Privia Health Group, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021, compared with the corresponding 2020 periods. Privia operates a physician-enablement platform across six U.S. markets, providing management services and supporting fee-for-service (FFS) and value-based care (VBC) arrangements.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $251.5m | $207.2m | $690.9m | $603.4m |
| Operating income (loss) | ($12.8m) | $8.5m | ($198.1m) | $21.2m |
| Net income (loss) attributable to Privia | ($9.1m) | $16.7m | ($176.3m) | $27.4m |
| Adjusted EBITDA (non-GAAP) | $13.9m | $9.1m | $33.9m | $23.2m |
| Operating cash flow | Not presented separately for the quarter | Not presented separately for the quarter | $67.4m | $42.2m |
Q3 revenue rose 21.4%; nine-month revenue rose 14.5%. Growth reflected higher FFS patient-care revenue, shared savings, and care-management fees. Q3 Care Margin was $61.5m versus $46.7m; Platform Contribution was $31.1m versus $21.5m, with a 50.6% margin versus 46.0%. Nine-month Care Margin was $169.8m versus $136.3m; Platform Contribution was $79.8m versus $59.2m, with a 47.0% margin versus 43.4%. These are company-defined non-GAAP measures.
GAAP results were heavily affected by IPO-related stock-based compensation: expense was $25.8m in Q3 and $228.5m for the first nine months, including $195.1m in Q2 tied to modifications of existing awards. Management reported $119.1m of unrecognized stock compensation at quarter-end, expected to be recognized over a weighted-average one year. Adjusted EBITDA excludes stock-based compensation and should not be viewed as a substitute for GAAP results.
Balance sheet, cash flow and debt
- Cash and cash equivalents were $362.1m at September 30, 2021, up from $84.6m at year-end 2020. Nine-month operating cash flow was $67.4m; investing cash outflow was $0.4m; financing cash inflow was $210.5m, primarily from the IPO and Anthem private placement.
- Current assets were $469.4m and current liabilities $187.2m. Physician and practice liability was $145.0m.
- Term-loan principal outstanding was $33.5m; there were no revolving borrowings. The amended credit facility provides a $65m revolver and matures August 2026. Substantially all company property is collateral. Springing financial covenants were not applicable at quarter-end; the company said it was in compliance with covenants.
- Management believed cash, together with operating cash flows, would fund operating and capital needs for at least the next 12 months, while noting that growth spending or other factors could increase funding needs.
Material changes, outlook and risks
- The IPO and concurrent Anthem private placement closed May 3, 2021; together they generated $211.0m in net proceeds for the company. IPO-related award modifications drove the outsized stock-compensation charge and GAAP loss.
- Implemented Providers increased 15.2% to 2,826 and Attributed Lives increased 17.6% to 760,000 year over year. Management attributed growth to organic expansion, higher visit volumes as COVID-19 restrictions eased, and growth in VBC programs.
- VBC revenue is a growing share of revenue: 13.8% in Q3 2021 versus 11.1% in Q3 2020. Management expects it to increase over time as attributed lives and risk levels grow, but the filing gives no formal financial guidance.
- Management planned a January 1, 2022 launch of Privia Care Partners, targeting more than 25,000 attributed lives and over 300 providers. After quarter-end, Privia launched in West Texas on October 1 and entered California through a BASS Medical Group affiliation on October 13, acquiring a majority interest in its management services organization.
- COVID-19 continued to affect volumes and service mix. Other revenue declined year over year, mainly because $13.3m of Provider Relief Fund grants had been received in the first nine months of 2020 and none in 2021.
- Concentration warrants attention: six payers accounted for 82% of collections for both nine-month periods and 71% of accounts receivable at September 30, 2021. Risks also include healthcare regulation and compliance, reliance on medical-group relationships and athenahealth’s EMR platform, payer rates and mix, market expansion, competition, and privacy/security obligations.
- The company reported no material commitments or contingencies and no material changes to previously disclosed risk factors. It disclosed ordinary-course legal matters, including medical malpractice and consumer claims, whose outcomes are uncertain. Disclosure controls were assessed as effective.
Important facts for investors to verify
- How much of the reported GAAP loss and future expense burden reflects IPO-related stock awards, and how does performance look alongside GAAP operating results?
- Whether growth in provider count, attributed lives, and VBC revenue continues, and whether VBC expansion produces durable margins and cash generation.
- Whether the stated 12-month liquidity outlook remains adequate after expansion investments, the planned Care Partners launch, and potential acquisitions.
- How payer concentration, COVID-related effects, and the new market affiliations affect collections, receivables, and execution risk.
- The amended facility’s springing covenant triggers, collateral terms, and potential exposure to floating interest rates.