Privia Health Group Stock

Thank you for standing by, and welcome to Privia Health's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Robert Borchert, SVP of Investor and Corporate Communications. Please go ahead.

Thank you, Latif. Joining me are our CEO, Parth Mehrotra, 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 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's reported results are preliminary and are not final until our Form 10-Q for the second quarter and 6-month period ended June 30, 2026, is filed with the Securities and Exchange Commission. Some of our statements today may be forward-looking in nature based on our current expectations and view of our business as of August 6, 2026. Statements such as 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. These statements should be considered along with the cautionary statements in today's press release and the risk factors described in our 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. And now I'd like to turn the call over to our CEO, Parth Mehrotra.

Thank you, Robert, and good morning, everyone. Today, I'll summarize our performance and market presence, and David will discuss our financial results and updated 2026 guidance before we take your questions. Privia Health has continued to execute at a very high level across all aspects of our business. We delivered strong new provider signings across all our markets, which provides excellent visibility through 2026 and into next year. Implemented provider growth of 10.1% and value-based attributed lives growth of 19.2% year-over-year helped drive total practice collections growth of 12.4% in the second quarter.

Adjusted EBITDA increased 29% with EBITDA margin as a percentage of care margin expanding 310 basis points from a year ago. We are continuing our journey to deploy AI applications in various workflows across the organization and expect to continue to expand our EBITDA margin towards the high end of our long-term target range of 30% to 35% of care margin over the next few years. In late May, we announced entry into the state of New Jersey in partnership with the Urology Group of Bergen County, a practice for 25 adult and pediatric clinicians. This represents Privia's 25th state as we build our national primary care-centric delivery network.

We raised our 2026 outlook across all key financial metrics, including practice collections, care margin and EBITDA, given our strong first half performance. Attributed lives is above the high end of prior guidance. Our implemented provider guidance is unchanged. We would add 570 providers at the midpoint of our 2026 guidance, which is 10.6% growth over 2025. The Privia Health footprint of community-based medical groups and value-based risk-bearing entities continues to expand. We now have 5,644 implemented providers caring for over 6.1 million patients in more than 1,300 care center locations operating across 25 states and the District of Columbia. A defining component of Privia's operating model is our gross provider retention averaging 98% over the past 3 years.

We serve over 1.64 million attributed lives across more than 130 commercial and government value-based care programs. Commercial attributed lives increased 11.7% from last year to reach 942,000. Lives attributed to the CMS Medicare programs were up 55%. Medicare Advantage and Medicaid attribution increased more than 12% and 18%, respectively. The diversification of Privia's value-based care contracts gives us the confidence in our ability to build scale and profitability without depending on any one particular program.

Slide 7 shows the scale and breadth of Privia's ACOs. We manage an estimated $15.7 billion in total medical spend across all commercial and government value-based risk arrangements. This $15.7 billion estimate captures the full scope of our value-based programs relative to our fee-for-service collections. It more accurately represents the breadth of total medical spend our clinicians are able to potentially impact over time. We remain highly focused on increasing attribution and generating positive contribution margin across our value-based book. Our ultimate goal is to achieve consistent and sustainable earnings growth for our physician partners and shareholders.

David will now review our recent financial results, balance sheet strength and our updated 2026 guidance in more detail.

Thank you, Parth. Privia Health's strong operational execution and growth continued through the second quarter. Implemented providers grew 109 sequentially from Q1 to reach 5,644 at June 30, an increase of 10.1% year-over-year. Implemented provider growth as well as strong ambulatory utilization trends and value-based performance led to practice collections growing 12.4% from a year ago to reach $970 million. Adjusted EBITDA, which is reconciled to GAAP net income in the appendix, increased 29% over the second quarter last year to reach $37.4 million, representing 28.3% of care margin. This is a 310 basis point margin improvement as we generated operating leverage across both cost of platform and G&A while investing across all markets.

For the first half of 2026, practice collections increased 13.4% to $1.88 billion. Care margin was up 18.3% and adjusted EBITDA grew 32.5% to reach $74.1 million. We ended the second quarter with more than $412 million in cash and no debt. As we mentioned previously, beginning this year, Privia is now a full cash taxpayer. Given the timing of cash tax payments and provider disbursements, we expect 70% to 80% of our full year adjusted EBITDA to convert to free cash flow. This does not include any capital deployment in year for business development and assumes we will receive a significant portion of our shared savings cash payments for 2025 performance by year-end.

Last month, CMS announced certain proposed changes that would be retroactively applied to the Medicare Shared Savings Program for performance year 2025 if finalized. To allow for the implementation of these changes, CMS may delay delivery of the final reconciliation results for performance year 2025 until November. While this has minimal impact on our accruals, it may lead to an atypical year-end cash flow dynamic, depending on when we receive the cash settlement from CMS as well as our subsequent payments to the providers. Our healthy balance sheet continues to position us with significant financial flexibility to deploy capital and take advantage of opportunities in the current market environment.

Our first half results gives us confidence to raise our 2026 outlook above the high end of our prior guidance range for attributed lives to the high end of our ranges for practice collections and GAAP revenue and to mid- to high end of our ranges for care margin platform contribution and EBITDA. Our guidance for implemented providers is unchanged. We also continue to maintain a robust pipeline of existing market expansion and potential new market opportunities. As a reminder, our guidance does not assume any additional business development activity. Over the last 9 years, Privia's consistent growth and profitability across cycles is the ultimate proof of our consistent execution, the strength of our differentiated business and the compounding of our economic model year after year. We are confident that our integrated model, combining medical groups, risk-bearing entities and tech and services platforms will continue to drive sustainable growth and profitability for years to come.

As Privia continues to build large-scale primary care-centric delivery networks across the nation, we would like to thank all our clinicians and employees for their continued partnership, dedication and hard work to help us achieve these results. Operator, we are now ready to take questions.

[Operator Instructions] Our first question comes from the line of Elizabeth Anderson of Evercore ISI.

Maybe just could we double-click on your question about the CMS shared savings payment being delayed. I guess, obviously, out of your control as that's a government function. But I guess what gives you confidence that it is going to come in the fourth quarter? And how should we think about sort of external signposts we can watch to monitor that?

Yes. I mean we're not that worried about it. They've been really good over the past many years. Usually, results come in August, September. The cash settlement happens sometime October. So it's delayed by, call it, 30 to 45 days. I think it's in their interest to make sure all the providers are getting the cash flow as they deserve for a good performance here. I just think the changes that they proposed are positive in general. So I just think they need a little bit more time to reconcile it, but we don't see any issues in receiving the money. I think whether it comes early November, late November, December, I mean, that's just -- it will happen when it happens, but I don't think it's a big concern for us.

Our next question comes from the line of Ryan Daniels of William Blair.

This is Matthew Mardula on for Ryan Daniels. So in your prepared remarks, you talked about being towards the high end of your long-term target range of 30% to 35% for the care margin over the next few years. Can you give us some color on what has changed to give you confidence of being at the high end for your long-term target as well as the drivers of what will help you get to that target? And then any directional time line on when this could be achieved? Is it maybe in the next few years or more of a longer-term target of 5 years?

Yes. Thanks for the question, Matt. So I mean, we covered this a little bit last quarter as well. I mean, if you see our guidance, we expect to be 29% this year EBITDA to care margin. So it's pretty much very close to the 30%. And given all the work we are doing with different AI applications, we're just scaling our business with growth, I think we're pretty confident that we can keep accreting that. There's no set time line. I mean we said over the next few years, it can ebb and flow, but I think we'll just keep accreting it. And we actually feel really good about it because this was a target we had set when we went public at our IPO about 5 years ago.

And we're already there at the low end. A lot of our mature markets are already well above that target, close to the high end or above even the high end. So that gives us the confidence that as we mature some of the other newer markets, overall, the profitability should keep trending up.

Our next question comes from the line of Daniel Grosslight of Citi.

Congrats on another solid quarter here. I want to focus a little bit on the updated guide, particularly around practice collections. It does imply a pretty strong deceleration in growth from 1H to 2H. I think it's around -- you mentioned 13% in the first half to around 3% in the second half year-over-year. And that's despite continued provider and attributed lives growing. I'm just curious, what's driving that implied deceleration? Is that just conservatism? Or are there specific headwinds or maybe a difficult comp period that we should be aware of in the second half of the year?

Yes. Thanks for the question, Dan. Yes, there's nothing much in the implied. I mean we've done this for 21 quarters. You've seen how we guide still middle of the year. So we're just being prudent, conservative, whatever you want to call it. At the midpoint, we got it to the high end of the original range. If the trends continue, there should be further upside. We'll just see how it plays out. I think we feel really good about ambulatory utilization. I think folks continue to visit their primary care providers or whoever is the first point of contact. So I think a lot of the utilization trends you're seeing on the inpatient side as reported by the health systems, I think doesn't really apply to a business like Privia. We've talked about that in the past. So I think we feel really good overall and the year goes on and we keep progressing. So we'll update the guidance as it comes.

Our next question comes from the line of A.J. Rice of UBS.

I know there are a variety of drivers to give you confidence on that margin improvement over time, operating leverage, obviously, shared risk performance, value-based performance. But you also now for several quarters have been mentioning the AI opportunities. And I wondered if it's possible to get you to enumerate a little bit on some of the use cases, either at the corporate level or at the practice level that you're seeing that get you excited about the opportunities for that to drive improved efficiencies.

Yes, I appreciate the question, A.J. So I think we covered this in a fair bit of detail on the last call, but we are looking at our 4 core workflows across corporate functions, fee-for-service workflows, value-based workflows and then everything that happens in the patient care experience as the doctor or the provider sees their patients. So I think across those flows, we're looking at every single aspect, existing partnerships we have. We're on the Google platform. So we're using Gemini all across the board in different aspects of the corporate workflow. We have other tech companies we work with similarly that have embedded a lot of AI applications. And then our dev teams are continuing to see where we can build, buy, partner.

So whether it's patient experience, whether it's clinical decision-making by the doctors, whether it's obviously revenue cycle workflows. All of those are getting impacted. I think technology is advancing at a pretty good pace. We are piloting a lot of stuff. We're already seeing a lot of benefit. And I think tangibly, that's why we've always linked this with EBITDA margin expansion. Ultimately, we are measuring our ability to deploy these applications and seeing if things can be done better, faster, cheaper. And as we grow, we probably don't need to add a lot more expenses in headcount or other fixed costs. So all of those are going to help us achieve that.

We've talked in the past about we invested in a business called Navina for suspect medical conditions, coding compliance, et cetera. That's already played out pretty well. We have good case studies for that. And so I think, again, we're really excited. A business like ours is a perfect use case in deploying a lot of these applications as they evolve over time. And so I think we'll just continue in that journey over the next few years.

Our next question comes from the line of Jailendra Singh of Truist.

Congrats on a strong quarter. I want to ask about the New Jersey entry. I know it's a small sized initial anchor practice. But just to confirm, did that have any impact to your guidance on any metric? And more broadly, anything you can share about your approach there, onboarding process? Do you see that market ultimately evolving similar to some of your more successful market launches in the past?

Yes. Thanks for the question, Jailendra. Yes, I mean, pretty small practice, but really good set of providers. We're really excited to partner with them. It's a very important state from a health care spend perspective. A lot of independent providers. I think a lot of providers inside health systems or other entities that may come out and join a platform like Privia as some of the things play out in the market. So it's been on our -- it was on our radar for a while, and we're glad to just finally enter. And like many other markets, I think this will be a 5-, 10-year play for us. In every market we enter, we hope to establish a pretty large medical group. I mean, as you know, our strategy is not to just be small in any market. We are looking to build local density of providers across the state. So that playbook hopefully plays out here as well, and we hope to just continue to grow.

Again, given the size of the practice, I mean, it's not like this impacted given the timing of the deal and towards the middle of the year, it doesn't impact some of our metrics meaningfully, but a small contribution. But overall, we've just had a good first 6 months, so that reflects in our guidance.

Our next question comes from the line of Ryan Langston of TD Cowen.

Just maybe any updates on how the Evolent and IMS transactions from last year are progressing this year?

Yes. Thanks, Ryan. Yes, I mean, they're progressing really well. We've integrated both pretty much into our operating cadence. You're seeing some of the growth rates that reflect those acquisitions. They were both good additions. And our updated guidance reflects some of the good performance in both. So we're really excited about being in Arizona. I think it will be a big state for us. A lot of momentum, great physician partners there with IMS as we build that medical group further over the next few years. And really excited about the Evolent business that we bought. The Care Partners business will continue to grow, hopefully, and it will be an added way for us to partner with many providers that may not choose to join our medical group so the full offering right away, but ultimately, it will be a good pipeline.

So I think it allows us to expand into many states, look at further tuck-in acquisitions to add to that platform over time. So, we're pretty excited, just going to grind it out quarter-by-quarter, month by month and just keep building those businesses.

Our next question comes from the line of Sean Dodge of BMO Capital Markets.

This is Thomas Kelliher on for Sean. From the practice or the physician's perspective and thinking about the economics and the value prop around joining the Privia platform, how much incrementally do they typically stand to benefit? And how has that value prop evolved over the last few years or so as you built all this density and continue to strengthen and scale the value-based care business?

Yes. I appreciate the question, Tom. So I mean, this is a question that should come up much earlier in our journey as a public company as we're explaining the story. But like that thesis has only improved over time over the past 5 years as we build density. So, the components of value creation are obviously better fee-for-service contract rates relative to what they could cobble up on their own that appropriately pays them for all the work that they're doing relative to -- which are still lower than a lot of the health systems or facility-based providers. So, it's a good value for the payers to prevent these doctors from being acquired by much more expensive entities. Obviously, a lot of expense savings on the technology side, a lot of efficiency. There's 10% to 20% productivity lift as the physicians are not spending time on technology or payer contracts or some of the administrative tasks that we take over.

And then obviously, the whole value-based story plays along where a lot of the providers have never been in a value-based arrangement or have just dabbled into it, and we just provide a very sophisticated machinery around them to participate across the entire patient panel, which is important. It's not just Medicare lives, but also commercial lives and Medicaid. And we are able to transform what is a simple fee-for-service payment into multi set of payments between care management fees, shared savings, bonus-related payments across the entire patient panel, and that's the value add to the payers as well. So you add all that up over time, and it can range from 15%, 20% to as high as 50%.

And then what we also do is develop a business plan for each of these practices to organically grow their business, whether it's adding extra providers, physicians, nurse practitioners, growing their patient panel, adding another location, adding a specialist. So we've had practices, and we had some of these case studies in our SEC filings over time, where we've doubled the size of the practice over a 5-, 7-year period and really build these businesses at the small-scale level. So that's all the benefit, and I think we just continue to refine that, continue to be a great partner to these practices as they remain independent and thrive as a business in the communities in a very low-cost setting. So, you can see that in the flywheel and our growth rates over the past 8, 9 years on Slide 12, and that contributes to the same-store growth. So really excited about continuing to just have that play out.

Our next question comes from the line of Andrew Mok of Barclays.

This is Jeffrey on for Andrew. Provider expenses increased to $500 million in the quarter, which grew faster than revenue and was a bit higher than street expectations. Can you provide more detail on the drivers of that variance, particularly across care categories and business lines?

Can you repeat that again? You said provider expenses?

Provider expense. So I think it was a little bit -- it was $500 million in the quarter. Just wondering what the delta between balance sheet is.

Yes. I think you got to just take a look at an annual -- on an annual basis. I mean, I'm assuming you're referring to the disclosure on Page 9 of our press release. So, I just think you got to look at annually and our guidance just reflects the good performance overall. So overall, those are payments that we pass through to the providers on our fee-for-service book as well as the value-based book over time. So it just reflects the growth of the business.

Our next question comes from the line of Matthew Gillmor of KeyBanc.

I wanted to follow up on some of the MSSP discussion and the proposed changes to the financial methodology. It seemed positive overall and CMS is trying to encourage participation. There were some sort of puts and takes for enhanced track ACOs, at least the way we read it. I was curious what you all thought of the proposal and if there are any sort of noteworthy implications for Privia.

Yes. Thanks, Matt. Yes, I think as you summarize, like overall, we think it's positive. I think CMS continues to refine the program for the better. So some of the changes on adding new providers who've never been in an ACO, how we measure attribution. I think some of the changes around rebasing that happens every 5 years or so. I think all of those are positive. I think they can continue to refine it based on some of the adjustments on a regional basis. And then I think there's still some work to be done in our minds where you don't need 3 or 4 programs. I mean they tried REACH, now they have Lead. Over time, let's see if these programs merge into MSSP. But overall, look, I think it's a step in the right direction. I think it was pretty positive overall.

I think they made a real good effort to continue to improve the program. It continues to be one of the longest serving programs with very wide adoption across many hundred thousands of providers, millions of beneficiaries. So I think CMS appropriately wants to make sure that they keep doing right by community-based providers who are participating in this. So I think we feel really good about MSSP directly contracting with the government on this program and delivering shared savings. So I think over time, it will just get better. So pretty excited. And part of our guidance increase kind of reflects that. And so we'll just see how we keep doing that over the next few years, but really, really happy about it.

Our next question comes from the line of Whit Mayo of Leerink Partners.

Looking at the implemented provider growth this quarter, would you be willing to share how much of that growth is coming from new physicians joining existing groups versus new groups affiliating with Privia?

Yes. Thanks for the question. Yes, we don't break that out because it just changes every quarter. So we just look at that on an annual basis. Same-store growth is usually 1% to 2%, but that includes both price and volume. Some years, it's higher depending on just the mix. We're growing our practices same-store in a pretty meaningful way, and the base keeps getting bigger. So it could be higher than that number in a few years. And then obviously, we are adding new practices in the existing states and then entering new states. So just mix just varies. The good news is it just, as you know, it takes us 5 to 6 months to implement every provider from the sale and the business becomes, therefore, very predictable 9 to 12 months out.

So if we keep hitting the metrics, by the time we give the following year guidance in February, 90% of the business is pretty much locked in on a fee-for-service basis. So I think that just bodes well, and I think we'll just continue to play on all those levers like try to grow these practices same-store and try to keep adding new providers. But it's tough to just break out in one particular quarter or half a year because that just changes.

Our next question comes from the line of Matthew Shea of Needham.

Congrats on the nice quarter here. Maybe on go-to-market, you're running the 2 go-to-market motions now the full medical group and the wider ACO-only model. How is the 2-pronged strategy done so far into 2026? Anything interesting to call out? And obviously, we can see the adoption of the full medical group and implemented providers, but it would be good to hear specifically how the ACO-only model is resonating. I mean any notable additions there?

Yes, I appreciate the question. I mean it's still a little bit early for us. We just bought the business, closed it in -- by the end of last year and integrated it. But I think it allows us to have many more conversations in states where we do not have a medical group entity set up yet. And so I think it allows us to enter into partnerships with a much more bigger TAM, if you will. It also allows us to follow up that one particular acquisition with other tuck-in acquisitions that's available. There are a lot of ACO entities in subscale business models that I think we could pick up over time. It just depends what is available at what price.

So I think it allows us to run that playbook pretty efficiently as some of the disruption happens in the industry. So overall, I think we're very excited about it. I think -- and we do it in MSSP, which is a program largely that we understand. And then we can also add commercial and MA value-based contracts to that same playbook through a CIN or an IPA type of a network in a particular state. So I think we'll just build that out over time, and it will be a good addition. And then hopefully, over time, we'll have some cross-sell where some of these providers join our full medical group for the full set of services. So I think -- it will play out over the next 4, 5 years. That's our timeline to run any of these plays. So -- but it's early days, but I think we're pretty excited about it.

Our next question comes from the line of Jessica Tassan of Piper Sandler.

Congrats on the strong results again. So we have cost of platform coming in at about 52.5% of care margin, which is down 400 bps year-over-year. Should we still think about the cost of platform as kind of the cost associated with third-party EHR software? And then just does the 2Q leverage reflects the full extent of that opportunity? Or is there a longer-term opportunity to kind of negotiate pricing down and continue to drive margin expansion on that line?

Yes, I appreciate the question, Jess. So I think, again, like you got to look at it over years, on an annual basis. It can get impacted by shared savings accruals in 1 quarter or 1 half also because that flows down care margin to cost of platform. But over time, our job is to keep increasing that, and that's part of the EBITDA to care margin story as well. Like I said, it's a combination of both the cost of platform and SG&A. So I think it will just keep improving hopefully, over time. And there are different levers. I mean, technology spend is one. We don't capitalize any software, as you know. It's all expensed in the P&L. But then it's also a lot of our practice operations supporting these practices on both the fee-for-service and value-based book, a lot of the revenue cycle function that we have, a lot of our market leadership, fixed cost, variable costs.

So I think it's a combination of all of those that we'll continue to hopefully scale over time. And yes, we have levers in our contracts that as we get bigger, we scale those costs appropriately. And so we'll just keep pulling that lever. So, I think, as we've said, our target is try to get to that high end of EBITDA to care margin. And I think if you look at over the -- look at Slide 12, over the past 9 years, I mean, both cost of platform and SG&A has scaled really well. That has led to pretty good accretion on the EBITDA margin as a percentage of care margin. So hopefully, we'll just keep doing that.

Our next question comes from the line of Jack Slevin of Jefferies.

Congrats on the quarter. I just want to double-click a little bit a bit on the BD side of things for the ACO business. Just understanding we have this transition this year from ACO REACH to LEAD, possibly some disruption in the marketplace. Just wanted to hear if you have any additional color on sort of if that's creating pockets of opportunity or how you think about organic adds to the ACO business going forward?

Yes. Good question. So I think it's both organic and inorganic, where now that we have Care Partners, the Evolent platform that we bought, it allows us to go sell organically into practices that were part of REACH that may be considering what they do next. And so I think that's helpful. We didn't have that before. And then obviously, there are acquisition opportunities of all scale and size. which we continue to evaluate. So we can add to that. And part of that is based on this disruption of essentially a set of contracts just ended with CMS. So those providers have to find a new partner or the entity has to figure out a new set of programs that they have to participate in, which they may or may not have the capability to do so.

So again, I think as the industry consolidates to a few larger players at scale, I think it allows us to capture both that organic and inorganic opportunity. So I think it will play out over time because I do think over time, you do need a set of capabilities, which are much more deep rooted than anybody raising some capital and starting an ACO and just giving money away to providers to join. I mean that was the easy play. A lot of it got funded in 5, 6 years ago, private equity, venture capital, smaller entities trying to do it, but I think all that gets consolidated hopefully, over time as scale matters. So we'll hopefully play on the right side of that trade.

Our next question comes from the line of Ryan Halsted of RBC.

My question is about the managed care landscape looking ahead at 2027. Just curious if there's anything you are starting to think about as you hear about MA plans reevaluating which markets that they're looking to stay in or exit. And similarly, Medicaid managed care and some of the comments that have been coming out about their expectations on membership. I appreciate that.

Yes, it's a good question. Look, I mean, we are not in that business directly, but from everything you see and a lot of you have written about it based on the companies you cover, I think this happens every 5 years. The payers go through their cycle. I think some of the changes in B-28 changes in the exchange population, redetermination in Medicaid, et cetera, have just caused a little bit more of a disruption this cycle. So I think the payers obviously will make their adjustments. It's payer by payer, state by state, as you noted. The good news for a business like ours is we are in the business of creating very large dense medical group with low cost in the community providers. And we take that network in a very sophisticated manner to payers of health car. across the patient panel. Commercial, MA, Medicaid.

And I think as cost pressures continue to increase and as payers continue to -- wanting to create value, a business like ours becomes a really important partner to them because we are delivering care at the ground level in these communities. So I think we just become a pretty important part of the whole machine. I think primary care has been written by a lot of you. It's been written in many studies. Primary care is a chassis that helps deliver care in a very cost-effective manner and take ownership of the total life cycle of the care dollars effectively for any patient and the resulting outcomes from that. So I think as value-based care evolves, as payers look to improve their own performance, they'll have to turn to entities like ours because that's where performance is really delivered and care is delivered at the ground level. So I think we'll just continue to be that partner and keep evolving state by state.

The good news for us is the patients don't go away. It's not like populations are changing massively. So if a payer exits, the person still has to go see their doctor if they are not well. And human beings get ill, they age, things happen. So I think it bodes well for a business like ours to continue to capitalize on whatever might happen in the payer landscape.

Our next question comes from the line of Olivia Miles of Baird.

This is Olivia on for Michael Ha. I wanted to ask more on your long-term adjusted EBITDA growth target, having achieved an average 32% adjusted EBITDA growth over the last 2 years and with yet another quarter of nearly 30% EBITDA growth on a business with high visibility. Can you help us understand how you think about the puts and takes of your 20% long-term EBITDA growth target? Specifically, I'm interested in which factors or developments could cause you to revisit and potentially raise your multiyear view on EBITDA growth.

Yes. Thanks for the question, Olivia. So look, I mean, you've seen how we performed and Slide 12 just speaks for itself. We said we're going to target around 20%. We've said it can be higher or lower in any particular year. We've doubled EBITDA on a rolling 3-year basis, as you noted, in a pretty challenging MA environment, which if you asked us that 4 years ago, could we do that? We would have probably said no. But it just speaks to the execution of the people on the team here and how well we've just continued to expand this business. And the drivers are multitudinal here. We're looking to grow organically in the states we are in. We're looking to make acquisitions. We are looking to continue to perform in value-based arrangements, grow our practices same-store, use our balance sheet capital.

So I think all of those factors will play over the next many years. I think we're going to continue to target that level. But I think, again, it will be -- some years, it will be higher, some years, it will be lower. Some years we'll have acquisitions that will contribute. And so, I think we're just going to keep targeting that. I mean the overall TAM for us is pretty large. There are about 1.1 million clinicians in the country. Even if the addressable TAM is half of that, that 600,000 non-facility-based providers, and we are just around 6,000 with our guidance for this year. And so I think the ability for us to continuing to expand that platform, add providers, add lives and just continue the playbook. The fact that we are already at a pretty healthy EBITDA margin towards the low end of our long-term range, and that's why we're saying we can get to the high end of that range, continue to get operating leverage to help us at this scale, I think, just speaks for itself.

So as we 2x or 3x our platform on providers, the unit economics has already played out, which is great for this business. So I think we'll just continue to execute over the next many years.

Our next question comes from the line of John Pinney of Canaccord Genuity.

John Pinney on for Richard Close. So I just wanted to touch on the -- again, on the AI initiatives. Is there anything that's been surprising to you as far as like the cost of the compute and the token use? And just generally, how you're thinking about managing AI spend?

Yes. I mean I'm glad you asked because in our prepared remarks, we just link it to EBITDA margin expansion. So our view is whether the companies we partner with are embedding some of the technology to improve the workflows or if we are spending directly with our dev team using some of the models. Ultimately, we are expensing a lot of this on the P&L, and we are measuring it at a very micro level by workflow, time saved, outcomes achieved, cost saved, so on and so forth. Ultimately, we're tying it to increasing EBITDA margin.

So I don't think our view is that we need to overly spend on technology without seeing the resulting margins compress. So I think we'll just manage it with our guidance. And that's our view that if -- and it's like every other technology cycle over the past many years, a lot of the innovations, I think this one has the potential to disrupt existing workflows in a much more meaningful manner in a positive way. But our focus is on accreting EBITDA as we use this technology and increasing margins. So I think we'll just continue to do that.

Our next question comes from the line of David Larsen of BTIG.

This is Jenny Shen on for David. I was just wondering if you could provide some updated thoughts on cost and volume trends in the quarter maybe compared to last quarter or a year ago? And whether you've seen any notable pockets of higher acuity and any notable shifts in the acuity mix?

Thanks for the question, Jenny. So yes, there's not much to speak. I mean, again, we look at it on an annual basis. I think it's tough to compare it quarter-over-quarter given any quarter has accruals for the current year, true-ups from the past year. So, I think you just got to look at it on an annual basis. I think some of the inpatient utilization trends help us as they've been ebbing down. Ambulatory utilization is pretty good, as you can see in our fee-for-service book. And that's good utilization because that means folks are seeing their primary care providers and/or first point of contact in the system on a much more regular basis.

So overall, look, our shared savings accruals speak for themselves in the results. Our increased guidance just reflects all that. So -- but there's nothing notable that we would point out year-over-year that has changed. If anything, I think we're performing pretty well in our value-based book, and that just speaks to the diversified nature of our platform where we benefit from these trends.

Gentlemen, we have no further questions. Please continue.

Yes. Thank you for listening to our call today. We appreciate your continued interest and look forward to discussing our performance next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Hello, and thank you for standing by. My name is Pat, and I will be your conference operator today. At this time, I would like to welcome everyone to the Privia Health First Quarter Conference Call. 

[Operator Instructions]

I would now like to turn the call over to Robert Borchert, SVP Investor Relations of Incorporated Communications. Robert, go ahead.

Well, thank you, Pat, and good morning, everyone. 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. 

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 to get as many questions as possible.

The financial results reported today are preliminary and are not final until our Form 10-Q for the quarter ended March 31, 2026, is filed with the Securities and Exchange Commission. 

Some of the statements we'll make today are forward-looking in nature, based on our current expectations and view of our business as of today, May 7, 2026.

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 is 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.

Thank you, Robert, and good morning, everyone. Privia Health delivered a strong first quarter as we continue to execute extremely well and drive growth across our markets.

This morning, I'll summarize our first quarter performance and business highlights, and David will discuss our first quarter financial results and our updated 2026 guidance before we take your questions. 

Privia Health's outstanding operational execution and the strength of our diversified business model clearly demonstrate our ability to perform in all types of market and health care regulatory environments.

We are proud to deliver on our mission to achieve the quadruple aim, better outcomes, lower costs, improved patient experience, and happier and more engaged providers. 

New provider signings and implementations remain strong. This provides great visibility through the remainder of 2026. We ended the first quarter with 5,535 providers, a 13.6% increase year-over-year, and with 1.6 million value-based attributed lives, up 26.5% from a year ago.

The combination of implemented provider growth, attribution growth, and value-based care performance helped increase practice collections 14.6% from the first quarter last year. 

We continue to show strong operating leverage across the platform and G&A expenses. Adjusted EBITDA for the quarter increased 36.3% to $36.7 million, with EBITDA margin as a percentage of care margin expanding 290 basis points to reach 28.5%. 

Given our strong Q1 performance, we feel confident about our annual guidance across all metrics. Since it's still early in the year, we are maintaining our 2026 guidance, except for increasing our range for attributed lives given the strong first-quarter attribution growth. 

Our ongoing business momentum is expected to drive EBITDA growth of approximately 20% at the midpoint of the guidance, while converting approximately 80% of EBITDA to free cash flow.

Privia's national footprint now includes a presence in 24 states and the District of Columbia. Our 5,535 implemented providers care for over 5.9 million patients. 

We continue to demonstrate very high gross provider retention and patient Net Promoter Score across our footprint. Our growth and momentum have positioned us as one of the leading primary care-centric medical groups and value-based care organizations in the country.

We expect to expand our presence in existing and new states, both organically and inorganically, given our balance sheet strength. 

Privia's diversified value-based platform serves over 1.6 million patients through more than 130 commercial and government contracts.

Our total attributed lives increased over 26% from a year ago. This was driven by new provider growth and the addition of the Evolent ACO business. 

Commercial attributed lives increased more than 17% from last year to reach 913,000. Lives attributed to CMS Medicare programs were up 62%.

Medicare Advantage and Medicaid attribution increased 20% and 36%, respectively, from a year ago. We remain highly focused on increasing attribution and generating positive contribution margin across our value-based book. 

Ultimately, our goal is to achieve consistent and sustainable earnings growth for our physician partners and shareholders. David will now review our first quarter financial results and updated 2026 guidance.

Thank you, Parth. Privia Health's strong operational performance continued through the first quarter.

Implemented providers grew 155 sequentially from year-end 2025 and increased 13.6% year-over-year.

Implemented provider growth, along with solid value-based performance and ambulatory utilization trends, led to practice collections increasing 14.6% from the first quarter a year ago to reach $914.8 million. 

Adjusted EBITDA, which is reconciled to GAAP net income in the appendix, increased 36.3% over the first quarter last year to reach $36.7 million, representing 28.5% of care margin.

This 290 basis point margin improvement continues to highlight significant operating leverage. We ended the first quarter with $219.5 million in cash and no debt following typical Q1 cash outflows from value-based care payments to providers and employee bonuses. 

We are reiterating our full-year 2026 guidance metrics following our strong performance in the first quarter and raising our guidance range for attributed lives at the year-end.

This guide implies adjusted EBITDA growth of approximately 20% at the $150 million midpoint, and we expect 80% of full-year EBITDA to convert to free cash flow as we become a full cash taxpayer. 

While our guidance assumes no new business development, we have a robust pipeline of existing market expansion and new market opportunities.

We will remain disciplined and strategic while leveraging our healthy balance sheet to grow the business and compound our EBITDA and free cash flow. 

Over the last 2 years, our EBITDA growth rate has averaged 32%. Achieving the midpoint of our 2026 guidance will result in EBITDA more than doubling over the last 3 years.

Our consistent growth and ability to compound EBITDA and free cash flow across economic, health care, and regulatory cycles over the past 9 years validate the strength of the Privia business model. 

Privia's business momentum is powered by the consistent execution of our provider partners and our employees. This has positioned us well to continue to drive growth and profitability as we build and scale our national footprint.

I would like to take this opportunity to thank each one of them for their hard work.

Operator, we are now ready to take questions.

Pat, we're ready for questions.

[Operator Instructions]

First question comes from the line of Jailendra Singh from Truist Securities.

This is Jailendra Singh from Truist Securities. Congrats on a strong start to the year.

So you guys reported strong Q1, but now you are deciding to maintain the outlook on most metrics, except attributed lives. Is this you guys just doing the Privia approach of being conservative?

Or are there any items we should be aware of in terms of puts and takes for the rest of the year compared to Q1? And related to that, are you guys still expecting shared savings to be flat year-over-year? Q1 figures are pretty strong. So just give us any color about the guidance here.

Yes, I appreciate the question, Jailendra. Yes. So look, I mean, it's still early in the year. You've seen how we've done this for the last five years since we went public.

Our approach is just to keep executing every quarter. There will be some puts and takes. But as we get more data, we get comfortable in then adjusting guidance.

We just gave guidance about 50 business days ago. So if this continues, then obviously, hopefully, we'll just do what we've been doing in previous years.

But I don't think shared savings should be flat if this trend continues, but we'll just see what data we get for any prior period stuff in the current year across our value-based book. But if the trend continues, then it should grow year-over-year.

The next question will come from the line of Jessica Tassan from Piper Sandler.

So I know you emphasized just the focus on attributed lives. So I'm interested if you guys can discuss your perspective on Medicare Advantage, just given the final year V28. Is the space emerging as more attractive as you guys hear payers describe kind of prioritization of margin over growth for '27?

And then just interested to hear what your appetite for that business is, whether you're seeing a sustained effort from the payers to subcap lives, or any change in payer appetite? And just any directional commentary on how we might think about the capitated business from here?

Yes. Thanks for the question, Jess. So our answer is not that different from what I think came up on the last earnings call as well.

MA has overall good tailwinds with the demographic changes that we'll see over the next 5, 10, and 15 years. So I think it's a pretty important program, whether you do it with CMS directly or through payers. We are really focused on the MA book.

I mean, you can see now we have over 550,000 MA attributed lives between MSSP and then Medicare Advantage. And so I think we're highly focused on growing that book, both attribution and then performing in that.

I think as it relates to capitation or subcapitation, I mean, you've seen our view that doing full capitation is not the only way to perform well in MA. We believe in sharing the risk. That view remains consistent.

It avoids any potential conflict of interest as payers adjust in each state, in each local geography, with baseline trends, utilization, or their program designs or attribution changes.

So I think as V28 flushes through, I think there are some other adjustments that CMS has announced that they will do with the program across the board.

I think just generally having good hygiene around the program. So I think we'll just continue to work with the payers. The value we really bring is very low-cost, dense networks in all of our geographies. I think that's Privia's value proposition to any payer.

That, I think, will speak for itself because we have the doctors, we have the patients. The patients don't leave the doctors, no matter what happens to V28 or the MA program or what some particular payer might do or not do.

That relationship is what we bring to the table, and our ability to influence the total cost of care with that patient, starting with the lowest cost setting, I think it's very, very positive for our business and the tailwinds we have. So I think we'll continue to work with the payers.

As long as our doctors get rewarded for taking risks, we will take more risks. We prefer the shared risk model. Some of our books will be capitated going forward as it is today.

Some would be shared risk with a lot more upside. So we'll just see how this plays out in every geography because you're contracting at the ZIP code level, in different risk pools.

And so even though the macro environment may get better and the payers come out of the last couple of years, how we contract with them just varies by geography.

And the next question will come from the line of Matthew Gillmor with KeyBanc.

I had a bigger picture question just on growth. Our thought is that there's going to be some washout with the industry, and perhaps you're seeing that already, and that stronger organizations with good balance sheets will benefit from that.

Is that something you're seeing either from the business development pipeline or with M&A? Are there more opportunities than you've seen in the past? Or would you describe it as steadier?

Yes, I appreciate the question, Matt. I think you're right. There were a lot of investments done, VCs entering the space, and private equity being very aggressive.

I think with all of that dissipating, I think it bodes well for a business like Privia with a very strong balance sheet and free cash flow profile. I think also medical groups with ownership structures, which were pretty unique across the landscape, with physicians owning certain assets, small businesses owning certain assets, and smaller private equity firms owning certain assets.

I think as they look for exit or they look for a much more permanent capital structure, I think they've seen what they have to see in the last four, five years. And I think they realize what a company like Privia is from that kind of ownership, permanent capital perspective.

So I think our business development pipeline is really strong.

We're looking at deals across the spectrum. And as you know, our platform is really broad in terms of acquiring service entities, tech platforms, ACO entities, medical groups, and tax IDs. So, it's really broad in terms of what we can do and how we can uniquely structure these deals.

Ultimately, with the objective of creating these dense medical groups, ACOs, and full tech and services platforms in every state in a very integrated fashion.

I think that's a very unique value proposition that we bring to the table for any physician group, any patient, any specialty, any type of value-based arrangement.

So, I think we're keeping busy, and we'll continue to deploy capital to keep compounding the business. You've seen us do that last year. I think we'll continue to just do it, just be disciplined around it, just be patient with valuation expectations.

But I think as there are less and less exit opportunities for some of these assets, I think we've become a pretty attractive option.

The next question will come from the line of Elizabeth Anderson with Evercore ISI.

Congrats on the quarter. Maybe just to piggyback off of what Matt was saying. I mean, you've obviously built Privia around primary care and the entry point, expanding that.

But it's like the network maturity grows, how do you think about adding more specialty or perhaps changing the mix? Is that sort of something that you just think will happen sort of naturally? Is there any change in how you're thinking about that as an attractiveness in terms of the mix?

Yes. Thanks for the question, Elizabeth. So, I think that's already happening very naturally. It varies by geography because the physician mix is different in every geography we are in, and who we partner with initially is different.

So today, even today, it's a 60-40 mix trending towards a 50-50 mix. And we define primary care pretty broadly.

So, who's the first point of contact for somebody in the family to include pediatricians for the children, OB/GYNs, family medicine, internal medicine, and so on, and so forth?

So, I think it's already happening. And even on the specialty side, we're not really focused on the surgical specialties. But over time, as volumes move outside of the health system, and we can focus on the total cost of care for certain procedures, surgeries move to the ASC setting.

I think that becomes pretty attractive for a multi-specialty medical group like ours.

And so, I think you'll continue to see us expand on that strategy. And we are set up really well to do that. 80% of the total cost is downstream from the PCP, with a lot of reimbursement still in fee-for-service.

And so, I think the engine that we have today to add value to those practices, I think, is also very differentiated. And then over time, as value-based arrangements and programs evolve that include those specialists, I think we are very well positioned to capitalize on that opportunity.

The next question will come from the line of A.J. Rice with UBS.

I thought I might ask you about this new lead program and your thoughts on that.

We're hearing that some providers that maybe historically haven't been particularly well-positioned for some of the value-based care that this program is offering them some opportunities.

And so, I wondered how you see it? And do you see this as something incremental that you have an interest in?

Yes, I appreciate the question, A.J. So, really similar to REACH when that came about three years ago or so, I mean, we evaluate all the programs from CMS.

I think given what we see today, it's unlikely we'll move our MSSP ACO into lead, just given how well we perform, the nature of the program, you can do one versus -- you can't do both with the same tin. So, you've got to pick one, really. And I think MSSP is designed really well.

Our hope is that some of the elements of lead as CMS experiments with these and changes some of these programs to make them more long-term sustainable.

I think you could see more convergence between MSSP and Lead as an example, because a lot of the baseline program structure is pretty much the same, with some added benefits in Lead.

So again, it's a new program. It comes into effect next year. We'll evaluate it. I don't think you should expect us to move our existing MSSP book, but we have the flexibility to add new providers and lives into lead in new geographies, or if we acquire a business that has reach, it makes sense to move them into lead. I think we'll look at that.

So, like any other program, we just evaluate it, but we think it's a step in the right direction, and CMS continues to evolve its thinking and take out some of the program structures that make it more attractive for a certain set of providers, like health systems, and so on and so forth. So, we'll just see how it comes about.

Next question will come from the line of Sean Dodge by BMO Capital Markets.

This is Thomas Kelliher on for Sean. On the attributed lives on the commercial side of the business, the number of lives where you're taking downside risk is up about 60% over the last two years.

Can you walk us through how risk works in commercial? And then how does the shared savings potential per individual and the volatility of that shared savings compare to some of the government programs?

That's a great question. I appreciate it, Tom. So look, I think it speaks to the value prop that Privia brings to payers, where, just backing off of what I said earlier, once you bring a very large, dense, low-cost medical group structure in any geography, we are one of the very few entities that can do commercial value-based at this scale.

OptumHealth does it really well in certain geographies. And I think the value prop is really converting the traditional fee-for-service payment stream into helping the payer take care of these lives, manage the total cost of care, having some quality metrics around different subsets of populations, whether it's children, whether it's working adults, whether it's pre-

The

Medicare population is between 50 and 65. So, we are converting some of the work we do into our ability to take some risk on those lives, helping the payer manage their MLR really better.

And honestly, the payers are willing to compensate us in addition to the fee-for-service reimbursement on a care management PMPM basis, as well as certain quality-based bonus payments, and then ultimately, shared savings if we bend the MLR cost curve for them.

So over time, we're not going to take a lot of risk at this point because it's an open-access product. The commercial patient has the ability to go wherever it likes, pretty much for different needs, especially if there's a specialty event.

But again, we have corridors at risk. But as you're seeing, we are working with more and more payers across our geographies to implement some of these contracts and try to perform well.

Our objective remains the same. We give value to the payers. It reduces their MLR. Our doctors and medical groups need to get compensated for it. And it's really an effort to move some of the traditional fee-for-service payments into a more value orientation.

It's still, give or take, 50% of the population is commercially insured, give or take the geography. And so this is really trying to do value-based care at a very, very broad scale for the working-class population.

All right. That concludes our question-and-answer session. I will now turn the call back over to Robert...

I'm sorry. Pat, we're still taking questions.

So the next question will come from the line of Matthew Shea with Needham.

I wanted to touch on technology. We picked up, I think, in April that you guys brought on a new Chief Technology Officer. Seems to bring a good background to an interesting moment, particularly as you're expanding the implementation base.

So would love to hear what gets you excited about this appointment. And I know you touched on some of the tech investments you were making last quarter, but it seems like AI is becoming a louder theme in health care.

So curious if the new hire changes any of your thinking or maybe accelerates some of your initiatives.

Yes, absolutely. Appreciate the question. So we had Konda join us from Optum Insights, really good background. It's on the website.

And then Chris Foy, our long-standing CTO, finally retired after a very long career. He's been working tirelessly with us since the inception of Privia, pretty much. So we're just lucky that we don't lose our great people to any competitors. 

So look, I mean, we are really excited. Konda brings a great background and renewed enthusiasm to the team. We talked a lot about our tech stack and what we are doing with AI across all aspects of our business. And we have to link that with the margin profile of the business ultimately.

So I think I'll just reiterate that we are looking to implement different AI applications across our whole tech stack in 3 broad buckets. Whether it's the Privia Enterprise, which is our core corporate functions, care center operations, and those are broken into fee-for-service, value-based care, and then again, patient interaction. 

And then the third ultimately is care delivery. And then in each of those buckets, we are working with a lot of existing players, like we're on Google Suite and Gemini for all our corporate functions. We have Salesforce and Workday.

We are also focused on every single function where we could use generative AI to increase productivity, ultimately reduce costs, or, as we grow, do not add costs, existing partnerships with Snowflakes on their Coreex AI as an example.

So I think this will evolve as applications are just getting better every 3 to 6 months. 

And then on the care center side, we're looking at literally every single workflow in the doctor's office. On the fee-for-service side, some examples we have iterated last time were prior auth, autonomous coding, and referral management.

On the value-based side, we are focused on care gap closures, chart prep, patient scheduling, and patient interaction, which is a big focus with Agentic AI. We're looking at automated outreach, Agentic AI engagement with the patients, self-service tools, virtual health, obviously, I think we'll get much more efficient. 

And then ultimately, with care delivery, you're looking at completely accurate coding, clinical decision support, suspect medical conditions, things like that.

So I think there are a whole host of companies that are coming about.

I think you'll see us just evolve this strategy, again, using our build-to-partner approach. But I think a company like ours, with 6 million patients, with 1.6 million in value-based lives, complex workflows around physician practices with our scale, I think we're just set up really well to benefit. 

Then I think we talked about the margin profile. I mean, we are already approaching the low end of our long-term margin target, EBITDA to care margin of 30% to 35%.

Our guidance this year gets us close to 29%. I think if we look at the next 5 years with everything we see that we can do with AI, I think we'll easily be close to the high end, if not exceed the high end of that margin target.

So we're really excited on what we could do with all the innovation and really excited about what our new CTO can bring to the table here.

[Operator Instructions]

So the next question will come from the line of Andrew Mok with Barclays.

Just wanted to follow up on the shared savings revenue. Could you elaborate a little bit more on the drivers of strength in the quarter, including how much corresponds to prior year performance versus current year performance?

And related to this, it would be helpful to hear an update on how the Evolent assets are performing.

I appreciate it, Andrew. So look, like last past quarters, I mean, we don't usually break down. I mean, there's always some dry period at this point in the year as 2025 closes out, and it's across the book, commercial, MSP, and MA.

And then there's obviously, we get good data, and then we see what our actuaries believe about how we can perform in the current year. So there's always a mix between the 2. It varies quarter-by-quarter.

So for me to give you something, it's going to change next quarter. So I think if you just look at a rolling 12-month basis, you'll see the increase over time. But it's pretty much across the book. There was not one particular area that stood out, which just bodes well for us.

Sorry, could you repeat the second question? I thought I was. Just an update on the Evolent assets.

Yes. So I think it's going really well. I think we're ahead on the integration. We feel really good about the asset.

It's a core MSSP and some commercial lives. So I think we're really excited that the team is pretty integrated in the first 3 months. The tech stack is pretty much integrated.

We're ahead on schedule a little bit there. So kudos to the team for doing a very hard job out of the gate here. And we look forward to working with those provider partners and continuing to increase their performance.

So I think hopefully, if all that works out well, that will be good for shared savings as well as we close out this year.

[Operator Instructions].

The question will come from the line of Daniel Grosslight with Citi.

I actually had a similar question to the last part of the previous question, but I was hoping to get a little bit more granular detail, specifically on the sell-through of the full Privia platform into the physician base. 

What's been the early reception there? Are there any metrics you can give us on what that sell-through has been and the progress you're really making in the six new states? Any stats or quantification you can give us where Evolent gave you that beachhead in those newer states?

Yes, I appreciate the question. I mean, it's still early days. The cross-sell takes time. We're just less than five months into the acquisition, which closed in December.

So job number one was making sure the team is integrated, making sure the tech stack is integrated, making sure we reach out to the practices and implement how we work on these programs, on MSSP in particular.

So I think that's been our focus. Our sales team obviously reaches out to these practices to deliver the full Privia stack, but that happens usually over time.

Our sales cycles are three to six months. When you're cross-selling, it's a new relationship, and you just don't want to disrupt what's there initially.

So I think that will come over time. We just don't break out externally what portion of those practices move over. I think that's just part of our existing book.

So you'll see that in the implemented provider numbers, which only reflect the providers that are on the full stack and part of the single-TIN from a fee-for-service perspective. So that will just happen over time.

The next question will come from the line of Brian Tanquilut with TD Cowen.

This is Will Spak on for Brian. Most of my questions have been asked, but I guess, is there any color you can provide around the $11 million repurchase of NCI in the quarter? And then just a quick one on, it didn't seem like there was a major impact, but anything from weather and weaker respiratory on ambulatory utilization in the quarter?

So, on the repurchase of the noncontrolling interest, we just acquired the minority interest in some of our markets.

We expect it's going to lead to better cash flow and net income. We're constantly looking in our current markets where we have minority interests for these opportunities, and we just executed on a couple of those in the quarter.

On the second part, look, I think it's important to distinguish, as we've said before, ambulatory and community doctor utilization for flu or other respiratory diseases versus the inpatient setting. We didn't see any major swings relative to previous years.

The flu season comes and goes. Some years it is better, some years it's worse. Our book is very diverse. So we didn't experience the kind of change that I guess you all wrote about for some of the hospital companies reporting results in the past quarter.

I think inpatient care can vary a lot more than ambulatory. Preventative care continues to be pretty good around flu, people getting their vaccinations, going in if they have symptoms, and so on and so forth. Even with snow days, telehealth is fully embedded in.

It's really efficient. People know how to use it. So that's reflected in our results. You didn't see practice collections dip because of that. I think it just speaks to the diversification of our business.

Next question will come from the line of Whit Mayo.

The press release didn't mention $600 million of cash at year-end, probably nothing really to read into that, but just maybe update on expectations for cash this year. And Parth, just wanted to maybe take your temperature on how you guys are thinking about buybacks at some point.

Yes, I appreciate the question, Whit. The guidance is the same. We reiterated 80% of EBITDA would convert to free cash flow if you exclude any BD line items, including things like purchasing minority interests.

So really, if you look at what cash was at the end of the year and just add free cash flow to it, which is cash flow from operations less CapEx, I think you should get close to that number. I don't think our guidance is changing there.

But that does not include, obviously, the business development line or any spending on acquisitions, which is not included in our guidance. So that $600 million round number, excluding that, remains if things go well.

And then look, our preference is, given the TAM out there and the opportunity to continue to consolidate different assets in this industry around community-based physician groups, ACO entities, IPAs, MSO entities, and so on and so forth.

I think the best value creation opportunity for shareholders here is for us to keep compounding the business.

Using our balance sheet cash to acquire these assets, integrate them, synergize them, and then just keep running that playbook, that's focus number one for deploying our cash.

You've heard us say we like to keep some "sleep-well-at-night" money for a rainy day, pandemics happen, hurricanes happen, and so on. And then look, we always have the flexibility to return capital.

That's an easy trigger if the value in the stock price is well below what we think is the intrinsic value for the company.

But our preference is to compound earnings and free cash flow and continue acquiring businesses with our balance sheet cash. It just depends on when BD deals happen.

So you can have cash accumulate, and then we could do larger transactions that are more meaningful and value-creating. We'll just see how that plays out over the next 24 months.

The next question will come from the line of Jeff Garro with Stephens.

I wanted to ask about the strong implementation of provider growth. One question, but I'll throw three parts at you.

First, any callouts by market or specialty? Second, any update to contributions from provider-to-provider referrals? And third, how is the current visibility into the signed-but-not-yet-implemented providers and the current pipeline of provider prospects?

Yes, I appreciate the question, Jeff. I'll take them in order.

Look, I think given now that we are in 15 states with the single-TIN model and then another nine with the ACO-only model, the market or specialty mix just varies by quarter and by geography.

As a sales team builds its pipeline, they convert, and then some markets get hot one year or one quarter, and then the others catch up. So, given the diversification of the book, it really varies each year.

I think the strength of the overall business just speaks for itself. As we get bigger, we've talked about this earlier, the snowballing effect happens in this business.

In our most mature markets, 50%, sometimes even 60% or 70%, of the referrals are from existing Privia practices to their colleagues.

They are the best salespeople, our doctors. They've worked with us. They know what this model is. We perform for them. So, for them to refer another physician who has very high conversion rates.

The LTV to CAC is off the charts in this business, some of the best that I've seen. We've talked about our payback period being less than a year. LTV to CAC is well over 10 years if somebody even decides to leave, and then our attrition rates are very, very low.

So, provider-to-provider referral is very strong. And then the visibility is exceptional in this business. I mean, this is our sixth year reporting as a public company. You've seen the track record.

It's a three- to six-month sales cycle, a four to five to six-month implementation cycle, given just the length of the size of the group. And so by this time of the year, pretty much every provider that has to be implemented is pretty much sold.

So the visibility is over 90 percent at this point in the year. And that's why we're really confident about the guidance. And that hasn't changed much. If anything, it improves as the book of the business gets bigger.

So again, the metrics around the business, the conversion rates, all are trending really, really well. We're really pleased with how we're performing.

The next question will come from the line of Ryan Daniels with William Blair.

Parth, maybe a strategic one for you, and you alluded to this earlier, but it seems like there's a lot going on in real time with acute care hospitals and health systems and movement of volume to lower-cost settings.

So you've got teams rolling out with entire episodes of care. You've got things like the inpatient-only list being dissolved. And I'm curious what that is doing strategically with your conversations with health systems as a potential partner to help them deal with all these pretty big changes they're facing.

Yes, I appreciate the question, Ryan. That's a good one. Look, I do think the pressure on the traditional health system model and how they were kind of monetized is going to be higher for all the reasons you outlined.

You could add the 340B program if something changes there, inpatient-only list, the willingness for them to employ primary care doctors, or certain nonsurgical specialties, and subsidize them.

I mean, a lot of you have written about that over the years. I think it's going to be tough. The changes to the Medicaid or the ACA exchange population and how that filters through different health systems are also going to add pressure.

So look, I think it bodes well for a business like ours as physicians look to come out of these settings into more outpatient settings and as different health systems figure out their strategy. I think it's going to vary by health system, different strategies in different communities.

They have a different mandate. A lot of them are not-for-profit and are delivering care to really low-income populations. So I think it will vary by geography.

But generally speaking, I think as these pressures mount up, we should expect this consolidation that's happened with physician practices at the health system setting to start to unwind a little bit, and physicians looking at businesses like ours to be a natural landing spot or even as they complete their residency as a very viable option to start or join an existing independent practice.

And then it also adds to the question that was asked before around certain specialties and ASC opportunity, and our willingness to have a very strong referral base with primary care doctors having the pen in directing where the patient goes.

So I think we're going to look at all of those strategies to keep expanding our network. And just given our platform that focuses on creating large multi-specialty groups in every single geography that we are in and then offering that to payers of health care in unique ways, mainly on the commercial population as well, it's a big differentiation.

And I mean, you're seeing that in the results somewhat. They're very stable across cycles. And I think it's part of all of these strategies is playing out. So I think we're just going to keep looking for opportunities that we can keep compounding with that. But great question.

[Operator Instructions] So the next question will come from the line of Constantine Davides with Citizens.

Yes. Just two really quick ones for me. David, it looks like capitated profitability really stepped up in the first quarter. Just wondering if there's anything to call out there?

And then second, Parth, you just talked about Medicaid and low-income populations. And you guys had a really nice or pronounced step-up in your Medicaid attributed lives.

So, just wondering if you can talk about your Medicaid arrangements and what's prompting that growth.

Yes. Thanks for the question. Yes. So again, this is just the first quarter of the year. The timing of data can vary quarter-to-quarter.

As we always like to say in the capitated, both look at the full 12 months and a rolling 12 months. This quarter, we did get some prior year adjustments that benefited both revenue and margin.

So I would say our prudent approach to the book is, at some level, paying off as we continue to see more data. We continue to get some good news there. And again, we just continue to follow our same consistent and prudent, I'll say, accrual methodology.

It's a long period of time we need to review this information. But again, as good news comes in, we're able to see a little bit of additional good news.

And then on the second part, Constantine, look, I think we service the entire panel in every physician's office. So organically, as we grow in existing states or new states, some part of the panel is Medicaid patients.

So I think the strength of our implemented provider growth and what our sales team is able to do in certain geographies, I mean, this organic Medicaid attribution growth.

We continue, again, to work with payers to figure out the right value-based strategy in that book. The gap between what any provider business would like to do and what it could get paid for is still very big, especially for the population.

I mean, they have special needs, transportation needs, nutrition needs, just getting people to see the doctors, single mothers, very low-income families, so on and so forth.

So I think while we can do a lot more, the willingness of the payers to reimburse us for some of those strategies is there, but there's still a gap. So while we'd like to continue to grow that book, as you can see in our Slide 6, it's all 100% upside-only deals, where again, we are taking the network to the payers, asking them much like our commercial book where we can do certain things with the population, impact the annual well visit rates with the children, with women, with working adults, making sure that they're at least seeing the doctors, getting the vaccinations, getting their screenings done.

And for that, the payers are willing to pay a certain PMPM, a certain quality bonus. And then if we impact the MLR, there's shared savings to be had. But to take a risk in that book is tough. Unless the payer is really willing to get behind us and solve for some of these things.

So I think we'll continue to grow it. I don't think you should expect us to take downside risk in Medicaid unless there's a unique opportunity.

The next question will come from the line of Jack Slevin with Jefferies.

Nice job on the quarter. I guess maybe not to backtrack over this too much, but just on the Medicare Advantage discussion, because there's pretty palpable excitement across payers and the value-based care space around that environment improving.

My understanding or my read is really that many investors think that some of the moves you took to pare down risk meant that you don't necessarily participate in upside in the same way on some of the tailwinds that are now behind the industry.

Maybe just breaking down that book across the 71% in upside only, the 19% upside, the downside, and the 9% cat book. Can you just talk a little bit about how better rates or more margin favorable payer bids flow through to you in each sleeve of the book there?

Yes, it's a great question. I think the biggest dichotomy lies in the fact that broad industry sentiment does not necessarily translate into the ground-to-ground payer contracting discussion with any particular payer in one geography with a certain book of business in MA.

So I think overall, I don't think reimbursement is going to increase massively over time. I think what CMS is trying to do is make sure that everybody is getting reimbursed appropriately, whether that comes through star scores or risk adjustment or whatever other mechanism they can look at.

I think they had a one-time adjustment. The system got a shock.

Some of the payers, I mean, these cycles have happened with MA payers over the last 20 years. You can see every 4, 5 years, payers grow their book, they overshoot, they make a correction, and then the lives move from one to the other, and then somebody is left holding the bag until the cycle repeats itself.

So I think while you're coming off the trough from a payer perspective and you're seeing those results after the last 2, 3 years, how a provider business contracts at the ground level kind of remains the same.

We're going to look at each geography, each book of business. And then we continue to believe, I think, this broad-based view that capitation is the only way to capture the upside.

I think it's certainly myopic. I mean that you've seen the last 5 years play out. I mean, it's not like any other provider group was making a lot of money in capitation 5 years ago in '21 when they were really talking about it, and we'll see how the next few years play out.

And then there's an economic profit that is there to be shared between the payers, the doctors, and the providers. Our view is that economic profit should be shared and not just captured, or the risk should not be borne by one while the economic profit is shared.

So I think it's a shared risk arrangement is much more sustainable. I think you prevent some of the anomalies, some of the potential conflicts that can happen.

So I think we'll just continue to work with our payers and continue to capture the upside based on the value that we provide. It does not necessarily have to happen in a capitation.

Some businesses might like that volatility and play for that extra risk for the additional downside potential. But our view is to have, as we've said, sustainable earnings is sustainable earnings.

And you've seen us do that over the last 6 years as a public company and then even before that. So our strategy is going to be the same. And if there are opportunities for us to take more risk, we'll take more risk.

All right. The next question comes from the line of Ryan Halsted with RBC Capital Markets.

Most of my questions have been answered. But maybe just a question, any views or thoughts about payers reform on prior authorization policies, I would think certainly potential implications for your fee-for-service business, perhaps opposite implications on value-based care, but just any thoughts on that would be helpful.

Yes. I mean, look, there's a lot of noise in the media around it these days. I think the focus there is for higher value claims, probably in the acute setting, more so than the ambulatory settings with community-based doctors.

95% to 99% of claims are resolved on the first pass. It's mainly at the specialist level where you need prior authorizations. I mean, for a primary care-centric group, it's pretty low-value claims in the first place.

Ultimately, I think, look, with AI, there will be an equilibrium where the payers and the larger providers in the acute setting will just settle out on prior auth. I think it's in everybody's interest not to have extended timelines for those.

It doesn't bode well for the ultimate patient who gets stuck in the middle of these, either as a surprise bill after care has been delivered or is just waiting for prior auth.

So I think everybody's interest is aligned with that patient ultimately, but I think we just go through a period where some of this stuff will just get settled out.

But I don't think it really impacts our business in that big of a way relative to the acute setting. I think we obviously continue to work with payers in making sure that if there are certain areas of specialties where we feel there's some friction, we smooth that out.

And I think a lot of the payers have the right intent to continue to not have this as a source of friction, especially when it impacts patient care.

And our last question comes from the line of David Larsen with BTIG.

This is Jenny Shen on for Dave. I was wondering if you could comment on medical cost trends, how that compares to a quarter ago, and maybe a year ago?

And then also, any updated thoughts on your general appetite for risk? It sounds like it's pretty consistent, but whether that has changed at all.

Yes, I appreciate the question, Jenny. So the medical cost trend is pretty consistent. I mean, you've seen that result in our value-based book and how we perform.

Again, we like to look at it over a 12-month rolling basis, as David was saying, and that's broadly across our book. So nothing jumped out quarter-over-quarter here for us.

There are some impacts of the flu season, but that happens every year. So we'll just continue to look at data and then see. But from our perspective, what's in our accruals, what's in our guidance is pretty consistent.

If anything, we like to be pretty prudent. And if we are wrong, there should be upside, like we've always said. So I think that's how we look at it. And I think we answered the other question previously already in terms of our ability to take risks.

All right. That concludes our question-and-answer session. I will now turn the call back over to Robert Borchert, SVP, Investor of Corporate Communications, for closing remarks. Thanks.

I'll hand it over to Parth.

Thank you for listening to our call today. We appreciate your continued interest and look forward to speaking to you again in the near future.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Privia Health Fourth Quarter Conference Call.

[Operator Instructions] I would now like to turn the call over to Robert Borchert, SVP, Investor and Corporate Communications. Please go ahead.

Thank you, Kelvin, and good morning, everyone. 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.

Following our prepared comments, we will open the line for questions. Please limit yourself to 1 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, 2025, is filed with the Securities and Exchange Commission.

Some of the statements we'll make today are forward-looking in nature, based on our current expectations and view of the business as of February 26, 2026. 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 statement 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 on our website.

Now, I'd like to hand the call over to our CEO, Parth Mehrotra.

Thank you, Robert, and good morning, everyone. Privia Health delivered a very strong 2025 as we continue to execute extremely well and drive growth across our markets. This morning, I'll summarize our performance and business highlights, then David will discuss our 2025 financial results and our 2026 guidance before we take your questions.

Privia Health's outstanding operational execution and the strength of our diversified business model clearly demonstrate our ability to perform in all types of market and health care regulatory environments. We are proud to deliver on our mission to achieve the quadruple aim: better outcomes, lower costs, improved patient experience and happier and more engaged providers.

New provider signings and implementations remain strong across all markets, which provides great visibility through 2026. We added 591 providers, a 12.3% increase year-over-year. We ended the year with 1.54 million value-based attributed lives, up 22.7%. The combination of Implemented Provider growth and very strong value-based performance helped increase practice collections 16.9% in 2025.

We continue to show strong operating leverage across the platform and G&A expenses. Adjusted EBITDA for the year increased 38.8% to $125.5 million, with EBITDA margin as a percentage of care margin expanding 480 basis points to reach 27.2%.

On December 5, we completed the acquisition of Evolent Health's ACO business. This added over 120,000 value-based attributed lives across existing and new states. We also entered Arizona in April with our anchor partner, IMS. IMS was implemented on the Privia platform at the end of Q3, and we are seeing strong sales momentum in the state. We deployed $180 million for these transactions, and our cash balance ended the year at $480 million. This was only $11 million below a year ago due to the tremendous cash flow generation of our business as we converted 130% of EBITDA to free cash flow.

Our 2025 performance and momentum positions our business extremely well. We expect to drive EBITDA growth of approximately 20% at the midpoint of our 2026 guidance and convert 80% of EBITDA to free cash flow. This positions Privia to end 2026 with approximately $600 million in cash, assuming no new business development. Our 2025 results and 2026 guidance further demonstrate our ability to continue to compound EBITDA and free cash flow in a very difficult health care services environment.

Privia's national footprint now includes a presence in 24 states and the District of Columbia, including the Evolent Health ACO business. At year-end 2025, we had 5,380 implemented providers caring for over 5.8 million patients. We continue to demonstrate very high gross provider retention of 98% and patient NPS of 87 across our footprint.

Privia's diversified value-based platform serves over 1.5 million patients through more than 130 commercial and government programs. Our total attributed lives increased 23% from a year ago. This was driven by new provider growth across our markets, the addition of Evolent ACO and our entry into Arizona. Commercial attributed lives increased more than 16% from last year to reach 910,000. Lives attributed to the CMS Medicare programs were up 52%. Medicare Advantage and Medicaid attribution increased 15% and 23%, respectively, from a year ago.

We remain highly focused on generating positive contribution margin in our value-based book. We have proven that we can build scale and manage risk without depending on any one particular contract, while we continue to implement clinical and operational enhancements in our medical groups. Our performance over the past few years is a testament of our approach to value-based care and the strength of our actuarial underwriting, clinical operations and physician-led governance structure.

Now I'll ask David to review our financial results and 2026 guidance in more detail.

Thank you, Parth. Privia Health's strong operational performance continued through the fourth quarter. Implemented providers grew 130 sequentially from Q3 to reach 5,380 at December 31, an increase of 12.3% year-over-year. Implemented Provider growth, along with solid value-based performance and ambulatory utilization trends led to practice collections increasing 9.6% from Q4 a year ago to reach $868.7 million.

Adjusted EBITDA, which is reconciled to GAAP net income in the appendix, increased 26.4% over the fourth quarter last year to reach $31.5 million, representing 27% of Care Margin. This is a 390 basis point margin improvement year-over-year as we continue to generate significant operating leverage.

For the year, we exceeded the high end of our updated 2025 guidance provided in November for all key operating and financial metrics with practice collections and platform contribution coming in at the high end. Practice collections increased 16.9% to reach $3.47 billion. Care margin was up 14.4% and adjusted EBITDA grew an exceptionally strong 38.8% to reach $125.5 million. All metrics were substantially higher than our initial guidance that we provided at the beginning of 2025, reflecting our strong execution amidst a very challenging environment.

Our business continues to generate very strong financial leverage as conversion from EBITDA to free cash flow was 130% in 2025. We ended the year with $479.7 million in cash with no debt. Given our outstanding cash generation with minimum capital expenditures, we expect to end 2026 with approximately $600 million in cash, assuming no capital deployment for new business development. This positions us with significant financial flexibility to take advantage of opportunities as they present themselves in the current market.

Our outstanding 2025 performance positions us well to continue our momentum through 2026. Using the midpoints of our new 2026 guidance, implemented providers are expected to increase 10.6% year-over-year to reach 5,950 by year-end. Attributed lives are expected to be approximately 1.58 million. We expect practice collections to grow 6.6% and care margin 13% at their respective midpoints.

We are guiding to adjusted EBITDA growth of 19.5% at the $150 million midpoint and expect 80% of full year 2026 adjusted EBITDA to convert to free cash flow as we become a full cash taxpayer this year. While our guidance for 2026 assumes no acquisitions, we will remain disciplined and strategic in our capital deployment. We expect to continue to actively seek business development deals, both in new and existing markets to continue to grow the business and compound our EBITDA and free cash flow.

Over the last 2 years, our EBITDA growth rate has averaged 32%, far exceeding our target growth rate of 20%. The midpoint of our 2026 guidance will result in more than a doubling of EBITDA in the past 3 years. Privia's consistent growth and our ability to compound EBITDA and free cash flow across economic, health care and regulatory cycles over the past 9 years validates the strength of our business model.

Privia's business momentum, powered by the consistent execution by our provider partners and our employees has positioned us well to continue to drive growth and profitability as we build our national footprint. I would like to take this opportunity to thank each one of them for their continued hard work.

Operator, we are now ready to take questions.

Your first question comes from the line of Josh Raskin of Nephron Research.

Can you speak to tech investments, including AI and maybe advancements that you're making on your model for physicians? I'm interested in any new capabilities that you've implemented, maybe efficiencies you're seeing on both the administrative side and the revenue cycle side? And then lastly, anything Athena has rolled out that you think is making an impact on your implemented provider base?

Yes. Thanks for the question, Josh. So, I think it's very timely, and I'd like to just step back maybe. I think, just to structure our thoughts, there are 3 components when we think about AI-related investments, and I'll go into a little bit deeper. So, the first is, I think it's important to understand in our business model, we are very uniquely positioned with our medical group structure, with the singleton medical groups, with the ACO entity and then with the full tech and services platform where we are deeply embedded in the workflow that we have access and ownership of a lot of data across every single patient, 5-plus million; every single specialty; every single practice across the whole care continuum.

So, the medical groups have access to every single patient encounter, the clinical records. Our MSO has access to every single claim that goes through the RCM engine. And then we have every single patient interaction with the doctor, with our service lines, with after hours, everything is documented. So, this -- it leads us to be a real perfect model where it's a very data-rich environment, and we are really excited on all potential applications of AI.

So, with that being true, the second key point is what buckets of investments we can make to enable us to benefit from all of this innovation that's going to happen now and into the next 2, 3 years that will lead us to enhance margins and then ultimately, shareholder returns.

And we look at these in 5 broad buckets effectively. One is, every single corporate function at Privia on the corporate side. So, we're on Google Cloud, Google Workspace as an example. We are implementing Gemini in every single thing that we do in a HIPAA-compliant manner as an example. We are working with our existing technology partners. So, you mentioned athenahealth. There's also Salesforce, there's Workday on every single corporate function. And then, there are new innovators that are innovating across the spectrum that we are continuously piloting. So, that's on the corporate side.

And then, on the physician practice side, I think there are 3 buckets: the entire fee-for-service workflow, the entire value-based workflow and then the patient engagement workflow where we are looking at different applications of AI with both existing vendors that we work with like Athena, but then also new companies. So, we invested in Navina last year, as we talked about, helping us with clinical decision support with suspect medical conditions, with better documentation of patients.

We are looking at everything that's happening on the revenue cycle side, all the innovations coming through, scribing as an example. And I think this will be a balance between what existing partners can do and what new innovations will happen over the next few years, a balance between how much we can implement sooner versus a little bit of delayed gratification as these models are becoming better and faster as we're all reading about.

And the last bucket is actual care delivery. So how our doctors interact with patients in a capacity-constrained manner. There's a shortage of PCPs, shortage of nurse practitioners and APPs. And so, I think the productivity enhancement that we can get across our whole organization is massive. And then ultimately, the last bucket is how does all that lead to tangible ROI and margin improvement as we grow and then also scale this company.

So, I think if you look at Slide 11, on our investor presentation this morning, we've gotten the business to -- if you look at the midpoint of our guidance for 2026, at 29% EBITDA margin as a percentage of care margin. That's very close to what we thought at IPO as our long-term range, 30% to 35%. I think with all that we see from what we can do with AI, I think we can get to the high end of the range or even exceed it over the next many years. There's no reason why a company like ours with this much opportunity should not be able to do that. So, I think that's going to lead to really good results for the shareholders as the margin improves.

Next question comes from the line of Jailendra Singh of Truist Securities.

Congrats on a strong quarter. I was wondering if you can provide some color on practice collection trends for both Q4 and 2026 guidance. I mean Q4 results and '26 guidance are both pretty solid, but that's the one metric with some variability versus consensus, and what you have typically seen. You also noticed in your slide deck that care center locations declined slightly, like 40 from Q3 to Q4. I'm not sure if that's the primary driver for practice collections not growing in '26 at the rate we have historically grown.

Yes. Thanks for the question, Jailendra. So, on practice collection, there are 2 or 3 things. So, one is Q3 to Q4. In Q3, as you recall, we recognized there's a lot of prior period true-up on our value-based book from '24. That's obviously led to the great outperformance on EBITDA. But that's -- we -- I think we talked about this last quarter where Q3, we had some prior period adjustments so that quarter-over-quarter, the comps get a little bit tougher. And then, annually, there are 2 or 3 variables.

So one is, if you look at Page 10 of our press release where we break out revenue by source, you'll see the capitated revenue line went up by close to $100 million. And that was a result of increase in lives, in capitation as well as the percentage of premium we are recognizing. That's not going to carry forward in '26. I mean we're pretty prudent with our guidance. I don't think you're going to see -- we're not assuming -- the guidance does not assume that that will repeat itself.

And then also on the Evolent ACO business, it's important to highlight, like, we are not recognizing any premium revenue in practice collections on our value-based book other than this capitated line. So that makes the comps tougher. I think the right way to look and compare is at the care margin line. That's what we are focused on, on what Privia can get from a shared savings perspective and our shareholders can, and that's growing pretty consistently. So, at the midpoint, care margin is growing low double digits, which is very consistent with how we've looked at the business. So hopefully, that clarifies on the collections. But, overall, it's pretty strong trends, just some year-over-year nuances.

And then on the care centers, I think it's just rounding instead of being precise, it's 1,300-plus care centers. The provider growth speaks for itself. The implemented providers is really strong. We had one of our best sales year, best implementation years. You can see the year-over-year growth. You can see the guidance for next -- for this year, for '26. So that's the key metric there.

Your next question comes from the line of Lisa Gill of JPMorgan.

I just have a question around utilization trends. Obviously, it's been a really strong utilization environment the last few years. What are your thoughts around some of the changes around ACA and Medicaid enrollment and any potential impact that it could have?

Yes. Thanks for the question, Lisa. So, look, I think as we've said previously, we really have to bifurcate utilization into ambulatory physician, community-based physician practice, primary care and obese peds, the community-based care utilization versus the inpatient that you see more in the post-acute or acute facilities. I think we've consistently said and that holds true that post-COVID, as the trends normalized, the ambulatory utilization continues to stay elevated, and we expect it to remain elevated. And that's actually a good thing. That's the lowest cost setting.

You want patients to interact with their primary care providers. and we don't see that utilization coming down. I do think, like you pointed out, with what's happening with the ACA population, with Medicaid, all the changes either enforced by the government or otherwise payers reacting to it, you're going to see a lot of churn. We expect that to happen. I think our diversified model across commercial, MA, MSSP, Medicaid, exchange positions us really well. I mean it's reflected in our results.

We don't have a big Medicaid population, don't have a big exchange population. Whatever we have tends to get normalized. People tend to see their primary care provider, children tend to see their pediatrician even if they lose coverage or move on. So, we see a lot of uninsured or self-insured folks show up. So, we don't see any trends abating for us. So, I think that bodes well for our business. Overall, I do think for the acute and post-acute care, I mean, there's going to be nuances as all of this normalizes over the next couple of years.

Question comes from the line of Jeff Garro of Stephens.

I want to ask about EBITDA to free cash flow conversion. Conversion guidance was 90% a couple of years ago and 80% last year and now here in 2026, you also materially outperformed on that metric ultimately in 2025. And I know there's a couple of moving pieces with taxes and folding in ECP. So, I was hoping you could help us bridge between those historical expectations, 2025 outperformance and the FY '26 guidance on EBITDA to free cash flow conversion.

Yes, absolutely. I'll start and then Dave will give some of the specifics. So, look, I think you've highlighted one of the strongest elements of our business model. Again, look at Slide 11, you look at the -- this is 9 years of data, including this year's guidance. I mean we've averaged over 100% conversion.

We love free cash flow. You can quote me on it. It's the cleanest, purest metric. You can't adjust it. It's either in the bank or it's not. I think we manage a negative float in this business, and we've tried to do that, obviously, whether at some point, we're going to start paying taxes here, real cash taxes as we run down the NOLs, and David will walk through some of the nuances.

But I think we're really focused on how we better can manage that negative float, focus on collections, get money to our providers. It's a strength of our business model relative to others in the space. And I think enterprise value to free cash flow is a key metric here that normalizes across companies and across business models in the physician enablement or even clinic-based models where you can see the strength where we barely -- we have no CapEx and everything is expensed on the P&L, and it's a very clean metric.

So, I think we're going to manage that as the best we can. Obviously, our guidance always assumes more normalization. And then if things turn out better, that's what we hope benefits the shareholders. We expect to pay taxes in -- cash taxes in '26. So that's reflected in the 80%.

And then I'll let David answer any specifics on that one.

Yes. I mean -- outside of that, I mean, I would just say we had a really good collection year. And we had a few timing issues at the year-end that I think we were originally expecting them to come in beginning of January, and they came in at the end of the year. So, we did have a little bit of timing there at the end, but we are definitely confident in our 80% or more for 2026, and we will become a full cash paying taxpayer in '26. So that is going to put a little hit in our number for '26.

Your next question comes from the line of Whit Mayo of Leerink Partners.

Parth, you're going to have $600 million of cash at the end of the year. You don't have any debt, not very efficient to have this much cash sitting on the balance sheet. So just maybe any updated thoughts around capital deployment and if the priorities have changed at all?

Yes, I appreciate that question, Whit. Look, I think, first of all, we really love our position in this space. The strength of the model, the cash flow generation, the balance sheet strength, relative to others, private or public companies. I think our answer is consistent to that question. Our priority will be to continue to deploy capital to keep compounding the business.

You saw us deploy $180 million last year. We've doubled EBITDA '23 to '25. On a rolling basis, we're going to double it again in '24 to '26 in probably the toughest health care MA regulatory environment. And I think our ability to use cash to acquire assets across this ecosystem and keep compounding our units, whether it's entering new states, adding implemented providers, adding lives, we can acquire medical group tax IDs, ACO entities, MSO entities. It's such a diversified business model. And I think there are a lot of companies that are challenged, public and private.

I think a lot of medical groups, hopefully, as all of this disruption goes through as venture capital dollars, private equity dollars stop chasing the space that happened in the last 5 years. I think it hopefully, given our track record, gives us the ability to be the partner of choice from a long-term perspective for a lot of the physician groups out there.

So, I think our priority is to keep compounding the business. Obviously, as we've stated before, we like to keep a sufficient cash balance for a rainy day. We don't like leverage on businesses that have -- could potentially have variability in shared savings. As we all know, pandemics happen, hurricanes happen. We're supporting our medical group. So, there's a rainy-day fund. But then also, if -- again, we have the flexibility to return capital as a last resort if our stock price -- if it deviates meaningfully from what we think is intrinsic value, we have that option too. But I think the priority is going to be, continuing to deploy capital and keep compounding the business the way we've been doing.

Your next question comes from the line of Matthew Gillmor of KeyBanc.

I wanted to ask about the Evolent acquisition. Now that you've owned the asset for a few months, I was curious if you had any updated perspective about the business or the synergy within the acquisition. I was particularly curious about the cross-sell discussions with Privia platform into that physician base, whether that's new or existing states.

Yes, I appreciate the question, Matt. So, we just closed this in December. I think we're really excited to have the team join us and be part of the Privia family. I think the provider groups that they focused on are really solid. I think you see their MSSP results. It's publicly available. Our hope is, we can increase that savings rate pretty meaningfully this year into the next few years. You can compare the savings rate on that book relative to our overall savings rate, and I think there's a lot of opportunity there just on the core business that they run.

I also think it allows us to have an offering in this Care Partners model where providers are not on our technology stack that we can go out and reach out to a lot more providers that may have partnered with other companies that may not be doing that well to get them at least have a relationship with Privia in an ACO entity and then obviously, cross-sell into our full medical group business model.

And I think that will happen over time, both on the existing Evolent providers. There will be opportunities in some of the existing states where we have the medical group presence and then obviously, in new states as we enter over time. So, I think that will materialize itself over the next few years. But we are really excited to have that business be part of our offering. And I think we're going to realize as many synergies as we can going forward.

Your next question comes from the line of Sean Dodge of BMO Capital Markets.

Maybe just staying on the Evolent ACO acquisition, Parth you mentioned increasing their savings rate up to the levels of the other Privia ACOs, maybe as quickly as this year. Just mechanically, how do you do that? What are the first couple of levers you can pull there to drive that? And then initially, you said it would contribute positively to EBITDA in 2026. Just any quantification you can share on how much you've embedded in the guidance for '26 from the Evolent acquisition?

Yes, I appreciate it, Sean. So just to be clear, I didn't say it will happen this year. I think it will happen over time. These things take time. We just got the business. I think rule #1 is don't do anything stupid and disruptive and get to know these provider practices and implement how Privia does things hopefully a little bit better, given we've -- MSSP has been a core part of our business model, as you've known for many years.

And I think it's the same block and tackling. I mean, we've known that -- we've been in that program for the last 8, 9 years. We have a playbook that we run. You have all the quality metrics that you want to improve. There's some basic block and tackling. I think it's a little bit nuanced given that these providers are not on our platform. So we are focused on making sure we have the right level of engagement with the practices, right level of data that comes through the technology stack that's implemented on top of their existing infrastructure, getting the patients to see their doctors, making sure we prevent the ED rates and patient rates, all of those things.

So, there are like basic stuff that obviously every ACO does and then all the nuances as we stratify the population, look at where you have some high acuity patients, manage those, things like that. So, I think we're going to run our playbook -- and so this will happen over time. So please don't expect that this will be like a 1-year thing, but we do feel really good about the business.

And then on your second part of the question, the acquisition is accretive. You saw their savings rate. It makes money, there are synergies to be had. We didn't break out the EBITDA. It's all included in our guidance. I mean, that's why, I mean, we grew EBITDA 39% last year. We're growing another 20% this year. Part of that is from the acquisitions that we did, and that's a core part of the strategy.

I mean, our growth algorithm is going to be based on same-store provider growth, same-store care center growth, adding new providers, adding lives into value-based arrangement and then doing deals that are accretive. So, I think we're going to keep doing all of those 4 things and hopefully keep compounding EBITDA here.

Your next question comes from the line of Andrew Mok of Barclays.

The corporate G&A expense dropped sharply in the quarter. Was there anything to call out driving the beat? And is this the right run rate to think about for 2026 even with the moderation in practice collections growth for next year?

Yes. No, I mean, there's not really anything to call out. I mean we definitely had some sequential, I would say, decreases in things like legal and some of our consulting. I would look at our 2026 guidance as maybe a better way to look at all of our expenses. We do expect to continue to gain leverage in the G&A space. But I would say nothing other than sort of normal decreases around the operating business flow.

Your next question comes from the line of Matthew Shea of Needham & Company.

One of the things that's impressed us is the continued provider growth in existing markets. So, it's good to hear you're already seeing strong sales momentum in Arizona. I guess it would be great if you could expand on that comment and what you're seeing in Arizona in particular as well as any other noteworthy markets. And as we look across the broader network, and you touched on this a bit, but do you expect your sales or growth efforts to be different in the value-based care ACO-only states versus the implemented provider states? Or is it the same playbook and resources sort of across markets?

Yes. I appreciate the question, Matt. So, look, our playbook in the core medical group business is the same across all our markets. Our objective is to develop really-dense delivery systems with a very low-cost provider base with community-based providers at the forefront. That materializes differently in every state. We establish presence, work with a great anchor group if we can get a pretty sizable anchor partner like we did with IMS. Doctors know doctors the best.

Before we show up in a state, this model pretty much does not exist on how physicians can be autonomous, independent and yet be part of something bigger like a Privia. I think our objective is to then showcase what we've done in other states. The payers know us. They know the playbook that we run and then offer that delivery network to the payers of health care because this is where cost can really be taken out, quality can be improved. Independent practices can stay alive.

And so, there's a win-win here given all the cost pressures and everything that we hear that's wrong with the health care ecosystem. So, I think how that materializes, to your question, I mean, we got a great anchor group, great set of physicians with IMS. I think they're super excited to be part of Privia. They see what we've done elsewhere. So, I think it leads us to then reaching out to and running full steam ahead in a state like that.

It's a great state in terms of population growth, percentage of Medicare Advantage lives as a percentage of total, the networks around these patients and the opportunity that's there with independent providers given the health system dynamics and the payer dynamics in the state. So that's our playbook there.

And I think, again, that's kind of generally speaking, the case in all our markets. There are some nuances in particular markets, some hit up in some year than others. It's an ebb and flow that happens. But as a portfolio approach, you've seen us, again, on Slide 11, just speaks for itself, that implemented provider growth hopefully just continues to tick up.

And I think the way we sell just the ACO only versus the full stack, I think it just depends by state. I think there are obviously nuances to both. We have a very ROI-driven value prop in each. There's a separate sales team for each, but there'll be cross-sell opportunities. So we'll just try to optimize that. But the medical group value prop, obviously, is a much more deeper discussion versus an ACO only. Some of the competitors that we deal with are also different in both of those.

But I think our overall story should resonate with physician practices. I mean, they're looking for a full solution. Whether we get them in one or the other, we're kind of indifferent as long as we get them. And then I think, we'll just continue to go full steam ahead on both.

Your next question comes from the line of Jack Slevin of Jefferies.

Congrats on the really strong results. I want to touch on a little bit of the MA contracting environment and acknowledging you've got less full risk in your book and sort of have been on the front end of getting ahead of utilization swings. But what we're seeing right now, I think, is a lot of sort of concessions that are being given by payers to value-based players that are driving value. I'd just be curious to hear your take on how that might develop for your business as you look at 2026 and then beyond to '27 with some of the payers looking to claw back margin, but also sort of acknowledging the value that's being brought from PCP-led provider groups in the space.

Yes, thanks for the question. I mean, it's pretty nuanced. And just to take a step back, look, I think us foresighting what might would have happened in the MA environment and that transpiring over the last few years, given all the headwinds that all of you have written on this call, I think it was similar to like a call on shorting mortgage-backed securities before 2008. I just think the dynamics were so challenged that I think whether by luck or by foresight or by execution, we kind of avoided some of the traps.

Look, we've continued to have a belief that shared risk is the right model where the doctor, an entity like Privia and the payer all have skin in the game. I think what you're seeing is an adjustment in the industry by the payers. And I think you've seen a little bit of round robin with how the payers have reacted. It was payer x in 2 years ago, payer Y last year, payer Z this year. The lives are moving between those entities as they adjust benefits, as they prioritize it differently between 3 or 4 of the big MA players out there, as you've seen and noted on.

So I think the answer to your question is really nuanced on a geography-by-geography basis, which payer we are dealing with, what risk pool, what's the MLR trend? What are they willing to do with us? Are they willing to share risk? What's the benefit design? So our payer contracting team has just done a fantastic job just navigating through all of this. And so I think it just depends on the market and the geography. I don't think it's a cookie-cutter answer that has broad application as each payer is treating it differently. I think they have margin pressure. They're trying to adjust depending on the payer and the geography.

So I think we're just continuing to be very sophisticated and nuanced about this. We are very forward leaning. We love to take as much risk as we can if we can manage it. If the payer gives us a contract that compensates us well to take that risk and compensates the physicians that are working extra hard to perform in these contracts. You have to recognize the amount of work that the physicians have to do.

We have to do increases to manage a high-cost patient population and to deliver results. You got to get paid for it. If you don't get paid for it, I don't think anybody wins. You can't have physician practices lose money as they -- especially community-based doctors that are on the front line of health care, it's the lowest cost setting. They can impact quality, cost, outcomes, as we all know, really well. And you got to compensate them for doing all the hard work.

So I think we're just going to continue to look for opportunities with our payers, keep getting our delivery networks more dense, adding capabilities in impacting the total cost of care and delivering it and showing that to the payers. So hopefully, we'll be pretty forward-leaning. And when the tide turns, which I think it will. I think these things get normalized. I think we're going to flush through V28 over a couple of years here. I think the payer environment will stabilize. And so I think it positions us really well.

And if there's some delayed gratification in ramping up risk, we'll do that because the doctors don't go anywhere, the patients don't go anywhere. It's just coming to a consensus with the payers on the right contract structure. So I think we'll continue to be forward leaning there.

Your next question comes from the line of David Larsen of BTIG.

Congratulations on another good quarter. Can you just confirm the Evolent Care Partners EBITDA and revenue? Is it $10 million of EBITDA on $100 million of revenue? And then how many of those doctors do you think you'll be able to convert over to like your core Privia, Athena platform where you're doing all the billing in AR for them?

Yes. Thanks for the question, David. So look, I don't think we disclosed any of those numbers. I think those were numbers that Evolent might have disclosed in their earnings call over the last couple of quarters, including this past this week. So we're not disclosing that. I would say our revenue recognition methodology is different. We're not recognizing any premium revenue as part of that book. So whatever numbers you're getting from them may be different for us. Our EBITDA and top line includes everything.

You'll see the results when CMS announces it in August. So we're not going to break down EBITDA by any acquisition. Like we've not done it for any acquisition or any line of business. But it is accretive. It is contributing meaningfully to this year's EBITDA. That's why I think this was asked earlier on the call. We grew EBITDA 39% last year. We're growing another 20% this year, doubling EBITDA on a 3-year rolling basis. And so Evolent is part of that growth.

Your next question comes from the line of A.J. Rice of UBS.

A specific question and then a broader one. On the embedded in the guidance, I know shared savings was a big source of growth last year, you were at $235 million, up from $179 million in the prior year in contribution. What have you embedded in your guidance there? And you mentioned early successes in Arizona. I just wonder if you could just update us on some of your newer markets. Are there any wins worth calling out there? How are they progressing relative to your expectations?

Yes. Thanks, A.J. So look, I think our goal is to accrue prudently, and that's been very consistent. So I'm not going to say anything new here and then hopefully outperform. I think you saw the actuals for '25 come in materially higher. I mean our initial guidance was $105 million to $110 million EBITDA. We ended the year at $125 million. A lot of it was related to shared savings, some prior year, some in year as we perform well.

So I think our guidance, again, we've taken the same methodology. I would not expect a material jump. If we do better, we'll hopefully see in the results. If we don't, then we'll hopefully stick with what we have. I think it just depends on the contract. We have a very diversified book.

You've written -- all of you have written really well about all the trends that impact various pools of risk. So it's still -- it's an environment we got to navigate carefully. We've got to perform in these deals. So I wouldn't expect a material step up, and there'll be some, but we'll see how the year progresses as we get data, and we'll keep updating that.

Your next question comes from...

Sorry, by the way, I forgot the second part of the question on the growth in other markets. So, look, I think it's a portfolio approach. I mean we're now in 24 states, some ACO only, some with a full model. I think there are some markets that are doing really well. You can see overall how we've progressed as a company. We don't break out EBITDA by market or things like that. But overall, with our guidance, we are close to 29% EBITDA to Care Margin. So that should tell you that the whole company, the mature markets are running well ahead of that number. And there are some markets that are maturing. Some are still negative EBITDA. Some may not be doing that well. It's a portfolio approach. We evaluate all our markets. Some markets, if we don't think are working well, we'll exit. We exited Delaware as an example, a couple of years ago.

So you'll see us be very, very prudent with this business. I don't think you can make mistakes. And I think if you think some deal structures or anchor partners or markets are not working well, and we have an opportunity to do it differently. I think you got to keep pruning the tree here to keep letting it grow really well. So I think, again, the overall business is in a very good shape. And then if there are markets, there are always puts and takes, some do better 1 year. But we take a 5-, 10-year view, like I said earlier, to just develop very dense physician networks here with community-based providers. So that's our strategy overall.

Next question comes from the line of Elizabeth Anderson of Evercore ISI.

This is [ Ayush ] on for Elizabeth. As CMS transitions from the ACO REACH program towards the new ACO LEAD model, how are you guys evaluating whether that framework sort of aligns with Privia's long-term value-based strategy? And then as your value-based book continues to grow and scale, how do you think about maintaining the consistency of performance across cohorts, particularly as the provider mix evolves?

Yes. I appreciate the question, Ayush. So like with any new program, we'll evaluate it. It goes into effect next year. I think we're still going through the details of LEAD versus REACH. I think what bodes well is with the REACH sunsetting, it allows us to -- our sales team to reach out to a lot of physician practices and providers that may have participated in REACH. And by the way, like '25 to '26, anybody who's in REACH is going to see a pretty significant decline in the shared savings just given how they changed some of the elements of that program.

And we're still studying LEAD. I think MSSP enhanced track versus LEAD, we're doing the work. But if you have a pretty mature ACO and MSSP enhanced track that you've been in for the last many years like we have, the bar is pretty high to go to a new program overall. There will be opportunities in particular states. So we'll evaluate it ACO by ACO. You can participate in one, not both. It's on a pin basis. So like with any program, any changes that CMS has done over the past 10 years, we'll just evaluate it. There may be cases where we enter into LEAD in a particular state or not. It just depends on the patient population, the state, the ACO, how we think the actuarial underwriting happens.

So I think it's just TBD as to -- once we are in it, we'll obviously communicate it with you guys. We do have some REACH lives today. So we'll see if they move into MSSP enhanced or LEAD. And then as we work with other new partners, we'll see if LEAD makes sense or not. But we're evaluating it like others.

And then the second question, look, I think it just varies. You got to go ACO by ACO. You got to go through the maturity of the patient pool. You have to look at the relative benchmarks. You have to look at which value-based contracts you're in. So while it's a generic question, again, the answer is much nuanced. This is health care. It happens locally in every state, every pool, every patient population, every payer, every contract is different. I think that's a core value proposition and moat around this business. It's hard to replicate. A lot of people can enter these businesses, but I think you all have seen it on how hard it is to make real money and real free cash flow.

So you got to have real capabilities and a great team all around from a risk management perspective, underwriting perspective, influences in delivery of care and total cost of care management with these practices and how you work with them, the data, the technology stack. All of it is a core competence of this business that is very, very hard to replicate. And I think, given the diversity of our book and the number of contracts and the payers we work with and the scale we are operating this at across different types of patient populations on Slide 6, I think just speaks for itself and how we've been able to convert -- deliver value to the payers, generate shared savings, share that with physician practices and obviously, EBITDA with our and free cash flow with our shareholders. So I think that just speaks for itself.

Your next question comes from the line of Jessica Tassan of Piper Sandler.

Congrats on the really strong year. So I'm interested to understand, first, kind of what are the specific AI tools that you've rolled out nationally to all of your network providers? What did that rollout process look like? And then any early outcomes or savings data that you can share? And then I guess, going forward, what kind of clinical category would you maybe target for AI-enabled improvement? For example, are care transitions an opportunity? Is end-of-life care planning an opportunity? Just curious if there's any 1 or 2 categories that you'd call out?

Yes. I appreciate the question, Jess. I mean, this stacks to what Josh asked right at the beginning of the call. So I'm not going to repeat all of that. Hopefully, you got some of that. Look, I think from a category perspective, given the 5 buckets I described earlier, I mean, we're looking at interaction with the patients. So we're looking at care gap closures. We're looking at chart prep, scheduling patients, interaction with patients, Agentic AI as it relates to patient engagement, medication adherence, risk assessments, obviously, clinical decision support.

So all of that to just how the doctors interact with the patients, stratify the population, work with the high acuity patients. And just there's so much productivity lift we can get given our physicians are capacity constrained, the ability and the need to work deeply with every patient is front and center as we -- specifically as payment models evolve to different versions of value-based care. So I think all of those are elements where we are focused on.

Obviously, like I said, like there's a whole host of applications on revenue cycle, on the fee-for-service workflows. And from a company perspective, like I said, I mean, we're working with some existing companies that we work with today as they innovate. We invested in this business called Navina, like we talked about last year. I mentioned it earlier. So that was pretty tangible for us.

There are a number of new innovators in the space that we are partnering with, piloting some of them. And at some point, once it's more baked, we'll obviously highlight more. But those are the categories, and there are a lot of new companies out there. And I think this is -- like I said earlier, I mean, this is going to be a 3-, 5-, 7-year journey. The technology is evolving really fast. The improvements that we see are -- and the applications are pretty amazing already. But I think you're going to see a lot more adoption and how we can implement in every single one of those buckets.

So we're super excited on this journey. I think it will be a journey, and I think it's going to be pretty margin accretive and productivity enhancing going forward for a business like ours.

Your next question comes from the line of Michael Ha of Baird.

So as you look across the broader value-based care M&A landscape, it appears to be heating up in a pretty big way only very recently, acquisitions being made, especially in South Florida, interest ramping up in California, a lot of this is coming from a couple of your large payer partners looking to really build greater market saturation. And some of these multiples we're hearing of, they're not too far off from your own, but the quality of these assets appear to be much lower. So I'm curious to hear your thoughts on all of this. How does it look to you? Does it seem rational? What do you think is driving the activity? Is it simply we're now entering the end of V28 and the narrative is beginning to pick up again? And as you look ahead, how does all that you're seeing today impact your own M&A strategy?

Yes, it's a good question. Look, I'm not going to comment on what others have done recently or any particular deal. As you know, we're not in the clinic MA space. So you highlighted 2 geographies in South Florida and Southern California that almost run very, very differently from a large part of this country from a health care delivery and risk taking and the concentration of MA population. So those are very unique geographies. The assets are unique. Some of the payers have ROFRs on some of the assets. And so you're seeing that in transactions. I can't comment on the multiples they're paying or we're just not in the MA clinic business.

I mean, like I said, we believe in shared risk. We believe in community-based doctors staying autonomous independent and helping them. I think to the broader question, so other than commenting on those specific transactions and the multiples, I think Whit asked this question earlier, and I think we are positioned really well. We have a very diversified model. We can look at assets across the spectrum, ACO entities, medical groups, MSO entities, service providers, whatever have you, I think we can hopefully be a partner of choice. So I think we're going to be pretty aggressive.

I think finding quality assets is key. So I think what you highlighted there is very important. You could spend a lot of money buying a lot of things and they don't have the same quality of earnings. They don't have free cash flow, they don't have EBITDA. I don't want to spoil Slide 11 for you guys and our investors. It's -- we're going to be very, very disciplined. And if we can get an asset that we can improve, we're going to buy and integrate and synergize and just be disciplined in how we do this.

So while we have a lot of balance sheet capacity with our cash -- with our free cash flow, with our cash balance, with any potential debt capacity, even though we don't like leverage on this business, I think we are prime to do larger deals and make an impact and hopefully consolidate the space and continue this compounding of EBITDA. But I think we're going to be very thoughtful. We don't like to pay big multiples, especially for assets that are lower quality. So I think we're going to be pretty disciplined in how we approach this.

Your next question comes from the line of Craig Jones of Bank of America.

So, thinking more about the long-term 20% EBITDA growth number you have out there. So you've got a lot of levers in your portfolio to drive this every year. But I was wondering, could you break down how you see the components of driving that 20% growth in a typical year among organic, inorganic margin expansion or whatever it may be? And then which components do you view as, say, higher visibility versus lower visibility?

Yes, I appreciate the question. So look, I think you got to go back to Slide 11, again, to look at this on a multiyear basis. And you highlighted some of the components, but those are -- you enter new states, you add implemented providers in existing and new states. You add value-based lives in value-based contracts on which we have the potential to earn care management fees and 40% on shared savings versus our low double-digit management fees on the fee-for-service book. You can do M&A, and then you grow same-store and then you improve the cost structure like we've done, both on platform practice -- on platform contribution, so the cost of platform and then also on sales and marketing and G&A.

So as you've seen on that Slide 11, like, every year is different. The components are different, but they all work together. Some years, we've scaled the cost structure really well. Like this past year, you look at '22 to '23, we grew pretty fast. We entered 5 new states. The cost structure didn't scale. So like adjusted EBITDA margin barely improved across those 2 years. So I think it will ebb and flow, but the direction is hopefully towards the upward right. And like I said earlier, with the application of AI and everything else, I think we're going to continue to get this margin profile better.

If we do acquisitions, we're going to synergize them. If we enter new states, some of them lose money in the first couple of years. So I think it just depends. But given the whole book where it stands today, I think you're going to see us pursue all those 4 components. It will be a combination of both organic and inorganic growth at our size now, I mean, the law of large numbers is going to start playing up. So -- and given our balance sheet strength and all the discussions on -- and the questions we got on M&A. M&A is a core component of the strategy as we roll up the industry.

So I think you're going to see us press on all 4. But how it evolves, which year, which components higher, lower, I think it will just vary, but we're going to keep executing on all of those.

Your next question comes from the line of Daniel Grosslight of Citi.

Parth, you guys have been very forward thinking and frankly, right on taking on risk. I think that's been a recurring theme on a lot of these earnings calls. But it does seem like some of your competitors are now beginning to adopt your type of model or at least approach to risk taking, which I guess is good because imitation is the best form of flattery. But it does, I would think -- or it might change the conversation you're having with physicians who are now hearing a similar pitch from others. So I'm just hoping you can talk a little bit about your provider recruitment over the next couple of years, if your conversations with providers have shifted at all? And if so, how has that sales pitch gone?

Yes, it's a good question. And I think it builds on some of the themes on the earlier questions. Look, I mean, arguably speaking, the barriers to entry -- the perceived barriers to entry in this business can be lower. Anybody can start an ACO if they raise capital from some VC or private equity fund. The issue is performing and building core competence on how you deliver value and then execute day in, day out every year, year after year across cycles and deliver shared savings for the payers, for the doctors and generate free cash. That's where the core competence is.

So I don't think the pitch is any different. We execute the way we do. Our track record speaks for itself. I think a lot of money got raised. A lot of money that was raised got spent in giving irrational, call it, contracts or economics to -- without sharing the appropriate level of risk. We've said consistently, I'll repeat it, you got to share the risk with the doctor, an entity like Privia and the payer. That's the best long-term strategy that can outlast 8, 9 years of performance like you see on Page 11 across any cycle.

You do artificial things and the viability of the business can be put to question. And we've seen that. Like a lot of companies have not performed well. They're surviving. And so I think physician practices that may have partnered with an XYZ company. If they're happy, they're happy. If they're performing, it's good. We have a full service offering with our medical group that, again, a lot of the competitors don't have to join our medical groups for all lines of business, every patient, every specialty, technology stack, payer contracts, and then we have full suite of value-based, obviously, contracts to help them perform in those in a very integrated manner.

We think that's a very differentiated approach. And now we have a lot of history and data to speak for itself. So look, obviously, there are some competitors that are doing really well. I think we want them to perform really well because that's good for the industry. But I think the TAM is pretty large. And hopefully, we're one of the survivors and consolidators. And you'll have some great companies out there that do really well. And then hopefully, some of them which were not that great, hopefully, we can consolidate over time. So I think, hopefully, our results just speak for themselves as to how we're doing, but I don't think it's changing our strategy in any particular manner.

Your next question comes from the line of Ryan Langston of TD Cowen.

In the prepared remarks, you talked about the IMS acquisition saying there was pretty strong sales momentum in that state. I guess, can you just give us a sense on the organic pickup from IMS? I'm just trying to sort of understand broadly what the growth trajectory looks like on some of these larger deals as you ramp up in new states.

I mean, we don't break it up. We -- I think you got the size of that group if you go to the website. So you can see it was a pretty meaningful group, a very large multi-specialty group, got themselves out of a health system. And then they found us, we found them and there are a lot of synergies in the business model. So I think -- like I said earlier on one of the answers to the question, I mean, when you get a sizable group, hopefully, the snowballing starts sooner. Our best salespeople are our physicians. If we do well for them, they speak for ourself, for us.

And so I think, again, like it's a 5-year strategy to build a big medical group there. I just don't think any 1 year makes a difference. We established ourselves. We established the sales team. We start knocking on doors and we start performing. So I think we're going to continue to expect hopefully new signings and implemented providers and you start small and build it up.

Your next question comes from the line of Richard Close of Canaccord Genuity.

Richard?

Your next question comes from the line of Ryan Halsted of RBC.

Maybe just one last question on your appetite for new business development. Just how are you thinking about kind of the best return on your investment as you're thinking about either expansion into new markets or as you were just alluding to, maybe investing in some of your more recently entered markets and really trying to build density, just all in light of the challenging payer landscape that you've been referring to, how does that sort of impact your philosophy on return on invested capital?

Yes, that's a great question. Look, I think every deal is different and you got to evaluate it on its merit. Given our capital position and free cash flow profile, I think we have the luxury to do both. We have to take a portfolio approach. These markets and these dense networks take time to build. I think -- so we are pressing on all cylinders. It's a little bit -- it may sound like everything everywhere all at once, but each market runs with its own P&L. They have business leaders that are responsible for growing those markets. We can do in-market BD as opportunities arise to continue to add to density. We can add new markets. We can add new capabilities. We can buy businesses like we did with the Evolent deal.

So you're seeing us do a whole wide variety of transactions over the last 5, 6 years, at least the ones that we've disclosed being a public company. And I think you're going to continue to see that. I think we take a long enough view. The whole business is performing really well. So if there's a market where we know we're going to lose money as we invest and put the sales team on the ground and if it's a smaller anchor partner, but it's a big state with big good demographics and enough independent physicians.

We'll take a 5-year view because we understand the unit economics of this business really well. I mean, when you get a business which is operating close to 30% EBITDA to Care Margin that we thought we would do 5, 6 years ago, generating this much cash, I think we've seen across 15 states with the medical group model and now 9 more states with the ACO-only model. I think we know what works, what doesn't work. We've seen a lot of issues over the years. We worked with a lot of payers. So different health care geographies, different payer dynamics, different health system dynamics.

So we take all that into consideration as we take that 5- to 10-year view. And I think we have the luxury to do that because very few companies are in this position where they can invest with that kind of a mindset. So I think we're pretty fortunate, and we're going to keep pressing on all those fronts.

There are no further questions at this time. Please continue, gentlemen.

Thank you for listening to our call today. We appreciate your continued interest and look forward to speaking to you again in the near future. Thank you, operator.

Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.

Hello, and welcome to the Privia Health Third Quarter 2025 Results Conference Call. Please note that this call is being recorded. [Operator Instructions]

Thank you. I'd like to hand the call over to Robert Borchert, SVP of Investor and Corporate Communications. Please go ahead.

Thank you, Chris, and good morning, everyone. 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 through the Investor Relations section of priviahealth.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.

The financial results reported today are preliminary and are not final until our Form 10-Q for the third quarter and 9-month periods ended September 30, 2025 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 November 6, 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 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 turn the call over to Parth Mehrotra, our CEO.

Thank you, Robert, and good morning, everyone. Privia Health continued to execute very well across all aspects of our business through the third quarter of 2025. This momentum positions us for continued success in 2026. Today, I'll summarize our business and financial highlights, and David will discuss our financial results and updated 2025 guidance before we take questions.

Privia Health's consistent results, operational execution and differentiated business model have clearly demonstrated our ability to perform in all types of market environments. We delivered very strong results across our value-based care book, including the Medicare shared savings program for 2024. New provider signings and implementations remain strong across all of our markets, which provides great visibility for 2026. Implemented provider growth of 13.1% and value-based attribution growth of 12.8% year-over-year helped support practice collections growth of 27.1% in the third quarter.

Adjusted EBITDA increased 61.6% with EBITDA margin as a percentage of care margin expanding 720 basis points to reach 30.5%. This outstanding performance gives us confidence to raise our 2025 outlook above the high end of our previous ranges.

In September, Privia Health agreed to acquire an accountable care organization business from Evolent Health for $100 million in cash, plus an earnout of up to $13 million based on 2025 MSSP performance. This business will add over 120,000 value-based care attributed lives across existing and new states in MSSP as well as various commercial and Medicare Advantage arrangements. The transaction offers a compelling synergy for Privia as the ACO participating providers will have an opportunity to join Privia's Medical Groups for a full technology and service platform. The transaction is expected to close by year-end 2025 pending regulatory approvals and we expect it to positively contribute to adjusted EBITDA in 2026.

Privia's national footprint now includes 5,250 implemented providers, caring for over 5.6 million patients in more than 1,340 care center locations operating in 15 states in D.C. Our balanced and diversified value-based care organization now serves over 1.4 million patients through more than 100 commercial and government programs. Our total attributed lives increased close to 13% from a year ago. This was broadly driven by new provider growth and our entry into Arizona.

Commercial attributed lives increased more than 12% from last year to reach 864,000. Lives attributed to CMS Medicare programs were up 12%, and Medicare Advantage and Medicaid attribution increased more than 12% and 18%, respectively, from a year ago. This diversified value-based care book gives us the confidence to build scale and profitability without depending on any one particular contract. With the ACO business acquisition, Privia's total attributed lives will expand to more than 1.5 million.

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 medical groups. Our consistent performance over the past few years is a testament of our approach to value-based care and the strength of our actuarial underwriting physician-led governance structure and clinical operations. Our physicians and providers continue to strive to reduce costs, improve patient well-being and deliver value to our commercial and government payer partners.

Now I'll ask David to review our recent financial results, balance sheet strength and our updated 2025 guidance in more detail.

Thank you, Parth. We continue to see very strong performance across our value-based care book, especially in the Medicare shared savings program. Across our 9 ACOs and MSSP in 2024, Privia managed over $2.5 billion in medical spend. Our aggregate savings rate of 9.4% was up from 8.2% in 2023. Total shared savings of $234.1 million increased 32.6% from a year earlier. This demonstrates our continued success in increasing savings and profitability while adding value-based and downside risk lives and contracts.

After CMS' share, previous gross shared savings was $160.1 million, a 36% increase over 2023. This is the amount recognized in practice collections and GAAP revenue. In the Mid-Atlantic region, we operate one of the country's largest ACOs carrying for about 60,000 patients. We delivered savings of 11%, which for the fifth year in a row was the highest savings rate of all ACOs of greater than 40,000 attributed lives.

Privia helps strong operational execution and growth continued through the third quarter. Implemented providers grew 125% sequentially from Q2 to reach 5,250 at September 30, an increase of 13.1% year-over-year. Implemented provider growth along with strong value-based performance and solid ambulatory utilization trends led to practice collections increasing 27.1% from Q3 a year ago to reach $940.4 million.

Adjusted EBITDA, which is reconciled to GAAP net income in the appendix, increased 61.6% over the third quarter last year to reach $38.2 million, representing 30.5% of care margin. This is a 720 basis point margin improvement year-over-year as we posted better-than-expected results across our value-based care book, which helped generate significant operating leverage across both cost of platform and G&A. For the first nine months of 2025, practice collections increased 19.6% to $2.6 billion. [indiscernible] was up 16.7% and adjusted EBITDA grew 43.5% to reach $94.1 million.

Our business continues to generate very strong free cash flow. Pro forma cash at the end of the third quarter was $409.9 million with no debt. This assumes the deployment of $100 million by year-end for the ACO business acquisition, and the net cash received from CMS for the 2024 MSSP performance year. Year-to-date pro forma free cash flow, excluding cash deployed for business development transactions, was $104.4 million.

Assuming no further deployment of capital for business development, we expect to end the year with at least $410 million in cash. This continues to position us with significant financial flexibility to take advantage of opportunities in the current market environment.

Our outstanding year-to-date performance positioned us to once again raise our 2025 outlook. Using the midpoints of our new 2025 guidance, Implemented providers are expected to increase 11.2% year-over-year to reach 5,325 by year-end. [ Attributalized ] growth is expected to be approximately 12.5%. We expect practice collections to grow 17.1% and care margins by 13.2% at their respective midpoints. We are also guiding to adjusted EBITDA growth of 32% at the midpoint and expect more than 80% of full year 2025 adjusted EBITDA to convert to free cash flow.

Previous consistent long-term growth and profitability across economic, health care and regulatory cycles validates the strength of our differentiated business and economic model and consistent execution by our provider partners and our employees year after year. Our momentum and diversified book of business has positioned us well to drive organic provider growth and increase operating leverage for long-term adjusted EBITDA and free cash flow growth as we build our national footprint. We look forward to continuing to serve our physicians, providers and health system partners and their patients on our long-term journey together.

Operator, we are now ready to take questions.

[Operator Instructions] And your first question comes from the line of Joshua Raskin with Nephron Research.

This is actually Marco on for Josh. Actually I had one on your MSSP performance. So given the very strong results for that program in 2024, I'm just wondering how you plan to guide to that in the future. Does the outperformance in 2024 now just get factored into the baseline for future planning? Or are there any reasons why we should consider that year to be above the go-forward run rate?

Yes, I appreciate the question, Mark. So I think we're going to be pretty consistent with how we've done it over the past 7, 8 years. We take into account all the data we received from CMS, look at our attribution, see any changes to the program structure, fee rates, et cetera, just factor all that in. We look at the results and if we perform well relative to benchmarks, all that just does get factored into the next year. So every year when we report, we are updating for prior year and then also updating current estimates for the current year. So all that's factored into the guidance. So you can see with our outperformance that includes both factoring in for '24 actual results as well as updated view on '25.

Your next question comes from the line of Elizabeth Anderson with Evercore ISI.

Congrats on the quarter and the good MSSP results and thanks for the question. Could you talk to us about the one to sort of go forward for the 4Q? I know you obviously had the outsized gains in the third quarter, but sort of how are you seeing the core business performing as we go into the fourth quarter? And on prior calls, you talked about over $130 million of EBITDA for 2026. I don't know if you could comment on sort of where you're seeing that number now.

Yes. Thanks, Elizabeth. I appreciate it. So look, I think we continue to see very strong trends. There's no reason to believe the momentum changes in Q4. We don't give quarterly guidance. We're just focused on annual results given when value-based care results flowing into the year. There's a very specific reason we just avoid the quarterly guidance or implied outlook and so on and so forth. I think we're being our usual prudent in terms of implied guidance for Q4. So I think we'll just see how the year goes. We just don't want to get ahead of ourselves given we've had a pretty outstanding year-to-date Q3.

And then I think, look, I mean the updated guidance, we are sitting close to $120 million for 2024, I think we're going to keep targeting 20% growth off of that where we closed this year into next year. We'll just see how we close the year, hopefully strong and then close the Evolent transaction like we noted, factor all that in, see updated results on the value-based book across all categories as we enter later this year, early next year, factor all that in and give guidance in February like we do. But there's no reason to believe, I mean we've had one of our best years, and I think the momentum should help us take that forward like we noted in our prepared remarks, it positions us exceptionally well for a pretty strong '26.

Your next question comes from the line of Whit Mayo with Leerink partners.

When I look at revenues or practice collections per provider, it's just up a ton this quarter. And I know it's just a metric. But can you just talk about the factors influencing the strong fee-for-service growth? I know you don't give same-store volumes, but just the revenues are growing so much faster than the implemented provider growth.

Yes, thanks for the question, Whit. So, I think it was pretty broad-based. We saw that across the fee-for-service book, utilization trends and then also value-based book where if the actual results come in, ahead of accruals, all that gets factored in the practice collections. We added a couple of markets. Arizona is now fully factored in. When we gave original guidance, we don't include BD like we noted. And once we close the transaction, all that gets factored in Indiana as -- got implemented, that got ramped up.

So I think you're seeing the momentum across the business, same-store, new provider growth, new markets, good value-based book and it just speaks to the momentum in the business. When all of these things hit, you get results like this, and it flows down EBITDA free cash. So I think we're really pleased as to how it's played out.

Our next question comes from the line of Matt Gillmor with KeyBanc.

Parth, I wanted to ask about the synergy opportunities with the Evolent Health ACO. How are you thinking about the pathway to enhancing the savings rate from Evolent's ACO up to previous performance? And then also, can you provide a couple of comments about the physician base, which I think is relatively large around 1,000 physicians. Just give us a sense for what those practices look like and the appetite to join the Privia Medical Group.

Yes. Thanks for the question, Matt, and kudos to calling the deal out like a year ago when we hadn't even started conversations. Look, I think you noted all of them. I mean, our thesis is, this is a core part of our business. We've done MSSP for 10 years. We think we can offer a lot more to these provider groups. Obviously, there's a synergy opportunity in our existing states where we have medical groups. We have a full infrastructure. We'll have a pretty tangible ROI for many of the practices that can join us. And so there's that cross-sell opportunity. I don't think it plays out just in the next quarter or two. I think this thing takes a few years to play out as practices -- some of the larger practices make that fundamental decision to join our medical groups. It's an entirely different business value proposition. And then I think it gives us a good opportunity to -- we're now going to enter 6 new states with a lighter model, we're just in the ACO, but then there's an opportunity for us to find anchor providers and others that we can actually establish our medical group and then implement our full suite and enter these states.

And so I think we're going to focus on both of those. And then obviously, improving the performance of the ACO at hand is kind of job #1. So they are at a certain level of shared savings rate with CMS. You've seen our performance across our other ACOs as we've consistently improved that. We have 4, 5 ACOs that are now close to double digit or higher than double-digit savings rate. So I don't think, again, that plays out in the near term. But over time, our hope is we can improve performance. So there are multiple levers to get synergies out of the business. We haven't closed the transaction yet, so we'll just go through that, and hopefully, that gives us good tailwinds over the next 2, 3 years as we play out that thesis.

Your next question comes from the line of Andrew Mok with Barclays.

This is Thomas Walsh on for Andrew. Hoping you could discuss some of the moving pieces in the capitated business this quarter including the step-up in revenue, prior year claims development and any change in membership?

Yes. Thanks, Thomas. So I think we have a pretty small capitated book, about 20,000, 22,000 lives, so I think that's just to note that. And then this was a small book that we retained on a capitated basis when we kind of restructured these contracts a couple of years ago, given our view on the broader M&A environment. And our hope was that we would perform well in the book that we are keeping. So I think you're seeing that play out. I think it's effectively the factors that you would expect on the revenue side given attribution, risk adjustment, and then obviously, performance relative to that on the cost side with all our programs just performing a little bit better than what we expected, which was the hope. So you're seeing that play out. I don't think it fundamentally changes our view on capitation and how that plays out going forward. We continue to believe having shared risk model with payers, providers, Privia, like we've said in our previous calls, we just think that's the most optimal structure. All the pressures in MA continue to persist as most of the analysts on the call have written pretty extensively about V28 and [ STAR scores ], utilization trends, none of that is changing fundamentally. So I think we're going to be pretty cautious on capitated MA, but we're really pleased with the book we have and we'll continue to optimize it for profitability and continue to give that value to both our payer partners and our providers.

And just to add to that, for the quarter, there was a little bit of timing of data and a little bit of retroactivity back to [ 11 ]. So I would say we're looking at probably Q3 is the high mark for the year and wouldn't expect that exact trend to continue into Q4.

Your next question comes from the line of Matthew Shea with Needham & Company.

Congrats on the nice quarter here. I wanted to ask about kind of the go-forward growth algorithm. Historically, you've stuck to the cadence of one to two markets per year. You demonstrated that this year. Evolent obviously adds more than one to two markets immediately. So curious, how does the acquisition change the cadence of new markets? Is it fair to expect you will pause for a bit while you process through integrating those assets or just how does the deal change the growth algorithm? And then you also commented on the flexibility, the cash position gives you at this point. So just curious what your appetite for incremental M&& is.

Yes, I appreciate the question, Matt. So I don't think anything changes fundamentally. We continue to have a pretty good business development pipeline. Evolent gives us access to six new states, but it's not with the full model as we just were talking about. So I think us -- when we talk about a new state, it's implementing the full model with our medical groups, risk entities, full services platform. So I think that will be the cadence. I think we have a pretty strong cash balance, $400-plus million even at the end of the year despite spending $200 million this year. I think we're going to continue to take advantage of all the dislocation in the market. A lot of companies have got started public, private, have struggled for different reasons. I don't think new money is chasing some of these models, which is great for us. A lot of TAM opens up as some of these models struggle, physicians come out. So I think we're going to continue to be pretty aggressive with BD and try to take advantage of this opportunity in window and keep growing our TAM, keep growing our business and compounding it. So again, but we're going to be disciplined on price, on the types of deals we do as we have been in the past. So I think we'll just continue with the cadence all across. So there's no fundamental change in how we think about our growth algorithm.

Your next question comes from the line of Jailendra Singh with Truist Securities.

Congrats on a strong quarter. I want to stay on the topic of MSSP, clearly, strong results there. With this landscaping jungle, I mean we have come across multiple companies who are previously only focused on the ACO [ reach ] program and now exploring ways to ship MSSP, given all the uncertainties in the ACO reach program. Is that -- how does [indiscernible] landscape for you guys I mean, on the same topic of M&A, do you think that could be an opportunity for you to look at some of these entities who might have done [indiscernible] ACO reach product now are uncertain about the future. Just give us a flavor about the landscape, this might be having some impact on it.

Yes. Thanks, Jailendra. I think it ties to the previous question. I think there's a lot of dislocation. The barriers to entry to start a reach or an MSSP ACO were pretty low but then executing on it and scaling it and making it profitable is where, I think, all the secret sauce is. I mean, there's no IP and health care services. So I think as new money does not flow in and people are not willing to put in good money behind bad money. And some of these models struggle to get profitable or scale. I think all of those give us good opportunities. I mean at the end of the day, if you look at Slide 12, we are chasing 2 units that drive this business. Providers, the patients they cover all lives and then how many of those are in some value-based arrangements. So as I think some of these entities struggle, the physicians come out or we have an opportunity to buy some of these entities at a reasonable price, I think we're going to look at all of those. The transaction we did with Evolent is an example of that. I mean they didn't do reach, but I mean there's a pretty big value-based care book available. And I think the transaction was good for both parties. We got it at a reasonable price. They had something that was noncore to them. So I think we're going to look for those kind of opportunities. But I think, like we said, we're going to be pretty aggressive across the board and looking for opportunities to keep growing.

Your next question comes from the line of Jeff Garro with Stevens.

I want to ask how we should be thinking about the evolution of your relationships with payers as we head into the next calendar year, and so you might be finalizing any of the negotiations or contractual arrangements with those counterparties towards year-end. Has your execution on value-based care from both the cost and quality perspective, changed those conversations dramatically? Or should we continue to think about it as kind of incremental gains towards value-based care as you show the high level of service that your providers offer.

Yes, I appreciate the question, Jeff. I think it's a great question. Given the breadth of our relationship across commercial, MA, Medicaid, our -- these are ongoing discussions. It's not like we have contracting discussions at one point of the year because like we said, we have over 100 [ VBC ] contracts, they're close to 200 commercial contracts, including commercial value based. So the discussions are really broad-based. And these happen at the state level, just given how the industry works. But then as we really performed well in one state, we have case studies, we have a history of performance. The payers understand what we've done for them in one state. And so as we enter a new state or we have some of the younger states, I think those conversations help us. So there's a local level discussion. There's a national level discussion. We include multiple aspects to contracting. So when we go and negotiate a fee-for-service contract. It includes a value-based element to it, even on the commercial book, the MA book, the Medicaid book. So I think it's a differentiated value proposition that very few companies in the space have, at the scale and breadth that we do. And so I think we continue to work with the payers. They are seeing strong results. We offer them a very low-cost provider network, a delivery network. And that's the right side of history in terms of where -- what you have to do to reduce cost, improve outcomes, improve patient well-being so on and so forth. So I think it's great to see that play out over 4, 5, 6, 7 years. So you have empirical tangible results to show. And I think that continues to differentiate us. And I think it's not only with the payers, it's with provider groups, it's with the government. So I think all of that bodes pretty well for us as we continue the momentum.

Your next question comes from the line of Ryan Langston with TD Cowen.

On the MA cap performance, I think I heard you say there was some favorable retro pickup. I guess, can you maybe help us frame how much of that was sort of core performance versus onetime in nature? And then just on the current number of MA lives, 20,000, 22,000, if you wanted to, is there an opportunity to increase the number of those lives and the current contracts that you have? Or would you sort of have to move outside of those and sign additional contracts to grow lives?

Yes, I appreciate the question. So I think it was a bit of both on the first part. It's also relative to our accruals, what the actual results are. I mean, we've been very, very prudent and thoughtful on how we accrue just given the environment, given everything you've heard from the payers. So we were fairly prudent in our assumptions. But then at the same time, we just don't take a step back on actually performing in those contracts and then we hope for the best. And I think what you saw was the team did a pretty good job.

Now it's a pretty small book. It's like we said earlier, it's 20,000, 22,000 lives, one or two states, a couple of payers. So we really focused on what we needed to do to reduce costs, improve outcomes and then have the results we did. So I think it was a bit of both in terms of great performance in the year.

Now like we said, I don't think we're going to continue to assume that some of the headwinds in MA just goes away. So I think we'll continue to be prudent in our accruals going forward. And if results are better, then you'll see the outperformance again. But I think that's the tactic we're just going to keep.

And then I think in terms of increasing attribution, look, I think it's going to be both things. I mean we're looking to increase same-store attribution growth in existing states with existing contracts with existing doctors. We add new providers in the same state, so -- and in the same geography. So if we have an MA contract in a few zip codes, we add new providers there, that attribution adds to it. And then we're going to obviously try to enter into new contracts in existing and new states as well. So I think you'll see a combination of all of that. Our approach is to continue to increase lives across the value-based book, MA, MSSP, Medicaid, commercial and because that's the chassis for the business and the economic model. So I think you're going to continue to see us just increase lives as fast as we can.

Next question comes from the line of A.J. Rice with UBS.

Hi, everybody. You have a unique window on a bunch of different payer classes coverage categories. And I wonder, there seems to still be quite a bit of disruption and underlying utilization trends. Is there anything you're seeing to call out there? There's also been speculation [indiscernible] people face coverage changes going into the new year, there might be some acceleration on utilization during the fourth quarter. Are you seeing any of that in and how people are approaching your primary [ client ] care operations and so forth?

Yes, thanks for the question, A.J. So as we've done previously, I think it's important to distinguish between ambulatory utilization. Physician practice offices in the communities versus in the hospitals and post-acute and so forth. And so I think we continue to see elevated trends across the board. I don't think there's any reason to believe that those trends reduce. We'll just see how Q4 plays out and whether all the changes in some of the programs and where the attribution might change with Medicaid or exchange population.

It's not really big for us, but I think that impacts more of the post-acute an acute side of things versus ambulatory. But we'll see how that plays out. But I think our underlying assumption is going to be pretty elevated, and so we plan for that. in the value-based book. It bodes well for us on the fee-for-service side. So I think that's our view.

Your next question comes from the line of Constantine Davides with Citizens.

Thanks. Maybe just part of changing gears a little bit here, but you've more than doubled the number of providers on the platform in the past five years. Can you maybe talk about Privia's ancillary capabilities and how they've evolved over this time frame as you've added new markets and particularly new specialties and increased density in more mature markets. So just again, how your ability to continue to scale the platform is maybe driving your thinking about some of the ancillary services you provide to your groups.

Yes, I appreciate the question, Constantine. So it's a really good point. I think -- look, our strategy is enter a state, get density of providers and then run the entire playbook for the whole line of business, all patients, all payers or lines. And as we develop that density, there's a lot of opportunity for us to get into things like labs, pharmacy benefits, ASCs potentially, clinical research, anything that goes through our practices because we are operating integrated medical groups, risk entities, full tech and services platform. We've got all the data. The medical groups make the decisions collectively with the Privia team and so there's a lot of saving opportunities that we can offer to the payers, incremental revenue opportunities we can offer to our medical groups and our provider practices. And so you'll see us pursue all that. Now it varies by state, depending on density. So it's not going to be homogenous. But across all of those lines, we look to monetize the platform and scale it. So -- and I think that leads to the great economic model where incremental revenue just flows down the P&L as we monetize the network. And I think that's one of the underappreciated parts of our business as to how we can -- how well we can do that. So you're seeing that play out in the thesis. Again, like Slide 12 speaks for itself. If you look at the provider growth, collections growth, care margin, EBITDA, free cash flow. And that's a fully expensed P&L for all sales, marketing, BD, software development, everything. And we are approaching close to target margins. Overall, as a company, we're at 26% EBITDA to care margin. When we went public 5 years ago, we said we're going to target 30% to 35%. I mean, we're pretty much there over the next few years. So I think you're seeing the whole thesis play out as a result.

Your next question comes from the line of Jessica Tassan with Piper Sander.

This is Derek Gross on for Jess. I had one on Evolent Care Partners. We believe that they had a $220 million a year partial capitation contract with Blue Cross Blue Shield of North Carolina. Do they have any other contracts like this? And did the acquisition include management of this contract or just the MSSP business?

Yes, I appreciate the question. So like as we noted in our press release when we did the deal, we bought the entire business, all contracts that included commercial and MA as well in addition to MSSP. And so yes, we assume that contract. We're not going to get into details of any specific contract and lives in it or revenue dollars and so forth, like we don't do it for the rest of our book, we'll include them as part of our whole entire platform and how we reported on Slide 6. But yes, we've inherited those contracts, and it's part of our core strategy to just act the lives in each of the each of the circles that you have on Slide 6, and that will add to the MA lives there, than we'll continue to hope to perform as expected or better over time.

Your next question comes from the line of Daniel Grosslight with Citi.

Congrats on another strong one here. If I look at the implied guide for 4Q on a year-over-year basis, it seems like you're projecting limited profitability growth. It's about low single digits and some margin compression. Parth, I know you mentioned that just given where you are in the year, you do continue to guide conservative. But I'm just curious if there's any investments that you're making in 4Q that may be weighing on margin. And I also just wanted to confirm if IMS contributed anything to profitability this quarter? Or are you still expecting that to start contributing in 4Q?

Yes, I appreciate the question. Yes. So there's no investments. There's nothing -- there's no anomaly, we're just being prudent. They want to get ahead of ourselves, just given the strong results. All that momentum continues, hopefully, we'll close the year pretty strong. And so IMS -- and to your second question, IMS will contribute in Q4 and going forward once they were implemented in September. So I think that hasn't contributed. So I think, look, we expect Q4 to be strong. We'll see how it plays out. Hopefully it's better than expected. We just had the magnitude of our performance in the first three months -- first three quarters that like we said earlier, like we don't give implied guidance, we don't guide by quarter. I think we're just looking at the full year on each of our operating metrics. We are well above the high end. So if it continues the trend that we expect it to, hopefully, you'll see all that outperformance continue.

Your next question comes from the line of Jack Slevin with Jefferies.

Most of my questions have been asked already, so maybe just a tidying up one on the numbers. In previous years when you've had significant outperformance or a strong lead in? I know you had sort of higher variable comp or bonuses that have come through in either the fourth quarter or on a cash basis, hitting early in the following year. Is there anything we should be looking out for on that front as we look at 4Q and 1Q coming up?

Yes, I appreciate it, Jack. So yes, that's all factored in the guidance. So as we look at our scorecard that you can see in the proxy every year, based on the metrics we accrue for that level of outperformance and bonus accruals and so forth. So that's all in the accrued bonus line on the balance sheet. That's reflected in the P&L. So that's all fully expensed already. And despite that, you're seeing the outperformance. So yes, that will lead to some increased cash outflow in Q1. So you'll expect that. But I mean, that's result of great business. So the interests are pretty aligned with the shareholders here in terms of how much free cash and EBITDA we generate.

Your next question comes from the line of David Larsen with BTIG.

This is Jenny Shen on for David. Congrats on a great quarter. I just wanted to ask about the new Big Beautiful Bill law, any thoughts on impacts to Privia? Any impact on your Medicaid book even though it's small?

Yes. Thanks for the question, Jenny. So as you noted, I mean, the two main areas there were Medicaid and the exchange populations, and both of those are pretty small for us. We don't take any downside risk on Medicaid. It's a pretty small percentage of collections for our practices. We'll see how the patient mix changes, but we don't expect any big changes, any fundamental issues, practices run at capacity, lives move. I don't think people give up their primary care. It's pretty essential to their well-being and getting back to work and things like that or kids going to school with pediatricians or women getting their care with their OBs. So I don't think all of that changes much for us. We'll just see how the shifts happen, but it's happened in the past. But -- so we don't expect any meaningful impact to us given just our business model and mix.

Your next question comes from the line of Ryan Daniels with William Blair.

On the strong year-to-date performance. Parth, I wanted to go back to some of your comments on ancillary services. And I'm curious in particular I know a few years ago, you signed a partnership with a surgery center chain we've got some potential changes to the inpatient-only list. Curious if that, in particular, would be a bigger growth opportunity and kind of managing referrals and point of care for the organization going forward.

Yes, I appreciate the question, Ryan. I think absolutely, as we build out, I mean we are consciously focused to building a multi-specialty medical group for that reason. Downstream, 80% of the costs are downstream from the PCP, give or take as you know. So I think as we continue to build out density in different states, that's a core focus for us. I think that comes with opportunities for outpatient surgeries, ASCs , managing more of the total cost of care and partnering with these physicians. So I think as we continue to build out our network in each state, get density, I think you'll expect us to continue to expand in that area. Again, I don't think we're going to be very surgical heavy, just given the nature of our business. But I do think folks being taken -- chronically ill patients whether it's cardiology, pulmonology, CKD, things like that. I think we're going to keep looking at it selectively. [indiscernible] another big area. So I do think you'd expect us to continue to deal with. It's again, it's not going to be homogenous by state, but as we build out the medical groups, that's a big lever to control cost of total care.

And your last question comes from the line of Craig Jones, Bank of America.

This is Joaquin on for Craig. So you have astutely shifted down risk in MA during the first two years of V28. What are the odds you think we could see some kind of V29 in the next few years? And what would make you more comfortable taking more risk in MA?

Yes, I appreciate the question, Joaquin. It's pretty much similar to what we've said earlier. I think we'll just have to see how it plays out. It's just tough to predict when V29 comes, it doesn't come, what are the specifics on it. We continue to believe that a shared risk model between the payers, the providers, somebody like a Privia in the middle is the right approach. You have to be thoughtful. These are long-term contracts. The patients don't change their PCPs, you're trying to manage their total cost as they are growing older, they're growing sicker. I don't think any one entity can perform well at the expense of the other on a long-term sustainable basis. So I think you can get anomalies in the middle when somebody is trying to grow their business with some benefit design changes on the payer side or provider enablement entities, throwing a lot of money to just get physicians in some risk contracts and you then see blow-ups happen like we did in the last 2, 3 years. So we just think the best long-term sustainable model is alignment of interest and everybody having share in the game. And that's what we're going to focus on. I think everybody got too infatuated with this how capitation work and does it have to be 100% downstream at the provider entity level versus the payer, and we just believe in a different approach, and I think that's just more sustainable.

So the job to be done is not going to change. You're going to have an aging population that is growing sicker, older and ultimately dying. I mean that's the tourism of humanity, unfortunately. So I think that's the problem at hand. You need doctors in the community to do the work on behalf of the payers, like the payers, unless they have a care delivery arm, they're not taking care of people. So I just think you need interest aligned, and you need to have contracts that reflect that. Physicians need to be paid to get that job done and that's the lowest cost setting [indiscernible] the contact. So I think for all those reasons, no matter what the changes are, once we get some equilibrium over the last 2, 3 years, excesses [ one ] down, benefit design is getting more normalized. And so we'll just continue to work with our payers to have a sustainable contract to do our job and get paid for it.

There are no further questions. Please go ahead, sir.

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.

This concludes today's conference call. Thank you all for joining, and you may now disconnect.