What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-28 · 162 added, 135 removed, 336 unchanged (47% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Assets (unaudited)

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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

Common stock, $ 0.01 par value, 1,000,000,000 and 150,000,000 shares authorized;

105,740,462 and 95,985,817 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 579,257 165,666

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(in thousands, except share and per share data)

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Revenue $ 225,756 $ 183,264 439,363 396,206

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Total operating expenses 418,943 177,085 624,643 383,531

Operating income 7,907 6,496

Operating (loss) income ( 193,187 ) 6,179 ( 185,280 ) 12,675

Interest expense 302 509 593 976

Income before provision for income taxes 7,616 6,029

Provision for income taxes 2,000 700

Net income 5,616 5,329

Net income (loss) attributable to non-controlling interests 218 ( 85 )

Net income attributable to Privia Health Group, Inc.

(Loss) income before (benefit from) provision for income taxes ( 193,489 ) 5,670 ( 185,873 ) 11,699

(Benefit from) Provision for income taxes ( 20,004 ) 474 ( 18,004 ) 1,174

Net (loss) income ( 173,485 ) 5,196 ( 167,869 ) 10,525

Loss attributable to non-controlling interests ( 951 ) ( 85 ) ( 733 ) ( 170 )

Net (loss) income attributable to Privia Health Group, Inc.

$ ( 172,534 ) $ 5,281 $ ( 167,136 ) $ 10,695

Net income per share attributable to Privia Health Group, Inc.

Net (loss) income per share attributable to Privia Health Group, Inc.

stockholders – basic and diluted $ ( 1.68 ) $ 0.06 $ ( 1.68 ) $ 0.11

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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

Stock-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

Stock-based compensation expense — — 121 — 121 121

Net income — — 5,281 5,281 ( 85 ) 5,196

Balance at June 30, 2020 95,931,549 $ 959 $ 160,617 $ ( 40,427 ) $ 121,149 $ ( 2,926 ) $ 118,223

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

Stock-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

Issuance of common stock upon closing of initial public offering 9,725,000 97 210,897 — 210,994 — 210,994

Issuance of common stock upon exercise of stock options and vesting of restricted stock units

29,645 — 33 — 33 — 33

Stock-based compensation expense — — 202,560 — 202,560 — 202,560

Net loss — — — ( 172,534 ) ( 172,534 ) ( 951 ) ( 173,485 )

Balance at June 30, 2021 105,740,462 $ 1,057 $ 579,257 $ ( 187,014 ) $ 393,300 $ ( 3,829 ) $ 389,471

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

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(in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities

Net Income $ 5,616 $ 5,329

Adjustments to reconcile net income to net cash used in operating activities:

Net (loss) income $ ( 167,869 ) $ 10,525

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Depreciation 564 599

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Amortization of debt issuance costs 77 67

Share-based compensation 101 121

Deferred tax expense 2,000 670

Stock-based compensation 202,661 242

Deferred tax (benefit) provision ( 18,209 ) 1,270

Changes in asset and liabilities:

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Other long-term liabilities ( 5,262 ) 512

Net cash used in operating activities ( 2,476 ) ( 7,079 )

Net cash provided by in operating activities 4,727 6,690

Cash from investing activities

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Cash flows from financing activities

Proceeds from initial public offering 223,686 —

Payments of underwriting fees, net of discounts and offering costs ( 12,658 ) —

Repayment of note payable ( 438 ) ( 438 )

Proceeds from revolving loan — 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 210,590 9,562

Net increase in cash and cash equivalents 215,118 15,873

Cash and cash equivalents at beginning of period 84,633 46,889

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Interest paid $ 585 $ 914

Income taxes paid $ 451 $ 46

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

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The Company uses the same operational and financial model in each market.

As of March 31, 2021, Privia operates in six markets:

As of June 30, 2021, Privia operates in six markets:

1) the Mid-Atlantic Region (states of Virginia, Maryland and the District of Columbia);

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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.

On May 3, 2021, the Company also sold 4,000,000 shares to an affiliate of Anthem, Inc.

(“Anthem”) in a private placement.

In aggregate, the shares issued in the offering and Anthem private placement generated gross proceeds of $ 223.7 million and $ 211.0 million in net proceeds, which is net of underwriters’ discounts and commissions, and other offering costs.

Basis of Presentation

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All significant intercompany transactions are eliminated in consolidation.

The results of operations for the three months ended March 31, 2021, are not indicative of the results to be expected for the full fiscal year ending December 31, 2021.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020, contained in the Company’s Prospectus.

In the opinion of management, all adjustments (consisting of all normal and recurring adjustments) considered necessary for a fair presentation have been included.

The results of operations for the three and six months ended June 30, 2021, are not indicative of the results to be expected for the full fiscal year ending December 31, 2021.

The condensed balance sheet at December 31, 2020, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

In the opinion of management, all adjustments (consisting of only normal and recurring adjustments) considered necessary for a fair statement have been included.

Variable Interest Entities

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Privia Physicians join the medical group in their geographic market as an owner of such medical group.

Certain of our medical groups are majority-owned by the Company (each, an “Owned Medical Medical”), with Privia Physicians owning a minority interest, and some medical groups are owned entirely by Privia Physicians (each, a “Non-Owned Medical Group”).

Certain of our medical groups are majority-owned by the Company (each, an “Owned Medical Group”), with Privia Physicians owning a minority interest, and some medical groups are owned entirely by Privia Physicians (each, a “Non-Owned Medical Group”).

The Company evaluated its relationship with Non-Owned Medical Groups and their historic practice entities (the “Affiliated Practices”) as well as its relationship with Affiliated Practices associated with Owned Medical Groups to determine if any of these entities should be subject to consolidation.

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The only contractual relationship between Privia and Non-Owned Medical Groups is established through the MSA.

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

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).

Upon completion of our evaluations 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 for the three months ended March 31, 2021 and 2020.

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, and the Company determined they do not represent VIEs as they do not meet the criteria in ASC 810.

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).

Based on the Company’s evaluations, Non-Owned Medical Groups do not represent VIEs.

Each time the Company 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 SSAs, and the Company determined they do not represent VIEs as they do not meet the criteria in ASC 810.

Emerging Growth Company Status

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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 compensation, estimated useful lives of assets, intangible assets subject to amortization, and the computation of income taxes.

On an on-going basis we evaluate significant estimates and assumptions, including, but not limited to, 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;

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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.

The current COVID-19 pandemic had an impact on our results of operations, cash flow and financial position for the three and six months ended and as of June 30, 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.

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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 following are significant economic impacts for the Company and its subsidiaries as a result of specific provisions of the CARES Act for the three and six month periods ended June 30, 2021:

• 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:

• 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.

Approximately $ 1.6 million is recorded in accrued expenses on the balance sheet as of June 30, 2021 related to this deferral and the Company intends to remit payment by the end of 2021;

• The Company received $ 13.3 million in grant funds from the Provider Relief Fund under the CARES Act during the three and six months ended June 30, 2020.

No funds were received from the Provider Relief Fund under the CARES Act during the three and six months ended June 30, 2021.

Non-Controlling Interest

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The Company has separately reflected net income attributable to the non-controlling interests in net income in the condensed consolidated statements of operations.

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 in its Prospectus.

During the three months ended March 31, 2021, 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.”

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 in the Prospectus.

During the three and six months ended June 30, 2021, 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.”

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.

Upon lease commencement, which is defined as 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.

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The difference between the operating lease right-of-use assets and operating lease liabilities resulted from the reclassification of deferred rent.

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.

Adoption of the standard did not have a material impact on the consolidated statements of operations or cash flows for the three months and six months ended June 30, 2021.

The Company did not recognize a cumulative-effect adjustment to retained earnings upon adoption.

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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.

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.

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' financial condition, delinquency trends, aging behaviors of receivables and credit and liquidity indicators for industry groups, and future market and economic conditions.

As of June 30, 2021, the allowance for credit losses was not material.

Recently Issued Accounting Pronouncements Pending Adoption

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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.

This guidance is effective for the Company for the year ending December 31, 2022.

Early adoption is permitted.

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The following table presents our revenues disaggregated by source:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

(Dollars in Thousands) 2021 2020 2021 2020

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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 June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Commercial insurers 67 % 68 % 68 % 68 %

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Patient 16 % 16 % 16 % 17 %

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 generated through Care management fee (PMPM) payments from payers to provide care coordination services to patients and through shared savings contracts with large commercial payer organizations and the U.S.

Value Based Care (“VBC”) revenue is generated through per member per month Care management fee (“PMPM”) payments, from payers to provide care coordination services to patients and through shared savings contracts with large commercial payer organizations and the U.S.

Federal Government.

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The Company has the following contract assets and unearned revenue:

(Dollars in Thousands) March 31, 2021 December 31, 2020

(Dollars in Thousands) June 30, 2021 December 31, 2020

Balances for contracts with customers

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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:

Changes in the balance of total deferred revenue during the six months ended June 30, 2021 are as follows:

(Dollars in Thousands) December 31, 2020 Additions Revenue

Recognized March 31, 2021

Recognized June 30, 2021

Unearned revenue $ 2,759 2,724 ( 877 ) $ 4,606

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.

During the three and six months ended June 30, 2021, the Company recognized approximately $ 0.5 million and $ 0.9 million, respectively, of revenue related to amounts unearned as of December 31, 2020.

Remaining Performance Obligations

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Potential impairment is indicated when the carrying value of a reporting unit exceeds its estimated fair value.

The Company’s carrying amount of goodwill at March 31, 2021 and December 31, 2020 is approximately $ 118.7 million.

The most recently completed impairment test of goodwill was performed as of October 1, 2020 and the fair value of the reporting unit exceeded the carrying value and therefore it was determined that no impairment existed.

No indicators of impairment were identified during the three months ended March 31, 2021.

The Company’s carrying value of goodwill at June 30, 2021 and December 31, 2020 is approximately $ 118.7 million.

The most recently completed annual impairment test of goodwill was performed as of October 1, 2020 and the fair value of the reporting unit exceeded the carrying value and therefore it was determined that no impairment existed.

No indicators of impairment were identified during the six months ended June 30, 2021 and 2020.

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(Dollars in thousands) Intangible

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Intangible assets, net $ 5,659 $ 5,980

The remaining weighted average life of all amortizable intangible assets is approximately 10.5 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.

The remaining weighted average life of all amortizable intangible assets is approximately 10.3 years at June 30, 2021.

Amortization expense for intangible assets was approximately $ 0.2 million for both the three months ended June 30, 2021 and 2020, respectively, and $ 0.3 million for both the six months ended June 30, 2021 and 2020, respectively.

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

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

(Dollars in Thousands) For the Three Months Ended March 31, 2021

(Dollars in Thousands) For the Three Months Ended June 30, 2021 For the Six Months Ended June 30, 2021

Operating lease cost $ 485 $ 931

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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:

The aggregate future lease payments for operating leases in the years subsequent to June 30, 2021 are as follows:

(Dollars in Thousands)

Remainder of 2021 $ 1,087

Thereafter 1,407

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

(Dollars in Thousands) March 31, 2021 December 31, 2020

(Dollars in Thousands) June 30, 2021 December 31, 2020

Furniture and fixtures $ 1,073 $ 1,073

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Accrued expenses consisted of the following:

(Dollars in Thousands) March 31, 2021 December 31, 2020

(Dollars in Thousands) June 30, 2021 December 31, 2020

Accrued employee compensation and benefits $ 6,560 $ 6,167

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The Company’s note payable consists of the following:

(Dollars in Thousands) March 31, 2021 December 31, 2020

(Dollars in Thousands) June 30, 2021 December 31, 2020

Note payable $ 33,688 $ 34,125

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On November 15, 2019, the Company entered into a Credit Agreement with a third-party financial institution.

The debt agreement provides for up to $ 35.0 million in term 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 to an additional $ 10.0 million of financing in the form of a revolving loan.

The debt agreement provides for up to $ 35.0 million in term 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 June 30, 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 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.

During March 2020, the Company borrowed $ 10.0 million against the revolving loan, which bears interest at the lesser of LIBOR + 2.5 % or ABR + 1.5 % payable monthly and matures November 15, 2024.

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On July 17, 2020, the Company increased its capacity under the revolving loan to $ 15.0 million.

As of March 31, 2021 there were no amounts outstanding under the revolving loan.

Interest expense relating to the note payable and revolving loan was approximately $ 0.3 million and $ 0.5 million for the three months ended March 31, 2021, and 2020, respectively.

As of June 30, 2021 and December 31, 2020 there were no amounts outstanding under the revolving loan.

Interest expense relating to the note payable and revolving loan was approximately $ 0.3 million and $ 0.5 million for the three months ended June 30, 2021 and 2020, respectively, and $ 0.6 million and $ 1.0 million for the six months ended June 30, 2021, and 2020, respectively.

Debt issuance costs relating to the term loans of approximately $ 0.5 million have been capitalized and are being amortized over the life 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 and 2020.

Amortization expense of approximately $ 0.1 million was recorded for both the six months ended June 30, 2021 and 2020, respectively, and a de minimis amount for both the three months ended June 30, 2021 and 2020, respectively.

Substantially all of the Company’s real and personal property serve as collateral under the above debt arrangements.

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 covenants for the three months ended March 31, 2021 and 2020.

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

Annual aggregate principal payments applicable to long-term debt for years subsequent to June 30, 2021 are as follows:

(Dollars in Thousands)

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Total $ 33,688

The Company recorded an income tax provision of $ 2.0 million and $ 0.7 million for the three months ended March 31, 2021 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.

The Company recorded an income tax (benefit) of $ 20.0 million and provision of $ 0.5 million for the three months ended June 30, 2021 and 2020, respectively, and a income tax (benefit) of $ 18.0 million and provision of $ 1.2 million for the six months ended June 30, 2021 and 2020, respectively.

This represents an estimated annual effective tax rate of 9.7 % and 11.1 % as of June 30, 2021 and 2020, respectively.

The effective tax rate for the three and six month periods ended June 30, 2021 was lower than the statutory rate due to the effect on the pre-tax loss of the non-deductible stock-based compensation expense related to the Company’s IPO.

The effective tax rate for the three and six month periods ended June 30, 2020 was lower than the statutory rate due to the recognition of previously valued deferred tax assets offset by amortization expense associated with an indefinite lived intangible asset for tax purposes.

We consider both positive and negative evidence when evaluating the recoverability of our 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, 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 a valuation allowance against the deferred tax asset balance due to positive evidence outweighing the negative evidence .

Share-based Compensation

As of June 30, 2020, 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 June 30, 2021, there is no longer a valuation allowance against the deferred tax asset balance due to positive evidence outweighing the negative evidence .

Stockholders’ Equity

Anthem Private Placement

On May 3, 2021, concurrent with the closing of its IPO, the Company issued and sold, 4,000,000 shares of common stock, par value $ 0.01 per share, of the Company for an aggregate purchase price of $ 92 million (the “Private Placement”), or $ 23.00 per share, in a private placement to an affiliate of Anthem.

As of May 3, 2021, Anthem 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.

Stock option plan

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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 Parent Option Plan).

Stock Option Plan (the “PH Parent Option Plan” or “Prior 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.

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 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 recognized stock-based compensation of $ 195.1 million in the second quarter of 2021 related to these modifications and we expect to recognize an additional $ 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 10,278,581 shares of the Company’s common stock.

The Plan also allows for an 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 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 as of the date of grant.

The Plan also provides for the granting of Stock Appreciation Rights, Restricted Stock, Restricted Stock Units (“RSU’s”), 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 common stock as of the date of grant.

Participants in the Plan may include employees, consultants, other service providers and non-employee directors.

On 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 an exercise price equal to the offering price.

These issuances are expected to generate stock-based compensation expense of $ 62.3 million to be 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 Prior Plan.

2021 Employee Stock Purchase Plan

In April 2021, the Company’s Board of 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 the IPO, the Company has reserved 1,027,858 shares of common stock for issuance under the 2021 ESPP.

Stock option activity

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

Outstanding Weighted-

The following table summarizes stock option activity under the Prior Plan and Plan:

Number of Shares Weighted-

Exercise Price Weighted-

Fair Value Weighted-

Balance at January 1, 2021 18,300,959 2.01 0.34 7.82

Balance at December 31, 2020 18,300,959 2.01 0.34 7.82

Granted 3,683,217 23.00 9.51

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Forfeited ( 102,454 ) 2.32 0.53

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.

Balance at June 30, 2021 21,865,121 $ 5.55 1.88 7.74

Exercisable at June 30, 2021 12,218,540 $ 2.18 0.43 7.56

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

Number of Shares Grant Date Fair Value

Unvested and outstanding at December 31, 2020 — —

Granted 1,187,815 $ 23.07

Vested ( 13,044 ) $ 23.00

Forfeited ( 236 ) $ 23.00

Unvested and outstanding at June 30, 2021 1,174,535 $ 23.07

Stock-based compensation expense

Total stock-based compensation expense for the three months ended June 30, 2021 and 2020, was approximately $ 202.6 million and $ 0.1 million, respectively, and $ 202.7 million and $ 0.2 million for the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021, there was approximately $ 144.8 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 1.1 years.

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

For the Three Months Ended June 30, For the Six Months Ended June 30,

(Dollars in Thousands) 2021 2020 2021 2020

Cost of platform $ 36,040 $ — $ 36,040 $ —

Sales and marketing 7,694 — 7,694 —

General and administrative 158,826 121 158,926 242

Total stock-based compensation $ 202,560 $ 121 $ 202,660 $ 242

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.

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.

1 unchanged sentence

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.

There are no material commitments and contingencies as of June 30, 2021.

Concentrations of Credit Risk

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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 two financial institutions.

At June 30, 2021, substantially all of the Company’s cash and cash equivalents were held at two 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.

Six payers within the network accounted for approximately 74 % and 81 % of such payments for the three month periods ended June 30, 2021 and 2020, respectively, and 74 % and 81 % for the six month periods ended June 30, 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.

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,

As of June 30, 2021 and December 31, 2020, the Company had six payers within the network that made up approximately 71 % and 70 % of accounts receivable, respectively.

Net (Loss) Income Per Share

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

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in thousands, except for share and per share amounts) 2021 2020 2021 2020

Net income attributable to Privia Health Group, Inc.

Net (loss) income attributable to Privia Health Group, Inc.

common stockholders $ ( 172,534 ) $ 5,281 $ ( 167,136 ) $ 10,695

Weighted average common shares outstanding - basic 95,985,817 95,931,549

Potentially dilutive stock options — —

Weighted average common share outstanding - diluted 95,985,817 95,931,549

Weighted average common shares outstanding - basic and diluted 102,739,033 95,931,549 99,381,053 95,931,549

Earnings per share attributable to Privia Health Group, Inc.

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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,

Potentially dilutive stock options to purchase common shares 18,222,909 17,600,258

Total potential dilutive shares 18,222,909 17,600,258

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Potentially dilutive stock options and RSUs to purchase common shares 20,631,283 17,749,804 20,670,308 17,774,841

Total potentially dilutive shares 20,631,283 17,749,804 20,670,308 17,774,841

Segment Financial Information

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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.

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 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 stock-based compensation of $ 189.5 million in the second quarter of 2021 related to these modifications and we expect to recognize an additional $ 95.0 million of additional stock compensation expense over the eighteen months following the completion of the IPO.

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 % of our 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.

The Plan also allows for an automated 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 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 as of the date of grant.

The Plan also provides for the granting of Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, 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 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 Company issued 1,183,871 restricted stock units and 3,683,217 options, with a strike price equal to the IPO offering price.

These issuances are expected to generate stock compensation expense of $ 62.3 million to be expensed over the next four years starting on the effective date of the IPO as both the restricted stock units and stock options vest.

Anthem Private Placement

On May 3, 2021, concurrent with the closing of its IPO, 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 shares of common stock, par value $ 0.01 per share, of the Company 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.

As of June 30, 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements