LifeStance Health Group, Inc. Fair Value Disclosure
NOTE 8 FAIR VALUE MEASUREMENTS
Hedging Activities
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 was hedged against the interest rate swap at a fixed rate. The interest rate swap matured on September 30, 2025.
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) was designated and qualified 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 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 years ended December 31, 2025, 2024 and 2023, the Company included immaterial gains 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 consolidated statements of operations and comprehensive income (loss).
The following table summarizes the location of the interest rate swap in the consolidated balance sheets:
|
|
Consolidated balance sheets location |
|
December 31, 2024 |
|
|
Interest rate swap |
|
Prepaid expenses and other current assets |
|
$ |
1,272 |
|
Fair Value Measured on a Recurring Basis
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis:
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Assets Measured at Fair Value |
|
|
|
|
|
|
||
Money market funds |
|
$ |
175,520 |
|
|
$ |
119,616 |
|
Level 1 |
|
$ |
175,520 |
|
|
$ |
119,616 |
|
Interest rate swap asset |
|
$ |
— |
|
|
$ |
1,272 |
|
Level 2 |
|
$ |
— |
|
|
$ |
1,272 |
|
Total assets measured at fair value |
|
$ |
175,520 |
|
|
$ |
120,888 |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Mar 17, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.