Privia Health Group, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless stated otherwise. Financial statements are unaudited. Privia is a technology-enabled physician-enablement company operating in nine U.S. markets, combining fee-for-service (FFS) care and value-based care (VBC) arrangements.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $313.8 million | $213.6 million |
| Operating income (loss) | $(11.5) million | $7.9 million |
| Net income (loss) attributable to Privia | $(17.5) million | $5.4 million |
| Diluted EPS | $(0.16) | $0.06 |
| Net cash used in operating activities | $(5.3) million | $(2.5) million |
| Cash and cash equivalents at period end | $315.9 million | $81.9 million |
- Revenue grew 46.9%. By source, Q1 2022 revenue included FFS patient care of $204.3 million, FFS administrative services of $23.0 million, capitation of $48.3 million, shared savings of $28.0 million, care management fees of $8.8 million, and other revenue of $1.4 million.
- VBC revenue rose to 27.1% of total revenue from 12.4%, primarily reflecting new at-risk capitation contracts. Capitation began in Q1 2022 for about 23,000 Medicare Advantage beneficiaries in Florida and the Mid-Atlantic.
- Provider expense increased 50.3% to $242.2 million, driven by capitation-related costs, higher FFS activity, and provider growth. Total operating expenses grew 58.2% to $325.3 million.
- Operating margin was approximately (3.7)% versus 3.7% in Q1 2021. The $6.3 million income-tax provision despite a pretax loss reflected, among other items, nondeductible IPO-related stock compensation; the reported effective tax rate was (53.6)%.
- Stock-based compensation expense was $24.9 million versus $0.1 million, mostly in general and administrative expense. Management cited IPO-related awards as the main reason for the increase in G&A and the GAAP loss.
- Non-GAAP measures increased: Care Margin was $71.6 million (up 36.4%); Platform Contribution was $35.0 million (up 36.9%), with a 48.8% Platform Contribution Margin versus 48.6%; Adjusted EBITDA was $14.8 million (up 48.8%), and Adjusted EBITDA Margin was 20.7% versus 18.9%. These measures exclude items including stock-based compensation and should not be treated as GAAP results.
- Operating cash outflow reflected a $48.8 million increase in accounts receivable, partly offset by a $31.6 million increase in provider liabilities. Cash decreased $4.6 million during the quarter.
Balance sheet and liquidity
- At March 31, 2022, current assets were $492.6 million and current liabilities were $220.4 million. Accounts receivable was $166.2 million, up from $117.4 million at year-end; provider liabilities were $172.3 million, up from $140.7 million.
- Principal debt outstanding was $33.0 million, with no revolver borrowings. The company had a $65 million revolving facility and reported that springing financial covenants were not applicable at quarter-end. The term loan bears floating-rate interest; management estimated a 100-basis-point rate change would affect annual interest expense by about $0.3 million.
- Management said cash, available revolver capacity, and anticipated operating cash flows should fund short- and long-term needs, while cautioning that growth and investment needs could require additional financing. The company received $211.0 million in net IPO and private-placement proceeds in May 2021.
Changes, outlook, and risks
- Implemented providers increased 27.3% to 3,370; attributed lives increased 17.6% to 848,000; and Practice Collections rose 63.3% to $561.9 million. Growth reflected organic expansion, new markets, and the start of capitated contracts.
- The company launched three additional ACOs in Maryland, Florida, and Tennessee and launched Privia Care Partners in January 2022, with more than 25,000 attributed lives and over 300 providers at launch. It also announced entry into Montana with Great Falls Clinic.
- No numerical full-year guidance is provided. Management expects VBC revenue to become a larger share of revenue as attributed lives and risk-bearing arrangements grow, and expects continued investment in technology, sales, operations, and clinical capabilities.
- At-risk capitation increases exposure to medical utilization and claims-cost estimates. Provider liabilities include claims incurred but not yet reported and rely on actuarial estimates. Payer concentration is notable: six payers represented about 74% of payments for healthcare services in Q1 2022 and 69% of accounts receivable at quarter-end.
- Other stated risks include healthcare regulation and privacy compliance, dependence on medical-group relationships and the athenahealth EMR platform, payer mix and reimbursement changes, competition, expansion execution, and recruiting and compensation pressures. COVID-19 may continue to affect operations and cash flows.
- The company reported no material commitments or contingencies, no off-balance-sheet arrangements, and no material changes to its previously disclosed risk factors. Management concluded disclosure controls were effective as of March 31, 2022.
Important facts for investors to verify
- Whether the new capitation arrangements can produce sustainable margins after actual medical claims and utilization costs develop.
- The collectability and timing of the sharp increase in accounts receivable, and the adequacy of provider-liability reserves as claims mature.
- How recurring stock-based compensation and the remaining $77.5 million of unrecognized compensation expense affect GAAP profitability and dilution.
- The basis for management’s liquidity assessment, including operating cash generation, planned growth spending, and revolver availability.
- The cover page marks “No” for having filed all required reports during the preceding 12 months; verify this indicated status and its context against the filing record.