Lifestance Health Group - Earnings Call - Q3 2025

Transcript

Dave Bourdon (CEO)

Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I would like to welcome you to the LifeStance Health third quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question at that time, please press star, then the number one on your telephone keypad. If you'd like to withdraw your question at any time, please press star, one, again. Thank you. I would now like to turn the call over to Monica Prokopowicz. Please go ahead.

Monica Prokopowicz (VP of Finance and Investor Relations)

Thank you, Operator. Good morning, everyone, and welcome to LifeStance Health third quarter 2025 earnings conference call. I'm Monica Prokopowicz, Vice President of Finance and Investor Relations. Joining me today are Dave Bourdon, Chief Executive Officer, and Ryan McGroarty, Chief Financial Officer. We issued the earnings release and presentation before the market opened this morning. Both are available on the Investor Relations section of our website, investor.lifestance.com. In addition, a replay will be available following the call. Before turning over to management for their prepared remarks, please direct your attention to the disclaimers about forward-looking statements included in the earnings press release and SEC filings. Today's remarks contain forward-looking statements, including statements about our financial performance outlook, business model, and strategy. Those statements involve risks, uncertainties, and other factors, as noted in our periodic filings with the SEC, that could cause actual results to differ materially.

Please note that we report results using non-GAAP financial measures, which we believe provide additional information for investors to help facilitate comparison of current and past performance. A reconciliation to the most directly comparable GAAP measures is included in the earnings press release tables and presentation appendix. Unless otherwise noted, all results are compared to the comparable period and the prior year. At this time, I'll turn the call over to Dave Bourdon, CEO of LifeStance. Dave?

Dave Bourdon (CEO)

Thanks, Monica, and thank you all for joining us today. I'm incredibly proud of the LifeStance team for the exceptional results we delivered in the third quarter. For the past three years, we have met or exceeded our guided metrics, a testament to our consistency, execution, and the resilience of our commercial pay hybrid model. Offering both in-person and virtual care continues to be a key differentiator, especially in a fluid landscape that favors providers like LifeStance who can deliver high-quality care in both settings. Additionally, given our focus on commercial insurance, we have minimal exposure to government pay, largely insulating us from legislative shifts and stroke-of-the-pen risks. Our business model positions us well in a dynamic healthcare environment. Now turning to our quarterly results, this was a quarter of records for LifeStance. First, the team delivered remarkable organic visit growth of 17%, providing increased access for patients.

This was driven by both record organic clinician net adds and clinician productivity improvement. This growth reflects the strong demand for our services and the effectiveness of our model. Additionally, we achieved adjusted EBITDA of $40 million and margins of 11% in the quarter. Both are the highest since we went public in 2021. Given the outperformance in the third quarter, we are once again raising full-year guidance for adjusted EBITDA. From an operational perspective, our record organic net clinician growth in the quarter has resulted in a team of now roughly 8,000 clinicians, validating that our value proposition continues to resonate strongly in the market. At the same time, we are continuously looking to improve that value proposition as our clinicians' unwavering commitment to delivering high-quality patient care remains the cornerstone of our success.

Earlier this year, we outlined several initiatives designed to better fill the time clinicians give us to see patients. I'm pleased to report that these efforts are paying off. In the third quarter, we achieved the largest improvement of quarterly organic productivity in our company's history. For example, one of the initiatives is our cash incentive program launched in May, which has been highly effective in rewarding clinicians for improving access and quality. We also saw strong patient acquisition and improved retention, which was partially driven by the new engagement platform, which fosters deeper connections with patients. Additionally, we have implemented a tech platform to assist our phone scheduling team. This has delivered a meaningful improvement in conversion of phone calls to booked appointments, which also results in a higher number of new patients. By providing live guidance and summary AI, our team members are able to automate documentation.

Capture critical insights, and focus on more meaningful patient interactions. The result is stronger conversion rates, higher patient satisfaction, and greater workforce efficiency. Through multiple initiatives we've implemented this year, we have been responsive to clinician feedback to better optimize their schedules, while at the same time expanding access to high-quality mental health care for our patients. This milestone of meaningfully improved productivity underscores the strength of our operational strategy and our commitment to operational and clinical excellence. We also recently announced our partnership with Calm, a leading evidence-based mental health company. This collaboration allows Calm Health members to be seamlessly referred to LifeStance Health when higher acuity care is needed and is an example of new referral partners giving us access to patients we may not see through our existing channels. For patients, this will streamline access to trusted, personalized support through both virtual and in-person care.

Together, we're expanding access to mental healthcare and empowering individuals to take proactive steps towards wellness. As we look ahead to 2026 and beyond, we will continue to advance operational and clinical excellence to further differentiate ourselves in the marketplace. In addition, we remain focused on deepening strategic partnerships with payers, health systems, and partners from other channels like Calm, while also building our position to be the employer of choice for clinicians. By combining disciplined execution with innovation in care delivery, we aim to strengthen our leadership in outpatient mental health and create lasting value for patients, providers, and shareholders. With that, I'll turn it over to Ryan to provide additional commentary on our financial performance and outlook. Ryan?

Ryan McGroarty (CFO)

Thanks, Dave. I am pleased with the team's operational and financial performance in the third quarter. We delivered strong growth across revenue, visit volume, and clinician count. Revenue grew 16% year over year to $364 million. This outperformance was driven by visit volumes. Visit volumes of 2.3 million increased 17% year over year. This outperformance was primarily driven by better-than-expected clinician productivity as well as net clinician adds. Our visits per average clinician increased 5% year over year. This was achieved while at the same time adding a record 288 organic clinicians, an 11% increase year over year, bringing our total to 7,996 clinicians. Total revenue per visit of $158 was flat year over year, as expected. Turning to profitability, center margin of $117 million increased 16% year over year and was 32% as a percentage of revenue. The outperformance in the quarter was driven by the revenue beat.

Adjusted EBITDA of $40 million in the quarter exceeded our expectations. This 31% year-over-year increase resulted in our adjusted EBITDA as a percentage of revenue of 11.1%. As Dave mentioned, the adjusted EBITDA margins we achieved this quarter were the highest in our history as a public company. The outperformance in the quarter was primarily attributable to favorable center margins. Additionally, we delivered meaningful operating leverage on the G&A line for the second consecutive quarter, with our adjusted general and administrative expenses increasing only 10% in the quarter versus 16% revenue growth. After making strategic investments in 2023 and 2024, we said we would drive operating leverage on the G&A line, and that's exactly what we're delivering. These results validate our disciplined approach and position us well to continue expanding margins while achieving sustainable growth. We also finished with positive net income of $1.1 million in the quarter.

This is the second quarter this year and in our history as a public company that we achieved positive net income. We view this as a key profitability metric for our business, and our progress this year increases our confidence in delivering positive net income and earnings per share for the full year in 2026. Turning to liquidity, in the third quarter, free cash flow remained solid at positive $17 million. We exited the quarter with a strong cash position of $204 million. Net long-term debt of $269 million. This cash balance, which is roughly double our position from last year, is the result of the strength of our operating cash flows this quarter and year to date. We have additional capacity from an undrawn revolver of $100 million. DSO for the quarter improved once again and is now down to 31 days.

An improvement of three days sequentially and 16 days year over year. This DSO is the lowest since we went public, and we remain confident in our ability to deliver strong, positive free cash flow for the full year. We are pleased with our leverage ratios and continue to delever with net and gross leverage of 0.6 and 2x, respectively. We have significant financial flexibility to run the business and fully execute on our strategy, including potential acquisitions. In terms of our outlook for the full year, we are maintaining the midpoint of our revenue range of $1.41 billion-$1.43 billion. We are raising our center margin range by $2 million at the midpoint to $448 million-$462 million. We are raising our adjusted EBITDA guidance range by $4 million at the midpoint to $146-$152 million.

This puts us on track for approximately one point of margin expansion year over year and double-digit margins for the full year. As previously communicated, our annual guidance assumes year-over-year revenue growth driven primarily by higher visit volumes, with total revenue per visit being roughly flat. For the fourth quarter, we expect revenue of $368 million-$388 million. Center margin of $113 million-$127 million. And adjusted EBITDA of $37 million-$43 million. We expect the step-up in revenue quarter over quarter to be driven primarily by continued growth in our clinician base and modest sequential rate improvement. We are pleased with the productivity gains delivered in the third quarter, and we expect to maintain those elevated productivity levels in the fourth quarter. These factors position us to deliver another strong quarter of revenue growth to close out the year.

Based on the adjusted EBITDA outperformance so far this year, we have flexibility through the remainder of the year to make additional investments to better position us to achieve our 2026 growth objectives. Additionally, we continue to expect stock-based compensation of approximately $70 million-$85 million. We now expect to open 20-25 new centers in 2025, modestly lower than our previous range of 25-30 due to shifts in timing. Looking ahead to 2026, we continue to anticipate mid-teens revenue growth. We expect this to be driven by low double-digit visit volume increases and low to mid-single-digit rate improvements. We plan to drive volume growth with continued clinician expansion balanced with year-over-year productivity improvements, supported by strong demand for mental healthcare. At the same time, while our full-year guidance implies exceeding our initial expectations for 2025 margin expansion, we expect continued expansion in 2026 and beyond.

These will be driven by the operational efficiencies we have been introducing as we enter a new chapter of tech enablement, such as leveraging AI and digital solutions to automate processes, improve accuracy, and support our clinicians. These initiatives, combined with discipline execution and technology-driven operating leverage, will strengthen our financial profile and support sustainable, profitable growth. With that, I'll turn it back to Dave for his closing comments.

Dave Bourdon (CEO)

Thanks, Ryan. In closing, this was another outstanding quarter for LifeStance. While we are pleased with what we've accomplished, we feel the best is yet to come. Our progress this year and the incredible dedication of each of our clinicians and team members serve to reinforce our confidence in the future as we focus on expanding access to high-quality, affordable mental healthcare. Operator will now take questions.

Operator (participant)

Thank you. We will now begin the question and answer session. We ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star then the number one on your telephone keypad. If you would like to withdraw your question at any time, simply press star one again. Thank you. Your first question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is open.

Craig Hettenbach (Equity Analyst and Managing Director)

Yes, thank you. I wanted to touch on clinician productivity in the context of 17% growth in visits versus 11% clinician adds, and just how you're thinking about the durability of that in terms of being able to continue to see leverage there.

Dave Bourdon (CEO)

Hey, good morning, Craig. This is Dave. I'll take that one. First of all, we feel great about the productivity improvement that we saw in the quarter. As we mentioned in the prepared remarks, it was a record increase for us. We achieved that while also having really strong net clinician adds in the quarter. That just shows that we're able to balance both productivity and the net clinician adds and drive what you noted, the 17% visit growth. That's a testament to our value prop as well. As we think about the initiatives that drove that, I mentioned a few on the call. It was the cash incentive program that incentivizes access and quality, the patient engagement platform, and then some new things around tech and AI that we're implementing that's driving new patient volumes. All of those are durable.

They're not one-time in nature. We feel really good about those continuing. We still have additional initiatives like our care matching, enhancements and things like that that'll be coming online in the fourth quarter and as we step into next year.

Craig Hettenbach (Equity Analyst and Managing Director)

Great. And then just as a follow-up on operating leverage, consistent with how you've been talking about the business the last couple of years in terms of that increase in investment in the business. Then you'll see that in G&A. So encouraging to see it kind of come through. Can you maybe just expand a little bit more on kind of productivity on the AI side of things, understanding it's kind of early days, but just how much of a lever that adds on the operating leverage front?

Dave Bourdon (CEO)

Yeah, Craig, I'll take this one as well. I wouldn't dimension it with specifics. It is definitely part of the story. As when we think about getting to margins of 15%-20% in the out years, the expansion of operating leverage, that's a big part of that story. We are a heavily manual business when you think about the work we do behind the scenes to support our clinicians. Even what our clinicians do is very manual. There is a lot of opportunity for us to be able to implement technology, digital AI-type tools. We do expect those, again, to be a big part of the story of driving that operating leverage.

Craig Hettenbach (Equity Analyst and Managing Director)

Got it. Thank you.

Operator (participant)

Your next question comes from the line of Lisa Gill with JP Morgan. Your line is open.

Lisa Gill (Managing Director)

Great. Thanks very much. Good morning, Dave and Ryan. And congrats on the quarter. I just want to dig in a little bit on the revenue per visit, which increased more than we anticipated. I think previously you talked about it being roughly flattish. Dave, I think I just heard you talk about when we think about '26 being flattish. Can you talk about what you saw in the quarter on the revenue per visit? Is it a higher acuity? Is there any change from a managed care contracting or anything else we need to keep in mind when we think about that?

Ryan McGroarty (CFO)

Yeah, sure, Lisa. This is Ryan. I'll be happy to address that question. When you think of TRPV for the quarter, it was relatively flat, as you mentioned, and kind of sequentially stepped up like $1.3 overall. This was in line with our expectations. When you look ahead, this obviously, we had the unique payer situation this year. As you look ahead, from a full-year perspective, we expect TRPV to be flat overall for the full year. When we get into 2026, we start to see the low to mid-single-digit rate increases as we get back to a more normalized kind of environment. We're really encouraged with the dialogue and the discussions that we're having with the payers right now.

Again, as you kind of go out into the next year, you get to that low to mid-single digits.

Lisa Gill (Managing Director)

That's very helpful. Just as a follow-up on the comments around potential acquisitions, I'm just curious around what you see out in the marketplace today. Are valuations reasonable? Is it you're looking for geographic coverage? You're looking for adding of clinicians? How do I think about your strategy on the acquisition side?

Dave Bourdon (CEO)

Hey, Lisa, it's Dave. I'll take that one. First of all, I appreciate where your question's coming from, which is we're excited about the free cash flow generation that we have and the strength of the balance sheet, which gives us a lot of flexibility to be able to deploy capital to enable the business. M&A is certainly a part of that. We right now have a really good pipeline of opportunities for potential acquisitions that we're working through. The valuations for the ones that make our cut are what we feel is appropriate. We're being very thoughtful and disciplined. To where you were going, the primary purpose of these acquisitions is for geographic expansion, establishing beachheads in new MSAs or states, things like that. That's our focus area. We feel really good about M&A being complementary to our organic growth.

Organic growth is still going to be the primary driver in the coming years. I think we'll have more to share in the coming quarters around M&A.

Lisa Gill (Managing Director)

Great. Thank you.

Operator (participant)

Your next question comes from the line of Ryan Daniels with William Blair. Your line is open.

Matthew Mardulla (Equity Research Associate)

Hello, this is Matthew Mardulla on for Ryan Daniels. Thank you for taking our question. I want to focus more on the clinician retention side of the productivity initiatives. You've mentioned previously that a key objective of your productivity initiatives is improving clinician retention. Can you share how much of an impact these initiatives are having on retention? Looking out in the future, how much these initiatives could kind of provide an improvement for clinician retention?

Dave Bourdon (CEO)

Hey, good morning, Matthew. This is Dave. I'll take that one. As we mentioned, we had a really strong performance in the quarter with net adds of 288 clinicians. That was driven by stable retention and the strength of recruiting, of adding new clinicians. That's a similar story to what we've talked about in previous quarters, with retention being what we call stubbornly stable. At the same time, we're continuing to focus on enhancing the clinician experience and the value proposition for them. We talked about a number of initiatives both last quarter as well as even in our prepared remarks. That continues to be a big focus area for us. As we think about the future, we still believe that we can move the needle on clinician retention.

I'd say what gives me hope is when I look at our various regional businesses across the country, we have a region that is running at about 87% retention. We've talked about that North Star being in the mid to high 80s. We can actually see that happening in one of our regions. We just got to get the other ones up to that similar level.

Matthew Mardulla (Equity Research Associate)

Great. Thank you for those insights. Regarding the specialty services, how have those offerings progressed throughout the years and the quarter? How should we think about its progression into 2026? Lastly, how has the reception been from centers both in terms of adoption and overall engagement?

Dave Bourdon (CEO)

Yeah, Matthew, it's Dave. I'll take that one as well. First of all, just the ground. Specialty services is about $50 million of our revenue, so from an annual perspective. It is meaningful, but it is still not a major portion of our business. We're excited about this as an opportunity to increase services to our patients and to improve care. The focus right now has been neuropsych testing and services around treatment-resistant depression, so primarily Spravato and TMS. We have been rolling those out in phases, and that will continue actually for the coming years. The receptivity has been really great. The clinicians like it because it is more services that they can provide to be able to deliver better care for their patients. The patients obviously like it. It is one-stop shopping.

We expect these services to grow at a much higher rate than our core business in the coming years. When we get to maturity, these will have higher margins than our standard psychiatry and therapy services.

Matthew Mardulla (Equity Research Associate)

Great. Thank you for those insights. Great job on the quarter.

Dave Bourdon (CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Brian Tanquilut with Jefferies. Your line is open.

Brian Tanquilut (Senior Equity Research Analyst)

Hey, good morning, guys. Congrats on the quarter. Ryan, maybe first question, as I think about the revenue guidance, obviously you had a good Q3 here. The organic adds on clinicians in theory would drive productivity gains and carry over into the quarter. Just curious, what are the moving pieces that factored into maintaining the revenue guide? I know you cut the new clinic openings guidance, but just curious what you can share with us on that.

Ryan McGroarty (CFO)

Perfect, Brian. Yeah, this is Ryan, so I'll be happy to take that question as well. Overall, just starting off, we're super pleased with the outperformance in the quarter as it relates to revenue, which was largely driven, as you mentioned, just in terms of productivity. Again, if you take a step back, we're also very pleased that we're able to raise our full-year EBITDA guide by the $4 million. To go back to our Q2 call, we talked a lot about the step-up in second half over first half from an overall revenue perspective of approximately $60 million. That step-up still holds. Essentially, all we've really done is just rebalance between the quarters versus anything else. When you look at the fourth quarter in isolation, it's still really attractive when you look at the year-over-year growth of 16%.

It is a nice sequential step-up from Q3 as well of about $14 million. We really feel good about the team's progress in Q3 around productivities. As Dave mentioned in his prepared remarks, the ability to not only get productivity but have net clinician adds at such a high point bodes well as we kind of move into the fourth quarter this year.

Matthew Mardulla (Equity Research Associate)

Got it. Dave, maybe I know you alluded to your partnership with Calm. If you can just share with us how that works and what are you expecting in terms of growth contribution or also the profile of the patients that Calm brings to LifeStance. Thanks.

Dave Bourdon (CEO)

Yeah, Brian. Thanks. Good morning. We're really excited about the partnership with Calm. This is great for patients and their customers. It's an example of a different kind of referral partner for us than what we normally get through our existing channels. We're uniquely positioned for these kinds of new partnerships with our large scale and hybrid model. In regards to the types of patients, we actually think this will have a different profile, a younger demographic than what we typically get through our partnerships with health systems and primary care practices and things like that.

Matthew Mardulla (Equity Research Associate)

Awesome. Thank you.

Operator (participant)

Your next question comes from the line of Richard Close with Canaccord Genuity. Your line is open.

Richard Close (Managing Director of Digital and Tech-enabled Health Equity Research)

Yes, thanks for the questions. Congratulations on a great quarter there. Just curious your thoughts with respect to behavioral health has been called out over the last several quarters, I guess, by managed care. I'm just curious your perspectives if you think this is a risk to LifeStance or why not, and then maybe also confidence in that rate commentary for 2026.

Dave Bourdon (CEO)

Hey, Richard, good morning. It's Dave. I'll take that. Agreed. You've had multiple payers in recent quarters that have mentioned higher mental health utilization. It really varies by payer and by service line. For example, a lot of the commentary has been directed towards Medicaid and towards the autism, the ABA services. We have very little exposure to both of those business lines. It's not as relevant for us as it is to some of our competitors that are in the space. You always have to take a step back and think about there's still a significant unmet need in society today for mental health services. That's going to continue to drive higher utilization as we come into the.

Next few years, as well as another trend that benefits LifeStance is the move from cash pay to insurance as it becomes more of an affordability issue for individuals and still wanting to be able to get care. Those are probably some of my big points that go to the recent commentary around the higher trends. As far as rates, the one thing that I'd always highlight is that payers continue to focus on access for their employer clients and members. They're still getting a lot of pressure for them around access. What we're starting to see is a few thought-leading payers that are focusing on quality. We expect that the market will gradually shift towards quality and outcomes. We welcome that change. We think we're positioned really well for the market to go in that direction.

Richard Close (Managing Director of Digital and Tech-enabled Health Equity Research)

Okay. And as a follow-up, obviously, great adds, clinician adds in the quarter. What are you hearing from the clinicians in terms of why they're choosing LifeStance? Any changes that you're seeing in the marketplace? Just curious there.

Dave Bourdon (CEO)

Yeah, Dave, I'll take that one as well. I wouldn't point to anything new. In regards to the recruiting and retention dynamics. It's still a very competitive marketplace for mental health clinicians. And our value proposition continues to resonate. We're not for everyone. We're looking for a certain profile of clinicians. But within that profile, we certainly are doing very well from both a retention and a recruiting perspective.

Richard Close (Managing Director of Digital and Tech-enabled Health Equity Research)

Okay. Thank you.

Operator (participant)

Your next question comes from the line of Kevin Caliendo with UBS. Your line is open.

Kevin Caliendo (Healthcare Equity Research)

Thanks. Thanks for taking my question. My first one, just looking at the implied guidance for Q4. The gross profit and adjusted EBITDA margins are down a little bit sequentially. Normally, Q4 is a better quarter in terms of margin. I'm just wondering, you mentioned investments. Is there anything in particular there that's prompting that change or anything to call out?

Ryan McGroarty (CFO)

Yeah, Kevin, this is Ryan. To your question, you got it right. There is a little bit of a step down in margins going from Q4 from Q3. Overall, the way to think about that is an increase in GNA. We as a team are looking at items and pulling forward some of the investment that helps get off to a strong start in 2026 just in terms of execution of our plan and going back to the delivery of mid-teens revenue growth. An example of that, Kevin, would be accelerating our business development team, right? Folks that we want to get on board to be able to kind of work out in the local MSA and the local community just to make sure that the LifeStance brand is out there with the community partners. That is just an example.

It provides some flexibility just in terms of some of the investments that are positive from a return perspective, kind of getting a jumpstart on those from 2026.

Kevin Caliendo (Healthcare Equity Research)

Got it. The obvious logical follow-up question is you're pulling forward some spending. You're getting the productivity improvements that you said you were going to get and delivered on. You got better payer rates next year. When we think about the impact to margin next year, you said you expect the margin to expand, but should we think about expansion being greater than what we saw in 2025? Is there any kind of color you can provide us in terms of an outline of where you think margins can be next year?

Ryan McGroarty (CFO)

Yeah, Kevin. So really looking forward to providing more specific 2026 guidance in our 4Q call. Overall, I kind of go back to some of the points that we've made is really like the momentum that we have going into 2026. And then anchoring back to the mid-teens as it relates from a revenue perspective in terms of what the revenue growth is. When you look at it from an operating leverage perspective, we've had really nice momentum on that. We look forward to continuing to expand out the leverage, but we'll get more specific with guidance as we get into the conversation for the 4Q call.

Kevin Caliendo (Healthcare Equity Research)

Thanks. I appreciate it.

Operator (participant)

Your next question comes from David Larsen with BTIG. Your line is open.

David Larsen (Managing Director and Senior Analyst)

Hi. Congratulations on the good quarter. Can you expand maybe on your comments around business development and, in terms of filling the top of the funnel and patient volumes? Can you maybe touch on number one, the managed care piece, number two, getting referrals in from other providers in the area, and then number three, any sort of digital selling efforts that might be going on? It's my understanding that Google has sort of maybe changed some algorithms recently. Thanks very much.

Dave Bourdon (CEO)

Yeah. Good morning, David. This is Dave. I'll take your question. First of all, as I mentioned earlier, there's really strong patient demand in the marketplace for mental health services. It's that unmet need that is out there, and we have this demand, supply, and balance. We feel very good about our model. Then you put on top of that what we're trying to provide is high-quality care that's affordable. That's people being able to use their insurance versus cash pay, which also adds some additional patient opportunity for us. We continue to feel very good about the fourth quarter. As we step into next year in regards to patient supply or new patient supply, as far as the channels, our primary channel of how we get new patients is through referral partners that are medical practices.

We continue to strengthen that, as Ryan mentioned, in that that's what we call the business development team. These are the feet on the street. They're out there working with those medical practices to be able to provide a referral channel for their patients. We continue to enhance that year over year to continue to drive higher volumes. We certainly do a little bit of the paid search. I'll remind you that we spend less than 2% of revenue on marketing or in acquiring new patients. Again, the bulk of our patients are coming organic or through the referral partners. We expect that to continue into 2026.

David Larsen (Managing Director and Senior Analyst)

Thanks very much. Do you participate in risk or ACOs or any sort of value-based care arrangements? It's obviously an important part of primary care in Medicare per the new physician fee schedule for 2026. Just any thoughts around that? Thanks very much.

Dave Bourdon (CEO)

We do not. We do not take risk today. We have very limited exposure to government as a payer, right? That's about 5% of our total revenue for all government channels in regards to them being a payer. We have very limited exposure to that segment.

David Larsen (Managing Director and Senior Analyst)

Okay. Thanks very much.

Operator (participant)

Your last question comes from Steve Dechert with KeyBank Capital Markets. Your line is open.

Steve Dechert (VP and Equity Research Analyst)

Great. Thanks, guys. I just want to ask another one around the guidance. What does the high end of your Q4 revenue guidance imply in terms of visit volumes and TRPV? And then could you provide a little bit more color on the 2026 strategic investments you mentioned earlier to meet your revenue goals? Thank you.

Ryan McGroarty (CFO)

Yeah. So hey, Steve, appreciate the question. This is Ryan. The first piece, we do not provide specific guidance to that just in terms of the range and kind of how to think through the numbers. As it relates to the 2026 investment, we continue to make investments. We mentioned the business development. All healthcare is local. Being able to be out there with the key referral partners, as Dave mentioned earlier, and then a whole host of just investments that drive efficiency, we continue to be able to drive operating leverage. We are pleased with the momentum that we have overall just in terms of being able to drive leverage. The investments that we make will continue to have that orientation as well.

Steve Dechert (VP and Equity Research Analyst)

All right. Thank you.

Operator (participant)

With no further questions in queue, I'd like to turn the call back over to Dave Bourdon, CEO, for any closing remarks.

Dave Bourdon (CEO)

Hey, thank you, operator. I'd like to thank our over 10,000 mission-driven teammates who make sure that our patients get the quality care that they need and deserve. I continue to be inspired by the passion and the commitment that you all bring every day. Have a great day, everyone.

Operator (participant)

This concludes today's conference call. You may now disconnect.