decades on the physical side, it was always so obvious, but it's been so difficult to move from a fee-for-service to a, you know, pay-for-value. But I see that sort of on the heels of the macro trends on the physical side, I think that's where we need to get to with mental health. And so one of the things that we're trying to do with these relationships that we have with primary care is do some real studies to figure out what the impact is. So historically, in mental health, you've used these sort of questionnaires. There's the GAD-7 for general anxiety disorder. There's a PHQ-9, which is for depression, but it's not as compelling as being able to say, because somebody has received therapy, they're showing up more often at the office, or they're showing up more at school, et cetera. So starting with that, and then looking into what other patterns of behavior have changed. Are they seeing their primary care physician more often? Are they spending less time going to the emergency room, or even an inpatient setting? And then ultimately, the holy grail for me would be when we can do enough work with the physical side of healthcare to demonstrate that when you're effectively managing both the physical and the emotional well-being, there's a reduction in total cost of care. I have no doubt in my mind that's true, but now we have to prove it, and that's gonna take a while. And access is something that's very important, particularly for mental health. And so maybe you can touch on just the ability, what you're able to do there from an access perspective. And then to your last point, it's gonna take a lot of time, like, what are we looking at in the next 12, 18 months? So when would you have proof points? Yeah, I wish it was 12-18 months. I, I don't think that's realistic. It's probably 3-5 years, just having seen this evolve on the, again, on the physical side. It's, it's gonna take a level of collaboration that really hadn't existed between people focused on somebody's emotional well-being and people focused on their physical well-being. And so it's putting that together. It's doing sufficient studies. It's doing the right attribution, and then having significant data to support that hypothesis of mine. But again, I've, I've seen it so much in managing both Medicaid and Medicare populations, that it's just a matter of having the rigor to do the study, having the scale that we have to produce statistically significant data. Got it. So one of the things from an efficiency perspective, and coming from your payer background, it was a mind-boggling number of, like, 450+ or so payers that LifeStance worked with. I know that's something been one area of focus to bring that down. Yes. Can you talk about how that impacts the business? And then I guess that's step one, like, step two would be, how are you making sure with the payers you're still working with, that you're getting value that you're delivering on? Yeah. So when you're in a hyper-growth mode, it's like, you know, every contract is a good contract. So we would just sign them up, sign them up, sign them up, and lo and behold, we had hundreds and hundreds of payer contracts. We had more payer contracts than I thought there were payers in the space, having spent 40 years on that side of the business. But if you have a national payer, oftentimes we had a separate contract in every state. So that's how it got so large. So the, the motivation here was part of a broader plan, which is the company was unbelievably successful in growing, but now we had grown, and we had to do to get more organized, and we had to streamline and simplify so that we could drive operating leverage. One of the ways that occurred to us early, early on was when, let's look at these payer contracts, and I don't know what that number was. Let's call it 450. What kind of utilization do we have for each of these payer contracts? Because it costs something in credentialing and then loading the rates every time they change, et cetera. So it was largely a simplification play, and we reduced payer contracts by a third, and it had less than a 1%, 1% impact on our revenue and our visit volume, because essentially, there was nothing going on with that contract. Now, as we continue to look at it. We're looking not just at the volume, but what is the nature of the relationship? Do we work well together on credentialing? Because that's a big deal, getting a clinician credentialed so they can see patients. Do we have administrative obstacles that get in the way of seeing patients? And then thirdly, do we have a reimbursement that is appropriate for the work that we're doing? So those are the three criteria that we will use going forward. I don't expect we will have the same volume of payer contract reductions that we've had in the past year, but I expect we will continue to sort of work away at making sure that we have high-performing contracts. I want to shift gears just to clinician growth, and certainly for an industry where there's more demand than supply, I think organically you've been growing kind of mid-teens, so very robust growth- Yeah In clinician net adds. Can you talk about, you mentioned before, some of the primary care relationships. I know you're doing other partnerships with, like, women's health and chronic care. Just let's dig into a little bit, just the growth in clinicians that you're seeing and, and what's helping to drive that. Sure. The just to set the stage, in the first six years, we grew about 60% organically, literally hiring one clinician at a time, and about 40% through rolling up independent mental health practices. Currently, we are only growing organically. I wanted to put the M&A on hold for a bit. I wanted to fortify the existing platform so that when we went back and started doing acquisitions again, like, on day one, we could bring them onto our robust platform and not miss a dime. What was happening in the early years was too much variation was allowed. So you'd acquire a practice, they'd keep doing things their own way, and again, coming from fairly large companies, I've never seen that work well. That if you aren't able to standardize and drive some consistency, you don't drive the operating leverage that's required to run a, you know, sort of robust business. So we're, we're working on that. We are growing our clinicians, I would say, largely because they love the fact that we can fill their appointment schedule, and that gets back to referrals. We also try to give them a great deal of independence and flexibility. So even though they are W-2 employees, which is actually another differentiator for LifeStance, we don't tell them they have to work 40 hours. They can work whatever schedule they want. Obviously, they are only paid for the visits that they conduct, but that has been really, really valued by our clinicians. It's one of the reasons why I think we've had so much success. Just to put that in some kind of context, we probably hire 1000 or so clinicians every year. When I share that number with people, they're just blown away, but those are gigantic numbers. As it relates to these referral partnerships, there's several huge benefits. Number one, I've already talked about, by working closely with primary care, you mentioned women's health. So we're trying to find those partners where the patients that they are seeing have a really strong combination of physical and mental health needs. So, menopause is one example, and we're sort of the exclusive provider of behavioral health for a menopause company. We're doing the same thing with people that are on dialysis, so we work with US Renal Care. Those are just sort of obvious examples of you can't treat the person well if you're ignoring the behavioral aspect of the conditions that are being treated. So those are a couple of examples. I think we're gonna do a lot more of that going forward. Right now, it's a matter of we've got a nice pipeline of activity. It's getting people to focus and prioritize because this is sort of a new area of development. Got it. And on the clinician side, a couple years ago, the company was hit with some turnover, also broader industry across healthcare, we've seen that, but it has since stabilized. And so can you talk about just the angle of turnover, kind of what you're seeing, and then what are some things once the clinicians are on board, that keeps them there at the company? Yes. So you're right, it has stabilized, but we still have a fair amount of turnover, and I think that's a function of this disconnect between supply and demand. If you are a mental health clinician today, you have a multitude of options. We think we are the best fit for that clinician that wants to exercise more autonomy, that sort of has that ownership mindset, which is why we've been so successful with acquiring independent practices. But it's... So turnover is real, even though it has stabilized. The things that I think we can control, we've got to make sure that we onboard our clinicians well. We have to make sure that we fill their appointment schedule as soon as they're credentialed, and then we have to make sure we're wrapping them with a set of tools and processes, things like billing and appointment scheduling, and credentialing, that are sort of best in class... that they can't see elsewhere, that certainly they couldn't have experienced in a small mom-and-pop independent practice, which is typically where we're pulling our clinicians from. Got it. Maybe just building on that, because I think even before you came on board, Danish, there was some initiatives in place from a productivity perspective, and you had the OBIE kind of- online matching. You know, how is that going? And, and are there kind of proof points you're able to see internally? I know you've shared some stats with the street in terms of, lower cancellation rates- Yes and things like that, but, you know, can you give us an update there and just overall how productivity is performing? Sure. So productivity has improved. I think there's still more room to go there. But you mentioned probably one of the indicators that we're most excited about. In a world where people have to wait weeks and weeks and weeks to get an appointment, I couldn't understand why no-show cancellation rates were so high, but they're high across the industry. Through a more concerted effort and trying to make sure that we got sort of the right clinician with the right patient, we've been able to drop that from 14%-10%. 10% still feels high, but it's a strange thing. I guess it's... Somebody gets up the nerve to go ahead and see a counselor, and if it takes more than a week or two, they can change their mind, and that happens with some regularity. So that's one issue. The OBIE is our online booking and intake system, and that has been fantastic. That has helped reduce the cancellation rate, but it's also created a much better experience for patients trying to access mental health. To be able to do it right online has been great, and we're looking to just continue to expand that by making the process easier and easier and easier for patients. Got it. I want to pivot a bit. I know data and AI is kind of all the rage for the markets today, and I know more broadly this year for LifeStance, you talked about this year of investment in terms of to scale the business. Yeah. So when we think about data or AI or tech investments, what are some things you're doing, and what do you think is the impact on the business over time? So we're doing some really basic technology investments, like a human resource information system, which, you know, when we, when we were just so focused on, on hypergrowth, we weren't thinking about: Well, wait a minute, how do we manage all that? So that's not what you're really talking about. What you're talking about is, how can we use machine learning, and how can we use, you know, artificial intelligence to run the business better? And one of the things I'm most excited about is some pilots that we are doing to help our clinicians do their documentation, and it is machine learning. Filling out the notes is so critically important, and you're typically doing that right after the session, so you have a limited amount of time. You're trying to do it the best of your ability, and if we can make that far more efficient and effective and accurate, that will be a great service, not only to our clinicians, but to their patients. So I would say, sort of automated notes through a machine learning tool. And then when I think about some of our highly repetitive practices, some of the billing that we do, I think there's great opportunities to use AI there as well. And, we don't have investments underway today, but I expect that once we have streamlined our end-to-end processes, we have done some basic automation, that's really the next frontier. So I think that's only, like, a year or two out. Got it. I want to touch on just the footprint. So on the one hand, versus virtual, of course, you have an advantage. You mentioned 600 somewhat centers. Earlier this year, the company communicated to the street that you're going to close 30-40 centers. Can you just talk about that process? It's maybe in the umbrella of this overall more efficiencies, but just how that's going, and is this going to be an annual assessment in terms of as you look at your footprint, and measure that? Yeah, just to show how far the company's come, in its early years, we were sort of communicating our growth by how many centers we had. And that probably made sense as a very crude way of sort of using a proxy for growth. Once the pandemic hit, and we saw this huge move from in-person to virtual, in my opinion, we had more space than we needed. So what we're doing now is we're trying to be really thoughtful. We're trying to think long term. We don't want to overreact and cut back too much. So we are dramatically limiting the number of de novos that we are doing, and we have consolidated space. In addition to the 35 that we announced, in the remainder of the year, we think we'd probably do another 35 or 40. The criteria is pretty straightforward. It's one where there are very few people utilizing the office, where we have another office nearby, and where the office is just not up to our sort of physical standards for security, et cetera. Because so many of these, like I said, we did 86 acquisitions… And we wanna have a consistent look and feel and professionalism to our space, and some of them fell sort of under that benchmark. And so, I do, to your question, expect this will be an ongoing exercise. I don't know where we're gonna end up. We don't need 600 physical locations. We think it's a huge advantage, so we will have hundreds, but I would expect that over time, we will move to larger footprints. We've got more clinicians. Our clinicians tell us they love the camaraderie that exists when they can interact with their colleagues. And so if you think about having a multidisciplinary practice, if you're really gonna refer one of your patients to somebody else who you think can better treat, it's great if you have a relationship with them versus just sort of looking up on a screen to see what their credentials are. So, our clinicians are telling us that a larger practice works. It's obviously more efficient in terms of the staffing that you use to surround the physicians, whether it's a front office coordinator or a medical assistant, et cetera. So I think we'll just continue to look thoughtfully. As we're looking at everything across the company, we're just gonna be more focused. We're trying to be more disciplined, and we're looking for sort of obvious efficiencies without in any way impacting the patient experience. Got it. A few more I can get through, but if there are any questions from the audience, you can raise your hand, and we can bring the mic to you. All right, so maybe just touching on the financial metrics, right? As I mentioned before, you guys have been very clear that this year is investing in the business and that margin expansion should follow. You're at roughly mid-single digits, Adjusted EBITDA margin for this year, and have said exiting 2025 at 10%. Can you just talk about the confidence in moving margins to that? And then on a longer term basis, again, not to get ahead of yourselves here- Yeah. But just how do you think about profitability metrics and what makes sense for a business like this? So I can speak most effectively to the near term. You're absolutely right. In 2023 and 2024, we've been very clear, we're gonna make the investments so that we have built a platform that allows us to grow 20%+ a year, sort of in perpetuity, because we think that's the opportunity that's out there. But even to date, after one year, I can see enough opportunity that we're gonna have some margin expansion in 2024, just because some of the efficiencies that we've already created, some of the simplification, standardization, with even greater margin improvement in 2025. I remain very confident that we will exit 2025 double digit margins. In terms of where we go from here, it's likely gonna depend on a couple things: reimbursement from payers, and the mix of services that we offer. Primarily now, we are doing, you know, talk therapy. We do some psych testing. We will likely do more psych testing. We don't do a lot of group therapy. I think that's another great opportunity going forward. And so I think it'll be sort of the payer reimbursement and the service mix that will determine, you know, how far into the teens we get, ultimately with our margins. Got it. And I do wanna come back to M&A. Like you said, when you came on board, it was hit the pause button, which makes sense to kind of get the operations underneath you. You know, what's a reasonable time period in terms of when you feel like the business will be at a place where you can return to M&A? And will M&A look different versus when the company scaled? Yeah, that's a great question. So, this is gonna be overly simplistic, but if you think about what we've said, 2023 and 2024 are investment years. I would suggest that 2025 is likely when we get back into the M&A game. And when we do get back into M&A, to your question, I think we're gonna do two types of M&A. Historically, we've only done tuck-ins, which is basically you bring in clinician practices. I believe we have reached a scale where there's likely an opportunity for us to acquire capabilities. So instead of building it ourselves, we can find somebody that's already built something that we could leverage day one and achieve some significant synergies. So I don't have anything, you know, on the, on the radar screen right now, but I suspect that if you look at us over the next 3-5 years, you're gonna see both types of acquisitions. What I'm thrilled with is, even with no acquisitions, we're achieving that, you know, very high teens, maybe even 20% top line growth. Which means when we get back and we can sort of fuel that with M&A, we are setting ourselves up for a really nice growth story. Great. Well, as we wrap here, Ken, just, you know, a lot of change underway and particularly operational improvements and enhancements. You know, as investors look out the next 12-18 months, what are some things to kind of keep an eye on in terms of the LifeStance story? What do you wanna be executing on over that period of time? Yeah, I think, investors ought to focus on what we commit to doing for 2024. I'm proud of the fact that over the last several quarters, we have hit our commitments each and every quarter. I think investors should expect we will continue to do that. And so our guidance for 2024 ought to show some meaningful margin improvement, and, that should accelerate further in 2025, when we start to reap the full year benefit of these investments that we've been making the first couple years since I've been there. Got it. Okay, well, I think we're at time, so thanks everyone, for being here, and thanks for your time, Ken. Thank you, Craig. Appreciate it.