Privia Health Group, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless noted. Privia operates a physician-enablement and practice-management platform across six U.S. markets, with revenue from fee-for-service (FFS), value-based care (VBC), and related services. The filing states results for the quarter are not necessarily indicative of full-year results.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $213.6 million | $212.9 million | +0.3% |
| Operating income | $7.9 million | $6.5 million | +21.7% |
| Net income attributable to Privia | $5.4 million | $5.4 million | -0.3% |
| Basic and diluted EPS | $0.06 | $0.06 | Unchanged |
| Net cash used in operating activities | $2.5 million | $7.1 million | Use decreased $4.6 million |
| Adjusted EBITDA (non-GAAP) | $9.9 million | $7.1 million | +41.0% |
Operating margin was approximately 3.7%, versus 3.1% a year earlier. Care Margin, a non-GAAP measure, was $52.5 million (+9.7%); Platform Contribution was $25.5 million (+25.9%), with a 48.6% margin versus 42.4%; Adjusted EBITDA margin was 18.9% versus 14.7%.
Revenue mix and operating metrics
- FFS patient-care revenue fell 3.0% to $169.6 million, partly reflecting COVID-related visit-volume declines; FFS administrative-services revenue rose 5.9% to $15.4 million.
- Shared-savings revenue increased 8.5% to $17.8 million, and care-management fees increased 37.6% to $8.6 million. Management attributed growth mainly to more care-management contracts and growth in government-program attributed lives.
- Other revenue rose to $2.2 million from $0.8 million, primarily due to direct-to-employer business.
- Implemented Providers increased 4.7% to 2,648. Attributed Lives decreased 4.1% to 721,000; government-program lives rose 7.7%, while commercial-program lives fell 10.4%.
- Practice Collections, a company-defined metric that includes collections from non-owned medical groups, increased 5.1% to $344.1 million.
Liquidity, debt, and balance sheet
At March 31, 2021, cash and cash equivalents were $81.9 million; current assets were $204.6 million and current liabilities were $157.5 million. Term debt was $33.9 million, with no revolver borrowings outstanding. The term loan bears a floating rate (3.0% at quarter-end), matures in November 2024, is secured by substantially all real and personal property, and was in covenant compliance. Operating lease liabilities totaled $10.9 million following adoption of the lease standard in January 2021.
Operating cash use was $2.5 million; investing cash flow was approximately zero, and financing cash use was $0.2 million. Cash declined by $2.7 million during the quarter. The filing reports $212.0 million in net proceeds from the May 3 IPO and Anthem private placement and says post-IPO cash, together with operating cash flows, is expected to fund operations and capital needs for at least 12 months.
Changes, outlook, risks, and unusual items
- Revenue was nearly flat despite growth in VBC and administrative-service revenue, as FFS patient-care revenue declined. Operating income improved, while net income attributable to Privia was essentially unchanged, in part because the tax provision rose to $2.0 million from $0.7 million after release of the deferred-tax-asset valuation allowance.
- Management cited ongoing COVID-19 impacts, including lower-than-anticipated volumes and shifts in service mix. It expects VBC revenue to grow as attributed lives and risk levels increase, and expects continued investment in sales, marketing, technology, and clinical capabilities; the filing provides no specific forward-year financial guidance.
- After quarter-end, the May 3 IPO and Anthem private placement closed at $23 per share. The public offering included 5.725 million newly issued shares by the company and 16.7 million shares sold by the majority stockholder; the separate Anthem placement covered 4.0 million shares.
- A post-IPO option modification is expected to produce $189.5 million of stock-based compensation expense in Q2 2021 and a further $95.0 million over the following 18 months. April 29 awards of options and restricted stock units are expected to generate $62.3 million of expense over four years. These subsequent events may materially affect reported earnings.
- COVID-related risks, healthcare regulation and compliance, dependence on medical-group and payer relationships, competition, expansion execution, and reliance on athenahealth technology are identified risks. Six payers accounted for approximately 73% of payer payments in Q1 and approximately 70% of accounts receivable at quarter-end.
- The company reported no material changes to previously disclosed risk factors or contingencies. It is involved in ordinary-course legal matters, including medical malpractice and consumer claims, which it did not believe were reasonably likely to have a material adverse effect. Management concluded disclosure controls were effective as of March 31, 2021.
Most important facts for investors to verify
- Whether FFS patient volumes recover and whether VBC growth offsets continued weakness in FFS patient-care revenue.
- The trend in attributed lives, particularly the decline in commercial VBC lives, and progress in converting markets to higher-risk VBC arrangements.
- Cash conversion and working-capital movements, including accounts receivable and amounts payable to medical practices and providers.
- The actual timing and income-statement effect of post-IPO stock-based compensation, and its dilution impact.
- Debt covenant headroom, floating-rate exposure, payer concentration, and the extent to which IPO proceeds support the stated liquidity outlook.