Privia Health (PRVA) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Privia Health Group, Inc. as of June 30, 2024, and for the three and six-month periods then ended Condensed Consolidated Balance Sheets Total assets reached $1.078 billion by June 30, 2024, driven by accounts receivable, with liabilities at $434.0 million and equity at $643.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 (unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $779,671 | $700,804 | | Accounts Receivable | $370,055 | $290,768 | | Cash and cash equivalents | $387,352 | $389,511 | | Total Assets | $1,077,621 | $999,900 | | Total Current Liabilities | $429,592 | $386,952 | | Provider liability | $366,125 | $326,078 | | Total Liabilities | $434,014 | $392,511 | | Total Stockholders' Equity | $643,607 | $607,389 | Condensed Consolidated Statements of Operations For Q2 2024, revenue slightly increased to $422.3 million, but operating income declined to $5.1 million and net income to $3.5 million due to higher expenses Q2 2024 vs Q2 2023 Statement of Operations (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenue | $422,326 | $413,351 | | Total operating expenses | $417,228 | $406,372 | | Operating income | $5,098 | $6,979 | | Net income attributable to Privia | $3,467 | $7,274 | | Diluted EPS | $0.03 | $0.06 | H1 2024 vs H1 2023 Statement of Operations (in thousands, except per share data) | Metric | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | $837,569 | $799,627 | | Total operating expenses | $831,648 | $785,934 | | Operating income | $5,921 | $13,693 | | Net income attributable to Privia | $6,451 | $14,598 | | Diluted EPS | $0.05 | $0.12 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities for H1 2024 improved to $1.3 million from a $5.8 million use in 2023, ending with $387.4 million in cash and cash equivalents Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,330 | $(5,777) | | Net cash used in investing activities | $(5,713) | $(24,928) | | Net cash provided by financing activities | $2,224 | $658 | | Net decrease in cash and cash equivalents | $(2,159) | $(30,047) | | Cash and cash equivalents at end of period | $387,352 | $317,945 | Notes to Condensed Consolidated Financial Statements (Unaudited) The notes detail accounting policies, revenue recognition, and management of assets, covering revenue disaggregation, provider liability, debt, income tax, and stock-based compensation - The company operates in fourteen markets through a model collaborating with medical groups, health plans, and health systems, utilizing Management Services Organizations (MSOs) for administrative services[16] Revenue by Source for Six Months Ended June 30 (in thousands) | Revenue Source | 2024 | 2023 | | :--- | :--- | :--- | | FFS-patient care | $550,584 | $458,776 | | FFS-administrative services | $61,208 | $53,568 | | Capitated revenue | $107,742 | $164,955 | | Shared savings | $87,282 | $96,774 | | Care management fees (PMPM) | $26,766 | $22,126 | | Total revenue | $837,569 | $799,627 | - Stock-based compensation expense for H1 2024 was $26.3 million, a significant increase from $14.6 million in the same period of 2023[45] - As of June 30, 2024, the company had no outstanding borrowings under its $125 million five-year senior secured revolving credit facility established in November 2023[35] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's performance, highlighting growth in key metrics, revenue mix shifts, increased operating expenses, and strong liquidity with no outstanding debt Overview and Key Metrics Privia Health's physician-enablement platform showed strong growth in key metrics, with Implemented Providers increasing 16.4% and Attributed Lives growing 10.7% year-over-year by June 30, 2024 Key Metrics as of June 30 | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Implemented Providers | 4,504 | 3,870 | 16.4% | | Attributed Lives (in thousands) | 1,200 | 1,084 | 10.7% | Non-GAAP Financial Highlights (in millions) | Metric | H1 2024 | H1 2023 | % Change | | :--- | :--- | :--- | :--- | | Practice Collections | $1,435.7 | $1,358.9 | 5.7% | | Care Margin | $194.7 | $175.7 | 10.8% | | Platform Contribution | $92.1 | $86.0 | 7.1% | | Adjusted EBITDA | $41.9 | $36.2 | 15.9% | - The company expanded into four new markets in 2023: Connecticut, Ohio, Washington state, and South Carolina, contributing to provider growth[65] Results of Operations H1 2024 revenue grew 4.7% to $837.6 million, driven by FFS-patient care but offset by a 34.7% decrease in capitated revenue, leading to a 56.8% drop in operating income and 55.8% in net income due to rising expenses Revenue Breakdown for Six Months Ended June 30 (in thousands) | Revenue Source | 2024 | 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | FFS-patient care | $550,584 | $458,776 | $91,808 | 20.0% | | Capitated revenue | $107,742 | $164,955 | $(57,213) | (34.7)% | | Total Revenue | $837,569 | $799,627 | $37,942 | 4.7% | - The decrease in capitated revenue is due to renegotiated agreements, effective January 1, 2024, shifting approximately 19,800 Attributed Lives from a gross capitated revenue model to a net shared savings model[60][67][95] Operating Expenses for Six Months Ended June 30 (in thousands) | Expense Category | 2024 | 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Provider expense | $642,872 | $623,973 | $18,899 | 3.0% | | Cost of platform | $111,163 | $94,930 | $16,233 | 17.1% | | General and administrative | $61,037 | $52,759 | $8,278 | 15.7% | | Total operating expenses | $831,648 | $785,934 | $45,714 | 5.8% | - The increase in General and Administrative expenses for H1 2024 was primarily driven by a $7.6 million increase in stock-based compensation expense[101] Liquidity and Capital Resources The company maintains strong liquidity with $387.4 million in cash as of June 30, 2024, positive operating cash flow of $1.3 million for H1 2024, and no outstanding debt - As of June 30, 2024, the company had cash and cash equivalents of $387.4 million[104] Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,330 | $(5,777) | | Net cash used in investing activities | $(5,713) | $(24,928) | | Net cash provided by financing activities | $2,224 | $658 | - The improvement in operating cash flow was primarily driven by a smaller increase in accounts receivable compared to the prior year, related to the renegotiation of at-risk capitated arrangements[107] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its variable-rate credit facility, though this risk is currently mitigated by having no outstanding debt - The company's main market risk is from changing interest rates on its variable-rate credit facility[112][113] - As of June 30, 2024, the company had no outstanding debt, minimizing its current interest rate risk[113] - Management has concluded that inflation has not had a material effect on the company's operating results for the periods presented[114] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report (June 30, 2024)[115] - No changes were made during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[116] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings but does not expect them to have a material adverse effect on its financial condition or results of operations - The company is involved in ordinary course legal proceedings but does not expect them to have a material adverse effect on its business[117] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Company's Annual Report have occurred[118] Item 5. Other Information This section discloses changes to executive trading plans, including CEO Parth Mehrotra's new Rule 10b5-1 plan for stock options and board member Shawn Morris's plan for securities sales - On June 11, 2024, CEO Parth Mehrotra adopted a new Rule 10b5-1 trading plan for the exercise of 252,477 stock options, with the first possible trade date of September 10, 2024[120] - On June 3, 2024, board member Shawn Morris adopted a new Rule 10b5-1 trading plan for the sale of up to 2,500,000 securities, with the first possible trade date of September 3, 2024[120]