Earnings call transcript: Privia Health beats Q1 2025 expectations

Privia Health Group Inc. (PRVA) reported impressive financial results for the first quarter of 2025, exceeding earnings and revenue forecasts. The company posted an earnings per share (EPS) of $0.22, significantly surpassing the forecasted $0.04. Revenue reached $480.1 million, beating expectations of $452.13 million. In premarket trading, the stock rose 0.64% to $23.47. According to InvestingPro data, the company currently trades at a high earnings multiple with a market capitalization of $2.8 billion. While showing strong growth potential, InvestingPro analysis suggests the stock is slightly overvalued at current levels.

Key Takeaways

• Privia Health’s EPS of $0.22 far exceeded the $0.04 forecast.
• Revenue of $480.1 million outperformed the expected $452.13 million.
• Stock increased by 0.64% in premarket trading, reflecting positive sentiment.
• The company raised its full-year 2025 guidance to the mid-to-high end of the initial range.
• Continued strong performance in practice collections and EBITDA growth.

Company Performance

Privia Health demonstrated robust growth in Q1 2025, with practice collections increasing by 12.8% year-over-year to $798.6 million. The company’s adjusted EBITDA surged by 35.1% to $26.9 million, with an expanded EBITDA margin of 25.6%. This performance underscores the company’s effective operational strategies and strong market position. InvestingPro analysis reveals the company maintains a strong financial position with more cash than debt on its balance sheet, though it currently operates with relatively weak gross profit margins of 10.19%. Get access to 10+ additional exclusive ProTips and comprehensive financial metrics with InvestingPro.

Financial Highlights

• Revenue: $480.1 million, up from the forecasted $452.13 million.
• Earnings per share: $0.22, compared to the forecast of $0.04.
• Adjusted EBITDA: $26.9 million, a 35.1% increase year-over-year.
• Practice collections: $798.6 million, up 12.8% year-over-year.

Earnings vs. Forecast

Privia Health’s actual EPS of $0.22 significantly exceeded the forecasted $0.04, marking a 450% surprise. Revenue also surpassed expectations, coming in at $480.1 million against a forecast of $452.13 million. This strong performance highlights the company’s operational efficiency and market strength.

Market Reaction

Following the earnings announcement, Privia Health’s stock experienced a modest increase of 0.64% in premarket trading. The stock’s movement reflects investor optimism driven by the company’s strong financial results and positive guidance revisions. The stock remains below its 52-week high of $26.04 but shows potential for further gains. InvestingPro data indicates analyst targets suggest an upside potential of 24%, with a high target of $35. The stock has demonstrated strong momentum with a year-to-date return of 19.28%. Discover detailed valuation metrics and analyst recommendations with InvestingPro’s comprehensive research reports, available for 1,400+ US stocks.

Outlook & Guidance

Privia Health raised its full-year 2025 guidance to the mid-to-high end of the initial range, indicating management’s confidence in sustained growth. The company targets a 20% EBITDA growth and expects the Arizona market to become EBITDA positive by Q4 2025. Long-term margin targets are set at 30-35%, with potential for additional market expansions. InvestingPro’s Financial Health Score rates the company as "GREAT" with particularly strong scores in profit (3.7/5) and cash flow (3.69/5) metrics, supporting management’s optimistic outlook.

Executive Commentary

CEO Parth Merocha expressed confidence in the company’s strategy, stating, "We are one of the survivors in this industry." He emphasized the company’s performance, saying, "Our performance speaks for itself." Merocha also highlighted the company’s strategic focus, noting, "We will continue to pursue our strategy of sharing risk with the payers."

Risks and Challenges

• The Medicare Advantage environment remains challenging, potentially impacting growth.
• The cautious approach to full-risk contracts may limit aggressive expansion.
• Expansion into new markets could entail significant costs and operational risks.
• Market saturation and increased competition could pressure margins.

Q&A

During the earnings call, analysts inquired about the company’s entry into the Arizona market via the IMS practice acquisition, valued at $95 million. The company clarified that there are no capitated lives in this acquisition and reiterated its cautious approach to full-risk Medicare Advantage contracts.

Full transcript - Privia Health Group Inc (PRVA) Q1 2025:

Dee, Conference Operator: Thank you for standing by. My name is Dee, and I will be your conference operator. At this time, I would like to welcome everyone to the Privia Health first quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. I would like to turn the call over to Robert Borchardt, Senior Vice President of Investor and Corporate Communications. Please go ahead, sir.

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health: Thank you, Dee, and good morning, everyone. Joining me are Parth Merocha, our Chief Executive Officer and David Mountcastle, our Chief Financial Officer. This call is being webcast and can be accessed in the Investor Relations section of priviathealth.com along with today’s financial press release and slide presentation. Following our prepared comments, we will open the line for questions. Please limit yourself to one question only and return to the queue if you have a follow-up so we can get to as many questions as possible today.

The financial results reported today are preliminary and are not final until our Form 10 Q for the first quarter ended 03/31/2025, is filed with the Securities and Exchange Commission. Some statements we will make today are forward looking in nature based on our current expectations and view of our business as of 05/08/2025. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risks and uncertainties that may cause actual results to differ materially. As a result, these statements should be considered along with the cautionary statements in today’s press release and the risk factors described in our company’s most recent SEC filings. Finally, we may refer to certain non GAAP financial measures on the call, and reconciliation of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website.

So now, I’d like to hand the call over

: to our CEO, Parth Marotra.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Thank you, Robert, and good morning, everyone. Trivia Health started 2025 with strong growth and momentum as we continue to execute very well across all aspects of our business. This morning, I’ll cover our first quarter performance and recent business highlights. Then David will discuss our market presence, financial results, and our 2025 guidance update before we take your questions. Privia’s growth team has continued to deliver strong new provider signings across all of our markets, which underpins our visibility through 2025.

Implemented provider growth of 11.7% and value based attribution growth of 11.1 year over year helped drive total practice collections growth of 12.8%. Adjusted EBITDA increased 35.1%, with EBITDA margin expanding four sixty basis points year over year, while we continue to invest in growth and expansion. This highlights the scale and strength of our business model. In early April, we announced our entry into the state of Arizona, as we pursue disciplined growth to complement our organic sales engine. Following this outstanding overall performance in the first quarter, we are raising our 2025 outlook to the mid to high end of our initial guidance.

Attributed Life’s guidance remains unchanged. This guidance raised early in the year is being driven by our excellent operating execution and continued exceptional performance by all of our provider partners in the current healthcare services environment. We announced our partnership in early April with IMS as our anchor practice to enter the state of Arizona. IMS is one of the largest independent multi specialty practices in Arizona with approximately 70 providers. This is a very strategic market entry for Privia, as the demographics of Arizona offer a compelling value based care opportunity.

IMS has more than 28,000 value based care attributed lives across commercial, Medicare, and Medicaid programs. The transaction value was $95,000,000 at closing. Privia Health owns Medical Group entity and the management services organization in Arizona. IMS remains physician owned and will operate with significant clinical autonomy. We expect the Arizona market to be EBITDA positive in the fourth quarter this year, following IMS’ implementation on the Privia platform.

We also expect it to meaningfully contribute to adjusted EBITDA in 2026, giving us confidence in our ability to continue to target 20% EBITDA growth. We look forward to building on the IMS culture of delivering high quality community care as we continue to align with like minded providers across The United States. Now I’ll ask David to review our market position, recent financial results, balance sheet, and discuss our 2025 guidance outlook in more detail.

David Mountcastle, Chief Financial Officer, Privia Health: Thank you, Parth. With the addition of Arizona, Trivia Health now operates across 15 states and the District Of Columbia. Our footprint of high quality, community based medical groups and risk entities comprises 4,871 implemented providers caring for over 5,200,000 patients in more than 1,200 care center locations. Trivia now serves 1,270,000 attributed lives across more than 100 commercial and government value based care programs. This breadth and geographic reach positions us as a highly diversified and balanced value based care organization.

Total attributed lives at March 31 increased 11.1% from a year ago. This was driven by new provider growth, as well as new value based care contracts in certain programs. Commercial attributed lives increased 13.6% from last year to reach seven hundred and seventy nine thousand. Lives attributed to the Medicare Shared Savings Program were up almost 5%. Medicare Advantage and Medicaid attribution increased more than 811%, respectively, from a year ago.

The diversification of Privia’s value based care contracts gives us confidence in our ability to build scale and profitability across the business, despite challenges in any one particular program or contract. We remain highly focused on generating positive contribution margin in our value based care contracts as we pursue attribution growth, manage risk, and implement clinical and operational enhancements in our partner practices. We continue to evaluate moving to greater downside risk when we believe contract economics appropriately compensate our physician partners for the level of risk incurred. Ultimately, our goal is to achieve consistent and sustainable earnings growth for our medical groups and shareholders. Protivia Health executed very well to start 2025, with strong growth and momentum across all our markets.

Implemented providers grew 82% sequentially from Q4 to reach 4,871 at March 31, an increase of 11.7% year over year. The growth in implemented providers, along with strong ambulatory utilization trends and value based performance, led to practice collections increasing 12.8% from Q1 a year ago to reach $798,600,000 Adjusted EBITDA, which is reconciled to GAAP net income in the appendix, increased 35.1% over first quarter last year to reach $26,900,000 representing 25.6% of Care margin. This is a four sixty basis point improvement from a year ago, as we generated operating leverage across both cost of platform and G and A, while investing across all markets. We ended the first quarter of twenty twenty five with $469,000,000 in cash and no debt, following typical quarterly cash outflows early in the year related to employee bonuses and value based care payments to providers. This does not reflect the $95,000,000 deployed in April for the Arizona acquisition.

Our healthy balance sheet continues to position us with significant financial flexibility to deploy capital for business development and take advantages of opportunities in the current market environment. We are raising our full year 2025 guidance to the mid to high end of the initial ranges, due to the strength of our first quarter performance and visibility throughout the remainder of the year. Guidance for attributed lives remains unchanged. We are maintaining a robust pipeline of existing market expansion and potential new market opportunities. However, our 2025 guidance does not assume any additional business development activity beyond Arizona.

Capital expenditures are expected to be de minimis again this year as part of our capital light operating model. We continue to expect at least 80% of our full year adjusted EBITDA to convert to free cash flow. Trivia has delivered consistent growth in profitability across economic, healthcare and regulatory cycles over the past seven years. The power of our business model and consistent execution is evident in how we have compounded all key metrics over time. Our 2025 guidance demonstrates our expectation for another year of strong EBITDA growth and free cash flow conversion.

We look forward to continuing to serve our physicians, providers, and health system partners, and in turn creating value for our shareholders, as Privia Health builds large scale primary care centric delivery networks across the nation. Operator,

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: we are

David Mountcastle, Chief Financial Officer, Privia Health: now ready to take questions.

Dee, Conference Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, input, press 1 again. If you are called upon to ask your question or listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when you ask a question.

Our first question comes from the line of Singh Jalandra. Please go ahead.

Jalandra Singh, Analyst, Truist: Yeah. This is Jalandra Singh from Truist. So congratulations on the strong quarter and of course on the Arizona market entry. Can you take some time to talk about the IMS transaction and prospects you see in that market? What differentiated this ask from ones you have done in the past?

And how much practice collection and EBITDA benefit you’re including in your guidance right now? Thank you.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, thanks for the question, Jalenza. Look, IMS, as we said, Arizona’s a pretty important healthcare state. Big TAM, good demographic trends. IMS has been operating for many years and came out of a health system a few years ago and established itself as an independent practice. A lot of cultural alignment with what we are trying to do.

Very large practice, good size, many locations, really well established patient panels. So overall, really good partner to have and pursue the Privia mission in that state. Pretty important transaction relative to the value, pretty significant EBITDA contribution given the nature of the deal. We’re not disclosing specifics on the deal or specific EBITDA contribution specifically allocated to Arizona or to IMS. It’s all embedded in our guidance.

But as we’ve noted in our prepared remarks, this will be EBITDA positive from the first day that they implemented. Pretty significant contribution next year and that gives us a lot of confidence to keep growing EBITDA 20% into next year.

: Thank you.

Dee, Conference Operator: Our next question comes from the line of Josh Raskin from Nephron Research. Please go ahead.

Josh Raskin, Analyst, Nephron Research: Hi, thanks. I’m going to follow-up on Arizona as well. I guess I’m specifically interested in sort of that PCP versus specialist mix that IMS has maybe relative to your existing provider base. Anything we should be thinking in terms of differences in collections per physicians and maybe how IMS is positioned with the larger payers in the market? And then finally, did that strong value based care opportunity that you guys talk about, did that make the transaction more attractive, less attractive?

How are you thinking about that in the context of the broader Privia?

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, thanks for the question, Josh. So, they’re a multi specialty practice. You can go on their website and they’ve listed every single specialty and provider, so it’s all public info. Slightly more skewed towards specialists versus primary care, but pretty healthy mix. You see we disclosed the attributed lives of twenty eight thousand, so that’s all attributed to the PCPs.

But again, it’s very similar to some of our other states. It’s not skewed one way or the other in one direction. And it’s a multi specialty practice covering all specialties. So slightly higher practice collections per provider, as you would expect from that perspective. And then I think from an opportunity perspective, there’s a day one opportunity with the group with 28,000 lives.

But then more importantly, I think Arizona is a pretty important state as far as MA is concerned, the demographic trends are concerned, the availability of independent providers. So I think we can have a pretty good presence over the next four, five, ten years. That’s always our playbook. As we enter these states, it’s not a one, two year play. We’re looking to establish a pretty large medical group over time.

And I think the TAM opportunity is there for us to go get in Arizona. So we’re pretty excited about that.

Dee, Conference Operator: Thanks. Our next question comes from the line of Richard Close with Canaccord. Please go ahead.

Richard Close, Analyst, Canaccord: Yes. Congratulations. Thanks for the questions. When you guys are calling out strong ambulatory utilization, can you provide some perspective in terms of how it came in versus maybe what was baked into your guidance and your thoughts on utilization throughout the rest of the year and maybe how that factored into the updated commentary on guidance?

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, thanks for the question, Richard. So I think it’s been pretty strong. You know, the flu season varies every year. We have a pretty significant portion of our providers as pediatricians, as PCPs, as family medicine, as you know. So given which months the flu season hits, in that, call it November through March timeframe or April timeframe, some years it’s earlier, some years it’s later.

So we kind of normalize for that in our guidance over the years. But we’ve expected and experienced pretty strong trends continue, that’s reflected in practice collections. And I think we’re gonna continue to see those trends going forward. I mean, we’ve said that pretty consistently. Utilization continues to be at this elevated level.

And I think that bodes well for our fee for service business. It’s also great for the value based business because we are seeing the patients much more frequently. So our guidance fully reflects those trends continuing.

Dee, Conference Operator: Thank you. Our next question comes from the line of Matthew Gillmor with KeyBanc. Please go ahead.

David Mountcastle, Chief Financial Officer, Privia Health: Hey, thanks for the question. I just wanted to ask a clarification on IMS in the guide. Are you absorbing any new market entry costs, as it relates to Arizona within the guide? And then also, can you just remind us in terms of how the accounting works? Do you recognize any revenue prior to them being implemented on the Privya platform?

Thanks.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yes. Thanks for the question, Matt. So I’ll start, then David will take the accounting question. You know, we always have new market entry costs, because as you know the model, we enter a state, and we establish our sales team, implementation teams, our operations to go get other providers in the state to join our platform in addition to the Anchor practice. So our guidance assumes absorbing those costs starting this year and then going into next year.

And so obviously that highlights the merits of this transaction that despite absorbing those costs, we expect the transaction to be positive EBITDA this year upon implementation and pretty significantly next year. That was really attractive to us. I’ll let David handle the accounting question.

David Mountcastle, Chief Financial Officer, Privia Health: Yeah, and so from an accounting perspective, because we acquired the medical group, as soon as we acquired the medical group, we get revenue and practice collections from that entity. However, the deal works where we don’t get care margin and adjusted EBITDA until we implement them on the athena platform, which we expect to happen in Q4 this year.

Dee, Conference Operator: Our next question comes from the line of Jessica Tasson with Piper Sandler. Please go ahead.

Jessica Tasson, Analyst, Piper Sandler: Hi, guys. Thanks so much for taking the question, and congrats on Arizona and the strong quarter. I was hoping maybe you could talk a little bit about the growth in capitated lives quarter over quarter. Was that growth just population growth within existing contracts? And then any perspective on Medicare Advantage in 2026, just whether you’re interested in expanding with new health plans or expanding the scope of your MA capitated contracts?

Any color on just how you’re thinking about ’26 in light of the rate announcement? Thanks.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, thanks for the question, Jess. So, the growth was pretty much organic in the cap book, either existing, in the same existing contracts. So existing providers participating, seeing few more patients and expanding the panels, and then some new providers joining the same contracts in those geographies, and patients coming with those new providers. So, you know, it was a few thousand lives, that’s our objective. Once we enter these contracts, we want to improve performance, we want to add attributed lives, and continue to expand that book of business if we think we’re gonna do well.

And then on your second question, you know, our view on MA remains pretty much the same as we discussed at length on the last earnings call. I think we are in this three, four year period, which is gonna be pretty challenging for MA, for all the factors that you all know pretty well, and we’ve articulated in the past calls. We will continue to pursue our strategy of sharing risk with the payers in MA contracts. So we would look to grow our book, grow our attributed lives in MA. I would not expect us to get into full cap or 100% risk deals.

Our preference is to continue to enter into shared risk arrangements with the payers just given the environment. And we actually think that’s the best long term sustainable model. If we are able to underwrite any deals where we think we’re gonna get significantly compensated for the level of risk in a full cap kind of contract, we’ll look to add those. But at this moment, you should not expect us to enter fresh, new, fully 100% capitated contracts. But we’ll continue to grow the book with both existing payers and look for new payers in existing or new states and growing that MA book.

Dee, Conference Operator: Our next question comes from the line of Mayo with Leerink Partners. Please go ahead.

Alberta Massey/Joanna Kaczuk, Analyst, Leerink Partners/Bank of America: Hi, this is Alberta Massey on for Whit. Thanks for taking the question. We’re about halfway through B28 now. Are there any surprises with the implementation versus expectations in MSSP? Would be curious to hear about any changes in practice care management strategies.

Thanks.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, thanks for the question, Alberto. So, you know, V28 doesn’t impact MSSP as much per se, it’s mainly related to MA. I mean, the average risk score in MSSP is, you know, around one, and risk coding, while it plays some role, it’s not a big factor in our performance. As far as the MA book is concerned, it’s playing out as we expected. We took a very conservative view since the beginning of last year when we exited two capitation contracts.

We think it’s a pretty significant headwind to the industry, to the MA business, both for the payers and then providers downstream. And, you know, it’s playing out as we expected. You’ve seen pressures on different payers at different points of time, either last year or this year. You’ve seen pressures on the provider group. So I think we continue to be pretty cautious and see how it plays out.

And again, fundamentally, we’ve gotta get paid to take additional risk in MA, and we’ll keep looking for those opportunities, as we just said.

Dee, Conference Operator: Our next question comes from the line with AJ Rice with UBS. Please go ahead. Hi,

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health0: everybody. Maybe just broaden out discussion. There has been some speculation some of the trade press that the Trump administration might look at some changes to MSSP program. They were largely supported in the first term. Have you heard anything along those lines?

And maybe more broadly with all the discussions about Medicaid changes, I know that’s about a fifth of your government lives, but it sounds like you’ve only got upside arrangements. Any thoughts about any of that, and whether it will present opportunities and maybe just last on the government stuff. They haven’t been able to get the fix legislation this year. Does that have any impact on you? I assume some of your providers are impacted by that, but any comment on that?

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, thanks for the question, AJ. So I’ll take them in order. We haven’t heard anything new since last quarter. I think we covered it pretty extensively. MSSP continues to be pretty well established program, one of the most well established programs out of CMS.

I think they understand it, the folks in the administration understand it, and we continue to expect it to stay at the level that it is today. If we hear anything differently, they’ll make an announcement, and obviously we’ll comment on it. But we haven’t heard anything new on any potential changes to MSSP. You know, to your second question, I mean, it’s all fully baked in our guidance. Like on the Medicaid side, we don’t take any risk.

As you mentioned, it’s about 100,000 lives. It’s upside only. We get some care management fees. We’re trying to manage those lives without taking risk. It’s not a big part of our fee for service business.

I think what’s important to recognize is, you know, we have an ambulatory care delivery network with community based providers. So that’s the frontline of healthcare with some of these Medicaid patients. Know, doctors in the communities taking care of children, mothers, family members. And I think that’s a pretty important aspect of the level of care in that population. So we don’t expect that we’ll be impacted that significantly from cuts.

If anything, folks will likely hopefully, you know, seek that level of frontline care versus some of the more acute care that could be impacted downstream from potential cuts. But again, we’ll see how it plays out. On your last question, yeah, I mean, there may be some impact, but again, we have a pretty big diversified book. It’s all factored in our guidance and nothing material to call out on that particular legislation.

Dee, Conference Operator: Our next question comes from the line of Andrew Mock with Barclays. Please go ahead.

: Hi, this is Thomas Walsh on for Andrew. Hoping you could comment on if you’ve seen any behavioral change in patients using their coverage this year, whether that’s induced by premium increases or changes in patient cost responsibility.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: No, nothing out of the ordinary that’s worth calling out. It’s, you know, again, we have a pretty diversified book, five plus million patients, so we haven’t seen any fundamentally different levels of activity.

Dee, Conference Operator: Our next question comes from the line of Brian Langston with TD Cowen. Please go ahead.

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health1: Hey, thanks. Just go back

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health2: to the guidance, obviously updated it this quarter. Last couple of years in the first quarter, you simply just reiterated the guide. Most other companies this quarter maintain guide as well. So it sounds like you’re a little bit more confident than some of your peers based on your prepared comments. Is this mostly just the IMS pickup in the guide?

Or is really just what you’re seeing in the underlying business performance driving that guidance increase?

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yes, appreciate the question. I think it’s a combination of both. I mean, Q1, there was no IMS impact, and you’re seeing the outperformance across the board on all our metrics, all the way down to EBITDA. So that has no impact from Arizona. And then, you know, as we noted in our prepared remarks, all that impact starts in Q4, at least care margin downwards on our P and L.

So I think it’s a combination of both. We saw pretty good results this quarter. You’re right, we haven’t it’s still early in the year, but given the strong performance, given the impact of the transaction, we feel pretty confident for the rest of the year. We’ll see how the year plays out and then update guidance further. But at this point, we felt pretty comfortable going in, given the strong start to the year.

Dee, Conference Operator: Our next question comes from the line of Elizabeth Anderson with Evercore ISI. Please go ahead.

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health3: Hi, guys, thanks for the question. A slight two parter for me. One, not to beat a dead horse, but so the attributed lives for IMS come in, in which quarter? So I just want to make sure I have that down correctly. And then two, you had a nice, obviously, organic improvement in G and A in the quarter.

Is that should we just think of that as continuing to run, like, to sort of be smoothly across the year, or anything sort of one time you need to call out that would impact the cadence of the rest of the year? Thanks.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, thanks, Elizabeth. So the attributed lives will flow through in the following quarter, so that’s not yet reflected in the March 31 number for IMS. And that’s why you’re seeing while we’ve kept that piece of the guidance unchanged, you know, we’re still at the below the low end of the guidance, which is very typical for Q1, where some of the lives or some of the employers change their carriers on the commercial book, MA members change plans. And so if you look at past years, it’s very typical for us to have that churn. The patient’s not going anywhere, the doctor’s not going anywhere, but it’s just a movement of different health plans.

And so we’ll pick up all that attribution going forward. And then, sorry, could you repeat your second question again?

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health: The G and A question.

David Mountcastle, Chief Financial Officer, Privia Health: I think the second question was around G and A, and I’ll take that, Bart. From a G and A perspective, we saw like a sequential decline in G and A from the fourth quarter, mainly attributed to what we accrue for bonuses and our contractor expenses. Early on in the year, we pretty much just stay pretty consistent on bonus accruals and don’t look to increase that until we get further on in the year. So, it’s just those two things. Yeah, I think you were asking about throughout the rest of the year, I would say follow similar trends to previous years is what we’re expecting.

Dee, Conference Operator: Our next question comes from the line of Constantine Davides with Citizens JMP. Please go ahead.

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health1: Thanks. Parth, just following up on Arizona. What made them move to partner with you in this type of transaction? What was important to them with respect to what Privia checked the boxes on maybe relative to some other platforms or options they may have evaluated? And then just given their higher sort of mix of value based lives relative to the number of PCPs they have, are they moving away from a prior enablement partner?

Thanks.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, I appreciate the question, Constantine. So I think it’s a pretty important question that highlights the strength of our platform. Any practice that size, as we’ve stated in previous calls, has been approached by everybody you can imagine, health systems, private equity, bigger payers, other consolidators, so on and so forth, other enablement companies. I think what was key to them partnering with us is number one, we just have a unique model that can cater to the entirety of the practice. All specialties, every single patient, every single line of business, every payer, comprehensive tech services platform.

And that coupled with an ability to maintain clinical autonomy in a model like Privia where you’re not getting employed by another entity, you know, from your compensation perspective, you’re able to make the decisions in day to day working at the clinic and how you practice medicine. I think that was immensely important to the physician leadership there. They came out of a health system, and so obviously the group is fiercely independent and believes in autonomy of private practice, which leads us to having a pretty strong cultural alignment. And I think we can have a great business in Arizona with their help and grow that business, grow their clinics as well as grow around them. So I think it’s a combination of all of those.

They did partner with other enablement companies, and I think we just evaluate those contracts over time, but we fully own the medical group, risk entity, MSO entities, and so we just evaluate how we move some of those contracts over time. And that again highlights the importance where even though some of these practices can partner with other entities, once we come in with a comprehensive solution, that overweighs any prior decisions. So we’ll just see how those play out and what the contractual terms are and how they’re performing and take it from there.

Dee, Conference Operator: Our next question comes from the line of Jack Slivin with Jefferies. Please go ahead.

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health4: Hey, thanks for taking the question and congrats on a really strong quarter. Two parter. One, to clear this out. IMS, are they participants in MSSP or ACO REACH currently? And when you say that they’ve got other enablement agreements, presently, is that what you’re referring to?

And then the second one, really just thinking more about how we look at fee for service utilization in 2025. The United call out was that AWV ran really, really hot. I would think you would benefit from similar trends in the first quarter, but I’m just trying to get a sense of sort of what you’ve seen year to date in terms of PCP or primary care provider utilization versus specialist in your book? And is there an expectation that, that sort of front running of AWV might bring some upside throughout the year as you sort of trend downwards towards the or downstream towards the rest of the specialists in ecosystem? Thanks.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yes, on the first question, the short answer is yes. They do participate in MSSPACO REACH or one of those programs. We’re not gonna comment on which one and how many lives, but they do participate currently, and so we’ll inherit that book. On the second one, yeah, think as we said previously, I won’t categorize it just AWVs per se, but we’ve experienced pretty strong ambulatory utilization at our PCPs, pediatricians, OBGYNs, even some of the specialists. You know, we’ve seen in office community based physician utilization to be pretty strong.

That’s reflected in our practice collections. And, you know, we don’t see any reason to believe that that would not continue for the rest of this year. We’ll just see how it plays out. But that’s reflected in our guidance. We’ll update that as we go forward.

Dee, Conference Operator: Our next question comes from the line of Jeff Garo with Stephens. Please go ahead.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, good morning. Thanks for taking my question. I want to go back to the fall of twenty twenty three. You had announced an AI partnership that targeted physician productivity. So was hoping for an update on how adoption has been of that solution by your providers, and what kind of productivity gains you’ve realized.

Thanks. Yeah, appreciate the question. So the utilization’s been great. I mean, we’ve adopted that pretty significantly across our provider base. We continue to innovate with a partner, Navina, we think it’s a great solution you know, that streamlines clinical documentation, prevents errors, highlights care gaps at the point of care, you know, to the PCP, you know, when they’re seeing the patient.

So I think it’s another way where we are continuously evaluating where AI and other tools can improve the workflow, reduce the time that is spent. We have a case study out that I think is public on our website, so we can send it to you after the call that highlights all the stats on this particular partnership. I think they also showcased that at HIMSS recently. So, know, overall pretty happy, and we’ll continue to improve this and other areas with the adoption of AI.

Dee, Conference Operator: Our next question comes from the line with Ryan Daniels with William Blair. Please go ahead.

Richard Close, Analyst, Canaccord: Thanks for taking the question, guys. I guess most of the big ones have been answered. I wanted to a follow-up there and just ask, are there any other big IT initiatives or clinical initiatives that Sanofi is looking at for the next six to twelve months? We’ve heard a lot on AI, but also more on specialty referrals and things like behavioral health care. So curious kind of what’s on the agenda for the team.

Thanks.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, I appreciate the question, Ryan. So, as you know, we have a very comprehensive full tech service platform across all lines of business, both fee for service, rev cycle, value based care. And so we are continuously looking to improve. You know, the value based care is a big, big area, obviously, both on improving the clinical workflow, decision making, how the data comes in from different payers, different contracts. We have, you know, 100 plus value based contracts.

And to take risk, you want to make sure you’re getting real time data as much as possible, or with minimal lag, we have a lot of visibility into it. But there’s a lot of effort just to keep improving those. I think we’ve had, our good performance is reflective of the stack we have currently, that you need to have in place, but there’s always scope for improvement. So that’s a big area for us to focus. And then on the regular workflow, as a patient comes in and through their life cycle with the doctor during the year or over many years, I think we’ve continuously looked at different solutions that are improved, getting improved now, whether it’s on scribing, on RCM workflows, on just improving, again, accuracy, timelines, speed.

And so, you know, we have a bunch of things that are in the works that get implemented on the platform on a continuous basis with our clinical IT committee, which is chaired by a lot of the providers that we practice with. I think the interesting thing is we eat our own cooking. We are the medical group and the service provider all in one. So there’s a very good feedback loop, and I think that’s the strength of platform, where we can implement things that can be, you know, really used by our providers if they want.

Dee, Conference Operator: Our next question comes from the line of David Larsen with BTIG. Please go ahead.

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health5: Hey, congratulations on the good quarter. And Parth, I always like how you’re very careful around which risk contracts you get into. I did see capitated revenue increased pretty significantly sequentially. And then also your I think your medical loss ratio contracted by about 150 basis points sequentially. Can you maybe just talk about the growth in cap revenue?

I think you said it’s organic. How much visibility do you have into those physicians and those members? Are these groups that have been on your platform for a couple of years, so you’re very comfortable with them bearing risk with those new members? And then just any thoughts on the cap EBITDA would be very helpful. Some of your peers have had some pressures on this side of the thing, side of the house, which is why I’m asking.

Thanks a lot.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, I appreciate the question. So yes, we did see some, I think this question asked before, like we saw a few thousand lives increase in the cap book, pretty much all organic, either existing doctors seeing more patients or a few more doctors joining with new panels in that contract. So that’s reflected in the cap book. I mean, you can see from the disclosure in the press release, it’s still early days in the year, and it’s not like we’re making very significant EBITDA yet. But our hope is that, I mean, it’s still positive contribution pretty slightly.

But as the year progresses, our expectation is we continue to hopefully do well and this will be positive margin. Otherwise, there’s no point doing capitation to lose money. And I think that’s gonna be our strategy. We’ve articulated it pretty carefully. We wanna take risk when we’re getting paid to take risk, especially in this environment with all the pressures in MA.

And I think we’ll continue to do that. Otherwise, we’re just happy to have a pathway to risk, fiftyfifty risk sharing with the payers, and keep expanding our MA book from that perspective. But I think the growth was in that one particular contract that we have pretty much organically.

Dee, Conference Operator: Our next question comes from the line of Matt Sheehya with Needham. Please go ahead.

David Mountcastle, Chief Financial Officer, Privia Health: Hey, good morning. Thanks for taking the question and congrats on the Arizona expansion. In the past, you’ve commented on new markets requiring 2,000,000 to $3,000,000 in investment and you tend to breakeven on that in eighteen months. So with Arizona breakeven expected in the fourth quarter, it appears you guys are ahead of schedule. So curious what the dynamic is there.

Are you starting to breakeven faster in new markets or just requiring less initial investment? Maybe something specific about IMS or Arizona. Any color there would be helpful.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, appreciate the question. So I think Matt Gilmore asked the same one or similar question earlier. We will have new market entry costs. I think this transaction is unique in that it comes with pretty significant EBITDA contribution, which offsets some of that costs this year into next year. So while we continue to spend that, again, every anchor transaction that we do is different in nature, size of the practice, nature of our relationship, management fees, so on and so forth.

And so I think that’s reflected in the purchase price, which we’ve disclosed. And so I think, again, future markets may or may not look like this. We’ve entered all kinds of markets in our past. If you look at that slide 11 and see all the different markets that we’ve entered each of the years, some may not come with a pretty significant practice or significant EBITDA contribution. In fact, we’ve burned some cash in the first few years given the new market entry costs.

And then the market turns profitable. And in other cases, the market comes with a pretty significant book of business that can be EBITDA positive. So I think it just depends on the nature of the transaction, which market. There’s no other new markets in our guidance for this year other than Arizona. So if we end up deploying more capital and enter any new states, we’ll update guidance accordingly.

And like we’ve said previously, if we’re putting significant capital to work, we’re gonna be pretty disciplined and make sure we’re focused on EBITDA and free cash flow. So I think we’ll just continue to do that the way we’ve done and keep compounding EBITDA here.

Dee, Conference Operator: Our next question comes from the line of Jamie Persson with Goldman Please go ahead.

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health6: Hey, thanks. Good morning. A question on operating leverage you showed here in the first quarter. So cost of platform has been up mid teens the last two years. I think that reflects some of the infrastructure build out you’ve done in new markets that you’ve entered over that period.

Here in the first quarter, cost of platform was up 10% versus 13% practice collections growth. So you’re getting operating leverage there. So the broad question is just how to think about cost of platform investments in 2025? And then more specifically, are some of these new markets you’ve entered over the last couple of years now at a point where the infrastructure is in place and as you grow, you’ll see a lot of operating leverage there?

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yes. It’s a great question, Jamie. Appreciate you asking it. You know, I think I just want to go back to slide 11. And if you see our EBITDA margin as a percentage of care margin, you know, we’ve just grown that significantly over the past four, five, six years, despite entering some of the new markets.

Some years we get some leverage, some years we are investing, you saw that twenty two to twenty three, it was pretty flattish EBITDA as a percentage of care margin. Then you see the operating leverage in the subsequent years. I think our long term margins that we’ve guided to previously is around 30% to 35%. We are sitting at very close to 25% with our guidance. We were over 25% in this quarter.

And if you look at our midpoint of our guidance, it’s kind of at 24.6%. So we are pretty significantly there. And this is fully expensing all of G and A, public company costs, full sales and marketing, all of our technology development. As you know, we don’t capitalize much at all. And I think you’re seeing the strength of the business model that as we’ve scaled and grown our medical groups, gotten some of these markets to even come out of that initial one or two year initial ramp up phase, we start to see operating leverage all the way down to EBITDA and then conversion, 80 plus percent conversion to free cash flow.

So I think we continue to be pretty excited in how we’ve delivered this. Our guidance reflects for the rest of the year, what we expect. But again, if we perform better at the high end, it could better than what we have. We’ll just see how the year plays out. And I think it’s also important to understand, like we’re delivering this despite pretty significant headwinds in the value based space.

I mean, as you know, our management fee structure is pretty significantly skewed towards moving lives into risk arrangements of all shapes and sizes, and that’s where we earn 40% of those shared savings. So despite having a period where value based care shared savings is flat year over year, we’re still delivering on operating leverage. So I think we feel really good about the progress of the business, progress of the cost structure. As we add more lives, more providers, I think the existing infrastructure scales really well. I don’t, I mean, once we get to close to 30%, I think you’ll see some stability.

But our endeavor is to continue to keep expanding that EBITDA margin over time.

Dee, Conference Operator: Our next question comes from the line of Daniel Grosslight with Citi. Please go ahead.

: Hi, thanks for taking the question and congrats on the strong start to the year. I’m just curious how your conversations with providers have changed, if at all, this year. Are they more or less receptive to joining the Privia platform, particularly as it relates to potentially moving into some of these value based care arrangements? And Bart, you mentioned that at least in IMS, they had been approached by you know, everyone under the sun, just given their size. I’m curious with other smaller providers, is it a similar dynamic where most folks now have been approached by someone to do something like what Privia is doing?

Or are you still really kind of chatting with folks where this is more new to them? Thanks.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, I appreciate the question, Daniel. I think it’s a pretty important question. I think the comprehensiveness of our platform across all specialties, all lines of business, all payers, joining a medical group versus just partnering with a company on one particular risk contract, I think it’s very attractive to a lot of small providers. They’ve been approached by someone or the other, so it’s very rare that even a small practice is just totally independent and did everything themselves, and has never spoken to anybody in either the physician enablement space or some hospital or private equity or whatever have you, depending on their size. Our sales team is performing really well, as we said in our prepared remarks.

Last two, three years, we’ve seen a lot of great momentum. I think we are one of the survivors in this industry, given all the takeout that’s happening. I think we are operating from a position of strength. The results are there for everybody to see. And so I think our performance speaks for itself.

And ultimately our existing physician base is our best sales team. You know, as we enter a state, the flywheel just snowballs and runs where existing practices that have been live for two, three, four, five years act as a great referral to new practices. And doctors speak with doctors, as you know. So I think even in some of our mature markets, are seeing where a lot of the top of the funnel activity is referral from our existing providers, and that comes with a very high conversion rate. So I think the fact that we have really performed well in this model, this model works, physicians are able to stay independent, autonomous, and yet be part of something bigger, I think it really resonates for the totality of the practice.

We’re not going in doing anything artificial, giving them money, protecting downside risk, giving them equity. Like all those things run their course over some period of time. And so I think from a sustainability perspective, this is the right long term partnership model that we think. Obviously, I’m biased, but I think all those things over time just help you continue to grow this business. So I think we’re seeing some of that across all our states.

Dee, Conference Operator: Our next question comes from the line of Michael with Baird. Please go ahead.

: Thank you. Just quickly first, I’m not sure if you’ll comment on this, but how many of the 28,000 IMS lives are over capitation? Then in terms of earning seasonality for this year, just given how first quarter was quite meaningful outperformance and historically looks like 1Q is generally softer in terms of full year earnings contribution. Curious if we should be how we should think about the remainder of the year? Do we expect anything different versus historical?

Any difference from these new Arizona costs? And last question, and with some of your larger value based care, full risk providers in the market facing some pretty meaningful issues this year, when you see all this plus you’re consistently scanning the country for profitable capitated providers, would love to hear if you’ve seen anything noticeable in terms of if V-twenty eight impacted TAD, maybe more specifically in your view if you think the cohort economics over the past five years for these provider models might now be structurally impaired? Thank you.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, thanks for the question, Michael. So three in one, I’ll try and take them in order. So on IMS, yeah, we don’t usually disclose, but none of the lives are capitated. So that’s the short answer of the twenty eight thousand. On the second one, again, it’s early in the year, but you shouldn’t expect anything different from a seasonality perspective.

So we’ve entered the year pretty strong, and we’ll update guidance as the quarters go by. But we don’t expect any anomaly this year versus previous years from a quarterly cadence perspective on how the P and L should run its course. But we’ll see, again, the biggest variable, as you know, is the value based book, and as we get more data, we’ll update our accruals and see how it all plays out, but we feel pretty comfortable updating our guidance the way we did. On the third one, I think that’s a pretty interesting question. I think there’ve been a lot of models, public and private, that try to get these providers, you know, in some way, shape, or form in contracts of certain tenure.

They haven’t performed, as is pretty obvious, in full risk. And I think over time, the providers, these provider practices will make the decision on whether to stick with their existing partner look for a switch. We’ve again said, we’re not out there hunting for capitated lies. Mean, that’s just a nature of a financial contract between the payer and an entity like us. I think it’s important to do value based care and MA risk thoughtfully in a manner where all three entities, the payer, an enablement company like Trivia and the doctor or the physician group all have skin in the game.

It’s long term sustainable. You’re not doing anything artificial just for the sake of doing capitation, and people are getting paid to take their risk and paid to do the piece of job that they’re supposed to do. And I think a lot of these companies entered into some contracts that didn’t validate that thesis. And financially now, you know, some of these contracts or structures might be impaired, just unsustainable from a payer enablement company perspective, or unsustainable from the relationship that they have with the provider group that they signed, in terms of economic sharing, overall opportunity to earn shared savings, so on and so forth, as all these impacts happen on the MA book from V28 and STARS scores utilization, so on and so forth. So, I think all that should bode well for us.

I think we’ll continue to see some disruption. We’ve said previously, we look to take advantage of that and get these groups in, hopefully, which is a model that is much more sustainable like ours, so organically and then also inorganically.

Dee, Conference Operator: The last question comes from the line of Joanna Kaczuk with Bank of America. Please go ahead.

Alberta Massey/Joanna Kaczuk, Analyst, Leerink Partners/Bank of America: Hey. Good morning. Thanks for squeezing me in. So, actually, I wanna ask about the m and a pipeline. So with all the cash that you have now on the balance sheet, would you look to do more deals immediately, or it’s more likely, you know, first to kind of you know, but just the Arizona before you move on because also what I’m getting at just curious because somewhat related to prior question around you know are there a lot of interests from practices, right?

Is there activity there, you know, in terms of deals just floating around? But the other part of the question is around valuations. How should we think about, you know, what you typically pay in terms of multiples for deals of that size? Thank you.

Parth Merocha/Marotra, Chief Executive Officer, Privia Health: Yeah, thanks for the question, Joanna. So the pipeline remains really strong. Again, you can see slide 11. We’ve entered one, two, or more states every year pretty consistently. Some years it’s more states, some years it’s less.

It just depends on when we do the deal. You know, we are still in 15 states, 35 to go. And so our view is we keep looking for opportunities to enter different states, also increase density in existing states. And we’ve done all kinds of deals. As you know, we bought medical group entities, risk entities, MSO entities, combination of them.

And so it just depends on what kind of deal we find where, given our unique model, where it’s a pretty comprehensive platform. Again, catering to all specialties, all payers, all patients, all lines of business. And so the valuation then just is reflective of the entities we buy, the earnings stream from that. We have pretty disciplined buyers focused on EBITDA free cash flow. So, you know, if you are putting significant capital to work, like we did in the Arizona deal, you should expect pretty significant EBITDA contribution.

If it’s a smaller deal, we may be just entering a state, buying a tax ID, buying a risk entity, so on and so forth, and playing the long game there. So it just depends on the nature of the transaction, but we’ll continue to be pretty disciplined. If you’re putting significant capital, you should expect that that’ll come with hopefully good earnings contribution. And lastly, I would say, again, this environment, we are in a position of strength with our balance sheet and our free cash flow generation to take advantage of as many opportunities that arise. Obviously, we don’t have billions of dollars, but I think we are hopefully a partner of choice, both given our business model, ability to partner with different kinds of provider groups as they make a decision whether to join us or a private equity group or any other payer.

So I think it’s a pretty unique time to be in this space, and we’re glad to be operating from a position of strength.

Dee, Conference Operator: We have no further questions. Management, please continue.

Robert Borchardt, Senior Vice President of Investor and Corporate Communications, Privia Health: Thank you for listening to our call today. We appreciate your continued interest and look forward to speaking with you again in the near future. Have a great day.

Dee, Conference Operator: This concludes today’s conference call. You may now disconnect.

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