UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2021~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-40365

_________________________

Privia Health Group, Inc.

(Exact Name of Registrant as Specified in Its Charter)

_________________________


Delaware		81-3599420
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

950 N. Glebe Rd.,
Suite 700
Arlington,	Virginia	22203
(Address of Principal Executive Offices)		(Zip Code)

(571) 366-8850

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	PRVA	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐☒	Accelerated filer	¨☐
Non-accelerated filer	☒☐	Smaller reporting company	☐
		Emerging growth company	☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May 21, 2021~~April 28, 2023, the registrant had outstanding ~~105,727,318~~115,662,314 shares of common stock.

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TABLE OF CONTENTS

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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include factors related to, among other things:

•the heavily regulated industry in which we operate, and if we fail to comply with applicable healthcare laws and government regulations, we could incur financial penalties and become excluded from participating in government health care programs;

•our dependence on relationships with Medical Groups (defined herein), some of which we do not own;

•our growth strategy, which may not prove viable and we may not realize expected results;

•difficulties implementing our proprietary end-to-end, cloud-based technology solution (the “Privia Technology Solution”) for Privia Physicians (defined herein) and new Medical Groups;

•the high level of competition in our industry and our failure to compete and innovate;

•challenges in successfully establishing a presence in new geographic markets;

•our reliance on our electronic medical record (“EMR”) vendor, athenahealth, Inc., which the Privia Technology Solution is integrated with and built upon;

•changes in the payer mix of patients and potential decreases in our reimbursement rates as a result of consolidation among commercial payers;

•our use, disclosure, and other processing of ~~personally identifiable~~personal information ~~including~~is subject to various federal and state privacy and security regulations and our use, disclosure, and other processing of protected health information is subject to the Health Insurance Portability and Accountability Act of ~~1996~~1996;

•the continued availability of qualified workforce, including staff at our Medical Groups, and ~~other federal and state privacy and security regulations;~~the continued upward pressure on compensation for such workforce; and

•~~those~~other risk factors ~~referenced~~described in ~~Part II, Item 1A, “Risk Factors” in~~our annual report on Form 10-K for the ~~Company’s final prospectus dated April 28, 2021, filed~~year ended December 31, 2022 and our other filings with the Securities and Exchange Commission (“SEC”) ~~on April 30, 2021 (the “Prospectus”) and our other public filings.~~.

You should read this quarterly report on Form 10-Q and the documents that we reference in this quarterly report on Form 10-Q and have filed as exhibits to this quarterly report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this quarterly report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this quarterly report on Form 10-Q, whether as a result of any new information, future events or otherwise.

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Part I - Financial Information

ITEM 1. FINANCIAL STATEMENTS

Privia Health Group, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)


		March 31, 2021		December 31, 2020			March 31, 2023		December 31, 2022
Assets	Assets	(unaudited)				Assets	(unaudited)
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	81,938	$	84,633	Cash and cash equivalents	$	311,229	$	347,992
Accounts receivable	Accounts receivable	116,720		99,118		Accounts receivable	260,881		189,604
Prepaid expenses and other current assets	Prepaid expenses and other current assets	5,988		6,333		Prepaid expenses and other current assets	16,667		14,366
Total current assets	Total current assets	204,646		190,084		Total current assets	588,777		551,962
Non-current assets:	Non-current assets:					Non-current assets:
Property and equipment, net	Property and equipment, net	4,529		4,814		Property and equipment, net	3,095		3,386
Right-of-use asset	Right-of-use asset	5,865		0		Right-of-use asset	7,618		8,089

Intangible assets, net	Intangible assets, net	5,819		5,980		Intangible assets, net	97,637		57,387
Goodwill	Goodwill	118,663		118,663		Goodwill	135,050		126,938
Deferred tax asset	Deferred tax asset	2,953		4,953		Deferred tax asset	38,503		40,368
Other non-current assets	Other non-current assets	5,801		4,475		Other non-current assets	4,663		4,683
Total non-current assets	Total non-current assets	143,630		138,885		Total non-current assets	286,566		240,851
Total assets	Total assets	$	348,276	$	328,969	Total assets	$	875,343	$	792,813

Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable		$	3,806	$	5,235
Accrued expenses		22,223		31,185
Physician and practice liability		123,767		106,811
Accounts payable and accrued expenses						Accounts payable and accrued expenses	$	46,300	$	52,837
Provider liability						Provider liability	260,368		208,424

Current portion of note payable		1,094		875

Operating lease liabilities, current	Operating lease liabilities, current	2,175		0		Operating lease liabilities, current	3,021		3,013
Other current liabilities		4,459		2,832
Total current liabilities	Total current liabilities	157,524		146,938		Total current liabilities	309,689		264,274
Non-current liabilities:	Non-current liabilities:					Non-current liabilities:

Note payable, net of current portion		32,293		32,784

Operating lease liabilities, non-current	Operating lease liabilities, non-current	8,757		0		Operating lease liabilities, non-current	7,788		8,490
Other non-current liabilities	Other non-current liabilities	333		5,595		Other non-current liabilities	1,345		1,000
Total non-current liabilities	Total non-current liabilities	41,383		38,379		Total non-current liabilities	9,133		9,490
Total liabilities	Total liabilities	198,907		185,317		Total liabilities	318,822		273,764
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)	0		0		Commitments and contingencies (Note 11)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.01 par value, 150,000,000 shares authorized; 95,985,817 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		960		960
Common stock, $0.01 par value, 1,000,000,000 and 1,000,000,000 shares authorized; 115,469,961 and 114,690,808 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, $0.01 par value, 1,000,000,000 and 1,000,000,000 shares authorized; 115,469,961 and 114,690,808 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	1,159		1,148
Additional paid-in capital	Additional paid-in capital	165,767		165,666		Additional paid-in capital	721,486		714,639
Accumulated deficit	Accumulated deficit	(14,480)		(19,878)		Accumulated deficit	(209,369)		(216,693)
Total Privia Health Group, Inc. stockholders’ equity	Total Privia Health Group, Inc. stockholders’ equity	152,247		146,748		Total Privia Health Group, Inc. stockholders’ equity	513,276		499,094
Non-controlling interest	Non-controlling interest	(2,878)		(3,096)		Non-controlling interest	43,245		19,955
Total stockholders’ equity	Total stockholders’ equity	149,369		143,652		Total stockholders’ equity	556,521		519,049
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	348,276	$	328,969	Total liabilities and stockholders’ equity	$	875,343	$	792,813

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Privia Health Group, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except share and per share data)

For the Three Months Ended March 31,
2021 2020
Revenue $ 213,607 $ 212,942
Operating expenses:
Physician and practice expense 161,113 165,106
Cost of platform 26,962 27,561
Sales and marketing 3,184 2,452
General and administrative 13,996 10,989
Depreciation and amortization 445 338
Total operating expenses 205,700 206,446
Operating income 7,907 6,496
Interest expense 291 467
Income before provision for income taxes 7,616 6,029
Provision for income taxes 2,000 700
Net income 5,616 5,329
Less: Net income (loss) attributable to non-controlling interests 218 (85)
Net income attributable to Privia Health Group, Inc. $ 5,398 $ 5,414
Net income per share attributable to Privia Health Group, Inc. stockholders – basic and diluted $ 0.06 $ 0.06
Weighted average common shares outstanding – basic and diluted 95,985,817 95,931,549


	For the Three Months Ended March 31,
	2023		2022

Revenue	$	386,276	$	313,801

Operating expenses:
Provider expense	302,255		242,187
Cost of platform	44,730		41,272
Sales and marketing	5,286		4,661
General and administrative	25,951		36,110
Depreciation and amortization	1,340		1,118
Total operating expenses	379,562		325,348
Operating income (loss)	6,714		(11,547)
Interest (income) expense, net	(1,813)		232
Income (loss) before provision for income taxes	8,527		(11,779)
Provision for income taxes	2,125		6,308
Net income (loss)	6,402		(18,087)
Less: loss attributable to non-controlling interests	(922)		(577)
Net income (loss) attributable to Privia Health Group, Inc.	$	7,324	$	(17,510)
Net income (loss) per share attributable to Privia Health Group, Inc. stockholders – basic and diluted	$	0.06	$	(0.16)

Weighted average common shares outstanding – basic	115,009,010		108,059,064
Weighted average common shares outstanding – diluted	124,328,964		108,059,064

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Privia Health Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands except share amounts)

Common Stock Shares Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity attributable to Privia Health Group, Inc. Non-controlling Interest Total Stockholders’ Equity
Balance at December 31, 2019 95,931,549 $ 959 $ 160,375 $ (51,122) $ 110,212 $ (2,756) $ 107,456
Share-based compensation expense — — 121 — 121 — 121
Net income — — — 5,414 5,414 (85) 5,329
Balance at March 31, 2020 95,931,549 $ 959 $ 160,496 $ (45,708) $ 115,747 $ (2,841) $ 112,906
Balance at December 31, 2020 95,985,817 $ 960 $ 165,666 $ (19,878) $ 146,748 $ (3,096) $ 143,652
Share-based compensation expense — — 101 — 101 — 101
Net income — — — 5,398 5,398 218 5,616
Balance at March 31, 2021 95,985,817 $ 960 $ 165,767 $ (14,480) $ 152,247 $ (2,878) $ 149,369


	Common Stock Shares	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity attributable to Privia Health Group, Inc.		Non-controlling Interest		Total Stockholders’ Equity















Balance at December 31, 2021	107,837,741	$	1,078	$	633,902	$	(208,108)	$	426,872	$	23,309	$	450,181
Issuance of common stock upon exercise of stock options	435,030	5		794		—		799		—		799
Stock-based compensation expense	—	—		24,881		—		24,881		—		24,881
Contributed non-controlling interest	—	—		—		—		—		125		125
Net loss	—	—		—		(17,510)		(17,510)		(577)		(18,087)
Balance at March 31, 2022	108,272,771	$	1,083	$	659,577	$	(225,618)	$	435,042	$	22,857	$	457,899





Balance at Balance at December 31, 2022	114,690,808	$	1,148	$	714,639	$	(216,693)	$	499,094	$	19,955	$	519,049
Issuance of common stock upon exercise of stock options and vesting of restricted stock units	779,153	11		1,466		—		1,477		—		1,477
Stock-based compensation expense	—	—		5,381		—		5,381		—		5,381
Contributed non-controlling interest	—	—		—		—		—		24,212		24,212
Net income (loss)	—	—		—		7,324		7,324		(922)		6,402
Balance at March 31, 2023	115,469,961	$	1,159	$	721,486	$	(209,369)	$	513,276	$	43,245	$	556,521

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Privia Health Group, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


		For the Three Months Ended March 31,					For the Three Months Ended March 31,
		2021		2020			2023		2022
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net Income		$	5,616	$	5,329
Adjustments to reconcile net income to net cash used in operating activities:
Net income (loss)						Net income (loss)	$	6,402	$	(18,087)
Adjustments to reconcile net income (loss) to net cash used in operating activities:						Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation	Depreciation	285		166		Depreciation	291		306
Amortization of intangibles	Amortization of intangibles	160		161		Amortization of intangibles	1,049		812
Amortization of debt issuance costs	Amortization of debt issuance costs	38		33		Amortization of debt issuance costs	—		38

Share-based compensation		101		121
Stock-based compensation						Stock-based compensation	5,381		24,881

Deferred tax expense	Deferred tax expense	2,000		670		Deferred tax expense	1,865		6,308
Changes in Asset and Liabilities:
Changes in asset and liabilities:						Changes in asset and liabilities:
Accounts receivable	Accounts receivable	(17,602)		(14,898)		Accounts receivable	(71,277)		(48,836)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(5,519)		(1,266)		Prepaid expenses and other current assets	(2,301)		(1,694)
Other non-current assets		(1,326)		109
Accounts payable		(1,520)		3,947
Accrued expenses		(8,962)		(10,425)
Physician and practice liability		16,956		7,328
Other current liabilities		1,627		973
Other non-current assets and right-of-use asset						Other non-current assets and right-of-use asset	493		1,679
Accounts payable and accrued expenses						Accounts payable and accrued expenses	(6,537)		(1,742)

Provider liability						Provider liability	51,944		31,616

Operating lease liabilities	Operating lease liabilities	10,932		0		Operating lease liabilities	(694)		(601)
Other long-term liabilities		(5,262)		673

Net cash used in operating activities	Net cash used in operating activities	(2,476)		(7,079)		Net cash used in operating activities	(13,384)		(5,320)
Cash from investing activities	Cash from investing activities					Cash from investing activities
Purchases of property and equipment	Purchases of property and equipment	0		(13)		Purchases of property and equipment	—		(34)

Business Acquisitions, net of cash acquired						Business Acquisitions, net of cash acquired	(24,856)		—
Net cash used in investing activities	Net cash used in investing activities	0		(13)		Net cash used in investing activities	(24,856)		(34)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities

Repayment of note payable						Repayment of note payable	—		(219)
Proceeds from exercised stock options						Proceeds from exercised stock options	1,477		799

Repayment of note payable		(219)		0
Proceeds from non-controlling interest						Proceeds from non-controlling interest	—		125

Proceeds from revolving loan		0		10,000

Net cash (used in) provided by financing activities		(219)		10,000
Net (decrease) increase in cash and cash equivalents		(2,695)		2,908
Net cash provided by financing activities						Net cash provided by financing activities	1,477		705
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(36,763)		(4,649)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	84,633		46,889		Cash and cash equivalents at beginning of period	347,992		320,577
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	81,938	$	49,797	Cash and cash equivalents at end of period	$	311,229	$	315,928

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Interest paid	Interest paid	$	308	$	323	Interest paid	$	22	$	368

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Privia Health Group, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Organization and Summary of Significant Accounting Policies

Organization

Privia Health Group, Inc. ~~(NASDAQ: PRVA)~~ (“~~we”~~Privia Health”, ~~“our”~~“Privia”, the “Company”)~~, became the sole shareholder of PH Group Holdings Corp. (“PH Holdings”) (formerly Brighton Health Services Holding Corporation) effective August 11, 2016. At the time, the Company was~~ is a ~~wholly owned subsidiary of Brighton Health Group Holdings, LLC (“BHG Holdings”~~technology-driven, national physician-enablement company that collaborates with medical groups, health plans, and health systems to optimize physician practices, improve patient experiences, and reward doctors for delivering high-value care in both in-person and virtual care settings (the “Privia Platform”) ~~(formerly MC Acquisition Holdings I, LLC, HoldCo)~~.

The Company uses the same operational and financial model in each market. As of March 31, ~~2021,~~2023, Privia operates in 6thirteen markets: 1) the Mid-Atlantic Region (states of Virginia, Maryland and the District of Columbia); 2) ~~the state of~~ Georgia; 3) the Gulf Coast Region (Houston, Texas); 4) North Texas (Dallas/Fort Worth, Texas); 5) West Texas (Abilene, Texas); 6) Central ~~Florida~~Florida; 7) Tennessee; 8) California; 9) Montana; 10) Ohio; 11) North Carolina; 12) Delaware; and ~~6) the state of Tennessee.~~13) Connecticut.

Medical groups are formed in each market with the primary purpose to operate as a physician group practice with healthcare services being furnished through physician members (“Privia Physicians”) and non-physician clinicians (together, “Privia Providers”) supervised by Privia Physicians.

The Company also forms local management companies to provide administrative and management services (“MSOs”) to the medical groups through a Management Services Agreement (“MSA”) in each market. The Company owns 100% of all MSOs, except 2four where the Company is at least the majority owner.

~~Initial Public Offering~~

On May 3, 2021, the Company closed its initial public offering (“IPO”) of 22,425,000 shares of the Company’s common stock, $0.01 par value per share, at an offering price of $23.00 per share. In aggregate, the shares issued in the offering and Anthem private placement generated gross proceeds of $223.7 million and $212.0 million in net proceeds, which is net of underwriters’ discount and commission, and other offering costs.

Basis of Presentation

The condensed consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its subsidiaries. Amounts shown on the condensed consolidated statements of operations within the operating expense categories of ~~physician and practice~~provider expense, cost of platform, selling and marketing, and general and administrative are recorded exclusive of depreciation and amortization.

All significant intercompany transactions are eliminated in consolidation.

The results of operations for the three months ended March 31, ~~2021,~~2023, are not indicative of the results to be expected for the full fiscal year ending December 31, ~~2021. These unaudited~~2023. The condensed consolidated balance sheet at December 31, 2022, was derived from audited annual financial statements ~~should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020, contained~~but does not contain all disclosures required by accounting principles generally accepted in the ~~Company’s Prospectus.~~United States of America. In the opinion of management, all adjustments (consisting of ~~all~~only normal and recurring adjustments) considered necessary for a fair ~~presentation~~statement have been included.

Variable Interest Entities

Management evaluates the Company’s ownership, contractual, and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical information, among other factors. If the Company determines that an entity in which it holds a contractual, or ownership, interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.

~~Privia Physicians join the medical group in their geographic market as an owner of such medical group. Certain of our~~The Company has relationships with medical groups ~~are majority-owned by~~in which the Company ~~(each, an “Owned Medical Medical”), with Privia Physicians owning a minority interest, and some medical groups~~has no ownership interests, which are either (a) owned ~~entirely~~100% by Privia Physicians ~~(each,~~(“Non-Owned Medical Groups”) or (b) majority owned, indirectly through a ~~“Non-Owned~~professional entity by a licensed physician holding a Privia leadership position (“Friendly Medical ~~Group”~~Groups”). Each of our Medical Groups (e.g., Owned Medical Groups, Non-Owned Medical Groups and Friendly Medical Groups) contracts with the Privia Physician’s historic practice entity, which no longer furnishes healthcare services (the “Affiliated Practice”) whereby the Affiliated Practice provides certain subcontracted services to the Medical Groups to allow the Medical Group to operate at the practice location.

The Company evaluated its relationship with (a) Non-Owned Medical Groups (not including Friendly Medical Groups) and and their Affiliated Practices, (b) Friendly Medical Groups and their ~~historic practice entities (the “Affiliated Practices”) as well as its relationship with~~Affiliated Practices, and (c) Affiliated Practices associated with Owned Medical Groups to determine if any of these entities should be subject to consolidation. The Company does not have ownership interest in any Affiliated ~~Practices;~~Practices (whether those of Owned Medical Groups, Non-Owned Medical Groups or Friendly Medical Groups); nor does the Company have an ownership in Non-Owned Medical Groups. The ~~Physician Member Services Agreement (“PMSA”)~~PMSA and ~~Support Services Agreement~~support services agreement (“SSA”) entered by Non-Owned Medical Groups and Friendly Medical Groups with their Privia Physician members and the Affiliated Practices are not contractual relationships within Privia’s legal structure. The only contractual relationship between Privia and Non-Owned Medical Groups is established through the MSA. For Friendly Medical Groups, in addition to the MSA, the Company has a contractual relationship, evidenced by a restriction agreement (each a “Restriction Agreement”) with its Nominee Physicians and their

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respective Friendly Medical Groups. Management has determined, based on the provisions of the MSAs between the Company and Non-Owned Medical Groups, and after considering the requirements of Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”), the Company is not required to consolidate the financial position or results of operations of the Affiliated

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Practices associated with Owned Medical Groups; nor is it required to consolidate the financial position or results of operations of Non-Owned Medical Groups (and, therefore, the Company is not required to consolidate the Affiliated Practices of the Non-Owned Medical Groups). However, management has determined, based on the provisions of the Restriction Agreement on the Nominee Physician (Friendly PC), the governing documents of the Friendly Medical Groups, and after considering the requirements of ASC 810, that the Company should consolidate the financial position or results of operations of the Friendly Medical Groups and the friendly PCs.

~~Upon completion~~ASC 810 requires the Company to consolidate the financial position, results of ~~our evaluations~~operations and cash flows of a Non-Owned Medical Group affiliated by means of a service agreement if the Non-Owned Medical Group is a VIE and the Company is its primary beneficiary. An Affiliated Practice would be considered a VIE if (a) it is thinly capitalized (i.e., the equity is not sufficient to fund the Non-Owned Medical Group’s activities without additional subordinated financial support) or (b) the equity holders of the Non-Owned Medical Group as a group have one of the following four characteristics: (i) lack the power to direct the activities that most significantly affect the Non-Owned Medical Group’s economic performance, (ii) possess non-substantive voting rights, (iii) lack the obligation to absorb the Non-Owned Medical Group’s expected losses, or (iv) lack the right to receive the Non-Owned Medical Group’s expected residual returns.

The characteristics of both (a) and (b) do not exist and as such the Non-Owned Medical Groups do not represent VIEs. Accordingly, the Company has not consolidated the financial position, results of operations or cash flows of the Non-Owned Medical Groups that are affiliated with the Company by means of a ~~SSA~~service agreement for the three months ended March 31, ~~2021~~2023 and ~~2020.~~2022. Each time that it enters into a new service agreement or enters into a material amendment to an existing service agreement, the Company considers whether the terms of that agreement or amendment would change the elements it considers in accordance with the VIE guidance. The same analysis was performed for the Affiliated Practices of Owned Medical Groups, which have contractual relationships with Privia through ~~SSA’s,~~the SSA, and the Company determined they do not represent VIEs as they do not meet the criteria in ASC ~~810.~~810 for similar reasons outlined above.

~~Emerging Growth~~The Company, ~~Status~~however, does meet the criteria for consolidation of the Friendly Medical Groups based on the discussion above.

~~We are an emerging growth company under~~In February 2023, the ~~Jumpstart Our Business Startups Act (the “JOBS Act”~~Company announced a partnership with Community Medical Group, the largest Clinically Integrated Network (“CIN”) in Connecticut with approximately 1,100 multi-specialty providers, to launch Privia Quality Network Connecticut (“PQN-CT”). The ~~JOBS Act provides~~Company performed an analysis as noted above and determined that ~~an emerging growth~~PQN- CT does not represent a VIE as it does not meet the criteria in ASC 810, but the entity is consolidated because Privia owns a majority of the voting interest in the entity.

Privia Medical Group – West Texas, PLLC, (“PMG West Texas”) is a physician-owned Medical Group, with PMG West Texas Holdings, PLLC (“Friendly WTX PC”), a Texas professional limited liability company ~~can delay adopting new or revised accounting standards until~~entirely owned by a licensed physician with a leadership role in the Company, owning majority membership interests and having governance and control rights via the governing documents of PMG West Texas. The Company has a contractual relationship with Friendly WTX PC through a Restriction Agreement. The VIE analysis was performed, and the Company determined that characteristic (b) exists as a result of meeting (ii) and (iv) and as such, ~~time~~PMG West Texas and Friendly WTX PC do represent VIEs and are consolidated as ~~those standards apply to private companies. We have irrevocably elected to avail ourselves~~they do meet the criteria in ASC 810.

Privia Medical Group Tennessee, PLLC (“PMG-TN” is a physician owned Medical Group, with PMG-TN Physicians, PLLC, a Tennessee professional limited liability company entirely owned by a licensed physician with a leadership role in the Company (“Friendly TN PC”), owning majority membership interests therein and having governance and control rights via the governing documents of ~~this exemption and, therefore, we will not be subject to~~PMG-TN. Again, the same ~~new or revised accounting standards~~analysis was performed, and the Company determined that characteristic (b) exists as ~~other public companies that are not emerging growth companies.~~a result of meeting (ii) and (iv) and as such, PMG-TN and Friendly TN PC do represent VIEs as they do meet the criteria in ASC 810.

~~Subject to certain conditions set forth~~The aggregated carrying value of the Company’s VIE’s for both the current assets and liabilities included in the ~~JOBS Act, if,~~consolidated balance sheets after elimination of intercompany transactions were $2.1 million as ~~an “emerging growth company”, we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our system~~ of ~~internal controls over financial reporting pursuant to Sarbanes-Oxley Act~~March 31, 2023 and $1.4 million as of 2002, Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) hold non-binding advisory votes on executive compensation and obtain shareholder approval of any golden parachute payments not previously approved. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.December 31, 2022.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure. On an on-going basis ~~we evaluate~~the Company evaluates significant estimates and assumptions, including, but not limited to, revenue recognition, ~~share-based~~stock-based compensation, estimated useful lives of assets, intangible assets subject to amortization, and the computation of income taxes. Future events and their effects cannot be predicted with certainty; accordingly, the Company’s accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment changes. Management evaluates and updates assumptions and estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

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Operating Segments

The Company determined in accordance with ASC 280, Segment Reporting (“ASC 280”) that the Company operates in and reports as a single operating segment, and therefore 1one reporting segment – Privia Health Group, Inc. ~~Refer~~

Business Combination

Accounting for business combinations requires us to ~~Note 14 “Segment Financial Information” for additional information concerning~~allocate the fair value of purchase considerations to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values, which were determined primarily using the income method. The excess of the fair value of purchase consideration over the fair values of these identified assets and liabilities is recorded as goodwill. Such valuations require us to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, revenue growth rates, medical claims expense, cost of care expenses, operating expenses, discount rate, contract terms and useful life from acquired assets.

Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects the Company’s ~~services.~~

~~Coronavirus Aid, Relief~~amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and ~~Economic Stimulus Act (“CARES Act”)~~

liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. During February 2023, Company completed an acquisition to expand into a new market. The ~~current COVID-19 pandemic had an impact on our~~consideration paid for each of the acquisitions was derived through arm’s length negotiations. The Company’s acquisition was accounted for using the acquisition method pursuant to the requirements of FASB ASC Topic 805, Business Combinations (“ASC 805”). The results of operations ~~cash flow and financial position for~~of the ~~period ended and as of March 31, 2021, as we experienced lower volumes than anticipated and shifts~~acquisition have been included in the ~~mix~~Company’s consolidated financial statements since their respective date of ~~services provided after the onset of the pandemic in the United States. See the Prospectus for~~acquisition. For additional ~~information on impacts during 2020. We are closely monitoring the impact of the pandemic on all aspects of our business including impacts~~details, refer to ~~employees, customers, patients, suppliers and vendors.~~

On March 27, 2020, the CARES Act was passed. It is intended to provide economic relief to individuals and businesses affected by the coronavirus pandemic. It also contains provisions related to healthcare providers’ operations and the issues caused by the coronavirus pandemic. The following are significant economic impacts for the Company and its subsidiaries as a result of specific provisions of the CARES Act for the three month periods ended March 31, 2021 and 2020:

•The Company elected to defer its portion of Social Security taxes in 2020, which may be repaid over two years as follows: 50% by the end of 2021 and 50% by the end of 2022. Approximately $1.6 million is recorded in accrued expenses on the balance sheet as of March 31, 2021 related to this deferral and the Company intends to remit payment by the end of 2021: and

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•~~No additional funds were received from the Public Health and Social Services Emergency Relief Fund under the CARES Act during the three months ended March 31, 2021 and 2020.~~Note 3 “Business Combinations.”

Non-Controlling Interest

The non-controlling interest represents the equity interest of the non-controlling equity holders in results of operations of Complete MD Solutions, LLC, Privia Management Services Organization, ~~(“PMSO”)~~LLC, Privia Management Company Montana, LLC, BASS Privia Management Company of California, LLC, Privia Management Company West Texas, LLC, Privia Management Company North Carolina, LLC, Privia Management Company of Ohio, LLC, Privia Services Company Connecticut, LLC, Privia Quality Network Connecticut, LLC, Privia Quality Network Delaware, LLC and our Owned Medical Groups. The condensed consolidated financial statements include all assets, liabilities, revenues, and expenses of less-than-100%-owned affiliates where the Company has a controlling financial interest. The Company has separately reflected net income attributable to the non-controlling interests in net income in the condensed consolidated statements of operations.

Significant Accounting Policies

The Company described its significant accounting policies in Note 1 of the notes to ~~condensed~~ consolidated financial statements for the year ended December 31, ~~2020~~2022 in ~~its Prospectus.~~the Annual Form 10-K. During the three months ended March 31, ~~2021,~~2023, there were no significant changes to those accounting policies ~~other than those policies impacted by the new accounting pronouncements adopted during the period noted below~~ and ~~further described below in “Recently Adopted Accounting Pronouncements.”~~

~~Leases~~

~~Beginning January 1, 2021, the Company accounts for its leases in accordance with~~ ~~ASU 2016-2, Leases (Topic 842)~~. The Company evaluates whether a contract is or contains a lease at the inception of the contract. Upon lease commencement, the date on which a lessor makes the underlying asset available to the Company for use, the Company classifies the lease as either an operating or finance lease. The Company’s leases primarily consist of operating leases for office space in certain states in which we operate. The Company also has operating leases for equipment, which are not significant.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are measured at the present value of the remaining, fixed lease payments at lease commencement. The Company uses its incremental borrowing rate, adjusted for the effects of collateralization, based on the information available at the later of adoption, inception, or modification in determining the present value of lease payments. Right-of-use assets are measured at an amount equal to the initial lease liability, plus any prepaid lease payments (less any incentives received) and initial direct costs, at the lease commencement date. The Company has elected to account for lease and non-lease components as a single lease component for its facility leases. As a result, the fixed payments that would otherwise be allocated to the non-lease components are accounted for as lease payments and are included in the measurement of the Company’s right-of-use asset and lease liability. Lease expense for lease payments is recognized on a straight-line basis over the lease term in general and administrative expense on the condensed consolidated statements of operations.

The Company does not recognize a lease liability or right-of-use asset on the balance sheet for short-term leases. Instead, the Company recognizes short-term lease payments as an expense on a straight-line basis over the lease term. A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option in the same manner as all other leases.estimates.

Recently Adopted Accounting Pronouncements

~~The Company adopted~~None.

Recently Issued Accounting ~~Standards Update (“ASU”) 2016-02,~~ ~~Leases (Topic 842)~~, as of January 1, 2021 using the modified retrospective transition approach for leases which existed on that date. Prior comparative periods were not adjusted and continue to be reported in accordance with Accounting Standards Codification (“ASC”) Topic 840, Leases. The Company elected the package of practical expedients that permitted the Company not to reassess the Company’s prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight practical expedient. The adoption of the standard resulted in the recognition of operating right-of-use assets of approximately $6.0 million and operating lease liabilities of approximately $11.3 million. Refer to Note 4 “Leases” for additional details. The difference between the operating lease right-of-use assets and operating lease liabilities resulted from the reclassification of deferred rent.Pronouncements Pending Adoption of the standard did not have a material impact on the consolidated statements of operations or cash flows for the three- months ended March 31, 2021. The Company did not recognize a cumulative-effect adjustment to retained earnings upon adoption.

~~On January 1, 2021, the Company adopted ASU 2016-13, Financial Instruments –~~ ~~Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”)~~, which replaces the incurred loss approach for recognizing credit losses on financial instruments with an expected loss approach. The expected loss approach is subject to management judgments using assessments of incurred credit losses, assessments of current conditions, and forecasts using reasonable and supportable assumptions. The Company adopted the standard using a modified retrospective approach which resulted in no adjustments to the allowance for credit losses and no cumulative-effect adjustment to retained earnings. The Company regularly reviews the adequacy of the allowance for credit losses based on a combination of factors, including historical losses adjusted for current market conditions, the Company's customers'None.

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financial condition, delinquency trends, aging behaviors of receivables and credit and liquidity indicators for industry groups, and future market and economic conditions. As of March 31, 2021, the allowance for credit losses was not material.

~~Recently Issued Accounting Pronouncements Pending Adoption~~

In March 2020, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12). ASU 2019-12 eliminates certain exceptions related to the approach for intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This guidance is effective for the Company for annual reporting periods beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2019-12 on its condensed consolidated financial statements.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides temporary relief from some of the existing rules governing contract modifications when the modification is related to the replacement of the London Interbank Offered Rate (“LIBOR”) or other reference rates discontinued as a result of reference rate reform. The ASU specifically provides optional practical expedients for contract modification accounting related to contracts subject to ASC 310, Receivables, ASC 470, Debt, ASC 842, Leases, and ASC 815, Derivatives and Hedging. The ASU also establishes a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and certain elective hedge accounting expedients. For eligible contract modifications, the principle generally allows an entity to account for and present modifications as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. That is, the modified contract is accounted for as a continuation of the existing contract. The standard was effective upon issuance on March 12, 2020, and the optional practical expedients can generally be applied to contract modifications made and hedging relationships entered into on or before December 31, 2022. Borrowings under the Company’s note payable agreement bear interest based on LIBOR or an alternate rate. Provisions currently provide the Company with the ability to replace LIBOR with a different reference rate in the event that LIBOR ceases to exist.

2.Revenue Recognition

The following table presents our revenues disaggregated by source:


		For the Three Months Ended March 31,					For the Three Months Ended March 31,
(Dollars in Thousands)	(Dollars in Thousands)	2021		2020		(Dollars in Thousands)	2023		2022
FFS-patient care	FFS-patient care	$	169,578	$	174,870	FFS-patient care	$	227,789	$	204,344
FFS-administrative services	FFS-administrative services	15,411		14,555		FFS-administrative services	26,396		23,006
Capitated revenue						Capitated revenue	78,260		48,330
Shared savings	Shared savings	17,833		16,439		Shared savings	43,928		27,959
Care management fees (PMPM)		8,570		6,230
Care management fees						Care management fees	8,558		8,804
Other revenue	Other revenue	2,215		848		Other revenue	1,345		1,358
Total Revenue		$	213,607	$	212,942
Total revenue						Total revenue	$	386,276	$	313,801

Fee-for-service (“FFS”) patient care is primarily generated from third-party payers with which the Company has established contractual billing arrangements. The following table presents the approximate percentages by source of net ~~operating~~ revenue received for healthcare services we provided for the periods indicated:


		For the Three Months Ended March 31,					For the Three Months Ended March 31,
		2021		2020			2023		2022
Commercial insurers	Commercial insurers	69	%	67	%	Commercial insurers	69	%	71	%
Government payers	Government payers	15	%	16	%	Government payers	14	%	14	%
Patient	Patient	16	%	17	%	Patient	17	%	15	%
		100	%	100	%		100	%	100	%

FFS-administrative services revenue is earned through the Company’s MSA with Non-Owned Medical Groups primarily based on a fixed percentage of net collections on patient care generated by those medical groups.

Value Based Care (“VBC”) revenue is primarily earned through contracts for Capitated revenue, Shared savings and Care management fees. Capitated revenue is generated through what is typically known as an “at-risk contract.” At-risk capitation refers to a model in which the Company receives a fixed monthly payment from the third-party payer in exchange for providing healthcare services to attributed beneficiaries. The Company is responsible for providing or paying for the cost of healthcare services required by those attributed beneficiaries for a set of services. At-risk Capitated revenue is recorded at the total amount gross in revenues because the Company is acting as a principal in arranging for, providing, and controlling the managed healthcare services provided to the attributed lives. Shared savings revenue and Care management ~~fee (PMPM) payments from payers to provide care coordination services to patients and~~fees are generated through ~~shared savings~~ contracts with large commercial payer organizations and the U.S. Federal Government.

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Contract Asset

The Company has the following contract assets and unearned revenue:

(Dollars in Thousands) March 31, 2021 December 31, 2020
Balances for contracts with customers
Accounts receivable $ 116,720 $ 99,118
Unearned revenue $ 4,443 $ 2,759

~~Unearned Revenue~~

Unearned revenue is presented on the condensed consolidated balance sheet under other current liabilities and represent payments made to, or due from, customers in advance of our performance. All contracts are less than or equal to twelve months. Changes in the balance of total deferred revenue during the three months ended March 31, 2021 are as follows:

(Dollars in Thousands) December 31, 2020 Additions Revenue
Recognized March 31, 2021
Unearned revenue $ 2,759 2,098 (414) $ 4,443

~~During the three months ended March 31, 2021, the Company recognized approximately $0.4 million of revenue related to amounts unearned as of December 31, 2020.~~


(Dollars in Thousands)	March 31, 2023		December 31, 2022
Balances for contracts with customers
Accounts receivable	$	260,881	$	189,604

Remaining Performance Obligations

As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in ASC 606-10-50-14(a). Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize revenue. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to continue receiving services at our facilities.

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3. Business Combinations

During February 2023, the Company entered into the Connecticut market through the acquisition of Privia Quality Network Connecticut (“PQN-CT”), whereby Privia acquired a majority ownership in PQN-CT. The acquisition was accounted for using the acquisition method pursuant to the requirements of ASC 805. The results of operations of the acquisition have been included in the Company’s consolidated financial statements since the date of acquisition. Unaudited proforma consolidated financial information for the acquisition during the three months ended March 31, 2023 have not been included as the results are immaterial.

The purchase price for the acquisition was allocated as follows:


(Dollars in thousands)	Total Acquisitions as of March 31, 2023
Cash paid	$	24,856
Other Liabilities	344
Total consideration	$	25,200

Payer contract intangible	41,300
Goodwill	8,112
Fair value of non-controlling interests	(24,212)
Total acquired net assets	$	25,200

The goodwill relating to this acquisition is primarily attributable to synergies related to the assembled workforce. Goodwill is measured as the excess of the consideration transferred over the fair value of assets acquired and liabilities assumed on the acquisition date.

4. Goodwill and Intangible Assets, Net

For the purposes of the goodwill impairment assessment, the Company as a whole is considered to be ~~the~~a reporting unit. The Company recognizes the excess of the purchase price, plus the fair value of any non-controlling interests in the acquiree, over the fair value of identifiable net assets acquired as goodwill. The Company performs a qualitative assessment on goodwill at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. If it is determined in the qualitative assessment that the fair value of a reporting unit is ~~estimated using~~more likely than not below its carrying amount, then the Company will perform a ~~combination of three approaches, all equally weighted: a) discounted cash flow analysis (income approach), b)~~quantitative impairment test. The quantitative goodwill impairment test is performed by comparing the fair value of ~~comparable transactions (transaction approach) and c) enterprise value to revenue multiple for comparable companies (market approach). Potential impairment is indicated when~~a reporting unit with its carrying amount. Any excess in the carrying value of a reporting ~~unit exceeds~~unit’s goodwill over its ~~estimated~~ fair ~~value.~~value is recognized as an impairment loss, limited to the total amount of goodwill allocated to that reporting unit. The Company’s carrying ~~amount~~value of goodwill at March 31, ~~2021~~2023 and December 31, ~~2020 is~~2022 was approximately ~~$118.7 million. The most recently completed impairment test of goodwill was performed as of October 1, 2020~~$135.1 million and ~~the fair value of the reporting unit exceeded the carrying value and therefore it was determined that no impairment existed.~~$126.9 million, respectively. No indicators of impairment were identified during the three months ended March 31, ~~2021.~~2023 and 2022.

During February 2023, the Company entered into the Connecticut market through the acquisition of Privia Quality Network Connecticut (“PQN-CT”), whereby Privia acquired majority ownership in PQN-CT. During the three months ended March 31, 2023 the Company recorded Goodwill of $8.1 million in connection with the acquisition, which represents the excess of the purchase price over the fair value of the net assets acquired.

A summary of the Company’s intangible assets is as follows:


		March 31, 2021				December 31, 2020					March 31, 2023				December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Intangible Assets		Accumulated Amortization		Intangible Assets		Accumulated Amortization		(Dollars in thousands)	Intangible Assets		Accumulated Amortization		Intangible Assets		Accumulated Amortization
Trade names	Trade names	$	4,600	$	1,514	$	4,600	$	1,457	Trade names	$	4,600	$	1,974	$	4,600	$	1,917
Consumer customer relationships	Consumer customer relationships	$	2,500	$	1,646	$	2,500	$	1,583	Consumer customer relationships	2,500		2,145		2,500		2,083
PMG customer relationships	PMG customer relationships	$	600	$	165	$	600	$	158	PMG customer relationships	600		215		600		208
Management Service Agreement (Complete MD)	Management Service Agreement (Complete MD)	$	2,200	$	756	$	2,200	$	722	Management Service Agreement (Complete MD)	2,200		1,031		2,200		997
Physician network										Physician network	1,520		152		1,520		127
Payer contracts										Payer contracts	2,750		196		2,750		164
MSO Service Agreement (BPMC)										MSO Service Agreement (BPMC)	51,800		3,694		51,800		3,087
Payer contracts (PQN-CT)										Payer contracts (PQN-CT)	41,300		$	226	—		$	—
		$	9,900	$	4,081	$	9,900	$	3,920		107,270		$	9,633	65,970		$	8,583
Less accumulated amortization	Less accumulated amortization	$	(4,081)			$	(3,920)			Less accumulated amortization	(9,633)				(8,583)
Intangible assets, net	Intangible assets, net	$	5,819			$	5,980			Intangible assets, net	$	97,637			$	57,387

The remaining weighted average life of all amortizable intangible assets is approximately ~~10.5~~19.3 years at March 31, ~~2021.~~

~~Amortization expense for intangible assets was approximately $0.2 million for both the three months ended March 31, 2021 and 2020.~~

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Amortization expense for intangible assets was approximately $1.0 million and $0.8 million for the three months ended March 31, 2023 and 2022, respectively.

Estimated amortization expense for the Company’s intangible assets for the following five years is as follows:


		(Dollars in Thousands)			(Dollars in Thousands)
Remainder of 2021		$	482
2022		643
2023		643
Remainder of 2023				Remainder of 2023	$	3,915
2024	2024	559		2024	5,147
2025	2025	393		2025	4,965
2026				2026	4,965
2027				2027	4,965
Thereafter	Thereafter	3,099		Thereafter	73,680
Total	Total	$	5,819	Total	$	97,637

~~4. Leases~~

The Company leases office space under various operating lease agreements. The initial terms of these leases range from 2 to 7 years and generally provide for periodic rent increases and renewal options.

~~The components of lease expense were as follows (in thousands):~~


~~(Dollars in Thousands)~~	~~For the Three Months Ended March 31, 2021~~
~~Operating lease cost~~	$	~~446~~

~~Cash paid for amounts included in the measurement of lease liabilities - operating leases~~	$	~~529~~
~~Weighted-average remaining lease term - operating leases~~	~~5.31 Years~~
~~Weighted-average discount rate - operating leases~~	~~3.5~~		%

~~The aggregate future lease payments for operating leases years subsequent to March 31, 2021 are as follows:~~

(Dollars in Thousands)
2021 $ 1,625
2022 2,213
2023 2,261
2024 2,274
2025 2,237
Thereafter 1,407
Total future lease payments 12,017
Imputed interest (1,085)
Total $ 10,932

5.Property and Equipment, Net

A summary of the Company’s property and equipment, net is as follows:


(Dollars in Thousands)	(Dollars in Thousands)	March 31, 2021		December 31, 2020		(Dollars in Thousands)	March 31, 2023		December 31, 2022
Furniture and fixtures	Furniture and fixtures	$	1,073	$	1,073	Furniture and fixtures	$	1,402	$	1,402
Computer equipment	Computer equipment	1,051		1,051		Computer equipment	1,657		1,657
Leasehold improvements	Leasehold improvements	4,863		4,863		Leasehold improvements	4,855		4,855
		6,987		6,987			7,914		7,914
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(2,458)		(2,173)		Less accumulated depreciation and amortization	(4,819)		(4,528)
Property and equipment, net	Property and equipment, net	$	4,529	$	4,814	Property and equipment, net	$	3,095	$	3,386

6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following:


(Dollars in Thousands)	March 31, 2023		December 31, 2022
Accounts payable	$	6,950	$	6,731
Accrued employee compensation and benefits	6,805		6,177
Bonuses payable	2,937		15,203
Other accrued expenses	29,608		24,726
Total accounts payable and accrued expenses	$	46,300	$	52,837

7. Provider Liability

Provider liability, represents costs payable to physicians, hospitals and other ancillary providers, including both Privia physicians, their related physician practices, and providers the Company has contracted with through payer partners. Those costs include amounts that have not yet been paid for physician guaranteed payments and other required distributions pursuant to the service agreements as well as medical claims costs for services provided to attributed beneficiaries for which the Company is financially responsible under at-risk Capitated revenue arrangements whether paid directly by the Company or indirectly by payers with whom the Company has contracted. Provider expenses are recognized in the period in which services are provided and include estimates of claims that have been incurred but have either not yet been received, processed, or paid and as such, not reported.

Provider liability estimates are developed using actuarial methods commonly used by health insurance actuaries that include a number of factors and assumptions including medical service utilization trends, changes in membership, observed medical cost trends, historical claim payment patterns and other factors.

Each period, the Company re-examines previously established provider liability estimates based on actual claim submissions and other changes in facts and circumstances. As more complete claims information becomes available, the Company adjusts its estimates and recognizes those changes in estimates in the period in which the change is identified. The difference between the estimated liability and the actual settlements of claims is recognized in the period in which the claims are settled. The Company’s provider liability balance represents management’s best estimate of its liability for unpaid Provider expenses as of March 31, 2023 and 2022. The Company uses judgment to determine the appropriate assumptions for developing the required estimates.

The Company’s liabilities for unpaid medical claims under at-risk capitation arrangements, which are included in Provider liability in the Company’s condensed consolidated balance sheets, were as follows:

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6.~~Accrued Expenses~~

~~Accrued expenses consisted of the following:~~

(Dollars in Thousands) March 31, 2021 December 31, 2020
Accrued employee compensation and benefits $ 6,022 $ 6,167
Bonuses payable 2,415 10,418
Other accrued expenses 13,786 14,600
Total accrued expenses $ 22,223 $ 31,185


	March 31,
(Dollars in Thousands)	2023		2022
Balance, beginning of period	$	28,617	$	—
Incurred health care costs
Current year	75,632		48,330
Prior years	3,268		—
Total claim incurred	$	78,900	$	48,330
Claims Paid
Current year	(29,716)		(33,476)
Prior years	(28,079)		—
Total claims paid	$	(57,795)	$	(33,476)
Adjustments to other claims-related liabilities	—		—
Other service physician service agreement adjustments	—		—
Balance, end of period	$	49,722	$	14,854

7.8. Note Payable

~~The Company’s note payable consists of the following:~~

(Dollars in Thousands) March 31, 2021 December 31, 2020
Note payable $ 33,906 $ 34,125
Less debt issuance costs (519) (466)
Less current portion (1,094) (875)
Note payable, net $ 32,293 $ 32,784

On November 15, 2019, the Company entered into a Credit Agreement ~~with~~(the “Original Credit Agreement”) by and among Privia Health, LLC, as the borrower, PH Group Holdings Corp., as the guarantor, certain subsidiaries of Privia Health, LLC, as guarantors, Silicon Valley Bank, as administrative agent and collateral agent (the “Administrative Agent”). On August 27, 2021, the Company and certain of its subsidiaries entered into an assumption agreement and third amendment (the “Third Amendment”) to the Original Credit Agreement (as amended by the Third Amendment, the “Credit Agreement”). Pursuant to the Third Amendment, the Company became the parent guarantor under the Credit Agreement and granted the Administrative Agent a ~~third-party financial institution. The debt agreement provides for up to $35.0 million in term loans that mature~~first-priority security interest on November 15, 2024 with interest payable monthly at the lesser of LIBOR plus 2.0% or ABR plus 1.0% payable monthly (3.0% at March 31, 2021), plus up to an additional $10.0 million of financing in the form of a revolving loan. The revolving loan also includes a letter of credit sub-facility in the aggregate availability amount of $2.0 million and a swingline sub-facility in the aggregate availability amount of $2.0 million. The Company borrowed $35.0 million in term loans on November 15, 2019. During the first year of any loans, the financing allows for early repayment of part orsubstantially all of ~~the term loans in increments of $0.5 million with a pre-payment fee of 1% of any debt prepaid. After the first year from any borrowing, the debt may be repaid without the pre-payment fee.~~its real and personal property, subject to permitted liens.

~~During~~On March ~~2020,~~16, 2023, the Company ~~borrowed $10.0 million against~~provided notice to terminate the revolving loan, which bears interest at the lesser of LIBOR + 2.5% or ABR + 1.5% payable monthly and matures November 15, 2024. These borrowings were repaid in 2020 with $5.0 million repaid in July 2020 and $5.0 million repaid in September 2020. On July 17, 2020, the Company increased its capacity under the revolving loan to $15.0 million.Credit Agreement. As of March ~~31, 2021 there were 0 amounts~~16, 2023, the Company had no borrowings and no letters of credit outstanding under the ~~revolving loan.~~Credit Agreement. The Company did not incur any early termination penalties in connection with the termination of the Credit Agreement.

~~Interest expense relating to the note payable and revolving loan was approximately $0.3~~

9. Income Taxes

The Company recorded a provision for income tax of $2.1 million and ~~$0.5~~$6.3 million for the three months ended March 31, ~~2021,~~2023 and ~~2020,~~2022, respectively.

~~Debt issuance costs relating to the term loans~~ This represents an effective tax rate of ~~approximately $0.5 million have been capitalized~~25.0% and ~~are being amortized over the life~~(53.6)% as of ~~the loan using the effective interest method. Amortization expense of approximately $0.1 million was recorded for both the three months ended~~ March 31, ~~2021~~2023 and ~~2020.~~

~~Substantially all of the Company’s real and personal property serve as collateral under the above debt arrangements.~~2022, respectively. The Credit Agreement requires the Company to maintain (i) a consolidated fixed charge coverage ratio not less than 1.25 to 1.0, and (ii) a consolidated leverage ratio of no more than 3.5 to 1.0 on March 31, 2021, and 3.0 to 1.0 thereafter. The company is in compliance with its debt covenantseffective tax rates for the three months ended March 31, ~~2021~~2023, and ~~2020.~~

~~Annual aggregate principal payments applicable to long-term debt for years subsequent to March 31, 2021 are as follows:~~

(Dollars in Thousands)
Remainder of 2021 $ 656
2022 1,750
2023 2,625
2024 28,875
2025 0
Total $ 33,906

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8.~~Income Taxes~~

~~The Company recorded an~~2022, respectively, differ from the statutory U.S. federal income tax ~~provision~~rate of ~~$2.0 million~~21% primarily due to 162(m) limitations, state income taxes, and ~~$0.7 million for the three months ended March 31, 2021~~excess tax benefits related to equity award vesting and 2020, respectively. This represent an effective tax rate for the respective periods of 26.2% and 11.1%. The Company had a valuation allowance against its deferred tax asset effective March 31, 2020 and the tax expense for this period is limited to the increase in the deferred tax liability associated with an indefinite lived intangible. As of March 31, 2021, there is no longer a valuation allowance against the Company's deferred tax asset and the tax expense is primarily a result of the statutory rate applied to pretax book income.exercise events.

~~We consider~~Management considers both positive and negative evidence when evaluating the recoverability of our ~~DTAs.~~deferred tax assets (“DTAs”). The assessment is required to determine whether, based on all available evidence, it is more likely than not (i.e., greater than a 50% probability) that all or some portion of the DTAs will be realized in the future. As of March 31, ~~2020,~~2023 and December 31, 2022, the weight of all available positive evidence was ~~not~~ greater than the weight of all negative evidence, ~~and the valuation allowance remained against the deferred tax asset balance. As of March 31, 2021, there is no longer~~so a valuation allowance against the deferred tax asset ~~balance due to positive evidence outweighing the negative evidence.~~was not recorded.

~~9. Share-based Compensation~~10. Stockholders’ Equity

Novant Health Private Placement

On March 2, 2023, Privia Health Group, Inc. (the “Company”) entered into a strategic alignment agreement (the “Equity Alignment Agreement”) with ChoiceHealth, Inc. (“Novant Sub”), a subsidiary of Novant Health, Inc. (“Novant Health”), in connection with the strategic partnership between the Company and Novant Health entered into in November 2022 to launch Privia Medical Group — North Carolina.

Pursuant to the Equity Alignment Agreement, Novant Sub will be entitled to receive, and the Company agreed to issue, shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), to Novant Sub any time each of the following events occurs, in the following amounts:

1.The Company will issue 745,712 shares of Common Stock to Novant Sub each time Privia Medical Group — North Carolina implements 1,000 providers in specified markets in North Carolina.

2.The Company will issue 372,856 shares of Common Stock to Novant Sub each time the Company and Novant Health enter a new state pursuant to a mutually agreed business plan developed for such state.

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3.The Company will issue 745,712 shares of Common Stock to Novant Sub each time the partnership between the Company and Novant Health for each new state implements 1,000 providers in specified core markets in such state.

The Equity Alignment Agreement will renew every four years, subject to the delivery of a third-party valuation opinion. The renewal will be required to use the same issuance triggers, but the number of shares may be adjusted to be consistent with the valuation opinion. The number of shares of Common Stock issuable to Novant Sub under the Equity Alignment Agreement and all renewals of the Equity Alignment Agreement will be subject to a total cap equal to 19.9% of the total number of shares of Common Stock outstanding as of the effective date of the Equity Alignment Agreement and as of the effective date of all renewals, whichever is lowest.

Stock option plan

The PH Group Holdings Corp. Stock Option Plan (the PH“PH Group Option ~~Plan)~~Plan”) was created on January 17, 2014. The employees of the Company and its subsidiaries, consultants of the Company and the employees of Brighton Health Plan Services Holdings Corp. (BHPS) (a wholly-owned subsidiary of BHG Holdings) and its subsidiaries who have performed services for the Company were the participants of the PH Group Option Plan. The aggregate number of shares of common stock for which options may be granted under the PH Group Option Plan shall not exceed 4,229,850 shares.

Effective August 11, 2016, the PH Group Option Plan was transferred to its parent and became the PH Group Parent Corp. Stock Option Plan (the PH“PH Parent Option ~~Plan)~~Plan”). All other terms in the PH Group Option Plan remained unchanged in the PH Parent Option Plan at the effective date of the transfer.

Effective August 28, 2018, the PH Parent Option Plan was amended and restated to increase the aggregate number of shares of common stock for which options may be granted from 4,229,850 shares to 18,985,846 shares.

~~Stock option activity~~

~~The following table summarizes information about the PH Parent Option Plan transactions:~~

Options
Outstanding Weighted-
Average
Exercise Price Weighted-
Average
Grant-Date
Fair Value Weighted-
Average
Remaining
Contractual
Life
Balance at January 1, 2021 18,300,959 2.01 0.34 7.82
Granted 0 0 0
Exercised 0 0 0
Forfeited (78,050) 2.01 0.42
Balance at March 31, 2021 18,222,909 $ 2.01 0.34 7.57
Exercisable options 3,276,976 $ 2.00 0.32 7.51

~~Share-based compensation expense~~

The estimated fair value of the outstanding time-based options is recognized as share-based compensation expense over the vesting period of the options. For the three months ended March 31, 2021 and 2020, the Company recognized share-based compensation expense of approximately $0.1 million and $0.1 million, respectively, related to the time-based options, which is included in general and administrative expenses in the accompanying condensed consolidated statements of operations. At March 31, 2021 the Company has approximately $0.7 million of unrecognized share-based compensation expense related to unvested time-based options. Future share-based compensation expense will be recognized on a straight-line basis over the remaining vesting period for the time-based options. The Company did not recognize any share-based compensation expense related to the performance-based options as the shares are only exercisable upon a liquidity event which did not occur during the period.

~~10.Related-Party Transactions~~

On October 31, 2020, the $4.0 million of related party receivables was used to repay $4.0 million of the Notes payable to related parties, leaving $4.7 million of Notes payable to related parties. The Company paid interest of $0.2 million through October 31, 2020.

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In addition, on December 22, 2020, the remaining $4.7 million of Notes payable to related parties were converted to a capital contribution, leaving no remaining Notes payable to related parties outstanding as of December 31, 2020.

~~11.Commitments and Contingencies~~

~~There have been no material changes during the three months ended March 31, 2021 to commitments and contingencies previously stated in the Prospectus.~~

~~12.Concentrations of Credit Risk~~

Our financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. While our cash and cash equivalents are managed by reputable financial institutions, the Company’s cash balances with the individual institutions may at times exceed the federally insured limits. At March 31, 2021, substantially all of the Company’s cash and cash equivalents were held at 2 financial institutions. The Company believes these financial institutions are financially sound and that minimal credit risk exists.

The Company receives payment for medical services provided to patients by its physicians through contracts with payers. Six payers within the network accounted for approximately 73% and 72% of such payments for the three months ended March 31, 2021 and 2020, respectively. The Company evaluates accounts receivable to determine if they will ultimately be collected. In performing this evaluation, significant judgments and estimates are involved, such as past experience, credit quality, age of the receivable balance and current economic conditions that may affect ability to pay. As of March 31, 2021 and December 31, 2020, the Company had six payers within the network that made up approximately 70% of accounts receivable.

~~13.Net Income (Loss) Per Share~~

~~A reconciliation of net income (loss) available to common shareholders and the number of shares in the calculation of basic and diluted earnings (loss) per share was calculated as follows:~~

For the Three Months Ended March 31,
(in thousands, except for share and per share amounts) 2021 2020
Net income attributable to Privia Health Group, Inc. common stockholders $ 5,398 $ 5,414
Weighted average common shares outstanding - basic 95,985,817 95,931,549
Potentially dilutive stock options 0 0
Weighted average common share outstanding - diluted 95,985,817 95,931,549
Earnings per share attributable to Privia Health Group, Inc. common stockholders – basic and diluted $ 0.06 $ 0.06

The treasury stock method is used to consider the effect of the potentially dilutive stock options. The following weighted-average outstanding shares of potentially dilutive securities were excluded from computation of diluted loss per share attributable to common shareholders for the period presented because including them would have been antidilutive:

For the Three Months Ended March 31,
2021 2020
Potentially dilutive stock options to purchase common shares 18,222,909 17,600,258
Total potential dilutive shares 18,222,909 17,600,258

~~14.Segment Financial Information~~

The Company determined in accordance with ASC Topic 280, Segment Reporting (“ASC 280”), that the Company operates in and reports as a single operating segment, which is to care for its patients’ needs. Operating segments are identified as components of an enterprise where separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, who reviews financial operating results on a regular basis for the purpose of allocating resources and evaluating financial performance.

The Company defines its CODM as its Chief Executive Officer, who regularly reviews financial operating results on a consolidated basis for purposes of allocating resources and evaluating financial performance. Although the Company derives its revenues from a number of different geographic regions, the Company neither allocates resources based on the operating results from the individual regions, nor manages each individual region as a separate business unit. The Company’s CODM manages the operations on a consolidated basis to make decisions about overall corporate resource allocation and to assess overall corporate profitability. As of March 31, 2021 and 2020, all of the Company’s long-lived assets were located in the United States and all revenue was earned in the United States.

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~~15. Subsequent Events~~

~~Amended and Restated Certificate of Incorporation~~

On May 3, 2021, in connection with the closing of the IPO, the Company amended and restated its certificate of incorporation (as amended and restated, the “Certificate of Incorporation”), which was filed with the Secretary of State of Delaware.

~~Amended and Restated Bylaws~~

~~On May 3, 2021, in connection with the closing of the IPO, the Company amended and restated its By-laws (as amended and restated, the “By-laws”).~~

~~Option Plan Modification~~

On April 1, 2021, contingent on the consummation of the IPO, the Board of Directors approved a modification to the PH Group Parent Corp. Stock Option Plan of the vesting conditions of certain outstanding stock option grants to certain employees and consultants. The modification accelerated by one year any time vested ~~option~~options that were not previously 100% vested and modified the vesting condition of the performance based options to vest 60% at IPO, 20% 12 months after IPO and 20% 18 months after the IPO. The modification also accelerated the CEO’s time based options by an additional four months such that 100% of his time based options are vested. ~~We expect to recognize~~The Company recognized stock-based compensation of ~~$189.5~~$195.1 million in the second quarter of 2021 related to these modifications and ~~we expect to recognize~~recognized an additional ~~$95.0~~$89.9 million of additional stock compensation expense over the eighteen months following the completion of the IPO.

2021 Omnibus Incentive Plan

On April 6, 2021, the Company approved the Privia Health Group, Inc. 2021 Omnibus Incentive Plan (the “Plan”) which permits awards up to ~~10%~~10,278,581 shares of ~~our~~the Company’s common stock issued and outstanding after the close of our IPO. Based upon 102,785,817 shares outstanding upon the closing of our IPO, there are 5,411,493 shares reserved for issuance under the Plan and 4,867,088 shares reserved for the options and restricted stock units issued on April 29, 2021.stock. The Plan also allows for an ~~automated~~automatic increase on the first day of each fiscal year following the effective date of the Plan by an amount equal to the lesser of (i) 5% of outstanding shares on December 31 of the immediately preceding fiscal year or (ii) such number of shares as determined by the Company’s ~~board of directors~~Compensation Committee in its discretion. The Plan provides for the granting of stock options at a price equal to at least 100% of the fair market value of the Company’s ~~Common Stock~~common stock as of the date of grant. The Plan also provides for the granting of Stock Appreciation Rights, Restricted Stock, Restricted Stock Units (“RSUs”), Performance Awards and other cash-based or other stock-based awards, all which must be granted at not less than the fair market value of the Company’s ~~Stock~~common stock as of the date of grant. Participants in the Plan may include employees, consultants, other service providers and non-employee directors. On ~~April 29, 2021,~~the effective date of the IPO, the Company issued 1,183,871 restricted stock units at the offering price and 3,683,217 options, with ~~a strike~~an exercise price equal to the ~~IPO~~ offering price. These issuances are expected to generate ~~stock~~stock-based compensation expense of $62.3 million to be ~~expensed~~recognized over the next four years starting on the effective date of the IPO as both the restricted stock units and stock options vest. The 2021 Plan is intended as the successor to and continuation of the PH Parent Option Plan. No additional stock awards will be granted under the PH Parent Option Plan.

~~Anthem Private Placement~~2021 Employee Stock Purchase Plan

~~On May 3,~~In April 2021, ~~concurrent with~~ the ~~closing~~Company’s Board of ~~its~~Directors approved the Company’s 2021 Employee Stock Purchase Plan (“2021 ESPP”). The 2021 ESPP became effective upon the execution of the underwriting agreement for the Company’s IPO in April 2021. Per the Plan, shares may be newly issued shares, treasury shares or shares acquired on the open market. The Compensation Committee may elect to increase the total number of Shares available for purchase under the Plan as of the first day of each Company fiscal year following the Effective Date in an amount equal to up to one percent (1%) of the shares issued and outstanding on the immediately preceding December 31; provided that the maximum number of shares that may be issued under the Plan in any event shall be 10,278,581 shares. As of March 31, 2023, the Company ~~issued and sold, at $23.00 per share, in a private placement to an affiliate of Anthem, Inc. (the “Investor”) 4,000,000~~has reserved 1,027,858 shares of common stock ~~par value $0.01~~for issuance under the 2021 ESPP. As of March 31, 2023, no shares have been issued under this plan.

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Stock option activity

The following table summarizes stock option activity under the PH Parent Option Plan and 2021 Plan:


	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2022	13,176,721	$	7.86	9.02	$	197,695
Granted	—	—
Exercised	(639,713)	2.01
Forfeited	(140,161)	23.00
Balance at March 31, 2023	12,396,847	$	7.99	8.60	$	243,650
Exercisable March 31, 2023	8,841,190	$	2.06	8.85	$	225,943

RSU Activity

The following table summarizes the RSU activity under the 2021 Plan:


	Number of Shares	Grant Date Fair Value
Unvested and outstanding at December 31, 2022	2,404,664	$	23.81
Granted	—	—
Vested	(101,457)	25.56
Forfeited	(99,890)	24.04
Unvested and outstanding at March 31, 2023	2,203,317	$	23.72

Stock-based compensation expense

Total stock-based compensation expense for the three months ended March 31, 2023 and 2022, was approximately $5.4 million and $24.9 million, respectively. At March 31, 2023, there was approximately $57.8 million of unrecognized stock-based compensation expense related to unvested options and RSUs, net of forfeitures, that is expected to be recognized over a weighted-average period of 1.2 years.

Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows:


	For the Three Months Ended March 31,
(Dollars in Thousands)	2023		2022
Cost of platform	$	2,107	$	4,623
Sales and marketing	400		788
General and administrative	2,874		19,470
Total stock-based compensation	$	5,381	$	24,881

11. Related-Party Transactions

On November 3, 2022, the Company announced a strategic partnership with Novant Health Enterprises, a division of Novant Health, to launch Privia Medical Group – North Carolina for independent providers throughout North Carolina. A member of our board of directors is a member of the board of trustees of Novant Health. No revenue or expense was recognized related to Novant Health for the three months ended March 31, 2023.

12. Commitments and Contingencies

There are no material commitments and contingencies as of March 31, 2023 and December 31, 2022.

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13. Concentrations of Credit Risk

Our financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. While our cash and cash equivalents are managed by reputable financial institutions, the Company’s cash balances with the individual institutions may at times exceed the federally insured limits. Our cash and cash equivalents primarily consist of highly liquid investments in money market funds and cash.

The Company receives payment for medical services provided to patients by its physicians through contracts with payers. Six payers within the network accounted for approximately 73% and 74% of such payments for the three month periods ended March 31, 2023 and 2022, respectively. The Company evaluates accounts receivable to determine if they will ultimately be collected. In performing this evaluation, significant judgments and estimates are involved, such as past experience, credit quality, age of the receivable balance and current economic conditions that may affect ability to pay. As of March 31, 2023 and December 31, 2022, the Company had six payers within the network that made up approximately 70% and 67% of accounts receivable, respectively.

14. Net Income (Loss) Per Share

A reconciliation of net income (loss) available to common shareholders and the number of shares in the calculation of basic and diluted earnings (loss) per share was calculated as follows:


	For the Three Months Ended March 31,
(in thousands, except for share and per share amounts)	2023		2022
Net income (loss) attributable to Privia Health Group, Inc. common stockholders	$	7,324	$	(17,510)
Weighted average common shares outstanding - basic	115,009,010		108,059,064
Weighted average common share outstanding - diluted	124,328,964		108,059,064
Earnings (loss) per share attributable to Privia Health Group, Inc. common stockholders – basic and diluted	$	0.06	$	(0.16)

The treasury stock method is used to consider the effect of the ~~Company~~potentially dilutive stock options. The following outstanding shares of potentially dilutive securities were excluded from computation of diluted loss per share attributable to common stockholders for ~~an aggregate purchase price of $92 million (the “Private Placement”). As of May 3, 2021,~~ the Investor holds approximately 3.9% of the issued and outstanding common stock of the Company. The securities issued to the Investor in the Private Placement were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933.period presented because including them would have been antidilutive:


	Three Months Ended March 31,
	2023	2022
Potentially dilutive stock options to purchase common stock and RSUs	5,280,210	20,815,106
Total potentially dilutive shares	5,280,210	20,815,106

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this quarterly report on Form 10-Q. In addition, the following discussion and analysis and information contains forward-looking statements about the business, operations and financial performance of the Company based on our current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. including, but not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Information Regarding Forward-Looking Statements” in this quarterly report on Form 10-Q.

Overview

Privia Health is a technology-driven, national physician-enablement company that collaborates with medical groups, health plans, and health systems to optimize physician practices, improve patient experiences, and reward doctors for delivering high-value care in both in-person and virtual care settings on the “Privia Platform”. We directly address three of the most pressing issues facing physicians today: the transition to the VBC reimbursement model, the ever-increasing administrative requirements to operate a successful medical practice and the need to engage patients using modern user-friendly technology. We seek to accomplish these objectives by entering markets and organizing existing physicians and non-physician clinicians into a unique practice model that combines the advantages of a partnership in a large regional Medical Group with significant local autonomy for Privia Providers joining our Medical Groups. Our Medical Groups are designated as in-network by all major health insurance ~~plans~~payers in all of our markets and all Privia Providers are credentialed with such health insurance ~~plans.~~payers.

Our platform is purpose-built, organizing physicians into cost efficient, value-based and primary-care centric networks bolstered by strong physician governance, and promotes a culture of physician leadership. The Privia Platform is powered by the Privia Technology Solution, which efficiently manages all aspects ofUnder our Privia Physicians’ provision of healthcare services and eliminates the complexity and reduces the cost of otherwise having to buy more than 30 point solutions. We enhance the patient experience, improve practice economics and influence point of care delivery through investments in data analytics, revenue cycle management (“RCM”), practice and clinical operations and payer alignment. The Privia Platform is designed to succeed across demographic cohorts, acuity levels and reimbursement models, including traditional FFS Medicare, Medicare Shared Savings Program (“MSSP”), Medicare Advantage, Medicaid, commercial insurance and other existing and emerging direct contracting programs with payers and employers. We believe that the Priviastandard model, is a highly scalable solution to help our nation’s healthcare system achieve the quadruple aim of better outcomes, lower costs, improved patient experience, and happier and more engaged providers. Our customers have affirmed our model, as Privia has rapidly become one of the nation’s leading independent physician companies since launching our first Medical Group in 2013.

~~There are three core elements to our physician alignment approach:~~

1)~~A focus on maximizing the potential of a physician’s medical practice across the physician’s entire patient panel, with the end goal of succeeding in VBC reimbursement;~~

2)~~A highly flexible payer-agnostic approach to address the needs of multiple types of physician practices, from independently owned to hospital employed or hospital affiliated practices; and~~

3)~~Delivering a profitable model for both Privia and our Privia Physicians, regardless of the reimbursement model, geographic environment or specialty.~~

The Privia Platform is powered by the Privia Technology Solution, which efficiently manages all aspects of our Privia Physicians’ practices and eliminates the complexity and reduces costs. The intended result is engaged physicians and non-physician clinicians delivering high quality virtual and in-person healthcare to patients with superior clinical outcomes and experiences at lower costs. We believe our technology-enabled platform is highly scalable, allowing us to both rapidly build density in new geographic markets and guide those markets from FFS to VBC by shifting the reimbursement model and helping our Privia Providers better manage the cost of care through a focus on quality and success-based reimbursement. This model is designed to enable significant growth, with significant revenue visibility, low invested capital and attractive margins. We believe the Privia Platform aligns with the direction healthcare is headed, including (1) a macro shift towards VBC models that focus on delivering coordinated, high quality care at lower total costs, (2) a greater focus on the patient experience and (3) a focus on optimizing provider workflow and bringing back the joy of practicing medicine. We believe our approach is highly attractive to multiple types of physician practices given our significant value proposition and our comprehensive solution set.

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We believe our technology-enabled platform is differentiated and well positioned to drive sustainable long-term growth, with attractive margins and attractive returns on invested capital. The Privia Platform has the following key attributes:

•~~Addresses a Large Total Addressable Market:~~ ~~Targets a large and growing total addressable market.~~

•~~Purpose-Built to Scale Nationally:~~ ~~Flexible model to enter new markets with multiple types of physician practices~~.

•~~Powered by the Privia Technology Solution:~~ ~~Comprehensive cloud-based technology-enabled platform designed to optimize provider workflow across the full continuum of reimbursement environments as well as both virtual and in-person care settings~~.

•~~Establishes Provider Density in Local Markets:~~ ~~Supports a proven expansion strategy resulting in increased relevance with payers and patients~~.

•~~Designed to Transform Care Delivery:~~ ~~Designed to transition care delivery in each market from FFS to VBC and to enhance the care model and ability of Privia Providers to manage higher risk patients~~.

•~~Demonstrates Physician Value Proposition Consistently:~~ ~~Reduces administrative burden and generally increases provider profitability.~~

•~~Generates Attractive Financial Results:~~ ~~Has an established scale, diversified revenue mix with no single payer or individual practice concentration, and is profitable and capital efficient with attractive growth~~. ~~See “Key Metrics” for a discussion of practice collections.~~

•~~Led by a Highly Experienced Executive and Physician Leadership Team:~~ ~~Our management team has significant experience leading payer, provider and healthcare information technology organizations.~~

Privia Physicians join the Medical Group in their geographic market as an owner of the Medical Group. Certain of our Medical Groups are ~~majority-owned by us (each, an “Owned~~Owned Medical ~~Group”),~~Groups, with Privia Physicians owning a minority interest. However, in those markets in which state regulations do not allow us to own physician practices, the Medical Groups are Non-Owned Medical Groups or Friendly Medical Groups. Privia Physicians who owned ~~entirely by~~their own practices prior to joining Privia ~~Physicians.~~ continue to own their Affiliated Practices, but those Affiliated Practices no longer furnish healthcare services. The Medical Groups have no ownership in the underlying Affiliated Practices, but the Affiliated Practices do provide certain services to our Medical Groups, such as use of space, non-physician staffing, equipment and supplies.

We provide management services to each Medical Group ~~though~~through a local MSO established with the objective of maximizing the independence and autonomy of our Affiliated Practices, while providing Medical Groups with access to VBC opportunities either directly or through Privia-owned ACOs. ~~In markets with Non-Owned Medical Groups, we earn revenue by providing administrative and management services through owned MSO entities (FFS-administrative services revenue).~~ We have national committees that distribute quality guidance, and we employ Chief Medical Officers who provide clinical oversight and direction over the clinical affairs of the Owned Medical Groups. Additionally, we hold the provider contracts, maintain the patient records, set reimbursement rates, and negotiate payer contracts on behalf of the Owned Medical Groups. The Medical Groups have no ownership in the underlying Affiliated Practices, but the Affiliated Practices do provide certain services to our Medical Groups, such as use of space, non-physician staffing, equipment and supplies. We principally derive our revenues from the following three sources: (i) FFS-patient care revenue generated from providing healthcare services to patients through Privia Providers of Owned Medical Groups and ~~FFS-administrative services earned for administrative services provided~~the owned ACOs.

We also offer Privia Care Partners, a more flexible provider affiliation model, to ~~Non-Owned Medical Groups, (ii) VBC revenue collected on behalf~~providers who do not desire to join one of our ~~Privia Providers~~medical groups. This model aggregates providers in certain of our existing markets as well as new markets who are looking solely for VBC solutions without the ~~form~~necessity of changing EMR providers. We furnish population health services, reporting and analytics to such providers along with a menu of management ~~and administrative fees,~~services from which at this time, are primarily in the form of PMPM fees and shared savings, which includes quality bonuses, and (iii) other revenue from additional services offered by Privia to its Privia Providers or directly to patients or employers. The operations of our Owned Medical Groups, owned ACOs and owned MSOs are reflected within our consolidated financial results.providers may choose.

GAAP Financial Measures

• Revenue was ~~$213.6~~$386.3 million and ~~$212.9~~$313.8 million for the three months ended March 31, ~~2021~~2023 and ~~2020,~~2022, respectively;

• ~~Operating income~~Gross profit was ~~$7.9~~$83.0 million and ~~$6.5~~$70.8 million for the three months ended March 31, ~~2021~~2023 and ~~2020,~~2022, respectively; ~~and~~

• ~~Net Income attributable to Privia Health Group, Inc.~~Operating income (loss) was ~~$5.4~~$6.7 million and ~~$5.4~~$(11.5) million for the three months ended March 31, ~~2021~~2023 and ~~2020,~~2022, respectively; and

• Net income (loss) attributable to Privia Health Group, Inc. was $7.3 million and $(17.5) million, for the three months ended March 31, 2023 and 2022, respectively.

Key Metrics and Non-GAAP Financial Measures

• Practice Collections ~~was $344.1~~were $658.9 million and ~~$327.4~~$561.9 million for the three months ended March 31, ~~2021.~~2023 and ~~2020,~~2022, respectively;

• Care Margin was ~~$52.5~~$84.0 million and ~~$47.8~~$71.6 million for the three months ended March 31, ~~2021.~~2023 and ~~2020,~~2022, respectively;

• Platform Contribution was ~~$25.5~~$41.4 million and ~~$20.3~~$35.0 million for the three months ended March 31, ~~2021.~~2023 and ~~2020,~~2022, respectively; and

• Adjusted EBITDA was ~~$9.9~~$16.9 million and ~~$7.1~~$14.8 million for the three months ended March 31, ~~2021.~~2023 and ~~2020,~~2022, respectively.

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See “Key Metrics and Non-GAAP Financial Measures” below for more information as to how we define and calculate Implemented Providers, ~~attributed~~Attributed lives, Practice Collections, Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin, and for a reconciliation of ~~income from operations,~~gross profit, the most comparable GAAP measure, to Care Margin, ~~income from operations,~~gross profit, the most comparable GAAP measure, to Platform Contribution, and net income (loss), the most comparable GAAP measure, to Adjusted EBITDA.

~~The COVID-19 Pandemic and the Coronavirus Aid, Relief and Economic Stimulus Act (“CARES Act”)~~

The current COVID-19 pandemic had an impact on our results of operations, cash flow and financial position for the period ended and as of March 31, 2021, as we experienced lower volumes than anticipated and shifts in the mix of services provided after the onset of the pandemic in the United States. See the Prospectus for additional information on impacts during 2020. We are closely monitoring the impact of the pandemic on all aspects of our business including impacts to employees, customers, patients, suppliers and vendors.

•~~No additional funds were received from the Public Health and Social Services Emergency Relief Fund under the CARES Act during the three months ended March 31, 2021 and 2020.~~

Our Revenue

We recognize revenue from multiple stakeholders, including health care consumers, health insurers, employers, providers and health systems. Our revenue includes (i) FFS revenue generated from providing healthcare services to patients through Privia Providers of Owned Medical Groups or administrative fees collected for providing administrative services to Non-Owned Medical Groups, (ii) VBC revenue collected on behalf of our providers, ~~primarily per member per month (PMPM)~~through capitated revenue, shared savings (including surplus payments, shared savings, total cost of care budget payments and similar payments) and care management fees (including care management fees, management services fees, care coordination fees and all other similar administrative fees) ~~and shared savings (including surplus payments, shared savings, total cost of care budget payments and similar payments)~~, and (iii) other revenue from additional services, such as concierge services, virtual visits, virtual scribes and ~~coding, clinical trials, behavioral health management, and partnerships with self-insured employers to offer direct primary care to their employees.~~coding.

FFS Revenue

We generate FFS-patient care revenue when we collect reimbursements for FFS medical services provided by Privia Providers. Our agreements with our providers have a multi-year term length and we have historically experienced a 95% provider retention rate, both of which lead to a highly predictable and recurring revenue model. Our FFS contracts with payer partners typically contain annual rate inflators and enhanced commercial FFS rates given our scale in each of our markets. As a result of receiving these rate inflators and enhancements, if we continue to be successful in expanding our provider base, we expect revenue will grow year-over-year in absolute dollars. In addition, in our FFS-patient care revenue, we include collections generated from ancillary services such as clinical laboratory, imaging and pharmacy operations. We also generate FFS-administrative services revenue by providing administration and management services to medical groups which are not owned or consolidated by us. FFS-patient care revenue represented ~~79.4%,~~59.0% and ~~82.1%~~65.1% of total revenue for the three months ended March 31, ~~2021~~2023 and ~~2020,~~2022, respectively. FFS-administrative services revenue represented ~~7.2%~~6.8% and ~~6.8%~~7.3% of total revenue for the three months ended March 31, ~~2021~~2023 and ~~2020,~~2022, respectively.

VBC Revenue

Over time, we create incremental value for our provider partners by enabling them to succeed in VBC arrangements. We generate VBC revenue when our providers are reimbursed through traditional FFS Medicare, MSSP, Medicare Advantage, commercial payers and other existing and emerging direct payer and employer contracting programs. The revenue is primarily collected in the form of (i) ~~PMPM~~Capitated revenue earned by providing healthcare services to Medicare Advantage attributed beneficiaries for a defined group of services to include professional, institutional and pharmacy through a contract that is typically known as an “at-risk contract,” (ii) Shared savings earned based on improved quality and lower cost of care for our attributed lives in VBC incentive arrangements and (iii) Care management fees to cover costs of services typically not reimbursed under traditional FFS payment models, including population management, care coordination, advanced technology and ~~analytics, and (ii) shared savings earned based on improved quality and lower cost of care for our attributed patients in VBC arrangements.~~analytics. VBC revenue represented ~~12.4%~~33.8% and ~~10.6%~~27.1% of total revenue for the three months ended March 31, ~~2021~~2023 and ~~2020,~~2022, respectively. We expect VBC revenue to continue to increase as a percentage of total revenue as we grow total Attributed Lives under management as well as increase risk levels undertaken across value-based arrangements.

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Other Revenue

The remainder of our revenue is derived from leveraging our existing base of providers and patients to deliver value-oriented services such as virtual visits, virtual scribes and ~~coding, clinical trials, behavioral health management, and partnerships with self-insured employers to offer direct primary care to their employees.~~coding. Other revenue represented ~~1.0%~~0.3% and 0.4% of total revenue for the three months ended March 31, ~~2021~~2023 and ~~2020,~~2022, respectively.

Key Factors Affecting Our Performance

Addition of New Providers

Our ability to increase our provider base will enable us to deliver financial growth as our providers generate both our FFS and VBC revenue. Our existing provider penetration and market share provides us with significant opportunity to grow in both existing and new geographies, and we believe the number of providers joining Privia is a key indicator of the market’s recognition of the attractiveness of our platform to our providers, patients and payers. We intend to increase our provider base in existing and new markets by adding new practices and assisting our existing practices with recruiting new providers, using our in-market and national sales and marketing teams. As we add providers to the Privia Platform, we expect them to contribute incremental economics as we leverage our existing brand and infrastructure, both at the corporate and in-market levels.

Addition of New Patients

Our ability to add new patients to our provider base in existing and new markets will also enable us to deliver revenue growth in both our FFS and VBC contracts. We believe the number of attributed patient lives in VBC programs is a key driver of our VBC revenue growth. Our branding and marketing strategies to drive growth in our practices ~~has~~have continued to result in increased engagement with

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new and existing patients. We believe our continued success in growing the visibility of the Privia brand will result in increased patient panels per provider and contribute incremental revenue in both FFS and VBC for our practices.

Expansion to New Markets

Based upon our experience to date, we believe Privia can succeed in all reimbursement environments and payment models. The data we collected from older provider cohorts consistently suggest that we improve their performance in both FFS and VBC metrics over time and inform our expectations for our new markets. We believe our in-market operating structure and ability to serve providers wherever they are on their transition to VBC can benefit physicians and providers throughout the U.S. and that our solution is applicable across all 50 states. We enter a market with an asset-light operating model and employ a disciplined, uniform approach to market structure and development. We partner with market leading medical groups and health systems to form anchor relationships and align other independent, affiliated, or employed providers into a single-TIN medical group. Our business model also gives us flexibility for future, incremental growth through the acquisition of minority or majority stakes in our practices and opening de-novo, fully-owned sites of care focused on Medicare Advantage and direct contracting models.

In November 2022, the Company announced a strategic partnership with Novant Health Enterprises, a division of Novant Health, to launch Privia Medical Group – North Carolina in order to offer community physicians and provider groups throughout North Carolina with resources to reduce administrative burden and enable care insights and collaboration, as well as to support their transition to value-based care.

In January 2023, the Company announced a partnership with Beebe Healthcare, a not-for-profit community healthcare system located in Sussex County, Delaware, to launch an ACO in that state.

In February 2023, the Company announced a partnership with Community Medical Group, the largest Clinically Integrated Network (“CIN”) in Connecticut with approximately 1,100 multi-specialty providers, to launch Privia Quality Network of Connecticut (“PQN-CT”). We acquired a majority ownership in PQN-CT. During the three months ended March 31, 2023 we recorded Goodwill of $8.1 million in connection with the acquisition, which represents the excess of the purchase price over the fair value of the net assets acquired.

In March 2023, The company announced signing of definitive agreements forming a strategic partnership with OhioHealth, a nationally recognized, not-for-profit, charitable, healthcare outreach of the United Methodist Church, to launch Privia Medical Group – Ohio for community physicians throughout the state of Ohio.

Provider Satisfaction and Retention

Privia Providers have high satisfaction with their overall performance on our platform, and we strive to continuously improve provider well-being and patient satisfaction. Our percentage of collections ~~Care Margin~~ model combined with high patient and provider satisfaction results in 90%+ Practice Collections predictability on a rolling twelve month forward basis. We believe these metrics demonstrate the stability of our provider base and the appeal to prospective providers and patients of our platform.

Payer Contracts and Ability to Move Markets to VBC

Our FFS and VBC revenue is dependent upon our contracts and relationships with payers. We partner with a large and diverse set of payer groups nationally and in each of our markets to form provider networks and to lower the overall cost of care, and we structure bespoke contracts to help both providers and payers achieve their objectives in a mutually aligned manner. Maintaining, supporting and increasing the number of these contracts and relationships, particularly as we enter new markets, is important for our long-term success.

~~Privia’s~~Our ability to work within each geographic market as it evolves in its shift towards VBC, with our experience working in all reimbursement environments, enables providers to accelerate and succeed in their transition. Our model is aligned with our payer partners, as we have demonstrated improved patient outcomes while driving incremental revenue growth. We intend to accelerate the move towards the adoption of VBC reimbursement in each market in current and emerging payer programs. To do so, we will need to continue enhancing our VBC capabilities and executing on initiatives to deliver next generation access, superior quality metrics and lower cost of care.

Privia Health launched three new ACOs in the first quarter of 2023, expanding the total number of Privia-owned ACOs to ten, serving beneficiaries across the District of Columbia and eleven states, including California, Connecticut, Delaware, Florida, Georgia, Maryland, Montana, North Carolina, Tennessee, Texas, and Virginia.

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Components of Revenue

Our FFS revenue is primarily dependent upon the size of our provider base, payer contracted rates and patient volume. Our ability to maintain or improve pricing levels in our contracts with payers and patient volume for our providers will impact our results of operations. In addition to increasing our provider base and contracted rates over time, we also seek to increase patient volume by demonstrating the ability to provide a better patient experience that leads to higher retention rates and drives referrals to preferred, high quality and value-based providers. Our VBC revenue is primarily dependent upon the number of attributed patients in our VBC arrangements, risk levels of our payer contracts, and effective management of our patients’ total cost of care. As we grow our provider base, we also expect to increase our total number of attributed patients in existing and new markets. In addition, we intend to increase the risk levels of our value-based programs as we seek a higher revenue opportunity on a per patient basis over time.

Investments in Growth

We expect to continue focusing on long-term growth through investments in our sales and marketing, our technology-enabled platform, and our operations. In addition, as we continue our efforts to move markets toward VBC, we expect to continue making additional investments in operations for an expanded suite of clinical capabilities to manage our patient population.

We launched Privia Care Partners on January 1, 2022 to offer a more flexible affiliation model for providers who do not desire to join one of our medical groups. This model aggregates providers solely for VBC contracts without the necessity for providers to change EHRs. We furnish population health services, reporting and analytics to such providers along with a menu of management services from which providers may choose. As of January 1, 2023, approximately 350 providers with more than 42,000 attributed lives are participating in the Privia Care Partners model.

Key Metrics and Non-GAAP Financial Measures

We review a number of operating and financial metrics, including the following key metrics and non-GAAP financial measures, to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plans, and make strategic decisions.

Key Metrics


		For the Three Months Ended March 31,					For the Three Months Ended March 31,
		2021		2020			2023		2022
Implemented Providers (as of end of period)	Implemented Providers (as of end of period)	2,648		2,528		Implemented Providers (as of end of period)	3,716		3,370
Attributed Lives (in thousands) (as of end of period)	Attributed Lives (in thousands) (as of end of period)	721		752		Attributed Lives (in thousands) (as of end of period)	1,037		848
Practice Collections (1) ($ in millions)	Practice Collections (1) ($ in millions)	$	344.1	$	327.4	Practice Collections (1) ($ in millions)	$	658.9	$	561.9

(1) We define Practice Collections as the total collections from all practices in all markets and all sources of reimbursement (FFS, VBC and other) that we receive for delivering care and providing our platform and associated services. Practice Collections differ from revenue by including collections from Non-Owned Medical Groups.

Implemented Providers

We define Implemented Providers as the total of all service professionals on Privia Health’s platform at the end of a given period who are credentialed by Privia Health and bill for medical services, in both Owned and Non-Owned Medical Groups during that period.This includes, but is not limited to, physicians, physician assistants, and nurse practitioners. We believe that growth in the number of Implemented Providers is a key indicator of the performance of our business and expected revenue growth. This growth depends, in part, on our ability to successfully add new practices in existing markets and expand into new markets. The number of Implemented Providers increased ~~4.7% between~~10.3% as of March 31, ~~2021 and 2020,~~2023 compared to March 31, 2022, due to organic growth in our healthcare delivery ~~business.~~business as well as entrance into Montana markets.

Attributed Lives

We define Attributed Lives as any patient that a payer deems attributed to Privia, in both Owned and Non-Owned Medical Groups, to deliver care as part of a VBC arrangement. ~~We define our Attributed Lives as patients who have selected one of our owned or Non-Owned Medical Groups as their provider of primary care services as of the end of a particular period.~~ The number of Attributed Lives is an important measure that impacts the amount of VBC revenue we receive. ~~While overall~~ Attributed Lives ~~decreased 4.1% between~~increased 22.3% as of March 31, ~~2021~~2023 compared to March 31, 2022, due to the entrance into the Delaware and ~~2020, Attributed Lives in government value-based programs increased by 7.7% and commercial value-based programs decreased by 10.4%.~~Connecticut Markets, as well as organic growth.

Practice Collections

We define Practice Collections as the total collections from all practices in all markets and all sources of reimbursement (FFS, VBC and other) that we receive for delivering care and providing our platform and associated services. Practice Collections differ from revenue by adding collections from Non-Owned Medical Groups. FFS arrangements accounted for 76.9% and 81.7% of our practice collections for the three months ended March 31, 2023 and 2022, respectively, while VBC accounted for 23.0% and 18.1% of practice collections for the three months ended March 31, 2023 and 2022, respectively.

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Practice Collections increased ~~5.1% between~~17.3% for the three months ended March 31, ~~2021 and 2020~~2023 when compared to the same period in 2022, due mainly to organic growth of our healthcare delivery ~~business.~~business, our at-risk Capitated revenue contracts and as well as entrance into the Connecticut markets.

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with GAAP, we believe Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin are useful as non-GAAP measures to investors as these are metrics used by management in evaluating our operating performance and in assessing the health of our business. We use Care

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Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook.

However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. A reconciliation is provided below for our non-GAAP financial measures to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

For the Three Months Ended March 31,
(amounts in thousands, except for percentages) 2021 2020
Care Margin 1 ($)
$ 52,494 $ 47,836
Platform Contribution 1 ($)
$ 25,532 $ 20,275
Platform Contribution Margin 1 (%)
48.6% 42.4%
Adjusted EBITDA 1 ($)
$ 9,947 $ 7,055
Adjusted EBITDA Margin 1 (%)
18.9% 14.7%
1. See below for more information as to how we define and calculate Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin and for a reconciliation of income from operations, the most comparable GAAP measure, to Care Margin, income from operations, the most comparable GAAP measure, to Platform Contribution, and net income, the most comparable GAAP measure, to Adjusted EBITDA.
In the third quarter of 2022, we changed the definition of Adjusted EBITDA to exclude employer taxes on equity vesting/exercise. In prior periods, this amount was considered de minimis and the Adjusted EBITDA amounts were not adjusted. Employer payroll tax expense related to employee stock transactions are tied to the vesting or exercise of underlying equity awards and the price of our common stock at the time of vesting, which varies in amount from period to period and is dependent on market forces that are often beyond our control. As a result, management excludes this item from our internal operating forecasts and models. Management believes that non-GAAP measures adjusted for employer payroll taxes on employee stock transactions provide investors with a basis to measure our core performance against the performance of other companies without the variability created by employer payroll taxes on employee stock transactions as a result of the stock price at the time of employee exercise.


	For the Three Months Ended March 31,
(amounts in thousands, except for percentages)	2023		2022
Care Margin (1) ($)	$	84,021	$	71,614
Platform Contribution (1) ($)	$	41,398	$	34,965
Platform Contribution Margin (1) (%)	49.3%		48.8%
Adjusted EBITDA (1) ($)	$	16,864	$	14,801
Adjusted EBITDA Margin (1) (%)	20.1%		20.7%
(1) See below for more information as to how we define and calculate Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin and for a reconciliation of Gross Profit, the most comparable GAAP measure, to Care Margin, Gross Profit the most comparable GAAP measure, to Platform Contribution, and net income (loss), the most comparable GAAP measure, to Adjusted EBITDA.

Care Margin

We define Care Margin as Gross Profit excluding amortization of intangible assets. Gross Profit is defined as total revenue less ~~the sum~~provider expenses and amortization of ~~physician and practice expense.~~intangible assets. Our Care Margin generated from FFS revenue is contractual and recurring in nature, and primarily based on an individually negotiated percentage of collections for each practice that joins Privia. Our Care Margin generated from VBC revenue is based on a percentage of care management fees and shared savings collected. We view Care Margin as all of the dollars available for us to manage our business, including providing administrative support to our practices, investing in sales and marketing to attract new providers to the Privia Platform, and supporting the organization through our corporate infrastructure. We expect Care Margin will grow year-over-year in absolute dollars as we continue to expand our provider base. We would also expect our care management and shared savings economics in our VBC arrangements to improve on a per patient basis as we manage towards lower total cost of care for our Attributed Lives and move towards higher risk VBC arrangements over time. Care Margin increased ~~9.7%~~17.3% for the three months ended March 31, ~~2021~~2023 when compared to the same period in ~~2020~~2022 due to organic growth of our medical practice business. As a percentage of revenue, Care Margin decreased to 21.8% for the three months ended March 31, 2023 from 22.8% for the same period in 2022 due to the addition of new at-risk capitation arrangements during the first quarter of 2023.

In addition to our financial results determined in accordance with GAAP, we believe Care Margin, a non-GAAP measure, is useful in evaluating our operating performance. We use Care Margin to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial

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measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Care Margin is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance.

The following table provides a reconciliation of ~~operating income,~~gross profit, the most closely comparable GAAP financial measure, to Care Margin.

For the Three Months Ended March 31,
(unaudited and amounts in thousands) 2021 2020
Operating income $ 7,907 $ 6,496
Depreciation and amortization 445 338
General and administrative 13,996 10,989
Sales and marketing 3,184 2,452
Cost of platform 26,962 27,561
Care margin $ 52,494 $ 47,836

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	For the Three Months Ended March 31,
(unaudited and amounts in thousands)	2023		2022
Revenue	$	386,276	$	313,801
Provider expense	(302,255)		(242,187)
Amortization of intangible assets	(1,049)		(812)
Gross Profit	$	82,972	$	70,802
Amortization of intangibles assets	1,049		812
Care margin	$	84,021	$	71,614

Platform Contribution

We define Platform Contribution as ~~total revenue~~Gross Profit, excluding amortization of intangible assets, less ~~the sum~~Cost of ~~(i) physician~~platform and ~~practice~~excluding stock-based compensation expense ~~and (ii) cost~~included in Cost of platform. The following table provides a reconciliation of gross profit, the most closely comparable GAAP financial measure, to Platform Contribution. We consider platform contribution to be an important measure to monitor our performance, specific to pricing of our services, direct costs of delivering care, and cost of our platform and associated services. As a provider spends a longer time on the Privia Platform, we expect the Platform Contribution from that provider to increase both in terms of absolute dollars as well as a percent of Care Margin. We expect that this increase will be driven by improving per provider revenue economics over time as well as our ability to generate operating leverage on our in-market infrastructure costs. Platform Contribution increased ~~25.9%~~18.4% for the three months ended March 31, ~~2021~~2023 when compared to the same period in ~~2020~~2022 due to organic growth of our medical practice ~~business.~~business and new market entry.

The following table provides a reconciliation of gross profit, the most closely comparable GAAP financial measure, to platform contribution:


	For the Three Months Ended March 31,
(unaudited and amounts in thousands)	2023		2022
Revenue	$	386,276	$	313,801
Provider expense	(302,255)		(242,187)
Amortization of intangibles assets	(1,049)		(812)
Gross Profit	$	82,972	$	70,802
Amortization of intangibles assets	1,049		812
Cost of platform	(44,730)		(41,272)
Stock-based compensation(1)	2,107		4,623
Platform contribution	$	41,398	$	34,965
(1) Amount represents stock-based compensation expense included in Cost of Platform.

Platform Contribution Margin

We define Platform Contribution Margin as ~~total revenue less the sum of (i) physician and practice expense and (ii) cost of platform calculated~~Platform Contribution as a percentage of Care Margin. We consider Platform Contribution Margin to be an important measure to monitor our performance, specific to pricing of our services, direct costs of delivering care, and cost of our platform and associated services. As a provider spends a longer time on the Privia Platform, we expect the Platform Contribution from that provider to increase both in terms of absolute dollars as well as a percent of Care Margin. We expect that this increase will be driven by improving per provider revenue economics over time as well as our ability to generate operating leverage on our in-market infrastructure costs. Platform Contribution Margin was ~~48.6%~~49.3% for three months ended March 31, ~~2021 an increase from 42.4%~~2023 compared to 48.8% during the same period in ~~2020 as we~~2022. We continue to make strategic investments to provide better service to both our patients and physicians at a pace slower than the increase in revenue.

In addition to our financial results determined in accordance with GAAP, we believe platform contribution, a non-GAAP measure, is useful in evaluating our operating performance. We use Platform Contribution to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Platform Contribution is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance.

~~The following table provides a reconciliation~~

Table of ~~operating income, the most closely comparable GAAP financial measure, to platform contribution:~~Contents

For the Three Months Ended March 31,
(unaudited and amounts in thousands) 2021 2020
Operating income $ 7,907 $ 6,496
Depreciation and amortization expense 445 338
General and administrative 13,996 10,989
Sales and marketing 3,184 2,452
Platform contribution $ 25,532 $ 20,275

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) excluding interest income, interest expense, ~~minority~~non-controlling interest expense / income, depreciation and amortization, stock-based compensation, severance, other one time or non-recurring expenses, employer taxes on equity vesting/exercises and the provision for income taxes. We include Adjusted EBITDA because it is an important measure on which our management assesses and believes investors should assess our operating performance. We consider Adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis. Adjusted EBITDA has limitations as an analytical tool including: (i) Adjusted EBITDA does not ~~include~~reflect the ~~dilution that results from~~impact of stock-based compensation ~~or any cash outflows included in stock-based compensation, including from our purchases of shares of outstanding common stock,~~expense, and (ii) Adjusted EBITDA does not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments. Adjusted EBITDA increased ~~41.0%~~13.9% for the three months ended March 31, ~~2021~~2023, when compared to the same period in ~~2020~~2022 due to organic growth of our medical practice business and growth in our value based care business.

Adjusted EBITDA Margin

We define Adjusted EBITDA Margin as net income (loss) excluding interest income, interest expense, minority interest expense/income, stock-based compensation, severance, other one time or non-recurring expenses and the provision for income taxes calculatedAdjusted EBITDA as a percentage of Care Margin. We included Adjusted EBITDA Margin because it is an important measure on which our management assesses and believes investors should assess our operating performance. We consider Adjusted EBITDA Margin to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis. Adjusted EBITDA Margin was ~~18.9%~~20.1% for three months ended March 31, ~~2021 an increase~~2023 a decrease from ~~14.7%~~20.7% for the same period in ~~2020~~2022 due to the addition of ~~organic growth~~new at-risk capitation arrangements and investments in new markets during the first quarter of ~~our medical practice business.~~

~~Table of Contents~~

~~In addition to our financial results determined in accordance with GAAP, we believe Adjusted EBITDA Margin, a non-GAAP measure, is useful in evaluating our operating performance.~~2023.

We believe that Adjusted EBITDA, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance.

The following table provides a reconciliation of net income (loss) attributable to ~~Privia Health Group, Inc. and subsidiaries,~~the Company, the most closely comparable GAAP financial measure, to Adjusted EBITDA:


		For the Three Months Ended March 31,					For the Three Months Ended March 31,
(unaudited and amounts in thousands)	(unaudited and amounts in thousands)	2021		2020		(unaudited and amounts in thousands)	2023		2022

Net income		$	5,398	$	5,414
Net income (loss) attributable to non-controlling interests		218		(85)
Net income (loss)						Net income (loss)	$	7,324	$	(17,510)
Net loss attributable to non-controlling interests						Net loss attributable to non-controlling interests	(922)		(577)
Provision for income taxes	Provision for income taxes	2,000		700		Provision for income taxes	2,125		6,308
Interest expense		291		467
Interest (income) expense, net						Interest (income) expense, net	(1,813)		232
Depreciation and amortization	Depreciation and amortization	445		338		Depreciation and amortization	1,340		1,118
Stock-based compensation	Stock-based compensation	101		121		Stock-based compensation	5,381		24,881
Other expenses(1)	Other expenses(1)	1,494		100		Other expenses(1)	3,429		349
Adjusted EBITDA	Adjusted EBITDA	$	9,947	$	7,055	Adjusted EBITDA	$	16,864	$	14,801

(1) Other expenses include certain non-cash or non-recurring costs.
(1) Other expenses include employer taxes on equity vesting/exercises, legal, severance and certain non-recurring costs. Employer taxes on equity vesting/exercises of $0.3 million were recorded for the three months ended March 31, 2023.						(1) Other expenses include employer taxes on equity vesting/exercises, legal, severance and certain non-recurring costs. Employer taxes on equity vesting/exercises of $0.3 million were recorded for the three months ended March 31, 2023.

Components of Results of Operations

Revenue

~~Our~~As noted above under “Our Revenue,” revenue is earned in three main categories: FFS revenue, VBC revenue and other revenue.

~~Our FFS-patient care revenue is generated from providing healthcare services~~Operating Expenses

Provider expenses

Provider expenses are amounts accrued or payments made to ~~patients. We receive~~physicians, hospitals and other service providers, including Privia physicians, their related physician practices, and providers the Company has contracted with through payer partners. Those costs include physician guaranteed payments and other required distributions pursuant to contracts with the U.S. federal government and large and small payer organizations that are multi-year in nature, typically ranging from three to five years. We also receive payments from patients that may be financially responsible for a portion or all of the service ~~in the form of co-pays, coinsurance or deductibles.~~

Our FFS-administrative services business provides administration and management services to Non-Owned Medical Groups. The Company’s MSAs with Non-Owned Medical Groups range from 5-20 years in duration and outline the terms and conditions of the administration and management services to be provided, which includes RCM services such as billings and collections,agreements as well as ~~other~~medical claims costs for services ~~including, but not limited~~provided to ~~payer contracting, information technology services and accounting and treasury services. In certain MSAs,~~attributed beneficiaries under at-risk Capitated revenue arrangements for which the Company is financially responsible whether paid ~~administrative fees equal to~~directly by the ~~cost of supplying certain services as outlined~~Company or indirectly by payers with whom the Company has contracted. Provider expenses are recognized in the ~~MSAs, and if applicable, a margin is added to the cost of certain services. Other MSAs~~period in which services are ~~based on a fixed percentage of net collections.~~

VBC revenue is earned through our clinically integrated network and accountable care organizations which bring together independent physician practices to focus on sharing data, improving care coordination, and collaborating on initiatives to improve outcomes and lower healthcare spending. The Company has contracts with the U.S. federal government and large payer organizations that are multi-year in nature typically ranging from three to five years and is paid as follows: (1) care management fees on a PMPM basis and (2) incentive amounts typically earned on a shared savings basis.

The Other revenue is derived from leveraging our existing base of providers and patients to deliver value-oriented services such as concierge services, virtual visits, virtual scribes and coding, clinical trials, behavioral health management, and partnerships with self-insured employers to offer direct primary care to their employees.provided.

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~~Operating Expenses~~

~~Physician and practice expenses~~

Physician payments are set payments made to physicians associated with Owned Medical Groups. These payments are set and adjusted as necessary, pursuant to the Owned Medical Groups’ Board of Directors’ approved guidelines with variances specifically approved by the Owned Medical Groups’ Board of Directors. Practice related payments are used to cover an Affiliated Practice’s staff salary and benefits, medical supplies, rent and other occupancy costs, insurance and office supplies. Affiliated Practices are not owned by the Company and the Company bears no responsibility for any losses incurred by Affiliated Practices. Affiliated Practices are paid a variable amount based on collections and the services provided.

Cost of platform

Third-party EMR and practice management software expenses are paid on a percentage of revenue basis, while we pay most of the costs of our platform on a variable basis related to the number of implemented physicians we service. In addition, expenses contain stock-based compensation related to employees that provide Cost of platform services but exclude any depreciation and amortization expense. Software development costs that do not meet capitalization criteria are expensed as incurred. As we continue to grow, we expect the cost of platform to continue to grow at a rate slower than the revenue growth rate.

Sales and marketing

Sales and marketing expenses consist of employee-related expenses, including salaries, commissions, stock-based compensation, and employee benefits costs, for all of our employees engaged in marketing, sales, community outreach, and sales support. In addition, sales and marketing expenses also include central and community-based advertising to generate greater awareness, engagement, and retention among our current and prospective patients as well as the infrastructure required to support all of our marketing efforts.

General and administrative

Corporate, general and administrative expenses include employee-related expenses, including salaries and related costs and stock-based compensation, technology infrastructure, occupancy costs, operations, clinical and quality support, finance, legal, human resources, and development departments. We expect our general and administrative expenses to increase over time following the closing of the IPO due to the additional legal, accounting, insurance, investor relations and other costs that we will incur as a public company, as well as other costs associated with continuing to grow our business. However, we anticipate general and administrative expenses to decrease as a percentage of revenue over the long term, although they may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.

Depreciation and amortization expense

Depreciation and amortization expenses are primarily attributable to our capital investment and consist of fixed asset depreciation and amortization of intangibles considered to have definite lives. We do not allocate depreciation and amortization expenses to other operating expense categories.

Interest ~~Expense~~(income) expense

Interest (income) expense consists primarily of interest earned by the Company, offset by interest payments (including deferred financing costs) on our outstanding borrowings under our ~~note payable.~~Term Loan Facility. See “Liquidity and Capital Resources—General and Note Payable.”

~~Table of Contents~~

Results of Operations

The following table sets forth our condensed consolidated statements of operations data for the three months ended March 31, ~~2021~~2023 and ~~2020.~~2022.


		For the Three Months Ended March 31,									For the Three Months Ended March 31,
		2021		2020		Change ($)		Change (%)			2023		2022		Change ($)		Change (%)
(in thousands)	(in thousands)									(in thousands)
Revenue	Revenue	$	213,607	$	212,942	$	665	0.3	%	Revenue	$	386,276	$	313,801	$	72,475	23.1	%
Operating expenses:	Operating expenses:									Operating expenses:
Physician and practice expense		161,113		165,106		(3,993)		(2.4)	%
Provider expense										Provider expense	302,255		242,187		60,068		24.8	%
Cost of platform	Cost of platform	26,962		27,561		(599)		(2.2)	%	Cost of platform	44,730		41,272		3,458		8.4	%
Sales and marketing	Sales and marketing	3,184		2,452		732		29.9	%	Sales and marketing	5,286		4,661		625		13.4	%
General and administrative	General and administrative	13,996		10,989		3,007		27.4	%	General and administrative	25,951		36,110		(10,159)		(28.1)	%
Depreciation and amortization	Depreciation and amortization	445		338		107		31.7	%	Depreciation and amortization	1,340		1,118		222		19.9	%
Total operating expenses	Total operating expenses	205,700		206,446		(746)		(0.4)	%	Total operating expenses	379,562		325,348		54,214		16.7	%
Operating income		7,907		6,496		1,411		21.7	%
Interest expense		291		467		(176)		(37.7)	%
Income before provision for income taxes		7,616		6,029		1,587		26.3	%
Operating income (loss)										Operating income (loss)	6,714		(11,547)		18,261		(158.1)	%
Interest (income) expense, net										Interest (income) expense, net	(1,813)		232		(2,045)		(881.5)	%
Income (loss) before provision for income taxes										Income (loss) before provision for income taxes	8,527		(11,779)		20,306		(172.4)	%
Provision for income taxes	Provision for income taxes	2,000		700		1,300		185.7	%	Provision for income taxes	2,125		6,308		(4,183)		(66.3)	%
Net income		5,616		5,329		287		5.4	%
Less: Net income (loss) attributable to non-controlling interests		218		(85)		303		(356.5)	%
Net income attributable to Privia Health Group, Inc.		$	5,398	$	5,414	$	(16)	(0.3)	%
Net income (loss)										Net income (loss)	6,402		(18,087)		24,489		(135.4)	%
Less: loss attributable to non-controlling interests										Less: loss attributable to non-controlling interests	(922)		(577)		(345)		59.8	%
Net income (loss) attributable to Privia Health Group, Inc.										Net income (loss) attributable to Privia Health Group, Inc.	$	7,324	$	(17,510)	$	24,834	(141.8)	%

~~Comparison~~

Table of ~~the three months ended March 31, 2021 and 2020.~~Contents

Revenue

Revenue was $213.6 million for the three months ended March 31, 2021, a slight increase of $0.7 million or 0.3%, compared to $212.9 million for the three months ended March 31, 2020. Key drivers of this revenue growth were care management fees (PMPM), which increased $2.3 million or 37.6%, shared savings revenue, which increased $1.4 million or 8.5%, other revenue which increased $1.4 million or 161.2%, and FFS-Administrative services revenue which increased $0.9 million or 5.9%, partially offset by a decrease in FFS–patient care revenue of $5.3 million or 3.0%.

Growth in FFS–administrative services revenue was due mainly to the addition of a new market for the first quarter of 2021(Tennessee) and the ramp up of the Florida market. Care management fees (PMPM) growth was due mainly to an increase in the total number of VBC contracts that include the payment of care management fees and an increase in Attributed Lives in government programs. Shared savings growth was mainly due to more Attributed Lives in government programs. The increase in other revenue was primarily due to the rise of direct to employer business. The decrease in FFS – patient care revenue was mainly attributed to visit volume declines related to certain state and local initiatives imposed as a result of COVID-19, such as social distancing guidelines partially offset by the addition of new providers.

The following table presents our revenues disaggregated by source:


		For the Three Months Ended March 31,									For the Three Months Ended March 31,
(Dollars in Thousands)	(Dollars in Thousands)	2021		2020		Change ($)		Change (%)		(Dollars in Thousands)	2023		2022		Change ($)		Change (%)
FFS-patient care	FFS-patient care	$	169,578	$	174,870	$	(5,292)	(3.0)	%	FFS-patient care	$	227,789	$	204,344	$	23,445	11.5	%
FFS-administrative services	FFS-administrative services	15,411		14,555		856		5.9	%	FFS-administrative services	26,396		23,006		3,390		14.7	%
Capitated revenue										Capitated revenue	78,260		48,330		29,930		61.9	%
Shared savings	Shared savings	17,833		16,439		1,394		8.5	%	Shared savings	43,928		27,959		15,969		57.1	%
Care management fees (PMPM)	Care management fees (PMPM)	8,570		6,230		2,340		37.6	%	Care management fees (PMPM)	8,558		8,804		(246)		(2.8)	%
Other revenue		2,215		848		1,367		161.2	%
Other Revenue										Other Revenue	1,345		1,358		(13)		(1.0)	%
Total Revenue	Total Revenue	$	213,607	$	212,942	$	665	0.3	%	Total Revenue	$	386,276	$	313,801	$	72,475	23.1	%

~~Table of Contents~~

Three months ended March 31, 2023 and 2022

~~Operating Expenses~~

For the Three Months Ended March 31,
(Dollars in Thousands) 2021 2020 Change ($) Change (%)
Operating Expenses:
Physician and practice expense $ 161,113 $ 165,106 $ (3,993) (2.4) %
Cost of platform 26,962 27,561 (599) (2.2) %
Sale and marketing 3,184 2,452 732 29.9 %
General and administrative 13,996 10,989 3,007 27.4 %
Depreciation and amortization expense 445 338 107 31.7 %
Total operating expenses $ 205,700 $ 206,446 $ (746) (0.4) %

~~Physician and practice expenses~~

~~Physician expenses were $161.1~~Revenue was $386.3 million for the three months ended March 31, ~~2021, a decrease of $4.0 million, or 2.4%, compared to $165.1~~2023, an increase from $313.8 million for the three months ended March 31, ~~2020.~~2022. Key drivers of this revenue growth were an increase in capitated revenue of $29.9 million during the three months ended March 31, 2022; FFS–patient care revenue, which increased $23.5 million; shared savings revenue, which increased $15.9 million and FFS-administrative services, which increased $3.4 million.

Growth in FFS-patient care revenue and FFS-administrative services was primarily attributed to the addition of new providers and increase in visit volume. As of March 31, 2023, we had 3,716 implemented providers compared to 3,370 as of March 31, 2022. Capitated revenue growth is due to the addition of new arrangements during the first quarter of 2023. Shared savings growth was primarily due to more Attributed Lives in Medicare programs as well as continued strong performance in our value based care programs.

Operating Expenses


	For the Three Months Ended March 31,
(Dollars in Thousands)	2023		2022		Change ($)		Change (%)
Operating Expenses:
Provider expense	$	302,255	$	242,187	$	60,068	24.8	%
Cost of platform	44,730		41,272		3,458		8.4	%
Sales and marketing	5,286		4,661		625		13.4	%
General and administrative	25,951		36,110		(10,159)		(28.1)	%
Depreciation and amortization expense	1,340		1,118		222		19.9	%
Total operating expenses	$	379,562	$	325,348	$	54,214	16.7	%

Provider expenses

Provider expenses were $302.3 million for the three months ended March 31, 2023 compared to $242.2 million for the same period in 2022. This ~~decrease~~increase was driven primarily by ~~lower~~higher FFS-patient care revenue ~~partially offset by the~~and growth in Implemented ~~Providers.~~Providers and the addition of new capitated arrangements during the first quarter of 2023.

Cost of platform

Cost of platform expenses were ~~$27.0~~$44.7 million for the three months ended March 31, ~~2021, a slight decrease of $0.6 million, or 2.2%,~~2023 compared to ~~$27.6~~$41.3 million for the same period in 2022. The increase was driven by an increase in platform costs of $3.2 million, primarily related to an increase in implemented providers and an increase in salaries and benefits of $3.4 million related to continued growth during the three months ended March 31, ~~2020. This decrease was driven primarily~~2023 compared the same period in 2022, partially offset by a decrease of $2.5 million in ~~consulting costs~~stock-based compensation expense primarily related to the remaining pre-IPO stock option awards becoming fully vested during the fourth quarter of ~~$0.3 million, and a decrease in travel of $0.2 million.~~2022.

Sales and marketing

Sales and marketing expenses were ~~$3.2~~$5.3 million for the three months ended March 31, ~~2021, an increase of $0.7 million, or 29.9%,~~2023 compared to ~~$2.5~~$4.7 million for the ~~three months ended March 31, 2020. This increase was driven primarily by an increase~~same period in ~~salaries and benefits of $0.9 million related to opening a new market in Tennessee.~~

~~General and administrative~~

General and administrative expense was $14.0 million for the three months ended March 31, 2021, an increase of $3.0 million, or 27.4%, compared to $11.0 million for the three months ended March 31, 2020.2022. The increase was ~~primarily~~ driven by an increase in salaries and benefits of ~~$1.4~~$0.5 million during the three months ended March 31, 2023 compared to the same period in 2022.

Table of Contents

General and administrative

General and administrative expenses was $26.0 million for the three months ended March 31, 2023 compared to $36.1 million for the same period in 2022. The decrease was driven by the reduction of $16.6 million in stock-based compensation expense during the three months ended March 31, 2023 compared to the same period in 2022, primarily related to the remaining pre-IPO stock option awards becoming fully vested during the fourth quarter of 2022, partially offset by an increase in non-recurring expense of $2.4 million and an increase in salaries and benefits of ~~$1.4 million in consulting services due to preparing to be a public company.~~$1.3 million.

Depreciation and amortization expense

Depreciation and amortization expense was $0.4 million for the three months ended March 31, 2021, an increase of $0.1 million, or 31.7%, compared to $0.3 million for the three months ended March 31, 2020. This increase was driven primarily by an increase in the amortization of leasehold improvements related to the build out of our Physician Operated Laboratory.

~~Interest expense~~

Interest expense was $0.3 million for the three months ended March 31, 2021, a decrease of $0.2 million, or 37.7%, compared to $0.5 million for the three months ended March 31, 2020. The decrease was primarily driven by the repayment of a note payable to related parties in 2020.

~~Provision for income taxes~~

~~Provision for income taxes increased~~expenses were $1.3 million for the three months ended March 31, ~~2021, when~~2023 compared to $1.1 million for the same period in ~~2020. The expense for the three months ended March 31, 2020 is~~2022. This increase was primarily ~~related to an increase in the deferred tax liability~~driven by amortization of intangible assets related to the ~~tax amortization~~acquisition of ~~an indefinite live intangible with~~Privia Quality Network Connecticut (“PQN-CT”) during the ~~remaining deferred tax balances fully offset with~~first quarter of 2023.

Interest (income) expense, net

Interest (income) expense was a ~~valuation allowance. The expense for the three months ended March 31, 2021 is primarily the result~~net interest income amount of ~~the statutory rate applied to pretax book income as there is no longer a valuation allowance offsetting the deferred tax balances.~~

~~Net income (loss) attributable to non-controlling interest~~

~~Net loss attributable to non-controlling interest increased $0.3~~$(1.8) million for the three months ended March 31, 2023 compared to $0.2 million of interest expense for the same period in 2022. This change was primarily the result of the repayment of the Term Loan Facility at the end of June 2022 and the increase in the rate of interest earned on cash in our bank accounts.

Provision for income taxes

The provision for income taxes was $2.1 million for the three months ended March 31, 2023, a decrease from $6.3 million for the same period in 2022. The provision for income taxes for the three months ended March 31, 2023 is primarily the result of the pre-tax income offset by windfall tax benefits recorded on stock option exercises and RSU vesting during the quarter. The provision for income taxes for the three months ended March 31, 2022 is primarily the result of the pre-tax loss offset by the non-deductible stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO during the second quarter of 2021 ~~when~~in addition to the windfall tax benefit recorded on stock option exercises during the quarter.

Net loss attributable to non-controlling interests

Net loss attributable to non-controlling interests was $0.9 million for the three months ended March 31, 2023, an increase from $0.6 million compared to the same period in ~~2020~~2022. The change was primarily ~~due~~related to ~~an increase~~investments in ~~net income before non-controlling interest in these~~new markets.

~~Table of Contents~~

Liquidity and Capital Resources

General ~~and Note Payable~~

To date, we have financed our operations principally through sale of our equity, payments received from various payers and through borrowings under the ~~issuance of a note payable to a third-party financial institution.~~Credit Facilities. As of March 31, ~~2021,~~2023, we had cash and cash equivalents of ~~$81.9~~$311.2 million. ~~We received an additional $212.0 million of net proceeds following the closing of the Company’s IPO and Anthem private placement on May 3, 2021.~~ Our cash and cash equivalents primarily consist of highly liquid investments in money market funds and cash.

We believe that ~~following our IPO,~~ our cash and cash equivalents, including the proceeds from the IPO, together with cash flows from operations, will ~~be sufficient~~provide adequate resources to fund our short-term and long-term operating and capital ~~needs for at least the next 12 months.~~needs. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary because of, and our future capital requirements will depend on many factors, including our growth rate, and the timing and extent of spending to increase our sales and marketing activities. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may in the future seek a credit facility with a financial institution for long term capital structure flexibility, and we may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.

Indebtedness

On ~~December 31, 2018,~~August 27, 2021, the Company ~~assumed $8.7 million in notes payable~~and certain of its subsidiaries entered into an assumption agreement and third amendment (the “Third Amendment”) to ~~related parties~~the Credit Agreement, dated as ~~part~~ of a merger with a sister organization. The notes mature on dates ranging from December 2020 to December 2021 and have interest rates ranging from 1.25% to 2.93%. On October 31, 2020, $4.0 million of related party receivables was used to repay $4.0 million of the Notes payable to related parties, leaving $4.7 million of Notes payable to related parties. The Company paid interest of $0.2 million through October 31, 2020. In addition, on December 22, 2020, the remaining $4.7 million of Notes payable to related parties was forgiven and assigned to BHG Holdings, leaving no remaining Notes payable to related parties outstanding.

On November 15, 2019 (as amended by the Third Amendment, the “Credit Agreement”) by and among the Company, ~~entered into~~certain of the Company’s subsidiaries, as guarantors, and Silicon Valley Bank, as administrative agent, collateral agent and lender, providing for a term loan (the “Term Loan Facility”) and a revolving loan (the “Revolving Loan Facility”). Pursuant to the Third Amendment, the Company became the parent guarantor under the Credit Agreement ~~with~~and granted the Administrative Agent a ~~third-party financial institution.~~ first-priority security interest on substantially all of its real and personal property, subject to permitted liens.

The ~~debt agreement provides for up~~Third Amendment increased the size of the Revolving Loan Facility to ~~$35.0~~$65.0 million, increased the letter of credit sub-facility to $5.0 million and extended the maturity date of the Credit Agreement to August 27, 2026. As amended, borrowings under the Credit Agreement bore interest at a rate equal to (i) in ~~term~~the case of eurodollar loans, ~~that mature on November 15, 2024 with interest payable monthly at the lesser of~~ LIBOR plus ~~2.0% or ABR plus 1.0% payable monthly (3.0% at March 31, 2021), plus up~~an applicable margin, subject to ~~an additional $10.0 million of financing~~a 0.5% floor, and (ii) in the ~~form~~case of ABR loans, an ABR rate plus an applicable margin, subject to a ~~revolving loan. The Company borrowed $35.0 million in term loans on November 15, 2019. During~~floor of 1.5%. In addition, the first year of any loans, the financing allows for early repayment of part or all of the term loans in increments of $0.5 million with a pre-payment fee of 1% of any debt prepaid. After the first year from any borrowing, the debt may be repaid without the pre-payment fee. As of March 31, 2021 and December 31, 2020, total term loans outstanding was $33.9 million and $34.1 million.

~~On July 17, 2020, the Company increased its capacity under the revolving loan to $15.0 million. No balance is outstanding under the revolving loan as of March 31, 2021.~~

Amendment,

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among other things, (i) changed the Term Loan Facility amortization schedule to 0.625% of the original principal amount of term loans for the fiscal quarters ending September 30, 2021 through and including June 30, 2024 and 1.25% of the original principal amount of term loans for the fiscal quarters ending thereafter and (ii) added a 1.0% prepayment premium for any term loans prepaid within six months of the effective date of the Third Amendment. The Third Amendment converted the financial covenants in the Original Credit Agreement to “springing” financial covenants, so that at any time the Company’s cash is less than 125% of the outstanding borrowings under the Credit Facilities, or at least $15.0 million of borrowings are outstanding under the Revolving Loan, the Company will be required to maintain (i) a consolidated fixed charge coverage ratio of not less than 1.25 to 1.0, and (ii) a consolidated leverage ratio of no more than 3.0 to 1.0.

On June 24, 2022, we voluntarily prepaid all outstanding indebtedness under the Term Loan Facility under the Credit Agreement using cash on hand.

On March 16, 2023, we provided notice to terminate the Credit Agreement.

As of March 16, 2023, we had no borrowings and no letters of credit outstanding under the Revolving Loan Facility. We did not incur any early termination penalties in connection with the termination of the Credit Agreement.

We believe we do not have any near-term credit facility needs given our available cash balance. However, we do plan to evaluate the need for a credit facility in the future as it would provide additional long term capital structure flexibility.

Cash Flows

Our cash requirements within the next twelve months include provider liabilities, accounts payable and accrued liabilities, and purchase commitments and other obligations. We expect the cash required to meet these obligations to be primarily generated through cash flows from operations and our available cash. Based on current and anticipated levels of operations, we anticipate that net cash provided by operating activities, together with the available cash on hand at March 31, 2023, should be adequate to meet anticipated cash requirements for the short term (next 12 months) and long term (beyond 12 months).

The following table presents a summary of our condensed consolidated cash flows from operating, investing and financing activities for the periods indicated.


		For the Three Months Ended March 31,					For the Three Months Ended March 31,
		2021		2020			2023		2022
(in thousands)	(in thousands)					(in thousands)
Condensed Consolidated Statements of Cash Flows Data:	Condensed Consolidated Statements of Cash Flows Data:					Condensed Consolidated Statements of Cash Flows Data:
Net cash used in operating activities	Net cash used in operating activities	$	(2,476)	$	(7,079)	Net cash used in operating activities	$	(13,384)	$	(5,320)
Net cash used in investing activities	Net cash used in investing activities	—		(13)		Net cash used in investing activities	(24,856)		(34)
Net cash (used in) provided by financing activities		(219)		10,000
Net increase in cash and cash equivalents		$	(2,695)	$	2,908
Net cash provided by financing activities						Net cash provided by financing activities	1,477		705
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	$	(36,763)	$	(4,649)

Operating Activities

Net cash used in operating activities was ~~$2.5~~$13.4 million for the three months ended March 31, ~~2021, a decrease of $4.6 million, compared to $7.1~~2023, an increase from $5.3 million for the same period in ~~2020.~~2022. Significant changes impacting net cash used in operating activities for the three months ended March 31, ~~2021~~2023 compared to the same period in ~~2020~~2022 were as follows:

•~~Increase~~A decrease in loss of ~~$9.7~~$24.5 million ~~due to liability owed by medical practices and providers, which was an increase~~from income of $6.4 million for the three months ended March 31, ~~2021~~2023 compared to loss of ~~$17.0~~$(18.1) million for the same period in 2022, primarily driven by the decrease in stock-based compensation expense during the three months ended March 31, 2023 when compared to the same period in ~~2020~~2022, primarily related to the remaining pre-IPO stock option awards becoming fully vested during the fourth quarter of ~~$7.3 million. This change is primarily driven by the increase in Implemented Providers and additional physician and practice expenses associated with the increase in shared savings revenue.~~2022.

•~~Increase~~An increase of ~~$2.7~~$(71.3) million ~~related to~~in accounts receivable, ~~net, which was a decrease~~ for the three months ended March 31, ~~2021 of $17.6 million~~2023 compared to the same period in ~~2020~~2022 of ~~$14.9~~$(48.8) million, a difference of $(22.5) million. The increase is primarily driven by the ~~increase in Implemented Providers~~addition of new at-risk capitation arrangements during the three months ended March 31, 2023 and an increase in ~~the receivable related to shared savings~~FFS and VBC revenue.

•~~Increase~~An increase of ~~$1.3~~$51.9 million ~~related to deferred tax benefit which was an increase~~in provider liability for the three months ended March 31, ~~2021~~2023 compared to an increase of ~~$2.0~~$31.6 million ~~compared to~~during the same period in ~~2020~~2022, a difference of ~~$0.7 million,~~$20.3 million. The increase is primarily due to an increase in provider expense related to shared savings and new at-risk capitation arrangements during the ~~release of the valuation allowance and the tax provision for Q1 2021.~~three months ended March 31, 2023.

•~~Decrease~~A decrease of ~~$4.0~~$(4.4) million ~~related to accounts payable and accrued expenses~~in deferred tax expense which was ~~an increase of~~a decrease for the provision for income tax for the three months ended March 31, ~~2021~~2023 of ~~$10.5~~$1.9 million compared to a decrease for the provision for income tax for the same period in ~~2020~~2022 of ~~$6.5~~$6.3 million. ~~This change~~The decrease is primarily driven by ~~IPO related costs~~the impact of non-deductible stock-based compensation expense.

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Investing Activities

Net cash used in investing activities ~~remained relatively consistent for three months ended March 31, 2021, and 2020.~~

~~Financing Activities~~

~~Net cash used in financing activities~~ was ~~$0.2~~$24.9 million for the three months ended March 31, ~~2021, a decrease of $10.2 million,~~2023 compared to ~~$10.0~~a de minimis amount during the same period in 2022, primarily due to Privia’s investment in one new market during the first quarter of 2023.

Financing Activities

Net cash provided by financing activities was $1.5 million for the three months ended March 31, 2023, an increase from net cash provided of $0.7 million for financing activities for the same period in ~~2020.~~2022. This ~~decrease~~increase primarily related to ~~the draw~~an increase in proceeds from stock options exercised of ~~$10.0 million from the Company's revolver during the first quarter of 2020 in response to COVID-19.~~$0.7 million.

Contractual Obligations, Commitments and Contingencies

Operating Leases. The Company leases office space under various operating lease agreements. The initial terms of these leases range from 2 to 79 years and generally provide for periodic rent increases, renewal, and termination operations. Total rent expense under operating leases was ~~$0.4~~$0.7 million ~~and $0.6 million~~ for both the three months ended March 31, ~~2021~~2023 and ~~2020, respectively.~~2022.

Off Balance Sheet Obligations. We do not have any off-balance sheet arrangements as of March 31, ~~2021.~~2023.

Commitments and Contingencies. See Note 1112 “Commitments and Contingencies” for further discussion on our commitments and contingencies.

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Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure. On an on-going basis we evaluate significant estimates and assumptions, including, but not limited to, revenue recognition, ~~share-based~~stock-based compensation, estimated useful lives of assets, intangible assets subject to amortization, and the computation of income taxes. Future events and their effects cannot be predicted with certainty; accordingly, the Company’s accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment changes. Management evaluates and updates assumptions and estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

There have been no changes to the critical accounting policies reported in the ~~Prospectus~~2022 Annual Form 10-K that affect our significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements other than those outlined in Note 1, "Organization and Summary of Significant Accounting ~~Policies."~~Policies".

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure ~~due~~ to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.

Interest Rate Risk

Our primary market risk exposure is changing prime rate-based interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. ~~Our Loan Agreement bears interest at a floating rate equal to the lesser of LIBOR plus 2.0% or ABR plus 1.0%.~~ As of March 31, ~~2021, we~~2023, the Company had ~~total outstanding debt~~no borrowing agreements and no letters of ~~$33.9 million~~credit in principal amount under the Loan Agreement. Based on the amount outstanding, a 100 basis point increase or decrease in market interest rates over a twelve-month period would result in a change to interest expense of $0.3 million.place.

Inflation Risk

Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of March 31, ~~2021.~~

2023.

Changes to our Internal Controls over Financial Reporting

There were no changes made to the Company’s internal control over financial reporting during the three months ended March 31, ~~2021~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently involved in, and may in the future become involved in, legal proceedings, claims and investigations in the ordinary course of our business, including medical malpractice and consumer claims. Although the results of these legal proceedings, claims and investigations cannot be predicted with certainty, we do not believe that the final outcome of any matters that we are currently involved in are reasonably likely to have a material adverse effect on our business, financial condition or results of operations. Regardless of final outcomes, however, any such proceedings, claims, and investigations may nonetheless impose a significant burden on management and employees and be costly to defend, with unfavorable preliminary or interim rulings.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in the ~~Prospectus.~~Company’s Annual Report on Form 10-K filed with the SEC, except as set forth below:

Adverse developments affecting the financial services industry could adversely affect our business operations, financial condition and results of operations.

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which immediately appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. On March 12, 2023, the U.S. Treasury, Federal Reserve, and FDIC announced that SVB depositors would have access to all of their money starting March 13, 2023. We maintain our cash and cash equivalents in accounts with financial institutions that exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, we could lose our deposits in excess of the federally insured or protected amounts and there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

Widespread investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to obtain financing on acceptable terms or at all. On March 16, 2023, we provided notice to terminate our credit agreement with SVB, and, as a result, we do not currently have a revolving loan facility. If we are unable to obtain new debt financing when needed, it could, among other risks, adversely impact our ability to meet our operating expenses or fulfill our other obligations.

In addition, if any parties with whom we conduct business, including our customers and vendors, are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, their ability to pay their obligations to us or to enter into new commercial arrangements with us could be adversely affected. Any of these impacts, or any other impacts resulting from or related to the factors described above, could have material adverse impacts on our business operations, financial condition and results of operations.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Use of Proceeds from Initial Public Offering~~

Novant Health Private Placement

On ~~May 3, 2021, we completed our IPO~~March 2, 2023, Privia Health Group, Inc. (the “Company”) entered into a strategic alignment agreement (the “Equity Alignment Agreement”) with ChoiceHealth, Inc. (“Novant Sub”), a subsidiary of Novant Health, Inc. (“Novant Health”), in connection with the strategic partnership between the Company and Novant Health entered into in November 2022 to launch Privia Medical Group — North Carolina.

1.The Company will issue 745,712 shares of Common Stock to Novant Sub each time Privia Medical Group — North Carolina implements 1,000 providers in specified markets in North Carolina.

2.The Company will issue 372,856 shares of Common Stock to Novant Sub each time the Company and Novant Health enter a new state pursuant to a ~~Registration Statement (File No. 333-255086), which was declared effective on April 28, 2021.~~ mutually agreed business plan developed for such state.

3.The ~~Registration Statement registered an aggregate of 22,425,000~~Company will issue 745,712 shares of ~~our common stock at an aggregate offering price~~Common Stock to Novant Sub each time the partnership between the Company and Novant Health for each new state implements 1,000 providers in specified core markets in such state.

The Equity Alignment Agreement will renew every four years, subject to the delivery of ~~$515.8 million. In~~a third-party valuation opinion. The renewal will be required to use the ~~offering, we sold 5,725,000~~same issuance triggers, but the number of shares ~~of common stock at an aggregate offering price of $131.7 million and our majority stockholder sold 16,700,000 shares of our common stock at an aggregate offering price of $384.1 million.~~may be adjusted to be consistent with the valuation opinion. The number of shares ~~sold by us included~~of Common Stock issuable to Novant Sub under the ~~full exercise~~Equity Alignment Agreement and all renewals of the ~~underwriters’ option~~Equity Alignment Agreement will be subject to ~~purchase up~~a total cap equal to ~~an additional 2,925,000~~19.9% of the total number of shares of ~~common stock from us. Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC acted~~Common Stock outstanding as ~~representatives~~ of the ~~underwriters for the offering. The offering commenced on April 26, 2021 and did not terminate before all~~effective date of the ~~securities~~Equity Alignment Agreement and as of the effective date of all renewals, whichever is lowest.

Any issuance of Common Stock to Novant Sub will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), and will be made in reliance on the ~~Registration Statement were sold.~~

~~We received net proceeds~~exemption from registration provided by Section 4(a)(2) of ~~approximately $212.0 million from~~ the IPO and Anthem private placement after deducting underwriters’ discounts and commissions of $7.9 million and estimated expenses of $3.8 million payable by us. There has been no material change in the use of proceeds as described in the Prospectus.

Securities Act.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

~~None.~~

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Item 6. EXHIBITS


Exhibit Number						Description

~~3.1~~						~~Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (Commission File No. 001-40365) filed on May 3, 2021)~~

~~3.2~~						~~Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (Commission File No. 001-40365) filed on May 3, 2021)~~

10.1						Form of PSU Award Agreement under the 2021 Omnibus Incentive Plan ~~(incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (Commission File No. 333-255598) filed on April 29, 2021)~~

10.2						~~Form~~Strategic Alignment Agreement, dated as of ~~2021 Omnibus Plan Restricted Stock Unit Award for Employees (incorporated~~March 2, 2023, by ~~reference to Exhibit 10.8 to the Company’s Amendment No. 1 to Registration Statement on Form S-1 (Commission File No. 333-255086) filed on April 22, 2021)~~

~~10.3~~						Form of 2021 Omnibus Plan Restricted Stock Unit Award for Non-Employee Directors (incorporated by reference to Exhibit 10.9 to the Company’s Amendment No. 1 to Registration Statement on Form S-1 (Commission File No. 333-255086) filed on April 22, 2021)

~~10.4~~						Form of 2021 Omnibus Plan Stock Option Award (incorporated by reference to Exhibit 10.10 to the Company’s Amendment No. 1 to Registration Statement on Form S-1 (Commission File No. 333-255086) filed on April 22, 2021)

~~10.5~~						~~Second Amended~~ and Restated PH Group Parent Corp. Stock Option Plan (incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 (Commission File No. 333-255598) filed on April 29, 2021)

~~10.6~~						Form of Non-Qualified Stock Option Agreement under the Second Amended and Restated PH Group Parent Corp. Stock Option Plan (incorporated by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-8 (Commission File No. 333-255598) filed on April 29, 2021)

~~10.7~~						~~Form of Amendment to Non-Qualified~~ ~~Stock~~ ~~Option Agreement under Second Amended and Restated PH Group Parent Corp. Stock Option~~ ~~Plan~~ ~~(incorporated by reference to Exhibit 99.4 to the Company’s Registration Statement on Form S-8 (Commission File No. 333-255598) filed on April 29, 2021)~~

~~10.8~~						Privia Health Group, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 99 to the Company’s Registration Statement on Form S-8 (Commission File No. 333-255593) filed on April 29, 2021)

~~10.9~~						~~Registration Rights Agreement~~ between Privia Health Group, Inc. and ~~the other signatories party thereto, dated May 3, 2021 (incorporated~~ChoiceHealth, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on ~~May 3, 2021).~~

~~10.10~~						Shareholder Rights Agreement between Privia Health Group, Inc. and the other signatories party thereto, dated May 2, 2021 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 3, 2021).March 7, 2023)

31.1						Certification of the Chief Executive Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 20 02 ,2002, filed herewith.

31.2						Certification of the Chief Financial Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 20 02 ,2002, filed herewith.

32.1*						Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, filed herewith.

32.2*						Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, filed herewith.

101.INS						XBRL Instance Document **

101.SCH						XBRL Taxonomy Schema **

101.CAL						XBRL Taxonomy Definition **

101.DEF						XBRL Taxonomy Calculation **

101.LAB						XBRL Taxonomy Labels **

101.PRE						XBRL Taxonomy Presentation **

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)**

* The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

** The financial information contained in these XBRL documents is unaudited.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Privia Health Group, Inc.

Dated:	May ~~27, 2021~~04, 2023	/s/ David Mountcastle
		Name: David Mountcastle
		Title: Executive Vice President, Chief Financial Officer and Authorized Officer


		Page
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2927
Item 4.	Controls and Procedures	2928
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	3029
Item 1A.	Risk Factors	3029
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32


(Dollars in Thousands)	December 31, 2020		Additions	Revenue Recognized	March 31, 2021
Unearned revenue	$	2,759	2,098	(414)	$	4,443


(Dollars in Thousands)
2021	$	1,625
2022	2,213
2023	2,261
2024	2,274
2025	2,237
Thereafter	1,407
Total future lease payments	12,017
Imputed interest	(1,085)
Total	$	10,932


	Options Outstanding	Weighted- Average Exercise Price		Weighted- Average Grant-Date Fair Value	Weighted- Average Remaining Contractual Life
Balance at January 1, 2021	18,300,959	2.01		0.34	7.82
Granted	0	0		0
Exercised	0	0		0
Forfeited	(78,050)	2.01		0.42
Balance at March 31, 2021	18,222,909	$	2.01	0.34	7.57
Exercisable options	3,276,976	$	2.00	0.32	7.51