LifeStance Health Group, Inc. (LFST) Q4 2021 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the LifeStance Health Fourth Quarter and Full Year 2021 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will have a question-and-answer session. [Operator Instructions] Please be advised, today's conference call is being recorded. [Operator Instructions] I would now like to hand the conference over to your host today, Monica Prokocki, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to LifeStance Health's Fourth Quarter 2021 Earnings Call. I'm Monica Prokocki, Vice President of Investor Relations. Joining me today are Mike Lester, Chief Executive Officer; Mike Bruff, Chief Financial Officer; and Danish Qureshi, Chief Growth Officer. We issued the earnings release and presentation after the market closed today. Both are available on the Investor Relations section of our website at investor.lifestance.com. In addition, a replay of this conference call will be available following the call. Before turning the call over to management for their prepared remarks, please direct your attention to the disclaimers about forward-looking statements included in the earnings press release and SEC filings. Today's remarks contain forward-looking statements, including statements about our financial performance outlook. Those statements involve risks, uncertainties and other factors, including the possible future impact of the COVID-19 pandemic on our business that could cause actual results to differ materially. In addition, please note that we report results using non-GAAP financial measures, which we believe provide additional information for investors to help facilitate comparison of prior and past performance. A reconciliation to the most directly comparable GAAP measures is included in the earnings press release tables and presentation appendix. Unless otherwise noted, all results are compared to the prior year comparative period. At this time, I'll turn the call over to Mike Lester, CEO of LifeStance. Mike?

Thank you, Monica. Good afternoon, everyone, and thank you for joining us today. I want to start by covering our performance and our outlook upfront. 2021 was a milestone year for LifeStance as we made the transition from a private to a public company. We delivered revenue of $668 million and positive adjusted EBITDA of $49 million. We grew our clinician base to 4,790 and had a net add of 1,693 clinicians in the year. We demonstrated strong performance and are well positioned as we continue to build the nation's leading outpatient mental health platform. We grew our revenue by over 75% in 2021, which we're incredibly proud of. For 2022, we are reaffirming our preliminary outlook of revenue growth rates in the low 30s for the year, with adjusted EBITDA dollar growth rate on pace with or slightly greater than revenue. We expect full year revenue to be in the range of $865 million to $885 million and a positive adjusted EBITDA in the range of $63 million to $67 million. Our unique hybrid model provides competitive advantages in meeting patient and clinician needs as well as operational flexibility. While we believe the long-term mix of virtual versus in-person visits will be around 50-50, our mix of telehealth visits is currently over 80%. Therefore, we plan to strategically moderate our de novo center openings in the second half of 2022 to improve profitability. Given the flexibility of our hybrid model, we can flex the pace of physical location expansion based on current and projected patient and clinician demand for in-person visits while continuing to aggressively grow our total clinician base which is the primary driver of revenue growth. LifeStance is uniquely positioned to support patients both in-person and virtually, and we believe that this is a significant advantage for our patients, for our clinicians and for our shareholders. Our 2022 guidance reflects our continued confidence in our ability to execute on our profitable growth strategy, significantly expand our clinician population and deliver best-in-class app patient mental health services. Mike Bruff will go into more detail about our financial performance and outlook in his section. Turning to the market. As our country -- our country is in the middle of a significant mental health crisis, and our work has never been more needed or more critical. At LifeStance, we remain deeply committed to our company vision of a truly healthy society for mental and physical health care or unified to make labs better. Similarly, as many of you heard, the President highlighted in his state of the union last week, the nation's imperative to get all Americans the mental health services they need and achieve full parity between physical and mental health care. Demand for our services remains at record levels nationwide and continues to grow. Today, there are over 50 million Americans who require mental health services, one in five adults and one in six children have a mental health issue and untreated mental health creates a significant burden on patient health and the entire health system. This represents a total addressable market of over $100 billion growing at double-digit rates to over $200 billion by 2025. LifeStance operates what we believe is the largest provider of outpatient mental health services in the country, yet we currently represent only 1% of that large and growing total addressable market, demonstrating a long runway of growth and white space. While there are many players in the mental health care market, LifeStance is differentiated by our profitable hybrid model of care meeting patients where they are, whether in-person or via telehealth when they need it most. According to a recent survey of nearly 8,000 patients conducted by Rock Health and the Stanford University School of Medicine, 75% of patients prefer in-person mental health visits and 25% preferred telehealth visits. Patients seeking mental health care want to build a close relationship with their provider, and for many, that connection is developed by meeting face-to-face. While telehealth has played an important role during the pandemic, our ability to support our patients both at home and in our physical locations has solidified our position as a mental health care leader, providing high-quality care across multiple care settings. Combined with the fact that we've negotiated telehealth rate parity and the majority of our payer contracts, LifeStance has an unparalleled ability to seamlessly transition both the business and individual patient care back and forth between in-person and virtual settings. When COVID first emerged in 2020, our patient visits moved from 5% virtual to over 90% virtual within weeks. Through 2021, our telehealth mix trended downward to the low 80s, and we expect that mix to be approximately 50-50 virtual versus in-person over the long term. We have found that our clinicians having a personal and meaningful connection with our patients makes a tremendous difference. We are confident that our hybrid model is the future of mental health care delivery and we are well positioned to win in this space. Regardless of the COVID environment and patient and clinician preferences, we can seamlessly transition with our hybrid model and provide a mix of in-person and virtual visits to provide patients the very best care. Turning to the labor market dynamics. 2021 has seen a record number of resignations across all industries in the country, especially in the health care industry. Even in this environment, we have demonstrated that LifeStance is positioned as a best-in-class employer with a culture, value proposition and technology to attract and retain clinicians. We've continued to experience significant rates of clinician growth, which powers our growth engine and retention has continued to be stable. As an example of our focus on continuing to build a destination of choice for clinicians, LifeStance was recently recognized as a Great Place to Work based on direct employee feedback. When asked what makes LifeStance a great place to work, our team members most valued our flexibility, caring people, management, support staff and inclusion. We were honored to be recognized by the global authority on workplace culture, employee experience and leadership behaviors and intend to continue making improvements to build quality experience for our clinicians and all employees. Our employees are deeply compassionate, dedicated advocates for mental health and overall well-being. Over the last year, we've implemented a number of initiatives to support our employees' health and well-being, including improving communication channels, developing a long-term equity incentive program that includes our clinicians, enhancing medical benefits and wellness plans, offering peer-to-peer support and developing a robust national diversity, equity and inclusion network. At LifeStance, over 70% of our clinicians, 50% of our executive leadership team and 40% of our Board of Directors are diverse by gender or race and ethnicity. Another attribute of happiness and well-being is participation in the community and giving back. In support of this and further increase in access to affordable mental health care, LifeStance endowed the LifeStance Health Foundation in June of 2021. The foundation was developed to award grants and scholarships to support organizations that share our mission with a focus on especially vulnerable patients, including youth and adolescents, underrepresented minority communities and the underemployed and uninsured. To date, the LifeStance Health Foundation has awarded more than $400,000 to both national and regional nonprofits working to destigmatize access to mental health care, including the Mental Health Coalition and the U.S. Olympic and Paralympic Foundation. We are very proud to support our employees and their commitment to our mission, which improves the health and well-being of patients across the communities we serve. While world events over the last few years have destigmatized mental health in important ways, our clinicians and team members chose a career in mental health long before it was in the spotlight. Their compassion, expertise and advocacy are making a difference. Our company values of delivering compassion, building relationships and celebrating difference underlie everything we do on a daily basis, and we believe will allow us to continue to attract the best talent nationwide. Turning to the payer environment. Our payer partnerships are critical to our success in improving patient access. In the highly fragmented mental health space, our scale is unmatched as we provide payers with thousands of clinicians working within a single integrated organization to deliver mental health care to their broad membership base and a low-cost outpatient care setting. Providing in-network care for patients, where the alternatives are largely cash pay or out-of-network options with limited patient affordability, combined with the depth, breadth and geographic reach of our payer partnerships, is a key competitive advantage for LifeStance. Success with our payer partners speaks for itself. Since 2017, we've grown to over 250 national and regional payer relationships and have never lost a payer contract. Approximately 90% of our business is in-network reimbursed by commercial insurers. We are differentiated in providing in-network care and improving access and affordability for patients. Turning back to execution. Our strong results in 2021 show that both our growth strategy and business model are working. We are revolutionizing how patients receive easy access to affordable mental health care. To deliver on that goal, we continue to focus on our three growth strategy -- on our growth strategy on three core pillars: first, expand into new markets; second, build market density; and third, deploy our tech-enabled services. In 2021, we delivered strong progress against each of these pillars. First, in terms of expanding into new markets. 2021 represented another banner year of geographic expansion. In the fourth quarter, we expanded into Rhode Island, our sixth new state entry for the year, bringing our nationwide total to 32 states served. Each new state brings us access to a greater pool of clinicians, the ability to reach patients with our hybrid model in new markets and contributes to delivering on our mission of improving access. Long term, we remain committed to delivering care to all 50 states through either in-person or virtual care, and we won't stop until every person in the U.S. is one click or call away from a LifeStance health clinician. Second, in terms of building market density, clinicians remain our primary growth driver. And in 2021, we grew our clinician base nationwide. We added 415 net clinicians in the fourth quarter, bringing our total to 4,790, an increase of 1,693 or approximately 55% year-over-year. This strong growth, especially in the current labor market environment demonstrates that our value proposition is resonating as we continue tremendous net clinician growth quarter after quarter, after quarter. When we founded LifeStance, creating a new model for mental health clinicians was a central foundation of our mission. To achieve this, we set out to solve key clinician pain points, which we call our six points of value, including a mission-driven culture, collegial and collaborative environment, strong work-life balance, enhanced digital tools, robust support services and competitive compensation. Most recently, in Q4 of 2021, we announced the addition of a seventh point of value, which is creating an ownership mentality among our clinicians by including them in our employee long-term equity incentive program. Our clinician growth was driven by our organic recruiting engine as well as practice acquisition engine, with 24 acquisitions closed in 2021 or seven in the fourth quarter. In 2021, we also opened 106 new de novo centers or 14 in the fourth quarter to bolster our physical presence in addition to our virtual service offering. In total, we now have over 500 centers nationwide. Growing our clinician base supports our mission of improving access to affordable high-quality mental health care. In 2021, we cared for over 570,000 unique patients versus 357,000 in 2020, representing growth of approximately 60%. And we grew visit volume. Last year, we reported 2.29 million visits for 2020, which excluded approximately 240,000 visits from pre-integrated acquisitions, for a total of 2.53 million visits. For 2021, visit volume grew to 4.57 million, including approximately 530,000 visits from pre-integrated acquisitions. This represents growth of over 80% year-over-year. Going forward, we will continue to provide the total volume of visits on an annual basis. Third, in terms of deploying our tech-enabled services. As we announced earlier this year, we are rolling out a new improved matching, booking and intake experience for new patients to better set up our patients and clinicians for success in that first visit. This new interface has been designed by our in-house experts with strong check backgrounds. Improving the match between patient and clinician from the very start and seamlessly collecting necessary patient information upfront leads to higher satisfaction for both. Patients can more easily find the right care while clinicians can better be prepared for the first visit. Based on our earlier experience, the reception has been extremely positive, and we have seen a reduction in the number of cancellations and rebookings related to clinician-patient matching. This enhancement will be rolled out state by state throughout 2022 and into early 2023 as well as receive additional product improvements over time as we continue to invest in innovation around the booking experience for our patients. Additionally, we're in the process of designing similar user-friendly tools for our customer care teams to make their workflows more efficient, while offering an improved patient experience over the phone. This investment will allow us to deliver consistent and unified patient experience, both on and off-line. Looking beyond our three core growth pillars, we remain excited about our next growth horizon of integrated care models, including value-based care. We currently have over 10 partnership programs in place, including Medicare Advantage plans, large dialysis provider and others. So this is not just a goal, we are innovating in this space today and are at the forefront of integrated care in the mental health industry. LifeStance is truly cutting edge in this space. While we expect it will take several years for the market to build the capabilities to fully support integrated care, we believe it is critical to maximizing the impact that mental health care can have in improving outcomes and reducing overall medical cost for Americans. While we lead the industry in these new models of care, it is important to understand that the runway and growth opportunity we have in our core outpatient market is enormous, with significant white space left to capture. We are laser-focused on executing against that core market opportunity and maintaining our strong focus on growth and profitability. Over the last year, we delivered on the three pillars of our growth strategy. We've also deepened our focus on the patient, working to expand access and improve the end-to-end experience through tech-enabled services and creating future growth options through integrated care model programs. In closing, we're starting 2022 with strong momentum following our third consecutive quarter of strong profitable growth as a public company. I'm confident in our future and our ability to help our people on their path to better mental health care. Now I'll turn it over to Mike Bruff, Chief Financial Officer, to provide more detail on our financial performance and outlook.

Thanks, Mike. Today and going forward, I will frame my comments in the context of our long-term growth strategy, which includes balancing growth, profitability and liquidity. Let me start with growth. LifeStance continued to deliver solid growth in the fourth quarter with revenue of $190 million, up 61% year-over-year. This included an estimated impact of approximately $1 million to $2 million from an uptick in patient and clinician cancellations in late December caused by the Omicron COVID variant. For the full year, we delivered revenue of $668 million, up 77% year-over-year. Turning to profitability. In the fourth quarter, Center Margin of $54 million increased 39% over the same period last year, driven by strong revenue growth. Full year Center Margin of $202 million grew 69% year-over-year. We generated adjusted EBITDA of $11 million in the fourth quarter or 6% of revenue. For the full year, adjusted EBITDA was $49 million or 7.4% of revenue, slightly down year-over-year, driven by strong clinician and revenue growth, offset by the impact from a shift in labor market dynamics and investments in future growth and scalable infrastructure. Turning to liquidity. LifeStance continues to be supported by a strong balance sheet. We exited the year with cash of $148 million and debt of $157 million. Additionally, the Company ended the year with an undrawn revolver of $20 million. We have no material debt payments due until 2026. In 2021, we generated $9 million of cash from operations, including IPO-related payments and interest payments on long-term debt. Turning to 2022 guidance. We expect another year of strong profitable growth, with revenue of $865 million to $885 million, Center Margin of $240 million to $255 million, and adjusted EBITDA of $63 million to $67 million. For the first quarter, we expect revenue of $195 million to $200 million, Center Margin of $50 million to $54 million, and adjusted EBITDA of $7 million to $10 million. This guidance includes approximately $3 million to $7 million in revenue impact from Omicron. We expect improvements in profitability in the second half of 2022 based on the resolution of the Omicron impact in the first quarter, continued growth in our clinician base and leverage in the second half of the year driven by our strategic decision to moderate de novo center openings as well as scaling in G&A costs. Our planning assumptions include 80 to 90 de novo center openings this year, heavily weighted toward the first half with 70 to 75 openings. M&A spend of $50 million to $70 million and no further COVID-related impacts or changes in the current labor market environment. Additionally, we expect stock-based compensation expense of approximately $190 million in 2022, including approximately $30 million from new 2022 grants. We expect stock-based compensation expense to continue to decrease as the pre-IPO awards vest. To summarize, we remain focused on delivering long-term growth by balancing growth, profitability and liquidity. With that, I'll turn it back to Mike Lester for a few words before going to Q&A.

Thank you, Mike. Before we transition to the Q&A portion of the call, I hope you've already taken away the strong sense of confidence I and my team have in the growth potential of this company. So here's what you can expect from us, that we will deliver strong, sustainable growth and profitability, coupled with strategic and disciplined capital deployment and continued investment and focus on a sustainable business and employee development and well-being, which is our pathway to our top line and bottom line goals over time. My confidence in our potential is shaped by our strong performance in 2021 that we are carrying into 2022, supported by highly differentiated, profitable, hybrid platform, strong market demand and digital innovation that is driving patient and clinician preference for LifeStance. As we enter 2022, I have significant confidence in our ability to execute upon our objectives and I'm excited about our next growth horizons. Our ability to positively impact the lives and mental health of the millions of people nationwide that are in need of our services is unparalleled. That drive is what motivates each of our over 6,500 team members every day as we execute on our mission of helping people lead healthier, more fulfilling lives by improving access to trusted, affordable and personalized mental health care. Mike, Danish and I will now take your questions. Operator?

[Operator Instructions] And our first question comes from the line of Ricky Goldwasser with Morgan Stanley.

Yes. So a couple of questions here. First of all, Mike, in the prepared comments, you talked about sort of the current mix being 80-20 remote versus in person and sort of long term stabilizing around 50-50. So when you think about sort of your infrastructure, the center infrastructure, when you're slowing down the opening of the de novo centers. But how do you think about sort of the total number of centers? And are you also thinking of potentially, over time, closing some of the existing centers to really kind of like be in line with that kind of like demand-supply balance that you see over the long term?

Sure. Thank you, Ricky. We don't have any intention of closing any centers. Brick-and-mortar is still important to us. We quoted a study that 75% of patients want to be seen in person. So we think that, that's -- remains to be very important. But if you just do the simple math, if we're correct on this 50-50 assumption that, that's going to be the mix, mathematically, we could go double the number of clinicians today that we have and not open up a single new center. We're going to continue to open centers, but we just feel like we can modulate that and as we've stated a couple of times, we remain focused on profitability, while at the same time, it has zero impact. I mean the number of centers has zero impact on our ability to grow. It's all about the number of clinicians and the conversion to -- the big conversion over the last two years to telemedicine is able to do that. And again, we're agnostic because we have rate parity.

Okay. And then when we think about sort of the clinicians, I know you touched a little bit about that, but maybe if you can give us a little bit more color on what you're seeing out there in the hiring environment and also a lot of focus, a lot of questions that we're getting about sort of wage inflation?

Sure. Danish, would you like to talk about the clinician hiring environment and maybe Mike can take wage inflation? Or -- yes, you can take wage inflation as well.

Sure. Happy to. This is Danish. So on the clinician environment, our ability to continue to attract a net growth of new clinician adds every quarter. We see the environment to continue to be very favorable. For LifeStance are six, now seven points of value continue to resonate in the market in both our ability to attract clinicians through organic recruiting engine as well as our ability to identify practices for acquisition through our M&A team. So we feel highly confident in our ability to, again, attract clinicians through either one of those levers. And then in terms of wage inflation, so we continue to see wage inflation as we always have, which is that our clinicians have remained in high demand over the years and continue to be in very high demand. We continue to plan for merit increases every year in line with what we believe the market to be. And all those increases remain as part of our current planning assumptions and what we provided in our ranges.

Okay. And just one last question. Can you just give us an update on the retention rates? You guided back in third quarter, I think it was for 80%. So how should we think about 2022?

Sure. So retention is stable, and we are using the same planning assumptions for 2022 as we did on the back half of 2021.

And our next question comes from the line of Lisa Gill with JPMorgan.

Mike Lester, I just want to go back to your comments as you talked about telehealth versus in-person. And you talked about 70% of the demand being in-person, but your thought is that you're going to get back to 50-50. My first question would be what were your expectations pre-COVID? And as we think about getting back to that 50-50 versus, say, 70-30, where there's the demand from the patient to be in-person, is that driven based on the clinician's preference to not be in person? How do I think about that?

Sure. So the -- it was a 75% number that was quoted in the study. So it was an 8,000-patient study that Stanford did. It said 75% of patients prefer to see their mental health clinician in person. Back to your original part of your question, pre-COVID, less than 5% of our visits were virtual. And then that accelerated to 90% over the course of just a couple of weeks and has started to tick down, it's in the low 80s now. It's stalled out around in the low 80s because of Omicron. And I suspect next -- for the remainder of the year, I suspect it's going to continue to tick down. Again, we think that, for us, and if you just think about mental health as a clinical specialty, it lends itself more to telemedicine environment than, let's say, going and seeing your dermatologists or your cardiologist does. So I think other specialties will be far below 50%, but we think 50-50 is the right mix for us. And with -- particularly it's the right mix from a patient care perspective. And at this point, it's the clinician and the patient that are communicating with each other, and they decide together what's best for them. Do they want to be seen in-person? Or do they want to be seen virtually? Patients were sort of forced, due to the pandemic, to experience the virtual visit. And patients said, I like this. It's kind of convenient, but I don't want to do it all the time. And clinicians are seeing the same thing. Clinicians see things when the patient is being seen at home that they wouldn't normally see, and it gives them some advantage. But it still isn't the same as an in-person visit. So we think the mix is the right.

And then my second question would just really be around clinician adds. You talked about seven acquisitions in the quarter. Can you talk about the number of clinicians that were added via an acquisition? And then secondly, talk about retention of those via an acquisition and what the steps are to get to productivity? Is it different between an acquisition and just outright hiring a clinician?

Yes. So we haven't seen -- and we've stated this before, we haven't seen any difference in retention from an acquisition standpoint, a hired standpoint, we've sliced and diced this every way you can. And there's just not any difference. It's equal across the board. So we're not making acquisitions and because of integrations, we're losing more clinicians in an acquired business versus hired. So it's just equal across the board. Mike, do you want to comment on...

Yes. And Lisa, what I would say, you asked about the mix of clinicians added organically versus acquired, and that's not something that we are going to disclose. But I do think it's worth noting that in 2020 and in 2021, greater than half of our growth clinician adds have come from the organic recruiting side. And that's been something that we've been trending in that direction, and it's something that we expect. And hopefully, it was noted within some of the assumptions around our guidance that we intend to allocate $50 million to $70 million towards M&A in 2022, which is back to what we would consider a normal pace versus what was elevated in 2020 and 2021.

And our next question comes from the line of Ryan Daniels with William Blair.

Nick, speaking on for Ryan. I guess to start, could you guys talk a little bit about clinicians productivity and how that's sort of progressing versus your expectations as you're bringing on these newer, a little bit less productive clinicians and training them and getting them kind of up to standard?

Mike, do you want to take that?

Yes, sure. From an individual clinician productivity perspective, we haven't assumed any difference from our prior models from a ramp rate perspective, to number of visits by clinician type, et cetera. Those remain relatively intact. However, from a clinician-based productivity perspective, we certainly saw a downtick when the labor market dynamics change mid last year. And I think that's pretty simple to look at when you look at the revenue per average clinician on a quarterly basis. I think it's down roughly 1,000 in each the second -- pardon me, the third and fourth quarter relative to the first part of the year. But as I said, the unit economics of an individual clinician really haven't changed.

Okay. You guys kind of have talked a lot about some of the COVID-related fatigue and pressures, a lot of your clinicians have been facing. And that as being not the only reason, but one of the reasons that some of your clinicians are dropping off. I'm wondering if maybe even anecdotally, you guys are seeing any alleviation on that front as the kind of quarter is going on -- or the year is going on?

I would say that things are stable. Anecdotally, we think it's getting slightly better, I would say. I'm not sure what inflation is going to do to the workforce, but you have to think that people would want to ensure that they have income necessary to keep up with the rising cost. So I would say, anecdotally, it's about the same or maybe slightly improved.

And we haven't made any changes in our planning assumptions relative to the assumptions that we had in the back half. And that was one of the things that we called out on the third quarter earnings call is that we were going to go ahead and make that assumption. And with what we've seen between then and now, I think that assumption is very stable as well.

And our next question comes from the line of Kevin Caliendo with UBS.

And just looking through the guidance a little bit. Our Center Margin -- the Center Margin looks a little bit lower than what we had anticipated. The EBITDA is more in line. Is there anything that's changed outside of the, say, the slowdown in the Center growth that would be impacting that? Is there anything with mix that we should be thinking about at all?

Kevin, is that a -- and I just want to clarify, this is Mike Bruff. And apologies, Kevin, you may have to go on mute, you're a little garbled there, so if you wouldn't mind going on mute, but I guess I'll go and answer this from two perspectives: one is the first quarter and one is the full year. I think from a full year perspective, the only impact that we've noted versus prior models is the impact of the labor market dynamics on the overall clinician base. There is, in the first quarter, an incremental impact. So let me kind of go through the first quarter and what perhaps is normal versus not normal. In the first quarter, what's normal is you typically see pressure on Center Margin because of payroll taxes coming back in versus the fourth quarter. That typically has a one point negative impact to Center Margins, just moving from the fourth quarter to the first quarter, you've seen that in prior years. So that's a normal planning assumption that we make. And as we roll through the first quarter, we'll continue to open the centers that we had planned a year in advance. So that's a fixed cost that's going to be in our Center Margins. But again, we always normally plan for clinician growth and visit growth, which is the positive impact to Center Margin rate. And what I'd say is what's incremental to those normal planning assumptions is the Omicron impact on that third item, the visit growth, which we believe is isolated to the first quarter. And as Mike mentioned, we believe it's in the range of a $3 million to $7 million revenue impact which certainly has -- would put pressure on Center Margins. But as I said, we believe it's isolated to the first quarter, and it's incorporated in our full year guidance.

Okay. That's helpful. And I apologize for being garbled before.

No worries, Kevin.

The next question, just the stock-based comp number was a little bit bigger than expected. Is it reflective of the lower stock price? Is it reflective of maybe incentives or higher incentives for retention? And you said that you expect it to trend down over time. Can you just maybe explain why?

Sure. As we said, just to remind everybody, we're estimating stock-based expense for next year of $190 million, which is $160 million from the pre-IPO grants and $30 million from the 2022 equity awards. We do expect stock-based expense to come down year-over-year as the pre-IPO grants vest or amortized. In terms of the value of the 2022 grants, that four-year value, of which 1/4 of that is vesting across 2022, the four-year value is very much in line with our peer group, in comparable public companies. It's been validated by our independent compensation consultant. So we feel very good about that. And we've made certain assumptions around having retention rates around that, which -- there's a lot of assumptions baked into that number which may play out differently over time and we'll give updates if there's something that changes. But I guess, at the end of the day, we feel like the value that we put out there over the four years for this grant is very much in line with peer groups.

And our next question comes from the line of Gary Taylor with Cowen.

Wanted to confirm one thing. On the $50 million to $70 million of M&A for '22, that's M&A spend, right? Not dollars or revenue acquired?

Yes, that is correct.

And how should we be modeling that spend in terms of revenue multiple, pro forma EBITDA multiple? Like where would you point us to?

I'm not going to point you anywhere. Unfortunately, that's something that we don't disclose.

Okay. The other question I had was thinking about the 30% revenue growth that you're reiterating. How do we think about the concept of clinicians that have been -- sort of the same-store concept, clinicians that have been employed for more than a year or centers that have been inside of LifeStance for more than a year versus the de novo openings and acquisition contribution? Is there any way to help us sort of break down how you think about what drives that 30%?

Yes. We don't really think about those types of breakdown, same-store or de novos. Those are -- the de novos is very much a secondary metric. We don't even consider same-store as an operational metric. Our primary focus is clinician growth and the overall productivity of our clinician base. And as I mentioned earlier, the individual clinician productivity that is within this guidance as assumed normal -- what I would consider normal clinician productivity that we've experienced, the only difference is having a higher turnover rate on a quarterly basis been consistent with what we saw in the back half of last year. So the way that I'd have you think about this is focus on the clinician and not try to break this down by stores or centers just focus on the clinician and clinician growth.

And our next question comes from the line of Jamie Perse with Goldman Sachs.

I just wanted to go back to your expectations for clinician adds in 2022. I know you don't give that explicitly, but based on the guidance range for revenue and the experience in 2021, it looks like an implied slowdown. So I'm just wondering if you can give a little bit of color if there's anything that's changing in terms of the environment for adding clinicians? Or if that has some conservatism baked into it?

Danish?

Yes. So in terms of clinician growth, so we don't guide on the number of net clinicians. However, like we mentioned before, we still have very high confidence in the ability to both attract new clinicians through our organic recruiting engine as well as our ability through our Prax acquisition engine to bring on a net number of additional clinicians and feel very confident in the -- have a lot of confidence in the cadence on both the organic hiring and the inorganic acquisitions.

Okay. So no real change versus '21 in terms of environment?

No. We feel the environment going into this year, we don't feel any material change for us last year.

Okay. Okay. Great. And then just on margins, just curious if you can comment on this new growth strategy you have more focused on clinicians that will not be in-person, so to speak. What's the margin difference? It sounds like you expect a margin ramp in the second half of the year, if you can kind of give us some quantification of how you're thinking about that? Or if that's more of a 2023 event? And then relatedly, I mean, you guys said back in 2021, talked about all the investments you had planned for this year to build the infrastructure. It seems like this is an investment year. How should we think about leverage going into 2023 or just on a longer-term basis? So two margin questions probably for Mike Bruff.

Thanks for calling me out already. Sure. Look, I think that we wanted to give the first quarter guidance very specifically because we know that there is an impact from Omicron embedded within the first quarter. We believe it's isolated there. But even prior to that, Jamie, we've known that, number one, growing our clinician base is the primary driver of revenue growth. It's also the driver of our profitability. And we're going to execute on growing our clinicians. Now having an eye on profitability because last year, in the second half, we had pressure on profitability with the change in the labor market dynamics. So as we were moving into our planning process for 2022, we certainly had an eye on profitability. And noting that with the recent COVID variance of Delta and Omicron had kind of stalled the movement back toward what we would think is a 50-50 mix of telehealth and in-person. And so we believe that we would see a higher telehealth mix in 2022 than perhaps we had originally thought. We're able to leverage the hybrid model, which gives us a lot of operational flexibility in terms of cost and profitability without impacting two very important metrics, which is, first, the most important is patient and clinician satisfaction; and two, it doesn't impact clinician or revenue growth. So having that operational flexibility and being able to look at the demand for in-person versus virtual just allows us to modulate the pace of de novo center openings. And we're still going to open them, but we're able to modulate the pace to improve profitability here in the near term. And so that will set us up, I think, very nicely coming out of the year. But this is something that we'll be monitoring more closely as we continue to balance considerations of growth, profitability and liquidity. And then I think the last piece you asked about, just to be complete, is around the G&A scaling. We have made very focused investments around areas where we believe we can get scale and get it more quickly. We're going to continue with our standardization efforts within our operating models, whether it's out in the division or within our corporate space. We'll continue to focus on back-office processes and systems. And at the same time, we're going to make the digital investments necessary aligned with our current road map. And all of those things being very disciplined and very focused in the back half of the year, our G&A will be growing at less than our revenue pace. And again, this is where -- how we think we'll start to get better leverage in the P&L.

And our final question comes from the line of Chris Neamonitis with Jefferies.

Just wanted to clarify on the guidance. Can you confirm you're still using that 80% clinician retention number? I'm just kind of thinking, right, just given some of the improvement you mentioned as well as kind of the employee retention initiatives you've kind of undertaken. Is it maybe fair to think about that 80% shaking out to be more of an initial floor as you kind of trend back towards that 87%? Or do you see the 80% is more of a kind of a structural rate in the business?

Yes. We've seen that annualized rate within the quarter be fairly stable through the back half of the year. And we think it's a prudent planning assumption for 2022. If something changes, we'll certainly let you know, but I think it's a very prudent planning assumption for 2022, which is the guidance that we've given.

Got it. And then I guess this is my last and my other question would be, if you're seeing any changes maybe in the demand backdrop, do you feel like maybe you're gaining any incremental patient or referral share? And then maybe any color on this trajectory or maybe, I guess, the dynamics relative to patient wait times to see a clinician.

Yes. So the patient demand continues to be incredibly robust. We don't -- we used to spend a lot of time thinking about the patient experience. We don't spend a lot of time thinking about patient acquisition because the demand is so robust. We're focused on adding clinicians as fast as we add clinicians, and we're confident that there's a supply of patients for the clinicians that we hire.

Thank you. This does conclude today's question-and-answer session. Ladies and gentlemen, this also does conclude today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.