Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August ~~3, 2022,~~2, 2023, the registrant had ~~376,181,577~~378,005,241 shares of common stock, $0.01 par value per share, outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. For example, all statements we make relating to: our ability to grow our business, expand access to our patients and our payors and invest in our platform; our plan to partner with additional hospital systems, large primary care groups and other specialist groups; our expectation that we will continue to open de novo center and acquire new centers; our growth rates and financial results; our plans and objectives for future operations, growth or ~~initiatives;~~initiatives and ~~strategies~~strategies; and our expected market opportunity are forward-looking statements.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, factors and assumptions described in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission (the "SEC") on March ~~17, 2022,~~9, 2023, including, among other things:

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this report. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise, except as required by law.


	June 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
CURRENT ASSETS
Cash and cash equivalents	$	96,686		$	148,029		$	79,605		$	108,621
Patient accounts receivable, net		99,740			76,078			121,796			100,868
Prepaid expenses and other current assets		47,860			42,413			36,480			23,734
Total current assets		244,286			266,520			237,881			233,223
NONCURRENT ASSETS
Property and equipment, net		190,694			152,242			193,144			194,189
Right-of-use assets								191,381			199,431
Intangible assets, net		282,088			300,355			243,788			263,294
Goodwill		1,243,721			1,204,544			1,293,502			1,272,939
Other noncurrent assets		7,888			3,448			11,221			10,795
Total noncurrent assets		1,724,391			1,660,589			1,933,036			1,940,648
Total assets	$	1,968,677		$	1,927,109		$	2,170,917		$	2,173,871
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	12,941		$	14,152		$	8,044		$	12,285
Accrued payroll expenses		61,215			60,002			81,144			75,650
Other accrued expenses		26,209			26,510			34,348			30,428
Current portion of contingent consideration		8,984			14,123			10,537			15,876
Operating lease liabilities, current								43,446			38,824
Other current liabilities		2,191			1,965			3,335			2,936
Total current liabilities		111,540			116,752			180,854			175,999
NONCURRENT LIABILITIES
Long-term debt, net		203,364			157,416			248,718			225,079
Operating lease liabilities, noncurrent								205,586			212,586
Deferred tax liability, net								38,324			38,701
Other noncurrent liabilities		64,538			50,325			2,559			2,783
Contingent consideration, net of current portion		3,653			3,307
Deferred tax liability, net		54,281			54,281
Total noncurrent liabilities		325,836			265,329			495,187			479,149
Total liabilities	$	437,376		$	382,081		$	676,041		$	655,148
COMMITMENTS AND CONTINGENCIES (see Note 14)
COMMITMENTS AND CONTINGENCIES (see Note 12)
STOCKHOLDERS’ EQUITY
Preferred stock – par value $0.01 per share; 25,000 shares authorized as of June 30, 2022 and December 31, 2021; 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021		0			0
Common stock – par value $0.01 per share; 800,000 shares authorized as of June 30, 2022 and December 31, 2021; 376,181 and 374,255 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		3,763			3,743
Preferred stock – par value $0.01 per share; 25,000 shares authorized as of June 30, 2023 and December 31, 2022; 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022								—			—
Common stock – par value $0.01 per share; 800,000 shares authorized as of June 30, 2023 and December 31, 2022; 378,005 and 375,964 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively								3,782			3,761
Additional paid-in capital		2,015,665			1,898,357			2,141,247			2,084,324
Accumulated other comprehensive income								4,151			3,274
Accumulated deficit		(488,127	)		(357,072	)		(654,304	)		(572,636	)
Total stockholders' equity		1,531,301			1,545,028			1,494,876			1,518,723
Total liabilities and stockholders’ equity	$	1,968,677		$	1,927,109		$	2,170,917		$	2,173,871

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

~~FOR THE~~ ~~three~~ and ~~six months ended June 30, 2022 and 2021~~comprehensive loss


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
TOTAL REVENUE	$	209,527		$	160,549		$	412,622		$	303,681		$	259,578		$	209,527		$	512,167		$	412,622
OPERATING EXPENSES
Center costs, excluding depreciation and amortization shown separately below		149,697			109,341			298,590			208,475			186,607			149,697			369,594			298,590
General and administrative expenses		103,559			85,479			206,928			118,130			101,854			103,559			186,480			206,928
Depreciation and amortization		16,743			12,774			32,427			25,002			19,530			16,743			38,599			32,427
Total operating expenses	$	269,999		$	207,594		$	537,945		$	351,607		$	307,991		$	269,999		$	594,673		$	537,945
LOSS FROM OPERATIONS	$	(60,472	)	$	(47,045	)	$	(125,323	)	$	(47,926	)	$	(48,413	)	$	(60,472	)	$	(82,506	)	$	(125,323	)
OTHER EXPENSE
Loss on remeasurement of contingent consideration		(180	)		(250	)		(614	)		(557	)
OTHER INCOME (EXPENSE)
Gain (loss) on remeasurement of contingent consideration														1,539			(180	)		2,576			(614	)
Transaction costs		(19	)		(1,996	)		(297	)		(3,530	)		(3	)		(19	)		(89	)		(297	)
Interest expense		(7,133	)		(23,174	)		(10,574	)		(31,806	)
Interest expense, net														(5,119	)		(7,133	)		(10,211	)		(10,574	)
Other expense		0			(1,356	)		0			(1,445	)		(24	)		—			(69	)		—
Total other expense	$	(7,332	)	$	(26,776	)	$	(11,485	)	$	(37,338	)	$	(3,607	)	$	(7,332	)	$	(7,793	)	$	(11,485	)
LOSS BEFORE INCOME TAXES		(67,804	)		(73,821	)		(136,808	)		(85,264	)		(52,020	)		(67,804	)		(90,299	)		(136,808	)
INCOME TAX (PROVISION) BENEFIT		(923	)		3,788			5,753			6,549
INCOME TAX BENEFIT (PROVISION)														6,542			(923	)		10,579			5,753
NET LOSS	$	(68,727	)	$	(70,033	)	$	(131,055	)	$	(78,715	)	$	(45,478	)	$	(68,727	)	$	(79,720	)	$	(131,055	)
Accretion of Redeemable Class A units		0			0			0			(36,750	)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS/MEMBERS	$	(68,727	)	$	(70,033	)	$	(131,055	)	$	(115,465	)
NET LOSS PER SHARE, BASIC AND DILUTED		(0.19	)		(0.22	)		(0.37	)		(0.37	)		(0.13	)		(0.19	)		(0.22	)		(0.37	)
Weighted-average shares used to compute basic and diluted net loss per share		353,729			313,536			352,297			309,559			363,161			353,729			362,039			352,297

NET LOSS													$	(45,478	)	$	(68,727	)	$	(79,720	)	$	(131,055	)
OTHER COMPREHENSIVE INCOME
Unrealized gains on cash flow hedge, net of tax														2,147			—			877			—
COMPREHENSIVE LOSS													$	(43,331	)	$	(68,727	)	$	(78,843	)	$	(131,055	)

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ~~FOR THE~~ ~~three and six months ended June 30, 2022 AND~~ ~~CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE UNITS AND STOCKHOLDERS'/MEMBERS’ EQUITY FOR THE~~ ~~three and six months ended June 30, 2021~~

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY ~~FOR THE~~ ~~three and six months ended June 30, 2022 AND~~ ~~CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE UNITS AND STOCKHOLDERS'/MEMBERS’ EQUITY FOR THE~~ ~~three and six months ended June 30, 2021~~


	Common Stock					Additional Paid-in			Accumulated			Total Stockholders'			Common Stock						Additional Paid-in			Accumulated Other Comprehensive		Accumulated			Total Stockholders'
	Shares			Amount		Capital			Deficit			Equity			Shares			Amount			Capital			Income		Deficit			Equity
Balances at December 31, 2021		374,255		$	3,743	$	1,898,357		$	(357,072	)	$	1,545,028
Balances at December 31, 2022																375,964		$	3,761		$	2,084,324		$	3,274	$	(572,636	)	$	1,518,723
Net loss		—			—		—			(131,055	)		(131,055	)		—			—			—			—		(79,720	)		(79,720	)
Adoption of ASU 2016-13																—			—			—			—		(1,948	)		(1,948	)
Issuance of common stock upon vesting of restricted stock units		1,954			20		(57	)		—			(37	)		4,006			40			(40	)		—		—			—
Forfeitures		(28	)		—		(185	)		—			(185	)		(1,965	)		(19	)		(3,380	)		—		—			(3,399	)
Other comprehensive income																—			—			—			877		—			877
Stock-based compensation expense		—			—		117,550			—			117,550			—			—			60,343			—		—			60,343
Balances at June 30, 2022		376,181		$	3,763	$	2,015,665		$	(488,127	)	$	1,531,301
Balances at June 30, 2023																378,005		$	3,782		$	2,141,247		$	4,151	$	(654,304	)	$	1,494,876

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.


	Six Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(131,055	)	$	(78,715	)	$	(79,720	)	$	(131,055	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		32,427			25,002			38,599			32,427
Stock and unit-based compensation		117,365			30,120
Non-cash operating lease costs								20,263			—
Stock-based compensation								56,944			117,365
Loss on debt extinguishment		3,380			5,620			—			3,380
Amortization of discount and debt issue costs		748			1,081			1,076			748
Loss on remeasurement of contingent consideration		614			557
Endowment of shares to LifeStance Health Foundation		0			9,000
(Gain) loss on remeasurement of contingent consideration								(2,576	)		614
Other, net								2,708			—
Change in operating assets and liabilities, net of businesses acquired:
Patient accounts receivable, net		(21,900	)		(11,831	)		(20,558	)		(21,900	)
Prepaid expenses and other current assets		(5,351	)		(14,964	)		(15,176	)		(5,351	)
Accounts payable		1,731			2,261			(5,395	)		1,731
Accrued payroll expenses		(289	)		9,580			5,158			(289	)
Operating lease liabilities								(16,929	)		—
Other accrued expenses		13,471			15,283			7,282			13,471
Net cash provided by (used in) operating activities		11,141			(7,006	)
Net cash (used in) provided by operating activities							$	(8,324	)	$	11,141
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(53,775	)		(31,803	)		(19,310	)		(53,775	)
Acquisitions of businesses, net of cash acquired		(35,118	)		(39,126	)		(19,820	)		(35,118	)
Net cash used in investing activities		(88,893	)		(70,929	)	$	(39,130	)	$	(88,893	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from initial public offering, net of underwriters discounts and commissions and deferred offering costs		0			554,169
Issuance of common units to new investors		0			1,000
Proceeds from long-term debt, net of discount		228,000			98,800			25,000			228,000
Payments of debt issue costs		(7,184	)		(2,360	)		(188	)		(7,184	)
Payments of long-term debt		(181,230	)		(310,729	)		(1,173	)		(181,230	)
Prepayment for debt paydown		(1,609	)		0			—			(1,609	)
Payments of contingent consideration		(11,090	)		(5,587	)		(5,201	)		(11,090	)
Taxes related to net share settlement of equity awards		(478	)		0			—			(478	)
Net cash provided by financing activities		26,409			335,293		$	18,438		$	26,409
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(51,343	)		257,358
NET DECREASE IN CASH AND CASH EQUIVALENTS								(29,016	)		(51,343	)
Cash and Cash Equivalents - Beginning of period		148,029			18,829			108,621			148,029
CASH AND CASH EQUIVALENTS – END OF PERIOD	$	96,686		$	276,187		$	79,605		$	96,686
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	4,927		$	24,889
Cash paid for interest, net							$	9,830		$	4,927
Cash paid for taxes, net of refunds	$	860		$	900		$	313		$	860
SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND FINANCING ACTIVITIES
Unpaid deferred offering costs included in accounts payable and other accrued expenses	$	0		$	5,264
Equipment financed through capital leases	$	256		$	14
Equipment financed through finance leases							$	—		$	256
Contingent consideration incurred in acquisitions of businesses	$	5,683		$	2,739		$	1,985		$	5,683
Acquisition of property and equipment included in liabilities	$	13,055		$	10,233		$	6,238		$	13,055
Issuance of common units for acquisitions of businesses	$	0		$	1,486

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

NOTE 1 NATURE OF THE BUSINESS

Description of Business

LifeStance Health Group, Inc. ~~(“LifeStance Health Group”) was formed as a Delaware corporation on~~ ~~January 28, 2021~~ ~~for~~("LifeStance" or the ~~purpose of completing an initial public offering (“IPO”~~"Company") and related transactions in order to carry on the business of LifeStance TopCo, L.P. (“LifeStance TopCo”) and subsidiaries. LifeStance Health Group is the sole equity holder of LifeStance TopCo and operates and controls all of the business and affairs. As a result, LifeStance Health Group consolidates the financial results of LifeStance TopCo, its wholly-owned subsidiaries and variable interest entities. LifeStance Health Group and LifeStance TopCo are collectively referred to herein as the “Company”, "LifeStance" or "LifeStance Health".

~~The Company~~ operates as a provider of outpatient mental health services, spanning psychiatric evaluations and treatment, psychological and neuropsychological testing, and individual, family and group therapy.

~~Initial Public Offering~~

~~On June 14, 2021, the Company completed its IPO in which it issued and sold~~ ~~32,800~~ shares of common stock and affiliates of TPG Inc. ("TPG"), affiliates of Silversmith Capital Partners ("Silversmith"), and affiliates of Summit Partners ("Summit") (collectively, the "Selling Shareholders") sold ~~7,200~~ ~~shares of common stock at an offering price of $18.00~~ ~~per share. The Selling Shareholders granted the underwriters an option to purchase an additional~~ ~~6,000~~ shares of common stock. The underwriters exercised in full their option to purchase additional shares, and the sale of the option shares was completed on June 25, 2021. The Company received net proceeds of $~~548,905, after deducting underwriting discounts and commissions of $32,472~~ ~~and deferred offering costs of $9,023~~. The Company did not receive any proceeds from the sale of shares by the Selling Stockholders, including the option shares. Deferred, direct offering costs were capitalized and consisted of fees and expenses incurred in connection with the sale of the Company’s common stock in the IPO, including legal, accounting, printing and other offering related costs. Upon completion of the IPO, these deferred offering costs were reclassified from current assets to stockholders’ equity and recorded against the net proceeds from the offering.

Prior to the IPO, each of the holders of partnership interests in LifeStance TopCo contributed its partnership interests to LifeStance Health Group in exchange for shares of common stock (including shares of common stock issued as restricted stock subject to vesting) of LifeStance Health Group (the "Organizational Transactions"). Following the contribution of partnership interests, LifeStance TopCo became wholly-owned by LifeStance Health Group. The number of shares of common stock that each such holder of partnership interests in LifeStance TopCo received was determined based on the value that such holder would have received under the distribution provisions of the limited partnership agreement of LifeStance TopCo, with shares of common stock valued by reference to the IPO price. All ~~1,046,196~~ ~~of LifeStance TopCo’s outstanding redeemable and common Class A units and~~ ~~152,620~~ ~~Class B units (the "Class B Common Units", "Profits Interests Units" or "Profits Interests") were contributed in exchange for~~ ~~310,083~~ ~~shares of common stock of LifeStance Health Group plus~~ ~~30,766~~ ~~shares of common stock issued as restricted stock ("RSAs") subject to vesting.~~

In connection with the IPO, the Company established the LifeStance Health Foundation, a non-profit organization that focuses on youth mental health, and the mental health of underrepresented minority communities, the underemployed and the uninsured. Concurrently with the closing of the IPO, the Company endowed the LifeStance Health Foundation through a combination of $~~1,000~~ ~~in cash and~~ ~~500~~ ~~shares of its common stock, representing aggregate cash and equity value of $10,000~~.

Following the effective date of the IPO, LifeStance Health Group consolidates the financial results of LifeStance TopCo, its wholly-owned subsidiaries and variable interest entities ("VIEs") and the financial statements for the periods prior to the IPO have been adjusted to combine the previously separate entities for presentation purposes. Prior to the IPO restructuring transactions, LifeStance Health Group had no operations.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company's significant accounting policies are discussed in Note 2 "Summary of Significant Accounting Policies" in Item 15 of its Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. During the six months ended June 30, ~~2022,~~2023, there have been no significant changes to these policies other than the ~~additions~~addition to the ~~stock~~cash and ~~unit-based compensation~~cash equivalents policy further described below.

Basis of Presentation and Principles of Consolidation

The Company has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the SEC regarding interim financial reporting, which include the accounts of LifeStance, ~~Health Group, LifeStance TopCo,~~ its wholly-owned subsidiaries and ~~VIEs~~variable interest entities ("VIEs") in which LifeStance ~~TopCo~~ has an interest and is the primary beneficiary. Pursuant to these rules and regulations, the Company has omitted certain information and footnote disclosures it normally includes in its annual consolidated

~~LIFESTANCE HEALTH GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~(In thousands, except per share/unit amounts)~~

financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation. In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly state its consolidated financial condition, results of operations and cash flows. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s audited financial statements for the year ended December 31, ~~2021~~2022 in the Company's Annual Report on Form 10-K.

On May 14, 2020, affiliates of TPG acquired the majority of the equity interests of LifeStance Health Holdings, Inc. through certain newly formed subsidiaries ("TPG Acquisition"). Periods subsequent to the acquisition and prior to the IPO and restructuring transactions reflect the financial statements of LifeStance TopCo. Periods subsequent to the IPO and restructuring transactions reflect the financial statements of LifeStance Health Group. All periods subsequent to the TPG Acquisition have been presented as the financial statements of LifeStance Health Group.

Use of Accounting Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Variable Interest Entities

The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a VIE. These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available information. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. The Company performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change.

The Company acquires and operates certain care centers which are deemed to be Friendly-Physician Entities (“FPEs”). As part of an FPE acquisition, the Company acquires 100% of the non-medical assets, however due to legal requirements the physician-owners must retain 100% of the equity interest. The Company’s agreements with FPEs generally consist of both a Management Service Agreement, which provides for various administrative and management services to be provided by the Company to the FPE, and Stock Transfer Restriction (“STR”) agreements with the physician-owners of the FPEs, which provide for the transition of ownership interests of the FPEs under certain conditions. The outstanding voting equity instruments of the FPEs are owned by the nominee shareholders appointed by the Company under the terms of the STR agreements. The Company has the right to receive income as an ongoing management fee, which effectively absorbs all of the residual interests and has also provided financial support through loans to the FPEs. The Company has exclusive responsibility for the provision of all nonmedical services including facilities, technology and intellectual property required for the day-to-day operation and management of each of the FPEs, and makes recommendations to the FPEs in establishing the guidelines for the employment and compensation of the physicians and other employees of the FPEs. In addition, the STR agreements provide that the Company has the right to designate aan appropriately licensed person(s) to purchase the equity interest of the FPE for a nominal amount in the event of a succession event at the Company’s discretion. Based on the

provisions of these agreements, the Company determined that the FPEs are VIEs due to the equity holder having insufficient capital at risk, and the Company has a variable interest in the FPEs.

The contractual arrangements described above allow the Company to direct the activities that most significantly affect the economic performance of the FPEs. Accordingly, the Company is the primary beneficiary of the FPEs and consolidates the FPEs under the VIE model. Furthermore, as a direct result of nominal initial equity contributions by the physicians, the financial support the Company provides to the FPEs (e.g., loans) and the provisions of the contractual arrangements and nominee shareholder succession arrangements described above, the interests held by noncontrolling interest holders lack economic substance and do not provide them with the ability to participate in the residual profits or losses generated by the FPEs. Therefore, all income and expenses recognized by the FPEs are allocated to the Company. The Company does not hold interests in any VIEs for which the Company is not deemed to be the primary beneficiary.

~~LIFESTANCE HEALTH GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~(In thousands, except per share/unit amounts)~~

As noted previously, the Company acquires 100% of the non-medical assets of the VIEs. The aggregate carrying values of the VIEs total assets and total liabilities not purchased by the Company but included on the consolidated balance sheets were not material at June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

~~Stock~~Cash and ~~Unit-Based Compensation~~Cash Equivalents

~~Beginning~~Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less at the time of purchase. Cash and cash equivalents consist of demand deposits held with financial institutions and investments in 2022, the Company granted restricted stock units ("RSUs") to certain employees and other service providers subject to certain service-based or service- and performance-based vesting conditions. The ultimate number of shares that are issued in respect of the performance-based RSUs are based on actual performance over a three or four-year performance period and ranging from zero to 100% of the performance-based RSUs subject to the award. Each fiscal year within the award period represents a separately vesting tranche of the award. For a portion of the performance-based RSUs, as the performance conditions have not been established beyond the first year of the award, a grant date has not yet been established for the remaining annual periods of these performance-based RSUs.

The performance-based RSUs are measured at fair value on their grant date. The related compensation expense for the performance awards is recognized on a straight line basis over the requisite service period for each separately vesting tranche of the award if and when the Company concludes that it is probable that the performance conditions will be achieved. At the end of each reporting period, the Company reevaluates the probability that the performance conditions will be achieved.money market funds.

Emerging Growth Company Status

The Company is currently an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the Company's unaudited consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

As of June 30, 2023, the market value of the Company's common stock held by non-affiliates exceeded $700 million. As a result, the Company will become a large accelerated filer beginning January 1, 2024 for future filings and will no longer be an emerging growth company. As a large accelerated filer, the Company will be subject to certain disclosure and compliance requirements that apply to other public companies but did not previously apply to the Company due to its status as an emerging growth company. These requirements include, but are not limited to: the requirement that the Company's independent registered public accounting firm attest to the effectiveness of the Company's internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; compliance with any requirements that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors' report providing additional information about the audit and the financial statements; the requirement that the Company provide more detailed disclosures regarding executive compensation; and, the requirement that the Company hold a non-binding advisory vote on executive compensation and obtain shareholder approval of any golden parachute payments not previously approved.

~~New~~Recently Adopted Accounting Pronouncements ~~Not Yet Adopted~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ and also issued subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20, ASU 2019-01, ASU 2020-02, and ASU 2020-05 (collectively, “ASC 842”). ASC 842 outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. ASC 842 is effective for private entities for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, inclusive of a one year deferral provided by ASU 2020-05. ASC 842 must be adopted using a modified retrospective method and early adoption is permitted. The Company is in the process of determining the impact of the adoption of ASC 842 on the Company’s consolidated financial statements and disclosures. The Company has organized an implementation group to ensure the completeness of its lease information, analyze the appropriate classification of leases under the new standard, and develop new processes to execute, approve and classify leases on an ongoing basis. However, given the Company’s current operating lease portfolio (see Note 13 and Note 14) the Company expects the recognition of the right-of-use assets and lease liabilities to have a material impact on the Company’s consolidated balance sheets.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326)-Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The estimate of expected credit losses requires entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. The CECL model is expected to result in more timely recognition of credit losses. ~~ASU 2016-13 also requires new disclosures~~The Company adopted the standard on January 1, 2023 using the modified retrospective adoption method and did not have a material impact to the consolidated financial statements. The Company makes estimates of expected credit losses based on a combination of factors, including historical losses adjusted for current market conditions, the Company's customers' financial ~~assets measured at amortized cost, loans~~condition, delinquency trends, aging behaviors of receivables and available-for-sale debt securities. ASU 2016-13 is effective for private entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASU 2016-03 will apply as a cumulative-effect adjustment to retained earnings ascredit and liquidity indicators, and future market and economic conditions and regularly reviews the adequacy of the ~~beginning~~allowance for credit losses.

NOTE 3 TOTAL REVENUE

The Company’s total revenue is dependent on a series of contracts with third-party payors, which is typical for providers in the health care industry. The Company has determined that the nature, amount, timing and uncertainty of revenue and cash flows are affected by the payor mix with third-party payors, which have different reimbursement rates.

The payor mix of fee-for-service revenue from patients and third-party payors consists of the ~~first reporting period in which~~following:


	Three Months Ended June 30,										Six Months Ended June 30,
	2023					2022					2023					2022
	Amount		% of Total Revenue			Amount		% of Total Revenue			Amount		% of Total Revenue			Amount		% of Total Revenue
Commercial	$	235,896		91	%	$	189,061		91	%	$	464,815		91	%	$	372,670		91	%
Government		10,999		4	%		9,063		4	%		21,950		4	%		17,896		4	%
Self-pay		10,384		4	%		8,723		4	%		20,131		4	%		17,098		4	%
Total patient service revenue		257,279		99	%		206,847		99	%		506,896		99	%		407,664		99	%
Nonpatient service revenue		2,299		1	%		2,680		1	%		5,271		1	%		4,958		1	%
Total	$	259,578		100	%	$	209,527		100	%	$	512,167		100	%	$	412,622		100	%

Among the ~~guidance is adopted.~~ commercial payors, the table below represents insurance companies that individually represented 10% or more of revenue:


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Payor A		19	%		19	%		19	%		19	%
Payor B		13	%		14	%		13	%		14	%

NOTE 4 PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:


	June 30, 2023			December 31, 2022
Leasehold improvements	$	162,494		$	148,249
Computers and peripherals		27,701			26,650
Internal-use software		8,352			7,894
Furniture, fixtures and equipment		40,709			36,437
Medical equipment		950			950
Construction in process		11,285			16,892
Total	$	251,491		$	237,072
Less: Accumulated depreciation		(58,347	)		(42,883	)
Total property and equipment, net	$	193,144		$	194,189

Depreciation expense consists of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Depreciation expense	$	9,354	$	6,750	$	18,250	$	12,477

~~NOTE 3 ACQUISITIONS~~

~~During~~June 30, 2023 and for the three and six months ended June 30, 2023, the Company accounts for its leases in accordance with ASC 842. For the comparative interim periods prior to 2023, the Company prepared its quarterly unaudited consolidated financial statements in accordance with ASC 840, which is a basis different from that of the current year. Accordingly, for the comparative three and six months ended June 30, 2022 leases are presented in accordance with ASC 840.

The Company leases its office facilities and office equipment which are accounted for as operating leases. Some leases contain clauses for renewal at the Company's option with renewal terms that generally extend the lease term from one to seven years.

The components of lease expense for the Company's operating leases in its unaudited consolidated statements of operations and comprehensive loss were as follows:


	Three Months Ended June 30, 2023		Six Months Ended June 30, 2023
Operating lease costs	$	14,264	$	28,572

Variable lease costs and short-term lease costs were not material.

The weighted-average remaining lease term and discount rate for operating lease liabilities included in the consolidated balance sheets are as follows:


	June 30, 2023			December 31, 2022
Weighted-average remaining lease term (in years)		5.0			5.3
Weighted-average discount rate		6.77	%		6.47	%

Supplemental cash flow information related to operating leases was as follows:


	Six Months Ended June 30, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	30,995
Noncash lease activity
Right-of-use lease assets obtained in exchange for new operating lease liabilities	$	14,554

The future minimum lease payments under noncancellable operating leases as of June 30, 2023 are as follows:


Year Ended December 31,	Amount
Remainder of 2023	$	25,987
2024		64,960
2025		61,345
2026		53,713
2027		40,457
Thereafter		49,810
Total lease payments	$	296,272
Less: imputed interest		(47,240	)
Total lease liabilities	$	249,032

The Company incurred $205 and $417 in related-party lease expense in its unaudited consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023, respectively. The Company recognized the following amounts in its unaudited consolidated balance sheets in connection with leases with related parties:


	June 30, 2023		December 31, 2022
Right-of-use assets	$	2,770	$	5,058
Operating lease liabilities, current		549		1,324
Operating lease liabilities, noncurrent		2,315		3,902

Total rent expense amounted to as follows in the unaudited consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022:


	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Related-party rent expense	$	391	$	778
Third-party rent expense		12,137		23,296
Total lease cost	$	12,528	$	24,074

NOTE 6 GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table summarizes changes in the carrying amount of goodwill:


	Amount
Balance as of December 31, 2022	$	1,272,939
Business acquisitions (Note 7)		20,733
Measurement period adjustments		(170	)
Balance as of June 30, 2023	$	1,293,502

Intangible Assets

Intangible assets consist of the following:


June 30, 2023	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Useful Life (Years)
Regional trade names	$	36,694	$	(20,358	)	$	16,336		5.0
LifeStance trade names		235,500		(32,791	)		202,709		22.5
Non-competition agreements		94,535		(69,792	)		24,743		4.2
Total intangible assets	$	366,729	$	(122,941	)	$	243,788


December 31, 2022	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Useful Life (Years)
Regional trade names	$	36,259	$	(16,688	)	$	19,571		5.0
LifeStance trade names		235,500		(27,557	)		207,943		22.5
Non-competition agreements		94,127		(58,347	)		35,780		4.2
Total intangible assets	$	365,886	$	(102,592	)	$	263,294

Gross carrying amount is based on the fair value of the intangible assets determined at the acquisition date. Total intangible asset amortization expense consists of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Amortization expense	$	10,176	$	9,993	$	20,349	$	19,950

NOTE 7 BUSINESS COMBINATIONS

During the three months ended June 30, 2022 and ~~2021,~~six months ended June 30, 2023 and 2022, the Company completed the acquisitions of 4, 10, 63 and 116 outpatient mental health practices, respectively. There were no completed acquisitions during the three months ended June 30, 2023. The Company accounted for the acquisitions as business combinations using the acquisition method of accounting. The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the respective acquisition dates.

Total consideration transferred for these acquisitions consisted of the following:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended		Six Months Ended June 30,
	2022		2021		2022		2021		June 30, 2022		2023		2022
Cash consideration	$	12,600	$	40,612	$	35,925	$	41,312	$	12,600	$	20,000	$	35,925
Cash consideration to be paid		0		325		0		325
Contingent consideration, at initial fair value		3,213		1,931		5,683		2,739		3,213		1,985		5,683
Class A-2 common units		0		1,486		0		1,486
Total consideration transferred	$	15,813	$	44,354	$	41,608	$	45,862	$	15,813	$	21,985	$	41,608

The results of the acquired businesses have been included in the Company’s consolidated financial statements beginning as of their acquisition dates. It is impracticable to provide historical supplemental pro forma financial information along with revenue and earnings subsequent to the acquisition dates for acquisitions during the period due to a variety of factors, including access to historical information and the operations of acquirees being integrated within the Company shortly after closing and not operating as discrete entities within the Company’s organizational structure.

Fair Values of Assets Acquired and Liabilities Assumed

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the dates of acquisition:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended		Six Months Ended June 30,
Allocation of Purchase Price	2022		2021		2022		2021		June 30, 2022		2023		2022
Cash	$	430	$	2,008	$	851	$	2,048	$	430	$	181	$	851
Patient accounts receivable		707		3,515		1,193		3,799		707		372		1,193
Prepaid expenses and other current assets										166		138		230
Property and equipment		19		676		53		694		19		221		53
Prepaid expenses and other current assets		166		221		230		227
Right-of-use assets										—		368		—
Other noncurrent assets		53		86		56		91		53		22		56
Intangible assets		901		2,936		1,683		3,061		901		843		1,683
Goodwill		14,526		40,170		39,227		41,287		14,526		20,733		39,227
Total assets acquired		16,802		49,612		43,293		51,207		16,802		22,878		43,293
Total liabilities assumed		989		5,258		1,685		5,345		989		893		1,685
Fair value of net assets	$	15,813	$	44,354	$	41,608	$	45,862	$	15,813	$	21,985	$	41,608

The majority of the tangible assets acquired and liabilities assumed were recorded at their carrying values as of the respective dates of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and other intangible assets acquired in these acquisitions were estimated primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets are expected to generate in the future. The Company developed estimates for the expected future cash flows and ~~liabilities other than intangible assets approximate~~discount rates used in the ~~carrying amounts as of acquisition dates.~~present value calculations.

~~LIFESTANCE HEALTH GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~(In thousands, except per share/unit amounts)~~

The following table summarizes the fair values of acquired intangible assets as of the dates of acquisition:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended		Six Months Ended June 30,
	2022		2021		2022		2021		June 30, 2022		2023		2022
Regional trade names (1)	$	555	$	1,839	$	897	$	1,916	$	555	$	435	$	897
Non-competition agreements (2)		346		1,097		786		1,145		346		408		786
Total	$	901	$	2,936	$	1,683	$	3,061	$	901	$	843	$	1,683

(1)

Useful lives for regional trade names are 5 years.

(2)

Useful lives for non-competition agreements are 5 years.

Contingent Consideration

Under the provisions of the acquisition agreements, the Company may pay additional cash consideration in the form of earnouts, contingent upon the acquirees achieving certain performance and operational targets (see Note 6)8).

The following table summarizes the maximum contingent consideration based on the acquisition agreements:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended		Six Months Ended June 30,
Contingent consideration	2022		2021		2022		2021		June 30, 2022		2023		2022
Maximum contingent consideration based on acquisition agreements	$	4,200	$	2,350	$	7,200	$	3,350	$	4,200	$	2,650	$	7,200

Goodwill

~~Goodwill represents the excess of the purchase price over the net identifiable assets acquired and liabilities assumed.~~ Goodwill is primarily attributable to the assembled workforce, customer and payor relationships and anticipated synergies and economies of scale expected from the integration of the businesses. The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the acquisition. ~~Goodwill~~All goodwill is deductible for tax ~~purposes is $36,091~~ ~~from the acquisitions in 2022.~~purposes.

~~NOTE 4 INTANGIBLE ASSETS~~

~~Intangible assets consists of the following:~~

June 30, 2022

Gross
Carrying Amount

Accumulated
Amortization

Net
Carrying Amount

Weighted
Average Useful
Life (Years)

Regional trade names

$
35,314

$
(13,103
)

$
22,211

5.0

LifeStance trade names

235,500

(22,324
)

213,176

22.5

Non-competition agreements

93,536

(46,835
)

46,701

4.2

Total intangible assets

$
364,350

$
(82,262
)

$
282,088

December 31, 2021

Gross
Carrying Amount

Accumulated
Amortization

Net
Carrying Amount

Weighted
Average Useful
Life (Years)

Regional trade names

$
34,417

$
(9,633
)

$
24,784

5.0

LifeStance trade names

235,500

(17,090
)

218,410

22.5

Non-competition agreements

92,750

(35,589
)

57,161

4.2

Total intangible assets

$
362,667

$
(62,312
)

$
300,355

~~Gross carrying amount is based on the fair value of the intangible assets determined at acquisitions. Total intangible asset amortization expense consists of the following:~~

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Amortization expense

$
9,993

$
9,704

$
19,950

$
19,323

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company adjusted the fair value of the contingent consideration liability due to remeasurement at the reporting date. ~~See Note 14 for discussion of payment of contingent consideration made related to acquisitions, fair value adjustments, and a roll-forward~~The noncurrent portion of the contingent consideration liability is included within other noncurrent liabilities on the unaudited consolidated balance sheets.

The Company uses derivative financial instruments, including an interest rate swap, for hedging and non-trading purposes to manage its exposure to changes in interest rates. The Company entered into a hedge transaction (interest rate swap) using a derivative financial instrument for the purpose of hedging the Company’s exposure to interest rate risks, which the contractual terms of the hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. The objective of entering into the interest rate swap is to eliminate the variability of cash flows in the Secured Overnight Financing Rate ("SOFR") interest payments associated with the variable-rate loan over the life of the loan. In August 2022, the Company entered into an interest rate swap agreement to pay a fixed rate of 3.24% on a total notional value of $189,000 of debt. As a result of the interest rate swap, 94.5% of the term loan previously exposed to interest rate risk from changes in SOFR is now hedged against the interest rate swap at a fixed rate. The interest rate swap matures on September 30, 2025. As of June 30, 2023, the notional value was $187,583. As changes in interest rates impact the future cash flow of interest payments, the hedge provides a synthetic offset to interest rate movements.

The Company used the income approach to value the derivative for the interest rate swap using observable market data for all significant inputs and standard valuation techniques to convert future amounts to a single present value amount, assuming that participants are motivated but not compelled to transact. This derivative instrument (interest rate swap) is designated and qualifies as a cash flow hedge, with the entire gain or loss on the derivative reported as a component of other comprehensive income. Amounts recorded in accumulated other comprehensive income are released to earnings in the same period that the hedged transaction impacts consolidated earnings within interest expense, net. The cash flows from the ~~prior year.~~derivative treated as a cash flow hedge is classified in the Company’s consolidated statements of cash flows in the same category as the item being hedged.

For the three and six months ended June 30, 2023, the Company included an immaterial gain on the hedged instrument (variable-rate borrowings) in the same line item (interest expense, net) as the offsetting gain on the related interest rate swap in the unaudited consolidated statements of operations and comprehensive loss.

The following table summarizes the location of the interest rate swap in the unaudited consolidated balance sheets:


	Consolidated balance sheets location	June 30, 2023		December 31, 2022
Interest rate swap	Other noncurrent assets	$	5,611	$	4,426

The amount of estimated cash flow hedge unrealized gains and losses that are expected to be reclassified to earnings in the next twelve months is not material.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis:

June 30, 2022

Level 1

Level 2

Level 3

Total

Financial Instrument

Contingent consideration liability

$
0

$
0

$
12,637

$
12,637

December 31, 2021

Level 1

Level 2

Level 3

Total

Financial Instrument

Contingent consideration liability

$
0

$
0

$
17,430

$
17,430


	June 30, 2023			December 31, 2022
Assets Measured at Fair Value
Money market funds	$	57,021		$	—
Level 1	$	57,021		$	—
Interest rate swap asset	$	5,611		$	4,426
Level 2	$	5,611		$	4,426
Total assets measured at fair value	$	62,632		$	4,426

Liabilities Measured at Fair Value
Contingent consideration liability:
Beginning balance	$	17,824		$	17,430
Additions related to acquisitions		1,985			11,221
Payments of contingent consideration		(5,201	)		(12,515	)
(Gain) loss on remeasurement		(2,576	)		1,688
Ending balance		12,032			17,824
Level 3	$	12,032		$	17,824
Total liabilities measured at fair value	$	12,032		$	17,824

As disclosed in Note 3, the Company acquired several outpatient mental health practices during the three and six months ended June 30, 2022 and 2021. The values of net tangible assets acquired, and the resulting goodwill and other intangible assets, were recorded at fair value. The majority of the tangible assets acquired and liabilities assumed were recorded at their carrying values as of the respective dates of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and other intangible assets acquired in these acquisitions were estimated by management or with the assistance of a third-party valuation expert primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets are expected to generate in the future. The Company developed estimates for the expected future cash flows and discount rates used in the present value calculations. Other than assets acquired and liabilities assumed in these acquisitions, there were 0 ~~material assets or liabilities measured at fair value on a nonrecurring basis during the periods presented.~~

NOTE ~~7 GOODWILL~~

~~Goodwill consists of the following:~~

Amount

Balance as of December 31, 2021

$
1,204,544

Business acquisitions (Note 3)

39,227

Measurement period adjustments

(50
)
Balance as of June 30, 2022

$
1,243,721

~~NOTE 8~~9 LONG-TERM DEBT

On May 14, 2020, in connection with the TPG Acquisition, the Company entered into the Credit Agreement among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto (the “May 2020 Credit Agreement”). The term loans and delayed draw loans were payable in quarterly principal and interest payments through ~~May 14, 2026~~.

On May 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto. The 2022 Credit Agreement established commitments in respect of a term loan facility of $200,000, a revolving loan facility of up to $50,000 and a delayed draw term loan facility of up to $100,000. The commitments under the term loan facility and the revolving facility were available to be drawn on May 16, 2022. The Company borrowed $200,000 in term loans on that date, with a maturity date of May 16, 2028. The remaining commitments under the delayed draw term loan facility are scheduled to terminate on the second anniversary of May 16, 2022. Once drawn upon, the delayed draw term loan facility has a maturity date of May 16, 2028. The loans under the term loan facility and the delayed draw term loan facility bear interest at a rate per annum equal to (x) adjusted term ~~Secured Overnight Financing Rate ("SOFR")~~SOFR (which adjusted term SOFR is subject to a minimum of 0.75%) plus an applicable margin of 4.50% or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50% above the federal funds effective rate and (iii) one-month adjusted term SOFR (which adjusted term SOFR is subject to a minimum of 0.75%) plus 1.00%) plus an applicable margin of 3.50%. The term loans are collateralized by substantially all of the assets of the Company. The revolving loan has interest only payments until the maturity date of May 16, 2027.

The proceeds from the 2022 Credit Agreement term loans were used to repay in full and extinguish the May 2020 Credit Agreement. The 2022 Credit Agreement term loans are treated as a new issuance of debt. In relation to the May 2020 Credit Agreement, the Company recognized an extinguishment of debt charge within interest expense of $~~3,380, consisting of $1,609~~ ~~prepayment charge and the write-off of unamortized debt issue costs associated with the extinguished term loans of $1,771~~.

~~The~~ 2022 Credit Agreement requires the Company to maintain compliance with certain restrictive financial covenants related to earnings, leverage ratios, and other financial metrics. The Company was in compliance with all debt covenants at June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Long-term debt consists of the following:

June 30, 2022

December 31, 2021

Term loans

$
200,000

$
70,665

Delayed Draw loans

0

90,565

Revolving loan

11,000

0

Total long-term debt

211,000

161,230

Less: Current portion of long-term debt

(1,500
)

(1,323
)
Less: Unamortized discount and debt issue costs (1)

(6,136
)

(2,491
)
Total Long-Term Debt, Net of Current Portion
and Unamortized Discount and Debt Issue Costs

$
203,364

$
157,416


	June 30, 2023			December 31, 2022
Term loans	$	198,500		$	199,500
Delayed Draw loans		59,291			34,464
Total long-term debt		257,791			233,964
Less: Current portion of long-term debt		(2,595	)		(2,345	)
Less: Unamortized discount and debt issue costs (1)		(6,478	)		(6,540	)
Total Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issue Costs	$	248,718		$	225,079

(1)

The unamortized debt issue costs related to long-term debt are presented as a reduction of the carrying amount of the corresponding liabilities on the unaudited consolidated balance sheets. Unamortized debt issue costs related to delayed draw term loan commitments and revolving loans are presented within other noncurrent assets on the unaudited consolidated balance sheets.

The current portion of long-term debt is included within other current liabilities on the unaudited consolidated balance sheets.

Interest expense, net consists of the following:

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Interest expense

$
7,133

$
23,174

$
10,574

$
31,806


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest expense, net	$	5,119	$	7,133	$	10,211	$	10,574

Future principal payments on long-term debt as of June 30, 2023 are as follows:


Year Ended December 31,	Amount		Amount
Remainder of 2022	$	500
2023		2,000
Remainder of 2023			$	1,298
2024		2,000		2,595
2025		2,000		2,595
2026		2,000		2,595
2027				2,595
Thereafter		202,500		246,113
Total	$	211,000	$	257,791

The fair value of long-term debt is based on the present value of future payments discounted by the market interest rates or the fixed rates based on current rates offered to the Company for debt with similar terms and maturities, which is a Level 2 fair value measurement. Long-term debt is presented at carrying value on the unaudited consolidated balance sheets. The fair value of long-term debt at June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was $~~192,304~~262,681 and $~~186,497~~235,049, respectively.

~~Under the May 2020 Credit Agreement, the Company had a revolving loan commitment from Capital One in the amount of $20,000. Any borrowing on the revolving loan under the May 2020 Credit Agreement was due in full on~~ ~~May 14, 2025~~.

Under the 2022 Credit Agreement, the Company has a revolving loan commitment from Capital One in the amount of $50,000. Any borrowing on the revolving loan under the 2022 Credit Agreement is due in full on May 16, 2027. The revolving loan bears interest at a rate per annum equal to (x) adjusted term SOFR plus an applicable margin of 3.25% or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50% above the federal funds effective rate and (iii) one-month adjusted term SOFR plus 1.00%) plus an applicable margin of 2.25%. The unused revolving loan incurs a commitment fee of 0.50% per annum.

In ~~June 2022,~~April 2023, the Company drew $~~11,000~~25,000 from the aforementioned revolving ~~loan. In July 2022, the Company~~loan and converted the outstanding balance on the revolving loan to a delayed draw term ~~loan.~~loan in May 2023. There are no amounts outstanding on the revolving loan as of June 30, 2023 and December 31, 2022.

NOTE ~~9 TOTAL REVENUES~~10 STOCK-BASED COMPENSATION

2021 Equity Incentive Plan

Effective June 9, 2021, the Company’s Board of Directors (the "Board") and its stockholders as of that date adopted and approved the LifeStance Health Group, Inc. 2021 Equity Incentive Plan (the “2021 Equity Incentive Plan”). The ~~Company’s total revenues are dependent on a series~~2021 Equity Incentive Plan permits the grant of ~~contracts with third-party payors, which is typical~~awards or restricted or unrestricted common stock, stock options, stock appreciation rights, restricted stock units, performance awards, and other stock-based awards to employees and directors of, and consultants and advisors to, the Company and its affiliates. On January 1, 2023, the number of shares of common stock reserved and available for ~~providers in~~issuance under the ~~health care industry. The Company has determined that the nature, amount, timing and uncertainty of revenue and cash flows are affected~~2021 Equity Incentive Plan increased by ~~the payor mix with third-party payors, which have different reimbursement rates.~~18,798 shares.

Restricted Stock Awards ("RSA")

The ~~payor mix~~following is a summary of ~~fee-for-service revenue from patients~~RSA transactions as of and ~~third-party payors consists of~~for the ~~following:~~six months ended June 30, 2023:

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Amount

% of Total Revenue

Amount

% of Total Revenue

Amount

% of Total Revenue

Amount

% of Total Revenue

Commercial

$
189,061

91
%

$
147,391

92
%

$
372,670

91
%

$
275,649

91
%
Government

9,063

4
%

6,488

4
%

17,896

4
%

12,211

4
%
Self-pay

8,723

4
%

5,518

3
%

17,098

4
%

13,282

4
%
Total patient service
revenue

206,847

99
%

159,397

99
%

407,664

99
%

301,142

99
%
Nonpatient service
revenue

2,680

1
%

1,152

1
%

4,958

1
%

2,539

1
%
Total

$
209,527

100
%

$
160,549

100
%

$
412,622

100
%

$
303,681

100
%


	Unvested Shares			Weighted-Average Grant Date Fair Value
Unvested, December 31, 2022		16,796		$	11.98
Vested		(9,095	)		11.98
Forfeited		(1,965	)		11.98
Unvested, June 30, 2023		5,736		$	11.98

1415

~~LIFESTANCE HEALTH GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Restricted Stock Units ("RSU")

The following is a summary of RSU transactions as of and for the six months ended June 30, 2023:


	Unvested Shares			Weighted-Average Grant Date Fair Value
Outstanding, December 31, 2022		14,203		$	10.61
Granted		17,755			6.08
Vested		(4,006	)		12.86
Canceled and forfeited		(2,143	)		9.39
Outstanding, June 30, 2023		25,809		$	7.25

Stock Options

The following is a summary of stock option activity as of and for the six months ended June 30, 2023:


	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding, December 31, 2022		13,476	$	7.42		9.70	$	—
Granted		—		—
Exercised		—		—				—
Canceled and forfeited		—		—
Outstanding, June 30, 2023		13,476	$	7.42		9.21	$	23,083
Vested or expected to vest at June 30, 2023		13,476	$	7.42		9.21	$	23,083

Stock-Based Compensation Expense

The Company recognized stock-based compensation expense related to RSAs, RSUs, and stock options within general and administrative expenses in the unaudited consolidated statements of operations and comprehensive loss as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Stock-based compensation expense	$	33,078	$	57,510	$	56,944	$	117,365

As of June 30, 2023, the Company had $199,683 in unrecognized compensation expense related to all non-vested awards (RSAs, RSUs and stock options) that will be recognized over the weighted-average remaining service period of 2.4 years.

~~(unaudited)~~2021 Employee Stock Purchase Plan

~~(In thousands, except per share/unit amounts)~~Effective June 9, 2021, the Board and its stockholders as of that date adopted and approved the LifeStance Health Group, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP is more fully described in Note 14 in the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

As of June 30, 2023, no shares of common stock have been purchased under the Company’s ESPP.

~~Among the commercial payors, the table below represents insurance companies that individually represented~~ 10~~% or more of revenue:~~

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Top one payor

19
%

18
%

19
%

19
%
Top two payor

14
%

16
%

14
%

17
%
Top three payor

0

13
%

0

13
%

NOTE 1011 INCOME TAXES

The (benefit) provision ~~(benefit)~~ for income taxes is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Provision (benefit) for income taxes

$
923

$
(3,788
)

$
(5,753
)

$
(6,549
)


	Three Months Ended June 30,					Six Months Ended June 30,
	2023			2022		2023			2022
(Benefit) provision for income taxes	$	(6,542	)	$	923	$	(10,579	)	$	(5,753	)

The effective tax rates are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Effective tax rate

(1.4
)%

5.1
%

4.2
%

7.7
%


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Effective tax rate		12.6	%		(1.4	)%		11.7	%		4.2	%

The difference between the Company’s effective tax rate and the U.S. statutory tax rate of 21% was primarily the result of non-deductible equity awards. The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all the deferred tax assets will not be realized. ~~The Company has a valuation allowance of $239~~ ~~and $~~0 ~~as of June 30, 2022 and December 31, 2021, respectively.~~

~~NOTE 11 STOCK AND UNIT-BASED COMPENSATION~~

~~2021 Equity Incentive Plan~~

Effective June 9, 2021, the Company’s Board of Directors (the "Board") and its stockholders as of that date adopted and approved the LifeStance Health Group, Inc. 2021 Equity Incentive Plan (the “2021 Equity Incentive Plan”). All equity-based awards subsequent to June 9, 2021 will be granted under the 2021 Plan. The 2021 Equity Incentive Plan permits the grant of awards or restricted or unrestricted common stock, stock options, stock appreciation rights, restricted stock units, performance awards, and other stock-based awards to employees and directors of, and consultants and advisors to, the Company and its affiliates.

~~The maximum number of shares of the Company’s common stock that may be delivered in satisfaction of awards under the 2021 Equity Incentive Plan was initially reserved at~~ ~~47,037~~ ~~shares.~~ The share pool will automatically increase on January 1 of each year beginning in 2022 and continuing through and including 2031 by the lesser of (i) five percent of the number of shares of the Company’s common stock outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares determined by the Board on or prior to such date for such year. ~~On January 1, 2022, the number of shares of common stock reserved and available for issuance under the 2021 Equity Incentive Plan increased by~~ ~~18,713~~ ~~shares.~~

~~Restricted Stock~~

~~The RSAs were issued as part of the Organizational Transactions (see Note 1).~~

~~The following is a summary of RSA transactions as of and for the six months ended June 30, 2022:~~

Unvested Shares

Weighted-Average
Grant Date Fair Value

Unvested, December 31, 2021

23,501

$
11.98

Vested

(4,392
)

11.98

Forfeited

(28
)

11.98

Unvested, June 30, 2022

19,081

$
11.98

~~LIFESTANCE HEALTH GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~(In thousands, except per share/unit amounts)~~

~~Restricted Stock Units~~

The RSUs were granted in connection with the IPO and subsequent to the IPO. RSUs are accounted for as equity using the fair value method, which requires measurement and recognition of compensation expense for all awards granted to employees, directors and consultants based upon the grant-date fair value.

~~The following is a summary of RSU transactions as of and for the six months ended June 30, 2022:~~

Unvested Shares

Weighted-Average
Grant Date Fair Value

Outstanding, December 31, 2021

6,031

$
17.95

Granted

11,654

8.56

Vested

(1,954
)

17.70

Canceled and forfeited

(737
)

8.49

Outstanding, June 30, 2022

14,994

$
10.87

~~Stock and Unit-Based Compensation Expense~~

The Company recognized stock and unit-based compensation expense related to RSAs, RSUs and the Class B Profits Interests within general and administrative expenses in the unaudited consolidated statements of operations as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Stock and unit-based compensation expense

$
57,510

$
29,515

$
117,365

$
30,120

~~As of June 30, 2022, the Company had $193,529~~ ~~in unrecognized compensation expense related to all non-vested awards (RSAs and RSUs) that will be recognized over the weighted-average remaining service period of~~ ~~1.6~~ ~~years.~~

~~2021 Employee Stock Purchase Plan~~

Effective June 9, 2021, the Board and its stockholders as of that date adopted and approved the LifeStance Health Group, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP permits the grant to eligible employees of the Company and its participating subsidiaries of options to purchase shares of the Company’s common stock.

~~The aggregate number of shares of the Company common stock initially available for purchase pursuant to the exercise of options under the ESPP is~~ ~~6,817~~ ~~shares, plus an automatic annual increase, as of~~ January 1 of each year beginning in 2022 and continuing through and including 2031, equal to the lesser of (i) one percent of the number of shares of the Company’s common stock outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares determined by the Board on or prior to such date for such year, up to a maximum of ~~42,500~~ ~~shares of the Company’s common stock in the aggregate. On January 1, 2022, the number of shares of common stock reserved and available for issuance under the ESPP increased by~~ ~~3,743~~ ~~shares.~~ ~~The ESPP allows participants to purchase common stock through payroll deductions of up to~~ 15~~% of their eligible compensation. The purchase price of the shares will be~~ 85~~% of the lower of the fair market value of the Company’s common stock on the grant date or the exercise date.~~

The ESPP will generally be implemented by a series of separate offerings referred to as “Option Periods”. Unless otherwise determined by the administrator, the Option Periods will be successive periods of approximately six months commencing on the first business day in January and July of each year, anticipated to be on or around January 1 and July 1, and ending approximately six months later on the last business day in June or December, as applicable, of each year, anticipated to be on or around June 30 and December 31. The last business day of each Option Period will be an “Exercise Date”. The administrator may change the Exercise Date, the commencement date, the ending date and the duration of each Option Period, in each case, to the extent permitted by Section 423 of the Internal Revenue Code; provided, however, that no option may be exercised after 27 months from its grant date.

~~As of June 30, 2022,~~ 0 ~~shares of common stock have been purchased under the Company’s ESPP.~~

NOTE 1412 COMMITMENTS AND CONTINGENCIES

~~Contingent Consideration relating to Acquisitions~~

For the six months ended June 30, 2022, there were post-closing payments contingent upon the future performance of the Company’s recently acquired targets achieving certain agreed-upon performance metrics. Contingent consideration is recorded at fair value and was recognized in the purchase price allocation (see Note 3) of the acquired company.

~~LIFESTANCE HEALTH GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~(In thousands, except per share/unit amounts)~~

~~The following table presents changes to the Company’s contingent consideration balance:~~

June 30, 2022

December 31, 2021

Beginning balance

$
17,430

$
16,414

Additions related to acquisitions

5,683

10,685

Payments of contingent consideration

(11,090
)

(12,279
)
Loss on remeasurement

614

2,610

Ending balance

$
12,637

$
17,430

~~Leases with Third Parties~~

~~The Company leases its office facilities under operating leases expiring through~~ ~~2032~~. The leases provide for monthly minimum rent payments, and some include renewal options for additional terms. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease. ~~Total third-party rent expense amounted to as follows in the unaudited consolidated statements of operations:~~

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Center costs, excluding depreciation and amortization

$
11,998

$
7,173

$
23,018

$
13,576

General and administrative expenses

139

353

278

528

Total rent expense

$
12,137

$
7,526

$
23,296

$
14,104

~~A summary of non-cancellable future minimum third-party operating lease payments under these leases as of June 30, 2022 is as follows:~~

Year Ended December 31,

Amount

Remainder of 2022

$
28,413

2023

57,352

2024

53,617

2025

49,707

2026

43,775

Thereafter

63,674

Total

$
296,538

Professional Liability Insurance

The medical malpractice insurance coverage is subject to a $3,000 per claim limit and an annual aggregate shared limit of $8,000. Should the claims-made policy not be renewed or replaced with equivalent insurance, claims based on occurrences during its term, but reported subsequently, would be uninsured. The Company is not aware of any unasserted claims, unreported incidents, or claims outstanding that are expected to exceed malpractice insurance coverage limits as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Health Care Industry

The health care industry is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, and government health care program participation requirements, reimbursement for patient services, and Medicare fraud and abuse. Recently, government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by health care providers. Violation of these laws and regulations could result in expulsion from government health care programs together with imposition of significant fines and penalties, as well as significant repayments for patient services billed.

Laws and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation. As a result of investigations by governmental agencies, various health care companies have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in companies entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government review and interpretation as well as significant regulatory action, including fines, penalties, and potential exclusion from the related programs. There can be no assurance that regulatory authorities will not challenge the Company’s compliance with these laws and regulations, and it is not possible to determine the impact (if any) such claims or penalties would have upon the Company. In addition, the contracts the Company has with commercial payors also provide for retroactive audit and review of claims.

~~LIFESTANCE HEALTH GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~(In thousands, except per share/unit amounts)~~

Management believes that the Company is in substantial compliance with fraud and abuse as well as other applicable government laws and regulations. While no regulatory inquiries have been made, compliance with such laws and regulations is subject to government review and interpretation, as well as regulatory actions unknown or unasserted at this time.

General Contingencies

The Company is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions, injuries to employees, and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. There has been no significant reduction in insurance coverage from the previous year in any of the Company’s policies.

Litigation

The Company may be involved from time-to-time in legal actions relating to the ownership and operations of its business. ~~In management’s opinion,~~Liabilities related to loss contingencies are recognized when the ~~liabilities, if any, that may ultimately result from such~~Company believes it is probable a liability has occurred and the amount can be reasonably estimated by management. The Company will establish an accrual for those legal ~~actions are not expected to have~~proceedings and regulatory matters for which a ~~material adverse effect on~~loss is both probable and the ~~financial condition, results~~amount can be reasonably estimated.

On August 10, 2022, a shareholder class action lawsuit captioned Nayani v. LifeStance Health Group, Inc., et al. was filed in the United States District Court for the Southern District of ~~operations, or cash flows~~New York (the “Court”) against the Company and certain executives and board members (the “LifeStance Defendants”), as well as the underwriters of the Company’s initial public offering (the “IPO”) (collectively, “Defendants”). The lawsuit alleges, in part, that the Defendants violated Section 11 of the Securities Act of 1933 (the “Securities Act”) because the IPO registration statement purportedly contained inaccurate and misleading statements and/or failed to disclose certain facts concerning patient visits and clinician retention. The lawsuit also asserts that the LifeStance Defendants violated Section 15 of the Securities Act because they are control persons of the Company. The lawsuit seeks unspecified monetary damages and purports to represent all shareholders who purchased the Company’s common stock pursuant to the IPO registration statement. The process of resolving these matters is inherently uncertain and may develop over an extended period of time; therefore, at this time, the ultimate resolution cannot be predicted. The Company has not recorded any material accruals for loss contingencies and in management's opinion no material range of loss is estimable for this matter as of June 30, 2023.

In March 2020, the Company received a Civil Investigative Demand from the U.S. Attorney’s Office of the Northern District of Georgia involving an investigation of a laboratory arrangement. The Company does not believe that it is a target of the investigation or that there is any material exposure based on its internal review. The Company does not know how the investigation will be resolved, to what extent it may be expanded, or whether the Company or its employees will be subject to further investigation, enforcement action or related penalties that could have an adverse impact on its business, results of operations and financial condition.17

NOTE 1513 NET LOSS PER SHARE

Prior to the IPO, as discussed in Note 1, the partnership interests of LifeStance TopCo included Redeemable Class A, Class A common and Class B units. The Class B Units were intended to be "profits interests" for U.S. federal income tax purposes. Prior to the IPO, each of the holders of partnership interests in LifeStance TopCo contributed its partnership interest to LifeStance Health Group in exchange for shares of common stock (including shares of common stock issued as RSAs subject to vesting) of LifeStance Health Group, with no changes in relative equity holder rights, rank or value before or after this exchange. As a result, the LifeStance TopCo equity exchange of common units was considered equivalent to a stock split and requires retrospective treatment for net loss per share purposes. All share and per share information has been retroactively adjusted to reflect the equity exchange for all periods presented. Vested Class B Profits Interests Units outstanding prior to the equity exchange were considered compensatory arrangements that were settled with shares of common stock at the time of the exchange and have been included as outstanding shares subsequent to that date.

The following table presents the calculation of basic and diluted net loss per share (“EPS”) for the Company’s common ~~shares (on an as-converted basis):~~shares:

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Net loss available to common stockholders'/members'

$
(68,727
)

$
(70,033
)

$
(131,055
)

$
(115,465
)
Weighted-average shares used to compute basic and
diluted net loss per share

353,729

313,536

352,297

309,559

Net loss per share, basic and diluted

$
(0.19
)

$
(0.22
)

$
(0.37
)

$
(0.37
)

~~LIFESTANCE HEALTH GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~(In thousands, except per share/unit amounts)~~


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net loss available to common stockholders'	$	(45,478	)	$	(68,727	)	$	(79,720	)	$	(131,055	)
Weighted-average shares used to compute basic and diluted net loss per share		363,161			353,729			362,039			352,297
Net loss per share, basic and diluted	$	(0.13	)	$	(0.19	)	$	(0.22	)	$	(0.37	)

The Company has issued potentially dilutive instruments in the form of RSAs, RSUs and ~~the RSUs.~~stock options. The Company did not include any of these instruments in its calculation of diluted loss per share ~~(on an as-converted basis)~~ for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 because to include them would be anti-dilutive due to the Company’s net loss during the period. See Note 1110 for the issued, vested and unvested RSAs, RSUs and ~~RSUs.~~stock options. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share:


	As of June 30,				As of June 30,
	2022		2021		2023		2022
RSAs		19,081		30,766		5,736		19,081
RSUs		14,994		6,128		25,809		14,994
Stock options						13,476		—
		34,075		36,894		45,021		34,075

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and the accompanying notes as well as "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth under “Risk Factors” Part II, Item 1A in this Quarterly Report on Form 10-Q as well as those discussed in the Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Unless stated otherwise or the context otherwise requires, the terms "we," "us," "our," "our business," "LifeStance" and "our Company" and similar references refer to LifeStance Health Group, Inc. was formed as a Delaware corporation on January 28, 2021 for the purpose of completing an initial public offering (“IPO”) and related transactions in order to carry on the business of LifeStance TopCo, L.P. (“LifeStance TopCo”) and its consolidated subsidiaries and affiliated practices. ~~LifeStance Health Group, Inc. wholly-owns the equity interest~~References to "our employees" and "our clinicians" refer collectively to employees and clinicians, respectively, of ~~LifeStance TopCo and operates and controls all of the business and affairs and consolidates the financial results of LifeStance TopCo and its wholly owned~~our subsidiaries and affiliated practices. ~~Unless the context otherwise indicates or requires, the terms "LifeStance Health Group", "LifeStance Health", "LifeStance", “we”, and “our” as used herein~~References to "our patients" refer to ~~LifeStance Health Group and its consolidated subsidiaries and affiliated practices.~~the patients treated by such clinicians.

We are ~~dedicated to improving the lives of our patients by~~ reimagining mental health through a disruptive, tech-enabled ~~in-person and virtual~~ care delivery model built to expand access, ~~and~~address affordability, improve outcomes and lower overall health care costs. We are one of the nation’s largest outpatient mental health platforms based on the number of clinicians we employ through our subsidiaries and our affiliated practices and our geographic scale, employing ~~5,226~~6,132 licensed mental health clinicians as of June 30, ~~2022. We combine~~2023. Our patient-focused platform combines a personalized, digitally-powered patient experience with differentiated clinical capabilities and in-network insurance relationships to fundamentally transform patient access ~~to mental health~~and treatment. By revolutionizing the way mental health care is delivered, we believe we have an opportunity to improve the lives and health of millions of individuals.

Our model is built to empower each of the healthcare ecosystem’s key stakeholders—patients, clinicians, payors and primary care and specialist physicians—by aligning around our shared goal of delivering better outcomes for patients and providing high-quality mental health care.

~~With~~We believe the COVID-19 pandemic placing an unprecedented strain on daily life, existing trends in mental health care have worsened dramatically since the beginning of the pandemic—41% of adults reported at least one adverse mental health condition, including symptoms of mental illness or substance abuse related to the pandemic. Quarantining and lockdown measures have resulted in furloughs and layoffs, dramatically increasing stressors and leading to poorer overall mental and physical health.

While the impact of the COVID-19 pandemic has increased stressors associated with mental health, we believe that a combination of factors contribute to our total patient visits and related revenue, including, among others, long-term trends in reduced stigmatization of mental health. Even before the pandemic, we saw the need to have a platform supported by leading technology to give us the ability to treat patients virtually or in-person. Our prior investment in our technology platform, most notably in our digital capabilities, became an essential component for continuing to deliver care to our patients during the pandemic. We observed an impact on appointments in mid-March 2020 as patients moved to shelter-at-home and increased cancellations. By the end of March 2020, appointments and visits had returned to normal levels. Since then, as the pandemic has surged and waned, we believe there has been some impact due to patient and clinician illness, resulting in cancelations of appointments, deferrals and fewer appointments initially scheduled. However, as we are unable to quantify deferrals or appointments that were not scheduled, we are unable to specifically measure the impact. Our clinician recruitment opportunities have also increased as a result of the pandemic, driven by an increase in clinician supply from those seeking more stable employment models. While we continue to take advantage of clinician recruitment opportunities, recent changes in the labor market dynamics driven by pandemic-related burnout have also impacted retention.

~~We believe COVID-19 represents~~represented a paradigm shift in the importance of and focus on mental health care. We ~~have seen~~saw a significant increase in patient demand as well as payor and employer adoption of mental health coverage options during the ~~pandemic and it is now integrated into health care offerings more than ever before. We feel the spotlight~~pandemic. However, as the pandemic surged and waned, we believe there has ~~put on the need for mental health care will have a positive~~been some impact on our ~~industry~~operations, including due to patient and ~~business for years to come.~~clinician illness, which resulted in cancellations of appointments, deferrals and fewer appointments initially scheduled.

We have built a powerful organic growth engine that enables us to drive growth within our existing footprint.

As of June 30, ~~2022,~~2023, we employed ~~5,226~~6,132 psychiatrists, advanced practice nurses, psychologists and therapists through our subsidiaries and affiliated practices. We generate revenue on a per visit basis as clinical services are rendered by our clinicians. As our existing centers mature, we grow our physical capacity by leveraging our hybrid clinical model to increase our average clinicians per center, effectively expanding the four walls of our centers.We generate lower revenue and experience lower clinician productivity in periods that have fewer business days than other periods. Recruiting new clinicians and retaining existing clinicians ~~in our existing centers~~ enables us to see more patients ~~per center~~ by expanding our patient visit capacity. We believe our ~~fully employed~~dedicated employment model offers a superior value proposition compared to independent practice. Our network relationships provide clinicians with ready access to patients. We also enable clinicians to manage their own patient volumes. Our platform promotes a clinically-driven professional culture and streamlines patient access and care delivery, while optimizing practice administration processes through technology. We believe we are an employer of choice in mental health, allowing us to employ highly qualified clinicians.

We believe we have significant opportunity to grow our employed clinician ~~base—we estimate there are approximately 650,000 mental health clinicians in the United States, providing us with a meaningful runway to grow~~base from our current base of ~~5,226~~6,132 clinicians employed through our subsidiaries and affiliated practices, as of June 30, ~~2022. To capitalize on this opportunity, we~~2023. We have developed a rigorous and exclusive in-house national clinician recruiting model that works closely with our regional clinical teams to select the best candidates and ~~fulfill~~expand capacity in a timely manner. As we grow our clinician base, we can grow our business, expand access tofor our patients and ~~our~~ payors and invest in our platform to further reinforce our differentiated offering to clinicians. We have available physical capacity to add clinicians to our existing centers, as well as an opportunity to add new clinicians with the roll-out of de novo ~~centers and acquire additional clinicians through our acquisition strategy.~~centers. Our virtual care offering also allows clinicians to see more patients without investments in incremental physical space, expanding our patient visit capacity beyond in-person only levels.

We believe our ability to attract and retain patients to drive growth in our visits and meet the availability of our clinician base will enable us to grow our revenue. We believe we have a significant opportunity to increase the number of patients we serve in our existing markets. In ~~2021,~~2022, our clinicians treated more than ~~570,000~~680,000 unique patients through ~~4.6~~5.7 million visits. We believe our ability to deliver more accessible, flexible, affordable and effective mental health care is a key driver of our patient growth. We believe we provide a superior and differentiated mental health care experience that integrates virtual and in-person care to deliver care in a convenient way for our patients, meeting our patients where they are. Our in-network payor relationships allow our patients to access care without significant out-of-pocket cost or delays in receiving treatment. We treat mental health conditions across the ~~clinical~~outpatient spectrum through a clinical approach that delivers improved patient outcomes. We support our patients throughout their care

continuum with purpose-built technological capabilities, including online assessments, digital provider communication, and seamless internal referral and follow-up capabilities.

We utilize multiple strategies to add new patients to our platform, including our primary care and specialist physician relationships, internal referrals from our clinicians, our payor relationships and our dedicated marketing efforts. We have established a large network of national, regional and local payors that enables their members to be referred to us as patients. Payors refer patients to our platform to drive improvement in health outcomes for their members, reduction in total medical costs and increased member satisfaction and retention. Within our markets, we partner with primary care practice groups, specialists, health systems and academic institutions to refer patients to our centers and clinicians. Our local marketing teams build and maintain relationships with our referring partner networks to create awareness of our platform and services, including the opening of new centers and the introduction of newly hired clinicians with appointment availability. We also use online marketing to develop our national brand to increase brand awareness and promote additional channels of patient recruitment.

We have built a powerful patient referral network through partnerships with primary care physicians and specialist physician groups across the country. We deliver value to our provider partners by offering a more efficient referral ~~base,~~pathways, delivering improved outcomes for our ~~mutual~~shared patients, and enabling more integrated care and lower total health care costs. As we continue to scale nationally, we plan to partner with additional hospital systems, large primary care groups and other specialist groups to help streamline their mental health network needs and drive continued patient growth across our platform. Our vision over time is to further integrate our mental health care services with those of our medical provider partners. By co-locating and driving towards integration with primary care and specialty providers, we can enhance our clinician’s access to patients. We anticipate that we will continue to grow these relationships while evolving our offering toward a fully-integrated care model in which primary care and our mental health clinicians work together to develop and provide personalized treatment plans for shared patients. We believe these efforts will help to further align our model with that of other health care providers increasing our value to them and driving new opportunities to partner to grow our patient ~~base.~~base and revenue opportunities.

Our payor relationships, including national contracts with multiple payors, allow ~~payors~~ access to our services through in-network coverage for their members. We believe the alignment of our model with our payor partners’ population health objectives encourages third-party payors to partner with us. We believe we deliver value to our payor partners in several ways, including access to a national clinician employee base, lower total medical costs, ~~measurable outcomes,~~ and stronger member and client value proposition through the offering of in-network mental health services. The strength of our payor relationships and our value proposition allowed us to secure rate parity between in-person and virtual visits, either by contract or payor policy. To expand this network and grow access to covered patients, we continue to establish new payor relationships and national contracts while also seeking to drive regional rate improvement to support continued investment in our differentiated model for ~~our patients and clinicians.~~delivering mental healthcare. We believe our payor relationships differentiate us from our competitors and are a critical factor in our ability to expand our market footprint in new regions by leveraging our existing national payor relationships. As we continue to grow, we believe our scale, breadth and access will continue to be enhanced, further strengthening the value of our platform to payors.

We believe we have developed a highly replicable playbook that allows us to enter new markets and pursue growth through multiple vectors. We typically identify new markets based on the core characteristics of patient population demographics, substantial clinician recruiting opportunities, untreated patient communities and a diverse group of payors. To enter new markets, we seek to open de novo centers or acquire high-quality practices with a track record of clinical excellence and in-network payor relationships. Once we enter a new market, our powerful organic growth engine drives our growth through de novo openings, center ~~expansions,~~expansion and optimization, clinician recruiting and tuck-in acquisitions. ~~We anticipate focusing on continued expansion, both in our existing markets and in new geographies, where mental health care remains a large unmet need.~~

Our de novo center strategy is a central component of our organic growth engine to build our capacity and increase density in our existing ~~MSAs.~~metropolitan statistical areas. From our inception in 2017 through June 30, ~~2022,~~2023, we have successfully opened ~~294~~331 de novo centers, including 6815 de novo centers in 2023, 90 de novo centers in 2022, and 106 de novo centers in ~~2021 and 78 de novo centers in 2020.~~2021. We believe there is a significant opportunity to use de novo center openings to address potential patient need in our existing markets and new markets that we have determined are attractive to enter. We systematically locate our centers within a given market to ensure convenient coverage for in-person access to care. We believe our successful de novo program and national clinician recruiting team can support additions of new centers and clinicians.

~~In 2021, we transitioned~~ We continue to utilize a more sustainable design for all new de novo centers ~~going forward~~ that reimagines the mental healthcare experience for both patients and clinicians while reinforcing our commitment to sustainability.

~~We have built a proprietary pipeline of acquisition targets, providing us with significant opportunities to scale through potential acquisitions.~~ We believe the highly fragmented nature of the mental health market provides us with a meaningful opportunity to execute on our acquisition playbook. We seek to acquire select practices that meet our standards of high-quality clinical care and align with our mission. We believe our guiding principle of creating a national platform built with a patient and clinician focus makes us a partner of choice for smaller, independent practices. Our acquisition strategy is deployed both to enter new markets and in our existing markets. In new markets, acquisitions allow us to establish a presence with high-quality practices with a track record of clinical excellence and in-network payor relationships that can be integrated into our national platform. In existing markets, acquisitions allow us to grow our geographic reach and clinician base to expand patient access. ~~For newly acquired centers, we typically fully integrate them into our operational and technology infrastructure within four to six months following an acquisition.~~

As we grow our platform, we seek to generate consistent returns on our investments. See “—Key Metrics and Non-GAAP Financial Measures—Center Margin” for our definition of Center Margin and reconciliation to loss from operations. We believe this metric best reflects the economics of our model as it includes all direct expenses associated with our patients’ care. We seek to grow our Center Margin through a combination of (i) growing revenue through clinician hiring and retention, patient growth and engagement, hybrid virtual and in-person care, existing office expansion, and in-network reimbursement levels, and (ii) leveraging on our fixed cost base at each center. For acquired centers, we also seek to realize operational, technology and reimbursement synergies to drive Center Margin growth.

We will continue to focus on long-term growth through investments in our centers and technology. In addition, we expect our general and administrative expenses to increase in the foreseeable future due to our planned investments in growth initiatives and public company infrastructure.

We evaluate the growth of our footprint through a variety of metrics and indicators. The following table sets forth a summary of the key financial metrics we review to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions:

Center Margin and Adjusted EBITDA are not measures of financial performance under ~~GAAP~~generally accepted accounting principles ("GAAP") and are not intended to be substitutes for any GAAP financial measures, including revenue, loss from operations or net loss, and, as calculated, may not be comparable to companies in other industries or within the same industry with similarly titled measures of performance. Therefore, non-GAAP measures should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.

We define Center Margin as loss from operations excluding depreciation and amortization and general and administrative expenses. Therefore, Center Margin is computed by removing from loss from operations the costs that do not directly relate to the delivery of care and only including center costs, excluding depreciation and amortization. We consider Center Margin to be an important measure to monitor our performance relative to the direct costs of delivering care. We believe Center Margin is useful to investors to measure whether we are sufficiently controlling the direct costs of delivering care.

Center Margin is not a financial measure of, nor does it imply, profitability. The relationship of loss from operations to center costs, excluding depreciation and amortization is not necessarily indicative of future profitability from operations. Center Margin excludes certain expenses, such as general and administrative expenses, and depreciation and amortization, which are considered normal, recurring operating expenses and are essential to support the operation and development of our centers. Therefore, this measure may not provide a complete understanding of the operating results of our Company as a whole, and Center Margin should be

reviewed in conjunction with our GAAP financial results. Other companies that present Center Margin may calculate it differently and, therefore, similarly titled measures presented by other companies may not be directly comparable to ours. In addition, Center Margin has limitations as an analytical tool, including that it does not reflect depreciation and amortization or other overhead allocations.

The following table provides a reconciliation of loss from operations, the most closely comparable GAAP financial measure, to Center Margin:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
(in thousands)
Loss from operations	$	(60,472	)	$	(47,045	)	$	(125,323	)	$	(47,926	)	$	(48,413	)	$	(60,472	)	$	(82,506	)	$	(125,323	)
Adjusted for:
Depreciation and amortization		16,743			12,774			32,427			25,002			19,530			16,743			38,599			32,427
General and administrative expenses (1)		103,559			85,479			206,928			118,130			101,854			103,559			186,480			206,928
Center Margin	$	59,830		$	51,208		$	114,032		$	95,206		$	72,971		$	59,830		$	142,573		$	114,032

We present Adjusted EBITDA, a non-GAAP performance measure, to supplement our results of operations presented in accordance with generally accepted accounting principles, or GAAP. We believe Adjusted EBITDA is useful in evaluating our operating performance, and may be helpful to securities analysts, institutional investors and other interested parties in understanding our operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to companies in other industries or within the same industry with similarly titled measures of performance. Therefore, our Adjusted EBITDA should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP, such as net income or loss.

We define Adjusted EBITDA as net loss excluding interest expense, depreciation and amortization, income tax (benefit) provision, ~~(benefit),~~(gain) loss on remeasurement of contingent consideration, ~~stock and unit-based~~stock-based compensation, ~~management fees,~~loss on disposal of assets, transaction costs, ~~offering related~~executive transition costs, litigation costs, strategic initiatives, special charges, and other expenses. We include Adjusted EBITDA in this Quarterly Report because it is an important measure upon which our management assesses, and believes investors should assess, our operating performance. We consider Adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis.

A reconciliation of net loss to Adjusted EBITDA is presented below for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view Adjusted EBITDA in conjunction with net loss.

The following table sets forth a summary of our financial results for the three and six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
(in thousands)
TOTAL REVENUE	$	209,527		$	160,549		$	412,622		$	303,681		$	259,578		$	209,527		$	512,167		$	412,622
OPERATING EXPENSES
Center costs, excluding depreciation and amortization shown separately below		149,697			109,341			298,590			208,475			186,607			149,697			369,594			298,590
General and administrative expenses		103,559			85,479			206,928			118,130			101,854			103,559			186,480			206,928
Depreciation and amortization		16,743			12,774			32,427			25,002			19,530			16,743			38,599			32,427
Total operating expenses	$	269,999		$	207,594		$	537,945		$	351,607		$	307,991		$	269,999		$	594,673		$	537,945
LOSS FROM OPERATIONS	$	(60,472	)	$	(47,045	)	$	(125,323	)	$	(47,926	)	$	(48,413	)	$	(60,472	)	$	(82,506	)	$	(125,323	)
OTHER EXPENSE
Loss on remeasurement of contingent consideration		(180	)		(250	)		(614	)		(557	)
OTHER INCOME (EXPENSE)
Gain (loss) on remeasurement of contingent consideration														1,539			(180	)		2,576			(614	)
Transaction costs		(19	)		(1,996	)		(297	)		(3,530	)		(3	)		(19	)		(89	)		(297	)
Interest expense		(7,133	)		(23,174	)		(10,574	)		(31,806	)
Interest expense, net														(5,119	)		(7,133	)		(10,211	)		(10,574	)
Other expense		—			(1,356	)		—			(1,445	)		(24	)		—			(69	)		—
Total other expense	$	(7,332	)	$	(26,776	)	$	(11,485	)	$	(37,338	)	$	(3,607	)	$	(7,332	)	$	(7,793	)	$	(11,485	)
LOSS BEFORE INCOME TAXES		(67,804	)		(73,821	)		(136,808	)		(85,264	)		(52,020	)		(67,804	)		(90,299	)		(136,808	)
INCOME TAX (PROVISION) BENEFIT		(923	)		3,788			5,753			6,549
INCOME TAX BENEFIT (PROVISION)														6,542			(923	)		10,579			5,753
NET LOSS	$	(68,727	)	$	(70,033	)	$	(131,055	)	$	(78,715	)	$	(45,478	)	$	(68,727	)	$	(79,720	)	$	(131,055	)

Total revenue increased ~~$49.0~~$50.1 million, or ~~31%~~24%, to $259.6 million for the three months ended June 30, 2023 from $209.5 million for the three months ended June 30, ~~2022 from $160.5 million for the three months ended June 30, 2021.~~2022. This was primarily due to an increase composed of ~~$47.5~~$50.4 million of patient service revenue due to ~~the~~an increase in patient visits and ~~$1.5~~slightly offset by a decrease of $0.3 million of nonpatient revenue.

Total revenue increased ~~$108.9~~$99.6 million, or ~~36%~~24%, to $512.2 million for the six months ended June 30, 2023 from $412.6 million for the six months ended June 30, ~~2022 from $303.7 million for the six months ended June 30, 2021.~~2022. This was primarily due to an increase composed of ~~$106.5~~$99.3 million of patient service revenue due to ~~the~~an increase in patient visits and ~~$2.4~~$0.3 million of nonpatient revenue.

Center costs, excluding depreciation and amortization increased ~~$40.4~~$36.9 million, or ~~37%~~25%, to $186.6 million for the three months ended June 30, 2023 from $149.7 million for the three months ended June 30, ~~2022 from $109.3 million for the three months ended June 30, 2021.~~2022. This was primarily due to a ~~$33.9~~$34.4 million increase in center-based compensation due to the increase in clinicians and visits and a ~~$6.5~~$2.5 million increase in occupancy costs consisting of center rent and utilities and other operating expenses consisting of office supplies and insurance due to the increase in our number of centers.

Center costs, excluding depreciation and amortization increased ~~$90.1~~$71.0 million, or ~~43%~~24%, to $369.6 million for the six months ended June 30, 2023 from $298.6 million for the six months ended June 30, ~~2022 from $208.5 million for the six months ended June 30, 2021.~~2022. This was primarily due to a ~~$75.1~~$66.7 million increase in center-based compensation due to the increase in clinicians and visits and a ~~$15.0~~$4.3 million increase in occupancy costs consisting of center rent and utilities and other operating expenses consisting of office supplies and insurance due to the increase in our number of centers.

General and administrative expenses ~~increased $18.1~~decreased $1.7 million, or ~~21%~~2%, to $101.9 million for the three months ended June 30, 2023 from $103.6 million for the three months ended June 30, ~~2022 from $85.5 million for the three months ended June 30, 2021.~~2022. This was primarily due to ~~increases~~a decrease of ~~$35.8~~$24.4 million in ~~salaries, wages and employee benefits, which included an increase of $28.0 million in stock and unit-based~~stock-based compensation expense primarily relating to RSAs and the RSUs granted at the time of ~~IPO~~our initial public offering ("IPO") without a similar expense in 2023, which was offset by increases in salaries, wages and ~~$1.4~~employee benefits of $9.3 million, $5.7 million in occupancy costs ~~slightly offset by a decrease of $19.2~~and $7.7 million in other operating expenses, including professional ~~services and insurance related to our IPO.~~services.

General and administrative expenses ~~increased $88.8~~decreased $20.4 million, or ~~75%~~10%, to $186.5 million for the six months ended June 30, 2023 from $206.9 million for the six months ended June 30, ~~2022 from $118.1 million for the six months ended June 30, 2021.~~2022. This was primarily due to ~~increases~~a decrease of ~~$104.2~~$60.4 million in ~~salaries, wages and employee benefits, which included an increase of $87.2 million in stock and unit-based~~stock-based compensation expense primarily relating to RSAs and the RSUs granted at the time of our IPO without a similar expense in 2023, which was offset by increases in salaries, wages and ~~$3.5~~employee benefits of $20.6 million, $7.3 million in occupancy costs and ~~slightly offset by a decrease of $18.9~~$12.1 million in other operating expenses, including professional ~~services and insurance related to our IPO.~~services.

Depreciation and amortization expense increased ~~$3.9~~$2.8 million to $19.5 million for the three months ended June 30, 2023 from $16.7 million for the three months ended June 30, ~~2022 from $12.8 million for the three months ended June 30, 2021.~~2022. This was primarily due to the amortization of intangibles and depreciation during the periods.

Depreciation and amortization expense increased ~~$7.4~~$6.2 million to $38.6 million for the six months ended June 30, 2023 from $32.4 million for the six months ended June 30, ~~2022 from $25.0 million for the six months ended June 30, 2021.~~2022. This was primarily due to the amortization of intangibles and depreciation during the periods.

Loss on remeasurement of contingent consideration decreased $0.1 million to a $0.2 million loss for the three months ended June 30, 2022 from a $0.3 million loss for the three months ended June 30, 2021. This was primarily due to changes in the weighted probability of achieving the performance and operational targets.

Loss on remeasurement of contingent consideration increased $0.06 million to a $0.6 million loss for the six months ended June 30, 2022 from a $0.6 million loss for the six months ended June 30, 2021. This was primarily due to changes in the weighted probability of achieving the performance and operational targets.

~~Transaction costs~~Interest expense decreased $2.0 million to ~~$0.02~~$5.1 million for the three months ended June 30, ~~2022~~2023 from ~~$2.0 million for the three months ended June 30, 2021. Transaction costs decreased primarily due to lower fees related to corporate transactions.~~

Transaction costs decreased $3.2 million to $0.3 million for the six months ended June 30, 2022 from $3.5 million for the six months ended June 30, 2021. Transaction costs decreased primarily due to lower fees related to corporate transactions.

~~Interest expense decreased $16.1 million to~~ $7.1 million for the three months ended June 30, ~~2022 from $23.2 million for the three months ended June 30, 2021.~~2022. This decrease was primarily due to ~~lower~~the decrease of extinguishment of debt charge of $3.4 million related to the extinguishment of the May 2020 Credit Agreement during the second quarter of 2022 and offset by higher borrowings outstanding during the period.

Interest expense decreased ~~$21.2~~$0.4 million to $10.2 million for the six months ended June 30, 2023 from $10.6 million for the six months ended June 30, 2022. This decrease was primarily due to the decrease of extinguishment of debt charge of $3.4 million related to the extinguishment of the May 2020 Credit Agreement during the second quarter of 2022 and offset by higher borrowings outstanding during the period.

Income tax benefit increased $7.4 million to $6.5 million for the three months ended June 30, 2023 from a $0.9 million provision for the three months ended June 30, 2022 primarily due to non-deductible equity awards for the three months ended June 30, 2023.

Income tax benefit increased $4.8 million to $10.6 million for the six months ended June 30, ~~2022~~2023 from ~~$31.8~~$5.8 million ~~for the six months ended June 30, 2021. This decrease was primarily due to lower borrowings outstanding during the period.~~

Other expense decreased to $0 for the three months ended June 30, 2022 from $1.4 million for the three months ended June 30, 2021 primarily due to the termination of the management services as a result of our IPO during the second quarter of 2021.

~~Other expense decreased to $0~~benefit for the six months ended June 30, 2022 ~~from $1.4 million~~primarily due to non-deductible equity awards for the six months ended June 30, ~~2021 primarily due to the termination of the management services as a result of our IPO during the second quarter of 2021.~~

Income tax provision decreased $4.7 million to $0.9 million for the three months ended June 30, 2022 from a $3.8 million benefit for the three months ended June 30, 2021 primarily due to taxable loss and non-deductible equity awards for the three months ended June 30, 2022.

Income tax benefit decreased $0.8 million to $5.8 million for the six months ended June 30, 2022 from $6.5 million for the six months ended June 30, 2021 primarily due to taxable loss for the six months ended June 30, 2022.2023.

We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital needs, capital expenditures, including to execute on our de novo strategy, contractual obligations, debt service, acquisitions, settlement of contingent considerations obligations, and other commitments with cash flows from operations and other sources of funding. Our principal sources of liquidity to date have included cash from operating activities, cash on hand and amounts available under that certain credit agreement entered into on May 4, 2022 by the ~~2022~~Company, LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto (the "2022 Credit ~~Agreement.~~Agreement"). We had cash and cash equivalents of ~~$96.7~~$79.6 million and ~~$148.0~~$108.6 million as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

We believe that our existing cash and cash equivalents will be sufficient to fund our operating and capital needs for at least the next 12 ~~months.~~months from the issuance date of our June 30, 2023 unaudited financial statements, without any additional financing. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary because of, and our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to acquire new centers and expand into new markets and the expansion of marketing activities. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies. We have based this estimate on assumptions that may prove to be wrong, and

we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations and financial condition would be adversely affected.

Our future obligations primarily consist of our debt and lease obligations. We expect our cash generation from operations and future ability to refinance or secure additional financing facilities to be sufficient to repay our outstanding debt obligations and lease payment obligations. As of December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, there was an aggregate principal amount of ~~$161.2~~$234.0 million ~~outstanding under the May 2020 Credit Agreement~~ and ~~$211.0~~$257.8 million outstanding under the 2022 Credit Agreement, respectively. As of June 30, ~~2022,~~2023, our non-cancellable future minimum operating ~~third-party~~ lease payments totaled ~~$296.5 million, and our non-cancellable future minimum operating related-party lease payments totaled $4.4~~$296.3 million.

On May 14, 2020 and in connection with the TPG Acquisition, LifeStance Health Holdings, Inc., one of our subsidiaries, entered into the May 2020 Credit Agreement. The May 2020 Credit Agreement provides for senior secured credit facilities in the form of (i) $37.5 million original and delayed draw principal amount of Closing Date Term B-1 Loans and $222.5 million original and delayed draw principal amount of Closing Date Term B-2 Loans, and (ii) $20.0 million of Revolving Commitments. On November 4, 2020, we entered into the First Amendment to the May 2020 Credit Agreement which, among other things, provided for incremental credit facilities in the form of $16.6 million original principal amount of First Amendment Term B-1 Loans and $98.4 million original principal amount of First Amendment Term B-2 Loans. On February 1, 2021, we entered into the Second Amendment to the Credit Agreement, which provided for incremental delayed draw term loans in the aggregate principal amount of $50.0 million. On April 30, 2021, we entered into the Third Amendment to the Credit Agreement, which provided for incremental delayed draw term loans in the aggregate principal amount of $70.0 million. On May 16, 2022, in connection with the closing of the 2022 Credit Agreement, the outstanding debt on the May 2020 Credit Agreement was repaid in full.

Borrowings under the May 2020 Credit Agreement were subject to variable interest rates determined at LIBOR plus 3.00% to 7.09%. We were required to make quarterly principal and interest payments through May 14, 2026. Under the terms of the May 2020 Credit Agreement, we were subject to a requirement to maintain a Total Net Leverage Ratio as of the last day of each fiscal quarter to not exceed 8.00:1.00, which maximum level steps down to 7.25:1.00 beginning with the fiscal quarter ending June 30, 2022 and to 7.00:1.00 beginning with the fiscal quarter ending June 30, 2023. We were in compliance with the financial covenants since the inception of the May 2020 Credit Agreement through payoff.

On May 4, 2022, LifeStance Health Holdings, Inc., one of our subsidiaries, entered into the 2022 Credit Agreement. The 2022 Credit Agreement establishes commitments in respect of a senior secured term loan facility of $200.0 million (the “Term Loan Facility”), a senior secured revolving loan facility of up to $50.0 million (the “Revolving Facility”) and a senior secured delayed draw term loan facility of up to $100.0 million (the “Delayed Draw Term Loan Facility”).

The loans under the Term Loan Facility and the Delayed Draw Term Loan Facility bear interest at a rate per annum equal to (x) adjusted term SOFR (which adjusted term SOFR is subject to a minimum of 0.75%) plus an applicable margin of 4.50% or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50% above the federal funds effective rate and (iii) one-month adjusted term SOFR (which adjusted term SOFR is subject to a minimum of 0.75%) plus 1.00%) plus an applicable margin of 3.50%. The loans under the Revolving Facility bear interest at a rate per annum equal to (x) adjusted term SOFR plus an applicable margin of 3.25% or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50% above the federal funds effective rate and (iii) one-month adjusted term SOFR plus 1.00%) plus an applicable margin of 2.25%.

The 2022 Credit Agreement also contains a maximum ~~First Lien Net Leverage Ratio~~first lien net leverage ratio financial maintenance covenant that requires the First Lien Net Leverage Ratio as of the last day of each fiscal quarter to not exceed 8.50:1.00. First Lien Net Leverage Ratio means the ratio of (a) Consolidated First Lien Secured Debt outstanding as of the last day of the test period, minus the Unrestricted Cash Amount on such last day, to (b) Consolidated EBITDA for such ~~Test Period,~~test period, in each case on a pro forma basis. As of June 30, ~~2022,~~2023, we were in compliance with all financial covenants under the 2022 Credit Agreement.

During the six months ended June 30, 2023, operating activities used $8.3 million of cash, primarily impacted by our $79.7 million net loss and $117.0 million in non-cash charges. This was partially offset by changes in our operating assets and liabilities of $45.6 million. During the six months ended June 30, 2022, operating activities provided $11.1 million of cash, primarily impacted by our $131.1 million net loss and $154.5 million in non-cash charges. This was partially offset by changes in our operating assets and liabilities of $12.3 million. During the six months ended June 30, 2021, operating activities used $7.0 million of cash, primarily impacted by our $78.7 million net loss and $71.4 million in non-cash charges. This was partially offset by changes in our operating assets and liabilities of $0.3 million.

During the six months ended June 30, 2023, investing activities used $39.1 million of cash, primarily resulting from our business acquisitions totaling $19.8 million and purchases of property and equipment of $19.3 million. During the six months ended June 30, 2022, investing activities used $88.9 million of cash, primarily resulting from our business acquisitions ~~totaling~~of $35.1 million and purchases of property and equipment of $53.8 million. During the six months ended June 30, 2021, investing activities used $70.9 million of cash, primarily resulting from our business acquisitions of $39.1 million and purchases of property and equipment of $31.8 million.

During the six months ended June 30, 2023, financing activities provided $18.4 million of cash, resulting primarily from borrowings of $25.0 million under the 2022 Credit Agreement, partially offset by payments of loan obligations of $1.2 million, payments of debt issue costs of $0.2 million and payments of contingent consideration of $5.2 million. During the six months ended June 30, 2022, financing activities provided $26.4 million of cash, resulting primarily from ~~net~~ borrowings of $228.0 million under the 2022 Credit Agreement, partially offset by payments of loan obligations of $181.2 million, a prepayment for the debt paydown under the May 2020 Credit Agreement of $1.6 million, payments of debt issue costs of $7.2 million and payments of contingent consideration of $11.1 million. During the six months ended June 30, 2021, financing activities provided $335.3 million of cash, resulting primarily from our IPO of net proceeds of $554.2 million, which is offset by unpaid deferred offering costs of $5.3 million, borrowings of $98.8 million under the May 2020 Credit Agreement, partially offset by payments of loan obligations of $310.7 million, payments of debt issue costs of $2.4 million and payments of contingent consideration of $5.6 million.

Our consolidated financial statements have been prepared in accordance with GAAP. The consolidated financial statements included elsewhere in this Quarterly Report include the results of (i) LifeStance TopCo, L.P., its wholly-owned subsidiaries and variable interest entities consolidated by LifeStance TopCo, L.P. in which LifeStance TopCo, L.P. has an interest and is the primary beneficiary for the period prior to the completion of the IPO and (ii) LifeStance Health Group, Inc., its wholly-owned subsidiaries and ~~variable interest entities~~VIEs consolidated by LifeStance Health Group, Inc. in which LifeStance Health Group, Inc. has an interest and is the primary beneficiary for the period ended June 30, ~~2022.~~2023. Preparation of the consolidated financial statements requires our management to make judgments, estimates and assumptions that impact the reported amount of total revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting estimate to be critical when (1) the estimate made in accordance with GAAP is complex in nature or involves a significant level of estimation uncertainty and (2) the use of different judgments, estimates and assumptions have had or are reasonably likely to have a material impact on the financial condition or results of operations in our consolidated financial statements. Actual results could differ materially from those estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected. For a description of our policies regarding our critical accounting estimates, see “Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no significant changes in our critical accounting estimates or methodologies to our consolidated financial statements.

Recently issued and adopted accounting pronouncements are described in Note 2 to our unaudited consolidated financial statements.

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards

apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting

standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our unaudited consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

~~We will remain an emerging growth company until the earlier to occur of: (i) the last day~~ As of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of $1.07 billion or more, or (c) in which we are deemed to be a large accelerated filer, which meansJune 30, 2023, the market value of our common stock ~~that is~~ held by non-affiliates ~~exceeds $700.0 million~~exceeded $700 million. As a result, we will become a large accelerated filer beginning January 1, 2024 for future filings and will no longer be an emerging growth company. Therefore, as of that date, we will be required to comply with new or revised accounting standards as of the ~~prior June 30th; and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.~~effective dates applicable to public companies that are not emerging growth companies.

Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.

Our primary market risk exposure is changing prime rate-based interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.

As of June 30, ~~2022,~~2023, we had an aggregate principal amount of ~~$211.0~~$257.8 million outstanding under our credit facilities. AsIn the current economic environment, we manage interest expense using a combination of ~~June 30,~~variable-rate debt and a fixed-interest-rate swap. In August 2022, we entered into a ~~100 basis point~~hedge transaction (interest rate swap) using a derivative financial instrument for the purpose of hedging our exposure to interest rate risks, which the contractual terms of the hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. The objective of entering into the interest rate swap is to eliminate the variability of cash flows in the Secured Overnight Financing Rate interest payments associated with variable-rate loan over the life of the loan under our credit facilities.

We do not believe that an increase or decrease in ~~market~~ interest rates ~~over~~of 100 basis points would have a ~~twelve-month period would result in a change to interest expense~~material effect on our business, financial condition or results of ~~$2.1 million.~~operations.

Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, as a result of the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, ~~2022~~2023 due to the material weaknesses described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. As previously reported in the Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, in connection with the preparation of our consolidated financial statements as of and for the year ended December 31, 2019, we identified material weaknesses in our internal control over financial reporting, which continue to exist as of June 30, ~~2022.~~2023. The material weaknesses we identified were as follows:

We did not design and maintain an effective control environment commensurate with our financial reporting requirements due to an insufficient complement of resources in the accounting/finance and IT functions, with an appropriate level of knowledge, experience and training. This material weakness contributed to the following additional material weaknesses:

These material weaknesses resulted in material misstatements related to the identification and valuation of intangible assets acquired in business combinations that impacted the classification of intangible assets and goodwill, related impacts to amortization and income tax expense, and the restatement of our previously issued annual consolidated financial statements as of and for the years ended December 31, 2019 and 2018 with respect to such intangibles assets acquired in business combinations. Additionally, these material weaknesses could result in a misstatement of substantially all of the financial statement accounts and disclosures that would result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected.

These IT deficiencies did not result in a material misstatement to our consolidated financial statements; however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Accordingly, we have determined these deficiencies in the aggregate constitute a material weakness.

We are in the process of designing and implementing measures designed to improve our internal control over financial reporting and remediate the control deficiencies which led to the material weaknesses. As of June 30, ~~2022,~~2023, our remediation measures are ongoing and include the following:

We have made progress towards designing and implementing the plan to remediate the material weaknesses and will continue to review, revise, and improve the design and implementation of our internal controls as appropriate. Although we have made

enhancements to our control procedures, these material weaknesses will not be considered remediated until our controls are operational for a sufficient period of time, tested, and management concludes that these controls are operating effectively.

We intend to evaluate current and projected resource needs on a regular basis and hire additional qualified resources as needed. Our ability to maintain qualified and adequate resources to support our business and our projected growth will be a critical component of our internal control environment.

We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

~~From time to time,~~For a discussion of certain legal proceedings in which we are ~~subject~~involved, please read Note 12, Commitments and Contingencies, to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will have a material adverse effect on our unaudited consolidated financial ~~condition, results of operations, or cash flows.~~statements in this report, which is incorporated into this item by reference.

There have been no material changes to our risk factors as previously disclosed under Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, except as follows:

We will no longer qualify as an “emerging growth company” after December 31, 2023, and, as a result, we will have to comply with increased disclosure and compliance requirements.

We are currently an “emerging growth company” as defined in the JOBS Act. However, because the market value of our common stock held by non-affiliates exceeded $700 million as of June 30, 2023, we will no longer qualify as an “emerging growth company” as of December 31, 2023 and will be a large accelerated filer beginning January 1, 2024 for future filings.

As a large accelerated filer, we will be subject to certain disclosure and compliance requirements that apply to other public companies but that did not previously apply to us due to our status as an emerging growth company. These requirements include, but are not limited to:

We expect that the loss of emerging growth company status and compliance with the additional requirements of being a large accelerated filer will increase our legal, accounting and financial compliance costs and costs associated with investor relations activities, and cause management and other personnel to divert attention from operational and other business matters to devote substantial time to public company reporting requirements. In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities, which would require additional financial and management resources.

~~On June 14, 2021, we completed the initial public offering of our common stock pursuant to a Registration Statement (File No. 333-256202), which was declared effective on June 9, 2021.~~

There has been no material change in the use of proceeds as described in the final prospectus for our IPO filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, with the SEC, on June 11, 2021 and our Annual Report on Form 10-K for the year ended December 31, 2021.

~~Severance and Change~~During our fiscal quarter ended June 30, 2023, none of our directors or officers (as defined in ~~Control Policy~~Rule 16a-1(g) under the Securities Exchange Act of 1934, as amended) entered into, modified (as to amount, price or timing of trades) or terminated (i) contracts, instructions or written plans for the purchase or sale of our securities that are intended to satisfy the conditions specified in Rule 10b5-1(c) under the Exchange Act for an affirmative defense against liability for trading in securities on the basis of material nonpublic information or (ii) non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K).

On August 9, 2022, the Board approved a Severance and Change in Control Policy (the “Severance & CIC Policy”) pursuant to which certain employees of the Company and our subsidiaries selected by the Board or its delegate will be eligible to participate (each, an “Eligible Employee”), including each of our currently employed named executive officers, Michael K. Lester (President and Chief Executive Officer) and J. Michael Bruff (Chief Financial Officer and Treasurer) (the “Named Executive Officers”). The terms “Cause,” “Good Reason” and “Change in Control” referred to below are defined in the Severance & CIC Policy.

Under the Severance & CIC Policy, an Eligible Employee whose employment is terminated by the Company without Cause or who resigns for Good Reason (a “Qualifying Termination”), in either case other than during the period beginning six months before a Change in Control and ending 12 months after the Change in Control, will be eligible to receive the following severance benefits: (a) 12 months (the “Severance Period”) of continued base salary; (b) monthly payments during the Severance Period equal to the Eligible Employee’s premium costs for continued coverage under the Company’s health, dental and other insurance plans; and (c) for the Chief Executive Officer (“CEO”) only, a pro-rata portion of the CEO’s annual cash bonus for the year of termination based on actual performance, generally payable at the same time as annual bonuses are paid to our other executives.

Under the Severance & CIC Policy, if the Eligible Employee’s Qualifying Termination occurs during the period beginning six months before a Change in Control and ending 12 months after the Change in Control, the Eligible Employee will be eligible to receive the following severance benefits instead of the benefits described in the previous paragraph: (a) a lump sum payment equal to 12 months of the Eligible Employee’s base salary (or 24 months for the CEO); (ii) a lump sum amount equal to the Eligible Employee’s target annual bonus for the year of termination, (iii) 12 monthly payments (or 24 for the CEO) equal to the Eligible Employee’s premium costs for continued coverage under the Company’s health, dental and other insurance plans; and (iv) except to the extent that an award agreement or applicable employment agreement entered into before the effective date of the plan provides for more favorable vesting terms or the terms of an award agreement or employment agreement entered after the effective date of the plan provides otherwise (x) full acceleration of the vesting of all of the Eligible Employee’s unvested and outstanding time-based equity

awards and performance-based equity awards originally granted on or after June 9, 2021 (it being understood that such performance-based awards shall be deemed earned at the Change in Control assuming target performance and shall thereafter be converted into time-based equity awards) and (y) vesting of the Eligible Employee’s unvested and outstanding performance-based equity awards originally granted prior to June 9, 2021 based on actual performance through the Change in Control.

Receipt and retention of any severance benefits provided under the Severance & CIC Policy will be conditioned on (i) the Eligible Employee signing a release of claims in favor of the Company and our affiliates and on (ii) the Eligible Employee’s continued compliance with all non-competition, non-solicitation and confidentiality obligations contained in any agreement between the Eligible Employee and the Company or any of our affiliates.

The Board or its delegate will administer the Severance & CIC Policy. The Company generally may amend or terminate the Severance & CIC Policy in our discretion without the consent of participants, except that we may not, without an Eligible Employee’s consent, alter the terms of the Severance & CIC Policy so as to affect materially and adversely the Eligible Employee’s rights under the Severance & CIC Policy.

The terms of the Severance and CIC Policy reflect recommendations from an independent compensation consultant to the compensation committee of the Board, following a review of various executive compensation policies including the level of cash severance and equity treatment for a not-for-cause termination and a termination following a change in control, in accordance with market-based pay practices.

The foregoing is only a summary of the Severance & CIC Policy and is qualified in its entirety by reference to the full and complete terms of the Severance & CIC Policy, a copy of which is attached to this Periodic Report on Form 10-Q as Exhibit 10.6 and is incorporated herein by reference.

On August 8, 2022, the compensation committee of the Board approved an increase to the base salary for Mr. Lester (to $611,200 per year) retroactive to July 1, 2022. The compensation committee of the Board also approved an increase to Mr. Lester’s target annual bonus to 100% of his annual base salary (as in effect at the end of the year), effective for 2022. These adjustments reflect recommendations from an independent compensation consultant to the compensation committee of the Board, following a review of various executive compensation policies including the level of cash compensation and total direct compensation, in accordance with market-based pay practices.

+ Indicates a management contract or compensatory plan, contract or arrangement.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on


Delaware	86-1832801
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4800 N. Scottsdale Road Suite 6000 Scottsdale, Arizona	85251
(Address of principal executive offices)	(Zip Code)


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations and Comprehensive Loss	3
	Consolidated Statements of Changes in Stockholders' Equity ~~and Consolidated Statements of Changes in Redeemable Units and Stockholders'/Members' Equity~~	4
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2119
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3128
Item 4.	Controls and Procedures	3128
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3431
Item 1A.	Risk Factors	3431
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3431
Item 3.	Defaults Upon Senior Securities	3431
Item 4.	Mine Safety Disclosures	3431
Item 5.	Other Information	3431
Item 6.	Exhibits	3632
Signatures		3733


	June 30, 2022			December 31, 2021
Leasehold improvements	$	137,260		$	87,807
Computers and peripherals		26,803			22,038
Furniture, fixtures and equipment		33,614			20,286
Medical equipment		1,018			1,018
Construction in process		24,002			40,619
Total	$	222,697		$	171,768
Less: Accumulated depreciation		(32,003	)		(19,526	)
Total property and equipment, net	$	190,694		$	152,242


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐

~~Non-accelerated filer~~	☒	Smaller reporting company	☐

Emerging growth company	☒


	Class A Redeemable Units						Class A-1 Common Units						Class A-2 Common Units						Class B Common Units					Common Stock				Additional Paid-in			Accumulated			Total Stockholders'/ Members'
	Units			Amount			Units			Amount			Units			Amount			Units			Amount		Shares		Amount		Capital			Deficit			Equity
Balances at March 31, 2021		35,000		$	71,750			959,563		$	959,563			50,908		$	50,946			0		$	0		0	$	0	$	2,057		$	(58,557	)	$	954,009
Net loss		—			—			—			—			—			—			—			—		—		—		—			(70,033	)		(70,033	)
Issuance of common units for acquisitions of businesses		—			—			—			—			725			1,486			—			—		—		—		—			—			1,486
Vested Class B Profits Interests		—			—			—			—			—			—			17,920			—		—		—		—			—			—
Conversion of Redeemable Class A Units into common stock upon closing of initial public offering		(35,000	)		(71,750	)		—			—			—			—			—			—		10,234		102		71,648			—			71,750
Conversion of common units into common stock upon closing of initial public offering		—			—			(959,563	)		(959,563	)		(51,633	)		(52,432	)		—			—		295,663		2,957		1,009,038			—			—
Conversion of vested Class B Profits Interests to common stock upon closing of initial public offering		—			—			—			—			—			—			(17,920	)		—		4,186		42		(42	)		—			—
Conversion of unvested Class B Profits Interests to restricted stock upon closing of initial public offering		—			—			—			—			—			—			—			—		30,766		308		(308	)		—			—
Issuance of common stock upon closing of initial public offering, net		—			—			—			—			—			—			—			—		32,800		328		548,577			—			548,905
Endowment of shares to the LifeStance Health Foundation		—			—			—			—			—			—			—			—		500		5		8,995			—			9,000
Stock and unit-based compensation expense		—			—			—			—			—			—			—			—		—		—		29,515			—			29,515
Balances at June 30, 2021		0		$	0			0		$	0			0		$	0			0		$	0		374,149	$	3,742	$	1,669,480		$	(128,590	)	$	1,544,632


	Amount
Balance as of December 31, 2021	$	1,204,544
Business acquisitions (Note 3)		39,227
Measurement period adjustments		(50	)
Balance as of June 30, 2022	$	1,243,721


	Unvested Shares			Weighted-Average Grant Date Fair Value
Unvested, December 31, 2021		23,501		$	11.98
Vested		(4,392	)		11.98
Forfeited		(28	)		11.98
Unvested, June 30, 2022		19,081		$	11.98


	Unvested Shares			Weighted-Average Grant Date Fair Value
Outstanding, December 31, 2021		6,031		$	17.95
Granted		11,654			8.56
Vested		(1,954	)		17.70
Canceled and forfeited		(737	)		8.49
Outstanding, June 30, 2022		14,994		$	10.87


•	We did not maintain formal accounting policies and procedures, and did not design and maintain controls related to significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over account reconciliations, segregation of duties and the preparation and review of journal entries.

	These material weaknesses resulted in material misstatements related to the identification and valuation of intangible assets acquired in business combinations that impacted the classification of intangible assets and goodwill, related impacts to amortization and income tax expense, and the restatement of our previously issued annual consolidated financial statements as of and for the years ended December 31, 2019 and 2018 with respect to such intangibles assets acquired in business combinations. Additionally, these material weaknesses could result in a misstatement of substantially all of the financial statement accounts and disclosures that would result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected.

•	We did not design and maintain effective controls over IT general controls for information systems that are relevant to the preparation of our consolidated financial statements. Specifically, we did not design and maintain: (i) program change management controls for financial systems to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel; (iii) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored; and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.


•	hired additional accounting and IT personnel to enhance our technical reporting, transactional accounting, and IT capabilities. We designed and implemented controls to support training, development, and technical research capabilities for those resources along with development and implementation of policies and procedures to support the external financial reporting functions. We continue to evaluate our staffing needs and plan to hire additional resources as necessary to support our operations;

•	~~performed detailed risk assessments for significant financial processes to identify, design, and implement control activities related to internal control over financial reporting;~~

•	~~developed and implemented controls related to the formalization of our accounting policies and procedures and financial reporting;~~

•	development and implementation of controls related to significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over account reconciliations, segregation of duties and the preparation and review of journal entries;

•	developed and implemented IT security and governance controls to address program change of internally and externally developed system and computer operations associated with information systems impacting the preparation of our consolidated financial statements; and

•	developed and implemented controls related to the periodic monitoring and review of user access rights, the identification and risk ranking of segregation of duties conflicts, and, where it is determined there is a need for an individual to have conflicting access, a periodic review of the underlying activities is performed by an independent person who does not have such conflicting access.


		Description of Exhibit Incorporated Herein by Reference
Exhibit Number	Description	Form	File No.	Exhibit	Filing Date	Filed Herewith

10.1*	~~Credit Agreement, dated as of May 4, 2022, among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., and Capital One, National Association~~					X
~~10.2*+~~	~~Separation and General Release Agreement, dated as of May 22, 2022, between LifeStance Health Group, Inc. and Gwendolyn Booth~~					X
~~10.3*+~~	~~Independent Contractor Agreement, dated as of July 1, 2022, between LifeStance Health Group, Inc. and Gwendolyn Booth~~					X
~~10.4*+~~	~~Amendment to Restricted Stock Unit Award Agreement, dated as of June 30, 2022, between LifeStance Health Group, Inc. and Gwendolyn Booth~~					X
10.5*	~~Amendment to Stock Transfer Restriction Agreement, dated as of June 30, 2022, between LifeStance Health Group, Inc. and Gwendolyn Booth~~					X
~~10.6*+~~	~~Severance and Change in Control Policy~~					X
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)


	LifeStance Health Group, Inc.

Date: August ~~10, 2022~~9, 2023	By:	/s/ ~~J. Michael Bruff~~David Bourdon
		~~J. Michael Bruff~~David Bourdon
		Chief Financial Officer and Treasurer (principal financial and accounting officer)