Q1 2021 Privia Health Group Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the PDL Health quarterly conference call.
This time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
Anyone should require operator assistance. Please press Star then the number zero key on your attached on the telephone as a reminder, this call maybe recorded.
I'd now like to introduce Robert Archer P. D. S S VP of Investor and corporate Communications.
Thank you, Jeff and good afternoon, everyone. Joining me today on today's call are Sean Morris, Our Chief Executive Officer, parse Mehrotra, President and Chief operating Officer, and David Mountcastle, Our Chief Financial Officer.
This call is being webcast and can be accessed from the Investor Relations section of our company website at Caribbean Health Dot Com.
Today's press release, highlighting our financial and operating performance as well as the slide presentation accompanying our formal remarks are posted on our IR website pages.
Shawn and parts opening comments, we will open the line for questions.
So you please limit yourself to 1 question and 1 follow up so we can get through the full queue in a timely fashion.
The financial results reported today and in the press release are preliminary and are not final until our form 10-Q for the first quarter ended March 31, 'twenty 'twenty, 1 as 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 our view of our business as of May 27, 2021, such statements, including those related to our future financial operating performance and future business plans and objectives are subject to risks and uncertainties that may cause actual results could differ materially.
As a result these statements should be considered in conjunction with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filings.
We may refer to certain non-GAAP financial measures on the call and reconciliations of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website.
With that I'll now turn the call over to Sean.
Thank you Robert good afternoon, everyone.
I'll provide a brief performance summary, including an overview of our investment thesis growth strategy and our first quarter performance as well as an update on where we are seeing momentum and continued success on our business and park will cover more detailed review of our financial and operating performance and outlook for the year before we take your questions.
Engagement with physicians is absolutely key as reimbursement models in the U S health care market shift to value based care.
<unk> health has purposely building on <unk>.
Next generation position organization that engages with Oregon, I, just physicians into large scale medical groups covering wide geographic areas and each day.
Our model has proven to move providers thoughtful and successful manner to value based care overtime generating over $430 million in savings since 2014.
Our strategy is simple, but elegant are difficult for others to replicate as we work to achieve massive scale quickly.
We have built a comprehensive technology solution directly for our providers to address the key thing I would say page each and every day.
Our solution directly aligns with providers financial success and facilitates position on Tommy while preserving their current ownership structures.
Our values.
Selected and are high <unk>.
Provider retention rates and net promoter scores for both providers and patients a differentiation of the previous platform is our ability to support all providers all patients across all reimbursement models on commercial Medicare change things Medicare advantage and Medicaid stiff.
This differentiation aligns with our provider health system and payer partners as they look to serve all health care consumers.
We enter and expand in new and existing markets with our capital light financial model.
This does not preclude us in the future from acquiring a minority or majority stake in anchor medical practice or even opening a de novo clinic.
We will continue to be good stewards of capital, taking a smart and thoughtful approach.
I actually sound business decisions. These decisions will be ground solid market dynamics on demographics are predicated on market density targets and profitable growth.
We are well positioned to continue to monetize our platform and drive growth through 5 core strategies, Let me walk through each on the next slide.
First we organically grow our existing practices by increasing the number of providers increase their patient panels and helping our providers be more productive.
We look to move markets at scale.
Ah you're based care by participating in a variety of risks.
Arrangements as they evolve in each of our geographic markets third we expect to capitalize on the white space opportunities are existing markets by adding new providers and monetizing the previous platform by adding and expanding ancillary services, such as labs imaging pharmacy, and clinical research when and where it makes sense.
We also plan to introduce states, our geographic markets and then repeat steps 1 through 3 and finally, we will be opportunistic in acquiring or investing in other service models to expand our platform.
It is important to spend a couple of minutes reviewing our approach to taking risk across many different value based reimbursement models.
First and foremost.
Health already participate in multiple value based care programs across commercial Medicare Medicare advantage as well as Medicare costs in fact, our medical practices deliver care to more than 720000 attributed value based large and more than 7 day risk based payer contracts today.
We were already have scale, we will continue to grow attributed lives and move more of those lives in full risk arrangements overtime.
Our financial investments are closely aligned with our providers as we share upside and downside risk and we are executing on an intentional long term plan to enable those providers to transition profitably to value based care.
1 very important dynamic on our top line is that our practice collections and revenue dollars only reflects deeper service collections care management fees and shared shapes under our current partial risk contracts. We are not recognizing the full per member per month premium for our Medicare advantage lives, we certainly expect us to.
Change as we move more of these lives from partial to full risk arrangements. The previous health leadership team has decades of experience managing and underwriting risk. We will remain focused on profitably transition practice to partial and full risk models within both existing and new markets.
Let's move on to performance. We started 2021 was on strong first quarter results that were at or above the high end of the estimated ranges. We provided in April during our IPO process on a year over year basis practice collections increased 5.1% per margin was up 9.7% and we continue.
To drive operating leverage through our Permian platform, which helped to deliver platform contribution and adjusted EBITDA growth of 26% and 41% respectively.
Our strong top line performance in Q1, which generated through both our fee per service and value based care models of which we expect value based care to grow faster as more lives move to partial and full risk and as park will highlight we have continued to add attributed lives across a number of value based programs, while also continuing to grow organically.
Ed providers in our existing markets.
As we achieved same store growth. We are also executing on a number of gross initiatives to enter new markets and leverage our operating structure to drive margin expansion.
<unk> Park to provide additional detail on our first quarter performance and outlook for the remainder of 2021.
Thanks, Helen over the past 7 years trivia health has proven its operating model and has delivered strong organic growth with double digit historical top line expansion.
We expect that level of growth to continue in 2021, given the hypo and visibility of our model.
As you will see in the charts on the top row on the slide growth and implement on providers in value based on a computer lives.
5.1% increase in practice collections in the fourth quarter from the same period a year ago.
Of note in mid 'twenty 'twenty, 1 large medical practice in our mid Atlantic market decided to leave our platform and align with the local health system. In this case, we decided not to utilize our capital resources from a day and that practice. Despite this departure, we experienced growth and implemented providers in Q1, 2021 over Q1.2020 and that growth.
Continued sequentially from year end 2020 per the first quarter of 2021.
Our GAAP margin increased 9.7% from Q1 of last year. This is essentially the gross profit generated by <unk> health.
After cost of care delivery, which in our model includes patient care physician and provider costs medical claims cost to build and operate per center locations and our provider share of any shared savings and value based contracts.
We showed significant operating leverage with platform contribution increasing 25, 9% year over year as we continue to scale, our operations and leverage our technology platform.
This operating leverage further translated into adjusted EBITDA growth, which was up 41% from the first quarter a year ago as we scale on sales and marketing platform development and corporate G&A costs adjusted EBITDA margin.
As a percentage of care margin expanded 420 basis points year over year on the first quarter of 2021 to reach 18, 9%.
Our performance this quarter is a great reflection on the inherent operating leverage of our platform as we move down the P&L.
Turning to our full year, 2020.1 guidance.
We are confident in our business momentum and outlook on the remainder of the year.
We expect to increase the number of implemented providers by 11.8, <unk>, 7% over 2020 and value based on a computer lives by 7% to 10 per cent as we continued to move providers and their patients to risk based reimbursement programs.
Collections are expected to grow 11, 112, 6% year over year and reached 1445 to 146.5 billion for 2021.
As we stated in our IPO prospectus in our model practice collection influenced collections in both states with corporate practice of medicine laws and states with no corporate practice of medicine laws. So as our business growth in states, where we don't on the medical groups via the corporate backers laws.
Cash collections will grow faster than GAAP revenue on.
GAAP margin is expected to expand by 14, 6% to 17, 8% over full year 2020 to reach $215 million to $221 million and we expect the operating leverage on our model to drive adjusted EBITDA growth in 2020.1 of approximately 21, 4% at the midpoint of our guidance range.
There are a few other assumptions I wanted to highlight with regard to on 'twenty 'twenty..1 guidance. There were some modifications to our pre IPO stock option program as well as some additional equity grants as part of our IPO as we previously disclosed in our IPO prospectus.
We expect the fully diluted weighted average number of common shares outstanding to be 110 to 120 million for full year 2021, which includes the pre IPO period of about 4 months Renee.
Related to that we expect a noncash stock compensation expense to be on the range of $195 million to $205 million in Q2, and 245 to 255 million per fully at 121, primarily related to our pre IPO stock option program.
Net cash proceeds from the IPO and anthem private placement growth of approximately $212 million. So our quarter end pro forma cash balance was approximately $294 million.
And with about $34 million in debt outstanding at the end of Q1 on net cash position of about $216 million gives us sufficient capital and liquidity to pursue our various growth drivers.
Given our highly efficient growth and expansion model, we expect capex to be less than $1 million on all of 2021, and we continue to expect high free cash flow conversion.
And finally, we expect our effective tax rate to be in the 25% to 27% range for the full year we.
We do have a deferred tax assets that will offset much of our cash tax payments this year.
In closing since this is my first earnings call as a public company all of US on Privy are really excited to embark on this new chapter on our company's history both of the IPO.
We continued to transform health care delivery experience with our purpose built platform and believe Korea is on the rights on our history.
We look forward to continuing to serve all our stakeholders which include.
Our physicians providers and health system partners are patients, who entrusted to add to our medical groups on various private and public payer partners.
All premiums and care Center staff, and our investors, who have entrusted us with their capital because we think our responsibility to serve all of you very seriously with that operator, we're now ready for the first question.
Yes.
Thank you.
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1 moment for our question.
Okay.
Our first question from the line of.
Mr Hale of J P. Morgan.
Your line is open.
Thanks, very much good afternoon, Sean on parts congratulations on your first quarter as a publicly traded company.
I really just wanted to start with your comments around 16 kept full risk I know during the IPO process, you talked about several hundred thousand Medicare lives.
If we think about shifting under Medicare catch up the risks can you maybe just walk us through a timeline of when your expectations are that you will have some full risk arrangements on weight within premier.
Yeah. Thank you for the question and thank you for them.
Just a congratulatory we're excited as parts share this is Sean.
I'll touch on that part is good.
And also if it chooses to.
Yeah, we structure, most we've structured our contracts in a way.
Talking about through the IPO process.
On the Medicare advantage side is kind of build attribution.
To get to some form of partial risk and move into full risk over time.
It gets them critically important to do that because we we actually share upside and downside with our positions in and really at the same time it.
We think it's we're just going to be disciplined.
On appropriately doing so we're kind of looking forward to that most will see that over here over the over the next over the.
In the near future kind of coming quarters out there, but but we really we these are structured in a manner to do that but more importantly, we'll do that when we feel it's disciplined and appropriate.
Appropriate time to do that with our position spark anything you want to comment on.
Yeah, Hey, Lisa to do other things to add 1 is I just want to make clear weeds today do day downside risk in a lot of on contracts, both Medicare advantage as well as MSP with CMS, so while it's not full risk.
There is downside risk and over 100000 lives.
What CMS already.
They could potentially move over to direct contracting as we said during the IPO process.
Once we can figure out the equivalency of the benchmarks and so forth and then even in MA we aren't taken some downside risks.
The second comment.
I wanted to make is.
Yeah.
With respect to timing as you know we are highly incentivized give.
Given our fee structure.
We are on Korea Forex.
On on a value based book versus a fee per service book to.
To profitably move and ensure that they are shared savings on those contracts and so make no mistake. I mean, we are incentivized on the company and often on providers are looking to do the same.
Okay, and then just to confirm that there's no full risk at all and then 'twenty 'twenty 1 guidance of ICP. This is kind of maybe 'twenty 'twenty 2 'twenty 'twenty 3 opportunities. It just want to make sure that I have that correct.
Yes, that's correct.
In 'twenty, 1 and then we'll obviously, let you know when we get to guidance.
Okay, great. Thank you.
Thank you Alicia.
Thank you next question from the line of Linda Tsai.
Credit Suisse. Your line is open.
Next page on interesting from credit Suisse I had that before.
Hello, everyone. Congratulations on your first quarter as a public company and as Sean and Bob.
This is your first call as a public company. So I think it's really important for you to spend some time on kind of educating the.
Some commodity about investor community about how your model is differentiated I mean over the past few months several EPC protecting the book BCP companies have gone public some opening new clinics in centers, some falling with partnership approach somewhat bad agnostic on focus on Medicare I understand the overall market opportunity is big enough for all of them to succeed but just curious like if you.
Can spend some time at on your unique differentiation in your model versus others, and how that impacts physicians willingness to what would prevail or with others.
Sure Linda.
Thanks for the question and thank you for.
From a just all the work we've done throughout this thing in.
Building on long term relationship with us.
So it's a great question, we talked a lot about it.
During the IPO process.
I'll start park will have some things to.
And I'm sure, but do you think about positions out there.
We're upwards of 20.
'twenty 700, plus signed over 2500 on the platform itself and we just think it's really critical on those physicians and those 650 care centers to meet their desire is not to practice value based care on.
On 1 cohort I mean, they see all kinds of patients from like we've mentioned from commercial to Medicare.
Traditional that's going through an MSP product through Medicare advantage, Medicaid and they want to provide that high value, meaning you know.
On a go.
Cost effective high quality differentiated patient experience to everybody that walks through the door, who they see virtually so I think it should be attractive position that wants to do that with they self select in.
And it's just.
It's I think it's important we believe you need to do that the way the model, where we've kind of our land and expand model, where we move into a market maybe that's a city. Initially we have no intention of staying in that city, we build our medical groups at scale overstates or multiple states and we just believe you Ute.
Our lives all the patients that walk through the door because that's the way physicians want to practice to move markets at scale to value based care.
Highly differentiated from the other ones are doctors share upside and downside with us we're not we're not backstopping on on risk when they get in it they know they need the tools they know they need Tyler.
The technology and.
They come to us desiring to move there, but they they know will be very thoughtful and we'll be very disciplined will move their together, but at the same time. They are just as interested in moving to risk because we are in.
They know it can be rewarding, but at the same kind of lashing you want to do with the with a group of doctors or anyone is fail. Early so we think it's critical to do that parse anything to add.
Yeah, Julian I went on for quick things quick point.
Number 1 is just to add to what Sean said.
We are agnostic to where geographic market, we enter given our diversity.
How we partner with providers and payers. So so if a market has not evolved into a very heavy Medicare advantage market with a lot of seniors that's totally fine for us and so forth and we are willing to form these large medical groups.
And then play the long game.
Second is it also enables us to partner with very different types of provider groups. So while we are very primary care centric.
We're also focused on on other specialists obese mutations and so forth and building out these large medical groups and all of them play a role in value based care as we know.
The third thing I would say is our unique platform also allows us to partner with health systems, which is differentiated.
They are employed or affiliated practices, which opens up a big Tam for us as we know 50 or 60% of providers are in Florida are affiliated with health systems today in the U S.
And then the last thing I would say is with respect to payers, both CMS and private payers.
Our ability to.
Provide a solution across all lines of business from commercial to Emma is a key differentiation.
And we look forward to do on that.
Yeah. Thank you on ex parte, great edge that Gilenya, the only thing I'd add apologize for getting back in but really when you think about as you guys know we.
But all our provider sit on the tech stack.
Highly differentiated from wider joins us as a partner they leave their technology behind they leave all of our contracts behind reform that single tax IV medical groups. So having that type of having the technology is a really big advantage of scaling and distributing information to and from payers and and to and from.
Patients from physicians.
Okay and then my follow up I was wondering if you could share some thoughts on your decision to not participate in the index contracting, but especially given the companys expose on fee for service and its ability to generate savings on our platform and would you consider participating in the future. If that program has opened up again.
Thanks to under.
Direct contracting is an interesting I think if you looked at <unk> looked at the management team's background, we are a big supporter and like government programs.
90000, Medicare advantage lives as part of share we're taking risk on on a 100000 MSP lives. So we really.
We appreciate understand and are very disciplined in the way about our understanding of government programs that's new.
As we've talked a lot about when we do were very successful on the programs, we're in and to make a move because we are.
We share upside and downside risk with our providers, it's important for us to understand that program and move their in kind.
A thoughtful and disciplined way share and we will do that so I would anticipate.
As you know.
Working in many government programs as they as their.
The guidelines are more clear in what they're trying to accomplish.
You want to add there park.
No I think it governance on the end of the 1 thing that Android is we have a pretty big MSP book of business as we've talked about so obviously.
As we worked through with CMS and understand new programs like direct contracting and how how the equivalency works from an economics perspective, that's a big factor into our calculus on the existing markets, but yes. These programs open up and we feel.
We can do better we will obviously look to move into them.
Great. Thanks, Congrats again.
Thank you Julien.
Yeah.
Thank you next question from the line of Sandy Draper of tourists Securities.
Your line is open.
Thanks, so much and good afternoon I'll add my congratulations.
Yes.
A question, but also incorporate in maybe sort of the way I think about something I want to make sure that I'm thinking about the business right.
And I think it was cylinder said there there are lots of different models out there a lot of people use care margin.
Type of terms out there when I think about care margin in platform contribution for you guys I think about care margin as how efficient the practices are in delivering care.
And generating savings and then platform contribution is the next level down is how efficient Privy is on a corporate level.
2.
To deliver profitability. So 1 am I thinking about that right and then 2 because you're guiding to those how do you think about the difference in visibility to guide to a care margin, where some of that is maybe out of your control versus guiding to platform contribution where some of those elements may be more in your control because it's you're spending not necessarily.
Doctors care so.
Thanks, a lot could you share your thoughts on that thanks.
Thanks, Andy a couple of questions in there.
Mark do you want to you want to touch on.
Hey, Charlie Thanks for the question, Yeah, So I'll move a step up sandy.
Our practice collections.
<unk> has 2 components as you know are fee for service book and a value based care book. The 1 key difference as we outlined is in a bar showed risk value based on book.
What we are recognizing in practice collections is essentially the shared savings so that's going to equate to the medical margins.
On risk contract.
Other companies state. So number 1 I think it's important to know the differentiation, where it's not apples to apples and our practice collections understate the true extended on the total medical premium revenue on medical costs.
Our care margin.
Just to make 1 minor correction and how you defined it is all the dollars that come to Privy are after.
We've made all payments to physicians. So that includes their portion of the share savings their portion of any of the fee per service or value based payments. So nothing we'll add the care margin line are below those of the physicians.
And our model so.
We have very good visibility at both the practice collections level and the care margin level, because we understand what our fees are on both books of business.
And then below that is all our operating costs to support our practices, which is also in our controls. So I think we have good visibility on all 3.
Okay, Great that was my question I appreciate it.
Thank you next question from the line of Ryan Daniels.
William Blair.
Your line is open.
Yes, thanks for taking the questions guys and I'll add my.
Congratulations on the quarter and the recent IPO.
Wanted to talk a little bit about the provider pipeline, obviously, a big part of your growth is additions to the platform and <unk> been very successful there. So 2 part question 1 just getting update on the outlook for the remainder of the year and then into 2022 and then number 2 I think another unique thing about your platform that you didn't discuss has the ability to.
Work more with health systems.
Help them with provider alignment or enable their medical groups.
There may be an alternative for groups that are functioning well under hospital ownership that could work well under your model. So could you share a little bit on those 2 topics as well thanks guys.
Yeah, Ryan. Thank you. Thank you for the graduations.
I'll.
To start us off kind of high level on but parse kind of dive into those.
Interesting it up on our pipeline, we feel really good about.
Go on to obviously this year as well as next year started off that you can see the quarter really you're really well with a strong quarter and the.
You did see kind of on the health system as park mentioned earlier.
I believe it was Lisa Gill Endo that asked about the question about kind of differentiating.
I don't I mean, we just it's something our peers are not doing is working with a health system and we learned do COVID-19 because we started this about 3 years ago with a health system down in Florida that we're trying to accomplish.
Quite a bit of things around their group.
Higher performance, especially on the value based care side looking for high performance technology, but.
We went through Covid.
On a lot of health systems, reaching out.
Ones that were put on.
Similar to the 1 we just once we work with them on IGN perspective, others that kind of across the gamut of what they plan on what you know what they want to do with their employed group, but probably most importantly, what they're what they see possible to do with the community positions that arent employed today on.
Almost.
100%, but a lot of these health systems adult desire to employ additional positions that really liked the preview of light model, it's very attractive to them.
What type of relationship we have with that health system be that in a joint venture be that in a bunch of different ways and we kind of the way we start that processes reversal. If we want to see if their vision aligns with ours around value based care, what they're what they're trying to solution or is it a full technology, replacing on there.
Ambulatory side is it connecting back with something they already have is it obviously, it's always you know kind of how can they are doctors perform better in value based care and then it's always what can we do in the community together to kind of grow there.
Grow their physician alignment strategy without having to purchase doctors and.
I think it's on these tend to be a little bit longer sales cycles. As you could imagine health systems are going to be that way, but I. Just I believe we're on the front end of this kind of wave and I I think.
It's a it's a solution that is that a lot of.
Health social drought there depending on their strategy will actually desire to kind of think through and work through with spark do you want to add anything to that.
On the only thing I would add just so you know.
Folks appreciate is the flexibility that we have in our model too.
The strategy based on the needs of any particular health system, you could have a very large IBM multiple states. That's very happy would be employed group and then we're really working with them on the community physicians as Sean said on the opposite end of the spectrum you can have regional health systems, much smaller who might say, hey look we really don't want to employ.
Any physicians, especially primary care.
Could you help us get them out of employment and stand up as an independent viable practice, while maintaining all the alignment that they have with us.
I think across those spectrums on model again can really work with them and then most importantly, I think we are uniquely positioned to help them transition into value based care.
Model, obviously is not naturally setup to succeed on the risk contracts and I think on working closely with physicians their positions on community physicians and really help them do it.
Yes, Greg Scott, Brian I'd, probably endo, if you just think about share Tam that's out there and available and we all saw kind of.
The resource on it goes day.
They are pushing things out the last couple of weeks, but I mean just share jam.
Over half the physicians are affiliated with some type of system and Theres less that are just purely employed so if youre dependent upon 1 or the other you don't have access to the other Tam so.
We just think this opens us up to as long as the strategies aligned to a much larger Tam and we all know both systems.
It's rare to see a system, that's not struggling or wanting to do better kind of moving to value based care.
Great. Thank you so much guys. Thank.
Thank you Ryan.
Thank you next question from the line of Josh Raskin of net.
<unk> research.
Your line is open.
Hi, Thanks, Good evening, guys out here with Mr. Percher as well so 2 questions. The first 1 hopefully just an easy 1 just the S..1 I think you alluded to this Sean in your prepared remarks had some estimates around.
GAAP revenues care margin platform contribution EBITDA et cetera. It seems like everything kind of came in at or above the high end of those ranges. So were there some specific areas of unexpected upside something trends that kind of a little bit better in terms of overall utilization of the system or was that just sort of appropriate levels of conservatism.
In light of the IPO.
Hey, Josh Taylor Colo.
I don't think there was any material kind of changes park.
When you think of anything do you think are out there.
Sure Hey, Josh Eric Thanks for the question 2 quick things 1 is I think we saw strength in both FIFA service and value based books, obviously in the quarter only about a January February we're still in the midst of Covid in many states and so there was some uncertainty around that and then we've got the Texas.
Freeze, which obviously impacted.
<unk> going into the into the physician's practice or even even conducting care virtually with the power outages. So I think despite all of that it was much better than we expected.
On the value based book and I wanted to I do have a question Sandy asked.
Given.
Brash as collections.
We are recognizing the share savings so even slight outperformance in value based share savings translate down the P&L into EBITDA and I think that's very important in our models given the operating leverage we see where if we outperform on our value based book.
Given the medical margins effectively what we are recognizing in practice collections.
Can see that outperformance on EBITDA as those dollars flow flow a lot of those dollars flow down to P&L. So.
I think that was a that was.
Good surprise for us on the upside.
That makes sense I guess with potentially some of the low utilization maybe that hits fee per service, but on the value based care side, if there's lower utilization net revenues almost all our EBITDA because that is that the right way to think about that.
Yes.
Okay, and then can you just speak to the timing of sort of setting up new entry in new markets in a January 1 and important day dragging I think about contracts with Medicare advantage and even commercial contracts tend to reset around that but it is much more about finding the providers.
And signing the contracts and then.
You know maybe any specific color on how we should be thinking about new market entry as we get closer to 2022.
Yeah, Josh I'll kick it off and parks can even still weigh in and maybe kind of speak to kind of what was on the bottle, but yeah. It's our business is more around.
Sure.
About it is if there's that anchor shale.
We're recruiting an anchor out there seems to be a little bit longer term than depending on the size of the practice and.
And then.
And kind of who you're working with them.
Our vision is aligned with us.
Smaller would probably kind of facilitates a little bit a little bit.
Quicker, so I guess for lack of a better word health systems or longer like I spoke to.
A while ago.
Once you get once you kind of landed that market ourselves.
We refer to as our machinery and kind of how we grow that is actually ramps up pretty well and it's.
A lot of our physicians that are kind of still on that front on those once we add on that same store growth in our market isn't it.
Below the kind of 5 practices by docs on a practice and below so.
That ramps up and kind of runs out of a more predictable pace and then if you're on kind of but it is about finding those providers, having those discussions on ROI business solution. As you guys know, we're not we're not just selling on Medicare advantage contract or something more so on the whole the technology the all the platform share.
She is just going to have new wealth fee per service to value based care the wrap around kind of the ACO model that we run all of our value based arrangements through within the platform itself, where we're kind of where it makes sense in a value based way of adding ancillary <unk> that debt.
That work long term and value based care as well as clinical research. So it's on.
It's an ROI solution sale, but it is about finding those markets and did the machinery kind of kicks in and.
<unk> Perth anything to add on what's kind of what are we thinking there.
And Josh just to answer your question on timing so.
And what's in the model is no new markets for 'twenty 'twenty..1 so our guidance does not include anything but we are actively on.
Having multiple discussions and.
Finding an anchor partner and opening a market January 1 is unimportant, we can do it on the middle of the year just depends on the timing you saw it last year, we opened up Tennessee and in Q4 in the middle of Covid.
End of Q3, so that really doesn't matter and if we do that we'll obviously update the guidance and providing the appropriate disclosure.
And then obviously from a value based contract perspective, mainly things reset 1.1 in a new market on an existing market. So.
M, a attribution et cetera kind of where the AEP enrollment.
Yes.
We're subject to the same same timeline as others.
Perfect all right. Thanks, guys congrats.
Thanks, Josh.
Thank you and next question from the line of Richard close.
Canaccord.
I N T.
Your line is open.
Thank you congratulations.
In order.
Just a question I appreciate the comments on the pipeline can you talk a little bit about the competitive landscape.
On a personal you said, you're having lots of discussions now but.
Are you guys is the only game in town.
Hum.
R R.
Are the practices you know.
I'm thinking about you know what theyre doing now in choosing you guys.
Or are there other players that you know you're essentially competing with.
In those discussions.
Richard I'll start Sean Thanks for the congratulations.
Doctors always have a choice on what theyre going to do and it's not just this.
This space on the physician enablement space. It's just in light in general think about a dark when they.
Let's look speed.
Kind of where I guess in current time, our position graduates medical school.
Guests at their age maybe they've got on maybe they've got a young family, maybe they've got debt, they're thinking about standard.
Maybe more of a job type that could be with a health system that could be in a downstream privy of group.
So that kind of come out of school they've got on the other things on their mind, besides kind of hanging on shingle getting started obviously there are some that do that as they.
Kind of mature in age and per annum.
I would even add competence.
Their ability to kind of.
Maybe you can kind of take care of more complex patients some of them.
Come out they want to join a group maybe be a share holder hang a shingle we have some obviously you have some models that allow them to do that and then sometimes towards the end of life.
The end of their career they want to sell their practice. So we've got models that actually could transition docks succession plan and so forth. The docs that we tend to attract Richard on those docs that are we're going to be a little more entrepreneurial by nature.
They're gonna be they're looking for something much larger so they've come to the conclusion that you know they're kind of 10.15 20 years left on their practice, they're going to be doing this a while they want to do it well and they just don't want to do it in 1 cohort of patients and they don't want to be an employee.
It's a it's like I said, we've always talked about it as a solution sale and they come to us as a partner.
And we provide the services and kind of share that risk up and down on it.
With them and kind of work through this over a period of time, and we're really thoughtful about that dynamic because I mean there.
There are some you know there can be an entrepreneur 1 or they could be entrepreneurs have a practice of 400. So you really were partners with them and we really kind of think through that hurt anything you'd add.
Hey, Richard just quickly on the competition is.
Now I'm going to comment on.
What other companies go after and they're facing it.
You know the dye to the answer we gave to the questions on lender asked our Tam I think is the broadest given our solution set is also the broadest across all lines of business.
And so I think we face competition from a wide variety of folks for different types of practices that could be practices debt.
Obviously, those who want to stay independent and on a full solution set across all lines.
We have a natural choice.
If folks are only focused on M&A and then obviously, we do face some competition from MAA only players.
Folks who want to sell obviously you can compete with health systems are.
On the buyers of practices private equity are often et cetera.
I do think even if folks are aligned with other models.
We'll participate in that model, given our flexibility across all lines of business. So.
No specific answer Unfortunately for you but.
Our broad solution set and damn allows us to go after many different kinds of practices that we think are the models have some some sort of limitation on.
Okay and as a follow up can you.
Provide any additional details you mentioned the and some investment.
Just any any more information in relationship to you know maybe the collaboration agreement.
Agreement going forward.
Yes.
The.
Richard the anthem agreement, you know they've invested 92 million debt.
At IPO it as a collaboration agreement.
It's not exclusive obviously they can work with any provider. They want to we can work with any payer we choose to I think it's more of a.
We don't believe they're there.
Contract with them on a couple of our states in a big way I think it's a reflection of our performance with them and you know they're excited if we could.
Would grow along with them and where they are and if we can perform in similar manners at some.
It's.
That's the way the arrangement works on I don't think it's limited to them to an anthem type of relationship I think theres other players out there and obviously the desire for us to work in a very simple fashion, alright anything you'd add.
No. Thank you.
Yes.
Thank you rich.
<unk>.
Thank you.
And now on our last question is from the line of Jessica the sand on platform.
Piper Sandler your line is open.
Hi, Congrats on that first quarter and thank you for taking my question on.
So 'twenty 'twenty, 1 guidance kind of suggest that practice collections are going to grow at roughly 2 times the rate of revenue in total.
21 and was health.
And you guys might be able to just bring you in terms of that market mix and maybe reimbursement, Nick what would drive packet collections and revenue growth to convert.
Alright, and then giving you on.
And then also on what might drive that.
Converging given you arent.
Thank you Park view on them you want to take that 1.
Yeah, Hey, Jeff. Thanks for the question. So there were 2 drivers for that.
Net divergence 1 is obviously as we grow faster in <unk>.
States with corporate practice laws, Texas, Tennessee, Florida, obviously, that's recognized in practice collections on non-GAAP revenue and then secondly, you. Obviously have this anomaly of just 1 practice that left us in mid Atlantic, which is a non call per practice state. So fully reflected in GAAP revenue and therefore, you know that.
Some of that divergence, so I think over time.
We'll guide you on mix at the opening of new market.
Whether it's corporate practice on the answer you can you can model that out but it really depends on the on the mix going in.
That's just.
Each book of businesses performing in those mix of states.
Got it and then just based on kind.
And it comes back on line can you.
Talk about the benefits pretty at a relative to the models that might book it explicitly on primary care both in terms of 15% net value.
They can't.
Yeah absolutely.
Great question, obviously on the fee for service book, we benefit directly as utilization comes on.
So that's a direct benefit on on.
In all our markets. It also helps us that we have some select specialists. So it is not primary care oriented 100% and so you can see some of those utilization rates will come up more so including the pediatricians as those visits have been.
They got hit pretty hard with Covid. So I think that would benefit us tremendously relative to other and their focus on Remodels and then on the value based side look again.
There's a reason we are thoughtful about taking full risk.
With depressed utilization, so MLR were lower across the across the board.
And obviously, that's a headwind.
In our value based book.
And you know hopefully appropriately so modeled.
The right amount of utilization going in.
And partial risk contracts protective.
If there's a spike in utilization so I.
I think that'll be the Crs is how it progresses and utilization spikes up towards the second half predominantly as vaccinations increase it'll be interesting to see how how different companies perform across the space.
Got it thank you.
Yes.
Thank you.
And I'm not showing any further questions I would now like to turn the call back to Mr. Morris for any further remarks.
Thank you operator more bouygues.
Thank each 1 of you for joining us on our inaugural earnings call and we appreciate it and we're looking forward to building a long term relationship with each 1 of you and look forward to speaking to each of you. Soon thanks, a lot have a good evening.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's event you may all disconnect and everyone have a great team.
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