Live Earnings Conference Call: Privia Health Group will host a live Q1 2025 earnings call on May 8, 2025 at 8:00AM ET. Follow this link to get details and listen to Privia Health Group's Q1 2025 earnings call when it goes live. Get details. NASDAQ:PRVA Privia Health Group Q2 2023 Earnings Report $23.33 +0.61 (+2.69%) Closing price 05/7/2025 03:59 PM EasternExtended Trading$23.33 0.00 (0.00%) As of 06:00 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Privia Health Group EPS ResultsActual EPS$0.06Consensus EPS $0.05Beat/MissBeat by +$0.01One Year Ago EPSN/APrivia Health Group Revenue ResultsActual Revenue$413.35 millionExpected Revenue$392.34 millionBeat/MissBeat by +$21.01 millionYoY Revenue GrowthN/APrivia Health Group Announcement DetailsQuarterQ2 2023Date8/3/2023TimeN/AConference Call DateThursday, August 3, 2023Conference Call Time8:30AM ETUpcoming EarningsPrivia Health Group's Q1 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Privia Health Group Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 3, 2023 ShareLink copied to clipboard.There are 16 speakers on the call. Operator00:00:00Good day, and thank you for standing by. Welcome to the Privia Second Quarter 2023 Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised. Operator00:00:25Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Robert Orchard, SVP, Investor and Corporate Communications. Speaker 100:00:36Thank you, Amanda, and good morning, everyone. Joining me today are Parth Marota, Our Chief Executive Officer and David Mountcastle, our Chief Financial Officer. This call is being webcast and can be accessed from the Investor Relations section of priviahealth.com. Today's financial press release and slide presentation are posted on the Investor Relations page at priviahealth.com. Following our prepared comments, we will open the line for questions. Speaker 100:01:00Please limit yourself to one question only and return to the queue if you have a follow-up, so we can get to as many questions as possible today. The financial results reported today and in the press release are preliminary and are not final until our Form 10 Q for Q2 6 months ended June 30, 2023 is filed with the Securities and Exchange Commission. Some of the statements we will make today are forward looking in nature based on our current expectations and view of our business as of August 3, 2023. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risks and uncertainties that may cause actual results to differ materially. As a result, these statements should be considered in conjunction with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filings. Speaker 100:01:47Finally, we may refer to certain non GAAP financial measures on the call and reconciliation of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website. Now, I'd like to turn the call over to Parth. Speaker 200:02:00Thank you, Robert, and good morning, everyone. Privia Health delivered another solid quarter as we moved into the second half of twenty twenty three. We continue to execute on our strategy and remain focused on building 1 of the largest ambulatory care delivery networks in the nation. This morning, I'll highlight a number of business and company updates, Then David will discuss our recent financial performance and our 2023 guidance outlook before we take your questions. Privia Health continues to gain market share and momentum with our broad provider partnership and operating model. Speaker 200:02:33We executed at a very high level during the 2nd quarter, which resulted in practice collections increasing almost 14% year over year. Adjusted EBITDA was up more than 24%, which demonstrates the very strong operating leverage of our model as we continue to increase our number of provider partners and invest in our new markets. Our results were driven by continued same store and new provider growth as well as strong performance in our value based arrangements in aggregate. Based on our performance year to date, we have updated our 2023 guidance and are raising most of the metrics to the mid to high end of our initial ranges. Earlier this week, we announced a definitive agreement to enter Washington, our 13 state in partnership with Walla Walla Clinic, A multi specialty practice with more than 50 providers caring for patients in 3 locations. Speaker 200:03:23It was essential for us to find the right partner who shares Our vision to help build a scale provider network in Washington, while improving access to and affordability of care in the local communities. Walla Walla Clinic has a highly successful history over its decades of operation and we look forward to continuing to build on its rich heritage of delivering high quality care in the community. We expect the transaction to close in the Q3 with Walla Walla Clinic being fully implemented on the Privia platform by the end of Turning to some other company news. On May 8, we completed a secondary offering of 42,600,000 shares of common stock or more than 34% of our total fully diluted shares outstanding. This entirely eliminated Goldman Sachs and Pamplona Capital's ownership in the company as well as the previous shareholder agreement provisions with the private equity sponsors. Speaker 200:04:17We are excited to welcome a number of new long term oriented investors and look forward to continuing to create shareholder value in the years to come. In addition, the Privia Health Board has continued to broaden the capabilities and expertise of our Board members. Adam Bowler, Managing Partner of Rubicon Founders, joined our Board on July 1. He brings deep domain experience as the former Senior Advisor for Value Based Transformation and Innovation at the Department of Health and Human Services and also previously served as Director of CMMI, the Innovation Center at CMS. Dave Vickman and Pam Kmet joined our Board on August 1st. Speaker 200:04:57Dave's distinguished career with UnitedHealth will bring unique insights to our Board across the healthcare industry landscape. Pam is a proven leader with broad corporate experience and human capital expertise both in and outside the healthcare sector. We look forward to the important insights and valuable contributions from each of these new Board members as Privia continues to execute on its vision. Privia's national footprint continues to expand and now includes close to 3,900 implemented providers in our medical groups Caring for more than 4,400,000 patients in over 1,000 care center locations. Our scale and diverse provider and payer partnerships Our true differentiators. Speaker 200:05:40We are building 1 of the largest multi specialty medical groups and ambulatory care delivery networks in the country that can improve patient outcomes and reduce costs. We continue to be ahead of our growth plan for adding new implemented providers in our recent new markets of Connecticut, North Carolina and Ohio. While not highlighted on this slide, it is also noteworthy that our gross provider attrition rate in 2023 has been less than 1% year to date. This is one of the lowest in our company's history and we continue to add providers on a net same store basis. Privia has one of the broadest, most balanced and diversified value based care platforms in the industry. Speaker 200:06:23We serve close to 1,100,000 attributed lives across more than 100 at risk fair contracts in commercial and government programs. Total attributed lives increased almost 27% from a year ago. There remains a significant embedded opportunity for us to move our Medicare Advantage lives into upside and downside risk arrangements over the next few years. However, we remain focused on thoughtfully moving to increased risk arrangements, while continuing to provide significant opportunities for EBITDA and free cash flow growth. Our strong performance in the current healthcare environment is a testament to Privia's proven ability to manage risk. Speaker 200:07:03Our book of business across a diverse set of fee for service and value based contracts in commercial, Medicare Advantage, the Medicaid Shared Savings Program and Medicaid Allow us to uniquely balance risk, while delivering significant shared savings, EBITDA and free cash flow growth across a cycle of varying utilization trends. We leverage our clinical operations, performance management, healthcare economics and actuarial expertise to manage the transition to risk. Our close alignment with our physician is critically important in managing patient panels across the risk spectrum. This is accomplished through our physician led governance structure in our homogenous single tax ID medical groups in each state and the hands on day to day work of our clinical and operations teams. These differentiated fee for service and value based care capabilities in the Privia model Allow us to be a unique partner to physician practices across all specialties in any state serving all patients across all reimbursement models. Speaker 200:08:03Now I'll ask David to review our recent financial results and 2023 outlook. Speaker 300:08:09Thank you, Par. Privia Health's operational execution continued to deliver strong performance in the Q2 of 2023. Our implemented provider count was 3,870, up 9.3% year over year. Solid ambulatory utilization trends and new implemented providers led to practice collections increasing 13.7 percent from Q2 a year ago to reach 700,000,000 Adjusted EBITDA was up 24.3 percent over Q2 last year to $19,300,000 highlighting our ability to continue to generate operating leverage as we expand and grow in existing and new markets. Total value based care comprised 37% Total GAAP revenue in the Q2 of 2023 compared to 29.6% in Q2 a year ago, which highlights our thoughtful and prudent moves to at risk contracts over time. Speaker 300:09:06For the first half of twenty twenty three, Practice collections increased 15.4 percent to almost $1,360,000,000 Care margin was up 18.8% and adjusted EBITDA grew 19.3 percent to reach $36,200,000 Our updated 2023 guidance highlights the strength and resiliency of our operating model and diversified book of business. Based on our year to date financial and operating performance, We are raising all of our 2023 guidance metrics to the mid to high end of our initial ranges, except practice collections and attributed lives. We expect practice collections to come in at the midpoint of the guidance as this includes the impact of the 1 pause capitated contract we discussed last quarter. We also expect year end attributed lives to be at the midpoint of our previous guidance. As we've noted previously, our 2023 adjusted EBITDA guidance absorbs $8,000,000 to $10,000,000 in new market entry and expansion investments. Speaker 300:10:02With 5 new states and 3 new ACOs in 2023, We plan to continue to invest across our business enterprise to support our significant expansion, while continuing to grow EBITDA and free cash flow year over year. We expect our new markets to scale significantly in the coming years as we grow our provider base and attribute their lives in these new states. Our balance sheet and capital position continue to be very strong with cash of approximately $318,000,000 and no debt. Given our capital efficient partnership model with annual capital expenditures of less than $1,000,000 we continue to expect 80% to 90% of our adjusted EBITDA to convert to free cash flow on an annual basis. We remain focused on building Privia Health into one of the largest ambulatory care delivery networks in the nation and investing to support this growth as we build our national footprint. Speaker 300:10:55We are now ready to take your questions. Operator00:11:03Thank you. We will now conduct the question and answer session. Please standby while we compile the Q and A roster. Our first question comes from Hellojandra Singh from Truist Securities. Speaker 200:11:32Yes. How this happens in a pre web call? This is Jalendra Singh from Truist Securities. Good morning, everyone, and congrats on a strong quarter. So actually, I wanted to get more color around utilization trends in the quarter. Speaker 200:11:45How did those compare with your Expectations and maybe what are you assuming for rest of the year there? And for the quarter in particular, were there any pockets where utilizations were Higher or lower than your expectations and impact on your business, various business lines. And kind of related, There was a $3,000,000 unfilled PYD in the quarter. Can you provide some color what drove that? Thanks, Jalendra. Speaker 200:12:10Appreciate the question. I'll tackle the first half and then David will comment on the $3,000,000 prior period adjustment. So generally speaking, on the utilization trends, one broad comment, if you look at the last 3 or 4 years, 2019 through 2022, Pre COVID, acute, during the COVID and then coming out of COVID, we've had ebbs and flow and utilization to a pretty extreme level. And the strength of our model just speaks for itself where we've each year grown both our fee for service book and our value based book from both the top line and an EBITDA perspective. So I think it's important to take that slightly longer term view as we look at utilization. Speaker 200:12:50The second point I'll make is, As we've said previously, it's important to distinguish between ambulatory utilization and then surgical or in or outpatient utilization trends. On the ambulatory side, we continue to see a higher plateau coming out of COVID. We've seen pretty strong tailwinds. That in our minds is good utilization with people seeing their primary care provider pediatrician OBGYN And that bodes well for our fee for service book and also is good for the value based book. I think if you see some spikes in surgical utilization both in and outpatient That obviously impacts the Medicare Advantage book. Speaker 200:13:29But despite that, our other value based books, Both commercial and the Medicare Shared Savings Program act as a very natural hedge. So I think obviously we are downstream from the payers. We've all seen the same commentary that you've read. And overall on balance, we performed really well in aggregate across both fee for service and value based book. Speaker 300:13:51Yes. And, Zandra, on the $3,000,000 that you see out there, it is not related to the polished capitation contract that we did last quarter. So I kind of wanted to make that point to start with. We received some payer data relative to retroactive 2022 adjustments. So the $3,000,000 in prior period claims increase was not actually a loss, but was offset by approximately the same amount of revenue booked in Q2 of 2023. Speaker 300:14:16And even with that, our financial performance remains strong as reflected in our Q2 results and updated 2023 financial guidance to the mid to high ranges. Speaker 200:14:27Thanks guys. Operator00:14:31Thank you. Please standby. Our next question comes from Lisa Gill from JPMorgan. Thanks very much. Good morning. Operator00:14:44I just wanted to dig in a little deeper on the ramp in the new markets, Adding North Carolina, Connecticut, Ohio, how do I think about the trend that you're seeing, how quickly You're getting physicians to come on to the platform. And would we expect an impact as we go towards Back half of this year and I understand that Washington will be will close in the Q3, so I'll think of that as more of a 2024 opportunity, but I'm just curious as to how the ramp is going versus your expectations. Speaker 200:15:16Thanks for the question, Lisa. So we're really pleased with how we've started in each of those markets. As we stated in our prepared remarks, we are running ahead of our expectations in new provider sales in each of those states And we continue to see pretty good opportunities to build very large medical groups over the next 4 to 5 years, which is always our thesis when we enter these new states. I think this year is we've experienced one of the strongest in market sales years in the history of the company. That's reflected in our Updated guidance of to mid to high end on the implemented providers for the end of the year. Speaker 200:15:55And then again, Washington is a new state that was not Disclosed earlier and we're really pleased with that partnership. They'll be implemented before the end of the year, but you'll see the financial impact for the full year going into 2024. So I think all of that leads us to have pretty good momentum closing out this year and then entering into next year and that's reflected in the guidance we provided today. Operator00:16:18And Parth, any early thoughts on like health system pipeline partnerships for 2024? Like how do you feel about that versus what we've seen in the last few years? Given your success, are you seeing more interest, the same interest? Just curious if there's a way to quantify how to think about that pipeline going into 2024? Speaker 200:16:36Yes, sure. I mean, we've seen really strong momentum. If you see our performance since going public a couple of years ago, We've accelerated the opening of new states. We've entered now 5 states in pretty short order here in the last 12 months. And when we went public, we said expect us to enter one state a year and we're clearly exceeding that. Speaker 200:16:59Our pipeline continues to be broad. We're having multiple with medical groups, ACO entities, health systems. Again, the timing of when these hit is always uncertain. These are very strategic partnerships, very long term oriented and we are very careful in who we choose as a partner. So obviously as those hit, we'll update you as we've been doing, but We feel really good about going into the next couple of years and the momentum of the business. Operator00:17:26Thank you. Our next question comes from Elizabeth Anderson from Evercore. Please go ahead. Speaker 400:17:34Hi, guys. This is Sameer Patel on for. We're upwards of $900 on MPMs for capitated revenues for the quarter, assuming no major change in lives. Should we expect something in this range going Forward, or is it kind of just trying to understand the range that it could potentially fall in over the rest of the year? Speaker 200:18:00Yes, Sameer. So I think that's a fair range to look at. Obviously, we are downstream from the payers on the cap book. So it's 85% of premium. And then in some risk pools, we are not taking the full 100% risk across all buckets of spend. Speaker 200:18:16So it just depends on the mix of business and the risk pool we are in and how much risk we are sharing with the payers. So We'll typically be slightly lower than the average PMPM that you usually see in the industry compared to 100% risk contract. Operator00:18:35Thank you. Our next question comes from Richard Close. Speaker 500:18:41Yes. Thanks for the question. I was wondering if you could just talk a little bit about Washington. The difference in that deal is maybe compared to, let's call it, BaaS in California. And then when do you expect to see, I guess, growth off of that in terms of bringing in new physicians? Speaker 200:19:06Thanks for the question, Richard. So the fundamental difference is, we will own the tax ID, Own the MSO entity, the ACO entity in Washington, so all three entities. That's not always the case in some of our partnerships, but in this state, we would own all three entities. So you'll see us consolidate results on a GAAP revenue basis and that will happen from the date of the closing of the transaction. The full year impact From an earnings standpoint, we'll happen likely starting 2024 as Walla Walla Clinic gets implemented towards the end of this year, similar to the 5 to 7 month ramp that we have in implementing providers. Speaker 200:19:42And then we'll start our work. Again, the thesis is very similar to other states. This is a 4 or 5 year journey for us to add providers and I think our differentiated model is really Should be welcomed in that state. I think there's a real need for providers to have an alternative in the Previa model to be autonomous and remain in their ownership structure while aligning with Somebody like us. So we're really excited. Speaker 200:20:06It's a big TAM in that state and we feel really excited to enter that state. Operator00:20:14Thank you. Our next question comes from Taji Phillips from Jefferies. Speaker 600:20:20Hi, this is Taji on. Thank you for Taking my question. So looking at the value based attributed lives growth, mainly concentrated in commercial and then on the government side, MA. So just curious, as we go through the year and there's a lot of, you could say, messiness or a lot of shifting in terms of enrollment with re determinations and exchanges, How are you thinking about the impact on your business? And then Parth, you had talked about still seeing a lot of embedded opportunity in Medicare Advantage. Speaker 600:20:50I guess, what would kind of Trigger that unlock right for you to see more growth in that part of the business? Thank you. Speaker 200:20:58Thanks for the questions, Ajay. So Obviously, the one key differentiator for Privia is our book of business is very balanced as you noted between commercial and government programs and within government programs In MSSB, MA and Medicaid, I think the puts and takes in each one of those, our view is as we grow our Provider base as we get more patients on the platform, we are looking to increase the number of attributed lives across all of these buckets. And I think we see great tailwinds across our states in continuing to add attributed lives and then increasing the yield per life As we enter into these programs, both for our physician partners and delivering low cost care and adding value for the payers, I think that differentiates us very meaningfully even in the commercial book. So I think you'll continue to see growth in each of those buckets. Obviously, there's movement within the year. Speaker 200:21:50If you take our 2 largest buckets, commercial and MSSP, they are more open access PPO like products. In the early half of the year, you sometimes see Employers change their insurance carrier, so there can be some shifting of lives as they need to Come and see their PCP again before being attributed in the new plan and we are downstream from that. It's very unlikely that the patient actually leaves the doctor. So I think you'll see some movement in the 1st couple of quarters. But overall, as we increase the number of providers, you should see growth in lives. Speaker 200:22:24And then to your last one on Medicaid, Again, you'll see some redetermination effect on that pool, but we are hoping that we'll capture those lives back in the commercial bucket over time. And then in the MA book, we'll continue to, as we've noted in our prepared remarks, take thoughtfully increase the level of risk We are taking on that book of business. There's a lot of embedded opportunity, but you need to do it very thoughtfully as we have been doing with Operator00:23:01Question comes from Jamie Purce from Goldman Sachs. Speaker 700:23:06Hey, thanks. Good morning. Two quick financial questions. First, Can you help us with the bridge on care management fees from 1Q to 2Q? It seems like a bigger step up than usual. Speaker 700:23:18So I'm wondering if there's Incremental services being offered or new partnerships there that are driving that. And then just on second half guidance, I mean, it feels like there's a lot of momentum coming out of the second quarter. Your implied second half really isn't changing too much across most metrics. I'm wondering if there's any incremental headwinds you're assuming for the second half or Just any specific assumptions we should be thinking about? Thank you. Speaker 200:23:45Thanks, Jamie. So on the first question, look again, you see the great operating leverage in our business where if we get great top line growth and perform well in value based arrangements, There's embedded operating leverage that you can see flow through into EBITDA and then free cash flow. So I think there are quarters where you see that play out very We also saw that in all of 2022 where we grew top line close to 50%, EBITDA close to 50%, free cash flow close to 50%. So I think Again, we differentiate from that perspective in our book of business and with the unit economics working and you're seeing some of that play out in Q2. And for the rest of the year, look, we'll try to be prudent with our guidance. Speaker 200:24:26We see a lot of good momentum. We're also investing in Five new markets, as David noted. So I think it's a balance between continuing to invest in and get Future growth versus profitability in the current year. So I think we feel really good about the guidance we've given. And as the year goes, we'll update guidance Operator00:24:51Our next question comes from Jeff Garro. Speaker 800:24:57Yes, good morning and thanks for taking the questions. So why us about investments in new markets? And You've mentioned the success ramping markets like North Carolina, Ohio and Connecticut. So curious how new market investment spend is tracking year to date? And then maybe also you could help us think about growth in new market investments going forward versus what you've detailed for the current year And specifically, how the types of markets and agreements like what you've disclosed in Washington and whatever else is in the pipeline might impact that? Speaker 800:25:29Thanks. Speaker 300:25:31Yes. So I would say, as we've been tracking with our results in those markets, so have The investments in those markets. So I would say the investments are on track and maybe even a little bit ahead of schedule for the ones that we've done in the past. On a go forward basis, obviously, we have an expectation of investment each time we enter one of these markets. And so we're expecting to invest in Washington starting, Obviously, as soon as we close, we'll have some of that impact this year. Speaker 300:26:01But obviously, that's reflected in our increased guidance that we provided for the year. And again, on a go forward basis, as we continue to enter new markets, we expect those operating costs as we get into those markets not to really be Much different from that in the past, being the larger the market, maybe a little bit larger cost, the smaller the market, maybe a little bit smaller. But at the end of the day, we are going to make that we are going to need to make an investment in any of those markets as we enter them, but we see great long term results for making those investments. Operator00:26:35Thank you. Our next question comes from Andrew Bach from UBS. Speaker 900:26:41Hi. I just wanted to follow-up on the utilization conversation. You held the midpoint of your practice collections outlook constant despite strong performance in the quarter, The low attrition rate you cited and your comments around strong trends in the ambulatory segment, can you help quantify the impact of the paused capitated And is there anything else you would call out why the higher utilization isn't necessarily flowing through to higher practice collections revenue? Thanks. Speaker 200:27:09Yes. Thanks, Andrew. So obviously, if you look at the implied lives that are not capitated, You can if we hadn't had that contract paused, you can imply that we would have been closer to the mid to high end of our Original guidance even on practice collections. Obviously, the reason for pausing that contract was preserving the earnings power and given the situation the unique situation in that One particular contract, it's not impacted our bottom line results and that was the objective here. So Again, you can see the top line impact is not resulting in any bottom line metric. Speaker 200:27:49And with the momentum we've had, Had it not been for that, we would have been at the high end of that guidance as well. Operator00:27:59Thank you. Our next question comes from David Larsen from BTIG. Speaker 1000:28:06Hi, congrats on the good quarter. Can you maybe talk a little bit about the nature of the conversations that you're having with the health plans? Are they willing and ready and happy and able to get into risk deals? Sometimes they want to avoid risk deals. Are you seeing more success on the Medicare or Medicaid side? Speaker 1000:28:26And then just any thoughts around the CMS proposed rule for 24, there's going to be some headwinds for the conversion factor, but an increase in risk. Just any color there would be helpful. Thank you. Speaker 200:28:38Yes. Thanks, Dave. So in general, look, we work really closely with all of our health plan partners. It's a longer term discussion than a very immediate discussion. We look at different risk pools. Speaker 200:28:51We look at density of lives, Density of duals and decide when to dial up risk. Look, our approach has been to be very prudent. We can't be more explicit than have a slide In our earnings call with the subheading that says it's called risk for a reason, our philosophy has been to have very close alignment Both with the payer partner as well as our physicians, having all three entities participate in that risk, we think that leads to Very better aligned outcomes and we'll continue to follow the same philosophy. Obviously, they can be in a period of time where everybody is chasing MA utilization sorry, MA attribution, you can have population growth or attributed lives growth, Which can be a little bit unnatural if everybody is chasing that from the payer side and we are downstream from the payer. So we try to avoid adverse selection and things of that nature. Speaker 200:29:47So having that alignment is very important. So I think we continue to have those discussions in every each one of our states. We'll thoughtfully move into risk. We really like the CMS MSSP program as you noted. It's a big part of our business. Speaker 200:30:01CMS takes about 25% share of the shared savings in the enhanced track. And I think most of the changes that they proposed further will strengthen the program and will be favorable in general to us around the assignment process, whether it's a benchmark risk adjustment methodology, quality reporting and then potentially the ability For ACOs like us to take more risk in the enhanced track. I would say though these will the financial impact will likely be more gradual Then some one time spike here as we've seen in the past with CMS adjusting the program, but we continue to think that this is one of the best most broadly Applicable value based programs in the country and we feel really good about it. Operator00:30:45Thank you. Our next question is from Jessica Tassane from Piper Sandler. Speaker 1100:30:50Hi, guys. Thanks for taking the question. So I was hoping you could maybe talk a little bit about the performance of some of your more mature MSSP ACOs. And I'm Specifically curious to know if ACOs like the Mid Atlantic are still growing new providers and new lives 9 years after inception. And kind of when an ACO is that sophisticated or mature, how do you think about bringing new providers into the fold without diluting the savings rate for existing providers? Speaker 1100:31:18Thanks. Speaker 200:31:19Thanks for the question, Jess. Look, we've continued to grow all of our ACOs over the years. We continue to add new providers even in mature markets Like Mid Atlantic, there are a lot of late adopters. We see a lot of momentum. We still despite being in this market for more than 8 or 9 years, Have pretty low market share relatively. Speaker 200:31:40We barely approach double digits even in mature markets with very large medical groups. And I think that speaks to the strength of this business model where the TAM is really large for us and we continue to get more attributed lives enter into Increased risk arrangements, so moving from TRACs 1, 2, 3 or ABC as they were in the past into more enhanced TRAC And then increase the savings rate. So I think you're going to see a double whammy on the shared savings and the EBITDA Progression on these ACOs and our hope is to continue to keep delivering on that. Obviously, the more mature the markets, you start to see some stabilization of results. But we think we have a pretty good line of sight in the next few years to keep growing some of our ACOs and continuing to deliver. Operator00:32:27Thank you. Our next question comes from Whit Mayo. Speaker 1200:32:33Hey, thanks. Parf, you guys acquired that ACO in Connecticut a few months ago. And I'm just wondering, is that a strategy that you guys think you might Plan on exploring further. I mean, I guess the question is, are you finding more inroads conversations after that transaction? Just how willing you are to maybe put capital to work to move into new markets. Speaker 1200:32:53I mean, you'll probably have over $400,000,000 of cash by year end. So just kind of curious as you Think about capital deployment and growth, how willing you are to maybe pursue that as a strategy? Speaker 200:33:07Yes. Thanks for the question, Whit. So the uniqueness of our business model is, as you well know, we are Forming medical groups, risk or ACO entities and then a full management services entity in every state. It's a very integrated type model across fee for service and value based care. The way we enter each market or grow a market after we enter Can we acquiring either of those 3 types of entities? Speaker 200:33:35And we've done that in the past as you've seen with different entries in different states With the and putting capital small amounts of capital to work. I think you should continue to expect that we'll keep doing that. Entering Washington is another example. We bought the Medical Group entity There and I think we're on the lookout for more such opportunities to either enter into new states or expand and increase our density in existing states. And I think that's a great use of capital for us to keep growing our business. Speaker 200:34:05And so I think you should continue to expect us to do that in the future. Operator00:34:11Thank you. Our next question comes from Gary Taylor From Speaker 1300:34:16Cowen. Hi, good morning. This is Ryan Langston in for Gary Taylor. It looks like AR jumped up quite a bit sequentially into the Q2. DSO looks like it's up about 10 days, but this is Pretty similar to what we saw last year. Speaker 1300:34:31Can you just remind us what is driving this? And also, it looks like on the cash flow statement, there was a $5,000,000 repurchase of NCI. Can you just maybe give us some context on what that refers to? Thanks. Speaker 300:34:45Yes. Hey, this is David. Yes, on the accounts receivable, so it was partially related to our new capitation related accruals in 23. We've got some new contracts But remember, on our value based care side of the business, with the typical 1 year annual payment in Q3 or Q4 of each year, AR builds in Q1 and Q2 each year. So unlike fee for service that you get sort of more of a normal DSO churn, For the value based care stuff, it grows throughout the year and then we get a payment in Q3 or Q4, AR goes back down and then it continues to grow back from there. Speaker 300:35:17So and again, as you mentioned, Very similar, same pattern as our past couple of years. So we expect this and this is what we expect. On the $5,000,000 on the cash flow, we purchased the remaining minority stake in an MSO that we own the majority stake in. So it was just a small additional investment to own 100 percent of an MSO in one of our markets. Operator00:35:44Thank you. Our next question comes from Sandy Draper from Guggenheim Partners. Speaker 1400:35:51Thanks very much. A lot of the questions have been asked and answered. Maybe just a Quick housekeeping then my actual question. I think, David, you mentioned you gave the percentages of fee for service and value based care versus as a percentage of practice collections. If that's true, could you just repeat that? Speaker 1400:36:06And I guess my broader question, I know you guys don't specifically comment on Capitated margins and where you are, but just in light of all what's out there and it's sort of been talked about how you're progressing in terms of you feel like you're progressing Your capital to revenue in terms of the margins and again how you think about the long term trajectory about where eventual scale is there and targeted margins? Thanks. Speaker 300:36:33Okay. Yes. So value based care represents 37% of GAAP revenue in 'twenty compared to 29.6% in Q2 of 22%. And Practice Collection's value based care was 24.9% in Q3, 2023 versus 20 1.8% in Q2 2022. Speaker 200:36:52Yes. And Sandy, appreciate the question. On the capitated book, look, our view is You take increased level of risk if there's significant earnings opportunity for taking that risk and us getting compensated and our doctors getting compensated. So I think with close to 150,000 MA lives, the embedded opportunity is pretty huge for us To dial up risk, we're just taking risk on downside risk on about 23% of those lives today. Over time, you should expect to see that number increase. Speaker 200:37:29Obviously, we try to do this very prudently working with our payers, We've got the right density, making sure our providers are aligned. They share the risk with us upside and downside. We don't backstop risk as you know. We think that's the right long term model to get all three entities aligned in such an environment. So I think while our approach has been more prudent Than many other players. Speaker 200:37:53I think there's been a lot of focus on taking more risk in the recent years than managing risk. We think managing risk should be as important, if not more important than taking risk, especially as you go through some of these utilization trends that the payers have been commenting on. We as provider entities taking risk are downstream from that. And I think again, you'll continue to see us being very thoughtful. Over time, over the long run, You should see very pretty significant opportunity for us to increase the earnings power of this business, as we take more risk in that particular segment And drive future EBITDA and free cash flow growth. Operator00:38:33Thank you. Our next question comes from Ryan Daniels from William Blair. Speaker 1500:38:39Yes, good morning. Thanks for taking the question. Parth, one for you. You've talked a little bit about outpatient utilization. Obviously, the managed care companies are seeing a lot of pent up demand and sustained outpatient surgery volume. Speaker 1500:38:51You're in a pretty unique position here, both with your surgery partners part And kind of your multi specialty purview, maybe help with some curious what you're seeing specifically there and if you can You'll move into more risk based contracts or episodes of care on the outpatient surgery to help deal with that and drive your growth and value proposition. Thanks. Speaker 200:39:11Yeah. Thanks for the question, Ryan. I told we would agree with your assessment. I think we are in a very unique position and that's a great differentiator for us. We have 50 plus specialties on the platform. Speaker 200:39:22We are not very heavy on surgical specialties, but we have partnerships that are and in the markets where we have Hospital partners, obviously, that's a bit more heavy. But overall, we think the commercial book is It's going to continue to be a pretty important part of our business. It's 50% of the population is commercially insured. I think there's a big focus by the payers to move A lot of the surgical procedures in an outpatient setting from an inpatient setting, I think that bodes well for our business and the value a multi specialty group like network can provide The payer partners and I we are having a lot of discussions, in adding to our specialist network and moving a lot of those volumes To the outpatient setting, so again, it's a long term strategy, but it adds a big tailwind to our business. And again, that diversification helps us Continuing to grow both top line and EBITDA, as I mentioned earlier in one of the questions. Speaker 200:40:20If you look at the last 4 years, it's just played out where Despite the ups and downs through the COVID years, we've continued to grow top line and bottom line with that kind of mix. And so We feel pretty excited about our strategy and it validates our approach in building big multi specialty groups. 80% of the costs are downstream from the PCP and it allows us to manage those costs in different arrangements as they come about over time. Operator00:40:47Thank you. Our next question comes from Adam Rahn of Bank of America. Speaker 900:40:54Hey, thanks for the question. Going back to the Washington market entry, just trying to get a sense for how dilutive it would really be to enter just because if you already have 50 providers, That could be like $30,000,000 in revenue. And if you take 10% of that, that's like $3,000,000 of incremental revenue to you. And you talk about like low single digit start up costs new market, so just wondering like why wouldn't that just be breakeven next year? And just trying to understand what Scale you kind of need in the market to overcome the dilutive investments. Speaker 900:41:24Thanks. Speaker 200:41:26Thanks, Adam. So Your assessment is correct. If we get a head start like we are doing here with 50 plus providers, as you've seen, we've entered the market and we've increased our Guidance ranges on the bottom line metrics are the mid to high end, so we are absorbing some of those costs within the year Despite addition of one new market that we hadn't previously announced. However, I think the TAM is pretty big. So While we'll get a little bit of a head start here, these markets breakeven as we are looking to build very big medical groups, 200, 2 or 300 providers over the next few years. Speaker 200:42:07There's pretty significant sales, marketing, implementation costs that go We've commented on the $2,000,000 to $3,000,000 spend per new state and that spend will happen in Washington as well. Getting a head start with 50 providers held, but most of these markets take a couple of years just to hit breakeven. Operator00:42:28Thank you. And our last question comes from Sean Dodge of RBC Capital Markets. Speaker 500:42:37Hey, good morning. This is Thomas Keller on for Sean. Thanks for taking the question. I guess I'll just go at the higher level in here. How does virtual care fit in your current provider playbook or strategy? Speaker 500:42:48Is this like an effective tool to improve overall economics, at least being on the value based care side? Or is it just More of a capability that certain patients kind of expect at this point. Thanks. Speaker 200:42:58Yes. Thanks for the question. I think we've continued with our playbook where It's everything that you mentioned. I mean, our job is to transform the practice once a provider joins us and optimize both their fee for service operations, take as many of the lives and move into value based arrangements, Streamline the expense structure and take on a lot of the admin burden. So we are focused on all of those aspects to increase at the end of the day the take home pay For our physician partners and the providers that join us, and that's our value proposition. Speaker 200:43:32It's a pretty big moat. A lot of hard work goes into it. We take a lot of the Dirty work off of their plates and then increase both the top line and bottom line. And then our management fees are directly tied to The performance of the practice. So I think the interests are pretty aligned. Speaker 200:43:48So I think we're going to focus on all three aspects of doing that and adding value to our provider groups and that increases the stickiness as you are seeing with our business. Operator00:44:01Thank you. I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Mayarotra for closing remarks. Speaker 200:44:11Thank you for listening to our call today. We appreciate your continued interest and support of our company and look forward to speaking with you again in the near future. Operator00:44:20This concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallPrivia Health Group Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Privia Health Group Earnings HeadlinesPrivia Health Reports First Quarter 2025 Financial ResultsMay 8 at 6:00 AM | globenewswire.comPrivia Health Group Inc (PRVA) Q1 2025 Earnings Report Preview: What To ExpectMay 8 at 1:25 AM | finance.yahoo.comNew breed of trader (Wall Street hates us?)Wall Street big wigs and old-money bankers can’t touch this 1 type of stock. And that opens the door for traders like you and me. They couldn’t touch this tech stock that ran from $1.50 to $98.40 in a week. Great – more for us. They wouldn’t touch this little-known imaging company. That’s fine – my friends and I were happy to ride it from $6 to $35 over breakfast.May 8, 2025 | Timothy Sykes (Ad)Privia Health (PRVA) Reports Earnings Tomorrow: What To ExpectMay 7 at 6:31 AM | msn.comPrivia Health Group, Inc. (NASDAQ:PRVA) Sees Significant Decline in Short InterestMay 4, 2025 | americanbankingnews.comIs Privia Health Group, Inc.'s (NASDAQ:PRVA) Recent Stock Performance Influenced By Its Financials In Any Way?April 29, 2025 | finance.yahoo.comSee More Privia Health Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Privia Health Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Privia Health Group and other key companies, straight to your email. Email Address About Privia Health GroupPrivia Health Group (NASDAQ:PRVA) operates as a national physician-enablement company in the United States. The company collaborates with medical groups, health plans, and health systems to optimize physician practices, enhance patient experiences, and reward doctors for delivering care in-person and virtual settings. It offers technology and population health tools to enhance independent providers' workflows; management services organization that enable providers to focus on their patients by reducing administrative work; single-TIN medical group that facilitates payer negotiation, clinical integration and alignment of financial incentives; accountable care organization, which engage patients, reduce inappropriate utilization, and enhance coordination and patient quality metrics to drive value-based care; and network for purchasers and payers that enable providers to connect with new patient populations and create custom contracts. The company was founded in 2007 and is headquartered in Arlington, Virginia.View Privia Health Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? 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There are 16 speakers on the call. Operator00:00:00Good day, and thank you for standing by. Welcome to the Privia Second Quarter 2023 Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised. Operator00:00:25Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Robert Orchard, SVP, Investor and Corporate Communications. Speaker 100:00:36Thank you, Amanda, and good morning, everyone. Joining me today are Parth Marota, Our Chief Executive Officer and David Mountcastle, our Chief Financial Officer. This call is being webcast and can be accessed from the Investor Relations section of priviahealth.com. Today's financial press release and slide presentation are posted on the Investor Relations page at priviahealth.com. Following our prepared comments, we will open the line for questions. Speaker 100:01:00Please limit yourself to one question only and return to the queue if you have a follow-up, so we can get to as many questions as possible today. The financial results reported today and in the press release are preliminary and are not final until our Form 10 Q for Q2 6 months ended June 30, 2023 is filed with the Securities and Exchange Commission. Some of the statements we will make today are forward looking in nature based on our current expectations and view of our business as of August 3, 2023. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risks and uncertainties that may cause actual results to differ materially. As a result, these statements should be considered in conjunction with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filings. Speaker 100:01:47Finally, we may refer to certain non GAAP financial measures on the call and reconciliation of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website. Now, I'd like to turn the call over to Parth. Speaker 200:02:00Thank you, Robert, and good morning, everyone. Privia Health delivered another solid quarter as we moved into the second half of twenty twenty three. We continue to execute on our strategy and remain focused on building 1 of the largest ambulatory care delivery networks in the nation. This morning, I'll highlight a number of business and company updates, Then David will discuss our recent financial performance and our 2023 guidance outlook before we take your questions. Privia Health continues to gain market share and momentum with our broad provider partnership and operating model. Speaker 200:02:33We executed at a very high level during the 2nd quarter, which resulted in practice collections increasing almost 14% year over year. Adjusted EBITDA was up more than 24%, which demonstrates the very strong operating leverage of our model as we continue to increase our number of provider partners and invest in our new markets. Our results were driven by continued same store and new provider growth as well as strong performance in our value based arrangements in aggregate. Based on our performance year to date, we have updated our 2023 guidance and are raising most of the metrics to the mid to high end of our initial ranges. Earlier this week, we announced a definitive agreement to enter Washington, our 13 state in partnership with Walla Walla Clinic, A multi specialty practice with more than 50 providers caring for patients in 3 locations. Speaker 200:03:23It was essential for us to find the right partner who shares Our vision to help build a scale provider network in Washington, while improving access to and affordability of care in the local communities. Walla Walla Clinic has a highly successful history over its decades of operation and we look forward to continuing to build on its rich heritage of delivering high quality care in the community. We expect the transaction to close in the Q3 with Walla Walla Clinic being fully implemented on the Privia platform by the end of Turning to some other company news. On May 8, we completed a secondary offering of 42,600,000 shares of common stock or more than 34% of our total fully diluted shares outstanding. This entirely eliminated Goldman Sachs and Pamplona Capital's ownership in the company as well as the previous shareholder agreement provisions with the private equity sponsors. Speaker 200:04:17We are excited to welcome a number of new long term oriented investors and look forward to continuing to create shareholder value in the years to come. In addition, the Privia Health Board has continued to broaden the capabilities and expertise of our Board members. Adam Bowler, Managing Partner of Rubicon Founders, joined our Board on July 1. He brings deep domain experience as the former Senior Advisor for Value Based Transformation and Innovation at the Department of Health and Human Services and also previously served as Director of CMMI, the Innovation Center at CMS. Dave Vickman and Pam Kmet joined our Board on August 1st. Speaker 200:04:57Dave's distinguished career with UnitedHealth will bring unique insights to our Board across the healthcare industry landscape. Pam is a proven leader with broad corporate experience and human capital expertise both in and outside the healthcare sector. We look forward to the important insights and valuable contributions from each of these new Board members as Privia continues to execute on its vision. Privia's national footprint continues to expand and now includes close to 3,900 implemented providers in our medical groups Caring for more than 4,400,000 patients in over 1,000 care center locations. Our scale and diverse provider and payer partnerships Our true differentiators. Speaker 200:05:40We are building 1 of the largest multi specialty medical groups and ambulatory care delivery networks in the country that can improve patient outcomes and reduce costs. We continue to be ahead of our growth plan for adding new implemented providers in our recent new markets of Connecticut, North Carolina and Ohio. While not highlighted on this slide, it is also noteworthy that our gross provider attrition rate in 2023 has been less than 1% year to date. This is one of the lowest in our company's history and we continue to add providers on a net same store basis. Privia has one of the broadest, most balanced and diversified value based care platforms in the industry. Speaker 200:06:23We serve close to 1,100,000 attributed lives across more than 100 at risk fair contracts in commercial and government programs. Total attributed lives increased almost 27% from a year ago. There remains a significant embedded opportunity for us to move our Medicare Advantage lives into upside and downside risk arrangements over the next few years. However, we remain focused on thoughtfully moving to increased risk arrangements, while continuing to provide significant opportunities for EBITDA and free cash flow growth. Our strong performance in the current healthcare environment is a testament to Privia's proven ability to manage risk. Speaker 200:07:03Our book of business across a diverse set of fee for service and value based contracts in commercial, Medicare Advantage, the Medicaid Shared Savings Program and Medicaid Allow us to uniquely balance risk, while delivering significant shared savings, EBITDA and free cash flow growth across a cycle of varying utilization trends. We leverage our clinical operations, performance management, healthcare economics and actuarial expertise to manage the transition to risk. Our close alignment with our physician is critically important in managing patient panels across the risk spectrum. This is accomplished through our physician led governance structure in our homogenous single tax ID medical groups in each state and the hands on day to day work of our clinical and operations teams. These differentiated fee for service and value based care capabilities in the Privia model Allow us to be a unique partner to physician practices across all specialties in any state serving all patients across all reimbursement models. Speaker 200:08:03Now I'll ask David to review our recent financial results and 2023 outlook. Speaker 300:08:09Thank you, Par. Privia Health's operational execution continued to deliver strong performance in the Q2 of 2023. Our implemented provider count was 3,870, up 9.3% year over year. Solid ambulatory utilization trends and new implemented providers led to practice collections increasing 13.7 percent from Q2 a year ago to reach 700,000,000 Adjusted EBITDA was up 24.3 percent over Q2 last year to $19,300,000 highlighting our ability to continue to generate operating leverage as we expand and grow in existing and new markets. Total value based care comprised 37% Total GAAP revenue in the Q2 of 2023 compared to 29.6% in Q2 a year ago, which highlights our thoughtful and prudent moves to at risk contracts over time. Speaker 300:09:06For the first half of twenty twenty three, Practice collections increased 15.4 percent to almost $1,360,000,000 Care margin was up 18.8% and adjusted EBITDA grew 19.3 percent to reach $36,200,000 Our updated 2023 guidance highlights the strength and resiliency of our operating model and diversified book of business. Based on our year to date financial and operating performance, We are raising all of our 2023 guidance metrics to the mid to high end of our initial ranges, except practice collections and attributed lives. We expect practice collections to come in at the midpoint of the guidance as this includes the impact of the 1 pause capitated contract we discussed last quarter. We also expect year end attributed lives to be at the midpoint of our previous guidance. As we've noted previously, our 2023 adjusted EBITDA guidance absorbs $8,000,000 to $10,000,000 in new market entry and expansion investments. Speaker 300:10:02With 5 new states and 3 new ACOs in 2023, We plan to continue to invest across our business enterprise to support our significant expansion, while continuing to grow EBITDA and free cash flow year over year. We expect our new markets to scale significantly in the coming years as we grow our provider base and attribute their lives in these new states. Our balance sheet and capital position continue to be very strong with cash of approximately $318,000,000 and no debt. Given our capital efficient partnership model with annual capital expenditures of less than $1,000,000 we continue to expect 80% to 90% of our adjusted EBITDA to convert to free cash flow on an annual basis. We remain focused on building Privia Health into one of the largest ambulatory care delivery networks in the nation and investing to support this growth as we build our national footprint. Speaker 300:10:55We are now ready to take your questions. Operator00:11:03Thank you. We will now conduct the question and answer session. Please standby while we compile the Q and A roster. Our first question comes from Hellojandra Singh from Truist Securities. Speaker 200:11:32Yes. How this happens in a pre web call? This is Jalendra Singh from Truist Securities. Good morning, everyone, and congrats on a strong quarter. So actually, I wanted to get more color around utilization trends in the quarter. Speaker 200:11:45How did those compare with your Expectations and maybe what are you assuming for rest of the year there? And for the quarter in particular, were there any pockets where utilizations were Higher or lower than your expectations and impact on your business, various business lines. And kind of related, There was a $3,000,000 unfilled PYD in the quarter. Can you provide some color what drove that? Thanks, Jalendra. Speaker 200:12:10Appreciate the question. I'll tackle the first half and then David will comment on the $3,000,000 prior period adjustment. So generally speaking, on the utilization trends, one broad comment, if you look at the last 3 or 4 years, 2019 through 2022, Pre COVID, acute, during the COVID and then coming out of COVID, we've had ebbs and flow and utilization to a pretty extreme level. And the strength of our model just speaks for itself where we've each year grown both our fee for service book and our value based book from both the top line and an EBITDA perspective. So I think it's important to take that slightly longer term view as we look at utilization. Speaker 200:12:50The second point I'll make is, As we've said previously, it's important to distinguish between ambulatory utilization and then surgical or in or outpatient utilization trends. On the ambulatory side, we continue to see a higher plateau coming out of COVID. We've seen pretty strong tailwinds. That in our minds is good utilization with people seeing their primary care provider pediatrician OBGYN And that bodes well for our fee for service book and also is good for the value based book. I think if you see some spikes in surgical utilization both in and outpatient That obviously impacts the Medicare Advantage book. Speaker 200:13:29But despite that, our other value based books, Both commercial and the Medicare Shared Savings Program act as a very natural hedge. So I think obviously we are downstream from the payers. We've all seen the same commentary that you've read. And overall on balance, we performed really well in aggregate across both fee for service and value based book. Speaker 300:13:51Yes. And, Zandra, on the $3,000,000 that you see out there, it is not related to the polished capitation contract that we did last quarter. So I kind of wanted to make that point to start with. We received some payer data relative to retroactive 2022 adjustments. So the $3,000,000 in prior period claims increase was not actually a loss, but was offset by approximately the same amount of revenue booked in Q2 of 2023. Speaker 300:14:16And even with that, our financial performance remains strong as reflected in our Q2 results and updated 2023 financial guidance to the mid to high ranges. Speaker 200:14:27Thanks guys. Operator00:14:31Thank you. Please standby. Our next question comes from Lisa Gill from JPMorgan. Thanks very much. Good morning. Operator00:14:44I just wanted to dig in a little deeper on the ramp in the new markets, Adding North Carolina, Connecticut, Ohio, how do I think about the trend that you're seeing, how quickly You're getting physicians to come on to the platform. And would we expect an impact as we go towards Back half of this year and I understand that Washington will be will close in the Q3, so I'll think of that as more of a 2024 opportunity, but I'm just curious as to how the ramp is going versus your expectations. Speaker 200:15:16Thanks for the question, Lisa. So we're really pleased with how we've started in each of those markets. As we stated in our prepared remarks, we are running ahead of our expectations in new provider sales in each of those states And we continue to see pretty good opportunities to build very large medical groups over the next 4 to 5 years, which is always our thesis when we enter these new states. I think this year is we've experienced one of the strongest in market sales years in the history of the company. That's reflected in our Updated guidance of to mid to high end on the implemented providers for the end of the year. Speaker 200:15:55And then again, Washington is a new state that was not Disclosed earlier and we're really pleased with that partnership. They'll be implemented before the end of the year, but you'll see the financial impact for the full year going into 2024. So I think all of that leads us to have pretty good momentum closing out this year and then entering into next year and that's reflected in the guidance we provided today. Operator00:16:18And Parth, any early thoughts on like health system pipeline partnerships for 2024? Like how do you feel about that versus what we've seen in the last few years? Given your success, are you seeing more interest, the same interest? Just curious if there's a way to quantify how to think about that pipeline going into 2024? Speaker 200:16:36Yes, sure. I mean, we've seen really strong momentum. If you see our performance since going public a couple of years ago, We've accelerated the opening of new states. We've entered now 5 states in pretty short order here in the last 12 months. And when we went public, we said expect us to enter one state a year and we're clearly exceeding that. Speaker 200:16:59Our pipeline continues to be broad. We're having multiple with medical groups, ACO entities, health systems. Again, the timing of when these hit is always uncertain. These are very strategic partnerships, very long term oriented and we are very careful in who we choose as a partner. So obviously as those hit, we'll update you as we've been doing, but We feel really good about going into the next couple of years and the momentum of the business. Operator00:17:26Thank you. Our next question comes from Elizabeth Anderson from Evercore. Please go ahead. Speaker 400:17:34Hi, guys. This is Sameer Patel on for. We're upwards of $900 on MPMs for capitated revenues for the quarter, assuming no major change in lives. Should we expect something in this range going Forward, or is it kind of just trying to understand the range that it could potentially fall in over the rest of the year? Speaker 200:18:00Yes, Sameer. So I think that's a fair range to look at. Obviously, we are downstream from the payers on the cap book. So it's 85% of premium. And then in some risk pools, we are not taking the full 100% risk across all buckets of spend. Speaker 200:18:16So it just depends on the mix of business and the risk pool we are in and how much risk we are sharing with the payers. So We'll typically be slightly lower than the average PMPM that you usually see in the industry compared to 100% risk contract. Operator00:18:35Thank you. Our next question comes from Richard Close. Speaker 500:18:41Yes. Thanks for the question. I was wondering if you could just talk a little bit about Washington. The difference in that deal is maybe compared to, let's call it, BaaS in California. And then when do you expect to see, I guess, growth off of that in terms of bringing in new physicians? Speaker 200:19:06Thanks for the question, Richard. So the fundamental difference is, we will own the tax ID, Own the MSO entity, the ACO entity in Washington, so all three entities. That's not always the case in some of our partnerships, but in this state, we would own all three entities. So you'll see us consolidate results on a GAAP revenue basis and that will happen from the date of the closing of the transaction. The full year impact From an earnings standpoint, we'll happen likely starting 2024 as Walla Walla Clinic gets implemented towards the end of this year, similar to the 5 to 7 month ramp that we have in implementing providers. Speaker 200:19:42And then we'll start our work. Again, the thesis is very similar to other states. This is a 4 or 5 year journey for us to add providers and I think our differentiated model is really Should be welcomed in that state. I think there's a real need for providers to have an alternative in the Previa model to be autonomous and remain in their ownership structure while aligning with Somebody like us. So we're really excited. Speaker 200:20:06It's a big TAM in that state and we feel really excited to enter that state. Operator00:20:14Thank you. Our next question comes from Taji Phillips from Jefferies. Speaker 600:20:20Hi, this is Taji on. Thank you for Taking my question. So looking at the value based attributed lives growth, mainly concentrated in commercial and then on the government side, MA. So just curious, as we go through the year and there's a lot of, you could say, messiness or a lot of shifting in terms of enrollment with re determinations and exchanges, How are you thinking about the impact on your business? And then Parth, you had talked about still seeing a lot of embedded opportunity in Medicare Advantage. Speaker 600:20:50I guess, what would kind of Trigger that unlock right for you to see more growth in that part of the business? Thank you. Speaker 200:20:58Thanks for the questions, Ajay. So Obviously, the one key differentiator for Privia is our book of business is very balanced as you noted between commercial and government programs and within government programs In MSSB, MA and Medicaid, I think the puts and takes in each one of those, our view is as we grow our Provider base as we get more patients on the platform, we are looking to increase the number of attributed lives across all of these buckets. And I think we see great tailwinds across our states in continuing to add attributed lives and then increasing the yield per life As we enter into these programs, both for our physician partners and delivering low cost care and adding value for the payers, I think that differentiates us very meaningfully even in the commercial book. So I think you'll continue to see growth in each of those buckets. Obviously, there's movement within the year. Speaker 200:21:50If you take our 2 largest buckets, commercial and MSSP, they are more open access PPO like products. In the early half of the year, you sometimes see Employers change their insurance carrier, so there can be some shifting of lives as they need to Come and see their PCP again before being attributed in the new plan and we are downstream from that. It's very unlikely that the patient actually leaves the doctor. So I think you'll see some movement in the 1st couple of quarters. But overall, as we increase the number of providers, you should see growth in lives. Speaker 200:22:24And then to your last one on Medicaid, Again, you'll see some redetermination effect on that pool, but we are hoping that we'll capture those lives back in the commercial bucket over time. And then in the MA book, we'll continue to, as we've noted in our prepared remarks, take thoughtfully increase the level of risk We are taking on that book of business. There's a lot of embedded opportunity, but you need to do it very thoughtfully as we have been doing with Operator00:23:01Question comes from Jamie Purce from Goldman Sachs. Speaker 700:23:06Hey, thanks. Good morning. Two quick financial questions. First, Can you help us with the bridge on care management fees from 1Q to 2Q? It seems like a bigger step up than usual. Speaker 700:23:18So I'm wondering if there's Incremental services being offered or new partnerships there that are driving that. And then just on second half guidance, I mean, it feels like there's a lot of momentum coming out of the second quarter. Your implied second half really isn't changing too much across most metrics. I'm wondering if there's any incremental headwinds you're assuming for the second half or Just any specific assumptions we should be thinking about? Thank you. Speaker 200:23:45Thanks, Jamie. So on the first question, look again, you see the great operating leverage in our business where if we get great top line growth and perform well in value based arrangements, There's embedded operating leverage that you can see flow through into EBITDA and then free cash flow. So I think there are quarters where you see that play out very We also saw that in all of 2022 where we grew top line close to 50%, EBITDA close to 50%, free cash flow close to 50%. So I think Again, we differentiate from that perspective in our book of business and with the unit economics working and you're seeing some of that play out in Q2. And for the rest of the year, look, we'll try to be prudent with our guidance. Speaker 200:24:26We see a lot of good momentum. We're also investing in Five new markets, as David noted. So I think it's a balance between continuing to invest in and get Future growth versus profitability in the current year. So I think we feel really good about the guidance we've given. And as the year goes, we'll update guidance Operator00:24:51Our next question comes from Jeff Garro. Speaker 800:24:57Yes, good morning and thanks for taking the questions. So why us about investments in new markets? And You've mentioned the success ramping markets like North Carolina, Ohio and Connecticut. So curious how new market investment spend is tracking year to date? And then maybe also you could help us think about growth in new market investments going forward versus what you've detailed for the current year And specifically, how the types of markets and agreements like what you've disclosed in Washington and whatever else is in the pipeline might impact that? Speaker 800:25:29Thanks. Speaker 300:25:31Yes. So I would say, as we've been tracking with our results in those markets, so have The investments in those markets. So I would say the investments are on track and maybe even a little bit ahead of schedule for the ones that we've done in the past. On a go forward basis, obviously, we have an expectation of investment each time we enter one of these markets. And so we're expecting to invest in Washington starting, Obviously, as soon as we close, we'll have some of that impact this year. Speaker 300:26:01But obviously, that's reflected in our increased guidance that we provided for the year. And again, on a go forward basis, as we continue to enter new markets, we expect those operating costs as we get into those markets not to really be Much different from that in the past, being the larger the market, maybe a little bit larger cost, the smaller the market, maybe a little bit smaller. But at the end of the day, we are going to make that we are going to need to make an investment in any of those markets as we enter them, but we see great long term results for making those investments. Operator00:26:35Thank you. Our next question comes from Andrew Bach from UBS. Speaker 900:26:41Hi. I just wanted to follow-up on the utilization conversation. You held the midpoint of your practice collections outlook constant despite strong performance in the quarter, The low attrition rate you cited and your comments around strong trends in the ambulatory segment, can you help quantify the impact of the paused capitated And is there anything else you would call out why the higher utilization isn't necessarily flowing through to higher practice collections revenue? Thanks. Speaker 200:27:09Yes. Thanks, Andrew. So obviously, if you look at the implied lives that are not capitated, You can if we hadn't had that contract paused, you can imply that we would have been closer to the mid to high end of our Original guidance even on practice collections. Obviously, the reason for pausing that contract was preserving the earnings power and given the situation the unique situation in that One particular contract, it's not impacted our bottom line results and that was the objective here. So Again, you can see the top line impact is not resulting in any bottom line metric. Speaker 200:27:49And with the momentum we've had, Had it not been for that, we would have been at the high end of that guidance as well. Operator00:27:59Thank you. Our next question comes from David Larsen from BTIG. Speaker 1000:28:06Hi, congrats on the good quarter. Can you maybe talk a little bit about the nature of the conversations that you're having with the health plans? Are they willing and ready and happy and able to get into risk deals? Sometimes they want to avoid risk deals. Are you seeing more success on the Medicare or Medicaid side? Speaker 1000:28:26And then just any thoughts around the CMS proposed rule for 24, there's going to be some headwinds for the conversion factor, but an increase in risk. Just any color there would be helpful. Thank you. Speaker 200:28:38Yes. Thanks, Dave. So in general, look, we work really closely with all of our health plan partners. It's a longer term discussion than a very immediate discussion. We look at different risk pools. Speaker 200:28:51We look at density of lives, Density of duals and decide when to dial up risk. Look, our approach has been to be very prudent. We can't be more explicit than have a slide In our earnings call with the subheading that says it's called risk for a reason, our philosophy has been to have very close alignment Both with the payer partner as well as our physicians, having all three entities participate in that risk, we think that leads to Very better aligned outcomes and we'll continue to follow the same philosophy. Obviously, they can be in a period of time where everybody is chasing MA utilization sorry, MA attribution, you can have population growth or attributed lives growth, Which can be a little bit unnatural if everybody is chasing that from the payer side and we are downstream from the payer. So we try to avoid adverse selection and things of that nature. Speaker 200:29:47So having that alignment is very important. So I think we continue to have those discussions in every each one of our states. We'll thoughtfully move into risk. We really like the CMS MSSP program as you noted. It's a big part of our business. Speaker 200:30:01CMS takes about 25% share of the shared savings in the enhanced track. And I think most of the changes that they proposed further will strengthen the program and will be favorable in general to us around the assignment process, whether it's a benchmark risk adjustment methodology, quality reporting and then potentially the ability For ACOs like us to take more risk in the enhanced track. I would say though these will the financial impact will likely be more gradual Then some one time spike here as we've seen in the past with CMS adjusting the program, but we continue to think that this is one of the best most broadly Applicable value based programs in the country and we feel really good about it. Operator00:30:45Thank you. Our next question is from Jessica Tassane from Piper Sandler. Speaker 1100:30:50Hi, guys. Thanks for taking the question. So I was hoping you could maybe talk a little bit about the performance of some of your more mature MSSP ACOs. And I'm Specifically curious to know if ACOs like the Mid Atlantic are still growing new providers and new lives 9 years after inception. And kind of when an ACO is that sophisticated or mature, how do you think about bringing new providers into the fold without diluting the savings rate for existing providers? Speaker 1100:31:18Thanks. Speaker 200:31:19Thanks for the question, Jess. Look, we've continued to grow all of our ACOs over the years. We continue to add new providers even in mature markets Like Mid Atlantic, there are a lot of late adopters. We see a lot of momentum. We still despite being in this market for more than 8 or 9 years, Have pretty low market share relatively. Speaker 200:31:40We barely approach double digits even in mature markets with very large medical groups. And I think that speaks to the strength of this business model where the TAM is really large for us and we continue to get more attributed lives enter into Increased risk arrangements, so moving from TRACs 1, 2, 3 or ABC as they were in the past into more enhanced TRAC And then increase the savings rate. So I think you're going to see a double whammy on the shared savings and the EBITDA Progression on these ACOs and our hope is to continue to keep delivering on that. Obviously, the more mature the markets, you start to see some stabilization of results. But we think we have a pretty good line of sight in the next few years to keep growing some of our ACOs and continuing to deliver. Operator00:32:27Thank you. Our next question comes from Whit Mayo. Speaker 1200:32:33Hey, thanks. Parf, you guys acquired that ACO in Connecticut a few months ago. And I'm just wondering, is that a strategy that you guys think you might Plan on exploring further. I mean, I guess the question is, are you finding more inroads conversations after that transaction? Just how willing you are to maybe put capital to work to move into new markets. Speaker 1200:32:53I mean, you'll probably have over $400,000,000 of cash by year end. So just kind of curious as you Think about capital deployment and growth, how willing you are to maybe pursue that as a strategy? Speaker 200:33:07Yes. Thanks for the question, Whit. So the uniqueness of our business model is, as you well know, we are Forming medical groups, risk or ACO entities and then a full management services entity in every state. It's a very integrated type model across fee for service and value based care. The way we enter each market or grow a market after we enter Can we acquiring either of those 3 types of entities? Speaker 200:33:35And we've done that in the past as you've seen with different entries in different states With the and putting capital small amounts of capital to work. I think you should continue to expect that we'll keep doing that. Entering Washington is another example. We bought the Medical Group entity There and I think we're on the lookout for more such opportunities to either enter into new states or expand and increase our density in existing states. And I think that's a great use of capital for us to keep growing our business. Speaker 200:34:05And so I think you should continue to expect us to do that in the future. Operator00:34:11Thank you. Our next question comes from Gary Taylor From Speaker 1300:34:16Cowen. Hi, good morning. This is Ryan Langston in for Gary Taylor. It looks like AR jumped up quite a bit sequentially into the Q2. DSO looks like it's up about 10 days, but this is Pretty similar to what we saw last year. Speaker 1300:34:31Can you just remind us what is driving this? And also, it looks like on the cash flow statement, there was a $5,000,000 repurchase of NCI. Can you just maybe give us some context on what that refers to? Thanks. Speaker 300:34:45Yes. Hey, this is David. Yes, on the accounts receivable, so it was partially related to our new capitation related accruals in 23. We've got some new contracts But remember, on our value based care side of the business, with the typical 1 year annual payment in Q3 or Q4 of each year, AR builds in Q1 and Q2 each year. So unlike fee for service that you get sort of more of a normal DSO churn, For the value based care stuff, it grows throughout the year and then we get a payment in Q3 or Q4, AR goes back down and then it continues to grow back from there. Speaker 300:35:17So and again, as you mentioned, Very similar, same pattern as our past couple of years. So we expect this and this is what we expect. On the $5,000,000 on the cash flow, we purchased the remaining minority stake in an MSO that we own the majority stake in. So it was just a small additional investment to own 100 percent of an MSO in one of our markets. Operator00:35:44Thank you. Our next question comes from Sandy Draper from Guggenheim Partners. Speaker 1400:35:51Thanks very much. A lot of the questions have been asked and answered. Maybe just a Quick housekeeping then my actual question. I think, David, you mentioned you gave the percentages of fee for service and value based care versus as a percentage of practice collections. If that's true, could you just repeat that? Speaker 1400:36:06And I guess my broader question, I know you guys don't specifically comment on Capitated margins and where you are, but just in light of all what's out there and it's sort of been talked about how you're progressing in terms of you feel like you're progressing Your capital to revenue in terms of the margins and again how you think about the long term trajectory about where eventual scale is there and targeted margins? Thanks. Speaker 300:36:33Okay. Yes. So value based care represents 37% of GAAP revenue in 'twenty compared to 29.6% in Q2 of 22%. And Practice Collection's value based care was 24.9% in Q3, 2023 versus 20 1.8% in Q2 2022. Speaker 200:36:52Yes. And Sandy, appreciate the question. On the capitated book, look, our view is You take increased level of risk if there's significant earnings opportunity for taking that risk and us getting compensated and our doctors getting compensated. So I think with close to 150,000 MA lives, the embedded opportunity is pretty huge for us To dial up risk, we're just taking risk on downside risk on about 23% of those lives today. Over time, you should expect to see that number increase. Speaker 200:37:29Obviously, we try to do this very prudently working with our payers, We've got the right density, making sure our providers are aligned. They share the risk with us upside and downside. We don't backstop risk as you know. We think that's the right long term model to get all three entities aligned in such an environment. So I think while our approach has been more prudent Than many other players. Speaker 200:37:53I think there's been a lot of focus on taking more risk in the recent years than managing risk. We think managing risk should be as important, if not more important than taking risk, especially as you go through some of these utilization trends that the payers have been commenting on. We as provider entities taking risk are downstream from that. And I think again, you'll continue to see us being very thoughtful. Over time, over the long run, You should see very pretty significant opportunity for us to increase the earnings power of this business, as we take more risk in that particular segment And drive future EBITDA and free cash flow growth. Operator00:38:33Thank you. Our next question comes from Ryan Daniels from William Blair. Speaker 1500:38:39Yes, good morning. Thanks for taking the question. Parth, one for you. You've talked a little bit about outpatient utilization. Obviously, the managed care companies are seeing a lot of pent up demand and sustained outpatient surgery volume. Speaker 1500:38:51You're in a pretty unique position here, both with your surgery partners part And kind of your multi specialty purview, maybe help with some curious what you're seeing specifically there and if you can You'll move into more risk based contracts or episodes of care on the outpatient surgery to help deal with that and drive your growth and value proposition. Thanks. Speaker 200:39:11Yeah. Thanks for the question, Ryan. I told we would agree with your assessment. I think we are in a very unique position and that's a great differentiator for us. We have 50 plus specialties on the platform. Speaker 200:39:22We are not very heavy on surgical specialties, but we have partnerships that are and in the markets where we have Hospital partners, obviously, that's a bit more heavy. But overall, we think the commercial book is It's going to continue to be a pretty important part of our business. It's 50% of the population is commercially insured. I think there's a big focus by the payers to move A lot of the surgical procedures in an outpatient setting from an inpatient setting, I think that bodes well for our business and the value a multi specialty group like network can provide The payer partners and I we are having a lot of discussions, in adding to our specialist network and moving a lot of those volumes To the outpatient setting, so again, it's a long term strategy, but it adds a big tailwind to our business. And again, that diversification helps us Continuing to grow both top line and EBITDA, as I mentioned earlier in one of the questions. Speaker 200:40:20If you look at the last 4 years, it's just played out where Despite the ups and downs through the COVID years, we've continued to grow top line and bottom line with that kind of mix. And so We feel pretty excited about our strategy and it validates our approach in building big multi specialty groups. 80% of the costs are downstream from the PCP and it allows us to manage those costs in different arrangements as they come about over time. Operator00:40:47Thank you. Our next question comes from Adam Rahn of Bank of America. Speaker 900:40:54Hey, thanks for the question. Going back to the Washington market entry, just trying to get a sense for how dilutive it would really be to enter just because if you already have 50 providers, That could be like $30,000,000 in revenue. And if you take 10% of that, that's like $3,000,000 of incremental revenue to you. And you talk about like low single digit start up costs new market, so just wondering like why wouldn't that just be breakeven next year? And just trying to understand what Scale you kind of need in the market to overcome the dilutive investments. Speaker 900:41:24Thanks. Speaker 200:41:26Thanks, Adam. So Your assessment is correct. If we get a head start like we are doing here with 50 plus providers, as you've seen, we've entered the market and we've increased our Guidance ranges on the bottom line metrics are the mid to high end, so we are absorbing some of those costs within the year Despite addition of one new market that we hadn't previously announced. However, I think the TAM is pretty big. So While we'll get a little bit of a head start here, these markets breakeven as we are looking to build very big medical groups, 200, 2 or 300 providers over the next few years. Speaker 200:42:07There's pretty significant sales, marketing, implementation costs that go We've commented on the $2,000,000 to $3,000,000 spend per new state and that spend will happen in Washington as well. Getting a head start with 50 providers held, but most of these markets take a couple of years just to hit breakeven. Operator00:42:28Thank you. And our last question comes from Sean Dodge of RBC Capital Markets. Speaker 500:42:37Hey, good morning. This is Thomas Keller on for Sean. Thanks for taking the question. I guess I'll just go at the higher level in here. How does virtual care fit in your current provider playbook or strategy? Speaker 500:42:48Is this like an effective tool to improve overall economics, at least being on the value based care side? Or is it just More of a capability that certain patients kind of expect at this point. Thanks. Speaker 200:42:58Yes. Thanks for the question. I think we've continued with our playbook where It's everything that you mentioned. I mean, our job is to transform the practice once a provider joins us and optimize both their fee for service operations, take as many of the lives and move into value based arrangements, Streamline the expense structure and take on a lot of the admin burden. So we are focused on all of those aspects to increase at the end of the day the take home pay For our physician partners and the providers that join us, and that's our value proposition. Speaker 200:43:32It's a pretty big moat. A lot of hard work goes into it. We take a lot of the Dirty work off of their plates and then increase both the top line and bottom line. And then our management fees are directly tied to The performance of the practice. So I think the interests are pretty aligned. Speaker 200:43:48So I think we're going to focus on all three aspects of doing that and adding value to our provider groups and that increases the stickiness as you are seeing with our business. Operator00:44:01Thank you. I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Mayarotra for closing remarks. Speaker 200:44:11Thank you for listening to our call today. We appreciate your continued interest and support of our company and look forward to speaking with you again in the near future. Operator00:44:20This concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by