LifeStance (LFST) Q2 2026 Earnings Call Transcript

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DATE

Thursday, Aug. 6, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Vice President of Finance and Investor Relations - Monica Prokocki
• Chief Executive Officer - David Bourdon
• Chief Financial Officer - Ryan McGroarty

TAKEAWAYS

• Revenue -- $435 million, representing 26% growth driven by higher visit volumes and an increase in total revenue per visit.
• Visit Volumes -- 2.6 million, a 19% increase reflecting improved clinician productivity and net clinician additions.
• Total Revenue Per Visit -- $167, representing a 6% increase due to favorable payer contracting and mid-single-digit rate improvements.
• Total Clinician Base -- 8,542 clinicians, an 11% increase following 193 net additions during the quarter.
• Adjusted EBITDA -- $66 million, a 94% increase year over year as a result of favorable center margins.
• Adjusted EBITDA Margin -- 15.2%, an improvement of over 500 basis points from the second quarter of the prior year.
• Center Margin -- $153 million, or 35.2% of revenue, driven primarily by top-line outperformance.
• Net Income -- $24 million, representing an improvement of $27 million compared to the second quarter of the prior year.
• Free Cash Flow -- $88 million, compared to $57 million in the prior year, reflecting strong collections and payroll timing.
• Full Year Revenue Guidance -- $1.685 billion to $1.725 billion, raised by $45 million at the midpoint based on year-to-date performance.
• Full Year Adjusted EBITDA Guidance -- $215 million to $235 million, representing a midpoint margin of 13.2% and over 200 basis points of year-over-year expansion.
• Cash and Cash Equivalents -- $226 million, ending the quarter with a strong liquidity position despite $49 million in share repurchases.
• Net Long-Term Debt -- $259 million, resulting in net leverage of 0.2x and gross leverage of 1.3x.
• Specialty Services Growth -- 40% expected increase for 2026, following approximately $50 million in revenue in the prior year.
• Visits Per Average Clinician -- 7% increase year over year, marking the third consecutive quarter of growth at this level.
• Clinician Capacity Utilization -- 70%, indicating a remaining runway for productivity improvements using existing clinician time.
• Third Quarter Revenue Guidance -- $420 million to $440 million, driven by higher visit volumes and stable revenue per visit.
• Third Quarter Adjusted EBITDA Guidance -- $49 million to $59 million, assuming planned investments in marketing, technology, and compensation.
• Stock-Based Compensation -- $60 million to $70 million, expected for the full year 2026.
• Share Repurchase Authorization -- $100 million, newly approved by the Board following the deployment of $97 million from the previous authorization.

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RISKS

• Bourdon stated, "When you roll out a new EHR, there's always going to be a little bit of a short-term blip in productivity that impacts the clinicians as they move on to the new platform," regarding the planned 2027 transition to a new technology vendor.

SUMMARY

Management reported that second quarter performance exceeded expectations across all guided metrics, led by 26% revenue growth and significant margin expansion. The company stated that it is currently in a planning year for a 2027 transition to a new electronic health record system to improve operational efficiency and clinician workflows. LifeStance reported a raise in full-year 2026 guidance, citing strong clinician productivity and constructive dialogue with payers regarding reimbursement rates. To support sustained growth, the company is increasing second-half investments in patient acquisition, technology infrastructure, and clinician compensation.

• CEO Bourdon noted that analysis of 140,000 patients showed 75% experienced "clinically meaningful improvement" in anxiety and depression symptoms regardless of age or geography.
• Management reported that LifeStance currently operates in approximately half of the 150 largest U.S. markets, identifying density growth in existing markets and entry into new geographies as key strategic priorities.
• The company completed a small tuck-in acquisition in Arizona during the second quarter and indicated that such acquisitions remain the preferred method for geographic expansion.
• CFO McGroarty noted that while the company has reached mid-teen margins in individual quarters, the 2028 target remains to achieve mid-teen margins on a full-year basis.
• CEO Bourdon indicated that specialty services, such as TMS and Spravato nasal spray, are growing faster than the core business as the company rolls out these services to additional centers.
• Management stated that roughly $60 million in cash outflows related to payroll and 401(k) matching will impact third quarter free cash flow.

INDUSTRY GLOSSARY

• TRPV: Total Revenue Per Visit, a metric measuring the average revenue generated from each patient encounter.
• TMS: Transcranial Magnetic Stimulation, a non-invasive procedure that uses magnetic fields to stimulate nerve cells in the brain to improve symptoms of depression.
• Spravato: An esketamine nasal spray used in conjunction with an oral antidepressant for the treatment of treatment-resistant depression.
• EHR: Electronic Health Record, a digital version of a patient's paper chart that manages data and clinical workflows.
• Center Margin: A non-GAAP measure representing income from operations excluding depreciation, amortization, and general and administrative expenses.
• De Novo: A method of expansion involving the establishment of a new practice or location from the ground up rather than through acquisition.
• RCM: Revenue Cycle Management, the financial process that facilities use to manage the administrative and clinical functions associated with claims processing, payment, and revenue generation.

Full Conference Call Transcript

Operator: Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to LifeStance Health Second Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Monica Prokocki. You may begin.

Monica Prokocki: Thank you, operator. Good morning, everyone, and welcome to LifeStance Health's second quarter 2026 earnings conference call. I'm Monica Prokocki, Vice President of Finance and Investor Relations. Joining me today are Dave Bourdon, Chief Executive Officer; and Ryan McGroarty, Chief Financial Officer. We issued the earnings release and presentation before the market open this morning. Both are available on the Investor Relations section of our website, investor.lifestance.com. In addition, a replay will be available following the call. Before turning 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, business model and strategy. Those statements involve risks, uncertainties and other factors, as noted in our periodic filings with the SEC that could cause actual results to differ materially. Please note that we report results using non-GAAP financial measures, which we believe provide additional information for investors to help facilitate comparison of current 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 comparable period in the prior year. At this time, I'll turn the call over to Dave Bourdon, CEO of LifeStance. Dave?

David Bourdon: Thanks, Monica, and thank you all for joining us today. This was another exceptional quarter for LifeStance. We exceeded each of our guided metrics for the quarter, delivering remarkable revenue growth of over 26% and adjusted EBITDA margins that exceeded 15%. Given the outperformance in the quarter, we are again raising our full year guidance across all metrics. Ryan will provide the details on our improved view of 2026 later. Regarding operational execution, we continue to grow our clinician base now at over 8,500 clinicians as our value proposition continues to resonate. Clinician productivity also remained strong in the quarter, reflecting the power of our operating model and discipline.

As for specialty services, we continue to expand our reach as we launched TMS and Spravato in additional centers to support patients with treatment-resistant depression and to drive clinically meaningful improvements in outcomes. Turning to technology. We continue to deploy digital, AI-enabled and workflow automation tools that improve patient access, enhance the clinician experience and drive operational efficiency across the organization. Regarding our new EHR, we have begun our preparations for the transition to a new vendor planned for 2027.

This investment is expected to be a critical enabler of our long-term strategy, helping us streamline front and back-office operations through more intelligent workflows, deliver a better patient and clinician experience that supports engagement and retention and equip clinicians with better tools to provide high-quality care and drive improved clinical outcomes. Turning to geographic expansion. We have a significant opportunity to increase density within our existing markets and expand our footprint into new geographies as we only have a presence in roughly half of the 150 largest U.S. markets. In addition, there is substantial room to expand in smaller markets as well.

Tuck-in acquisitions remain our preferred approach for entering new geographies, and we have a strong pipeline of opportunities that support our disciplined growth strategy. During the second quarter, we successfully completed another small tuck-in acquisition that expands our therapy and psychiatry presence in Arizona. Where compelling acquisition opportunities are not available, we will pursue expansion through our proven de novo approach. Finally, I'd like to highlight our ongoing commitment to clinical excellence, delivering high-quality care and improving patient outcomes is central to our mission and remains a key differentiator for LifeStance.

During our first quarter call, we discussed outcomes data we published in April from nearly 180,000 LifeStance patients with moderate to severe anxiety and depression, which showed that roughly 3/4 experienced clinically significant improvements in their symptoms. More recently, we took that analysis a step further by examining outcomes from nearly 140,000 LifeStance patients across different generations and geographic regions. What we found was remarkably consistent. At least 75% of patients experienced clinically meaningful improvement regardless of generation or region where they receive care. We believe these findings are important because they demonstrate that our strong outcomes are consistent across the diverse populations we serve.

More broadly, we believe mental health care is entering its next phase where differentiation will increasingly be driven by outcomes, not just access. While we're pleased to have delivered another quarter of exceptional growth and outstanding margin expansion, we believe the larger opportunity lies ahead. The combination of our scale, clinical outcomes and geographic expansion opportunities positions LifeStance to lead the evolution of outpatient mental health care and supports our confidence in the significant growth runway still in front of us. With that, I'll turn it over to Ryan to provide additional commentary on our financial performance and outlook. Ryan?

Ryan McGroarty: Thanks, Dave. I am pleased with the team's tremendous operational and financial performance in the second quarter, which exceeded our expectations. For the quarter, revenue grew 26% to $435 million. Revenue surpassed our expectations from both better-than-expected visit volumes and total revenue per visit. Visit volumes of $2.6 million increased 19%. The outperformance was driven by a combination of better-than-expected clinician productivity and net clinician adds. Total revenue per visit of $167 increased 6% and was ahead of our expectations. Our visits per average clinician were very strong once again, increasing 7% year-over-year for the third consecutive quarter.

This was achieved while at the same time adding 193 clinicians in the second quarter, bringing our total clinician base to 8,542, representing growth of 11%. Turning to profitability. Center Margin of $153 million in the quarter increased 41% and was 35.2% as a percentage of revenue. This came in ahead of our expectations, primarily due to the revenue beat. Adjusted EBITDA increased 94% to $66 million in the quarter, which was very strong and exceeded our expectations with the outperformance driven by favorable Center Margin. This resulted in a margin as a percentage of revenue of 15.2%, which is an impressive improvement of over 500 basis points from the second quarter of last year.

We also finished with positive net income of $24 million in the quarter, which was an improvement of $27 million from the second quarter of last year. Turning to liquidity. We generated robust free cash flow of $88 million in the quarter as compared to $57 million in the second quarter of last year. Free cash flow was driven by strong performance in collections in the quarter and also benefited from the favorable timing of payroll. These payments, along with our annual 401(k) match, represent roughly $60 million and will impact free cash flow in the third quarter.

We exited the quarter with a strong balance sheet, including a cash position of $226 million and net long-term debt of $259 million. Importantly, that cash balance is post the $49 million deployment towards share repurchases during the quarter. As a result, our net leverage is currently 0.2x and gross leverage is 1.3x. Additionally, this morning, we announced that our Board of Directors approved a $100 million share repurchase authorization. Since launching our initial $100 million program earlier this year, we deployed $97 million of the previously authorized capacity. We believe we are well positioned with significant financial flexibility to support the business and execute on our strategic priorities.

In terms of our outlook for the full year, we are raising our revenue range by $45 million at the midpoint to $1.685 billion to $1.725 billion. The midpoint of the revenue guidance range implies a growth rate of 20% for the full year. We are also raising our Center Margin range by $23 million at the midpoint to $570 million to $594 million and raising our adjusted EBITDA range by $15 million at the midpoint to $215 million to $235 million. The midpoint of the adjusted EBITDA guidance range implies a margin as a percentage of revenue of 13.2%, which is over 200 basis points of margin expansion year-over-year.

Our updated annual guidance assumes year-over-year revenue growth driven primarily by higher visit volumes, combined with mid-single-digit increases to our total revenue per visit. Based on the adjusted EBITDA outperformance so far this year, we continue to give ourselves flexibility to make additional investments in the second half of this year to better position us to support our long-term growth objectives. We are investing across a number of strategic priorities, including: first, we are driving patient acquisition and expanding access to our services through marketing and further growing our business development team. Second, we are investing in our technology team to support current and future tech and AI enablement.

Third, we are building out the teams that lead and support clinical excellence to drive improved patient outcomes. And finally, we enhanced total compensation and benefits for our clinicians and many of our center support staff. These investments are reflected in our updated outlook and support our continued focus on balancing growth, operational execution and profitability. Additionally, we continue to expect stock-based compensation of approximately $60 million to $70 million this year. For the third quarter, we expect revenue of $420 million to $440 million, Center Margin of $140 million to $152 million and adjusted EBITDA of $49 million to $59 million.

Given our excellent performance in the first half of the year and the strong momentum in the business, I remain excited about our long-term growth potential. With that, I'll turn it back to Dave for his closing comments.

David Bourdon: Thanks, Ryan. In closing, our performance in the second quarter underscores the substantial opportunity in front of us. As we go deeper in our existing markets, grow our geographic reach, broaden our specialty capabilities and strengthen our differentiation through clinical excellence and measurable patient outcomes, we are positioning LifeStance for sustained long-term growth. Operator, we will now take questions.

Operator: [Operator Instructions] Your first question comes from the line of Craig Hettenbach with Morgan Stanley.

Craig Hettenbach: Dave, understanding you're coming up on more difficult comps on productivity. What are some of the levers that remain to pull on that front as you go forward?

David Bourdon: Craig, this is Dave. And I appreciate the question around productivity. And the first thing I would say is that this is our fourth quarter of really strong productivity levels with our clinicians. And this is not just how we operate and manage the practice. We're continuing to evaluate opportunities and work on opportunities to improve that productivity level. And just kind of a reminder, of -- from a productivity perspective, there's 2 angles to it. First, there is -- we have to increase the flow of new patients. And we've talked in the past about actions like improving conversion of patients that are seeking care to a booked appointment and continue to work on activities like that.

And then the other side of that is just general practice management actions like optimizing clinician schedules so that those schedules are more receptive to that increased new patient flow. And then it's that deliberate balance between using more of the capacity that our clinicians are giving us versus adding new clinicians. And we still have a lot of runway on this. We're utilizing right now about 70% of the time that clinicians give us.

Craig Hettenbach: Very helpful. And then just as a follow-up, psychedelics are getting more attention on the back of Lilly's recent acquisition in that space. How do you think about that market and the role LifeStance can play there?

David Bourdon: It's Dave. I'll take that one as well. First of all, just at a macro level, the specialty services, which is where we would put psychedelics for us, it's a tremendous opportunity for us in the coming years and it's going to drive better outcomes for our patients and it will contribute to both growth and margins. Specific to the psychedelics, we're monitoring that and we think that is a great opportunity for us and we're set up really well if that were to be approved by the FDA and also from a payer reimbursement perspective.

And we'll be able to roll out those new services in a very efficient way, leveraging our center footprint as well as even some of the foundational work we've done to roll out Spravato.

Operator: Your next question comes from the line of Lisa Gill with JPMorgan.

Lisa Gill: I was wondering if we could talk a bit about revenue per visit and the key drivers there. You talked about the specialty business. I'm just curious what the key drivers are? Is that the increase in kind of the acuity level of the patient? Is it your contracting with managed care? What are some of the key drivers as we think about the revenue per visit?

Ryan McGroarty: Yes. Lisa, I appreciate the question. This is Ryan. And so I'll go into the question. Just in terms of -- so to start off, we're really pleased with the TRPV of 6% year-over-year. So we delivered TRPV of $167 in the quarter. So that grew sequentially $3.1 overall. And it really is one of the reasons between rate and volume in terms of why we raised our revenue by $45 million for the full year and also adjusted EBITDA by $15 million. To the extent around -- or to the question around like what's driving it, and it really is from a payer contracting perspective.

So we're sitting here midyear now, and we have good line of sight into the rate increases for the full year. And as you probably recognized in our commentary, we updated our guidance from low to mid-single digits to mid-single digits. And it really is just based off of the good visibility we have into our payer contracts. From an overall kind of payer perspective, we continue to have good constructive dialogue with them in terms of making sure that they're providing the access to high-quality mental health care that we offer.

Lisa Gill: That's really helpful, Ryan. And then just secondly, on the EBITDA, really nice margin, 15.2% in the quarter, a little more than 13% for the year. Can you talk about what your long-term goals are as we think about the EBITDA margin?

Ryan McGroarty: Absolutely. So when we think about EBITDA margins, and again, I appreciate you kind of recognizing the strength of the quarter and then also just the position as you think about the full year guide being 13.2%, we're really pleased with the momentum that we have. When we think about a long-term perspective, so we've gone out there saying long-term margins in the 15% to 20% range with 20% not being a ceiling on it. We actually further dimension that in our Q4 call just around the 2028 margins and having mid-teen margins by full year 2028. We're super happy, as I mentioned, with the progress that we have on the progression of margins.

But we're not, at this point, going to refine any of our long-term targets. And again, there's a ton of momentum in the business right now, and we're really pleased that we've been able to capture that.

Operator: Your next question comes from the line of Ryan Daniels with William Blair.

Ryan Daniels: Congrats on the strong performance year-to-date. I wanted to dive a little bit more into your specialty services. Obviously, it seems like a big growth opportunity. I know it's growing rapidly. I'm curious if you could talk about the rollout process there. You mentioned again, you expanded it in some markets. Given your density and the size of the markets you're in and what appears to be a pretty big need for treatment-resistant depression services, what are the gating factors there? Is it payer contracts? Is it just putting in the CapEx? Is it training? What are kind of the rollout plans and hurdles to that?

David Bourdon: Ryan, it's Dave. I'll take that one. As I mentioned in Craig's question, we view specialty services. And right now, that's neuropsych testing and then the treatment-resistant depression services of TMS and Spravato as a tremendous opportunity. And obviously, there's potential for other service lines as well. Just for a little bit of grounding, we were -- our specialty services comprised about $50 million of revenue last year. We said that's going to grow roughly 40% this year, and we expect for years to come that the growth rate of specialty will be higher than our core business.

And the majority of that growth this year is really coming from the TRD services because we're in that early stage of rollout. And we're adding new chairs and Spravato sites each quarter. From a gating perspective, it's a little bit of a few things. First is we're -- it's early stages for us. So we're refining that operating model. And so we're doing a little bit of test and learn. And it can be -- there can be nuances depending on states and the payer environment and things like that. So -- and I would view the gating is more us than anything else in the macro environment.

And then we would expect to be accelerating rollout in coming years.

Ryan Daniels: Okay. Perfect. Very helpful. And then the other question I had, I thought you had a really kind of insightful comment that payers are moving from just access to outcomes. And obviously, you're very well positioned given your scale in clinical studies and pending EHR to really prove that you can provide great services. And that gives you an advantage with payers, probably referral sources. So maybe talk a little bit more about how you'll use that to your advantage longer term? And then also any movement towards more value-based or outcome-based contracts where you could probably also have a unique advantage for some of your peers?

David Bourdon: Yes. This is Dave. I'll take that one as well. So first of all, as Ryan mentioned, we're having constructive conversations with payers. It isn't all about reimbursement and we really are trying to get to being a strong partner for the payers. And that's differentiated for us versus many of the other players in the industry. Having said that, the majority of payers are still focused on access for their employer clients and their members. We have some value-based arrangements based on access. And then there are a few leading payers that are starting to shift towards quality and outcomes. And we welcome that change.

In my prepared remarks, I talked about our second white paper that we just put out around clinical excellence with the quality outcomes we're delivering on depression and anxiety across different generations and geographies. And there's really a lot more to come. We're early days on clinical excellence. It's a very exciting space for us. And to your point, we believe that this will further differentiate us from other players in the industry. And that's just going to, if anything else, strengthen that partnership as we're having those dialogues with the payers.

Operator: Your next question comes from the line of Jack Slevin with Jefferies LLC.

Jack Slevin: Congrats on the quarter. Maybe to start, I know recently, you've talked a little bit about plans on EHR rollout and how that can expand things. I wanted to just sort of check in on progress to do that implementation and maybe any updated thoughts on some of the benefits you think that's going to bring to the platform?

David Bourdon: Jack, this is Dave. I'll take that one. So first of all, from an EHR perspective, it's foundational for us. It's going to enable future success for LifeStance. As we mentioned in our prepared remarks, this is a planning year for us. And then what we expect to do is roll out the new EHR next year. The benefits are widespread across the organization, right? So efficiency of front and back office, it's going to improve the patient and the clinician experience and as well as even patient engagement. And then it's going to empower our clinicians with better tools and data to deliver quality care and better outcomes.

So again, this is a foundational improvement for us that's going to enable future success of the business, and we're very excited about it.

Jack Slevin: Awesome. Helpful color. And then just for my follow-up here, I wanted to just think about the cadence of clinician adds going forward? I guess -- and maybe this dovetails on some earlier questions with the productivity. But with that so strong, it would seem you have room to continue adding on the clinician front. Can you just talk a little bit about the demand and sort of what's right in front of your face as far as the ability to bring new clinicians on while sustaining some of the great metrics you've had so far this year?

David Bourdon: Jack, it's Dave. I'll take that one as well. So first of all, if you look at the last year, what you've seen is strong net clinician adds and improved productivity. You can expect that is the recipe for the future. What we've talked about from a long-term growth algorithm perspective is low double-digit visit growth year-over-year, primarily driven by net clinician adds and complemented by improvements in productivity. And that's what we expect to see as we look into the back half of this year and into the future years.

Jack Slevin: Congrats on the results.

Operator: Your next question comes from the line of Kevin Caliendo with UBS.

Kevin Caliendo: I want to talk a little bit about M&A. You've done a couple of transactions now. And if you can just -- it's been a while. And I want to sort of understand why now this is happening? Is it reflective of the balance sheet of the opportunity? And if you can remind us strategically why M&A versus recruitment? Is it entering new markets? Is it better ROIC in certain cases? If you could just go back through it because I want to understand if it becomes a bigger part of the story, sort of how to think about the math around some of this and the rationale as to why.

David Bourdon: Kevin, this is Dave. I'll take that one. First of all, let's go to the business reason for doing M&A. And I mentioned in my prepared remarks, we have a significant opportunity in front of us for establishing presence in new markets. We're only in roughly 50% of the 150 largest U.S. markets, and we're in 33 of 50 states. So we have a lot of opportunity to plant flags in new geographies. And so then connect that to M&A. The primary intent right now for M&A is to use it to open up new geographies. And having said that, these small tuck-ins will not have a material impact on our '26 financials.

This really is about foundational acquisitions that will enable future growth. And so we're going to continue to be very disciplined and we'll focus on opportunities that are strategic and financially makes sense.

Kevin Caliendo: When you say financial sense, like does it from a real estate perspective, make more sense to do M&A versus de novos and things like that? How should we -- I'm just trying to understand mathematically when you're adding real estate or you're adding a new market or even just M&A in general mathematically? Because -- and I bring it up because in the first iteration pre you guys, the M&A became a little onerous, right, and the returns weren't as great and there was move away from in office, and I think there were some issues from the balance sheet that occurred. It doesn't seem like that's the strategy here. It seems much more adjunct.

Is that a fair way to describe it?

David Bourdon: It is. We will use M&A to open up new geographies. It is a very efficient way, a capital-efficient way to be able to enter a new geography. If there's not an attractive acquisition target, then we'll use de novo, but that can be a slower ramp to growth in that particular geography. So those are the 2 ways we can enter. We think of the de novo engine, again, as more for opening up new geographies. If we're going to plant a new center in an existing geography, we want to grow an existing geography, the organic engine is the way to do that. Just financially, it makes a lot more sense.

Operator: Your next question comes from the line of Richard Close with Canaccord Genuity.

Richard Close: Congratulations on the results. Maybe diving down on the clinician adds, maybe provide some more color on really what's driving the strength there in terms of why you seem to be bringing more and more clinicians to LifeStance, what's the differentiation? And then Ryan, you mentioned compensation changes. Maybe you can go into a little bit more detail there.

David Bourdon: Richard, it's Dave. I'll take that. What you saw in the second quarter is what we've been delivering consistently now for multiple years in regards to the clinician growth or the net clinician adds. And our value prop to clinicians continues to resonate. And that value proposition can look different to the different -- to the various clinician cohorts that we recruit from.

So whether they're a $10.99 clinician that is looking for more W-2 type benefits and more administrative support, and they just want to practice and not run a business or if it's a salaried clinician, they're looking for a little bit more flexibility while still maintaining the W-2 or if you're a new graduate and the support that we provide, which is much, much more than what you would get from especially like small practices or individual practice in the U.S. And so our value prop resonates across those 3 cohorts where we primarily recruit clinicians from and that continues.

And just as a reminder, we still are like low to mid-single-digit market share of the total mental health clinician universe. So we have a lot of room still to run in regards to growing our clinician base.

Richard Close: Ryan, do you want to comment on the compensation that you mentioned?

David Bourdon: Yes. Thanks. I'll take that one as well. So we did mention that, and I mean that is one of the reasons why Center Margin is going down a little bit in the back half of the year versus second quarter. Specific to the clinicians, we added some bereavement benefits that line up really well with the mission of the company.

Richard Close: Okay. That's helpful. And then my follow-up was maybe on the AI front. You just talked about the electronic health record. I assume since that's going to be a new platform, there's AI integrated into that. But maybe talk about the tech investments, Ryan, that you called out in the tech team. Maybe what you guys are using AI currently in the operations, administrative and clinical about like what's planned in the coming years?

David Bourdon: Richard, it's Dave. I'll take that one. So first of all, if you think about AI and digital, we're in a new chapter of enabling the business with those kinds of tools. And I think of it both growth and efficiency. There's been a lot of emphasis more on the efficiency side of this, but we've even leveraged it to improve growth. Talked about the use case last year in our contact center, our phone contact center, where we were able to improve conversion of patients seeking care to book appointments and we were using -- we accomplished that through the use of some AI tools.

And this year, we're just continuing to add on the use cases across RCM, new patient scheduling, the AI documentation for clinicians. And then we're also exploring new applications for the back half of this year in '27. We're piloting some additional use cases there. And then as you referenced, there will be a meaningful unlock from a technology perspective once we roll out the new EHR next year. So very exciting times at LifeStance in regards to this new chapter of technology enablement.

Richard Close: Congrats.

Operator: Your next question comes from the line of David Larsen with BTIG.

David Larsen: Congratulations on another very good quarter. It looks like the revenue per visit, as far as I can tell, increased like around 7% year-over-year. That's one of the highest increases I've seen over the past several quarters. Any sense for what's driving that? Is that reimbursement rates? Or is it mix? And then also, can you maybe just comment on your revenue cycle, the billing piece? Are you using AI there to perhaps create more accurate quoting?

Ryan McGroarty: Yes, sure. I'd be happy -- this is Ryan, Dave. I'll be happy to kind of address the first question, and Dave will jump in on the second question. So first and foremost, just as it relates to the TRPV. So we did grow TRPV 6% in the quarter on a year-over-year basis. And again, this is based off of the updated outlook just as it relates to our payer contracting. And so as I mentioned earlier in this call, is that we're midway through the year. And so we have good line of sight on our contracting. And as both Dave and I have mentioned, we have very constructive dialogue with the payers.

So we feel really good about the trajectory kind of closing out this year on TRPV. Now I'll turn it over to Dave for the second question.

David Bourdon: Yes. In regards to revenue cycle, you're seeing the strength of the performance of our revenue cycle team and DSO in the low 20s this quarter. That was part of the reason why we had such a strong positive free cash flow of $88 million. And that is -- that's driven by improved process as well as tools. And certainly, AI is a piece of that. So we're leveraging vendors that are RCM experts with innovative tools and things like that. And we're piloting new ones as well. And so we're just constantly looking to advance our capabilities in regards to technology. And again, it's not just AI, though. We're using RPA. We're using digital tools.

So there's a lot that goes into the improved RCM results.

David Larsen: It seems to me that even if the revenue per visit is increasing nicely, that's an area that the plans might kind of actually be happy about and they might want to invest in ambulatory or outpatient mental health because it can reduce total claims costs in other areas of their book of business. And it sounds like your plan relationships are good.

David Bourdon: That's really well said. You just -- you gave me the answer on why we're having constructive dialogue with the payers. I mean at the end of the day, they want to get quality care for their members and they want to reduce total cost of care and with outpatient mental health being a lower cost of care setting, if you can deal with the problems early on, you can avoid more costly medical interventions down the road.

David Larsen: One more quick one for me. Are you exploring Medicare, Medicaid exchange sort of coverage? Do you have any intentions to expand into those payer classes or not really?

David Bourdon: We do some of that today. We do Medicare Advantage and some exchange. Usually, they're in conjunction with a large payer contract where we're taking all of their lines of business. But our focus continues to be the commercial business. And so we -- again, it's more of an accommodation, but we do very little Medicaid and Medicare fee-for-service.

David Larsen: Congrats on another good quarter.

Operator: Your next question comes from the line of Sean Dodge with BMO Capital Markets.

Sean Dodge: On the Q3 guidance, it does imply EBITDA would be down sequentially. Ryan, you mentioned some investments you're making to help support future growth. But just can you frame for us like what the incremental spend with these investments are going to be? And is all of that kind of all of this incremental going to hit in the third quarter?

Ryan McGroarty: Yes, Sean. So this is Ryan. So I appreciate the question. So overall, you're right, like when you look at the sequential view, EBITDA goes down and you're referencing the investments that I went through just as it relates on the call. So when you think about the second half, so we're pleased with the opportunity to continue to invest in the business to be able to deliver the strong growth that we've done. So if you look at it on a 4-year basis, if you look at the revenue side on a CAGR, if you take the midpoint of our guide, it's like 19% compounded annual growth.

And so we feel really good that both on the revenue side and on the EBITDA with a 4-year CAGR of 44% that we have the track record of making disciplined investments. So when you think about some of the investments, and they're not all coming in Q3, Sean, to your question, it's really around tech, AI enablement, practice operations around some of the clinical support that Dave referenced in terms of clinical excellence and outcome measurement and then also just addressing the higher patient volume needs overall. But again, like we feel really good about the disciplined approach we have.

And then again, on the EBITDA basis, where midpoint of our guide expands margins up by over 200 basis points.

Sean Dodge: Okay. Great. And then -- going back to M&A, Dave, you talked about why you're restarting it. But just any update like on the pipeline now, how we should be thinking about cadence of deals, size and composition of the things you're looking at? Is it mostly going to be smaller practices? Are there some bigger kind of opportunities out there? And then just how -- like what kind of role is specialty going to play in again, M&A specifically?

David Bourdon: I'll take that on the M&A side. So first of all, the M&A today is primarily focused on the tuck-ins to open up new geographies. We are curious and opportunistically look at other parts of the ecosystem, whether that's specialty or larger practices. But what we're finding right now is that what makes sense for us from -- as we're being disciplined and strategic is that it's the small tuck-ins are the most actionable. We have a healthy pipeline that is growing in that space. And so I would expect that we'll continue to execute on the small tuck-ins for years to come. Again, it's a very efficient way for us to enter a new geography.

In regards to the larger practices, we'll be opportunistic. But up till now, they financially haven't made sense. There's just -- there's less value creation in acquiring one of those versus when we buy a small tuck-in and use that as the foundation to really grow a new geography. And then on the specialty side, there is opportunity in the coming years around acquisitions in that space. But again, up until now, we haven't seen anything that makes sense for us.

Operator: Your next question comes from the line of Scott Fidel with Goldman Sachs.

Unknown Analyst: You have [ Valentin Glossiv ] on for Scott Fidel. How are newly hired clinicians ramping today relative to the historical experience? And are there any changes in the productivity ramp time lines?

David Bourdon: This is Dave. I'll take that one. That's part of the story of the improved clinician productivity. So it is an area of intense focus for us in improving the ramp of new clinicians because they're going to be happier when they're more productive and so again, that's something that we focus on. And it has been improving and is part of that improved productivity story that we've been talking about for the past year.

Unknown Analyst: And also as a follow-up, as productivity improves, how do you think about balancing utilization of existing clinician capacity versus accelerating hiring?

David Bourdon: This is Dave. I'll take that one as well. We're always going to prioritize the using of the capacity of our existing clinicians first before we hire new clinicians. It's a win-win. We're filling the clinicians' panel. They're seeing more patients. They're making higher income. And at the same time, it's just a more efficient way of running the practice financially for LifeStance.

Operator: Your last question comes from the line of Scott Schoenhaus with KeyBanc.

Scott Schoenhaus: Can you hear me?

David Bourdon: Yes, Scott, we can hear you.

Scott Schoenhaus: Okay. Another great quarter. So congrats. Your Center Margins of 35%, this beat our estimate and was up nicely. And I know you talked about the maybe slowdown in the back half with some bereavement benefits and other compensation tools. But maybe talk about anything specific to call out in the quarter to drive those really great margins? I know you talked a lot about productivity. And then after we get through these compensation tools, should we expect these operating margins to reaccelerate back to these kind of levels?

Ryan McGroarty: Yes. So this is Ryan. So I appreciate the question. So just as it relates to Center Margin, when you think about the quarter, really clean, high-quality quarter. So when you think about the strength of Center Margin, if you isolate there, it really is on the backs of the revenue growth as it relates to both the rate and the volume. And you could think of those as like 60-40 between the rate and the volume in totality. And so we feel really good about the performance in the quarter. And then also when you kind of put it out on a full year basis in terms of Center Margin.

So you highlighted the investments that we're making second half over first half. Center margin in totality still grows on a year-over-year basis by like 175 bps. So really pleased with the progress that we've had on both -- on basically everything, top line growth, Center Margin and then adjusted EBITDA.

Scott Schoenhaus: Great. And if I could just sneak in one last follow-up here. You guys talked about the EHR EMR rollout happening next year. How should we think about that productivity ramp, right? I'm assuming as you implement this, depending on when you implement this, the timing of next year, it will be phased? And should we think of productivity gains then more back half weighted than front half weighted? Any comment would be -- or any color would be helpful.

David Bourdon: This is Dave. I'll take that one. We're still in the planning phase on the EHR, but you have it right in that our working hypothesis or approach right now is to do it in ways just because of the size of LifeStance with over 8,500 clinicians. And when you roll out a new EHR, there's always going to be a little bit of a short-term blip in productivity that impacts the clinicians as they move on to the new platform. That's something we're working through because obviously, we want to minimize that disruption as much as possible. And we'll give more specifics as we're getting closer to next year and giving some guidance.

Operator: That concludes our Q&A session. I will now turn the call back over to David Bourdon for closing remarks.

David Bourdon: Thank you, operator. Before we close, I want to take a moment to speak directly to our nearly 11,000 mission-driven teammates. The work you do matters. And every day, you show up for our patients, often at some of the hardest moments when they may feel vulnerable, overwhelmed or unsure where to turn, and you do this with extraordinary compassion and professionalism. I'm deeply grateful for the dedication you bring to our patients and to your fellow teammates. Mental health care has never been more essential. We're proud of the difference LifeStance is making today, and we remain even more committed to expanding access so we can help millions more people get the high-quality care they deserve.

Thank you for joining us today. And operator, that will conclude our call.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Everyone, have a great day.

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