Q2 2024 Privia Health Group Inc Earnings Call

August 8, 2024

Regina: Hello and thank you for standing by. My name is Regina and I will be your conference operator today.

Operator: I would like to welcome everyone to the Previous Health second quarter 2024 conference call. All lines have been placed on mute to prevent any background noise.

Operator: At this time, I would like to welcome everyone to the Privia Health Second Quarter 2024 conference call. All lines have been placed on mute to prevent any background noise.

Regina: At this time, I would like to welcome everyone to the Privia Health Second Quarter 2024 conference call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. I would now like to turn the conference over to Robert Borchert, SVP, Investor and Corporate Communications. Please go ahead.

Operator: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star one again.

Regina: After the speaker's remarks, there will be a question and answer session.

Regina: If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.

Robert Bortjard: I would now like to turn the conference over to Robert Bortjard, SVP, Investor and Corporate Communications. Please go ahead.

Robert Borchert: If you'd like to withdraw your question, press star 1 again. I would now like to turn the conference over to Robert Borchert, SVP, Investor and Corporate Communications. Please go ahead.

Robert Borchert: Thank you, Regina, and good morning everyone. Joining me are Parth Mehrotra, our Chief Executive Officer, and David Mountcastle, our Chief Financial Officer. This call is being webcast and can be accessed in the Investor Relations section of PriviaHealth.com. Today's financial press release and slide presentation are posted in the Investor Relations section of PriviaHealth.com. And following our prepared comments, we will open the line for questions. So please limit yourself to one question only.

Robert Bortjard: Thank you, Regina, and good morning, everyone. Joining me are Park Marotra, 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 PrivyHealth.com. Today's financial press release and slide presentation are posted in the Investor Relations section of PrivyHealth.com. And following our prepared comments, we will open the line for questions. So please limit yourself to one question only. In return to the queue, if you have a follow-up, we can get to as many questions as possible.

Robert Borchert: Thank You Regina and good morning everyone. Joining me are Parth Mehrotra, our Chief Executive Officer, and David Mountcastle, our Chief Financial Officer. This call is being webcast and can be accessed in the Investor Relations section of PriviaHealth.com

Speaker Change: Today's financial press release and slide presentation are posted in the Investor Relations section of PriviaHealth.com. And following our prepared comments, we will open the line for questions. So please limit yourself to one question only and return to the queue if you have a follow-up so we can get to as many questions as possible.

Robert Bortjard: The financial results report us today are preliminary and are not final until our form 10-Q for the second quarter and June 30th, 2024 is filed with the Securities and Exchange Commission. Some of the statements we will make today are forward-looking in nature based on our current expectations in view of our business as of August 8th, 2024. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risen uncertainties that may cause actual results to differ materially. As a result, these statements should be considered along with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filings.

Robert Borchert: The financial results reported today are preliminary and are not final until our Form 10-Q for the second quarter ended June 30, 2024 is filed with the Securities and Exchange Commission. Additionally, some of the statements we will make today are forward-looking in nature, based on our current expectations and view of our business as of August 8, 2024. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risk and uncertainties that may cause actual results to differ materially.

Robert Borchert: Please return to the queue if you have a follow-up question so we can get to as many questions as possible. The financial results reported today are preliminary and are not final until our Form 10-Q for the second quarter ended June 30, 2024 is filed with the Securities and Exchange Commission. Some of the statements we will make today are forward-looking in nature, based on our current expectations and view of our business as of August 8, 2024.

Speaker Change: The financial results reported today are preliminary and are not final until our Form 10-Q for the second quarter ended June 30, 2024 is filed with the Securities and Exchange Commission.

Robert Borchert: Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risk and uncertainties that may cause actual results to differ materially. As a result, these statements should be considered along with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filing. Finally, we may refer to certain non-GAAP financial measures on the call. Reconciliation of these measures, and comparable GAAP measures, is included in our press release and the accompanying slide presentation posted on our website. Now, I'd like to turn the call over to our CEO, Parth Mehrotra.

Speaker Change: Some of the statements we will make today are forward-looking in nature, based on our current expectations and view of our business as of August 8, 2024. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risk and uncertainties that may cause actual results to differ materially.

Speaker Change: As a result, these statements should be considered along with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filings.

Robert Bortjard: Finally, you may refer to certain non-GAAP financial measures on the call. Reconciliation of these measures, the comfortable GAAP measures are included in our press release and the accompanying flight presentation post on our website.

Speaker Change: Finally, we may refer to certain non-GAAP financial measures on the call. Reconciliation of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website. Now I'd like to turn the call over to our CEO , Parth Mehrotra.

Robert Bortjard: Now, I'd like to turn the call over to our CEO, Parts and Roadtrap.

Parth Mehrotra: Thank you, Robert, and good morning, everyone. Privia Health posted another strong quarter of financial performance as we are executing well operationally and continue to drive growth across all of our markets. This morning, I'll cover some key highlights and provide a business update. Then David will discuss our recent financial performance and provide an update to our 2024 guidance outlook, giving us strong results in the first half of the year before we take your questions.

Parth Mehrotra: Thank you, Robert, and good morning, everyone. Previous Health posted another strong quarter of financial performance as we are executing well operationally and continue to drive growth across all of our markets. This morning, I'll cover some key highlights and provide a business update.

Parth Mehrotra: This morning, I'll cover some key highlights and provide a business update, then David will discuss our recent financial performance and provide an update to our 2024 Guidance Outlook, giving us strong results in the first half of the year, before we take your questions.

Parth Mehrotra: Then David will discuss our recent financial performance and provide an update to our 2024 guidance outlook, given us strong results in the first half of the year before we take your questions. During the second quarter, previous momentum continued across all aspects of our business. We are making great progress towards our long-term vision to build one of the largest ambulatory care delivery networks in the nation. Implemented providers increased 16.4% from a year ago. This strength and same-store growth and new provider additions is reflected in our top-line performance. Q2 practice collections grew 4% year over year and increased more than 12% when you exclude the impact of the restructured MA-capitation contracts at the beginning of the year.

Robert Borchert: During the second quarter, Privia's momentum continued across all aspects of our business. Our pipeline for both existing market growth and new market business development remains robust. We have $387 million in cash, no debt, and a strong conversion of annual EBITDA to free cash flow, which positions us well for durable, long-term growth. We are working diligently to expand into new states and increase our provider density across every state we operate in. Our gross provider retention has averaged more than 98% over the past three years. We continue to expand our diversified value-based platform across reimbursement models. Now, I'll ask David to review our Q2 and year-to-date financial results and our updated 2024 guidance outline.

Parth Mehrotra: During the second quarter, Privia's momentum continued across all aspects of our business. We are making great progress towards our long-term vision to build one of the largest ambulatory care delivery networks in the nation. Implemented providers increased 16.4% from a year ago, strengthening same-store growth, and new provider additions are reflected in our top-line performance. Q2 practice collections grew 4% year-over-year and increased more than 12% when you exclude the impact of the restructured MA capitation contracts at the beginning of the year.

Parth Mehrotra: During the second quarter, Privia's momentum continued across all aspects of our business.

Parth Mehrotra: We are making great progress towards our long-term vision to build one of the largest ambulatory care delivery networks in the nation.

David: Implemented providers increased 16.4% from a year ago. This strengthens same-store growth and new provider additions is reflected in our top-line performance.

David: Q2 practice collections grew 4% year-over-year and increased more than 12% when you exclude the impact of the restructured MA capitation contracts at the beginning of the year.

Parth Mehrotra: Adjusted EBITDA was up 14% as we continue to drive operating leverage while absorbing incremental new market investments. Our pipeline for both existing market growth and new market business development remains robust. We have 387 million in cash, no debt, and a strong conversion of annual EBITDA to free cash flow, which positions us well for durable long-term growth.

Parth Mehrotra: Adjusted EBITDA was up 14% as we continue to drive operating leverage while absorbing incremental new market investment. Our pipeline for both existing market growth and new market business development remains robust. We have $387 million in cash, no debt, and a strong conversion of annual EBITDA to free cash flow, which positions us well for durable, long-term growth.

David: Adjusted EBITDA was up 14% as we continue to drive operating leverage while absorbing incremental new market investments.

David: Our pipeline for both existing market growth and new market business development remains robust.

David: We have $387 million in cash, no debt, and a strong conversion of annual EBITDA to free cash flow, which positions us well for durable, long-term growth.

Parth Mehrotra: . Given our solid first half performance across all metrics and high visibility into the rest of the year, we are increasing our guidance to the mid to high end for all metrics. The combination of our diversified value-based platform and strong underlying fee-for-service business, serving the entire physician practice, continues to be a key differentiator in attracting community providers to the Privia model in today's environment. Privia's national footprint continues to expand. At the end of Q2, we had 4,504 implemented providers, caring for more than 5 million patients across 13 states and the District of Columbia. We are working diligently to expand it in new states and increase our provider density across every state we operate in.

David: Given our solid first-half performance across all metrics and high visibility into the rest of the year, we are increasing our guidance to the mid to high end for all metrics.

Parth Mehrotra: Given our solid first tap performance across all metrics and high visibility into the rest of the year, we are increasing our guidance to the mid to high end for all metrics, a combination of a diversified value-based platform and strong underlying fee-for-service business. Serving the entire physician practice continues to be a key differentiator in attracting community providers to the Privia model in today's environment. Privia's national footprint continues to expand.

David: the combination of a diversified value-based platform and strong underlying fee-for-service business.

Speaker Change: Serving the entire physician practice continues to be a key differentiator in attracting community providers to the Privia model in today's environment.

Parth Mehrotra: At the end of Q2, we had 4,504 providers in place caring for more than 5 million patients across 13 states and the District of Columbia. We are working diligently to expand into new states and increase our provider density across every state we operate in. Our aim is to build large-scale, high-quality, community-based medical groups that will become one of the most important assets in the healthcare ecosystem. We have very high patient satisfaction, as reflected in the NEC promoter score of 85.

Speaker Change: Privia's national footprint continues to expand. At the end of Q2, we had 4,504 implemented providers caring for more than 5 million patients across 13 states and the District of Columbia.

Speaker Change: We are working diligently to expand into new states and increase our provider density across every state we operate in.

Parth Mehrotra: Our aim is to build large-scale, high-quality community-based medical groups that will become one of the most important assets in the healthcare ecosystem. We have very high patient satisfaction as reflected in the net promoter score of 85. Our gross provider retention has averaged more than 98% over the past three years. On a net basis, our provider retention is over 100% given our same-store growth in existing geographies. We continue to expand our diversified value-based platform across reimbursement models. Privia now serves over 1.2 million attributed lives across 100 plus commercial and government programs. Total attributed lives increase more than 10.5% from Q2 a year ago, which places Privia as one of the broadest and most balanced value-based care players in the industry.

Speaker Change: Our aim is to build large-scale, high-quality, community-based medical groups that will become one of the most important assets in the healthcare ecosystem.

Speaker Change: We have very high patient satisfaction as reflected in the NET promoter score of 85.

Parth Mehrotra: Our gross provider retention has averaged more than 98% over the past three years. On a net basis, our provider retention is over 100% given our same store growth in existing geography. We continue to expand our diversified value-based platform across reimbursement models. Privia now serves over 1.2 million attributed lives across 100 plus commercial and government programs. Total attributed lives increased more than 10.5% from Q2 a year ago, which places Privia as one of the broadest and most balanced value-based care players in the industry.

Speaker Change: Our gross provider retention has averaged more than 98% over the past three years.

Speaker Change: On a net basis, our provider retention is over 100% given our same store growth in existing geographies.

Speaker Change: We continue to expand our diversified value-based platform across reimbursement models.

Speaker Change: Privia now serves over 1.2 million attributed lives across 100 plus commercial and government programs.

Speaker Change: Total attributed lives increased more than 10.5% from Q2 a year ago, which places Privia as one of the broadest and most balanced value-based care players in the industry.

Parth Mehrotra: Our commercial attributed lives increase 11.6% from last year to reach 741,000. We own care management fees and generate shared savings that are incremental to our predictable fee-for-service management fees. This offers a highly differentiated value proposition to our medical groups and is core to our long-term strategy to opportunistically increase our attribution in various risk arrangements over time to drive future earnings growth. We continue to perform well in our Medicare Shared Savings book of business and have taken proactive steps to navigate the challenging MA environment, as we discussed last quarter.

Parth Mehrotra: Our commercial attributed lives increased 11.6% from last year to reach 741,000. We own care management fees and generate shared savings that are incremental to our predictable fee-for-service management fees. This offers a highly differentiated value proposition to our medical groups and is core to our long-term strategy to opportunistically increase our attribution in various risk arrangements over time to drive future earnings growth. We continue to perform well in our Medicare Shared Savings Book of Business and have taken proactive steps to navigate the challenging MA environment, as we discussed last quarter. Now, I'll ask David to review our Q2 and year-to-date financial results and our updated 2024 guidance outline. Thank you, Parth.

Speaker Change: Our commercial attributed lives increased 11.6% from last year to reach 741,000.

Speaker Change: We own care management fees and generate shared savings that are incremental to our predictable fee-for-service management fees.

Speaker Change: This offers a highly differentiated value proposition to our medical groups and is core to our long-term strategy to opportunistically increase our attribution in various risk arrangements over time to drive future earnings growth.

Speaker Change: We continue to perform well in our Medicare Shared Savings Book of Business and have taken proactive steps to navigate the challenging MA environment as we discussed last quarter.

David Mountcastle: Now I'll ask David to review our Q2 in a year-to-date financial results in our updated 2024 guidance outlook.

Speaker Change: Now I'll ask David to review our Q2 and year-to-date financial results and our updated 2024 guidance outlook.

David Mountcastle: Thank you, Par. Our strong operating and financial performance continue through the second quarter of 2024. Our implemented provider count group will emit 45 sequentially from Q1 to reach 4,504 at June 30, an increase of 16.4% year-over-year. Solid ambulatory utilization trends, new implemented providers, and additional attributed lives led to practice collections increasing 4% from Q2 a year ago to reach 728 million. As we previously mentioned, the balance and flexibility of our operating model enabled us to shift attributed lives out of capitated agreements for improved contribution margin. Excluding second quarter 2023 revenue from our renegotiated Medicare Advantage capitation agreements, practice collections increased more than 12% year-over-year in the second quarter of 2024.

David Mountcastle: Our strong operating and financial performance continued through the second quarter of 2024. Our implemented provider count grew 145 sequentially from Q1 to reach 4,504 on June 30th, an increase of 16.4% year-over-year. Solid ambulatory utilization trends, new implemented providers, and additional attributed lives led to practice collections increasing 4% from Q2 a year ago to reach $728 million. As we previously mentioned, the balance and flexibility of our operating model enabled us to shift attributed lives out of capitated agreements for improved contribution margins, excluding second quarter 2023 revenue from our renegotiated Medicare Advantage capitation agreement.

David: Thank you, Parth.

David: Our strong operating and financial performance continued through the second quarter of 2024.

David: Our implemented provider count grew 145 sequentially from Q1 to reach 4,504 at June 30th, an increase of 16.4% year-over-year.

David: Solid ambulatory utilization trends, new implemented providers, and additional attributed lives led to practice collections increasing 4% from Q2 a year ago to reach 728 million.

David: As we previously mentioned, the balance and flexibility of our operating model enabled us to shift attributed lives out of capitated agreements for improved contribution margin.

David: Excluding second quarter 2023 revenue from our renegotiated Medicare Advantage capitation agreements, practice collections increased more than 12% year-over-year in the second quarter of 2024.

David Mountcastle: Practice collections increased more than 12% year-over-year in the second quarter of 2024. Quarter to quarter variability in shared savings revenue was as expected due to accrual true-ups over 100 plus value-based contracts. As we mentioned previously, it is most helpful to look at our shared savings revenue trend on an annual basis to smooth out the quarterly variance. Adjusted EBITDA was up 14% over Q2 last year to reach $22 million as we continue to generate operating leverage despite investing in existing and new markets. For the first half of 2024, practice collections increased 5.7% to $144 billion, care margin was up 10.8%, and adjusted EBITDA grew 15.9% to reach $41.9 million.

David: Practice collections increased more than 12% year-over-year in the second quarter of 2024. Quarter-to-quarter variability in shared savings revenue was as expected due to accrual true-ups over 100-plus value-based contracts. For the first half of 2024, practice collections increased 5.7% to $144 billion. We now expect Attributed Lives to be at the high end of our initial guidance range. Given our capital-wide operating model, we expect approximately 80% of our full-year adjusted EBITDA to convert to free cash flow.

David Mountcastle: quarter quarter variability and shared savings revenue was as expected due to a cruel true ups over 100 plus value based contracts. As we mentioned previously, it is most helpful to look at our shared savings revenue trend on an annual basis to smooth out the quarterly variances. The variances increased 5.7% to 144 billion. Carmargin was up 10.8%, and adjusted even a group 15.9% to reach 41.9 million.

David: Quarter-to-quarter variability in shared savings revenue was as expected due to accrual true-ups over 100-plus value-based contracts.

David: As we mentioned previously, it is most helpful to look at our shared savings revenue trend on an annual basis to smooth out the quarterly variances.

David: Adjusted EBITDA was up 14% over Q2 last year to reach 22 million as we continue to generate operating leverage despite investing in existing and new markets.

David: For the first half of 2024, practice collections increased 5.7% to $144 billion.

David: Care margin was up 10.8% and adjusted EBITDA grew 15.9% to reach $41.9 million.

David Mountcastle: With strong first half performance and high visibility through 2024, we are raising our 2024 guides. We now expect attributable lives to be at the high end of our initial guidance range, and all other metrics to be in the mid to high end of our initial ranges. Recall that our full-year practice collections guidance assumed a reduction of approximately 198 million from 2023, given lower risk exposure from MA capitation agreements.

David Mountcastle: With strong first-half performance and high visibility through 2024, we are raising our 2024 guide. We now expect attributed lives to be at the high end of our initial guidance range, and all other metrics to be in the mid to high end of our initial range. Recall that our full-year practice collections guidance assumed a reduction of approximately $198 million from 2023, given lower risk exposure from MA capitation agreements. Our balance sheet and capital position continue to be very strong, with cash of more than $387 million and no debt.

David: With strong first half performance and high visibility through 2024, we are raising our 2024 guidance.

David: We now expect attribute of lives to be at the high end of our initial guidance range and all other metrics to be in the mid to high end of our initial ranges.

David: Recall that our full-year practice collections guidance assumed a reduction of approximately $198 million from 2023 given lower risk exposure from MA capitation agreements.

David Mountcastle: Our balance sheet and capital position continue to be very strong, with cash of more than 387 million and no debt. Given our capital-wide operating model, we expect approximately 80% of our full-year adjusted EBITDA to convert to free cash flow. Consistent with past year, if we expect to receive a significant portion of our shared savings cash payments in the second half of the year.

David: Our balance sheet and capital position continue to be very strong, with cash of more than $387 million and no debt.

David Mountcastle: Given our capital-wide operating model, we expect approximately 80% of our full-year adjusted EBITDA to convert to free cash flow. Additionally, consistent with past years, we expect to receive a significant portion of our shared savings cash payments in the second half of the year. Privia's business momentum and diversified book of business have positioned us well to drive organic provider growth and increased operating leverage for long-term adjusted EBITDA and free cash flow growth as we build our national footprint.

David: Given our capital-wide operating model, we expect approximately 80% of our full-year adjusted EBITDA to convert to free cash flow.

David: Consistent with past years, we expect to receive a significant portion of our shared savings cash payments in the second half of the year. Privia's business momentum and diversified book of business have positioned us well to drive organic provider growth and increased operating leverage for long-term adjusted EBITDA and free cash flow growth as we build our national footprint. We would like to thank all our physician partners and employees for their continued dedication and hard work to help us achieve these results. We are now ready to take your questions.

David: Consistent with past years, we expect to receive a significant portion of our shared savings cash payments in the second half of the year.

David Mountcastle: Trinity's business momentum and diversified book of business has positioned us well to drive organic provider growth and increased operating leverage for long-term adjusted EBITDA and free cash flow growth as we build our national footprint.

David: Privia's business momentum and diversified book of business has positioned us well to drive organic provider growth and increased operating leverage for long-term adjusted EBITDA and pre-cash flow growth as we build our national footprint.

Parth Mehrotra: We would like to thank all our physician partners and employees for their continued dedication and hard work to help us achieve these results.

David Mountcastle: We would like to thank all our physician partners and employees for their continued dedication and hard work to help us achieve these results. We are now ready to take your questions. And if you'd like to ask a question, simply press star followed by the number one on your telephone keypad. We'll take our first question from the line

Speaker Change: We would like to thank all our physician partners and employees for their continued dedication and hard work to help us achieve these results. We are now ready to take your questions.

Operator: We are now ready to take your questions. And if you'd like to ask a question, simply press star followed by the number one on your telephone keypad.

Operator: And if you'd like to ask a question, simply press star followed by the number one on your telephone keypad. We'll take our first question from the line of Josh Raskin with Nefron Research. Please go ahead. Hi, thanks.

Speaker Change: And if you'd like to ask a question, simply press star followed by the number one on your telephone keypad. We'll take our first question from the line of Josh Raskin with Nefron Research. Please go ahead. Thank you. Thank you. Thank you.

David Mountcastle: Yeah, thanks for the question, Josh. I appreciate it.

Josh Ruskin: We'll take our first question from the line of Josh Ruskin with Neffron Research. Please go ahead.

Parth Mehrotra: Hi, thanks a good morning. First question, maybe I'll sneak into the first question is I know you've gotten this before, but you know you'll have faithfully over 400 million in cash by the end of the year with no debt. So how are you thinking about updated capital priorities and then just secondly, maybe we give us an update on utilization trends.

Josh Raskin: Hi, thanks. So good morning. First question, maybe I'll sneak into the first question is, I know you've gotten this before, but, you know, you'll have safely over 400 million in cash by the end of the year with no debt. So how are you thinking about updated capital priorities? And then just secondly, maybe give us an update on utilization trends and if there were any differences as the quarter progressed, or even maybe compared to the first quarter.

Parth Mehrotra: And if there were any differences as the quarter progressed, or even maybe compared to the first quarter.

Parth Mehrotra: Thanks for the question, Josh. Appreciate it. Stop a mind for a lot of our shareholders.

David Mountcastle: It's top of mind for a lot of our shareholders. So on cash, look, I think broadly, a few big picture comments and then the framework. I think what's important to recognize is a lot of our organic growth is expensed fully in the P&L. So if you're looking to add, as we've said previously, four to 500 implemented providers each year, that growth is fully expensed in the P&L. So despite that, we are now converting 80 plus percent of EBITDA to free cash over the past few years. I think if you look at it relatively, that conversion rate is 2x the next best comp in the industry.

Josh Raskin: Yeah, thanks for the question, Josh. Appreciate it. It's top of mind for a lot of our shareholders. So on the cash, look, I think broadly a few big picture comments and then the framework. I think what's important to recognize is a lot of our organic growth

Parth Mehrotra: So on the cash look, I think broadly a few big picture comments and then the framework. I think what's important to recognize is a lot of our organic growth is expense fully on the BNL. So if you're looking to add, as we've said previously, 400 to 500 implemented providers each year, that growth is fully expense in the BNL. So despite that, we are now converting 80 plus percent of EBITDA free cash over the past few years. I think if you look at it relatively, that conversion rate is 2x the next best comp in the industry.

Josh Raskin: is expensed fully on the P&L. So if you're looking to add, as we've said previously, four to five hundred implemented providers each year,

Speaker Change: that growth is fully expense in the bnls to despite that we are now converting eighty-busus percent of ebitda free cash over the past few years

Speaker Change: I think if you look at it relatively, that conversion rate is 2x the next best comp in the industry, so you could almost double the EBITDA and still get the same free cash flow as our business, which is pretty incredible.

Parth Mehrotra: So you could almost double the EBITDA and still get the same free cash for as our business, which is which is pretty incredible. And as you rightly pointed out, if we don't spend any cash in business development activity or otherwise, we lend probably close to somewhere between 425 to 450 million by the end of this year.

David Mountcastle: So you could almost double the EBITDA and still get the same free cash flow as our business, which is pretty incredible. And, as you rightly pointed out, if we don't spend any cash on business development activities or otherwise, we will probably land somewhere between 425 to 450 million by the end of this year. And so I think the framework that we are looking at is as follows. The first bucket we've always said is sleep well at night money, which is just to make sure as we grow our risk book, if you have one-off events like pandemics, hurricanes, et cetera, that can impact in-year results, we have sufficient liquidity to support our medical groups. It's very dilutive to rely on external financing when something like that happens.

Speaker Change: And as you rightly pointed out, if we don't spend any cash in business development activity or otherwise, we land probably close to somewhere between $425 to $450 million by the end of this year. And so I think the framework that we are looking at is as follows. The first bucket we've always said is...

Parth Mehrotra: And so I think the framework that we are looking at is as follows. The first bucket we've always said is sleep well at night money, which is just to make sure, as we grow our wristbook, if you have one-off events like pandemics, hurricanes, etc. That can impact any of the results. We have sufficient liquidity to support our medical groups. It's very delusive to rely on external financing when something like that happens. And so approximately 25% of the cash balance plus our revolver, which is undrawn, about 125 million, we're going to keep it in that bucket.

Speaker Change: Sleep Well at Night money, which is just to make sure as we grow our risk book

Josh Raskin: If you have...

Josh Raskin: One-off events like pandemics, hurricanes, etc. that can impact

Speaker Change: In your results, we have sufficient liquidity.

Speaker Change: to support our medical groups. It's very dilutive to rely on external financing.

David Mountcastle: And so approximately 25% of the cash balance plus our revolver, which is undrawn for about 125 million, we kind of keep it in that bucket. Number two, our big priority will be to utilize the cash for bigger business development transactions. So that'll be either new market entries or we're just in 13 states.

Josh Raskin: When something like that happens, and so...

Speaker Change: you know approximately 25% of the cash balance plus our revolver which is undrawn about 125 million we kind of keep keep it in that bucket

Parth Mehrotra: Number two, our big priority will be to utilize the cash for bigger business development transactions. So that will be either new market entries. We're just in 13 states. Our aspirations are to be in many more states, become a national company. And so you should expect us to keep doing transactions, the likes of which we've done in the past. Either acquire tax IDs of medical groups, ACO entities, or MSO entities like we've done in Washington, or Connecticut, or California in the past few years. You have good examples of that. So I think that'll be the predominant use of cash, as well as doing transactions in our current existing states, to build more density.

Speaker Change: Number two, our big priority will be to utilize the cash for, you know, bigger business development transactions. So that'll be either new market entries, we're just in 13 states, our aspirations are to be in many more states, become a national company.

David Mountcastle: Our aspirations are to be in many more states, to become a national company. And so you should expect us to keep doing transactions the likes of which we've done in the past, either acquire tax IDs of medical groups, ACO entities, or MSO entities like we've done in Washington or Connecticut or California in the past few years. You have good examples of that.

Speaker Change: And so you should expect us to keep doing transactions the likes of which we've done in the past.

Speaker Change: either acquire tax IDs of medical groups, ACO entities.

Speaker Change: or MSO entities like we've done in Washington or Connecticut or California in the past few years. You have good examples of that. So I think that'll be the predominant use of cash as well as doing transactions in our current existing states to build more density.

David Mountcastle: So I think that'll be the predominant use of cash as well as doing transactions in our current existing states to build more dancers. And then finally, I think a lot of the board and the management team have pretty high, high ownership. So we're obviously looking at, you know, opportunities to return capital if the stock price materially deviates from what we think is intrinsic value. So I think that's the framework that we are using. But we'll do this in a pretty judicious manner, in a thoughtful and patient manner, which is a creative way to share.

Parth Mehrotra: And then finally, I think a lot of the board in the management team has a pretty high ownership. So we're obviously looking at, you know, we can look at opportunities to return capital if the stock price materially deviates from what we think is intrinsic value. So I think that's the framework that we are using. But we'll do this in a pretty judicious manner, in a thoughtful and patient manner, which is a creative to share.

Speaker Change: And then finally, I think a lot of the board and the management team have pretty high ownership.

Speaker Change: We're obviously looking at, you know, we can look at opportunities to return capital if the stock price materially deviates from what we think is intrinsic value. So I think that's the framework that we are using, but we'll do this in a pretty judicious manner, in a thoughtful and patient manner, which is accretive to shareholders.

Operator: Walters.

David: And then on your second question on utilization, I think as we've bifurcated it before, between ambulatory and then, let's say, inpatient or downstream utilization, you can see from our results that ambulatory utilization continues to be really high. We think that is good utilization. It really benefits our fee-for-service business. It's an opportunity for patients and our members to come visit their primary care doctors, and we think that's really good engagement. So that benefits us on both the fee-for-service as well as the value-based book.

David Mountcastle: And then on your second question on utilization, I think as we've bifurcated it before, between ambulatory and then, let's say, inpatient or downstream utilization, you can see from our results that ambulatory utilization continues to be really high. We think that is good utilization. It really benefits our fee-for-service business. It's an opportunity for patients and our members to come visit their primary care doctors, and we think that's really good engagement. So that benefits us on both the fee-for-service as well as the value-based book.

Parth Mehrotra: And then on your second question on utilization, I think as we've bifurcated it before between ambulatory and then, let's say, inpatient or downstream utilization, you can see from our results the ambulatory utilization continues to be really high. We think that is good utilization. It really benefits our fee-for-service business. It's utilization for patients and our members to come visit their primary care doctors, and we think that's really good engagement. So, and then I think we continue to see elevated utilization downstream on the inpatient side. Despite that, I think our value-based book is really balanced and really hedged in the nature of the programs we have.

Speaker Change: to

Speaker Change: And then on your second question on utilization, I think as we've bifurcated it before,

Speaker Change: between ambulatory and then let's say inpatient or downstream utilization.

Speaker Change: You can see from our results the ambulatory utilization continues to be really high. We think that is good utilization. It really benefits our fee-for-service business. It's utilization for patients and our members to come visit their primary care doctors, and we think that's really good engagement.

Speaker Change: so that benefits us on both the fee servicees as well as valy facebook

David: And then I think we continue to see elevated utilization downstream on the inpatient side. Despite that, I think our value-based book is really balanced and really hedged in the nature of the programs we have. So you're seeing that in our accruals and our updated guidance for that, but we continue to see good utilization.

David Mountcastle: And then I think we continue to see elevated utilization downstream on the inpatient side. Despite that, I think our value-based book is really balanced and really hedged in the nature of the programs we have. So you're seeing that in our accruals and our updated guidance for that, but we continue to see good utilization.

Speaker Change: And then I think we continue to see elevated utilization downstream on the inpatient side. Despite that, I think our value-based book is really balanced and really hedged in the nature of the programs we have. So you're seeing that in our accruals and our updated guidance reflects that, but we continue to see good utilization trends.

Parth Mehrotra: So you're seeing that in our cruells and our updated guidance for that, but we continue to see good utilization trends.

Operator: Thank you.

Andrew Mok: Our next question will come from the line of Andrew Mok with Our Place.

Operator: Our next question will come from the line of Andrew Mok with Barclays. Please go ahead.

Speaker Change: to

Speaker Change: Thank you.

Andrew Mok: Let's go ahead. Hi, I hope you can comment on the development pipeline and use the evolution of your sales process. You keep doing pretty well, adding implemented providers, but a lot has changed over the last two years with respect to value-based care.

Speaker Change: our next question will ver on the line of andrew mock with workplace if go ahead

Parth Mehrotra: Hi, hoping you can comment on the development pipeline and just the evolution of your sales process. You seem to be doing pretty well adding implemented providers, but a lot has changed over the last two years with respect to value-based care. So maybe just comment on how the sales process differs today in terms of pitch, process, and duration versus, say, three years ago.

Andrew Mock: i hoping you' commentments on the development pipeline and just evolution of your sales process you to be doing pretty well adding inimpleumment providers got a lot of changed over the last two years with respect to value based care so and you just comments on how the sales process differs today in terms of pitch process and duration versus say three years ago

Parth Mehrotra: So maybe just comment on how the sales process differs today in terms of pitch, process, and duration versus, say, three years ago.

Parth Mehrotra: Thanks for the question, Andrew. I think it's largely the same. I mean, we've had a very consistent sales growth engine, which is organic in our existing state. We are pitching the entire business model, which is very differentiated across all lines of business for any physician practice. Every single patient, every single payer walking in the door for every single specialty, so I think that has truly differentiated us. I think the last couple of years with all the changes in the risk-based environment and Medicare Advantage, I think, as we noted in our prepared remarks, physician practices are looking at us for a much more holistic solution rather than just a one-off solution for a particular risk contract.

Parth Mehrotra: Now that's what the question, Andrew. I think it's largely the same. I mean, we've had a very consistent sales growth engine, which is organic in our existing states. We are pitching the entire business model, which is very differentiated across all lines of business, for any physician practice, every single patient, every single pair, walking in the door for every single specialty. So I think that has truly differentiated us. I think the last couple of years, with all the changes in the risk-based environment and Medicare Advantage, I think, as we noted in our prepared remarks, physician practices are looking at us for a much more holistic solution rather than just a one-off solution for a particular risk contract.

Speaker Change: Thanks for the question, Andrew. I think it's largely the same. I mean, we've had a very consistent sales growth engine, which is organic in our existing state.

Speaker Change: We are pitching the entire business model which is very differentiated across all lines of business.

Speaker Change: for any physician practice, every single patient, every single payer.

Speaker Change: I think that has truly differentiated us. I think the last couple of years with all the changes in the risk-based environment and Medicare Advantage, I think, as we noted in our prepared remarks,

Speaker Change: Physician practices are looking at us for a much more holistic solution.

Parth Mehrotra: I think that truly differentiates trivia. I think on top of that, we are deeply embedded in the workflows of the practice from our technology stack and then revenue cycle and care management teams and value-based operations workflow perspective. So I think a practice joining trivia really is understanding all that value proposition, and you can see that in our results. We continue to focus on adding four to five hundred implementers and our existing geographies, and then entering many more new geographies, but the engine is pretty strong and it's running.

Parth Mehrotra: I think that truly differentiates Privia. On top of that, we are deeply embedded in the workflows of the practice from a technology stack and then revenue cycle and care management teams, and value-based operations workflow perspective. So I think a practice joining Privia really is understanding all that value proposition, and you can see that in our results. We continue to focus on adding four to five hundred providers in our existing geographies and then entering many more new geographies.

Speaker Change: rather than just a one-off solution for a particular risk contract.

Speaker Change: I think that truly differentiates Privia.

Speaker Change: I think on top of that, we are deeply embedded in the workflows of the practice from our technology stack.

Speaker Change: and then then revenue cycle and care management teams and value-based operations workflow perspective so

Speaker Change: I think a practice joining Privia really is understanding all that value proposition and you can see that in our results. We continue to focus on adding four to five hundred implemented providers in our existing geographies and then entering many more new geographies, but the engine's pretty strong and it's running.

Parth Mehrotra: But the engine is pretty strong, and it's

David: And if I could just follow up on the stock-based comp. It's picked up another $2.5 million sequentially. It's now up 80% year-to-date. What's the full-year expectation there? What's driving the significant increase? I thought that line was supposed to moderate as we got further from the IPO. Thanks.

David Mountcastle: And if I could just follow up on the stock-based comp. It's picked up another $2.5 million sequentially. It's now up 80% year-to-date. What's the full-year expectation there, and what's driving the significant increase? I thought that line was supposed to moderate as we got further from the IPO. Thanks.

Andrew Mok: Great. And if I could just follow up on the stock-based confidence, it's picked up another two and a half million dollars sequentially. It's now up 80% year-to-date.

Speaker Change: Great. And if I could just follow up on the stock-based comp. It picked up another two and a half million dollars sequentially. It's now up 80% year-to-date. What's the full-year expectation there? What's driving the significant increase? I thought that line was supposed to moderate as we go further from the IPO. Thanks.

David Mountcastle: What drives, what's the pull your expectation there? What's driving the significant increase?

Andrew Mok: I thought that line was supposed to moderate as we have further from the IPO. Thanks.

David Mountcastle: Yeah, so part of the part of the change is effectively when we issue the equity each year. So last year we issued our annual grants in the middle of Q2. This year we issued them in the middle of Q1, so we're still getting a little bit of residual, I would say, impact from a stock comp perspective from just sort of the timing difference there. And we're looking at, on an annual basis, probably 55 to 60 million in total stock comp expense. And then on a go-forward basis, you know, again, we're still sort of targeting the one and a half to two percent.

David Mountcastle: Yeah. So part of the change is effectively when we issued the equity each year. So last year we issued our annual grants in the middle of Q2. This year, we issued them in the middle of Q1. So we're still getting a little bit of residual. I would say impact from a stock perspective from just sort of the timing difference there.

Speaker Change: Yeah, so...

Speaker Change: Part of the change is effectively when we issued the equity each year. So last year we issued our annual grants in the middle of Q2.

David Mountcastle: Got it. But I guess I'm still a little confused. Like, what's driving that significant increase? You're saying it's all timing, or is it something else?

Speaker Change: This year we issued them in the middle of Q1, so we're still getting a little bit of residual.

Speaker Change: I would say impact from a stock comp perspective, from just sort of the timing difference there. And we're looking at, you know, on an annual basis, probably $55 to $60 million in total stock comp expense. And then on a go-forward basis, you know, again, we're still sort of targeting the 1.5% to 2% range.

David Mountcastle: And we're looking at, you know, on an annual basis, probably 55 to 60 million in total stock comp expense. And then on a go-forward basis, you know, again, we're still sort of targeting the one and a half to two percent. range.

David: Got it. But I guess I'm still a little confused. Like, what's driving that significant increase? You're saying it's all timing, or is it something else?

David Mountcastle: I guess I'm still a little confused; like what's driving that significant increase? You're saying it's all timing, or is it something else? It's all just it's all timing so it's it's when in the period that we issued both grants so the difference it was so the same explanation if you remember back to Q1 so again it's just when when did we so like for example last year we issued our annual stock com brand Q2 this year we issued a Q1 so there was a big larger variance in Q1 than Q2 because there was a larger period where we didn't have both years of comp expense this year it's just a composition of half a quarter versus a full quartering Q1.

Speaker Change: got i guess i'm still confuse like what's driving that significant increase ' saying all timing or is it is it something else

David Mountcastle: It's all just, it's all timing. So it's when in the period that we issued both grants. So the difference, it was the same explanation if you remember back to Q1. So, again, it's just when we did it, so like, for example, last year we issued our annual StockCom grant in Q2. This year we issued it in Q1. So there was a big, a larger variance in Q1 than in Q2, because there was a larger period where we didn't have both years of comp expense. This year, it's just the composition of half a quarter versus the full quarter in Q1.

Speaker Change: It's all just, it's all timing, so it's when in the period that we issued both grants.

Speaker Change: So, the difference, the same explanation, if you remember, back to Q1.

Speaker Change: so again it's just when did we to like for example last year we issued our annual stock comgr in q two

Speaker Change: This year we issued it in Q1, so there was a larger variance in Q1 than Q2, because there was a larger period where we didn't have both years of comp expense. This year, it's just the composition of half a quarter versus the full quarter in Q1.

and Operator Day.

Eduardo Ron: Our next question will come from the line of Jailendra Singh with Truest Securities. Please go ahead. Good morning, guys. This is Eduardo Ron on for Jailendra. Thanks for the question. Just curious if you can provide some color around, you know, the EBITDA margin progression and, you know, your long-term growth in margin targets. And maybe just piggybacking on Andrew's question, if we think about the current development pipeline, does it tend to skew more towards expanding in new states, or is it more building the breadth out in your existing markets? Thanks for the question, Eduardo. So, on the EBITDA progression, look, our long-term margin targets are 30 to 35% EBITDA to care margin. That's been very consistent since we went public four years ago. As you can see from the first half results, we are about 22%, and we're two thirds of the way there.

Operator: Our next question will come from the line of Jailendra Singh with Truist Securities. Please go ahead. Good morning, guys. This is Eduardo Ron on behalf of Jailendra Singh. Thanks for the question.

Operator: Our next question will come from the line of Jailendra Singh with Truist Securities. Please go ahead.

Speaker Change: Our next question will come from the line of Jalindra Singh with Truist Securities. Please go ahead.

Operator: At this time, I would like to welcome everyone to the Privia Health Second Quarter 2024 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, press star one again.

Eduardo Ron: Good morning, guys. This is Eduardo Ron on for Jailendra. Thanks for the question. Just curious if you could provide some color around, you know, the EBITDA margin progression and, you know, your long-term growth and margin targets.

Eduardo Ron: And maybe just piggybacking on Andrew's question, if we think about the current development pipeline, does it tend to skew more towards expanding in new states or is it more building the breath out in your existing markets?

Operator: I would[inaudible] given our solid first half performance across all metrics and high visibility into the rest of the year. We are increasing our guidance to the mid to high end for all metrics. The combination of our diversified value based platform and strong underlying fee for service business, serving the entire physician practice continues to be a key differentiator in attracting community providers to the Privia model in today's environment. Privia's national photo print continues to expand.

David Mountcastle: Thanks for the question, Eduardo. So on the EBITDA progression, look, our long-term margin targets are 30 to 35% EBITDA to CARE margin. That's been very consistent since we went public four years ago. As you can see from the first half results, we are about 22%. And so we're two-thirds of the way there. However, that number fully expense all of the new markets that we've entered in the last few years and about $10 to $12 million of expense in those new markets, which are still not close to EBITDA break-even, as well as all the growth investments, organic growth investments for the sales team, sales, and marketing lines, about $30 million.

Speaker Change: Thanks for the question Eduardo. So on the EBITDA progression, look our long-term margin targets are 30 to 35 percent EBITDA to CARE margin. That's been very consistent since since we went public four years ago. As you can see from the first half results, we are about 22 percent.

David Mountcastle: However, that number fully expenses all of the new market that we've entered in the last few years and about 10 to 12 million dollars of expense in those new markets, which are still not close to EBITDA break even, as well as all the growth investments, organic growth investments for the sales team, sales and marketing lines, about 30 million. So I think if you perform off of that, you can see, you know, the company is already operating in the most mature markets at the long-term target profile. And we're very proud of that. You can see it's a very proven business model; the unit economics are proven, the five flywheel is proven. So I think we see ourselves achieving those targets in all of our geographies and consistently progressing towards that long-term target profile.

Speaker Change: and so we're two-thirds of the way there. However, that number fully expenses...

Speaker Change: all of the new market that we've entered in the last few few years

Speaker Change: and about $10 to $12 million of expense in those new markets, which are still not close to EBITDA break-even, as well as all the growth investments, organic growth investments for the sales team, sales and marketing lines, about $30 million. So I think if you perform well for that, you can see the company is already operating in the most mature markets at the long-term target profile, and we're very proud of that. You can see it's a very proven business model. The unit economics are proven. The flywheel is proven. I think we see ourselves achieving those targets in all of our geographies and consistently progressing towards that long-term target profile.

David Mountcastle: So I think if you perform on that, you can see the company is already operating in the most mature markets at the long-term target profile. And we're very proud of that. You can see it's a very proven business model. The unit economics are proven. The flywheel is proven.

David Mountcastle: So I think we see ourselves achieving those targets in all of our geographies and consistently progressing towards that long-term target profile. And then on your second question, I think it's going to be a combination of both. We are acutely focused on building density in our existing states. That's what drives the flywheel.

David Mountcastle: And then on your second question, I think it's going to be a combination of both. We are acutely focused on building density in our existing states; that's what drives the flywheel, that's what drives EBITDA margin progression, that's what makes our medical groups very important assets for all the bears. And so you will see us do transactions that can meaningfully increase density in current geographies, and then obviously we're looking to add and get into as many new states, so you'll see a combination of both.

Speaker Change: And then on your second question, I think it's going to be a combination of both.

Speaker Change: Acutely focus on building density in our existing states.

Speaker Change: That's what drives the flywheel, that's what drives EBITDA margin progression, that's what makes our medical groups very important assets for all the payers.

Speaker Change: And so you will see us do transactions that can meaningfully increase density in current geographies. And then obviously we are looking to add and get into as many new states. So you'll see a combination of both.

Elizabeth Anderson: Our next question will come on the line of Elizabeth Anderson with Evercore ISI. Please go ahead. Hey guys, thanks so much for the question. I appreciate how the guidance is sort of like you obviously give it on an annual basis. Can you talk about anything you can call it, even qualitatively, on the three, two versus four key dance for this year? Thanks. Thanks for the question, Elizabeth. So, from a seasonality perspective, I think you should see the same trend line as past years; it should not materially differ.

Operator: Our next question will come from the line of Elizabeth Anderson with Evercore ISI. Please go ahead.

David Mountcastle: That's what drives EBITDA margin progression. That's what makes our medical groups very important assets for all the payers. And so you will see us do transactions that can meaningfully increase density in current geographies. And then, obviously, we are looking to add and get into as many new states. So you'll see a combination. Our next question will come from the line of Elizabeth Anderson with Evercore ISI. Please go ahead. Hey guys, thanks

Speaker Change: Our next question will come from the line of Elizabeth Anderson with Evercore ISI. Please go ahead.

David: Hey guys, thanks.

Elizabeth Anderson: Hey guys, thanks so much for the question. I appreciated how the guidance is sort of, you obviously give it on an annual basis. Can you talk about anything you can call out even qualitatively on the 3Q versus 4Q cadence for this year? Thanks.

David Mountcastle: Thanks for the question, Elizabeth. So, from a seasonality perspective, I think you should see the same trend line as past years. It should not materially differ. The second half is a little bit stronger than the first half.

Speaker Change: Thanks for the question, Elizabeth. So, from a seasonality perspective, I think you should...

David Mountcastle: The second half is a little bit stronger than the first half. We do get our MSSP results in Q3 or Q4, and so I think from a shared savings perspective and then utilization perspective on the FIFA service book, you know that that same pattern would follow. At this point in the year, half a you know we've sold and implemented every provider you know that will impact this year's results, so there's a very good visibility on the FIFA service book.

Elizabeth Anderson: You should see the same trend line as past years. It should not materially differ. The second half is a little bit stronger than the first half.

Speaker Change: We do get our MSSP results in Q3 or Q4 and so I think from a shared savings perspective and then utilization perspective on the FIFA service book you know that that same pattern would follow. At this point in the year half a you know we've sold

David Mountcastle: We do get our MSSP results in Q3 or Q4. And so, I think from a shared savings perspective, and then utilization perspective on the FIFA service book, that same pattern would follow. At this point in the year, we've sold and implemented every provider that will impact this year's results. So, there's very good visibility on the FIFA service book.

Elizabeth Anderson: and implemented every provider, you know, that'll impact this year's results. So there's a very good visibility on the FIFA service book.

David Mountcastle: And then our accruals are reflected based on all the data we've got across our value based book that's reflected in our updated guidance. But then again, we'll get our MSSP results in Q3 Q4, so we'll see how that plays out. But you know, we're hopeful you know that they'll be as expected, so that's reflected in our guide.

David Mountcastle: And then our accruals are reflected based on all the data we've got across our value-based book. That's reflected in our updated guidance. But then again, we'll get our MSSP results in Q3, Q4. So, we'll see how that plays out. But we're hopeful that they'll be as expected. So, that's reflected in our guidance.

Speaker Change: and then our approvals are reflected based on all the data we've got across our value-based book.

Speaker Change: That's reflected in our updated guidance, but then again, we'll get our MSSP results in Q3, Q4, so we'll see how that plays out, but we're hopeful that they'll be as expected, so that's reflected in our guidance.

AJ Rice: Our next question comes from the line of AJ Rice with UBS. Please go ahead.

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

Speaker Change: Our next question comes from the line of AJ Rice with UBS. Please go ahead.

AJ Rice: Hi, everybody. Just a specific question. Obviously, on the commercial lives, you're up nicely year-to-year, and sequentially, you showed good growth there. I think government's up similarly year-to-year, but sequentially it was more flat. Is that something about the new markets that they skewed to war? We're adding more commercial lives, or any thoughts on sequentially the variance and growth there, and then I might just piggyback off some of the other questions.

David Mountcastle: Hi, everybody. Just a specific question, obviously, on the commercial labs, you're up nicely year-to-year, and sequentially, you showed good growth there. I think government's up similarly year-to-year, but sequentially, it was more flat. Is that something about the new markets that they skew toward adding more commercial labs, or any thoughts on the sequential variance in growth there? And then I might just piggyback on some of the other questions. There's obviously a lot of disruption in the broad peer group, a lot of people pursuing strategies different than yours, but given that disruption among other physician-oriented companies, does that make you think about M&A any differently? Are there any opportunities that are presenting themselves that make you think maybe there's an opportunity to do a little bigger deal than you've done historically?

AJ Rice: hired body just a specific question obviously on the commercial loves europe nicely year-to year and sequentially you showed good growth there i think governments' up similarly year-to year but sequentially it was more flat is that

Operator: At the end of Q2, we had 4,504 implemented providers, caring for more than 5 million patients across 13 states and the district of Columbia. We are working diligently to expand into new states and increase our provider density across every state we operate in. Our aim is to build large scale high quality community based medical groups that will become one of the most important assets in the healthcare ecosystem. We have very high patient satisfaction as reflected in the net promoter score of 85.

Speaker Change: Something about the new markets that they skewed toward adding more commercial lines or any thoughts on sequentially?

Speaker Change: The variance in growth there and then...

AJ Rice: There's obviously a lot of disruption in the broad peer group, a lot of the people pursuing strategies different than yours, given that disruption among other physician-oriented companies. Is that make you think about M&A any differently? Is there any opportunities that are presenting themselves that make you think maybe there's an opportunity to do a little bigger deal than you've done historically?

Speaker Change: I might just piggyback off some of the other questions. There's obviously a lot of disruption.

Speaker Change: In the broad peer group, a lot of the people pursuing strategies different than yours, but given that disruption among other physician-oriented companies,

Speaker Change: Is that make you think about M&A any differently? Is there any opportunities that are presenting themselves that make you think maybe there's an opportunity to do a little bigger deal than you've done historically?

Operator: Our gross provider retention has averaged more than 98% over the past three years. On a net basis, our provider retention is over 100% given our same store growth in existing geographies. We continue to expand our diversified value based platform across reimbursement models. Privia now serves over 1.2 million attributed lives across 100 plus commercial and government programs. Total attributed lives increase more than 10.5% from Q2 a year ago, which places Privia as one of the broadest and most balanced value based care players in the industry.

David: Thanks for the question, AJ. So on the first piece, commercial lives generally follow implemented provider growth, so that's across all our markets. As we add providers, we get commercial lives on day one, and they get included in the value-based arrangements we have. On the government lives, I think it's just timing based on the data we get on some of the lagged attributions. So I think it ticks up, and then if there's any true ups or true downs, I guess that's kind of reflected in some of the differences between MSSP and MA.

David Mountcastle: Thanks for the question, AJ. So on the first piece, commercial lives generally follow implemented provider growth, so that's across all our markets. As we add providers, we get commercial lives on day one, and they get included in the value-based arrangements we have. On the government lives, I think it's just timing based on the data we get on some of the lagged attributions. So I think it ticks up, and then if there's any true ups or true downs, I guess that's kind of reflected in some of the differences between MSSP and MA.

Parth Mehrotra: Thanks for the question, AJ. On the first piece, the commercial lives generally follow implemented provider growth, so that's across all our markets. As we add providers, we get commercial lives on day one, and they get included in the value-based arrangements we have.

Speaker Change: Thanks for the question AJ. So on the first piece, the commercial lives generally follow implemented provider growth, so that's across...

Speaker Change: All our markets, as we add providers, we get commercial lives on day one and they get included in the value-based arrangements.

Parth Mehrotra: On the government lives, it's, I think, it's just timing based on the data we get on some of the lagged attribution, so I think it picks up and then, and then if there's any true ups, or true downs, I guess, that's kind of reflected in some of the between MSS, PNMA, but overall we feel pretty good. You can see, you know, overall attribution is already at the high end of our original guidance, so I think we've added what we expected to. You can see some more additions over the next couple of quarters. There's some lives bleed in, but we're already well ahead of our plan from that perspective, overall from an attribution perspective.

Speaker Change: We have...

Speaker Change: On the government lives, I think it's just timing based on the data we get on some of the lagged attributions. So I think it picks up and then if there's any true ups or true downs, I guess.

David Mountcastle: But overall, we feel pretty good. You can see that overall attribution is already at the high end of our original guidance, so I think we've added what we expected to. You can see some more additions over the next couple of quarters as some lives bleed in, but we're already well ahead of our plan from that perspective overall, from an attribution perspective. And then on your second question, I think we're in a very strong position. Josh asked the question about cash.

David: But overall, we feel pretty good. You can see that overall attribution is already at the high end of our original guidance, so I think we've added what we expected to. You can see some more additions over the next couple of quarters as some lives bleed in, but we're already well ahead of our plan from that perspective overall, from an attribution perspective. And then on your second question, look, I think we're in a very strong position. Josh asked the question about cash.

Speaker Change: you know that's that's kind of reflected in some of the between MSSP and MA but overall we feel pretty good you can see uh you know overall attribution is already at the high end.

Operator: Our commercial attributed lives increase 11.6% from last year to reach 741,000. We own care management fees and generate shared savings that are incremental to our predictable fee for service management fees. This offers a highly differentiated value proposition to our medical groups and is core to our long term strategy to opportunistically increase our attribution in various risk arrangements over time to drive future earnings growth. We continue to perform well in our Medicare shared savings book of business and have taken proactive steps to navigate the challenging and environment as we discuss last quarter.

Speaker Change: of our original guidance. So I think we've added what we expected to. You can see some more additions over the next couple of quarters as some lives bleed in, but we're already well ahead of our plan from that perspective overall from an attribution perspective.

Parth Mehrotra: And then on your second question, look, I think we're in a very strong position. You know, Josh asked the question on cash; we have a very pristine balance sheet, we have debt capacity, we have a pretty solid EBITDA free cash flow profile, so you can expect us to look at all kinds of assets. I think the key is to be really thoughtful and do deals that would be creative to shareholders from a long-term perspective that are EBITDA and free cashflow creative. I think we're going to be very disciplined, but I think our very consistent performance over the past seven, eight years, you can see the data from RS1 and being public for four years, the nature of our business model serving the needs of the entire practice.

David: We have a very pristine balance sheet. We have debt capacity. We have a pretty solid EBITDA and free cash flow profile, so you can expect us to look at all kinds of assets. I think the key is to be really thoughtful and do deals that would be creative for shareholders from a long-term perspective that are EBITDA and free cash flow creative. I think we're going to be very disciplined, but I think our very consistent performance over the past seven, eight years, you can see the data from our S1 and from being public for four years, the nature of our business model serving the needs of the entire practice, I think that's truly differentiated.

Speaker Change: And then on your second question, look, I think we're in a very strong position, you know, Josh asked the question on cash, we have a very pristine balance sheet.

David Mountcastle: We have a very pristine balance sheet. We have debt capacity. We have a pretty solid EBITDA and free cash flow profile, so you can expect us to look at all kinds of assets. I think the key is to be really thoughtful and do deals that would be creative for shareholders from a long-term perspective that are EBITDA and free cash flow creative. I think we're going to be very disciplined, but I think our very consistent performance over the past seven, eight years, you can see the data from our S1 and from being public for four years, the nature of our business model serving the needs of the entire practice, I think that's truly differentiated.

Speaker Change: We have debt capacity, we have pretty solid EBITDA free cash flow profile, so you can expect us to look at all kinds of assets. I think the key is to be really thoughtful.

Speaker Change: and do deals that would be creative to shareholders from a long-term perspective that are EBITDA and free cash flow creative. I think we're gonna be very disciplined, but I think our very consistent performance.

David: Now I'll ask David to review our Q2 in your today financial results in our updated 2024 guidance outlook. Thank you, part. Our strong operating and financial performance continue through the second quarter of 2024. Our implemented provider count grew on 100 and 45 sequentially from Q1 to reach 4,504 at June 30th, an increase of 16.4% year over year. Solid ambulatory utilization trends, new implemented providers and additional attributed lives led to practice collections increasing 4% from Q2 a year ago to reach 728 million.

Speaker Change: Over the past 7-8 years, you can see the data from our S1 and being public for 4 years, the nature of our business model serving the needs of the entire practice.

Parth Mehrotra: I think that's truly differentiated, so I think physician practices, other entities looking to sell or transact, are looking at our balance sheet, are looking at our performance, and our hope is they view us as a very strong, durable partner as this industry evolves. I think we'll be opportunistic to take advantage of any dislocations.

David: So I think physician practices, other entities looking to sell or transact, are looking at our balance sheet, and are looking at our performance, and our hope is that they view us as a very strong, durable partner as this industry evolves, and I think we'll be opportunistic to take advantage of any discrepancy.

David Mountcastle: So I think physician practices, other entities looking to sell or transact, are looking at our balance sheet, and are looking at our performance, and our hope is that they view us as a very strong, durable partner as this industry evolves, and I think we'll be opportunistic to take advantage of any discrepancy.

Speaker Change: I think that's truly differentiated. So I think physician practices, other entities looking to sell or transact, are looking at our balance sheet, are looking at our performance, and our hope is they view us as a very strong, durable partner as this industry evolves, and I think we'll be opportunistic to take advantage of any dislocations.

Jeff Garrow: Our next question will come from the line of Jeff Garrow with Stevens. Please go ahead. Yeah, good morning. Thanks for taking the questions.

Operator: Our next question will come from the line of Jeff Garro with Stevens. Please go ahead.

David: As we previously mentioned, the balance and flexibility of our operating model enabled us to shift attribute of lives out of capitated agreements for improved contribution margin. Excluding second quarter 2023 revenue from our renegotiated Medicare Advantage capitation agreements practice collections increased more than 12% year over year in the second quarter of 2024, quarter quarter variability and shared savings revenue was as expected due to a cruel true ups over 100 plus value based contracts.

Speaker Change: Our next question will come from the line of Jeff Garro with Stevens. Please go ahead.

Jeff Garro: Yeah, good morning. Thanks for taking the questions.

Operator: Yeah, good morning. Thanks for taking the questions.

Jeff Garrow: So I know it's a little early here, but as we head into fall, I was hoping you could discuss the current environment and previous appetite for growing exposure to upside, downside risk contracts next year.

Jeff Garro: Yeah, good morning. Thanks for taking the questions.

Jeff Garro: So I know it's a little early here, but as we head into fall, I was hoping you could discuss the current environment and previous appetite for growing exposure to upside-down risk contracts next year. You know, some of the largest payers have discussed a better environment for value-based care contracts that are wins for all stakeholders. So I want to check in whether you're seeing the same thing and how that's shaping your views over the next 12 to 18 months. Thanks.

David Mountcastle: So I know it's a little early here, but as we head into fall, I was hoping you could discuss the current environment and previous appetite for growing exposure to upside-down risk contracts next year. You know, some of the largest payers have discussed a better environment for value-based care contracts that are wins for all stakeholders. So I want to check in whether you're seeing the same thing and how that's shaping your views over the next 12 to 18 months. Thanks.

Jeff Garro: So, I know it's a little early here, but as we head into fall, I was hoping you could discuss the current environment and previous appetite for growing exposure to upside-downside risk contracts next year.

Parth Mehrotra: Some of the largest payers have discussed a better environment for value-based care contracts that are wins for all stakeholders, so I want to check in whether you're seeing the same thing and how that's shaping your views over the next 12 to 18 months. Thanks. Thanks for the question, Jeff.

Speaker Change: You know, some of the largest payers have discussed a better environment for value-based care contracts that are wins for all stakeholders, so I want to check in whether you're seeing the same thing and how that's shaping your views over the next 12 to 18 months. Thanks.

David: As we mentioned previously, it is most helpful to look at our shared savings revenue trend on an annual basis to smooth out the quarterly variances. Adjusted even it was up 14% over Q2 last year to reach 22 million as we continue to generate operating leverage despite investing and existing and new markets. For the first half of 2024, practice collections increased 5.7% to 144 billion. Carmargin was up 10.8% and adjusted even a group 15.9% to reach 41.9 million.

David Mountcastle: Yeah, thanks for the question, Jeff. So, I think it's important to recognize that we already do a fair bit of upside-downside and take downside risk. If you look at our MSSP book, 76% of our lives are in enhanced track with the maximum risk that CMS allows us. 38 plus percent of the commercial lives are in an upside-downside track, and I think we're one of the very few companies that do commercial risk in that manner, in a very sophisticated manner.

Parth Mehrotra: So I think it's important to recognize we today already do a fair bit of upside, downside, and take downside risk. If you look at our MSSP book, 76% of our lives are in enhanced track with the maximum risk that CMS allows us; 38 plus percent of the commercial lives are in upside downside track. And I think we're one of the very few companies that do commercial risk in that manner and a very sophisticated manner.

Speaker Change: Yeah thanks for the question Jeff. So I think it's important to recognize we today already do a fair bit of upside downside and take downside risk. If you look at our MSSP book

Jeff Garro: 76% of our lives are in enhanced track with the maximum risk that CMS allows us.

Jeff Garro: 38 plus percent of the commercial lives are in upside-down sidetrack and I think we're one of the very few companies that do commercial risk.

David: With strong first half performance and high visibility through 2024, we are raising our 2024 guidance. We now expect attribute of lives to be at the high end of our initial guidance range and all other metrics to be in the mid to high end of our initial ranges. Recall that our full year practice collections guidance assumed a reduction of approximately 198 million from 2023 given lower risk exposure from MA capitation agreements. Our balance sheet and capital position continue to be very strong with cash of more than 387 million and no debt.

David Mountcastle: It's a very different value proposition to the payers. So, if your question's mainly geared towards MA and capitated MA, we do take downside risk in MA. We're just putting guardrails given the current environment.

Parth Mehrotra: It's a very different value proposition to the pair. So if your questions mainly get towards MA and capitated MA, we do take downside risk in MA. We're just putting Godrails given the current environment. I think we're just going to continue to be thoughtful. I think you're seeing the pairs are just too obviously we 28 utilization friends. Every single pair commented on it. So I'm not going to go into details. But I think that's a two, three-year process. We, you know, we've had this view on MA, which has been a little bit contrarian. We just don't think overnight; the environment changes.

Speaker Change: In that manner, in a very sophisticated manner, it's a very different value proposition to the payers.

Speaker Change: So if your question is mainly geared towards MA and capitated MA, we do take downside risk

Speaker Change: I think we're just going to continue to be thoughtful. I think you're seeing the payers adjust to obviously V28 utilization trends. Every single payer has commented on it, so I'm not going to go into details.

David Mountcastle: I think we're just going to continue to be thoughtful. I think you're seeing the payers adjust to, obviously, V28 utilization trends. Every single payer has commented on it, so I'm not going to go into details. But I think that's a two, three-year process. We had this view on MA, which has been a little bit contrarian.

Speaker Change: But I think that's a two, three-year process. We've had this view on MA, which has been a little bit contrarian. We just don't think.

David: Given our capital-wide operating model, we expect approximately 80% of our full year adjusted EBITDA to convert to free cash flow. Consistent with past year, if we expect to receive a significant portion of our shared savings cash payments in the second half of the year. Trinity's business momentum and diversified book of business has positioned us well to drive organic provider growth and increased operating leverage for long term adjusted EBITDA and free cash flow growth as we build our national footprint.

David Mountcastle: We just don't think the environment changes overnight. You're going to see the payers adjust the benefit designs going into 2025. We think V28 impact will continue through 2025 into 2026.

Parth Mehrotra: You're going to see the pairs adjust the benefit designs going into 2025. We think we 28 impact will continue through 25 into 26. And then we are downstream from the pair. So we are happy to take as much risk. The key for us, as we said last quarter, is we've got to be compensated to take that additional risk. You have to recognize that care delivery takes place in entities like ours. The pairs, unless they're vertically integrated, don't, you know, the insurance arm does not provide care. So the doctors taking good care of patients across, you know, entire age cohorts have to be compensated well to assume that risk.

Speaker Change: overnight the environment changes you're going to see the payers adjust the benefit designs going into 2025

David Mountcastle: And then we are downstream from the payers, so we are happy to take as much risk as we can. But the key for us, as we said last quarter, is that we've got to be compensated to take that additional risk. You have to recognize that care delivery takes place in entities like ours. The payers, unless they're vertically integrated, the insurance arm does not provide care. So, the doctors taking good care of patients across entire age cohorts have to be compensated well to assume that risk.

Speaker Change: we think v28 impact will continue through 25 into 26.

Speaker Change: And then we are downstream from the payers, so we are happy to take as much risk. The key for us, as we said last quarter, is we've got to be compensated to take that additional risk. You have to recognize that care delivery takes place in entities like ours. The payers...

Speaker: We would like to thank all our physician partners and employees for their continued dedication and hard work to help us achieve these results.

Speaker Change: Unless they're vertically integrated don't you know, the insurance arm does not provide care So the doctors taking good care of patients across You know entire age cohorts

Operator: We are now ready to take your questions. And if you'd like to ask a question, simply press star followed by the number one on your telephone keypad.

David Mountcastle: And I think we are fiduciaries from that perspective on behalf of our physicians and our medical groups to ensure that they are getting paid for doing all the good work. So, I think as the payers adjust, hopefully, we'll get into some normalization. And then we're happy to dial up risk as long as we see a good risk-reward trade-off. And we are well-positioned to do so. The lives have not gone anywhere. The doctors are not going anywhere. We just restructured some of the contracts from a financial perspective to protect unnecessary downside for the good work.

Parth Mehrotra: And I think, you know, we are fiduciaries from that perspective on behalf of our physician and our medical groups to ensure that they are getting paid for doing all the good work. So I think as the pairs are just hopefully, you know, we'll get into some normalization, and then we're happy to dial up risk as long as we see a good risk-reward. And we have well positioned to do so. The lives have not gone anywhere. The doctors are not going anywhere. We're just, you know, restructure some of the contract from a financial perspective to protect unnecessary downside for the good work we're doing.

Speaker Change: have to be compensated well to assume that risk. And I think we are fiduciaries from that perspective on behalf of our physicians and our medical groups.

Josh Ruskin: We'll take our first question from the line of Josh Ruskin with nephron research. Please go ahead. Hi, thanks. Good morning. First question, maybe I'll sneak into the first question is I know you've gotten this before, but you know, you'll have faithfully over 400 million in cash by the end of the year with no debt. So how are you thinking about updated capital priorities and then just secondly, maybe we give us an update on utilization trends and if there were any differences as the quarter progressed or even maybe compared to the first quarter.

Speaker Change: to ensure that they are getting paid for doing all the good work. So I think as the payers adjust, hopefully, you know, we'll get into some normalization and then we're happy to dial up risk.

Speaker Change: As long as we see a good risk reward, and we are well positioned to do so. The lives have not gone anywhere, the doctors are not going anywhere, we just restructured some of the contracts from a financial perspective to protect unnecessary downside for the good work we're doing.

Jack Slevin: Our next question comes from the line of Jack Sleven with Jeffries. Please go ahead.

Operator: Our next question comes from the line of Jack Slevin with Jeffreys: please go ahead.

Josh Ruskin: Yeah, thanks for the question. Josh appreciate it. Stop a mind for a lot of our shareholders. So on the cash look, I think broadly a few few big picture comments and then the framework. I think what's important to recognize is a lot of our organic growth is expense fully on the BNL. So if you're looking to add as we've said previously, four to 500 implemented providers each year, that growth is fully expense in the BNL.

Speaker Change: Our next question comes from the line of Jack Slevin with Jeffreys. Please go ahead.

David Mountcastle: Hey, good morning. Thanks for taking the time to answer the question. I wanted to ask you a couple of questions on MSSP. Maybe one, just as we're coming sort of to the end of the business development cycle for 2025, how that's shaping up, and then a couple just to get your thoughts on some of the changes that CMS has announced this year and last year, going forward, you know, specifically, sort of what benefits you could see from prepaid shared savings.

Jack Slevin: Hey, good morning. Thanks for taking the question. I wanted to ask you a couple on MSSP.

Jack Slevin: Hey, good morning. Thanks for taking the question. I wanted to ask a couple on MSSP.

David Mountcastle: And, you know, if the elimination of the negative regional adjustment opens up more beady avenues for you than what you thought about previously, or really anything else that stuck out of note to you on some of the adjustments they announced. Thanks.

Jack Slevin: Maybe one, just as we're coming sort of to the end of the BD cycle for 2025, how that's shaping up. And then a couple of just to get your thoughts on some of the changes that CMS has announced, you know, this year and last year going forward, you know, specifically, sort of what benefits you could see from prepaid shared savings. And, you know, if, um, if the elimination of the negative regional adjustment opens up more BD avenues for you than what you thought about previously or really anything else that stuck out of note to you on some of the adjustments they announced.

Jack Slevin: Maybe one, just as we're coming sort of to the end of the BD cycle for 2025, how that's shaping up, and then

Speaker Change: A couple, just to get your thoughts on some of the changes that CMS has announced, you know, this year and last year, going forward, you know, specifically, sort of what benefits you can see from prepaid shared savings and, you know, if

Josh Ruskin: So despite that, we are now converting 80 plus percent of EBITDA free cash over the past few years. I think if you look at it relatively, that conversion rate is 2X the next best comp in the industry. So you could almost double the EBITDA and still get the same free cash for our business, which is which is pretty incredible. And as you rightly pointed out, if we don't spend any cash in business development activity or otherwise, we lend probably close to somewhere between 425 to 450 million by the end of this year.

Speaker Change: If the elimination of the negative regional adjustment opens up more BD avenues for you than what you thought about previously, or really anything else that stuck out of note to you on some of the adjustments they announced. Thanks.

Jack Slevin: Thanks.

David Mountcastle: Thanks for the question, Jack. So, from a BD perspective, look, it's no different than any of the past years. When we add a primary care, you know, physician or a provider to our platform, the lives come in on day one, and they get attributed to our MSSP program, even if we are adding providers during the course of the year. So I think it's less governed by a Jan. 1 date, even though the program resets from a performance year perspective.

Jack Slevin: Thanks for the question, Jack. So, from a BD perspective, look, it's no different than any of the past years. When we add a primary care physician or a provider to our platform, the lives come in day one and they get attributed into our MSSP program, even if we are adding providers during the course of the year. So I think it's less governed by, you know, on, you know, a Jan one date, even though the program resets from a performance here perspective. But we continue to add lives, and you can see that in our reported numbers, you know, as they grow, grow quarter over quarter.

Speaker Change: Thanks for the question Jack. So from a BD perspective look it's no different than any any of the past years. When we add a primary care you know physician or a provider to our to our platform

David: And so I think the framework that we are looking at is as follows. The first bucket we've always said is sleep well at night money, which is just to make sure as we grow our risk book, if you have one off events like pandemics, hurricanes, etc. That can impact any of the results. We have sufficient liquidity to support our medical groups. It's very delusive to rely on external financing when something like that happens.

Speaker Change: The lives come in day one and they get attributed into our MSSP program.

Speaker Change: even if we are adding providers during the course of the year so i think it's less of earneded by jan one date even though the program resets from a performance of perspective

David Mountcastle: But we continue to add lives, and you can see that in our reported numbers as they grow quarter over quarter. We do get a bump up in Q1, but then it normalizes. So I don't think from a sales perspective, it's any different.

Speaker Change: But we continue to add lives, and you can see that in our reported numbers, you know, as they grow quarter over quarter. We do get a bump up in Q1, but then it normalizes. So I don't think from a sales perspective it's any different. I do think, back to some of the questions on BD, that...

Parth Mehrotra: We do get a bump up in Q1, but then it normalizes. So I don't think, from a sales perspective, it's any different. I do think back to some of the questions on BD that we're taking advantage of the any dislocations in the industry and speaking to as many groups as we can.

David: And so approximately 25% of the cash balance plus our revolver, which is undrawn about 125 million. We're going to keep it in that bucket. Number two, our big priority will be to utilize the cash for, you know, bigger business development transactions. So that will be either new market entries. We're just in 13 states. Our aspirations are to be in many more states become a national company. And so you should expect us to keep doing transactions, the likes of which we've done in the past.

David Mountcastle: I do think back to some of the questions on BD that we're taking advantage of any dislocations in the industry and speaking to as many groups as we can ahead of the Jan 1 cycle, and this is a pretty strong sales quarter for us to kind of get ahead of those discussions. But that's no different than in the past. And then to the second question, look, I think we've been participants in MSSP with CMS for the past seven, eight years. We've seen many changes to the program over that period of time. That is the natural progression through the different tracks of MSSP and then the enhanced track.

Speaker Change: We're taking advantage of any dislocations in the industry and speaking to as many groups as we can ahead of the Jan 1 cycle, and this is a pretty strong sales quarters for us to kind of get ahead of those discussions, but that's no different than past years.

Parth Mehrotra: A head of the Jan one cycle and this is a pretty strong sales quarters for us to kind of get ahead of those discussions. So, but that's no different than past years. And then to the second question, but I think we've been participants in MSSP would see MS for the past seven, eight years. We've seen many changes over the over that period of time to the program. That is natural progression through different tracks of MSSP and then the enhanced rack. So whether it is a new full risk version of MSSP, whether it's pre paying some of the dollars to do care management and such services.

Speaker Change: And then to the second question, look, I think we've been participants in...

David: Either acquire tax IDs of medical groups, ACO entities or MSO entities like we've done in Washington or Connecticut or California in the past few years. You have good examples of that. So I think that'll be the predominant use of cash as well as doing transactions in our current existing states to build to build more density. And then finally, I think a lot of the board and the management team has have pretty high, high ownership.

Speaker Change: and MSSB with CMS for the past 7-8 years.

Speaker Change: We've seen many changes over that period of time to the program. That is natural progression.

Speaker Change: through different tracks of MSSP and then the enhanced track.

David Mountcastle: So whether it is a new full-risk version of MSSP, whether it's prepaying some of the dollars to do care management and such services, we are ready for it. I think those are all positive changes. They make sure that adequate dollars are flowing to primary care community doctors to take good care of patients. We saw that in the Maryland Primary Care Plus program, where three or four years ago, a version of that was implemented, and we did really well in that program.

Speaker Change: So, whether it is a new full-risk version of MSSP, whether it's pre-paying some of the dollars to do care management and such services, you know, we are ready for it. I think those are all positive changes.

Parth Mehrotra: You know, we're ready for it. I think those are all positive changes. They make sure that adequate dollars are flowing to primary care community doctors to take good care of patients. You know, we saw that in the Maryland Primary Care Plus program where, you know, three or four years ago, a version of that was implemented and we did really well in that program. So we've performed in such programs over the years. So I think most of these changes hopefully are beneficial to us. We'll obviously see the fine print if and when once they get implemented.

David: So we're obviously looking at, you know, we can look at opportunities to return capital if the stock price materially deviates from what we think is intrinsic value. So I think that's the framework that we are using, but we'll do this in a pretty judicious manner in a thoughtful and patient manner, which is a creative to share.

Speaker Change: They make sure that adequate dollars are flowing to primary care community doctors to take good care of patients.

Speaker Change: You know, we saw that in the Maryland Primary Care Plus program where, you know, three or four years ago, a version of that was implemented and we did really well in that program. So we've performed in such programs over the years. So I think most of these changes hopefully are beneficial to us. We'll obviously see the fine print if and when and once they get implemented.

David: Walters. And then on your second question on utilization, I think as we've bifurcated it before between ambulatory and then let's say inpatient or downstream utilization, you can see from our results, the ambulatory utilization continues to be really high. We think that is good utilization. It really benefits our fee-for-service business. It's utilization for patients and our members to come visit their primary care doctors and we think that's really good engagement. So that benefits us on both the fee-for-service as well as value-based book.

David: And then I think we continue to see elevated utilization downstream on the inpatient side. Despite that, I think our value-based book is really balanced and really hedged in the nature of the programs we have. So you're seeing that in our cruells and in our updated guidance for that, but we continue to see good utilization trends.

David Mountcastle: We've performed in such programs over the years, so I think most of these changes, hopefully, are beneficial to us. We'll obviously see the fine print if, when, and once they get implemented. But overall, with one of the largest MSSP books out there and given our performance track record, I think we look forward to some of these changes, and we're excited about how the program progresses.

Parth Mehrotra: But overall, with one of the largest MSSP books out there and given our performance track record, I think we look forward to some of these changes, and we're excited about how the program progress.

Speaker: Thank you.

Speaker Change: Overall with one of the largest MSSP books out there and given our performance track record I think we look forward to some of these changes and we're excited about how the program progresses from here

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

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

Speaker Change: to

Speaker Change: Our next question comes from the line of David Larsen with BTIG. Please go ahead.

David Larsen: Please go ahead. All right.

Parth Mehrotra: Hi. Can you talk a little bit about your discussions with health plans? I mean, obviously, all of the major plans seem to be under pressure with their MLRs increasing and V28 utilization. Are they introducing you to more, you know, physician practice partners in different states? And then, part of that, can you talk a bit about how you measure outcomes on sort of a consistent basis and how you're feeding that information to the health plans? Are they looking at declines in inpatient utilization and cost? on a regular basis, just any card there will be very helpful. Thanks Parth.

David Larsen: Can you talk a little bit about your discussions with health plans? I mean, obviously all of the major plans seem to be under pressure with our MLRs, increasing V28 utilization. Are they introducing you to more, you know, physician practice partners in different states, and then part of that.

David Larsen: Hi. Can you talk a little bit about your discussions with health plans? I mean, obviously, all of the major plans seem to be under pressure.

Speaker Change: with their MLRs increasing, V28 utilization. Are they introducing you to more, you know, physician practice partners in different states? And then part of that, can you talk a bit about how you measure outcomes on sort of a consistent basis and how you're feeding that information?

David Larsen: Can you talk a bit about how you measure outcomes on sort of a consistent basis and how you're feeding that information to the health plans? Are they looking at declines in inpatient utilization and costs on like a regular basis?

Andrew Mok: Our next question will come from the line of Andrew Mok with more place. Let's go ahead.

David: Hi, I hope you can comment on the development pipeline and you still evolution of your sales process. You keep doing pretty well, adding implemented providers, but a lot has changed over the last two years with respect to value-based care. So maybe just comment on how the sales process differs today in terms of pitch, process, and duration versus say three years ago. Now that's what the question Andrew. I think it's largely the same.

Speaker Change: to the health plans. Are they looking at declines in inpatient utilization and costs on like a regular basis? Just any call there will be very helpful. Thanks, Parth.

David Larsen: Just any call there will be very helpful.

Parth Mehrotra: Thanks, Parth. Thanks for the question, David. So on the first half, look at, you know, we have a very differentiated relationship with the bears, whether it's the blue plans or the national commercial bears. You know, they now understand our model much better than 7, 8 years ago. We've proven for them across our commercial book, across MSSP, across MA and then Medicaid, on what we can do and what we can achieve in a state once we get density. So I think the nature of the conversation is much broader for us. We are often speaking about commercial value-based contracts in addition to MA and Medicaid.

Parth Mehrotra: Thanks for the question, David. So in the first half, we have a very differentiated relationship with the payers, whether it's the Blue Plans or the national commercial payers. They now understand our model much better than seven, eight years ago. We've proven for them across our commercial book, across MSSP, across MA, and then Medicaid what we can do and what we can achieve in a state once we get density. So I think the nature of the conversation is much broader for us.

Speaker Change: Thanks for the question David. So on the first half, we have a very differentiated relationship with the bears, whether it's the Blue Plans or the National.

Speaker Change: Commercial Fares

David: I mean we've had a very consistent sales growth engine which is organic in our existing states. We are pitching the entire business model which is very differentiated across all lines of business for any physician practice, every single patient, every single pair walking in the door for every single specialty. So I think that has truly differentiated us. I think the last couple of years with all the changes in the risk-based environment and medical advantage I think as we noted in our prepared remarks, physician practices are looking at us for a much more holistic solution rather than just a one-off solution for a particular risk contract.

Speaker Change: You know, they now understand our model much better than seven, eight years ago. We've proven for them across our commercial book, across MSSB, across...

Speaker Change: M.A. and then Medicaid, on what we can do and what we can achieve in a state once we get density. So, I think the nature of the conversation is much broader for us. We are often speaking about commercial value-based...

David: I think that truly differentiates trivia. I think on top of that we are deeply embedded in the workflows of the practice from our technology stack and then revenue cycle and care management teams and value-based operations workflow perspective. So I think a practice joining trivia really is understanding all that value proposition and see that in our results. We continue to focus on adding 400 to 500 implementer providers and our existing geographies and then entering many more new geographies. But the engine's pretty strong and it's running. Great.

Parth Mehrotra: We are often speaking about commercial value-based contracts in addition to MA and Medicaid. So I think that broadens the conversation relative to some of the other payers and players in the industry. And I think, you know, what's changed fundamentally for us is that if we enter a new state, oftentimes, we have case studies of good data from what we've achieved in our existing states today that we can take to the payer teams on a national basis, and they're willing to work with us in a new state that we might enter.

Parth Mehrotra: So I think that broadens the conversation relative to some of the other bears, players in the industry. And I think, you know, what's changed fundamentally for us is if we enter a new state, oftentimes we have case studies, a good data from what we've achieved in our existing states today that we can take to the pair teams on a national basis, and they're willing to work with us, you know, in a new state that we might enter. So I think the path to getting into some of the value-based contracts, scooters to our health care economics team, you know, is much shorter, hopefully.

Speaker Change: Contracts in addition to MA.

Speaker Change: and Medicaid. So I think that broadens the conversation relative to some of the other payers.

Speaker Change: players in the industry. And I think what's changed fundamentally for us is if we enter a new state, oftentimes we have case studies or good data from what we've achieved in our existing states today that we can take to the player teams on a national basis, and they're willing to work with us.

Parth Mehrotra: So I think the path to getting into some of the value-based contracts, kudos to our healthcare economics team, is much shorter, hopefully. Our ability to take risk is obviously market-specific, but in general, that timeframe is shorter as we get more confident. So I think we have good payer relationships across the board, and they're happy to work with us and enable us as an entity that keeps community, low-cost community practices viable and saves a lot of money for their members.

Speaker Change: you know, in a new state that we might enter. So I think the path to.

Speaker Change: getting into some of the valuebased contrs go us to our health care economic team

Parth Mehrotra: Our ability to take risk is obviously market-specific, but in general, that time frame is shorter, as well as we get more confident. So I think we have good prayer relationships across the board, and they're happy to work with us and enable us as an entity that keeps community, low-cost community practices viable and save a lot of dollars for the members. And then I think, on your second question, look, I mean, we get data across the board, across each of our different program types within value-based care, and it's not consistent data. So on the commercial book is very different versus MA versus Medicaid.

Speaker Change: is much shorter, hopefully, our ability to take risk is obviously...

Speaker Change: Market-specific, but in general that time frame is shorter as well as we get more confident So I think we have good prayer relationships across the board and and they're happy to work with us and enable us as an entity That keeps community low-cost community practices viable and and save and save a lot of dollars for their members

Speaker: And if I could just follow up on the stock-based comp, it's picked up another $2.5 million sequentially. It's now up 80% year-to-date. What drives?

David: What's the pull-your-expectation there? What's driving the significant increase? I thought that line was supposed to moderate as we have further from the IPO. Thanks. Yeah. So part of the change is effectively when we issued the equity each year. So last year we issued our annual grants in the middle of Q2. This year we issued them in the middle of Q1. So we're still getting a little bit of residual. I would say impact from a stock-com perspective from just sort of the timing difference there.

Parth Mehrotra: And then on your second question, look, I mean, we get data across the board, across each of our different program types within value-based care, and it's not consistent data. So on the commercial book, it's very different versus MA versus Medicaid.

Speaker Change: And then I think on your second question, look, I mean, we get data across the board, across each of our different program types within value-based care, and it's not consistent data. So on the commercial book, it's very different versus MA versus Medicaid.

Parth Mehrotra: That's a big reason why we take the level of risk we do take in each of these buckets. If you enter a new state and get initial attribution, it's unlikely you enter with a full risk mindset because you want to establish a cadence with the physician practices, establish the best practices, start working with the payers, and lack of good data is a risk in the business. So if you're in the risk business like we are, you know that's a risk you have to manage, and so we manage it very thoughtfully.

Parth Mehrotra: That's a big reason why we take the level of risk we do take in each of these buckets.

Speaker Change: that's a big reason why we take the level of risk we do take in each of these buckets if you're enter a new state and get a get initial attribution

Parth Mehrotra: If you enter a new state and get an initial attribution, it's unlikely you enter with a full-risk mindset because you want to establish a cadence with the physician practices, establish the best practices, start working with the payers, and lack of good data is a risk in the business. So if you're in the risk business, like we are, you know, that's a risk you have to manage, and so we manage it very thoughtfully. Again, why we don't jump in with full-risk day one, but overall, I mean, we continue to see utilization trends being elevated. I think the payers are adjusting the benefit designs.

Speaker Change: It's unlikely you enter with full risk mindset because you want to establish...

Speaker Change: cadence with the physician practices, establish the best practices, start working with the payers.

David: And we're looking at, you know, on an annual basis probably 55 to 60 million in total stock-comp expense. And then on a go-forward basis, you know, again, we're still sort of targeting the 1.5 to 2%. Range.

Speaker Change: and and lack of good data is a risk in the business. So if you're in the risk business like we are

Speaker Change: You know, that's a risk you have to manage. And so we manage it very thoughtfully, again, why we don't jump in with full risk day one.

Parth Mehrotra: Again, why we don't jump in with full risk day one. But overall, I mean, we continue to see utilization trends being elevated. I think the payers are adjusting the benefit designs. We just answered a question previously that adds to this. So I think we continue to work with the payers, and we'll see how it plays out over the next few quarters and keep evaluating our risk.

David: I guess I'm still a little confused like what's driving that significant increase you're saying it's all timing or is it something else? It's all just it's all timing. So it's it's when in the period that we issued both grants. So the difference I was so the same explanation if you remember back to Q1. So again, it's just when when did we so like for example last year we issued our annual Stockholm grant Q2 this year we issued a Q1 so there was a big larger variance in Q1 than Q2 because there was a larger period where we didn't have both years of comp expense this year. It's just a composition of half a quarter versus a full quartering Q1.

Speaker Change: but overall i mean we continue to see utilization trends being elevated

Parth Mehrotra: We just answered a question previously that adds to this.

Speaker Change: I think the payers are adjusting the benefit designs. We just answered a question previously that adds to this. So I think we continue to work with the payers and, you know, we'll see how it plays out over the next few quarters and keep evaluating our risk book.

Richard Close: So I think we continue to work with the payers, and we'll see how it plays out over the next few quarters and keep evaluating our risks. Thank you.

Richard Close: Our next question will come from the line of Richard Close with CannonCore Genuity. Please go ahead. Yeah, thanks for the questions. Congratulations on the quarter and guidance.

Operator: Our next question will come from the line of Richard Close with Canaccord Genuity. Please go ahead.

Operator: Our next question will come from the line of Richard Close with Canucor Genuity. Please go ahead.

Speaker Change: Our next question will come from the line of Richard Close with Canaccord Genuity. Please go ahead.

Richard Close: Yeah, thanks for the questions, congratulations on the corridor and guidance.

Richard Close: yes thanks for the questions congratulations on the quarter and guidance

Parth Mehrotra: Parthas, I was wondering if you could provide an update on Ohio and North Carolina or those health system relationships performing in line with expectations now that we're, I guess, almost two years into them. And then can you talk to about any variances in same store growth across the different markets, or are they fairly similar? Yeah, I appreciate the question, Richard. So, on the first one, look at, you know, both markets are progressing as planned. They're never going to straight line, but we have two really strong partners in the Want and Ohio Health. We're working very closely with them.

Parth Mehrotra: Yeah, thanks for the questions, congratulations on the corridor and guidance. Parth, I was wondering maybe if you could provide an update on Ohio and North Carolina. Are those health system relationships performing in line with expectations now that we're, I guess, almost two years into them? And then can you talk about any variances in same store growth across the different markets? Or are they fairly similar?

Speaker Change: is one you to provide an update on ohio and north carolina or those health system relationships performing in line with expectations now that were' i guess almost two years into a

Eduardo Ron: Our next question will come from the line of Jailendra Singh with truest securities please go ahead. Good morning guys this is Eduardo Ron on for Jailendra. Thanks for the question.

Eduardo Ron: Just curious if you can provide some color around the EBITDA margin progression and you know your long-term growth in margin targets and maybe just piggybacking on Andrew's question. If we think about the current development pipeline does it tends to skew more towards expanding in new states or is it more building the breath out in your existing markets? Thanks for the question Eduardo. So on the EBITDA progression look our long-term margin targets are 30 to 35% EBITDA to care margin.

Speaker Change: And then, can you talk about any variances in same-store growth across the different markets, or are they fairly similar?

Parth Mehrotra: Yeah, I appreciate the question, Richard. So on the first one, look out, you know, both markets are progressing as planned. They never go in a straight line, but we have two really strong partners in Novant and Ohio Health. We're working very closely with them, and, you know, it's a long-term partnership.

Speaker Change: Yeah, I appreciate the question, Richard. So on the first one, look out, you know, both markets are progressing as planned. They never go in a straight line, but...

Speaker Change: we have two really strong partners in the want and ohio health we're working very closely with them and it's a long-term partnership our view s to develop those markets over the next

Parth Mehrotra: And, you know, it's a long-term partnership. Our view is to develop those markets over the next four or five 10 years and build very large medical groups like we've done elsewhere. So, but we are pretty pleased with how it's going, and it's pretty much according to plan, and hope we can accelerate some of the flywheel. And that upfields into your second question, which is our business snowballs as we start getting density because when we enter a state, pretty much nobody knows us. And once we get going, we establish an anchor practice or a partnership, and then as physicians join and start to perform better, that starts a very good flywheel where a lot of our top of the funnel, you know, sales referrals are coming from existing practices.

Parth Mehrotra: Our view is to develop those markets over the next few years, for pretty much nobody knows us. And once we get going, we will establish an anchor practice or a partnership. And then as physicians join and start to perform better, that starts a very good flywheel where a lot of our top of the funnel, you know, sales referrals are coming from existing practices. And that leads to very high conversion rates. And as we establish ourselves and start performing well, and there's empirical evidence, you know, we start to snowball.

Eduardo Ron: That's been consistent since since we went public four years ago. As you can see from the first half results we are about 22% and so we're two thirds of the way there. However, that number fully expenses all of the new market that we've entered in the last few years and about 10 to 12 million dollars of expense in those new markets which are still not close to EBITDA break even as well as all the growth investments organic growth investments for the sales team sales and marketing lines about 30 million.

Speaker Change: We've gone on for four, five, 10 years and build very large medical groups like we've done elsewhere, but we are pretty pleased with how it's going and it's pretty much according to plan, and hope we can accelerate some of the flywheel. And that dovetails into your second question, which is...

Speaker Change: Our business snowballs as we start getting density, because when we enter a state,

Speaker Change: Pretty much nobody knows us and once we get going we establish an anchor practice or a partnership and then as physicians join and start to perform better that starts a very good flywheel where a lot of our top of the funnel you know sales referrals are coming from existing practices.

Eduardo Ron: So I think if you perform off of that you can see you know the company is already operating in the most mature markets at the long-term target profile. And we're very proud of that. You can see it's a very proven business model. The unit economics are proven. The flywheel is proven so I think we see ourselves achieving those targets in all of our geographies and consistently progressing towards that long-term target profile.

Parth Mehrotra: And that leads to very high conversion rates. And as we establish and start performing well, and there's empirical evidence, you know, we start the snowballs. So you'll typically see the markets have some sort of an inverted S or some sort of an S curve that it follows. You're seeing that in mid-Atlantic in Georgia, where we continue to add, despite being pretty dense, despite being at, you know, our long-term margin profile targets. We continue to add pretty good sort of physicians every quarter. So, you know that we expect that to happen across all of our markets, and but no to progress in the same manner.

Speaker Change: and that leads to very high conversion rates.

Speaker Change: and as we establish and start performing well and there's empirical evidence we start the snowball so you'll typically see the markets have some sort of inverted us or some sort of an asor of that it follows you're seeing that inmidatlantic in georgia where we continue to add despite being pretty dense

Parth Mehrotra: So you'll typically see the markets have some sort of an S-curve that it follows. You're seeing that in the mid-Atlantic, in Georgia, where we continue to add, despite being pretty dense, despite being at, you know, our long-term margin profile targets, we continue to add a pretty good set of physicians every quarter. So you know, we expect that to happen across all of our markets, but no two progress in the same manner. Healthcare ecosystems are different, the payer dynamics are different, and the composition of medical groups is different.

David: And then on your second question I think it's going to be a combination of both. We are acutely focused on building density in our existing states. That's what drives the flywheel. That's what drives EBITDA margin progression. That's what makes our medical groups very important assets for all the payers. And so you will see us do transactions that can meaningfully increase density and current geographies. And then obviously we're looking to add and get into as many new states so you'll see a combination of both.

Speaker Change: despite being our long-term margin profile targets we continue to add

Speaker Change: pretty good set of physicians every every quarter so you know that we expect that to happen across all of our markets and but no two progress in the same manner health care ecosystems are different to payer dynamics are different composition of the medical groups is different so we just have to factor in all all of that as we as we progress these

Parth Mehrotra: Healthcare ecosystems are different; the payer dynamics are different; composition of the medical groups is different.

Parth Mehrotra: So we just have to factor in all of that as we progress these.

Elizabeth Anderson: Our next question will come from the line of the Elizabeth Anderson with Evercore ISI. Please go ahead. Hey guys, thanks so much for the question. I appreciate how the guidance is sort of like you obviously give it on an annual basis. Can you talk about anything you can call it even qualitatively on the 3-2 versus 4-Q cadence for this year? Thanks. Thanks for the question, Elizabeth. So from a seasonality perspective, I think you should you should see the same trend line as past years.

Jessica Tassen: Our next question comes from the line of Jessica Tassen with Piper Samara. Please go ahead. Hi guys, thanks for taking the question. So it looks like MLR in the 2024 capitated book went from about 99% last quarter to 95% in 2Q.

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

Parth Mehrotra: So we just have to factor in all of that as we progress. Our next question comes from the line of Jessica Tassan with Piper Sandler. Please go ahead. Hi guys, thanks for taking the question. Um, so it looks like MLR in the 2024 cap.

Speaker Change: Our next question comes from the line of Jessica Tassan with Piper Sandler. Please go ahead.

Jessica Tassan: Hi, guys. Thanks for taking the question. So it looks like MLR in the 2024 capitated book went from about 99% last quarter to 95% in QQ. So hopefully,

Jessica Tassen: So hopefully you can just talk a little bit about the positive development and the margin on that book and how we should be thinking about MLR for the rest of the year in the end.

Jessica Tassan: you can just talk a little bit about the positive development and the margin on that book and how we should be thinking about mlr for the rest of the year and the funy funny for capfitated book and then just wondering if you can address the prior year claims and into you you think

Jessica Tassen: It's funny, 24 capitated book and then just wondering if you can address the prior year claims in 2Q. Thanks.

Elizabeth Anderson: It should not materially differ. The second half is a little bit stronger than the first half. We do get our MSSP results in Q3 or Q4. And so I think from a shared savings perspective and then utilization perspective on the FIFA service book, you know, that same pattern would follow. At this point in the year, half a, you know, we've sold and implemented every provider, you know, that will impact this years results.

David Mountcastle: Yeah, thanks for the question, Jess. So obviously, you know, that's a good, positive indication for us. I mean, we restructured some of the MA contracts to protect our EBITDA margin, and the ones that remain, obviously, our hope was to continue to perform as well as we could. So you can see that in the results. David will comment on some of the prior period impact on the numbers. But if you look at in-year, if we are doing capitation, we would like to, you know, save the payer money and therefore generate shared savings for our medical group.

Parth Mehrotra: Yeah, thanks for the question, Jess. So obviously, you know, that's a good positive indication for us. I mean, we, we restructure some of the MEC contracts to protect our EBITL margin, and the ones that remain, obviously our hope was to continue to perform as well as we can. So you can see that in the results.

Speaker Change: yeahthanks for question yes so obvious you know 's that's a good

Speaker Change: Positive indication for us. I mean, we restructured some of the MA contracts.

Speaker Change: to protect our EBITDA margin, and the ones that remain, obviously, our hope was to continue to perform as well as we can. So you can see that in the results.

David Mountcastle: David will comment on some of the prior period. Impact on the numbers, but if you look at any year, if you're doing capitation, we would like to, you know, save the payer money and therefore generate shared savings for our medical groups. So that's our hope. And, and, and we'll only take risk, as we've said, if it's even done free cash flow creative. So, you know, we'll see how the performance continues. You see elevated utilization trends, etc. But we are working pretty diligently despite that to continue to perform well, but we'll see how it plays out.

Elizabeth Anderson: So there's a very good visibility on the FIFA service book. And then our accruals are reflected based on all the data we've got across our value. That's reflected in our updated guidance. But then again, we'll get our MSSP results in Q3, Q4. So we'll see how that plays out, but, you know, we're hopeful, you know, that they'll be as expected. So that's reflected in a guy.

Richard Close: David will comment on some of the prior period impact on the numbers but if you look at in-year, if we are doing capitation we would like to you know save the payer money and therefore generate shared savings for our medical group so that's our hope.

David Mountcastle: So that's our hope. And we'll only take risks, as we've said, if it's EBITDA and free cash flow positive. So, you know, we'll see how the performance continues. You're seeing elevated utilization trends, et cetera, but we are working pretty diligently despite that to continue to perform well. But we'll see how it plays out. But so far, we're pretty pleased.

And we'll only take risk, as we've said, if it's EBITDA and free cash flow creative. So, you know, we'll see how the performance continues. You're seeing elevated utilization trends, etc. But we are working pretty diligently despite that.

AJ Rice: Our next question comes from the line of AJ Rice with UBS. Please go ahead. Hi everybody. Just a specific question. Obviously on the commercial lives you're up nicely year to year and sequentially you showed good growth there. I think governments up similarly year to year but sequentially was more flat. Is that something about the new markets that they skewed to war? We're adding more commercial lives or any thoughts on sequentially the variance and growth there.

David Mountcastle: But so far, we're pretty pleased.

Speaker Change: to continue to perform well, but we'll see how it plays out, but so far we're pretty pleased.

David Mountcastle: And on the prior period development, we just got some updated payer data showing additional attributed lives for 2023. So although you can see the cost side of that, there was also an approximate revenue increase. So from an overall perspective, there was sort of a de minimis impact from the prior year development on the bottom line.

David Mountcastle: Yeah, and on the prior period development, we just got some updated payer data showing additional attributed lives for 2023. So, although you can see the cost side of that, there was also an approximate revenue increase.

Jessica Tassan: And on the prior period development, we just got some updated payer data showing additional attributed lives for 2023. So, although you can see the cost side of that, there was also an approximate revenue increase.

David Mountcastle: So, from an overall perspective, there was sort of a diminutive impact from the prior development to the bottom line.

Speaker Change: So from an overall perspective, there was sort of a de minimis impact from the prior development to the bottom line.

Ryan Daniels: Our next question will come from the line of Ryan Daniels with William Blair. Please go ahead.

Operator: Our next question will come from the line of Ryan Daniels with William Blair. Please go ahead.

Operator: Our next question will come from the line of Ryan Daniels with William Blair. Please go ahead. Yeah, good morning, guys. Thank you for taking the question. Parth, maybe a different twist on the commercial.

Speaker Change: our next question will come from the line of ryan danieualls with william lair please go ahead

Parth Mehrotra: Yeah, good morning, guys. Thank you for taking the question. Parth, maybe a different twist on the commercial risk question for you. A lot of the macro data indicates that employers are facing some of the highest cost trends they've seen in decades. And I'm curious if you've, in any of your more mature markets or hospital partnership markets, gone direct to employer to offer them value-based contracts for their workforce, given your kind of payer and patient agnostic platform. Thanks.

David: And then I might just piggyback off some of the other questions. There's obviously a lot of disruption in the broad peer group. A lot of the people pursuing strategies different than yours, given that disruption among other position oriented companies. Is that make you think about M and A any differently? Is there any opportunities that are presenting themselves that make you think maybe there's an opportunity a little bigger deal than you've done historically?

Richard Close: Yeah, good morning guys. Thank you for taking the question. Parth, maybe a different twist on the commercial risk question for you.

Speaker Change: lot of the macro data indicates that employers are facing some the highest costions 've seen in decades and i'm curious ifyouvein any your more mature markets or hospital partnership markets gone direct to employer to offer them value-based contracts for their workforce given your kind of payer and patient agnostic platform s

Parth Mehrotra: Yeah, I appreciate the question, Ryan. I think it's very underappreciated what we can do with the commercial book. You know, what we've done is to answer it directly. We have a couple of pilots where we have gone directly to employers in markets where we have a lot of density. So the key here is to build density and have an adequate network that we can then offer directly to self-insured employers. So you can think about the university towns. You can think about states where we have a very big density. And as we establish that, we can go directly to self-insured employers.

Parth Mehrotra: I appreciate the question, Brian. I think it's very underappreciated what we can do with a commercial book. What we've done is, to answer it directly, we have a couple of pilots where we have gone directly to employers in markets where we have a lot of density. So the key here is to build density and have an adequate network that we can then offer directly to self-insured employers. So you can think about university towns; you can think about states where we have a very high density.

David: Thanks for the question, AJ. So on the first piece, the commercial lives generally follow implemented provider growth. So that's across all our markets. As we add providers, we get commercial lives on day one and they get included in the value based arrangements we have on the government lives. It's I think it's just timing based on the data we get on some of the lagged attribution. So I think it picks up and then and then if there's any true ups or true downs, I guess, you know, that's that's kind of reflected in some of the between MSSP and MA, but overall, we feel pretty good.

Speaker Change: Yeah, I appreciate the question, Brian . I think it's very underappreciated what we can do with a commercial book. You know, what we've done is, to answer it directly, we have a couple of pilots.

Speaker Change: where we have gone directly to employers in markets where we have a lot of density so those are the key here is to build density

Richard Close: and have an adequate network

Richard Close: that we can then offer directly to self-insured employers.

Speaker Change: So you can think about university downs, you can think about states where we have a very big density, and as we establish that...

Parth Mehrotra: And as we establish that, we can go directly to self-insured employers. We also can work with health plans on the ASO book where they're managing the network, but then we are a very preferred partner where we can bring some sort of a narrow network product. And we've started to have some of those initial discussions with payers, but I think that is still to come. I just don't think it's tenable for this level of inflation in the commercial book to persist before employers say they've got to do something about it.

Parth Mehrotra: We also can work with health plans on the ASO book where they're managing the network. But then we are a very preferred partner where we can bring some sort of a narrow network product. And we've started to have some of those initial discussions with pairs. But I think that is to come.

David: You can see, you know, overall attribution is already at the high end of our original guidance. So I think we've added what we expected to. You can see some more additions over the next couple of quarters. There's some lives bleed in, but we already well ahead of our plan from that perspective overall from an attribution perspective.

Speaker Change: that we can go directly to self and sh employers

Richard Close: We also can work with health plans on the ASO book.

Speaker Change: where they're managing the network but then we are a very preferred partner where we can bring some sort of an aour network product

Speaker Change: and we started to have on those initial discussions with pairers but i think that is to come we just i just don't think it's stable for this level of inflation in in the commercial book to persist

Parth Mehrotra: I just don't think it's tenable for this level of inflation in the commercial book to persist before employers say they've got to do something about it. You see some of the on-site models come up as a way to at least have some presence on-site where employees can attend. But there are employers that are virtual; there are employers that are multi-state. I think we have a pretty unique model which can offer the ability to do commercial risk for self-insured employers. So I think state you and I think this will develop over the next few years. And we have a really well positioned to pursue this.

David: And then on your second question, look, I think we're in a very strong position. You know, Josh asked the question on cash. We have a very pristine balance sheet. We have debt capacity. We have pretty solid EBITDA free cashflow profile. So you can expect us to look at all kinds of assets. I think the key is to be really thoughtful and do deals that would be creative to share holders from a long term perspective that are EBITDA and free cashflow creative.

Parth Mehrotra: You're seeing some of the on-site models come up as a way to at least have some presence on-site where employees can attend. But there are employers that are virtual; there are employers that are multi-state. I think we have a pretty unique model which can offer the ability to take commercial risk for self-insured employers. So I think you should stay tuned. I think this will develop over the next few years, and we are really well positioned to...

Speaker Change: before employers said they've got to do something about it you' see some of the onsite models come up as a way to at least

Speaker Change: have some presence on site where employees can can attend but

Richard Close: There are employers that are virtual, there are employers that are multi-state. I think we have a pretty unique model which can offer the ability to do commercial risk for self-insured employers. So stay tuned. I think this will develop over the next few years and we are really well positioned to pursue this.

David: I think we're going to be very disciplined, but I think our very consistent performance over the past seven, eight years. You can see the data from our S1 and being public for four years. The nature of our business model serving the needs of the entire practice. I think that's truly differentiated. So I think physician practices. Other entities looking to sell or transact or looking at our balance sheet or looking at our performance. And our hope is they view us as a very strong durable partner as this industry evolves. And I think we'll be opportunistic to take advantage of any dislocations.

Michael Howell: Our next question will come from the line of Michael Howell with Baird. Please go ahead.

Operator: Our next question will come from the line of Michael Hall with Baird. Please go ahead.

Speaker Change: our next question will come from the line at michael haw was bard please go ahead

Michael Howell: I thank you. It's a quick clarification among my real question. Understanding, or I understand you're expecting minimal year-to-year increases in shared savings.

Operator: Hi, thank you. Just a quick clarification on my real question. I understand you're expecting minimal year-to-year increases in shared savings. However, it looks like revenue came in a bit lighter than expected. It looks like the typical 2Q cadence is an increase sequentially. Is that mainly driven by your MSSP live dropping 6,000 sequentially? Is that a Delaware exit? And then my main question is, yeah, Parth, you just mentioned you're one of the few value-based care providers that take on commercial upside and downside risk.

Speaker Change: Hi, thank you. Just a quick clarification on my real question. I understand you're expecting

Michael Howell: It looks like revenue came in a bit lighter than expected. It looks like typical QQ cadence is an increased sequentially. Is that mainly driven by your MSSP Live dropping 6,000 sequentially? Is that the Delaware exit? And then my main question is, yeah, part you just mentioned, you're one of the few value-based tech providers that take on commercial outside and downside risks. So I think you might have just answered my question. But it's a secret sauce, and managing those live really building market density, having great networks, driving better, sort of unit economics.

Speaker Change: minimal year to year increased insureance savings a less like revenue came in a bit lighterer than expected looks like typical q q cadence is an increase sequentially is that mainly driven by dsp v dropping two thousand sequentially is that

Jeff Garrow: Our next question will come from the line of Jeff Garrow with Stevens. Please go ahead. Yeah, good morning. Thanks for taking the questions.

Operator: So I think you might have just answered my question, but is the secret sauce in managing those lives really, you know, building market density, having great networks, driving better sort of unit economics, or is there anything in the clinical care and care management approach that you need to do differently in order to manage commercial lives better?

Richard Close: Delaware exit. And then my main question is, yeah Parth you just mentioned you're one of the few value-based care providers that take on commercial upside and downside risk.

Jack Slevin: So I know it's a little early here, but as we head into fall, let's hope and you could discuss the current environment and previous appetite for growing exposure to upside, downside risk contracts next year. Some of the largest payers have discussed a better environment for value-based care contracts that are wins for all stakeholders. So I want to check in whether you're seeing the same thing and how that's shaping your views over the next 12 to 18 months.

Speaker Change: So, I think you might have just answered my question, but is the secret sauce in managing those labs really, you know, building market density, having great networks, driving better sort of unit economics, or is there anything in the, like, clinical care, care management approach that...

Parth Mehrotra: Or is there anything in the clinical care management approach that you need to do differently in order to manage commercial lives better? Yeah, I appreciate the question.

David Mountcastle: Yeah, I appreciate the question. So I'll let David go first on the first one, and then I'll tackle it.

Speaker Change: you need to do differentlyin order to manage commercial

David Mountcastle: So I'll let David go first on the first one, and I'll tackle the second one. Yeah. So for the first one, again, from a shared savings perspective, this was just kind of normal, normal quarter-to-quarter value variability that we expect based on the timing over all of our contracts. So it's not MSSP. It's not one contract specifically. It's all of them. Again, you can see we raised our guidance and have a diversified value-based care book. who, you know, if anything else, it shows our confidence in the future. And again, we always remind people to look at this on an annual basis, so we're going to get some quarterly fluctuations, but on an annual basis, it's very consistent, so.

Richard Close: Better.

Speaker Change: the opre other quest i davidgo first on thefirst i'll ap the second

David Mountcastle: Yeah, so for the first one, again, from a shared savings perspective, this was just kind of normal quarterly-to-quarter variability that we expect based on the timing of all of our contracts, so it's not MSSP, it's not one contract specifically, it's all of them. Again, you can see we've raised our guidance to have a diversified value-based care book, so, you know, if anything else, it And again, we always remind people to look at this on an annual basis, so we're going to get some quarterly fluctuations, but on an annual basis, it is very consistent. Yeah, we have

Jack Slevin: Thanks. Thanks for the question, Jeff. So, I think it's important to recognize we today already do a fair bit of upside downside and take downside risk. If you look at our MSSP book, 76% of our lives are in enhanced track with the maximum risk that CMS allows us, 38% of the commercial lives are in upside downside track. And I think we're one of the very few companies that do commercial risk in that manner in a very sophisticated manner.

Speaker Change: one. Yeah, so for the first one, again, from a shared savings perspective, this was just kind of normal, normal quarter to quarter variability that we expect based on the timing over all of our contracts. So it's not MSSP, it's not one contract specifically, it's all of them.

Speaker Change: again you cansee we' raed our guidance that adiversified value-based carebooks so you know anything else shows our confence in the future and again we have always reminded you to lookat this on an annual basis so we're going to get some quarterly fluctuations but on an annual basis is very consistentso

Jack Slevin: It's a very different value proposition to the pair. So, if your questions mainly get towards MA and capitated MA, we do take downside risk in MA. We're just putting Godrails given the current environment. I think we're just going to continue to be thoughtful. I think you're seeing the pairs are just to obviously we 28 utilization friends. Every single pair is commented on it. So, I'm not going to go into details. But I think that's a two, three-year process.

David Mountcastle: Yeah, we're performing pretty much going to plan and that's reflected in the guidance I think there's a reason we don't give quarterly guidance because you know We're still not a really big player and that you can have some of this quarterly variance But overall we feel we feel really good and that's reflected in the updated guidance So on the second one, look, I think you have to start with the business model first I think it's very underappreciated that we are actually building Medical groups, which are very dense in the geographies we operate in, which are paragnostic for the entire patient population, entire specialty network that we are creating across the practice. I think it's pretty much OptumCare and us that do that at some scale on a multi-state basis.

David: Yeah, we are performing pretty much according to plan, and that's reflected in the guidance. I think there's a reason we don't give quarterly guidance because, you know, we're still not a really big player, and you can have some of this quarterly variance, but overall, we feel really good, and that's reflected in the updated guidance. So on the second one, look, I think you have to start with the business model first. I think it's very underappreciated that we are actually building medical groups that are very dense in the geographies we operate in, which are paragnostic for the entire patient population, and entire specialty network that we are creating across the practice. I think it's pretty much OptumCare and us that do that at some scale on a multi-state basis.

David Mountcastle: Yeah, we're performing pretty much according to plan, and that's reflected in the guidance.

David Mountcastle: I think there's a reason we don't give quarterly guidance, because, you know, we're still not a really big player, and you can have some of this quarterly variance. But overall, we feel really good, and that's reflected in the updated guidance.

David: we are performing pretty much acgoing to plan and that's reflected in the idancei there's a reason we don't give quarterly guidance because know we're still not

David: A really big player and you can have some of this quarterly variance, but overall we feel really good and that's reflected in the updated guidance. So on the second one, look, I think you have to start with the business model first. I think it's very underappreciated that we are actually building.

Parth Mehrotra: So on the second one, look, I think you have to start with the business model first. I think it's very underappreciated that we are actually building medical groups, which are very dense in the geographies we operate in, which are very agnostic for the entire patient population, entire specialty network that we are creating across the practice. I think it's pretty much optimum care and us that do that at some scale on a multi-state basis. On top of that, we are deeply embedded in the workflow. So if you want to do anything, and commercial, it's very hard to do if you are not in the technology stack, in the RCM workflows, and influencing some of that.

Parth Mehrotra: We've had this view on MA, which has been a little bit contrarian. We just don't think overnight the environment changes. You're going to see the pairs are just the benefit designs going into 2025. We think V28 impact will continue through 25 into 26. And then we are downstream from the pair. So, we are happy to take as much risk. The key for us, as we said last quarter, is we've got to be compensated to take that additional risk.

David: medical groups which are very dense in the geographies we operate in which are pair of nostic for the entire patient population entire specialty network that we are creating across the practice

David: I think it's pretty much OptumCare and us that do that at some scale on a multi-state basis.

David Mountcastle: On top of that, we are deeply embedded in the workflows. So if you want to do anything in commercial, it's very hard to do if you are not in the technology stack, in the RCM workflows, and influencing some of that.

David: On top of that, we are deeply embedded in the workflows. So if you want to do anything in commercial.

Parth Mehrotra: You have to recognize that care delivery takes place in entities like ours. The pairs, unless they're vertically integrated, don't, you know, the insurance arm does not provide care. So, the doctors taking good care of patients across, you know, entire age cohorts have to be compensated well to assume that risk. And I think, you know, we are fiduciaries from that perspective, on behalf of our physicians and our medical groups, to ensure that they are getting paid for doing all the good work.

David: It's very hard to do if you are not in the technology stack, in the RCM workflows, and influencing some of that. Otherwise, it's very difficult to take risk if you're just getting data from the payers on a three, six, nine month lag basis, which is what happens with commercial from a downstream perspective.

Parth Mehrotra: Otherwise, it's very difficult to take risk if you're just getting data from the payers on a three, six, nine-month lag basis, which is what happens with commercial from a downstream perspective. I think as we build that density, it allows us to start managing the population really well. We've demonstrated now that across many payers in many geographies with close to three-quarters of a million lives that we can get some care management fees and use those dollars to handhold some of these commercial patients much better across age cohorts. I think that's also important.

Parth Mehrotra: Otherwise, it's very difficult to take risk if you're just getting data from the payers on a three, six, nine-month lack basis, which is what happens with commercial from a downstream perspective. I think as we build that density, it allows us to start managing the population really well. We've demonstrated now that across many payers and many geographies, with close to three quarter of a million lives, that we can get some care management fees and use those dollars to handhold some of these commercial patients much better across age cohorts. And I think that's also important. You can do commercial value within the pediatric population, the middle ages.

David: i think as we build that density it allows us to start managing the population really well we've demonstrated now that across many payers and many geographies with close preree quarter ofamillion lives

Parth Mehrotra: So, I think as the pairs are just hopefully, you know, we'll get into some normalization. And then we're happy to dial up risk as long as we see a good risk reward. And we have well positioned to do so. The lives have not gone anywhere. The doctors are not going anywhere. We're just, you know, restructure some of the contract from a financial perspective to protect unnecessary downside for the good work we're doing.

David: that we can get some care management fees and use those dollars to hand hold some of these commercial patients much better across age cohorts and I think that's also important. You can do commercial value within the pediatric population, the middle ages, you can do it just pre-Medicare age cohorts call it 50-plus.

Parth Mehrotra: You can do commercial value within the pediatric population, the middle age population, you can do it just for pre-Medicare age cohorts, call it 50 plus. That's very valuable to the payers as those lives age into Medicare Advantage or Medicare Shared Savings. So I think the business model structure fundamentally differentiates us to allow us to do that. And as we've noted, getting care management fees and shared savings on top of fee-for-service management fees is a true differentiator. It really increases take-home pay for providers. It's getting them their due share for the good work that they're doing with these lives.

Parth Mehrotra: You can do it just pre-Medicare, age cohorts call it 50 plus. And then that's very valuable to the payers that those lives agent into Medicare Advantage or Medicare shared savings. So I think the business model structure fundamentally differentiates us to allow us to do that. And as we've noted, getting care management fee and shared savings on top of fee-for-service management fees is a true differentiator. It really increases stake home pay for the providers. It's getting them, getting them that do share for the good work that they're doing with these lives. And I think it diversifies our book of business and our profitability and EBITDA profile and the stability in our results, like you've seen.

David: And that's very valuable to the payers as those lives age into Medicare Advantage or Medicare Shared Savings.

Jack Slevin: Our next question comes from the line of Jack Sleven with Jeffries.

Speaker Change: so i think the business model structure fundamentally differentiatess us to allow us to do

David: Please go ahead. Hey, good morning. Thanks for taking the question.

Jack Slevin: I wanted to ask you a couple on MSSP. Maybe one, just as we're coming sort of to the end of the, the BD cycle for 2025, how that's shaping up. And then a couple of just to get your thoughts on, on some of the changes that CMS has announced, you know, this year and last year, going forward, you know, specifically sort of what benefits you could see from prepaid shared savings. And, you know, if, um, if the elimination of the negative regional adjustment opens up more BD avenues for you than then what you thought about previously or really anything else that stuck out of note to you on some of the adjustments they announced.

Speaker Change: and as we snoted

David: Getting care management fee and shared savings on top of fee-for-service management fees is a true differentiator It really increases take-home pay for the providers

Speaker Change: it's getting them getting them they do share for the good work that they're doing with these lives and i think it diversifies our book of business and our profitability and ebitda profile and the stability in our results like you've seen so if you look at the seven -year empirical data from the time we issued our s one

Parth Mehrotra: And I think it diversifies our book of business and our profitability and EBITDA profile and the stability in our results, as you've seen. So if you look at the seven-year empirical data from the time we issued our S1, you know, we had cycles pre-COVID, during COVID, post-COVID, utilization down, utilization up, MA environment challenging, and you've seen every single metric. We progressed very consistently on a very thoughtful basis and grew the business all the way down to free cash flow.

Parth Mehrotra: So if you look at the seven-year empirical data from the time we issued RS1, we had cycles pre-COVID, during COVID, post-COVID, utilization down, utilization up, MA environment challenging, and you've seen every single metric. We progress very consistently on a very thoughtful basis and grown the business and grown all the way down to free cash flow. So I think the commercial book plays a big part in that in the stability of those results across cycles. And I think that truly differentiates us.

David: You know, we had cycles pre-COVID, during COVID, post-COVID.

David: Utilization down, utilization up, MA environment challenging and you've seen every single metric we progress very consistently on a very thoughtful basis and grown the business and grown all the way down to free cash flow.

Jack Slevin: Thanks. Thanks for question, Jack. So from a BD perspective, look, it's no different than any of the past years. When we add a primary care, you know, physician or a provider to our to our platform, the lives come in day one and they get attributed into our MSSP program, even if we are adding providers during the course of the year. So I think it's less governed by, you know, on, you know, a Jan one date, even though the program resets from a performance here perspective.

Parth Mehrotra: So I think the commercial book plays a big part in that, in the stability of those results across cycles. And I think that truly differentiates us. Our next question comes from the line of Ryan Langston with TV Cowan. Please go ahead. Hi, good morning. Given all the elevated trend commentary we've heard from payers and even the providers, I guess.

Speaker Change: so i think the commercial book plays a big part in that in the stability of those results across cycles and i think that truly differentiates us

Ryan Langston: Our next question comes from the line of Ryan Langston with TD Cowlin. Please go ahead.

Operator: Our next question comes from the line of Ryan Langston with TV Cowan. Please go ahead.

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

Ryan Langston: Hi, good morning. Given, I guess all the elevated trend commentary we've heard from some of the payers and even the providers, I guess, combine that with the likelihood of probably broad MA benefit reductions and just general market dynamics. Are you seeing any different behavior from your competitors in markets, like maybe in terms of how aggressive or not aggressive they're going after capitated contracts or even competing with some of the physician affiliations you may be pursuing?

Ryan Langston: Hi, good morning. Given, I guess, all the elevated trend commentary we've heard from some of the payers and even the providers, I guess, you know, combine that with the likelihood of

Jack Slevin: But we continue to add lives and you can see that in our reported numbers, you know, as they grow, grow quarter over quarter. We do get a bump up in Q1, but then it normalizes. So I don't think from a sales perspective, it's any different. I do think back to some of the questions on BD that we're taking advantage of the any dislocations in the industry and speaking to as many groups as we can.

Ryan Langston: Probably broad MA benefit reductions and just general market dynamics. Are you seeing any different behavior from your competitors in markets? Like maybe in terms of how aggressive or not aggressive they're going after capitated contracts or even competing with, you know, some of the physician affiliations you may be pursuing? Thanks.

Parth Mehrotra: Thanks. Yeah, look, I'm not going to get into specific competitors, but generally there's been a lot of disruption. We read the same news you all read. Their company's going bankrupt, company's facing challenging, you know, free cash flow situations and financing situations, as they've not managed the risk book really well. They're raising dilutive capital, so on and so forth. I think what's important to recognize is sophisticated physician practices and community doctors have been around for a long time. They've been approached by private equity, back entities, venture capital back entities, some of the new players, you know, for the last 20, 30 years, if you've been around.

Parth Mehrotra: I'm not going to get into specific competitors, but generally, there's been a lot of disruption. We read the same news you all read, that companies are going bankrupt, companies facing challenging free cash flow situations and financing situations as they've not managed the risk book really well. They're raising dilutive capital, so on and so forth. But I think what's important to recognize is sophisticated physician practices and community doctors have been around for a long time.

Speaker Change: I'm not going to get into specific competitors, but generally there's been a lot of disruption. We read the same news you all read, their company is going bankrupt.

Jack Slevin: A head of the Jan one cycle and this is a pretty strong sales quarters for us to kind of get ahead of those discussions. So but that's no different than than past years. And then to the second question, but I think we've been participants in in MSSP would see MS for the past seven, eight years. We've seen many changes over the over that period of time to the program. That is natural progression through different tracks of MSSP and then the enhanced rack.

Speaker Change: companies facing challenging you know free cash flow situations and financing situations as they've not managed the risk book really well. They're raising dilutive capital so on so forth. I think what's important to recognize is

Speaker Change: Sophisticated physician practices and community doctors have been around for a long time.

Parth Mehrotra: They've been approached by private equity-backed entities, venture capital-backed entities, some of the new players, for the last 20, 30 years, if you've been around. I think they see this differentiation much more acutely than the street things they do. I think you can throw money at acquiring doctors' practices or signing them up, but ultimately, the business model and the performance matter. I think we're seeing a lot of rationalization over the past couple of years.

Speaker Change: They've been approached by private equity-backed entities, venture capital-backed entities, some of the new players, you know, for the last 20, 30 years, if you've been around.

Jack Slevin: So whether it is a new full risk version of MSSP, whether it's pre paying some of the dollars to do care management and such services. You know, we're ready for it. I think those all positive changes. They make sure that adequate dollars are flowing to primary care community doctors to take good care of patients. You know, we saw that in the Maryland primary care plus program where, you know, three or four years ago, a version of that was implemented and we did really well in that program. So we've we've performed in such programs over the years. So I think most of these changes hopefully are beneficial to us. We'll obviously see the fine print if and when once they get implemented.

Parth Mehrotra: And I think they see this differentiation much more acutely than the street things they do. So I think you can throw money in acquiring doctor's practices or signing them up, but ultimately the business model and the performance matters. And I think we're seeing a lot of rationalization over the past couple of years. I think it's feel the bigger entities had acquired assets, and they seem to be now shedding them or slowing them down. So I think any of this disruption naturally benefits a strong business model like ours. And that's reflective of some of the questions we just answered on the call earlier, where our flywheel continues to progress in existing states, good conversations, and entering new states.

Operator: I think they see this differentiation much more acutely than the street things they do. So I think you can throw money in acquiring doctor's practices or signing them up, but ultimately the business model and the performance matters.

Speaker Change: and I think we're seeing a lot of rationalization over the past.

Parth Mehrotra: I think a few of the bigger entities have acquired assets, and they seem to be now shedding them or slowing them down. I think any of this disruption naturally benefits a strong business model like ours, and that's reflective of some of the questions we just answered on the call earlier, where our flywheel continues to progress in existing states and we have good conversations about entering new states. We're just going to continue to be very thoughtful and take advantage of the situation.

Speaker Change: couple of years i think few of the bigger entities have had acquired assets

Speaker Change: and they seem to be now shutting them or slowing them down

Operator: So I think any of this disruption naturally benefits a strong business model like ours.

David: But overall with one of the largest MSSP books out there and given our performance track record, I think we look forward to some of these changes and we're excited about how the program progress, from here.

Speaker Change: And that's reflective of some of the questions we just answered on the call earlier where

Operator: Our flywheel continues to progress in existing states, good conversations in entering new states. We're just going to continue to be very thoughtful and take advantage of the situation as we can.

Parth Mehrotra: We're just going to continue to be very thoughtful and take advantage of the situation as we can.

Daniel Grosslight: Our next question comes from the line of Daniel Grosslight with City. Please go ahead.

David Larsen: Our next question comes from the line of David Larsen with BTIG. Please go ahead. All right.

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

Operator: Our next question comes from the line of Daniel Gross Lightwood City. Please go ahead.

Daniel Grosslight: Hey guys, thanks for taking the question, and congrats on a strong quarter here. I just wanted to go back on how you're thinking about new market entrance, not just this year, but over the next years. Your entrance into New Ridge Beach has slowed from last year, but perhaps last year was a bit anomalous. But here's if there's been anything different in how you're thinking about new markets versus it's now, or perhaps if there's any macro change in the environment that your preference to advancing market.

Operator: Hey guys, thanks for taking the question and congrats on a strong quarter here. I just wanted to go back on how you're thinking about new market entrance, not just this year but also over the next year. Your entrance into news has slowed from last year, but perhaps last year was a bit anomalous. But curious if there's been anything different in how you're thinking about new markets versus now, or perhaps if there's any macro change in the environment that has affected your preference for existing ones.

Richard Close: Can you talk a little bit about your discussions with health plans? I mean, obviously all of the major plans seem to be under pressure with our MLRs increasing V28 utilization. Are they introducing you to more, you know, physician practice partners in different states? And then part of that, can you talk a bit about how you measure outcomes on sort of a consistent basis and how you're feeding that information to the health plans?

Speaker Change: guys thanks are taking the question and congress on a strong court here i just wanted to to go back on how you're thinking about new market entrance not just gear by but over the next atyears your entrance into new workage be said slowed from last year but perhaps last year was a bit anomalous

David: But curious if there's been anything different in how you're thinking about new markets versus now, or perhaps if there's any macro change in the environment that has affected your preference for existing ones.

Speaker Change: curious if there's been anything different how you're thinking about new markets versus it's now or perhaps if there's any macro change in the vironment that if your preference to to existing market

Parth Mehrotra: Yeah, thanks for the question, Daniel. You're breaking up a little bit, but I think we got most of the questions. So I don't think anything's fundamentally changed since the IPO. We've said our aim is to target one to two new states every year. These are obviously lumpy. You saw when we did that consistently, and then there was a period of four to six quarters where we added five new markets. I think VD deals happen when they happen, as we noted in our prepared remarks. Our pipeline seems pretty robust. We're in 13 states. Our aspirations are to be a true national company, so you should expect us to keep adding.

Parth Mehrotra: Thanks for the questions, Daniel. You were breaking up a little bit, but I think we got most of the questions.

Parth Mehrotra: So I don't think anything's fundamentally changed. Since the IPO, we've said our aim is to target one to two new states every year, but these are obviously lumpy.

David: Yeah, thanks for the question, Daniel. You were breaking up a little bit, but I think we got got most of the questions. So I don't think anything's fundamentally changed.

Richard Close: Are they looking at declines and inpatient utilization and costs on like a regular basis? Just any call there will be very helpful. Thanks, Parth. Thanks for the question, David. So on the first half, look at, you know, we have a very differentiated relationship with the bears, whether it's the blue you know, they now understand our model much better than seven, eight years ago. We've proven for them across our commercial book, across MSSP, across MA and then Medicaid on what we can do and what we can achieve in a state once we get density.

Speaker Change: Since the IPO, we've said our aim is to target one to two new states every year. These are obviously lumpy. You saw when we did that consistently, and then there was a period of four to six quarters where we added.

Parth Mehrotra: You saw when we did that consistently, and then there was a period of four to six quarters where we added five new markets. I think BD deals happen when they happen. As we noted in our prepared remarks, our pipeline seems pretty robust. We're in 13 states. Our aspirations are to be a true national company, so you should expect us to keep adding. You'll have periods where we add two or three or four pretty quickly, and then we add a little slowly.

Speaker Change: five new markets i think bd deals happen when they happen as we noted in our prepared remarks are our pipeline seeamms pretty robust

Speaker Change: we're in thirteen states our aspirations ought to be a tr national company so you should expect us to keep badding

Richard Close: So I think the nature of the conversation is much broader for us. We are often speaking about commercial value-based contracts in addition to MA and Medicaid. So I think that broadens the conversation relative to some of the other bears, players in the industry. And I think, you know, what's changed fundamentally for us is if we enter a new state, often time we have case studies, a good data from what we've achieved in our existing states today that we can take to the pair teams on a national basis and they're willing to work with us, you know, in a new state that we might enter.

Parth Mehrotra: And you'll have periods where we add to a three or four pretty quickly, and then we add a little slowly, but that's just a nature of how we enter new markets on a thoughtful basis. Given our cash balance, as we noted earlier on the call, I think we have the capital to pursue some of these opportunities more aggressively. But again, we're going to be very thoughtful, do VD on a, you know, where it makes sense from an EBITDA and free cash for perspective and building these large scale medical groups. So I think we're going to keep pursuing these opportunities and keep doing what we've done consistently over the past few years.

Speaker Change: and you'll have periods where we add two or three or four pretty quickly and then

Parth Mehrotra: But that's just the nature of how we enter new markets on a thoughtful basis. Given our cash balance, as we noted earlier on the call, I think we have the capital to pursue some of these opportunities more aggressively. But again, we're going to be very thoughtful, do BD where it makes sense from an EBITDA and free cash flow perspective, and build these large-scale medical groups. So I think we're going to keep pursuing these opportunities and keep doing what we've done consistently over the past year.

Speaker Change: And then we add a little slowly, but that's just the nature of how we enter new markets on a thoughtful basis.

Speaker Change: given our cash balance as we noted earlier on the call i think we have the capital to pursue

Speaker Change: Some of these opportunities more aggressively, but again, we're going to be very thoughtful.

Speaker Change: do do bd on a where it kessense from an ebitddone free cash low perspective and building these large scale medical groups so i think we're to keep pursuing these opportunities and keep doing what we've done consistently over the past few years

Richard Close: So I think the path to getting into some of the value-based contract scooters to our health care economics team, you know, is much shorter, hopefully. Our ability to take risk is obviously market-specific but in general that time frame is shorter as well as we get more confident. So I think we have good prayer relationships across the board and they're happy to work with us and enable us as an entity that keeps community, low-cost community practices viable and save a lot of dollars for their members.

Adam Ron: Our final question will come from the line of Adam Ron with Bank of America. Please go ahead.

Operator: Our final question will come from the line of Adam Ron with Bank of America. Please go ahead.

Speaker Change: our final question will come from the line at adam ron with makeank of america please go ahead

Adam Ron: Hey, thanks for squeezing me in. So if I divide the fee for service practice collections by the number of implement to providers and come up with like my own feeling for a provider number, it seems like that has been somewhat flat over the past few quarters. I’m just wondering, like, you know, I would think about that as should being up like three to five percent with cost trend plus you’re trying to help the doctors recruit more patients. And so, like, is that a makeshift dynamics? Like, are you recruiting maybe like lower, you know, revenue position groups? And like, over time, how should we think about that number? Thanks.

Operator: Hey, thanks for squeezing me in. So if I divide the fee for service practice collections by the number of implemented providers and come up with my own billing for provider number, it seems like that has been somewhat flat over the past few quarters. And I'm just wondering, like, you know, I would think about that as should be up like 3 to 5% with the cost trend, plus you're trying to help the doctors recruit more patients. And so, like, is that a makeshift dynamic? Like, are you recruiting maybe, like, lower revenue position groups? And, like, over time, how should we think about that number? Thanks.

Speaker Change: hey thanks first swee me so if i divide the pleice for service practice collections by the number of implemented providers and come up with like my own billing for a provider number it things like that has been somewhat flat over the pastfew quarters that i'm just wondering like

Parth Mehrotra: And then I think on your second question, look, I mean, we get data across the board, across each of our different program types within value-based care and it's not consistent data. So on the commercial book is very different versus MA versus Medicaid. That's a big reason why we take the level of risk we do take in each of these buckets. If you enter a new state and get a get initial attribution, it's unlikely you enter with full-risk mindset because you want to establish a cadence with the physician practices, establish the best practices, start working with the payers and lack of good data is a risk in the business.

Speaker Change: You know, I would think about that as should being up like three to five percent with cost trend, plus you're trying to help the doctors recruit more patients, and so, like, is that a makeshift dynamic? Like, are you recruiting maybe, like, lower, you know, revenue physician groups? And, like, over time, how should we think about that number? Thanks.

David Mountcastle: Thanks for the question, Adam. So, yeah, I think that's an interesting metric, but we track that internally. It's not a big driver because, as you noted, it's mainly driven by new markets that come on when we don't have the full year collections number in for a provider if they come on mid-year. And then, secondly, it's a mix between physicians and APPs or NPs. So obviously, APPs and NPs have much lower collections per provider versus physicians, and then there's also the specialty versus primary care, pediatrician, and OBGYN mix.

David: Thanks for the question, Adam. So, yeah, I think that's an interesting metric, but we track that internally. It's not a big driver because, as you noted, it's mainly driven by new markets that come on when we don't have the full year collections number in for a provider if they come on mid-year. And then, secondly, it's a mix between physicians and APPs or NPs. So obviously, APPs and NPs have much lower collections per provider versus physicians, and then there's also the specialty versus primary care, pediatrician, and OBGYN mix.

Parth Mehrotra: Thanks for the question, Adam. So yeah, I think that's a that's an interesting metric, but you know we track that internally. It's not a big driver because, as you know, it's mainly driven by new markets that come on when we don't have the full year collections number in for a provider if they come on mid-year. And then secondly, it's a mix between positions and app's or np's, so obviously app's and np's have have much lower collections for provider versus physicians. And then there's also the specialty versus primary care pediatrician OBGYN mix, so that varies over time. But on a consistent basis, once a market is mature and more settled, you know we see pretty consistent trends. We have annual inflators and commercial contracts, we have pretty diversified books, so overall, you know that metric should be fairly stable. But those are the factors that that influence it, but we don't see any any concern from that perspective.

David: thanks for the question adam so yeah i think that's that's an interesting metric but youknow we track that internally it's not a big driver because as you noted

David: It's mainly driven by new markets that come on when we don't have the full year collections number.

David: in for a provider if they come on mid-year. And then secondly, it's a mix between.

David: Physicians and APPs or NPs. So obviously, APPs and NPs have much lower collections per provider versus physicians. And then there's also the specialty versus primary care pediatrician OBGYN mix.

Parth Mehrotra: So if you're in the risk business like we are, you know, that's a risk you have to manage and so we manage it very thoughtfully. Again, why we don't jump in with full-risk day one. But overall, I mean, we continue to see utilization trends being elevated. I think the payers are adjusting the benefit designs. We just answered a question previously that adds to this. So I think we continue to work with the payers and you know, we'll see how it plays out over the next few quarters and keep evaluating our risks.

David Mountcastle: So that varies over time. But on a consistent basis, once a market is mature and more settled, we see pretty consistent trends. We have annual inflation clauses in our commercial contracts. We have pretty diversified books.

David: So that varies over time. But on a consistent basis, once a market is mature and more settled, we see pretty consistent trends. We have annual inflation clauses in our commercial contracts. We have pretty diversified books.

David: So that varies over time, but on a consistent basis, once a market is mature and more settled, you know, we see pretty consistent trends. We have annual inflators in our commercial contracts. We have pretty diversified books, so overall, you know, that metric should be fairly stable.

Operator: So overall, you know, that metric should be fairly stable. But those are the factors that influence it. But we don't see any concern from that.

David Mountcastle: So overall, you know, that metric should be fairly stable. But those are the factors that influence it. But we don't see any concern from that.

Operator: But those are the factors that influence it, but we don't see any concern from that perspective.

Richard Close: Our next question will come from the line of Richard Close with Cannoncore Genuity. Please go ahead. Yeah, thanks for the questions.

Operator: That will conclude our question and answer session. I'll turn the call back to management for any closing remarks. Thank you for joining us today. We appreciate your interest in the company and look forward to discussing our results next quarter.

Operator: That will conclude our question and answer session. I'll turn the call back to management for any closing remarks.

Robert Borchert: That will conclude our question and answer session. I'll turn the call back to management for any closing remarks.

Parth Mehrotra: Thank you for joining us today. We appreciate your interest in the company and look forward to discussing our research.

Robert Borchert: Thank you for joining us today. We appreciate your interest in the company and look forward to discussing our results next quarter.

Jessica Tassen: Congratulations on the quarter and guidance. Parthas, I was wondering if you could provide an update on Ohio and North Carolina or those health system relationships performing in line with expectations now that we're I guess almost two years into them. And then can you talk to about any variances in same store growth across the different markets or are they fairly similar? Yeah, I appreciate the question, Richard. So on the first one, look at, you know, both markets are progressing as planned.

Robert Borchert: this thank you for joining us today we appreciate your interest in the company and look forward to discussing our results next quarter

Operator: Ladies and gentlemen, that will conclude today's call. Thank you all for joining. You may now disconnect.

Speaker Change: Ladies and gentlemen, that will conclude today's call. Thank you all for joining. You may now disconnect.

Jessica Tassen: They're never going to straight line, but we have two really strong partners in the want and Ohio health. We're working very closely with them. And, you know, it's a long term partnership. Our view is to develop those markets over the next four or five 10 years and build very large medical groups like we've done elsewhere.

Jessica Tassen: So, but we are pretty pleased with how it's going. And it's pretty much according to plan and hope we can accelerate some of the flywheel. And that upfills into your second question, which is our business snowballs as we start getting density because when we enter a state, pretty much nobody knows us. And once we get going, we establish an anchor practice or a partnership and then as physicians join and start to perform better, that starts a very good flywheel where a lot of our top of the funnel, you know, sales referrals are coming from existing practices.

Jessica Tassen: And that leads to very high conversion rates. And as we establish and start performing well and there's empirical evidence. You know, we start the snowballs, so you'll typically see the markets have some sort of a inverted S or some sort of an S curve that it follows. You're seeing that in Mid-Atlantic in Georgia where we continue to add, despite being pretty dense, despite being at, you know, our long term margin profile targets, we continue to add pretty good sort of physicians every quarter.

Jessica Tassen: So, you know, that we expect that to happen across all of our markets and but no to progress in the same manner, healthcare ecosystems of different pair dynamics, a different composition of the medical groups is different.

Ryan Daniels: So we just have to factor in all of that as we as we progress these.

Ryan Daniels: Our next question comes from the line of Jessica Tassen with Piper Samar, please go ahead. Hi guys, thanks for taking the question. So it looks like MLR in the 2024 capitated book went from about 99% last quarter to 95% in 2Q.

Michael Hawe: So hopefully you can just talk a little bit about the positive development and the margin on that book and how we should be thinking about MLR for the rest of the year in the 2024 capitated book. And then just wondering if you can address the prior year claims in in 2Q. Thanks. Yeah, thanks for the question, Jess. So obviously, you know, that's a, that's a good positive indication for us. I mean, we, we restructure some of the MEC contracts to protect our EBITL margin and the ones that, that remain.

Michael Hawe: Obviously, our hope was to continue to perform as well as we can so you can see that, that in the results. David will comment on some of the prior period impact on the numbers. But if you look at any year, if you're doing capitation, we would like to save the payer money and therefore generate shared savings for our medical groups. So that's our hope. And we'll only take risk as we've said if it's even done free cash flow creatives.

Michael Hawe: So you know, we'll see how the performance continues. You seeing elevated utilization trends, etc. But we are working pretty diligently despite that to continue to perform well, but we'll see how it plays out. But so far, we're pretty pleased. Yeah, and on the prior period development, we just got some updated payer data showing additional attributed lives for 2023, so although you can see the cost side of that, there was also an approximate revenue increase, so from an overall perspective there was sort of a diminutive impact from the prior development to the bottom line.

David: Our next question will come from the line of Ryan Daniels with William Blair, please go ahead. Yeah, good morning guys, thank you for taking the question. Parth, maybe a different twist on the commercial risk question for you.

Parth Mehrotra: A lot of the macro data indicates that employers are facing some of the highest cost trends they've seen in decades, and I'm curious if you've in any of your more mature markets or hospital partnership markets gone direct to employer to offer them value-based contracts for their workforce, given your kind of payer and patient diagnostic platform. Thanks. Yeah, I appreciate the question, Ryan. I think it's very underappreciated what we can do with the commercial book.

Parth Mehrotra: You know, what we've done is to answer it directly. We have a couple of pilots where we have gone directly to employers in markets where we have a lot of density, so the key here is to build density and have an adequate network that we can then offer directly to self-insured employers. So you can think about university towns, you can think about states where we have a very big density, and as we establish that, that we can go directly to self-insured employers.

Parth Mehrotra: We also can work with health plans on the ASO book where they're managing the network, but then we are a very preferred partner where we can bring some sort of an air network product, and we've started to have some of those initial discussions with pairs. But I think that is to come. I just don't think it's tenable for this level of inflation in the commercial book to persist before employers say they've got to do something about it.

Parth Mehrotra: You see some of the on-site models come up as a way to at least have some presence on-site where employees can attend, but there are employers that are virtual, there are employers that are multi-state. I think we have a pretty unique model which can offer the ability to do commercial risk for self-insured employers. So I think state-owned, I think this will develop over the next few years, and we're a really well-positioned due to pursue this.

Ryan Langston: Our next question will come from the line of Michael Hawe with Baird. Please go ahead. I thank you.

David: It's a quick clarification on my real question. I understand you're expecting minimal year-to-year increases in shared savings, but let's look rather than you came in a bit lighter than expected. It looks like typical QQ cadence is an increase sequentially. Is that mainly driven by your MSSP Live dropping 6,000 sequentially? Is that the Delaware exit?

David: And then my main question is, yeah, Park, you just mentioned you're one of the few value-based type providers that take on commercial upside-and-down progress. So I think you might have just answered my question, but isn't secret sauce managing those live, building market density, having great networks, driving better, sort of unit economics, or is there anything in the clinical care, care management approach that you need to do differently in order to manage commercial lives better?

David: Yeah, I appreciate the question. So I'll let David go first on the first one, and I'll tackle the second one. Yeah, so for the first one, again, from a shared savings perspective, this was just kind of normal, normal quarter to quarter value variability that we expect based on the timing over all of our contracts, so it's not MSSP, it's not one contract specifically, it's all of them. Again, you can see we raised our guidance and have a diversified value-based carebook.

David: So.., who, you know, if anything else, it shows our confidence in the future. And again, we always remind people to look at this on an annual basis, so we're going to get some quarterly fluctuations, but on an annual basis, it's very consistent, so. Yeah, we're performing pretty much according to plan, and that's reflected in the guidance. I think there's a reason we don't give quarterly guidance, because, you know, we're still not a really big player, and you can have some of this quarterly variance, but overall we feel really good, and that's reflected in the updated guidance.

David: So on the second one, look, I think you have to start with the business model first. I think it's very underappreciated that we are actually building medical groups, which are very dense in the geographies we operate in, which are very agnostic for the entire patient population, entire specialty network that we are creating across the practice. I think it's pretty much optimum care and us that do that at some scale on a multi-state basis.

David: On top of that, we are deeply embedded in the workflow. So if you want to do anything, and commercial, it's very hard to do if you are not in the technology stack, in the RCM workflows, and influencing some of that. Otherwise, it's very difficult to take risk if you're just getting data from the payers on a three six nine-month-lack basis, which is what happens with commercial from a downstream perspective. I think as we build that density, it allows us to start managing the population really well.

David: We've demonstrated now that across many payers and many geographies, with close to three quarter of a million lives, that we can get some care management fees and use those dollars to handhold some of these commercial patients much better across age cohorts. And I think that's also important. You can do commercial value within the pediatric population, the middle ages. You can do it just pre Medicare, age cohorts call it 50 plus. And then that's very valuable to the payers that those lives agent into Medicare advantage or Medicare shared savings.

David: So I think the business model structure fundamentally differentiates us to allow us to do that. And as we've noted, getting care management fee and shared savings on top of fee for service management fees is a true differentiator. It really increases stake home pay for the providers. It's getting them, getting them that do share for the good work that they're doing with these lives. And I think it diversifies our book of business and our profitability and EBITDA profile and the stability in our results like you've seen.

David: So if you look at the seven-year empirical data from the time we issued RS1, we had cycles pre COVID, during COVID, post COVID, utilization down, utilization up, MA environment challenging, and you've seen every single metric. We progress very consistently on a very thoughtful basis and grown the business and grown all the way down to free cash flow. So I think the commercial book plays a big part in that in the stability of those results across cycles. And I think that truly differentiates us.

David: Our next question comes from the line of Ryan Langston with TD Cowlin. Please go ahead. Hi, good morning. Given, I guess all the elevated trend commentary, we've heard from some of the payers and even the providers, I guess, combine that with the likelihood of probably broad MA benefit reductions and just general market dynamics. Are you seeing any different behavior from your competitors in markets, like maybe in terms of how aggressive or not aggressive they're going after capitated contracts or even competing with some of the physician affiliations you may be pursuing?

David: Thanks. Yeah, look, I'm not going to get into specific competitors, but generally there's been a lot of disruption. We read the same news you all read, their company's going bankrupt, company's facing challenging, free cash flow situations and financing situations, as they've not managed the risk book really well, they're raising delutive capital, so on and so forth. I think what's important to recognize is sophisticated physician practices and community doctors have been around for a long time.

David: They've been approached by private equity back entities, venture capital back entities, some of the new players, you know, for the last 20, 30 years, if you've been around. And I think they see this differentiation much more acutely than the street, the street things they do. So I think you can throw money in acquiring doctor's practices or signing them up, but ultimately the business model and the performance matters. And I think we're seeing a lot of rationalization over the past couple of years.

David: I think it's feel the bigger entities had acquired assets, and they seem to be now shedding them or slowing them down. So I think any of this disruption naturally benefits a strong business model like ours. And that's reflective of some of the questions we just answered on the call earlier where our flywheel continues to progress in existing states, good conversations in entering new states.

David: We're just going to continue to be very thoughtful and take advantage of the situation as we can.

Daniel Grosslight: Our next question comes on the line of Daniel Grosslight with City. Please go ahead. Hey guys, thanks for taking the question and congrats on a strong quarter here.

Parth Mehrotra: I just wanted to go back on how you're thinking about new market entrance, not just this year, but over the next years. Your entrance into New Ridge Beach has slowed from last year, but you know, perhaps last year was a bit anomalous, but here's if there's been anything different in how you're thinking about new markets versus it's now, or perhaps if there's any macro change in the environment that your preference to to advancing market. Yeah, thanks for the question, Daniel. You're breaking up a little bit about I think we got got most of the question. So I don't think anything's fundamentally changed.

Parth Mehrotra: Since the IPO, we've said our aim is to target one to two new states every year. These are obviously lumpy. You saw when we did that consistently and then there was a period of four to six quarters where we added five new markets. I think BD deals happen when they happen. As we noted in our prepared remarks, our pipeline seems pretty robust. We're in 13 states. Our aspirations are to be a true national company, so you should expect us to keep adding.

Parth Mehrotra: And you'll have periods where we add to a three or four pretty quickly. And then we add a little slowly, but that's just the nature of how we enter new markets on a thoughtful basis given our cash balance. As we noted earlier on the call, I think we have the capital to pursue some of these opportunities more aggressively, but again, we're going to be very thoughtful to do BD on where it makes sense from an EBITDA and free cash flow perspective and building these large scale medical groups. So I think we're going to keep pursuing these opportunities and keep doing what we've done consistently over the past few years.

Adam Ron: Our final question will come from the line of Adam Ron with Bank of America. Please go ahead. Hey, thanks for squeezing me in. So if I divide the fee for service practice collections by the number of implement to providers and come up with like my own feeling for a provider number, it seems like that has been somewhat flat over the past two quarters that I'm just wondering like, you know, I would think about that as should being up like three to five percent with cost rent plus you're trying to help the doctors recruit more patients. And so like, is that a makeshift dynamics? Like are you recruiting maybe like lower, you know, revenue, position groups and like over time, how should we think about that number?

David: Thanks. Thanks for the question, Adam. So, yeah, I think that's a, that's an interesting metric, but you know, we track that internally. It's not a big driver, because as you noted, it's mainly driven by new markets that come on when we don't have the full year collections number in for a provider, if they come on mid-year. And then secondly, it's a mix between positions and APPs or NPs. So obviously, APPs and NPs have have much lower collections per provider versus physicians.

David: And then there's also the specialty versus primary care, pediatrician, OBGYN mix. So that varies over time. But on a consistent basis, once a market is mature and more settled, you know, we see pretty consistent trends. We have annual inflators and our commercial contracts. We have pretty diversified books. So overall, you know, that metric should be fairly stable. But those are the factors that influence it, but we don't see any, any concern from that perspective.

Speaker: That will conclude our question and answer session. I'll turn the call back to management for any closing remarks. Thank you for joining us today. We appreciate your interest in the company and look forward to discussing our results next quarter.

Operator: Ladies and gentlemen, that will conclude today's call. Thank you all for joining.

Operator: You may now disconnect.

Q2 2024 Privia Health Group Inc Earnings Call

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