PRVA Q1 Earnings Call: Arizona Expansion and Value-Based Care Execution Offset Revenue Miss

Healthcare tech company Privia Health Group (NASDAQ:PRVA) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 15.6% year on year to $480.1 million. Its non-GAAP EPS of $0.22 per share was 19.7% above analysts’ consensus estimates.

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StockStory’s Take

Privia Health began 2025 with double-digit growth in both revenue and provider count, largely driven by strong ambulatory utilization and the addition of new provider partners. CEO Parth Mehrotra emphasized that implemented provider growth of 11.7% and value-based attribution growth of 11.1% led to a 12.8% increase in total practice collections, highlighting the company’s focus on expanding its provider network and deepening value-based care relationships. Management attributed margin improvement to operating leverage across both cost of platform and general and administrative expenses, while continuing to invest in growth. The entry into the Arizona market through the acquisition of IMS—a large, independent multi-specialty practice—was described as a strategic move to enhance geographic diversification and support long-term growth.

Looking forward, Privia Health’s guidance for the remainder of 2025 is underpinned by ongoing growth in attributed lives, continued expansion into new markets, and a disciplined approach to risk in value-based care contracts. CFO David Mountcastle noted that the Arizona acquisition is expected to be EBITDA positive by the fourth quarter and to contribute meaningfully in 2026. Management remains cautious on full-risk Medicare Advantage contracts, preferring to expand through shared-risk arrangements, particularly given industry headwinds from regulatory changes and payer pressures. Mehrotra stated, “We will continue to pursue our strategy of sharing risk with the payers in MA contracts,” adding that the current environment requires careful contract selection. Privia expects its capital-light operating model to support continued free cash flow generation and maintain financial flexibility for further expansion.

Key Insights from Management’s Remarks

Privia Health’s first quarter results were shaped by elevated utilization trends, the Arizona market entry, and disciplined risk management in value-based care.

• Arizona market entry: Management highlighted the acquisition of IMS as a key driver of geographic expansion, noting its multi-specialty mix and established patient panels. The transaction brings 28,000 attributed lives, none of which are capitated, and is expected to be EBITDA positive in the fourth quarter this year, with a more significant impact next year.

• Ambulatory utilization strength: Strong patient volumes, particularly in primary and pediatric care, contributed to higher practice collections. The company normalized for seasonal flu trends but reported persistently high in-office utilization, particularly benefiting the fee-for-service and value-based care segments.

• Disciplined risk approach: Leadership reiterated a cautious stance toward full-risk Medicare Advantage contracts, preferring shared-risk arrangements to manage exposure to regulatory and payer volatility. The company exited two capitated contracts last year and continues to evaluate risk economics before taking on new downside risk.

• Operating leverage and platform scalability: The company saw margin expansion through operating leverage in both cost of platform and G&A, reflecting benefits from infrastructure investments in prior years. Management noted that as markets mature, additional provider and patient growth drives further operating leverage and free cash flow conversion.

• Continued technology adoption: Management discussed ongoing adoption of AI-powered clinical tools, such as its partnership with Navina, to streamline workflows, improve documentation, and highlight care gaps. These initiatives are designed to enhance physician productivity and improve value-based care outcomes.

Drivers of Future Performance

Management expects continued growth from new provider signings, geographic expansion, and a measured approach to value-based contract risk to drive results.

• Arizona integration and new markets: The integration of the IMS acquisition in Arizona is projected to be EBITDA positive by the fourth quarter, setting a foundation for future market entries. Management expects similar disciplined expansions, but guidance does not assume additional acquisitions beyond Arizona this year.

• Value-based care risk management: The company plans to grow attributed lives in Medicare Advantage through shared-risk contracts while avoiding full capitation. This approach is intended to limit downside exposure amid regulatory changes like the CMS V28 risk model update, which management described as a significant industry headwind.

• Scaling technology and operational efficiency: Ongoing investments in AI-powered tools and operational process improvements are expected to support further operating leverage and free cash flow conversion. Management cited a target of at least 80% EBITDA-to-free-cash-flow conversion for the year, reinforcing the capital-light model.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will track (1) the pace and execution of the Arizona integration and how quickly it becomes EBITDA positive, (2) sustained patient and provider growth across existing and new markets, and (3) the company’s ability to manage risk and maintain profitability in value-based care contracts amid ongoing regulatory changes. Progress in technology adoption and any further expansion activity will also be important markers.

Privia Health currently trades at a forward P/E ratio of 27×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it’s free).

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