Privia Health : Q4'24 Conference Call 4Q24 Conference Call Script

4Q'24 Conference Call Script

Thursday, February 27, 2025 @ 8:00 am ET

Robert Borchert - SVP, Investor & Corporate Communications

Slide 1

Thank you and good morning. Joining me are Parth Mehrotra, 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 priviahealth.com along with today's financial press release and slide presentation.

Slide 2 - Disclaimer

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.

The financial results reported today are preliminary and are not final until our Form 10-K for the year ended December 31, 2024 is filed with the Securities and Exchange Commission. Some of the statements we will make today are forward-looking in nature based on our current expectations and view of our business as of February 27, 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. Reconciliation of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website. Now, I'd like to hand the call over to our CEO, Parth Mehrotra…

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Parth Mehrotra - Chief Executive Officer

Slide 3 - Agenda

Thank you, Robert, and good morning everyone. Privia Health had a very strong 2024 on many fronts as we continue to execute well and drive growth across all our markets.

This morning, I'll cover our 2024 performance and business highlights. Then David will discuss our recent financial results, capital position, and our 2025 guidance outlook before we take your questions.

Slide 4 - Exceeded All Operating and Financial Guidance in 2024

Privia's momentum extended across all aspects of our business as we exceeded the high end of all guidance metrics for 2024. Our Growth team once again delivered an exceptional year of new provider signings in existing markets, which underpins our strong visibility through 2025.

Implemented Providers increased 11.2% year-over-year, which drove fee-for-service collections growth of 13.6%. Healthy growth in attribution and a continued focus on clinical performance improvement led to better than expected value-based care results, despite the challenging Medicare Advantage environment.

Adjusted EBITDA was up 25.2%, with operating leverage driving margin expansion of 230 basis points year over year, despite continued investments in our newest markets. Privia also generated a record $109.3 million in free cash flow in 2024, converting 121% of adjusted EBITDA. We ended the year with $491 million in cash and no debt.

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Our balance sheet positions us with significant financial flexibility to deploy capital and take advantage of opportunities in the current market environment. Our business development pipeline is robust, and we are committed to pursuing disciplined growth that complements our organic sales engine in existing markets.

Privia's outstanding performance in the current healthcare and regulatory environment is a testament to the strength of our unique business model, strong execution by our operating teams and most importantly, exceptional performance by our physician partners in our high performing medical groups and risk entities.

Slide 5 -Building One of the Largest Primary Care-Centric Delivery Networks

We are well on our path to building one of the largest primary care centric delivery networks in the nation. Our large-scale, high-quality, community-based medical groups and risk entities have demonstrated proven success across 14 states and the District of Columbia. In these geographies, our footprint now comprises 4,789 implemented providers caring for over 5.2 million patients in more than 1,200 care center locations.

Gross provider retention of 98% highlights the stickiness of our model and our providers' satisfaction with the Privia platform. Likewise, our patient Net Promoter Score of 87 underscores the excellent patient experience being delivered by our medical groups.

Slide 6 - Diversified Value-Based Platform

Privia now serves over 1.26 million attributed lives across commercial and government value-based care programs. The breadth of our contracts and geographic reach positions us as one of the most balanced and diversified value-based care organizations.

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Total attributed lives estimated as of January 1st increased more than 11% from a year ago, driven by new provider growth as well as new value-based care contracts in certain programs. Commercial attributed lives increased 15.2% from last year to reach 782,000. Medicare Advantage and Medicaid attribution both increased almost 8% from a year ago.

We continue to expect headwinds in Medicare Advantage over the next few years given pressures from elevated utilization trends, phase-in of V28 through 2026 and changes in star scores, among other factors. However, 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.

We remain highly focused on generating positive contribution margin in our value-based contracts as we pursue attribution growth, manage risk, and implement clinical and operational enhancements in our partner practices. Ultimately, our goal is consistent and sustainable earnings growth for our medical groups and shareholders year after year.

Slide 7 - Consistent Growth & Profitability Across Cycles

Privia has delivered consistent growth, profitability and free cash flow across economic, healthcare, regulatory and political 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, including free cash flow, over time. Since 2018, we have consistently expanded EBITDA margins and converted 105% of EBITDA to free cash flow, on average.

The midpoint of our 2025 guidance metrics demonstrates our expectation for another year of strong EBITDA growth despite significant headwinds in the current healthcare environment for value-based care.

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Now, I'll ask David to review our recent financial results, and discuss our capital position and 2025 guidance outlook in more detail…

David Mountcastle - Chief Financial Officer

Slide 8 - 4Q'24 Performance

Thank you, Parth. Privia executed very well through the fourth quarter of 2024. Our Implemented Providers grew 147 sequentially from Q3 to reach 4,789 at December 31st, an increase of 11.2% year-over-year. The growth in Implemented Providers along with continuation of solid ambulatory utilization trends and value-based performance led to Practice Collections increasing 4.7% from Q4 a year ago to reach $792.5 million.

Excluding revenue from renegotiated Medicare Advantage capitated agreements, Practice Collections increased approximately 12.4% year-over-year in the fourth quarter of 2024.

Adjusted EBITDA, which is reconciled to GAAP Net Income in the Appendix, increased 44.0% over Q4 last year to reach $24.9 million, representing 23.1% of Care Margin. This is a 420 basis-point improvement from a year ago as we generated operating leverage across both cost of platform and G&A, while investing across all markets.

Slide 9 - FY'24 Performance

As Parth noted, we exceeded the high end of guidance for all key operating and financial metrics for full-year 2024. Practice Collections increased 4.5% to $2.97 billion. Care Margin was up 12.4%, and Adjusted EBITDA grew 25.2% to reach $90.5 million.

Slide 10 - Strong Balance Sheet and Capital Position

The free cash flow generation of our business model further strengthens our healthy balance sheet as we ended 2024 with approximately $491 million in cash and no debt.

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With de minimis capital expenditures in 2024, Free Cash Flow for the year was $109.3 million, or 121% of Adjusted EBITDA, higher than previous guidance due to the timing of certain outgoing cash payments as well as prudent working capital management.

Slide 11 - Initiating FY'25 Guidance

Our initial guidance for 2025 is built upon strong 2024 provider signings and the diversity and resiliency of our operating model in the current healthcare environment.

In 2025, we expect to focus on the same core priorities that have driven our business to-date: first, provider growth to increase density and scale in existing and new markets; second, attribution growth and performance in value-based arrangements; and third, operational improvements and efficiencies that impact the bottom line.

Using the midpoint of our 2025 guidance, Implemented Providers are expected to increase 9.6% year-over-year to reach 5,250 by year-end, and Attributed Lives growth is expected to be approximately 7 ½%.

We expect Practice Collections growth of approximately 7.8% at the midpoint. This guidance assumes minimal increase in Shared Savings accruals year over year given the ongoing challenges in Medicare Advantage.

We expect Care Margin growth of 8.9% at the midpoint given minimal increase in Shared Savings accruals. We are also guiding to Adjusted EBITDA growth of approximately 19% at the midpoint. EBITDA margin as a % of Care Margin is

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expected to expand approximately 200 basis points year over year as our operating leverage in more mature markets more than offsets new market entry costs.

While we are maintaining a robust pipeline of existing market expansion and potential new market opportunities, our initial 2025 guidance assumes no new business development activity or capital deployment.

Finally, we expect capital expenditures to be de minimis again this year as part of our capital-light operating model, and are assuming an effective tax rate of 26 to 28%. We are nearing the end of our net operating loss carryforwards, so we expect to pay more cash for taxes in 2025. This should still lead to at least 80% of our full-year Adjusted EBITDA converting to Free Cash Flow.

Privia Health remains focused on building one of the largest primary care-centric care delivery networks in the nation. We look forward to continuing to serve our physicians, providers and health system partners, and their patients while creating value for our shareholders for many years to come.

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