Privia Health Group, Inc. (NASDAQ:PRVA): Building a Market-Leading Primary Care-Centric Delivery Network

Published on March 14, 2025 | Ticker: PRVA

Business Overview

Privia Health Group, Inc. (NASDAQ:PRVA) is a technology-driven, national physician-enablement company that collaborates with physician practices, health plans, and health systems to achieve better outcomes, lower costs, improved patient experience, and happier and more engaged providers. The company has a unique practice model that combines the advantages of a partnership in a large regional Medical Group with significant provider autonomy for the Privia Providers joining its Medical Groups.

Privia Health was founded in 2016 and is headquartered in Arlington, Virginia. The company's first market was in the Mid-Atlantic region, consisting of Virginia, Maryland, and Washington D.C. Privia rapidly expanded its geographic footprint, entering Georgia in 2017, followed by the Houston-San Antonio-Austin, Texas Gulf Coast region in 2018, and the Dallas-Fort Worth, Texas North Texas market in 2019. In subsequent years, Privia continued its expansion into West Texas, Central Florida, Tennessee, California, Montana, Ohio, North Carolina, Connecticut, Washington state, and South Carolina.

The company operates in 14 states and the District of Columbia, with a total of 4,789 implemented providers as of December 31, 2024. Privia's business model is centered around organizing existing physicians and non-physician clinicians into a unique practice model that provides the benefits of a partnership in a large regional Medical Group while maintaining significant provider autonomy.

Under Privia's Medical Group model, Privia Physicians join the Medical Group in their geographic market as an owner. Privia owns a majority interest in certain of these Owned Medical Groups, with Privia Physicians collectively owning a minority interest. In markets where state regulations do not allow Privia to own the Medical Groups, the Non-Owned Medical Groups are either owned by the Privia Physicians or owned indirectly through a licensed physician holding a Privia leadership position (Friendly Medical Groups).

Privia Physicians furnish healthcare services through the company's Medical Groups and continue to own their historical practice entities (Affiliated Practices), which provide certain services to the Medical Groups. Privia provides management services to the Medical Groups through local management services organizations (MSOs), which provide access to value-based care (VBC) opportunities either directly or through Privia-owned accountable care organizations (ACOs).

Privia principally derives revenue from three sources: 1) fee-for-service (FFS) patient care revenue, 2) VBC revenue collected on behalf of Privia Providers, and 3) other revenue from additional services offered to Privia Providers or directly to patients or employers. The operations of Privia's Owned Medical Groups, owned ACOs, owned MSOs, and Friendly Medical Groups are reflected within the company's consolidated financial results.

Financial Performance

For the full year 2024, Privia reported total revenue of $1.74 billion, up 4.7% year-over-year. The company's FFS-patient care revenue grew 17.4% to $1.15 billion, while VBC revenue declined 37.1% to $456.3 million due to the renegotiation of certain at-risk capitation agreements. Other revenue remained relatively flat at $8.6 million.

Privia's operating income for 2024 was $17.0 million, compared to $20.7 million in 2023. Net income attributable to Privia Health Group, Inc. was $14.4 million, or $0.11 per diluted share, compared to $23.1 million, or $0.19 per diluted share, in the prior year.

The company generated $109.3 million in net cash provided by operating activities in 2024, up 35.3% from 2023. Free cash flow, defined as net cash provided by operating activities less capital expenditures, reached a record $109.3 million in 2024, representing a conversion rate of 121% of adjusted EBITDA.

For the fourth quarter of 2024, Privia reported revenue of $460.9 million, an increase of 4.6% year-over-year. The increase in revenue was primarily attributable to growth in FFS-patient care revenue and FFS-administrative services revenue, partially offset by a decrease in capitated revenue due to renegotiation of certain capitation agreements. Net income for the quarter was $4.4 million.

Privia's revenue streams are diversified across three main segments:

1. FFS Revenue: This segment represented 66% of total revenue in 2024, up from 58.9% in 2023. It includes FFS-patient care revenue and FFS-administrative services revenue.

2. VBC Revenue: This segment accounted for 26.3% of total revenue in 2024, down from 33.8% in 2023. It consists of capitated revenue, shared savings, and care management fees.

3. Other Revenue: This segment made up 0.5% of total revenue in 2024, consistent with 2023. It includes services such as concierge services, virtual visits, virtual scribes and coding, clinical trials, behavioral health management, and partnerships with self-insured employers.

Privia's Care Margin, which excludes amortization of intangible assets from Gross Profit, was $403.85 million in 2024, up from $359.16 million in 2023. The company's Platform Contribution, which is Gross Profit excluding amortization of intangible assets and stock-based compensation expense included in Cost of platform, was $195.63 million in 2024, compared to $173.48 million in 2023. Adjusted EBITDA, which excludes certain non-cash and non-recurring items, was $90.45 million in 2024, up from $72.23 million in 2023.

Liquidity

As of December 31, 2024, Privia had $491.1 million in cash and cash equivalents and no outstanding debt, providing significant financial flexibility to pursue growth opportunities. The company also had a $125 million revolving credit facility, of which no amount was outstanding.

Privia's strong liquidity position is reflected in its financial ratios:

Debt/Equity ratio: Very low due to no outstanding debt

Current ratio: 1.86
Quick ratio: 1.86

These ratios indicate that Privia has a strong ability to meet its short-term obligations and maintain financial flexibility.

Operational Highlights

Privia's implemented provider count increased 11.2% year-over-year to 4,789 as of December 31, 2024, driven by organic growth in existing markets and the company's entry into the Indiana market through the acquisition of Privia Medical Group Indiana, LLC.

The company's total attributed lives across commercial and government value-based care programs grew 12.1% year-over-year to 1.26 million as of December 31, 2024. This includes a 15.2% increase in commercial attributed lives to 782,000 and an almost 8% increase in Medicare Advantage and Medicaid attributed lives.

Privia's gross provider retention rate remained high at 98%, and the company's patient Net Promoter Score was 87, underscoring the strong provider and patient satisfaction with the Privia platform.

Guidance and Outlook

For the full year 2025, Privia expects implemented providers to increase 9.6% year-over-year to 5,250, with attributed lives growth of approximately 7.5%. The company is guiding for practice collections growth of around 7.8% and care margin growth of 8.9% at the midpoint, despite the ongoing challenges in the Medicare Advantage environment.

Adjusted EBITDA is expected to grow approximately 19% at the midpoint, with EBITDA margin as a percentage of care margin expanding by around 200 basis points year-over-year. Privia is also projecting capital expenditures to remain de minimis in 2025 as part of its capital-light operating model.

Additional guidance for 2025 includes:

At least 80% of full year adjusted EBITDA is expected to convert to free cash flow

The effective tax rate is expected to be 26% to 28%

It's worth noting that Privia exceeded the high end of guidance for all key operating and financial metrics in 2024, including implemented provider growth, fee-for-service collections growth, adjusted EBITDA growth, and free cash flow.

Risks and Challenges

Privia operates in a heavily regulated healthcare industry, which increases its costs and could restrict the conduct of its business. The company and its Medical Groups must comply with extensive applicable healthcare laws and government regulations, which may change over time. Failure to comply could result in adverse financial impacts, significant changes to operations, or reputational harm.

The company's business model relies on a complex legal framework that governs its relationships with Medical Groups and Privia Providers. Legal challenges or shifting interpretations of applicable laws could require Privia to make significant changes to its operations, which could adversely affect its business.

Changes and uncertainty in the healthcare industry, including health reform initiatives and other changes to laws and regulations, may adversely affect Privia's business, financial condition, and results of operations. The company may also be subject to legal proceedings, including litigation, governmental investigations and claims, and payer audits, which could result in significant costs and reputational harm.

Risks associated with value-based care arrangements may negatively impact Privia's business, operations, and financial condition. The company's revenue is dependent upon its contracts and relationships with payers, and if it is unable to retain and negotiate favorable contracts, its revenue may decline.

Conclusion

Privia Health Group, Inc. has established itself as a leading technology-driven, national physician-enablement company, building one of the largest primary care-centric delivery networks in the nation. The company's unique practice model, focus on value-based care, and strong financial position provide a solid foundation for continued growth and profitability, despite the challenges facing the healthcare industry. As Privia navigates the evolving regulatory landscape and competitive environment, its ability to adapt and innovate will be crucial to maintaining its market-leading position.

Privia's diversified revenue streams, strong financial metrics, and technology-enabled platform position the company to continue capitalizing on the industry's shift towards value-based care. With a robust liquidity position, no outstanding debt, and a track record of exceeding guidance, Privia is well-positioned to execute its growth strategy and deliver value to its stakeholders in the coming years.