Hey, good morning everyone. Thanks for being here at the second day of the conference. I'm Craig Hettenbach. I cover the health tech and provider space at Morgan Stanley. I'm very pleased to have with us LifeStance this morning. Just before we get started, just from a disclosure perspective, you can see the disclosures at www.morganstanley.com/researchdisclosures. With that, Dave and Ryan, welcome. Appreciate having you guys here. Thanks for having us. Appreciate it. Great. I think investors are familiar with the company at this point, but still would be great to just have kind of a refresher in terms of LifeStance and most importantly, how the company kind of differentiates and what kind of a crowded kind of mental health field. Yeah. It's a crowded but highly fragmented mental health space. We're the leader in outpatient mental health. That leadership or the uniqueness comes from a combination of the first I'd say is scale. We have over 7,500 clinicians. We'll do 8 to 9 million visits or sessions this year, and we have nearly 1 million patients. That's the first thing. The second thing is hybrid delivery. Many of the newer entrants in the marketplace are virtual only. We have the capabilities to do both in-person and virtually. We have nearly 600 centers spread across 33 states. The third thing that I'd point to is the broad range of licensure. We do both psychiatry and therapy, and we have everything from psychiatrists and nurse practitioners to psychologists and therapists. Being able to have all of that in one center to be able to holistically treat the patient is really powerful. Those are W2 clinicians. They're not 1099. The fourth ingredient I think that makes us unique is that our focus is on the commercially insured population. We will do an accommodation for cash pay, but that's a very small percentage of our practice. We are focused on the commercial insurance and seeing patients that have that insurance card. You add all that up. That's what makes us unique. It also is what allows us to have a very durable model. If you think about the last couple of years, we've had really strong organic growth and margin expansion. This model I think allows us to be flexible and respond in a dynamic environment to regulatory changes or patient preference changes or things like that. That answers your question around, you know, why we're a little bit unique. Perfect. I'd love to dig in on just the clinician side as well. To your point, really good organic growth. It's something that I think from a retention perspective, there's been stability. I know organizationally, since you joined us, it's coming up on three years now. You guys have put a lot into the organization. Can you just give us a sense in terms of clinicians, what's really resonating today? That is, I think, a differentiator in the market. Yeah. The clinician, what we call the value prop, right, to our clinicians and why they're attracted to come to LifeStance and stay is the first thing you always start out with is a competitive compensation package. For us, that's a combination of both what we're paying them for their services. While we're W2, we are fee-for-service. They get paid per visit, but also the benefits. They get matching 401(k), health benefits, those kinds of things, which is differentiated from many of our competitors that are more 1099. That's one thing. The other would be the support that they get by being at LifeStance. That's everything from finding new patients for them to all the administrative aspects of revenue cycle and collections and things like that. A big thing for our clinicians is that because it's a fee-for-service, they don't take the risk on collections. If they see a patient, they get paid. That was a big deal last year with the change healthcare environment, where if you were a 1099% of collections, you may not have gotten compensated for a couple of months. That's a big one. The third thing that I would point to is what I mentioned around what makes us unique is that broad range of licensure and services. If you're a therapist and you need your patient to be able to access medication management right in the center, you can refer them to a psychiatrist or a nurse practitioner. That's not common in our industry to have the combination of both. What we've been talking about is the adding of additional specialty services, so neuropsych testing, and then for treatment-resistant depression, things like TMS and Spravato. Having that broad range of services and licensure, like that along with other things, is really what makes us for a strong value proposition. Got it. You have recently shifted for clinicians from a bonus perspective, more away from kind of stock to kind of cash base. Can you just talk about the origin of that, what it means for the clinicians in terms of why they find that attractive, and then for LifeStance? Yeah. Sure. I'd be happy to jump in on that one. It was a very deliberate change that we contemplated in our planning process. Craig, you got the key headlines as we move to a cash-based incentive program from LTIP, so longer-term incentives. We were really reacting to the desires of the clinician population. They wanted to have a program that was more measurable and outcome-based in terms of being able to get paid within the current period versus the way the LTIP program was constructed, which was more longer durational. We're seeing really good feedback. The program was implemented in May, and we're seeing really good feedback from the clinician populations in terms of tracking with the program, engagement with the program. We're pretty excited just in terms of the implementation of the new incentive program and how it's being received by the clinicians. Great. How about just from a scheduling and productivity perspective? I know you have some procedures in place. How is that resonating and helping in terms of fill clinician schedules? Yeah. Yeah. It's definitely resonating, although early days. This goes to that productivity piece. I always want to make sure we're clear on this because it's different than how we were talking about it 18, 24 months ago, in that back then, we were saying the clinicians, they're giving us a certain amount of time, and our utilization of that time is pretty high. We were asking them for more productive, more capacity, more time on their calendar. We've been successful on getting more time on the calendar. Now we're at the point where we need to utilize that time better. There are a few things that we're focused on. This year, we've talked about more of a balance of filling existing clinicians' capacity versus hiring new clinicians. Our net clinician additions were a little bit lumpier. First quarter was a little bit lower than traditional. That was a deliberate choice that we've made. When a new patient comes in the door, instead of the priority being only the new clinicians, it's more of a balance of, yes, we still are hiring new clinicians. That's always going to be the primary growth driver for the business. There is some marginal capacity with our existing clinicians that we're putting those new patients to. There are initiatives around making the patient stickier with a clinician. We rolled out a new patient CRM tool that is sending communications out to patients who maybe saw a clinician for one or two visits and then dropped off. Or they booked an appointment, but we're sending the messages to ensure that they actually show up for the first appointment, things like that. Adding anything where we're adding an incremental visit to the clinician's calendar will obviously improve the productivity and visits and revenue for the company. Great. Just wrapping up on clinicians, it's good to see in the last year or two kind of stabilization, retention. On a longer-term basis, are there things that you think could actually drive retention higher? Yeah. There's no silver bullet on this. That's what we've come to realize over the last couple of years as we listen to the clinicians. We've done things like last year, we went from monthly payroll of clinicians to biweekly, like how most of us get paid. That was a big pain point for them. This year, we moved from the stock-based productivity program to cash, as we've talked about previously. Now we're working on filling their calendars better so that they can make the kind of income that they want and see the level, the number of patients that they'd like to see. All those things we think will contribute eventually to improved retention. It is a journey rather than, oh, if we do this one thing, we'll see retention move up five points. Now, having said all that, we think there is room to improve retention. We've seen best in class with some of these smaller practices that we've either purchased a few years ago or are currently evaluating from probably in the 90% retention range. The last time we disclosed, we were at about 80%. Think of it as there's opportunity. We think the North Star is probably 85% to high 80s as a percent for retention. That's what we're marching towards in the coming years. There's no one thing that I would point to that's going to get us there. Understood. I want to shift gears just to kind of payer dynamics because on the one hand, payers have been under pressure in terms of utilization. The margins have been pressured. On the other hand, they need more access, particularly for mental health. Can you just discuss the puts and takes there, what you're seeing payers? I think you still expect on exiting this year, kind of low to mid-single-digit rate increases. What gives you that confidence? Yeah. You just nailed it. You gave me the answer. It's really, thanks for the softball. It's really the fact that, yes, payers are under financial duress. This isn't new. It's actually been going on now for at least a couple of years. They're having financial challenges. At the same time, they're getting a lot of pressure from their employer clients and their members around access to mental health care. Access to mental health care can come in different flavors. It could be overall access. It could be access to in-person capabilities, which plays well for LifeStance. They're getting pressure from both sides. I think of it almost similar to, you know, it's no different than like a hospital system. The payers are under financial, they have financial stress. They still need the hospital system in their network. They've got to negotiate. The hospital system's costs are going up. There's just going to be that, there's that trade-off. We think, based on all the signals that we see as we do negotiations and have conversations with payers, that that low to mid-single-digit rate increase in the coming years is, you know, a reasonable spot for us to assume. While it's early days for next year, there was a positive signal in the early view of Medicare, the Medicare rates for next year. We have about 25% of our book of business tied to Medicare. We don't get Medicare rates. We get, it could be 165% of Medicare, but it's tied to Medicare. It's early. Obviously, nothing is final, as we know. Right now, that's solidly mid-single digits for a rate increase, which is a much better place to be than last year, where we were staring at like a -3%. Again, we feel good. There's recognition around the mind-body connection that mental health, improving patients' mental health will contribute to lower total cost of care. Most payers get that and value our services. Got it. I think exiting this year, we probably won't have to talk about the one payer. Thank you. Maybe one last time on that. Why was that unique? Maybe just to kind of get the bed and what are other discussions like that gives, again, gives you that confidence? Yeah. This was unique. This is a big national payer. Their reimbursement level was materially above market and their peers. This was an agreement from years ago when LifeStance Health Group was significantly smaller. I can only, my hypothesis, I'm guessing, is that this payer at the time was really trying to build out their mental health network and make sure they had access for their patients. They had gone with this very high reimbursement. A couple of years ago, as you know, the companies that had the payers that have MA and exposure and things like that were starting to feel the financial stress, they looked for opportunities across their corporation to improve earnings, to try to offset some of that financial stress. They looked at their entire provider portfolio for any provider, whether it was a hospital system or a LifeStance Health Group, that stood out to be well above market. If they had the contractual right, which they did, they could renegotiate. That's what happened. The great thing for us, or the silver lining, was that we were able to negotiate with them, had a good partnership where they spread it out over two years so that we could digest the reduction because it was a sizable reduction. There were three rate cuts. Two were last year, on March 1 and July 1. The last one was March 1 of this year. We're past all those now. We've been able to successfully digest those either with margin expansion last year while it was going on. Even this year, we're guiding to some modest margin expansion while digesting that. Great. I want to touch on just kind of value-based care. I mean, I think up until this point, it's been mostly about access in terms of what you're providing. I think the management team has always cautioned that this takes time. How do you think about that on a longer-term basis in terms of outcomes and kind of where you sit in that? Yeah. You're absolutely correct. Today, the value-based contracting with payers really centers around access. Even then, it's only a handful of, I would think of the more thought-leading, forward-leading payers that are even doing that. Most are just straight reimbursement. As we look out, let's say five years on the horizon, I believe that there's an opportunity for a company like LifeStance Health Group to be the best and to prove it. The only way you can prove it is by demonstrating outcomes and proving that you're improving patients' health and working with the payers to be able to prove out that that improvement in mental health is playing through also in the improvement of physical health. You're lowering total cost of care. With our size and the volume of patients and visits that we do, I think we're uniquely positioned to be able to have those kinds of conversations with payers. I was just meeting with the head of behavioral of one of the big national payers a month ago, and she was frustrated around this topic where she was like, "We just got to do something. We've got to take a first step. LifeStance Health Group, you're like nobody else. Let's let our two organizations partner together and see if we can figure something out. We just got to do something. We know it'll be wrong when we start, but let's get going on the journey." I think as we get out, eventually, the value that mental health companies are creating through improved health outcomes will become increasingly important. That's exciting for us. Let's shift gears just to kind of more in the near term, 2025 guidance. In particular, kind of the ramp in the back half. I did feel like you guys did a really good job with details around that on the conference call. Can you just talk about that kind of first half to second half, and in particular Q4, the visibility that you have or confidence that you can deliver on that? Yeah. I appreciate the question. First of all, we're really pleased with the first half performance that we've had this year and jumping into the second half. Dave kind of hit a lot of the initiatives that we have or the buckets of initiatives around increasing productivity. Craig, as you referenced on the call, we kind of broke it down between, you can think of second half over first half being 90% of the step up in revenue, like 90% from revenue, 10%, so a little bit of rate in there. On the revenue side, you get a mix between net clinician additions, which will be always important to our growth algorithm. This year, we're kind of putting in productivity as well. As you kind of step in between Q3, net clinician additions is more important than productivity when you think about the step up getting into Q4. In Q4, we've given enough time to be allowed for initiatives to take hold. That's where you see productivity more of an influence, kind of going into Q4, but net clinician additions will always be important overall. That's helpful. Margins have come in higher than expected in the first half of the year. What are some puts and takes into the back half on the margin front? Yeah. Overall, as Dave stated, a couple of these points. First and foremost, Q2, we increased our guide by $5 million on an adjusted EBITDA perspective, guiding full-year margin in double digits, so low 10%. We're really pleased with the trajectory of the business. When you think about puts and takes kind of going in second half versus first half, it really is on the ramp as it relates to the revenue in terms of being able to get the productivity from the clinicians. Again, Dave defined productivity, the way we think about it is really filling the capacity that our clinicians are providing us. I link back to when we think about it from a patient engagement, when we think about it from the incentive program we've discussed, when we think about pure practice management and things we're doing to make the flow of patients easier on the clinical operations and the clinical team, they're all very good markers in terms of being able to get that unlocked as it relates to productivity. Great. Understanding it's early here, right? When we think about kind of this year and transitioning into 2026, any high-level thoughts in terms of growth algorithm, kind of margin? Yes, absolutely. You referenced it, Craig. It is early, and we have not guided 2026, but we've had a lot of the conversation already. When you think about the growth algorithm, our intention is to, we believe, we'll return to the low middle single digits as it relates to rate. Overall, kind of thinking about the revenue in the mid-teens overall, kind of when you think about it, just pulling it all together. We expect to be able to continue to leverage G&A and operating expenses. This is what I'll move from 2026 to the long-term guide, is that we feel really good about the trajectory and being able to get to the 15% to 20% on an adjusted EBITDA perspective. Great segue. Dave, when you and Ken came on board, I mean, margins were kind of mid-single digits, and you've doubled them. I know at the time that was kind of an ambitious target, right? There was a lot of work to be done to get there. Can you talk about just kind of some of the things that have helped margin 5 to 10, but more importantly, the 15 to 20, where's the operating leverage in the business from here? You want to take this one? Yeah. If you look at the historicals, right? The team did a really nice job of being able to get margin expansion as it relates to center margin, Craig, like overall. When you think about the opportunity in front of us, there's some leveraging that we expect out of center margin overall. Most of those costs really are related to the service, though. It'd be your occupancy type costs. When you get to the general and administrative line, it really is from the benefit of deployment of both kind of like your growth scale and then also just technological initiatives and efficiencies to be able to have your revenue grow at a higher pace than what your G&A is growing. Overall, we feel that that's the algorithm that kind of gets you from our current margins into the 15% to 20% range in the long-term margin perspective. Is it incremental from here? If I think about a lot of the operating initiatives you took in terms of you reduced your payer network, you consolidated some of the physical footprint on center, a lot of kind of heavy lifting, so to speak. Are there any other initiatives out there in terms of to get to 15% to 20%, or is it more just incremental at this point? I would look at, I mean, and Dave can comment on some of what we're doing just around AI in total and totality, but a lot of that is enablement as it relates to driving efficiencies within your business. I don't think there's this big bang, Craig, like where all of a sudden you get this like huge unlock, right, to be able to kind of step into the 15 to 20. There's a bit of just the initiatives taking hold and kind of being able to get to that long-term margin. Dave, I don't know if there's anything you want to. Yeah, that's well said. I think if we go back a couple of years ago, it was all about simplification and standardization. We did things like we reduced the number of payer contracts we had in half. We did things like that. We still are a very heavily manual, people-intensive business from behind the scenes, the administration. Whether it's AI or RPA or just digital tools, like new vendored solutions, there's a lot of opportunity for us to become more efficient and be able to drive operating leverage in the coming years. It won't be like 400 bps of leverage in one year. I think it's going to be, as Ryan was saying, we'll just keep chipping away at it. We feel good about every year we'll be able to generate operating leverage. Got it. Maybe just building on that from an AI perspective, any interesting kind of use cases you're evaluating? I know you're also evaluating kind of an EHR, kind of how important that is. Yeah. Yeah. First of all, I'll start with your second part of your question. We are evaluating an EHR. We talked about it in the last couple of earnings calls. This is a huge decision for us. It's foundational for everything that we want to do. You got to get the EHR right to be able to plug in a lot of the point solutions. That's ongoing. We've said we'll decide the new EHR, and it could be our existing EHR vendor, but we'll decide on that new vendor this year. That's one thing. The second thing is that just when we think about technology in general, we're not going to build a lot ourselves. This is going to be more about going out, partnering with the best in-class solutions. We did that with digital patient check-in. We've done that with our clinician onboarding and some of these new tools that we've implemented. We're doing the same thing with the AI vendors. A lot of these are smaller venture-backed, private equity-backed, but they're the ones it's moving so fast that that's our process, that's our thought process, which is let's just go out and partner. Every year, we can stress test whether they're still best in class or should we move somewhere else. Now I'll get to your AI part of your question. The number of use cases we highlighted in the earnings call, you know, we're doing some things in our phone intake or new patient scheduling team. As you can imagine, whether that's an AI agent answering the phone and being able to take some work off of the actual, you know, the people that are answering phones work, you know, making that more efficient or using AI from a quality perspective, there's a lot that's going on there. On revenue cycle, there's just several use cases. I think those are going to become standard fare in the industry. It's moving fast, but that's going to be standard fare. The more exciting piece to me is what you can do to augment the clinician. I'll be clear, as I talked about, augment or support the clinician, not replace the clinician. The first use case that's out there is AI, AI scribe, AI note-taking. It's called different things. That is one where it's going to take mundane work off the clinician's plate. Most of them love this concept. The other thing is, as we've been piloting it, patients appreciate it. Because you think about you're having a conversation with your clinician and you're pouring out your soul to them, and they've got their head down in their computer and they're typing, you're not getting the best connection. Not that every clinician does that, but many do. We're getting great feedback from the patients as well. We think of AI documentation in two buckets. There's for the prescribers and then the ones that are doing therapy. We're looking to roll out company-wide the solution for the prescribers or the clinicians that are doing medication management or psychiatrists and nurse practitioners in the back half of this year. We're piloting a number of solutions for the therapists. I think that six months from now, a year from now, we'll be talking about other types of use cases that are relevant to be able to support and augment the clinician. Great. Just going back for a second to your comment on the digital check-in, I know that was an important initiative. I think it also had some positive implications for cash flow and things. Can you just give us an update in terms of how that got rolled out? Yeah. Yeah. So fully rolled out. We went out and we evaluated the various vendors and chose, you know, a best-in-class solution. It's gone really well. Let's take a step back. Why did we do this? Today, about 70% of our visits are virtual, 30% are in-person. During COVID, when we went from 100% in-person to 100% virtual, what we did was we made sure that we had the right technology and tools to be able to deliver care to patients. That was really important. What we didn't do was make sure we had the right tools to be able to do the administration. That's everything from making sure we had the right form signed or that we had their ID card or driver's license. Think of the things that you do when you go into your primary care physician's office and they ask you for, you know, that information. We didn't have a good way of doing that if it was a virtual appointment. That was the genesis of we need to get to a digital patient check-in tool. Yes, in addition, it has really changed the game for us on collecting of patients' cost share. It's one of the reasons why we're at, since we've been public, a record low for us for a DSO. We're at 34 days. I think, you know, at the worst last year, we were in the 50s after Change Healthcare, but you know, we were in the 40s typically as more of a stable number. Now we're at 34, and every day is worth $3.5 million, $4 million of cash on the balance sheet to us. There's still room to improve the 34 days. That was a contributor to the improved cash collections that you all have seen this year. Perfect. Just as we wrap things up in the next couple of minutes, I want to spend time on capital allocation. You've been very clear in terms of looking for kind of tuck-in deals, adding capabilities. What's the latest from the board in terms of that approach? How do they view that versus buybacks? Yeah. Yeah. So really from a capital deployment. First of all, I love the question because the assumption then is we actually have a strong balance sheet. We've got cash on the balance sheet. We've got some debt capacity. We have really low leverage ratios versus two and a half years, three years ago when I first joined. We were talking about, are you guys going to run out of cash and have to go out into the capital, you know, out to the debt and capital market? We're in a really good spot from that perspective. It gives us a lot of flexibility financially in executing on our business strategy. Craig, you and I, we've talked about our priorities for the deployment of capital. Our number one is organic, supporting organic growth. The example there would be building of de novos. Number two would be inorganic, which would be, you know, M&A. Right now, that's primarily tuck-ins as we for geographic expansion is how we're thinking about those. The third would be a stock buyback. There's a lot of opportunity for us in those first two buckets that we feel really good about the deployment of capital on organic and inorganic. That's been our focus. What's different this year is the level of the stock price. We believe, as a management team and as a board, that there's a dislocation between where we should be valued and the current stock price. If I think for the first time, we're having conversations with the board around, does it make sense from a capital deployment strategy to be doing, to potentially be doing stock buybacks? It's a conversation at this point. There's nothing that I would be announcing. It's early days, but it is a change in mindset because we do, because otherwise, we do feel really good about those first two buckets on being able to deploy capital in those. Great. Last one, I don't want to have you speak for Ken, but he did an open market purchase, which certainly was a shot in the arm to the stock. I think got a lot of attention. Any thoughts there in terms of whether that's voted confidence or maybe similar dislocation? Yeah. Yeah. I mean, I think Ken, the previous CEO and is currently Executive Chairman for LifeStance, was pretty annoyed at where the stock price was. As an investor, and he had some discretionary funds to invest, he decided that he would invest in LifeStance. I mean, I think of it as it was a vote of confidence on the management team, the business strategy, the performance. Also, in combination with, you know, the stock, the stock was really low. It was great to see. I appreciated them doing that. Great. All right. I think we're right at time. Dave and Ryan, thank you so much for your time today. I appreciate you being here. Thanks. Thank you for a great conference. We really appreciate the invite. Thanks for that. Thank you.