Sign in

    Privia Health Group Inc (PRVA)

    Q3 2024 Earnings Summary

    Reported on Apr 3, 2025 (Before Market Open)
    Pre-Earnings Price$21.16Last close (Nov 6, 2024)
    Post-Earnings Price$21.12Open (Nov 7, 2024)
    Price Change
    $-0.04(-0.19%)

    What went well

    • Strong financial performance with adjusted EBITDA growth of 25% year-over-year, exceeding the company's target of 20% annual growth. This reflects effective execution and operating leverage while investing in new markets.
    • Robust cash position of approximately $473 million with no debt, positioning the company to capitalize on growth opportunities and business development initiatives. The company expects approximately 90% of adjusted EBITDA to convert to free cash flow due to their capital-light operating model.
    • Consistent success in value-based care programs, particularly in the Medicare Shared Savings Program (MSSP), achieving shared savings of $176.6 million, a 34.1% increase from 2022. This success demonstrates effective cost management and validates their diversified value-based care strategy.

    What went wrong

    • Uncertainty in Achieving Targeted 20% EBITDA Growth: Privia Health may face challenges in maintaining its 20% EBITDA growth target, especially in 2025. The CEO acknowledged that while they aim for over 20% growth over the long term, there could be years where growth is lower due to costs associated with entering new markets, such as Indiana, and ongoing headwinds in the Medicare Advantage (MA) program.
    • Continued Headwinds in Medicare Advantage Limiting Risk Contract Expansion: The company anticipates that challenges in the Medicare Advantage program will persist through 2025 and 2026. As a result, Privia Health is cautious about significantly increasing its capitated book or taking full downside risk in MA, which could constrain revenue growth and profit potential in this segment.
    • Potential Impact of Benchmark Rebasing on MSSP Performance: Privia Health's largest Accountable Care Organization (ACO) will undergo benchmark rebasing in 2024. While the company has navigated rebasing before, the process could introduce headwinds affecting shared savings in the Medicare Shared Savings Program (MSSP), potentially impacting profitability.

    Q&A Summary

    1. Free Cash Flow Conversion
      Q: You raised free cash flow conversion to 90%; what's driving this?
      A: We outperformed across all lines of business, with strong fee-for-service and value-based care books, leading to higher adjusted EBITDA toward the high end. With effectively zero CapEx, this boosts free cash flow conversion to 90%.

    2. EBITDA Growth Target
      Q: Can you sustain 20% EBITDA growth despite Indiana's costs?
      A: Yes, our long-term target remains 20%+ EBITDA growth. While yearly figures may vary, we incorporate new market costs and feel good about our momentum into next year.

    3. Margins on Capitated Book
      Q: How are margins on your capitated book and Q4 trends?
      A: We had a small positive margin, better than expected. Despite ongoing headwinds like utilization trends and star scores, we manage carefully and hope to end the year positive.

    4. Indiana Expansion Impact
      Q: Will Indiana's ownership affect revenue classification?
      A: Yes, GAAP revenue will reflect the full top line, classified as fee-for-service revenue, not ASO.

    5. Shared Savings Outlook
      Q: Shared savings came in ahead; any change in expectations?
      A: Despite significant headwinds in MA, we outperformed and shared savings are slightly higher than anticipated, reflected in our results.

    6. Practice Collections Guidance
      Q: Is Q4 guidance conservative or reflecting other factors?
      A: We're being prudent as always. There's nothing suggesting otherwise, and we've guided to the high end, hoping for better.

    7. MA Risk Contracting Outlook
      Q: Are payers more willing to share risk in MA contracts?
      A: We prefer flexible shared risk arrangements. Given ongoing headwinds, we don't plan to increase full downside risk in our capitated book.

    8. Physician Growth and Pipeline
      Q: What drives your strong physician signings and pipeline?
      A: Our validated strategy and performance attract groups. Providers seek partners like us amid industry disruption, and our value proposition remains strong.

    9. Election Impact on MSSP
      Q: Will election results affect MSSP and your business?
      A: Our strategy doesn't change with administrations. We've succeeded through multiple administrations, and CMS aims to grow MSSP regardless.

    10. Fee Schedule Changes
      Q: Thoughts on new physician fee schedule changes?
      A: No material impact on our approach or results. We continue our strategy without significant changes.

    Related Publications