Privia Health (PRVA) Q4 2025 Earnings Transcript

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DATE

Thursday, Feb. 26, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Parth Mehrotra
• Chief Financial Officer — David Mountcastle
• Senior Vice President, Investor & Corporate Communications — Robert Borchert

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TAKEAWAYS

• Implemented Providers -- 5,380, up 12.3%, including a sequential increase of 130 from Q3, with new provider signings and implementations described as strong across all markets.
• Attributed Lives -- 1,540,000, up 22.7%; CMS Medicare attributed lives increased 52%, Commercial attributed lives rose 16% to 910,000, while Medicare Advantage and Medicaid increased 15%, and 23%, respectively.
• Gross Provider Retention Rate -- 98%, indicated as "very high" by management, highlighting stability in the provider base.
• Practice Collections -- $3.47 billion for the year, up 16.9%; Q4 collections totaled $868.7 million, an increase of 9.6% year over year; capitated revenue increased by approximately $100 million due to higher lives, offset by revenue recognition approaches in new ACO business.
• Care Margin -- Increased 14.4% for the year; Q4 margin improved 390 basis points year over year to 27% of care margin.
• Adjusted EBITDA -- $125.5 million for the year, up 38.8%, with full-year EBITDA margin as a percentage of care margin rising 480 basis points to 27.2%.
• Free Cash Flow Conversion -- 130% of adjusted EBITDA converted to free cash flow in 2025; management stated, "You can quote me on it. It is the cleanest, purest metric."
• Cash and Balance Sheet -- Ended the year with $479.7 million in cash and no debt, following $180 million in acquisitions, including the Evolent Health (NYSE: EVH) ACO business; cash balance was $11 million lower than a year ago.
• Evolent Health ACO Acquisition -- Added over 120,000 value-based lives and expanded presence into new and existing states, with management indicating positive financial contribution and integration underway.
• 2026 Guidance -- Implemented providers expected to grow 10.6%; attributed lives to reach around 1,580,000; practice collections to rise by 6.6%; care margin targeted to grow 13%; adjusted EBITDA guided to $150 million at the midpoint, up 19.5%; 80% of 2026 adjusted EBITDA expected to convert to free cash flow, with cash projected at approximately $600 million by year-end, assuming no new capital deployment.
• AI and Technology Investments -- Management described broad deployment of AI tools across corporate and physician practice functions, and expressed belief that, "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 is."
• National Reach -- Active operations in 24 states and the District of Columbia; entered Arizona via IMS partnership in April, and reported strong sales momentum.

SUMMARY

Management emphasized that operating leverage and scale continue to drive margin and cash flow improvements, supported by disciplined execution and a diversified value-based model. Upcoming transitions in the ACO regulatory landscape, including the shift to the LEAD model, are under active review, but any program alignments or changes will be announced as details are finalized. Cross-selling opportunities and integration efforts from the Evolent Health ACO acquisition may present additional synergies in mature and new geographies, though benefits are expected to materialize gradually. Strategic focus remains on reinvestment, and M&A for sustained EBITDA and free cash flow growth, enabled by a substantial cash balance and a clear five-year geographic rollout playbook.

• Management repeatedly clarified that revenue recognition methodology in the Evolent Health ACO business focuses on capitated revenue, creating tougher practice collections comparisons, and requiring investors to prioritize care margin for performance assessment.
• CEO Mehrotra outlined a "five-year strategy to build a big medical group" in new states, emphasizing the major role of anchor partnerships and a physician-led sales model in accelerating provider and patient growth.
• In response to pressures in the Medicare Advantage contracting environment, management signaled continued preference for shared risk arrangements and stated, "There is not a cookie cutter answer. It is nuanced on a geography-by-geography basis—Which payer are we dealing with? What risk pool? What is the MLR trend? What will they do with us? Are they willing to share risk? What is the benefit design? Our payer contracting team has done a fantastic job navigating through all of this. We will continue to look for opportunities with our payers, keep getting our delivery networks more dense, and add capabilities in impacting the total cost of care and delivering it and showing that to the payers."
• The company described a disciplined M&A strategy, noting that cash deployment remains prioritized for acquisitions and network expansion, but that returning capital to shareholders will be considered if the stock price materially diverges from intrinsic value.
• New AI-enabled tools under pilot include patient engagement, risk assessment, revenue cycle, and documentation support functions, aiming to drive incremental productivity and margin enhancement in the coming years.

INDUSTRY GLOSSARY

• Care Margin: The difference between practice collections and clinician compensation plus certain directly tied costs, reflecting the core profitability of clinical operations.
• Implemented Providers: Physicians or clinicians onboarded onto Privia Health Group's platform and actively participating in its care delivery, reporting, and contracting framework.
• Attributed Lives: Patients assigned or attributed to Privia Health Group under value-based contracts, determining revenue eligibility and shared savings participation.
• Capitated Revenue: Fixed payments received per patient per period, independent of services delivered, usually under managed care or value-based contract structures.
• ACO: Accountable Care Organization—a group of providers sharing responsibility for the quality and cost of care delivered to a defined patient population under value-based contracts.
• MSSP Enhanced Track: An advanced level in the Medicare Shared Savings Program offering greater risk/reward for participants managing Medicare fee-for-service beneficiaries.

Full Conference Call Transcript

Robert Borchert: Thank you, 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 investors.priviahealth.com along with today’s financial press release and slide presentation. Some of the statements we will make today are forward-looking in nature based on our current expectations and view of the business as of 02/26/2026. 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 to 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. Reconciliations of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation on our website. The financial results reported today are preliminary and are not final until our Form 10-K for the year ended 12/31/2025 is filed with the Securities and Exchange Commission. Following our prepared comments, we will open the line for questions. Now I would like to hand the call over to our CEO, Parth Mehrotra.

Parth Mehrotra: Thank you, Robert, and good morning, everyone. Privia Health Group, Inc. delivered a very strong 2025. Privia Health Group, Inc.’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: our outcomes lower costs, improve patient experience, and happier and more engaged providers. New provider signings and implementations remain strong across all markets, which provides great visibility through 2026. At year-end 2025, we had 5,380 implemented providers, caring for over 5,800,000 patients.

We continue to demonstrate very high gross provider retention of 98% and patient NPS of 87 across our footprint. We added 591 providers, a 12.3% increase year over year. We ended the year with 1,540,000 value-based attributed lives, up 22.7%. Medicare Advantage and Medicaid attribution increased 15% and 23%, respectively, from a year ago. Lives attributed to the CMS Medicare programs were up 52%. Commercial attributed lives increased more than 16% from last year to reach 910,000. Our total attributed lives increased 23% from a year ago. Privia Health Group, Inc.’s national footprint now includes a presence in 24 states and the District of Columbia, including the Evolent Health ACO business.

Privia Health Group, Inc.’s diversified value-based platform serves over 1,500,000 patients through more than 130 commercial and government programs. We remain highly focused on generating positive contribution margin in our value-based book. Our performance over the past few years is a testament to our approach to value-based care and the strength of our actuarial underwriting, clinical operations, and physician-led governance structure. 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. 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 on cost of 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. Our 2025 performance and momentum positions our business extremely well as we continue to execute extremely well and drive growth across our markets.

We converted 130% of EBITDA to free cash flow. 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 in a very difficult health care services environment. Our 2025 results and 2026 guidance further demonstrate our ability to continue to compound EBITDA and free cash flow assuming no new business development. 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 Health Group, Inc. to end 2026 with approximately $600 million in cash, assuming no new business development. We have proven that we can build scale and manage risk without depending on any one particular contract, and our performance over the past few years is a testament to our approach to value-based care and the strength of our actuarial underwriting, clinical operations, and physician-led governance structure. Now I will ask David to review our 2025 financial results and 2026 guidance in more detail.

David Mountcastle: Thank you, Parth. Privia Health Group, Inc.’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 in ambulatory utilization trends led to practice collections increasing 9.6% from Q4 a year ago to reach $868.7 million. Adjusted EBITDA 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. For the year, 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, reflecting our strong execution amidst a very challenging environment. 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, as we continue to generate significant operating leverage. 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. Using the midpoints of our new 2026 guidance, implemented providers are expected to increase 10.6% year over year, and attributed lives are expected to be approximately 1,580,000. 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. Privia Health Group, Inc.’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.

Operator: Your first question comes from the line of Josh Raskin of Nephron Research. Please go ahead.

Josh Raskin: Hi. Thanks, and good morning. Can you speak to tech investments, including AI, and maybe advancements that you are making on your model for physicians? I am interested in any new capabilities that you have implemented, maybe efficiencies you are 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?

Parth Mehrotra: Yeah, thanks for the question, Josh. I think it is very timely, and I would like to just step back. When we think about AI-related investments, there are three components important to understand in our business model. We are very uniquely positioned with the ACO entity, with our medical group structure, with the single TIN medical groups, and then with the full tech and services platform where we are deeply embedded in the workflow. We have a lot of data access and ownership across every single patient—five-plus million—every single specialty, every single practice, across the whole care continuum. 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. It is a very data-rich environment, and we are really excited to enable us to benefit from all of this innovation that is going to happen now and into the next two to three years. That will lead us to enhance what buckets of investments we can make on all potential applications of AI. One is every single corporate function at Privia Health Group, Inc. On the corporate side, we are on Google Cloud, Google Workspace as an example. We are implementing Gemini in every single thing that we do in a HIPAA-compliant manner. We are working with our existing technology partners, so you mentioned athenahealth.

There is also Salesforce, there is Workday. And then there are new innovators that are innovating across the spectrum that we are continuously piloting. So that is on the corporate side. On the physician practice side, I think there are three 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, and then also new companies. We invested in Navina last year as we talked about.

We are looking at everything that is happening on the revenue cycle side, scribing as an example, how our doctors interact with patients, with better documentation of patients, helping us with clinical decision support with suspect medical conditions, risk assessment, and clinical decision support. There is a shortage of PCPs, shortage of nurse practitioners and APPs, in a capacity-constrained manner. I think this will be a balanced approach between what existing partners can do and what new innovations will happen over the next few years, with a balance between how much we can implement sooner versus a little bit delayed as these models are becoming better and faster.

The productivity enhancement that we can get across our whole organization is massive. Ultimately, how does all that lead to tangible ROI and margin improvement as we grow and then also scale this company? If you look at slide 11 in our investor presentation this morning, we have gotten the business, at the midpoint of our guidance for 2026, to a 29% EBITDA margin as a percentage of care margin. That is very close to what we thought at IPO as our long-term range—30% to 35%. 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 is no reason why a company like ours with this much opportunity should not be able to do that. I think that is going to lead to really good results for margins and then ultimately shareholder returns.

Operator: Next question comes from the line of Jailendra P. Singh of Truist Securities. Please go ahead.

Jailendra P. Singh: Thank you, and good morning, and congrats on a strong quarter. I was wondering if you can provide some color on practice collection trends for both Q4 results and 2026 guidance. Practice collections declined slightly, like 40, from Q3 to Q4, and I also notice in your slide that the care center locations declined slightly from Q3 to Q4. Not sure if that is the primary driver. Mean Q4 results and 2026 guidance are both pretty solid, but that is the one metric where there is some variability versus consensus and what you have typically seen. Have historically grown for practice collections not growing in 2026 at the rate.

Parth Mehrotra: Yeah. Thanks for the question, Jailendra. So in Q3, as you recall, we recognized a lot of prior period true-up on our value-based book from 2024. That obviously led to the great outperformance on EBITDA. We talked about this last quarter, where Q3 we had some prior period adjustments, so the quarter-over-quarter comps get a little bit tougher. And then annually, there are two or three variables. If you look at page 10 of our press release where we break out revenue by source, you will see the capitated revenue line went up by close to $100 million, and that was a result of increase in lives.

It is important to highlight on the Evolent ACO business, we are not recognizing any premium revenue in practice collections on our value-based book other than this capitated line. That makes the comps tougher. I think the right way to look and compare is at the care margin line. That is what we are focused on—what Privia Health Group, Inc. can get from a shared savings perspective—and that is growing pretty consistently. At the midpoint, care margin is growing low double digits, which is very consistent with how we looked at the business. Hopefully that clarifies on the collections. Overall, it is pretty strong trends. On the care centers, I think it is just rounding.

To be precise, it is 1,300-plus care centers. We are not assuming in guidance that will repeat itself. We are pretty prudent with our guidance. The provider growth speaks for itself. Implemented providers are really strong. We had one of our best sales years and best implementation years. You can see the year-over-year growth. You can see the guidance for 2026. That is the key metric there.

Operator: Your next question comes from the line of Lisa Gill of JPMorgan. Please go ahead.

Lisa Gill: Good morning, and thanks for taking my question. I have a question around utilization trends. Obviously, it has 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?

Parth Mehrotra: Yes, thanks for the question, Lisa. As we have said previously, we really have to bifurcate the utilization into ambulatory—the community-based care utilization—versus the inpatient that you see more in the acute or post-acute facilities. Post-COVID, as the trends normalized, we have consistently said, and that holds true, that the ambulatory utilization continues to stay elevated, and we do not see that utilization coming down. We expect it to remain elevated, and that is actually a good thing. That is the lowest-cost setting. You want patients to interact with their primary care providers and OBs, pediatricians—the community-based physician practice.

With what is happening with the ACA population, with Medicaid, with all the changes either enforced by the government or otherwise, and payers reacting to it, you are going to see a lot of churn. We expect that to happen. Our diversified model across Commercial, MA, MSSP, and exchange positions us really well. We do not have a big Medicaid population, do not 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. We do not see any trends abating for us overall.

I do think for the acute and post-acute care, there are going to be nuances as all of this normalizes over the next couple of years. I think that bodes well for our business.

Operator: Question comes from the line of Jeffrey Robert Garro of Stephens. Please go ahead.

Jeffrey Robert Garro: Yeah, good morning, and thanks for taking the question. 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. I know there are a couple of moving pieces with taxes and folding in ECP. Can you help us bridge between those historical expectations, 2025 outperformance, and the FY2026 guidance on EBITDA to free cash flow conversion?

Parth Mehrotra: Yeah, absolutely. I will start, and then Dave will give some of the specifics. You have highlighted one of the strongest elements of our business model. If you look at slide 11—this is nine years of data, including this year’s guidance—we have averaged over 100% conversion. We love free cash flow. You can quote me on it. It is the cleanest, purest metric. You cannot adjust it; it is either in the bank or it is not. We manage a negative float in this business. We focus on collections, get money to our providers, and manage that negative float the best we can.

Obviously, at some point we are going to start paying real cash taxes as we run down the NOLs, and David will walk through some nuances. Our guidance always assumes more normalization, and if things turn out better, we hope that benefits the shareholders. Everything is expensed on the P&L, and it is a very clean metric. You can see the strength where we have no CapEx. It is a strength of our business model relative to others in the space. Enterprise value to free cash flow is a key metric here. That is reflected in the 80%, and then I will let David answer any specifics on that one.

David Mountcastle: Yeah, I would just say we had a really good collection year. We had a few timing issues at the year-end that we were originally expecting to come in 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 2026, so that is going to put a little hit in our number for 2026.

Operator: Your next question comes from the line of Whit Mayo of Leerink Partners. Please go ahead.

Whit Mayo: Hey, thanks. Good morning. You are going to have $600 million of cash at the end of the year. You do not have any debt, and it is not very efficient to have this much cash sitting on the balance sheet. Maybe any updated thoughts around capital deployment and if priorities have changed at all.

Parth Mehrotra: Yeah, I appreciate the question, Whit. In probably the toughest health care MA regulatory environment, we really love our position in the space. The strength of the model, the cash flow generation, the balance sheet strength, relative to others—private or public companies—position us well. Our priority will be to continue to deploy capital to keep compounding the business. You saw us deploy $180 million last year. We doubled EBITDA 2023 to 2025. On a rolling basis, we are going to double it again 2024 to 2026. We think our answer is consistent: continue to deploy capital and keep compounding the business.

Our ability to use cash to acquire assets across this ecosystem and keep compounding our units—whether it is entering new states, adding implemented providers, adding lives—can acquire medical group tax IDs, ACO entities, MSO entities. We like to keep a sufficient cash balance for a rainy day. We do not like leverage on businesses that could potentially have variability in shared savings. As we all know, pandemics happen, hurricanes happen. We are supporting our medical groups; there is a rainy day fund. It gives us the ability to be the partner of choice from a long-term perspective for a lot of the physician groups out there.

If our stock price deviates meaningfully from what we think is intrinsic value, we have the flexibility to return capital as a last resort. But the priority is going to be continue to deploy capital and keep compounding the business the way we have been doing.

Operator: Your next question comes from the line of Matthew Dale Gillmor of KeyBanc. Please go ahead.

Matthew Dale Gillmor: Wanted to ask about the Evolent acquisition. Now that you have owned the asset for a few months, do you have any updated perspective about the business or the synergy within the acquisition? I was particularly curious about the cross-sell discussions with Privia Health Group, Inc.’s platform into that physician base, whether that is new or existing states.

Parth Mehrotra: Yeah, appreciate the question, Matt. We just closed this in December. We are really excited to have the team join us. I think the core business that they run is solid. You can compare their savings rate on that book relative to our overall savings rate; it is publicly available. Our hope is we can increase that savings rate pretty meaningfully this year into the next few years. The provider groups that they focused on are really not on our technology stack.

It allows us to have an offering in this care partners model where we have partnered with other companies that may not be doing that well to get them to at least have a relationship with Privia Health Group, Inc. in an ACO entity and then obviously cross-sell into our full medical group business model, and then in new states as we enter over time. I think that will materialize itself over the next few years. There are opportunities in some existing states where we have the medical group presence, and then obviously over time in new states as we enter.

We are really excited to have that business be part of our offering, and I think we are going to realize as many synergies as we can.

Operator: Your next question comes from the line of Sean Dodge of BMO Capital Markets. Please go ahead.

Sean Dodge: Yes, thanks. 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? Any quantification you can share on how much you have embedded in the guidance for 2026 from the Evolent acquisition? Initially, you said it would contribute positively to EBITDA in 2026.

Parth Mehrotra: Appreciate it, Sean. Just to be clear, I did not say it happened this year. I think it will happen over time. MSSP has been a core part of our business model for many years—eight, nine years—and we have a playbook that we run. There is some basic block and tackling: you have all the quality metrics that you want to improve, getting the patients to see their doctors, making sure we prevent the ED rates and inpatient rates, stratify the population, look at where you have some high-acuity patients, manage those, things like that. It is a little bit nuanced given that these providers are not on our platform.

We are focused on making sure we have the right level of engagement with the practices, the right level of data that comes through the technology stack that is implemented on top of their existing infrastructure. Rule number one is do not do anything stupid and disrupt it. These things take time. We just got the business. We are going to run our playbook, and this will happen over time. So please do not expect that this will be a one-year thing. On your second part of the question, the acquisition is accretive. It makes money. We did not break out the EBITDA; it is all included in our guidance. We are growing another 20% this year.

Part of that is from the acquisitions that we did, and we are going to keep doing all of those four things—adding new providers, adding lives into value-based arrangements, doing deals that are accretive, and same-store care center growth—and hopefully keep compounding EBITDA here.

Operator: Your next question comes from the line of Andrew Mok of Barclays. Please go ahead.

Andrew Mok: Hi, good morning. The corporate G&A expense dropped sharply in the quarter. Was there anything to call out driving the beat? Is this the right run rate to think about for 2026, even with the moderation in practice collections growth for next year?

David Mountcastle: There is not really anything to call out. We definitely had some sequential decreases in things like legal and some of our consulting. I would look at our 2026 guidance as a better way to look at all of our expenses. We do expect to continue to gain leverage in the G&A space.

Operator: Your next question comes from the line of Matthew Dineen Shea of Needham & Company. Please go ahead.

Matthew Dineen Shea: One of the things that has impressed us is the continued provider growth in existing markets. It would be great if you could expand on your comment about seeing strong sales momentum in Arizona in particular, as well as any other noteworthy markets. 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 across markets?

Parth Mehrotra: Yeah, I appreciate the question, Matt. 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. Before we show up in a state, this model pretty much does not exist. We establish presence, work with a great anchor group—if we can get a pretty sizable anchor partner like we did with IMS—even better. Doctors know doctors the best. They know the playbook that we run. The payers know us. There is a win-win here given all the cost pressures and everything that is wrong with the health care ecosystem.

Cost can really be taken out, quality can be improved. In Arizona, we got a great anchor group and a great set of physicians with IMS. They are excited to be part of Privia Health Group, Inc. They see what we have done elsewhere. That leads us to reaching out to other physicians. Our best salespeople are our physicians. If we do well for them, they speak for us. We establish ourselves, set up the sales team, and start knocking on doors. It is a five-year strategy to build a big medical group. You start small and build up, and sometimes the snowballing starts sooner.

Given the health system dynamics and the payer dynamics in the state, independent practices can stay independent and yet be part of something bigger like Privia Health Group, Inc. As to ACO-only versus the full stack, it just depends by state. We have a very ROI-driven value prop in each. The medical group value prop is a much deeper discussion. There is a separate sales team for each, but there will be cross-sell. Some of the competitors that we deal with are also different in both of those. We are kind of indifferent as long as we get them. We will continue to go full steam ahead on both.

Operator: Your next question comes from the line of Jack Garner Slevin of Jefferies. Please go ahead.

Jack Garner Slevin: Hey, good morning. Thanks for taking the question and congrats on the really strong results. I wanted to touch on the MA contracting environment. Acknowledging you have less full risk in your book and have been on the front end of concessions that are being given by payers to value-based players that are driving value, how might that develop for your business as you look at 2026 and then beyond into 2027, with some of the payers looking to claw back margin but also acknowledge the value that is being brought from PCP-led provider groups in the space?

Parth Mehrotra: Thanks for the question. It is pretty nuanced. Taking a step back, I think us foresighting what might have happened in the MA environment and that shared risk is the right model. You have all written on this call about the headwinds that have transpired over the last few years. I think you are seeing an adjustment in the industry by the payers. You have seen a little bit of round robin with how the payers have reacted—payer X years ago, payer Y last year, payer Z this year—as they prioritize differently and adjust benefits. The lives are moving between those entities as they reprioritize.

Between three or four of the big MA players out there, as you have seen and noted on earnings calls over the last couple of quarters, including this past one, there is adjustment. Whether by luck, foresight, or execution, we avoided some of the traps. We have a belief that shared risk—where the doctor, an entity like Privia Health Group, Inc., and the payer all have skin in the game—is the best long-term strategy. You have to recognize the amount of work that the physicians have to do to manage a high-cost patient population and to deliver results. You have to get paid for it. If you do not get paid for it, I do not think anybody wins.

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, we are very forward-leaning. There is not a cookie cutter answer. It is nuanced on a geography-by-geography basis—Which payer are we dealing with? What risk pool? What is the MLR trend? What will they do with us? Are they willing to share risk? What is the benefit design? Our payer contracting team has done a fantastic job navigating through all of this.

We will continue to look for opportunities with our payers, keep getting our delivery networks more dense, and add capabilities in impacting the total cost of care and delivering it and showing that to the payers. I think things will normalize as we flush through V28 over a couple of years. The payer environment will stabilize. When the tide turns, I think we are positioned really well. If there is delayed gratification in ramping up risk, we will do that, because the doctors do not go anywhere, the patients do not go anywhere. It is just coming to a consensus with the payers on the right contract structure.

Also, our revenue recognition methodology is different; we are not recognizing any premium revenue part of that book.

Operator: Your next question comes from the line of David Larsen of BTIG. Please go ahead.

David Larsen: Congratulations on another good quarter. Can you just reconfirm 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 will be able to convert over to your core Privia Health Group, Inc./athena platform where you are doing all the billing and AR for them?

Parth Mehrotra: Yeah, thanks for the question, David. I do not 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 week. Whatever numbers you are getting from them may be different for us. Our EBITDA and top line includes everything. We are not going to break down EBITDA by any acquisition or any line of business, like we have not done for any acquisition. You will see the results when CMS announces it in August. It is accretive and contributing meaningfully to this year’s EBITDA. We grew EBITDA 39% last year.

We have grown another 20% this year—doubling EBITDA on a three-year rolling basis—so Evolent is part of that growth.

Operator: Your next question comes from the line of A.J. Rice of UBS. Please go ahead.

A.J. Rice: 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? You mentioned early successes in Arizona. Also, in your contribution you are $235 million, up from $179 million in the prior year. What have you embedded in your guidance this year?

Parth Mehrotra: Yeah, thanks, AJ. Our goal is to accrue prudently and then hopefully outperform. Our initial guidance was $105 to $110 million of EBITDA, and we ended the year at $125 million—materially higher. A lot of it was related to shared savings, some prior year and some in-year, as we perform well. Our guidance has been very consistent; we have taken the same methodology. I would not expect a material jump. If we do better, we will hopefully see it in the results. If we do not, then we will stick with what we have. We have a very diversified book. You have written really well about all the trends that impact the whole company. It is a portfolio approach.

We are now in 24 states; some markets are maturing, some are still negative EBITDA. The mature markets are running well ahead of that number. Some may not be doing that well. We evaluate all our markets. Some markets, if we do not think are working well, we exit. We exited Delaware, as an example, a couple of years ago. We will be very prudent. You cannot make mistakes. If you think some deal structures or anchor partners or markets are not working well, and we have an opportunity to do it differently, you have to keep pruning the tree to keep letting it grow really well. Overall, the business is in very good shape.

Operator: Next question comes from the line of Elizabeth Hammell Anderson of Evercore ISI. Please go ahead.

Ayush: Hey, good morning, guys. This is Ayush on for Elizabeth. Thanks for taking my question. As CMS transitioned from the ACO REACH program towards the new ACO LEAD model, how are you guys evaluating whether that framework aligns with Privia Health Group, Inc.’s long-term value-based strategy? Then, as your value-based book continues to grow in scale, how do you think about maintaining the consistency of performance across cohorts, particularly as the provider mix evolves?

Parth Mehrotra: Yeah, I appreciate the question, Ayush. Like with any new program, we take a five- to ten-year view, like I said earlier, with community-based providers, so that is our strategy overall. We will evaluate it. LEAD goes into effect next year; we are still going through the details of LEAD versus REACH. With REACH sunsetting, it allows our sales team to reach out to a lot of physician practices and providers that may have participated in REACH. By the way, from 2025 to 2026, anybody who is in REACH is going to see a pretty significant decline in the shared savings, given how they changed some elements of that program. We are still studying LEAD.

MSSP Enhanced Track versus LEAD is on a TIN basis. You can participate in one, not both. We will evaluate it ACO by ACO—patient population, relative benchmarks, which value-based contracts you are in, and the majority of the patient pool. There may be cases where, if you have a pretty mature ACO in MSSP Enhanced Track that you have been in for the last many years, you go to a new program overall. We are evaluating it like others. It is TBD, and once we are in it, we will communicate it with you. We do have some REACH lives today; we will see if they move into MSSP Enhanced or LEAD.

It is a generic question, and the answer is nuanced. This is health care; it happens locally in every state. Every pool, every patient population, every payer, every contract is different. That is a core value proposition and moat around this business. It is hard to replicate. A lot of people can enter these businesses, but you all have seen how hard it is to make real money and real free cash flow. Given the diversity of our book and the number of contracts and payers we work with, and the scale we are operating at across different types of patient populations on slide six, I think that just speaks for itself.

It is a core competence of this business that is very hard to replicate. We have to have real capabilities and a great team from a risk management perspective and underwriting perspective. We have been able to convert, deliver value to the payers, generate shared savings, and share that with physician practices, and deliver on care and total cost of care management with these practices and how we work with them—the data, the technology stack—and deliver EBITDA and free cash flow with our shareholders.

Operator: Your next question comes from the line of Jessica Elizabeth Tassan of Piper Sandler. Please go ahead.

Jessica Elizabeth Tassan: Thanks, and congrats on the really strong year. I am interested to understand what specific AI tools you have rolled out nationally to all of your network providers. What did that rollout process look like? Any early outcomes or savings data that you can share? Then going forward, what clinical category would you target for AI-enabled improvement? For example, are care transitions an opportunity? Is end-of-life care planning an opportunity?

Parth Mehrotra: Yeah, I appreciate the question, Jess. This stacks to what Josh asked at the beginning of the call, so I am not going to repeat all of that. Hopefully, you got some of that. We are looking at agentic AI as it relates to patient engagement—interaction with the patients—care gap closures, scheduling patients, medication adherence, chart prep, risk assessment, and clinical decision support. We stratify the population, work with the high-acuity patients, and just all of that to improve how the doctors interact with the patients.

There is so much productivity lift we can get, given our physicians are capacity constrained, and the ability and the need to work deeply with every patient is front and center as payment models evolve to different versions of value-based care. Obviously, there is a whole host of applications on revenue cycle and on the fee-for-service workflows. From a company perspective, we are working with some existing companies we work with today—as they innovate—and we invested in Navina last year. That was pretty tangible for us. There are a number of new innovators in the space that we are partnering with and piloting. The technology is evolving really fast. The improvements and applications we see are pretty amazing already.

I think this is going to be a three-, five-, seven-year journey. At some point, once it is more baked, we can implement in every single one of those buckets. It is going to be pretty margin accretive and productivity enhancing. You are going to see a lot more adoption. We will obviously highlight more, but those are the categories going forward for a business like ours. We are super excited on this journey.

Operator: Your next question comes from the line of Michael Ha of Baird. Please go ahead.

Michael Ha: Thank you. 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 coming from a couple of your large payer partners looking to really build greater market saturation. Some of these multiples we are hearing of are not too far off from your own, but the quality of these assets appears to be much lower. How does it look to you? What do you think is driving the activity? Is it simply now entering the end of V28 and the narrative is beginning to pick up again?

As you look ahead, how does all that you are seeing today impact your own M&A strategy?

Parth Mehrotra: Yeah, it is a good question. I am not going to comment on what others have done recently or any particular deal. You highlighted two geographies—South Florida and Southern California—that almost run very differently from a large part of this country, from a health care delivery and risk-taking perspective, and the concentration of MA population. Those are very unique geographies. As you know, we are not in the clinic MA space. We believe in shared risk. We believe in community-based doctors staying autonomous, independent, and helping them. The assets are unique. Some of the payers have rovers on some of the assets, and you are seeing that in transactions. I cannot comment on the multiples they are paying.

To the broader question, 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. We can hopefully be a partner of choice. We are going to be pretty aggressive, but finding quality assets is key. You could spend a lot of money buying a lot of things, and they do not have the same quality of earnings; they do not have free cash flow; they do not have EBITDA. We are going to be very thoughtful and disciplined. If we can get an asset that we can improve, buy, integrate, synergize, and make an impact—and hopefully consolidate the space—we will pursue it.

We do not like to pay big multiples, especially for assets that are lower quality. While we have a lot of balance sheet capacity with our cash balance, any potential debt capacity—even though we do not like leverage on this business—we are primed to do larger deals. Our free cash flow and cash balance put us in a strong position, but we will be very disciplined.

Operator: Your next question comes from the line of Craig Jones of Bank of America. Please go ahead.

Craig Jones: Great, thanks for the question. Thinking more about the long-term 20% EBITDA growth number you have out there. You have a lot of levers in your portfolio to drive this every year. 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? Which components do you view as higher visibility versus lower visibility?

Parth Mehrotra: I appreciate the question. You have to go back to slide 11 and look at this on a multiyear basis. You enter new states, you add implemented providers in existing and new states, you add value-based lives in platform practice, you grow same store, you improve the cost structure like we have done, both on sales and marketing and G&A, and both on shared savings. Every year is different; the components are different, but they all work together. Like the past year, you look at 2022 to 2023—we grew pretty fast; we entered five new states; the cost structure did not scale; adjusted EBITDA margin barely improved versus our low double-digit management fees on the fee-for-service book.

Across those two years, you can do M&A. It will ebb and flow, but the direction is hopefully upward and to the right. With the application of AI and everything else, I think we are going to continue to get this margin profile better. If we do acquisitions, we will synergize them. If we enter new states, some of them lose money in the first couple of years. It depends, but given the whole book where it stands today, you are going to see us pursue all those components. It will be a combination of both organic and inorganic. M&A is a core component of the strategy as we roll up the industry.

How it evolves—Which year, which component is higher or lower—I think it will vary, but we are going to keep executing on all of those.

Operator: Your next question comes from the line of Daniel R. Grosslight of Citi. Please go ahead.

Daniel R. Grosslight: Thanks. I think on taking on risk, that has been a recurring theme on a lot of these earnings calls. 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 make me think about your provider recruitment over the next couple years. Have your conversations with providers shifted at all? If so, how has that sales pitch gone?

Parth Mehrotra: It is a good question. Arguably speaking, 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 across cycles, and generate free cash. You have to share the appropriate level of risk—the doctor, an entity like Privia Health Group, Inc., and the payer. We have said consistently, and I will repeat it: you have to share the risk with the doctor. That is the best long-term strategy.

A lot of money got raised and spent giving contracts or irrational economics, and the viability of the business can be put to risk. We have seen that; a lot of companies have not performed well. They are surviving. If physician practices partnered with an XYZ company and are happy and performing, that is good. We have a full-service offering with our medical group that a lot of the competitors do not have: all lines of business, every patient, every specialty, technology stack, payer contracts, and then a full suite of value-based capabilities to help them perform in those in a very integrated manner. We think that is a very differentiated approach.

We now have a lot of history and data. Hopefully we are one of the survivors and consolidators. There will be some great companies out there that do really well, and hopefully some of them that are not that great we can consolidate over time. The TAM is large. Our results speak for themselves. I do not think it is changing our strategy in any particular manner.

Operator: Your next question comes from the line of Ryan M. Langston of TD Cowen. Please go ahead.

Ryan M. Langston: Thanks for squeezing me in. On the prepared remarks, you talked about the IMS acquisition saying there was pretty strong sales momentum in that state. Can you give us a sense on organic pickup from IMS? I am trying to understand broadly what the growth trajectory looks like on some of these larger deals as you ramp up in new states.

Parth Mehrotra: We do not break it up, but you have the size of that group if you go to the website. It was a pretty meaningful group—a very large multispecialty group that got themselves out of a health system, and then found us. We found them, and there are a lot of synergies in the business model. We establish ourselves, the sales team, and start knocking on doors. Our best salespeople are our physicians. We do well for them, they speak for us. It is a five-year strategy to build a big medical group. You start small and build up. Any one year does not make a difference. We expect new signings and implemented providers, and hopefully the snowballing starts sooner.

Operator: Your next question comes from the line of Richard Collamer Close of Canaccord Genuity. Please go ahead.

Richard Collamer Close: Morning. Thanks for fitting me in. Maybe just one last question on your appetite for new business development. How are you thinking about the best return on your investment as you are thinking about either expansion into new markets or investing in some of your more recently entered markets and really trying to build density, all in light of the challenging payer landscape that you have been referring to? How does that impact your philosophy on return on that invested capital?

Parth Mehrotra: That is a great question. Every deal is different, and you have to evaluate it on its merit. 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, add new capabilities, and buy businesses like we did with the Evolent deal. We have to take a portfolio approach. These markets and dense networks take time to build. You are seeing us do a wide variety of transactions over the last five or six years—at least the ones we have disclosed being a public company.

Given our capital position and free cash flow profile, we have the luxury to do both—continue to add to density and add new markets. The whole business is performing really well. If there is a market where we know we are going to lose money as we invest and put the sales team on the ground, and if it is a smaller anchor partner, but it is a big state with good demographics and enough independent physicians, we will take a five-year view. We understand the unit economics of this business really well.

When you get a business operating close to 30% EBITDA to care margin, generating this much cash, that is what we thought we would do five or six years ago. We have seen across 15 states with the medical group model and now nine more states with the ACO-only model what works and what does not. We have worked with a lot of payers and seen a lot of issues over the years—different health care geographies, different payer dynamics, different health system dynamics. Very few companies are in this position where they can invest with that kind of a mindset. We are pretty fortunate, and we are going to keep pressing on all those fronts.

We take all that into consideration as we take that five- to ten-year view.

Operator: Ladies and gentlemen, this concludes today’s call. We thank you for your participation. There are no further questions at this time. Please continue, gentlemen. You may now disconnect your lines.

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