Behavioral health company LifeStance Health (NASDAQ:LFST) announced better-than-expected revenue in Q3 CY2025, with sales up 16.3% year on year to $363.8 million. The company expects next quarter’s revenue to be around $378 million, close to analysts’ estimates. Its GAAP loss of $0 per share was in line with analysts’ consensus estimates.
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LifeStance Health Group (LFST) Q3 CY2025 Highlights:
- Revenue: $363.8 million vs analyst estimates of $355.6 million (16.3% year-on-year growth, 2.3% beat)
- EPS (GAAP): $0 vs analyst estimates of -$0.01 (in line)
- Adjusted EBITDA: $40.21 million vs analyst estimates of $35.15 million (11.1% margin, 14.4% beat)
- Revenue Guidance for Q4 CY2025 is $378 million at the midpoint, roughly in line with what analysts were expecting
- EBITDA guidance for the full year is $149 million at the midpoint, above analyst estimates of $143.6 million
- Operating Margin: 2%, up from 0% in the same quarter last year
- Free Cash Flow Margin: 4.7%, similar to the same quarter last year
- Sales Volumes rose 10.6% year on year (12.7% in the same quarter last year)
- Market Capitalization: $1.87 billion
“This was a record-breaking quarter for LifeStance,” said Dave Bourdon, CEO of LifeStance.
Company Overview
With over 6,600 licensed mental health professionals treating more than 880,000 patients annually, LifeStance Health (NASDAQ:LFST) provides outpatient mental health services through a network of clinicians offering psychiatric evaluations, psychological testing, and therapy across 33 states.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, LifeStance Health Group’s 33.6% annualized revenue growth over the last five years was incredible. Its growth beat the average healthcare company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. LifeStance Health Group’s annualized revenue growth of 16.7% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
We can better understand the company’s revenue dynamics by analyzing its number of clinicians, which reached 7,996 in the latest quarter. Over the last two years, LifeStance Health Group’s clinicians averaged 12.7% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases. 
This quarter, LifeStance Health Group reported year-on-year revenue growth of 16.3%, and its $363.8 million of revenue exceeded Wall Street’s estimates by 2.3%. Company management is currently guiding for a 16.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 14.3% over the next 12 months, a slight deceleration versus the last two years. Still, this projection is commendable and implies the market sees success for its products and services.
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Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.
Although LifeStance Health Group was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 14.2% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.
On the plus side, LifeStance Health Group’s operating margin rose by 29.1 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming in on its more recent performance, we can see the company’s trajectory is intact as its margin has also increased by 20.7 percentage points on a two-year basis.
This quarter, LifeStance Health Group generated an operating margin profit margin of 2%, up 2 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Although LifeStance Health Group’s full-year earnings are still negative, it reduced its losses and improved its EPS by 39.9% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.
In Q3, LifeStance Health Group reported EPS of $0, up from negative $0.02 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast LifeStance Health Group’s full-year EPS of negative $0.03 will flip to positive $0.02.
Key Takeaways from LifeStance Health Group’s Q3 Results
It was encouraging to see LifeStance Health Group meet analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter was in line. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 2.3% to $4.90 immediately following the results.
LifeStance Health Group may have had a good quarter, but does that mean you should invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.