Privia Health (PRVA) - 2024 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Financial Statements (Unaudited) This section presents Privia Health Group's unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2024 Condensed Consolidated Balance Sheets Total assets increased to $1.15 billion as of September 30, 2024, driven by cash and receivables, while total liabilities rose to $483.4 million due to higher provider liability Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2024 (unaudited) | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $853,753 | $700,804 | | Cash and cash equivalents | $421,997 | $389,511 | | Accounts receivable | $408,959 | $290,768 | | Total Assets | $1,145,565 | $999,900 | | Total Current Liabilities | $479,473 | $386,952 | | Provider liability | $411,252 | $326,078 | | Total Liabilities | $483,383 | $392,511 | | Total Stockholders' Equity | $662,182 | $607,389 | Condensed Consolidated Statements of Operations Q3 2024 revenue grew 4.9% to $437.9 million, but net income attributable to Privia decreased to $3.5 million due to higher operating expenses Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $437,921 | $417,282 | $1,275,490 | $1,216,909 | | Operating Income | $5,813 | $5,536 | $11,734 | $19,229 | | Net Income | $3,978 | $5,942 | $11,677 | $18,704 | | Net Income attributable to Privia | $3,535 | $5,643 | $9,986 | $20,241 | | Diluted EPS | $0.03 | $0.05 | $0.08 | $0.16 | Condensed Consolidated Statements of Cash Flows Net cash from operations significantly increased to $34.5 million for the nine months ended September 30, 2024, with cash and equivalents rising by $32.5 million Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,484 | $16,684 | | Net cash used in investing activities | ($5,713) | ($37,948) | | Net cash provided by financing activities | $3,715 | $3,663 | | Net increase (decrease) in cash | $32,486 | ($17,601) | | Cash and cash equivalents at end of period | $421,997 | $330,391 | Notes to Condensed Consolidated Financial Statements (Unaudited) Notes detail accounting policies, revenue recognition, debt, stock-based compensation, and revenue concentration, noting Indiana expansion - The company operates a physician-enablement model in 14 markets, collaborating with medical groups through Management Services Agreements (MSAs) and consolidating certain 'Friendly Medical Groups' determined to be Variable Interest Entities (VIEs)[17][19][20] Disaggregated Revenue (in thousands) | Revenue Source | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | FFS-patient care | $283,278 | $245,569 | $833,862 | $704,346 | | Capitated revenue | $53,393 | $88,526 | $161,135 | $253,481 | | Shared savings | $47,438 | $33,530 | $134,720 | $130,304 | | Total revenue | $437,921 | $417,282 | $1,275,490 | $1,216,909 | - The company terminated its previous Credit Agreement in March 2023 and entered into a new $125 million five-year senior secured revolving credit facility in November 2023, with no amounts outstanding as of September 30, 2024[37] - Stock-based compensation expense was $15.1 million for Q3 2024 and $41.4 million for the first nine months of 2024, up from $10.8 million and $25.4 million in the respective prior-year periods[42][45] - The company has significant revenue concentration, with three major payers (Payer A, B, and C) accounting for 30%, 15%, and 11% of total revenues, respectively, in Q3 2024[48] - Subsequent to the quarter end, in November 2024, the company announced its expansion into Indiana through a partnership with a multi-specialty practice[52] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Privia Health's financial condition and results for Q3 and nine months 2024, highlighting key metrics and liquidity Overview and Key Metrics Privia Health, a physician-enablement company, saw Implemented Providers grow 13.1% to 4,642 and Attributed Lives increase 14.0% to 1.25 million, with Q3 Adjusted EBITDA up 25.8% to $23.6 million - Privia's business model focuses on collaborating with medical groups, health plans, and health systems to optimize physician practices and facilitate the transition to value-based care (VBC)[55] Key Metrics (as of September 30) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Implemented Providers | 4,642 | 4,105 | 13.1% | | Attributed Lives (thousands) | 1,247 | 1,094 | 14.0% | Non-GAAP Financial Measures (in thousands) | Metric | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Practice Collections | $739,900 | $723,500 | $2,175,600 | $2,082,400 | | Care Margin | $101,420 | $92,060 | $296,117 | $267,714 | | Platform Contribution | $50,257 | $45,181 | $142,388 | $131,199 | | Adjusted EBITDA | $23,624 | $18,774 | $65,568 | $54,950 | - Effective January 1, 2024, the company renegotiated certain capitation agreements, moving approximately 19,800 Attributed Lives from gross-basis capitated revenue to net-basis shared savings revenue[61][70] Results of Operations Q3 2024 total revenue rose 4.9% to $437.9 million, driven by FFS-patient care, despite a 39.7% drop in capitated revenue, leading to a 37.4% decline in net income Revenue by Source - Q3 2024 vs Q3 2023 (in thousands) | Revenue Source | Q3 2024 | Q3 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | FFS-patient care | $283,278 | $245,569 | $37,709 | 15.4% | | Capitated revenue | $53,393 | $88,526 | ($35,133) | (39.7)% | | Shared savings | $47,438 | $33,530 | $13,908 | 41.5% | | Total Revenue | $437,921 | $417,282 | $20,639 | 4.9% | Operating Expenses - Q3 2024 vs Q3 2023 (in thousands) | Expense Category | Q3 2024 | Q3 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Provider expense | $336,501 | $325,222 | $11,279 | 3.5% | | Cost of platform | $56,068 | $50,324 | $5,744 | 11.4% | | General and administrative | $30,695 | $27,228 | $3,467 | 12.7% | | Total operating expenses | $432,108 | $411,746 | $20,362 | 4.9% | - The increase in Cost of Platform for Q3 2024 was driven by higher salaries and benefits ($1.8 million), increased stock-based compensation ($1.5 million), and higher platform costs ($1.4 million) related to provider growth[104] - The increase in General and Administrative expenses for Q3 2024 was primarily due to a $2.4 million increase in stock-based compensation expense[105] Liquidity and Capital Resources The company held $422.0 million in cash as of September 30, 2024, with operating cash flow significantly improving to $34.5 million for the nine months - The company had cash and cash equivalents of $422.0 million as of September 30, 2024, and believes this is adequate for short-term and long-term needs[108] Summary of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,484 | $16,684 | | Net cash used in investing activities | ($5,713) | ($37,948) | | Net cash provided by financing activities | $3,715 | $3,663 | - The improvement in operating cash flow was primarily due to a smaller increase in accounts receivable ($38.0 million favorable variance) and a smaller increase in provider liability ($38.7 million unfavorable variance) compared to the prior year, largely resulting from the renegotiation of at-risk capitated arrangements[113] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk primarily involves interest rates from its variable-rate Revolving Credit Agreement, though no debt was outstanding as of September 30, 2024 - The company is exposed to interest rate risk through its variable-rate Revolving Credit Agreement, but had no outstanding debt as of September 30, 2024[120] - Management believes that inflation has not had a material effect on the company's operating results for the periods presented[121] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2024 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2024[122] - 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[123] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings but does not anticipate a material adverse effect on its financial condition or operations - The company is involved in legal proceedings in the ordinary course of business but does not expect them to have a material adverse effect on its financial condition or results of operations[125] 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 - There have been no material changes to the risk factors disclosed in the Company's Annual Report[126] Item 5. Other Information CFO David Mountcastle adopted a Rule 10b5-1 trading plan on August 30, 2024, to sell up to 162,526 shares between December 2024 and November 2025 - On August 30, 2024, CFO David Mountcastle adopted a new Rule 10b5-1 trading plan to sell up to 162,526 shares between December 2024 and November 2025[127] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL financial data files[129]