Business context and reporting period
Privia Health Group, Inc. is a technology-enabled physician-enablement company operating in six U.S. markets. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2021; comparisons are to the corresponding 2020 periods. The company completed its IPO on May 3, 2021.
Financial and operating performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $225.8 million | $183.3 million | $439.4 million | $396.2 million |
| Operating income (loss) | $(193.2) million | $6.2 million | $(185.3) million | $12.7 million |
| Net income (loss) attributable to Privia | $(172.5) million | $5.3 million | $(167.1) million | $10.7 million |
| Adjusted EBITDA (non-GAAP) | $10.0 million | $7.0 million | $20.0 million | $14.1 million |
| Operating cash flow | Not separately stated for the quarter | $4.7 million | $6.7 million |
Q2 revenue growth was 23.2%; first-half growth was 10.9%. Q2 Care Margin, a non-GAAP measure, was $55.8 million versus $41.7 million; Platform Contribution was $23.1 million versus $17.4 million, with a 41.4% margin versus 41.7%. First-half Adjusted EBITDA margin was 18.4%, up from 15.7%.
At June 30, cash and cash equivalents were $299.8 million, total current assets $436.5 million and current liabilities $167.3 million. Term-loan principal was $33.7 million, with no revolver borrowings; the company reported compliance with debt covenants. Operating cash flow was positive, while financing cash flow of $210.6 million primarily reflected IPO and Anthem private-placement proceeds. Net proceeds from those transactions were approximately $211.0 million.
Material changes versus the prior comparable period
- GAAP results swung to a substantial loss, primarily because Q2 included $202.6 million of stock-based compensation expense, including $195.1 million related to IPO-linked option vesting modifications. Management reported $89.9 million of additional expense from those modifications expected over the following 18 months; total unrecognized compensation on unvested options and RSUs was $144.8 million at quarter-end.
- Revenue growth was led by fee-for-service patient-care revenue, up 37.7% in Q2, as visit volumes improved with easing COVID-19 restrictions and provider additions. Implemented Providers rose 6.4% to 2,692.
- Other revenue fell 90.6% in Q2, primarily because the company received $13.3 million of Provider Relief Fund grants in Q2 2020 and none in Q2 2021. Value-based-care revenue increased, but Attributed Lives declined 1.3% year over year to 739,000; government-program lives rose 9.8%, while commercial-program lives fell 7.2%.
- Cash increased substantially following the IPO and private placement. Debt remained broadly stable, while the company adopted lease accounting in 2021 and recognized operating lease assets and liabilities.
Outlook, commentary, risks and unusual items
Management said cash, together with expected operating cash flows, should fund operations and capital needs for at least the next 12 months. It expects to invest in sales and marketing, technology, operations and value-based-care capabilities, and anticipates public-company costs to increase. No specific revenue or earnings guidance was provided.
Management attributed underlying growth in its non-GAAP measures to organic expansion and described the platform as scalable, but cautioned that COVID-19 continued to affect volumes and service mix. Key risks include provider and payer relationships, reimbursement and payer mix, execution in new markets, competition, reliance on athenahealth technology, healthcare regulation and privacy/security requirements. Six payers represented approximately 74% of payments for the period; six payers also represented 71% of accounts receivable at quarter-end.
The company reported no material commitments or contingencies and no material change to previously disclosed risk factors. Ordinary-course legal matters, including medical malpractice and consumer claims, may still be costly to defend. The company stated that disclosure controls were effective as of June 30, 2021. Non-GAAP measures are supplemental and exclude items such as stock compensation; they should not be viewed as substitutes for GAAP results.
Important facts for investors to verify
- Whether revenue, provider growth and improving visit volumes continue, and whether Attributed Lives recover, particularly in commercial programs.
- The scale, timing and cash-flow effects of remaining stock-based compensation, IPO-related costs and potential equity dilution; 20.6 million potentially dilutive shares were excluded from diluted loss per share as antidilutive.
- Whether Adjusted EBITDA and other non-GAAP trends translate into durable GAAP profitability and operating cash generation.
- Liquidity and covenant headroom as the company funds growth investments, repays debt and meets deferred Social Security tax payments, including approximately $1.6 million intended to be paid by year-end 2021.
- Exposure to concentrated payer payments and receivables, COVID-related operating changes, healthcare compliance, and the company’s ability to execute its value-based-care and geographic expansion plans.