# Privia Health Group, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Privia Health Group, Inc.](/companies/prva.md) (CIK 1759655)
- Form: 10-Q
- Filed: 2023-11-03
- Accepted by EDGAR: Nov 3, 2023, 09:01 ET
- Period: 2023-09-30
- Accession: 0001759655-23-000211
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1759655/000175965523000211/prva-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1759655/000175965523000211/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $417.3m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $1.22bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $5.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $19.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $2.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $6.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $5.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $20.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.05 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.16 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.05 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.17 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 124,924,442 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 124,646,849 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $16.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $90.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $330.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $697.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $992.3m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $394.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $401.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $544.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 63,609 characters.

*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 payers in all of our markets and all Privia Providers are credentialed with such health insurance payers.

Under our standard model, Privia Physicians join the Medical Group in their geographic market as an owner of the Medical Group. Certain of our Medical Groups are Owned Medical 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 their own practices prior to joining Privia 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 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 Accountable Care Organizations (“ACOs”). 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 and the owned ACOs.

We also offer Privia Care Partners, a more flexible provider affiliation model, to providers who do not desire to join one of our 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 necessity of changing EMR providers. We furnish population health services, reporting and analytics to such providers along with a menu of management services from which providers may choose.

### GAAP Financial Measures

- Revenue was $417.3 million and $342.9 million for the three months ended September 30, 2023 and 2022, respectively, and $1.22 billion and $992.2 million for the nine months ended September 30, 2023 and 2022, respectively;
- Gross profit was $90.6 million and $76.9 million for the three months ended September 30, 2023 and 2022, respectively, and $263.8 million and $223.1 million for the nine months ended September 30, 2023 and 2022, respectively;
- Operating income (loss) was $5.5 million and $(4.6) million for the three months ended September 30, 2023 and 2022, respectively, and $19.2 million and $(21.4) million for the nine months ended September 30, 2023 and 2022, respectively; and
- Net income (loss) attributable to Privia Health Group, Inc. was $5.6 million and $1.6 million, for the three months ended September 30, 2023 and 2022, respectively, and $20.2 million and $(26.4) million for the nine months ended September 30, 2023 and 2022, respectively.

### Key Metrics and Non-GAAP Financial Measures

- Practice Collections were $723.5 million and $611.9 million for the three months ended September 30, 2023 and 2022, respectively, and $2.08 billion and $1.79 billion for the nine months ended September 30, 2023 and 2022, respectively;
- Care Margin was $92.1 million and $77.7 million for the three months ended September 30, 2023 and 2022, respectively, and $267.7 million and $225.6 million for the nine months ended September 30, 2023 and 2022, respectively;
- Platform Contribution was $45.2 million and $37.0 million for the three months ended September 30, 2023 and 2022, respectively, and $131.2 million and $109.5 million for the nine months ended September 30, 2023 and 2022, respectively; and
- Adjusted EBITDA was $18.8 million and $15.7 million for the three months ended September 30, 2023 and 2022, respectively, and $55.0 million and $46.6 million for the nine months ended September 30, 2023 and 2022, respectively.

See “Key Metrics and Non-GAAP Financial Measures” below for more information as to how we define and calculate Implemented Providers, Attributed Lives, Practice Collections, 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.

### 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, 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 (iii) other revenue from additional services, such as concierge services, virtual visits, virtual scribes and 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 58.8% and 64.7% of total revenue for the three months ended September 30, 2023 and 2022, respectively, and 57.9% and 64.3% for the nine months ended September 30, 2023 and 2022, respectively. FFS-administrative services revenue represented 7.2% and 7.4% of total revenue for the three months ended September 30, 2023 and 2022, respectively, and 6.9% and 7.2% for the nine months ended September 30, 2023 and 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 Privia 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) Capitated revenue earned by providing healthcare services to Medicare Advantage attributed beneficiaries for a defined group of services including 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. VBC revenue represented 33.5% and 27.5% of total revenue for the three months ended September 30, 2023 and 2022, respectively, and 34.8% and 28.1% for the nine months ended September 30, 2023 and 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.

#### 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. Other revenue represented 0.5% and 0.4% of total revenue for the three months ended September 30, 2023 and 2022, respectively, and 0.4% for both the nine months ended September 30, 2023 and 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 have continued to result in increased engagement with 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.

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.

In August 2023, the Company launched Privia Medical Group Washington in affiliation with Walla Walla Clinic, an independent multi-specialty group practice with more than 50 providers and 3 care center locations.

In October 2023, the Company launched Privia Medical Group South Carolina in affiliation with Greenville ENT and Allergy Associates, an independent specialty group practice.

### 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 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.

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.

### 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 Electronic Health Records (“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 September 30, 2023 | 2022 | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Implemented Providers (as of end of period) | 4,105 | 3,595 | 4,105 | 3,595 |
| Attributed Lives (in thousands) (as of end of period) | 1,094 | 846 | 1,094 | 846 |
| Practice Collections (1) ($ in millions) | $723.5 | $611.9 | $2,082.4 | $1,789.2 |

(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 14.2% as of September 30, 2023 compared to September 30, 2022, due to organic growth in our healthcare delivery business as well as our entrance into the Connecticut and Washington 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. The number of Attributed Lives is an important measure that impacts the amount of VBC revenue we receive. Attributed Lives increased 29.3% as of September 30, 2023 compared to September 30, 2022, due to our entrance into the Delaware and 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 77.3% and 80.1% of our practice collections for the three months ended September 30, 2023 and 2022, respectively, and 76.3% and 79.9% for the nine months ended September 30, 2023 and 2022, respectively. VBC accounted for 22.4% and 19.7% of practice collections for the three months ended September 30, 2023 and 2022, respectively, and 23.4% and 19.9% for the nine months ended September 30, 2023 and 2022, respectively.

Practice Collections increased 18.2% for the three months ended September 30, 2023 when compared to the same period in 2022 and 16.4% for the nine months ended September 30, 2023 compared to the same period in 2022, due mainly to organic growth of our healthcare delivery business, our at-risk Capitated revenue contracts and as well as our entrance into the Connecticut and Washington 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 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 measures 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.

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.

*(amounts in thousands, except for percentages)*

|  | For the Three Months Ended September 30, 2023 | 2022 | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Care Margin (1) ($) | $92,060 | $77,725 | $267,714 | $225,564 |
| Platform Contribution (1) ($) | $45,181 | $36,981 | $131,199 | $109,451 |
| Platform Contribution Margin (1) (%) | 49.1% | 47.6% | 49.0% | 48.5% |
| Adjusted EBITDA (1) ($) | $18,774 | $15,650 | $54,950 | $46,587 |
| Adjusted EBITDA Margin (1) (%) | 20.4% | 20.1% | 20.5% | 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 provider expenses and amortization of 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 18.4% for the three months ended September 30, 2023 when compared to the same period in 2022 due to organic growth of our medical practice business and an increase of 18.7% during the nine months ended September 30, 2023 when compared to the same period in 2022 due to organic growth of our medical practice business. As a percentage of revenue, Care Margin decreased to 22.1% for the three months ended September 30, 2023 from 22.7% for the same period in 2022 and decreased to 22.0% as a percentage of revenue for the nine months ended September 30, 2023, compared to 22.7% during the same period in 2022, in each case due to the addition of new at-risk capitation arrangements which resulted in higher revenues.

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 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 gross profit, the most closely comparable GAAP financial measure, to Care Margin.

*(unaudited and amounts in thousands)*

|  | For the Three Months Ended September 30, 2023 | 2022 | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $417,282 | $342,899 | $1,216,909 | $992,236 |
| Provider expense | (325,222) | (265,174) | (949,195) | (766,672) |
| Amortization of intangible assets | (1,434) | (842) | (3,883) | (2,509) |
| Gross Profit | $90,626 | $76,883 | $263,831 | $223,055 |
| Amortization of intangibles assets | 1,434 | 842 | 3,883 | 2,509 |
| Care margin | $92,060 | $77,725 | $267,714 | $225,564 |

### Platform Contribution

We define Platform Contribution as Gross Profit, excluding amortization of intangible assets, less Cost of platform and excluding stock-based compensation expense 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 22.2% for the three months ended September 30, 2023 when compared to the same period in 2022 and increased 19.9% for the nine months ended September 30, 2023 when compared to the same period in 2022, in each case due to organic growth of our medical practice business and new market entry.

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

*(unaudited and amounts in thousands)*

|  | For the Three Months Ended September 30, 2023 | 2022 | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $417,282 | $342,899 | $1,216,909 | $992,236 |
| Provider expense | (325,222) | (265,174) | (949,195) | (766,672) |
| Amortization of intangibles assets | (1,434) | (842) | (3,883) | (2,509) |
| Gross Profit | $90,626 | $76,883 | $263,831 | $223,055 |
| Amortization of intangibles assets | 1,434 | 842 | 3,883 | 2,509 |
| Cost of platform | (50,324) | (43,839) | (145,254) | (127,495) |
| Stock-based compensation(1) | 3,445 | 3,095 | 8,739 | 11,382 |
| Platform Contribution | $45,181 | $36,981 | $131,199 | $109,451 |
| (1) Amount represents stock-based compensation expense included in Cost of Platform. |  |  |  |  |

### Platform Contribution Margin

We define Platform Contribution Margin as 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 49.1% for three months ended September 30, 2023 compared to 47.6% during the same period in 2022 and 49.0% for the nine months ended September 30, 2023 compared to 48.5% during the same period in 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 and Platform Contribution Margin, each, a non-GAAP measure, are 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 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. In particular, we believe that the use of Platform Contribution is helpful to our investors as they are metrics used by management in assessing the health of our business and our operating performance.

### Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) excluding interest income, interest expense, 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 by 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 reflect the impact of stock-based compensation 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 20.0% for the three months ended September 30, 2023, when compared to the same period in 2022 and 18.0% for the nine months ended September 30, 2023 compared to the same period in 2022, in each case 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 Adjusted EBITDA as a percentage of Care Margin. We included Adjusted EBITDA Margin because it is an important measure by 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 20.4% for three months ended September 30, 2023 an increase from 20.1% for the same period in 2022 due to organic growth of our medical practice business and materially unchanged for the nine months ended September 30, 2023 compared to the same period in 2022.

We believe that Adjusted EBITDA and Adjusted EBITDA Margin, 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 and Adjusted EBITDA Margin is helpful to our investors as they are metrics 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 the Company, the most closely comparable GAAP financial measure, to Adjusted EBITDA:

*(unaudited and amounts in thousands)*

|  | For the Three Months Ended September 30, 2023 | 2022 | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $5,643 | $1,624 | $20,241 | $(26,361) |
| Net income (loss) attributable to non-controlling interests | 299 | (1,068) | (1,537) | (2,551) |
| Provision for (benefit from) income taxes | 2,488 | (4,845) | 6,049 | 6,931 |
| Interest (income) expense, net | (2,894) | (285) | (5,524) | 610 |
| Depreciation and amortization | 1,731 | 1,153 | 4,761 | 3,436 |
| Stock-based compensation | 10,801 | 14,833 | 25,429 | 58,184 |
| Other expenses(1) | 706 | 4,238 | 5,531 | 6,338 |
| Adjusted EBITDA | $18,774 | $15,650 | $54,950 | $46,587 |
| (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 and $2.2 million were recorded for the three months ended September 30, 2023 and 2022, respectively. Employer taxes on equity vesting/exercises of $1.5 million and $2.8 million were recorded for the nine months ended September 30, 2023 and 2022, respectively. |  |  |  |  |

23

### Components of Results of Operations

### Revenue

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

### Operating Expenses

#### Provider expenses

Provider expenses are amounts accrued or payments made to 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 the service agreements as well as medical claims costs for services provided to attributed beneficiaries under at-risk Capitated revenue arrangements for which the Company is financially responsible 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.

#### 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.

#### 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 (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 Term Loan Facility. See “Liquidity and Capital Resources—General and Indebtedness.”

### Results of Operations

The following table sets forth our condensed consolidated statements of operations data for the three and nine months ended September 30, 2023 and 2022.

*(in thousands)*

|  | For the Three Months Ended September 30, 2023 | 2022 | Change ($) | Change (%) | For the Nine Months Ended September 30, 2023 | 2022 | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $417,282 | $342,899 | $74,383 | 21.7% | $1,216,909 | $992,236 | $224,673 | 22.6% |
| Operating expenses: |  |  |  |  |  |  |  |  |
| Provider expense | 325,222 | 265,174 | 60,048 | 22.6% | 949,195 | 766,672 | 182,523 | 23.8% |
| Cost of platform | 50,324 | 43,839 | 6,485 | 14.8% | 145,254 | 127,495 | 17,759 | 13.9% |
| Sales and marketing | 7,241 | 5,088 | 2,153 | 42.3% | 18,483 | 14,568 | 3,915 | 26.9% |
| General and administrative | 27,228 | 32,219 | (4,991) | (15.5)% | 79,987 | 101,436 | (21,449) | (21.1)% |
| Depreciation and amortization | 1,731 | 1,153 | 578 | 50.1% | 4,761 | 3,436 | 1,325 | 38.6% |
| Total operating expenses | 411,746 | 347,473 | 64,273 | 18.5% | 1,197,680 | 1,013,607 | 184,073 | 18.2% |
| Operating income (loss) | 5,536 | (4,574) | 10,110 | (221.0)% | 19,229 | (21,371) | 40,600 | (190.0)% |
| Interest (income) expense, net | (2,894) | (285) | (2,609) | 915.4% | (5,524) | 610 | (6,134) | (1005.6)% |
| Income (loss) before provision for (benefit from) income taxes | 8,430 | (4,289) | 12,719 | (296.5)% | 24,753 | (21,981) | 46,734 | (212.6)% |
| Provision for (benefit from) income taxes | 2,488 | (4,845) | 7,333 | (151.4)% | 6,049 | 6,931 | (882) | (12.7)% |
| Net income (loss) | 5,942 | 556 | 5,386 | 968.7% | 18,704 | (28,912) | 47,616 | (164.7)% |
| Gain (loss) attributable to non-controlling interests | 299 | (1,068) | 1,367 | (128.0)% | (1,537) | (2,551) | 1,014 | (39.7)% |
| Net income (loss) attributable to Privia Health Group, Inc. | $5,643 | $1,624 | $4,019 | 247.5% | $20,241 | $(26,361) | $46,602 | (176.8)% |

### Revenue

The following table presents our revenues disaggregated by source:

*(Dollars in Thousands)*

|  | For the Three Months Ended September 30, 2023 | 2022 | Change ($) | Change (%) | For the Nine Months Ended September 30, 2023 | 2022 | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| FFS-patient care | $245,569 | $221,911 | $23,658 | 10.7% | $704,346 | $637,540 | $66,806 | 10.5% |
| FFS-administrative services | 29,845 | 25,270 | 4,575 | 18.1% | 83,413 | 71,911 | 11,502 | 16.0% |
| Capitated revenue | 88,526 | 54,708 | 33,818 | 61.8% | 253,481 | 160,776 | 92,705 | 57.7% |
| Shared savings | 33,530 | 30,243 | 3,287 | 10.9% | 130,304 | 90,296 | 40,008 | 44.3% |
| Care management fees (PMPM) | 17,778 | 9,239 | 8,539 | 92.4% | 39,904 | 27,519 | 12,385 | 45.0% |
| Other Revenue | 2,034 | 1,528 | 506 | 33.1% | 5,461 | 4,194 | 1,267 | 30.2% |
| Total Revenue | $417,282 | $342,899 | $74,383 | 21.7% | $1,216,909 | $992,236 | $224,673 | 22.6% |

### Three months ended September 30, 2023 and 2022

Revenue was $417.3 million for the three months ended September 30, 2023, an increase from $342.9 million for the three months ended September 30, 2022. Key drivers of this revenue growth include: an increase in capitated revenue of $33.8 million during the three months ended September 30, 2023 due to the addition of new arrangements during 2023; FFS–patient care revenue and FFS-administrative services, which increased $23.7 million and $4.6 million, respectively, primarily attributable to the addition of new providers and increase in visit volume; shared savings revenue, which increased $3.3 million primarily due to more Attributed Lives in Medicare programs as well as continued strong performance in our value based care programs; and an increase in PMPM revenue of $8.5 million primarily due to increased Attributed Lives.

### Nine months ended September 30, 2023 and 2022

Revenue was $1.22 billion for the nine months ended September 30, 2023, an increase from $992.2 million for the same period in 2022. Key drivers of this revenue growth include an increase in capitated revenue in 2023 of $92.7 million due to the addition of new arrangements during the first quarter of 2023; FFS–patient care revenue and FFS-administrative services, which increased $66.8 million and $11.5 million, respectively, due to the addition of new providers and increase in visit volumes; shared savings revenue, which increased $40.0 million primarily related to more Attributed Lives in Medicare programs as well as continued strong performance in our value based care programs; and PMPM, which increased $12.4 million primarily attributable to increased Attributed Lives.

### Operating Expenses

*(Dollars in Thousands)*

| Operating Expenses: | For the Three Months Ended September 30, 2023 | 2022 | Change ($) | Change (%) | For the Nine Months Ended September 30, 2023 | 2022 | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Provider expense | $325,222 | $265,174 | $60,048 | 22.6% | $949,195 | $766,672 | $182,523 | 23.8% |
| Cost of platform | 50,324 | 43,839 | 6,485 | 14.8% | 145,254 | 127,495 | 17,759 | 13.9% |
| Sales and marketing | 7,241 | 5,088 | 2,153 | 42.3% | 18,483 | 14,568 | 3,915 | 26.9% |
| General and administrative | 27,228 | 32,219 | (4,991) | (15.5)% | 79,987 | 101,436 | (21,449) | (21.1)% |
| Depreciation and amortization expense | 1,731 | 1,153 | 578 | 50.1% | 4,761 | 3,436 | 1,325 | 38.6% |
| Total operating expenses | $411,746 | $347,473 | $64,273 | 18.5% | $1,197,680 | $1,013,607 | $184,073 | 18.2% |

#### Provider expenses

Provider expenses were $325.2 million for the three months ended September 30, 2023 compared to $265.2 million for the same period in 2022, and $949.2 million for the nine months ended September 30, 2023 compared to $766.7 million for the same period in 2022. The increase for both the three and nine months ended September 30, 2023 compared to the same periods in 2022 was driven primarily by higher FFS-patient care revenue and growth in Implemented Providers and the addition of new capitated arrangements during the first quarter of 2023.

#### Cost of platform

Cost of platform expenses were $50.3 million for the three months ended September 30, 2023 compared to $43.8 million for the same period in 2022. The increase was driven by an increase in salaries and benefits of $3.5 million related to continued growth during the three months ended September 30, 2023 compared the same period in 2022 and an increase in platform costs of $2.1 million, primarily related to an increase in Implemented Providers.

Cost of platform expenses were $145.3 million for the nine months ended September 30, 2023 compared to $127.5 million for the same period in 2022. The increase was driven by an increase salaries and benefits of $12.4 million related to continued growth, an increase in platform costs of $7.4 million due to an increase in Implemented Providers partially offset by a decrease of $2.6 million in stock-based compensation expense primarily related to the remaining pre-IPO stock option awards becoming fully vested during the fourth quarter of 2022.

#### Sales and marketing

Sales and marketing expenses were $7.2 million for the three months ended September 30, 2023 compared to $5.1 million for the same period in 2022. The increase was driven by an increase in salaries and benefits of $1.7 million during the three months ended September 30, 2023 compared to the same period in 2022.

Sales and marketing expenses were $18.5 million for the nine months ended September 30, 2023 compared to $14.6 million for the same period in 2022. The increase was driven primarily by an increase in salaries and benefits of $3.4 million.

#### General and administrative

General and administrative expenses were $27.2 million for the three months ended September 30, 2023 compared to $32.2 million for the same period in 2022. The decrease was driven by the reduction of $4.4 million in stock-based compensation expense during the three months ended September 30, 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.

General and administrative expenses were $80.0 million for the nine months ended September 30, 2023 compared to $101.4 million for the same period in 2022. The decrease was driven by the reduction of $29.7 million in stock-based compensation expense 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 professional services of $4.6 million related to additional consulting services, an increase in salaries and benefits of $1.1 million and various other immaterial expenses.

#### Depreciation and amortization expense

Depreciation and amortization expenses were $1.7 million for the three months ended September 30, 2023 compared to $1.2 million for the same period in 2022, and $4.8 million for the nine months ended September 30, 2023 compared to $3.4 million for the same period in 2022. This increase was primarily driven by amortization of intangible assets related to the acquisitions during the nine months ended September 30, 2023.

#### Interest (income) expense, net

Interest (income) expense was a net interest income amount of $(2.9) million for the three months ended September 30, 2023 compared to $(0.3) million for the same period in 2022, primarily due to the increase in the rate of interest earned on cash in our bank accounts, and $(5.5) million for the nine months ended September 30, 2023 compared to the interest expense of $0.6 million 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 (benefit from) income taxes

The provision for income taxes was $2.5 million for the three months ended September 30, 2023, compared to (benefit from) income taxes of $(4.8) million for the same period in 2022. The change was primarily attributable to the growth in taxable income and fewer excess tax benefits stemming from share based compensation related stock option exercise and restricted stock vesting events.

The provision for income taxes was $6.0 million for the nine months ended September 30, 2023,compared to $6.9 million for the same period in 2022. The decrease was driven by the changes in taxable income, partially offset by fewer excess tax benefits stemming from share based compensation related stock option exercise and restricted stock vesting events.

#### Gain (loss) attributable to non-controlling interests

Net income attributable to non-controlling interests was $0.3 million for the three months ended September 30, 2023 compared to a loss of $(1.1) million during the same period in 2022. Net loss attributable to non-controlling interest was $(1.5) million for the nine months ended September 30, 2023 compared to $(2.6) million for the same period in 2022. The change was primarily due to the repurchase of non-controlling interests for the nine months ended September 30, 2023.

### Liquidity and Capital Resources

### General

To date, we have financed our operations principally through sale of our equity, payments received from various payers and through borrowings under the prior Credit Agreement. As of September 30, 2023, we had cash and cash equivalents of $330.4 million. Our cash and cash equivalents primarily consist of highly liquid investments in money market funds and cash.

We believe that our cash and cash equivalents, including the proceeds from the IPO, together with cash flows from operations, will provide adequate resources to fund our short-term and long-term operating and capital 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 August 27, 2021, the Company and certain of its subsidiaries entered into an assumption agreement and third amendment (the “Third Amendment”) to the Credit Agreement, dated as of November 15, 2019 (as amended by the Third Amendment, the “Credit Agreement”) by and among the Company, 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 and granted the Administrative Agent a first-priority security interest on substantially all of its real and personal property, subject to permitted liens.

The Third Amendment increased the size of the Revolving Loan Facility to $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 the case of eurodollar loans, LIBOR plus an applicable margin, subject to a 0.5% floor, and (ii) in the case of ABR loans, an ABR rate plus an applicable margin, subject to a floor of 1.5%. In addition, the Amendment, 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 September 30, 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.

*(in thousands)*

| Condensed Consolidated Statements of Cash Flows Data: | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $16,684 | $18,042 |
| Net cash used in investing activities | (37,948) | (89) |
| Net cash provided by (used in) financing activities | 3,663 | (21,634) |
| Net decrease in cash and cash equivalents | $(17,601) | $(3,681) |

### Operating Activities

Net cash provided by operating activities was $16.7 million for the nine months ended September 30, 2023, compared to $18.0 million for the same period in 2022. Significant changes impacting net cash provided by operating activities for the nine months ended September 30, 2023 compared to the same period in 2022 were as follows:

- An increase in net income of $47.6 million compared to the same period in 2022. Net income was $18.7 million for the nine months ended September 30, 2023 compared to loss of $(28.9) million for the same period in 2022, primarily driven by the decrease in stock-based compensation expense during the nine months ended September 30, 2023 when 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.
- An increase of $(156.2) million in accounts receivable, for the nine months ended September 30, 2023 compared to the same period in 2022 of $(128.9) million, a difference of $(27.3) million. The increase is primarily driven by the addition of new at-risk capitation arrangements during the nine months ended September 30, 2023 and an increase in FFS and VBC revenue.
- An increase of $123.9 million in provider liability for the nine months ended September 30, 2023 compared to an increase of $113.6 million during the same period in 2022, a difference of $10.3 million. The increase is primarily due to an increase in provider expense related to shared savings and new at-risk capitation arrangements during the nine months ended September 30, 2023.

### Investing Activities

Net cash used in investing activities was $37.9 million for the nine months ended September 30, 2023 compared to a de minimis amount during the same period in 2022, primarily due to Privia’s investments in new markets during the first and third quarters of 2023.

### Financing Activities

Net cash provided by financing activities was $3.7 million for the nine months ended September 30, 2023, compared to net cash used in financing activities of $(21.6) million for financing activities for the same period in 2022. The increase is primarily related the use of cash to repay the Company’s Term Loan Facility during the nine months ended September 30, 2022, partially offset by lower receipt of proceeds from stock options exercised and the repurchase of non-controlling interest.

### 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 9 years and generally provide for periodic rent increases, renewal, and termination operations. Total rent expense under operating leases was $0.7 million for both of the three months ended September 30, 2023 and 2022, and $2.0 million for both the nine months ended September 30, 2023 and 2022, respectively.

*Off Balance Sheet Obligations.* We do not have any off-balance sheet arrangements as of September 30, 2023.

*Commitments and Contingencies.* See Note 11, “Commitments and Contingencies” for further discussion on our commitments and contingencies.

### 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, provider liability, revenue recognition, 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 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".

## Market risk

As filed, 971 characters.

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 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. As of September 30, 2023, the Company had no borrowing agreements and no letters of credit in 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.

## Controls and procedures

As filed, 950 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our 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 September 30, 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 September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 2,426 characters.

There have been no material changes to the risk factors disclosed in the 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.

Filed Nov 3, 2023.
Source: SEC EDGAR, the filing index for accession 0001759655-23-000211. Last ingested by Listed: Nov 5, 2026, 12:30 ET. No prices; not investment advice.