What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-28 · 144 added, 112 removed, 325 unchanged (44% of the section changed)

56 unchanged sentences

GAAP Financial Measures

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

• Operating income was $7.9 million and $6.5 million for the three months ended March 31, 2021 and 2020, respectively;

• Net Income attributable to Privia Health Group, Inc.

was $5.4 million and $5.4 million, for the three months ended March 31, 2021 and 2020, respectively.

• Revenue was $225.8 million and $183.3 million for the three months ended June 30, 2021 and 2020, respectively, and $439.4 million and $396.2 million for the six months ended June 30, 2021 and 2020, respectively.

• Operating (loss) income was $(193.2) million and $6.2 million for the three months ended June 30, 2021 and 2020, respectively;

and $(185.3) million and $12.7 million for the six months ended June 30, 2021 and 2020, respectively;

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

was $(172.5) million and $5.3 million, for the three months ended June 30, 2021 and 2020, respectively, and $(167.1) million and $10.7 million for the six months ended June 30, 2021 and 2020, respectively.

Key Metrics and Non-GAAP Financial Measures

• Practice Collections was $344.1 million and $327.4 million for the three months ended March 31, 2021.

and 2020, respectively;

• Care Margin was $52.5 million and $47.8 million for the three months ended March 31, 2021.

and 2020, respectively;

• Platform Contribution was $25.5 million and $20.3 million for the three months ended March 31, 2021.

and 2020, respectively;

• Adjusted EBITDA was $9.9 million and $7.1 million for the three months ended March 31, 2021.

and 2020, respectively.

See “Key Metrics and Non-GAAP Financial Measures” 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 income from operations, the most comparable GAAP measure, to Care Margin, income from operations, the most comparable GAAP measure, to Platform Contribution, and net income, the most comparable GAAP measure, to Adjusted EBITDA.

• Practice Collections was $367.2 million and $281.7 million for the three months ended June 30, 2021 and 2020, respectively, and $711.3 million and $609.1 million for the six months ended June 30, 2021 and 2020, respectively;

• Care Margin was $55.8 million and $41.7 million for the three months ended June 30, 2021 and 2020, respectively, and $108.3 million and $89.6 million for the six months ended June 30, 2021 and 2020, respectively;

• Platform Contribution was $23.1 million and $17.4 million for the three months ended June 30, 2021 and 2020, respectively, and $48.7 million and $37.7 million for the six months ended June 30, 2021 and 2020, respectively;

• Adjusted EBITDA was $10.0 million and $7.0 million for the three months ended June 30, 2021 and 2020, respectively, and $20.0 million and $14.1 million for the six months ended June 30, 2021 and 2020, respectively.

See “Key Metrics and Non-GAAP Financial Measures” 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 income from operations, the most comparable GAAP measure, to Care Margin, income from operations, the most comparable GAAP measure, to Platform Contribution, and net (loss) income, the most comparable GAAP measure, to Adjusted EBITDA.

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

The current COVID-19 pandemic had an impact on our results of operations, cash flow and financial position for the period ended and as of March 31, 2021, as we experienced lower volumes than anticipated and shifts in the mix of services provided after the onset of the pandemic in the United States.

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 and 2020, 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 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.

We recognize revenue from multiple stakeholders, including health care consumers, health insurers, employers, providers and health systems.

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We also generate FFS-administrative services revenue by providing administration and management services to medical groups which are not owned or consolidated by us.

FFS-patient care revenue represented 79.4%, and 82.1% of total revenue for the three months ended March 31, 2021 and 2020, respectively.

FFS-administrative services revenue represented 7.2% and 6.8% of total revenue for the three months ended March 31, 2021 and 2020, respectively.

FFS-patient care revenue represented 80.1%, and 71.7% of total revenue for the three months ended June 30, 2021 and 2020, respectively, and 79.8% and 77.3% for the six months ended June 30, 2021 and 2020, respectively.

FFS-administrative services revenue represented 6.8% and 7.4% of total revenue for the

three months ended June 30, 2021 and 2020, respectively, and 7.0% and 7.1% for the six months ended June 30, 2021 and 2020, respectively.

Over time, we create incremental value for our provider partners by enabling them to succeed in VBC arrangements.

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The revenue is primarily collected in the form of (i) PMPM care management fees to cover costs of services typically not reimbursed under traditional FFS payment models, including population management, care coordination, advanced technology and analytics, and (ii) shared savings earned based on improved quality and lower cost of care for our attributed patients in VBC arrangements.

VBC revenue represented 12.4% and 10.6% of total revenue for the three months ended March 31, 2021 and 2020, respectively.

VBC revenue represented 12.5% and 13.2% of total revenue for the three months ended June 30, 2021 and 2020, respectively, and 12.4% and 11.8% for the six months ended June 30, 2021 and 2020, respectively.

We expect VBC revenue to continue to increase as a percentage of total revenue as we grow total Attributed Lives under management as well as increase risk levels undertaken across value-based arrangements.

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

Other revenue represented 1.0% and 0.4% of total revenue for the three months ended March 31, 2021 and 2020, respectively.

Other revenue represented 0.6% and 7.7% of total revenue for the three months ended June 30, 2021 and 2020, respectively, and 0.8% and 3.8% for the six months ended June 30, 2021 and 2020, respectively.

Provider Relief Funds under the CARES Act have been recorded within other revenue on the statement of operation for the three and six months ended June 30, 2020.

Key Factors Affecting Our Performance

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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.

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

Implemented Providers (as of end of period) 2,692 2,531 2,692 2,531

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This growth depends, in part, on our ability to successfully add new practices in existing markets and expand into new markets.

The number of Implemented Providers increased 4.7% between March 31, 2021 and 2020, due to organic growth in our healthcare delivery business.

The number of Implemented Providers increased 6.4% during the three and six months ended June 30, 2021 when compared to the same periods in 2020, due to organic growth in our healthcare delivery business.

Attributed Lives

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The number of Attributed Lives is an important measure that impacts the amount of VBC revenue we receive.

While overall Attributed Lives decreased 4.1% between March 31, 2021 and 2020, Attributed Lives in government value-based programs increased by 7.7% and commercial value-based programs decreased by 10.4%.

While overall Attributed Lives decreased 1.3% between June 30, 2021 and 2020, Attributed Lives in government value-based programs increased by 9.8% and commercial value-based programs decreased by 7.2%.

Practice Collections

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Practice Collections differ from revenue by adding collections from Non-Owned Medical Groups.

Practice Collections increased 5.1% between March 31, 2021 and 2020 due to organic growth of our healthcare delivery business.

Practice Collections increased 30.3% for the three months ended June 30, 2021 when compared to the same periods in 2020 and increased 16.8% for the six months ended June 30, 2021 when compared to the same period in 2020 due to organic growth of our healthcare delivery business.

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.

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 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.

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Investors are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business .

For the Three Months Ended March 31,

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

(amounts in thousands, except for percentages) 2021 2020 2021 2020

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Platform Contribution Margin 1 (%)

41.4% 41.7% 44.9% 42.1%

Adjusted EBITDA 1 ($)

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Adjusted EBITDA Margin 1 (%)

18.0% 16.8% 18.4% 15.7%

See below for more information as to how we define and calculate Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin and for a reconciliation of income from operations, the most comparable GAAP measure, to Care Margin, income from operations, the most comparable GAAP measure, to Platform Contribution, and net income, the most comparable GAAP measure, to Adjusted EBITDA.

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We would also expect our care management and shared savings economics in our VBC arrangements to improve on a per patient basis as we manage towards lower total cost of care for our Attributed Lives and move towards higher risk VBC arrangements over time.

Care Margin increased 9.7% for the three months ended March 31, 2021 when compared to the same period in 2020 due to organic growth of our medical practice business.

Care Margin increased 33.7% for the three months ended June 30, 2021 when compared to the same period in 2020 and 20.9% for the six months ended June 30, 2021 when compared to the same period in 2020 due to organic growth of our medical practice business.

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.

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In particular, we believe that the use of Care Margin is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance.

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

For the Three Months Ended March 31,

The following table provides a reconciliation of operating (loss) income, the most closely comparable GAAP financial measure, to Care Margin.

For the three months ended June 30, 2021, Cost of platform included $36.0 million of stock-based compensation expense, Sales and marketing included $7.7 million of stock-based compensation expense, and general and administrative included $158.8 million of stock-based compensation expense.

$195.1 million of this stock-based compensation expense was recognized for the modification of outstanding options in connection with our IPO.

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

(unaudited and amounts in thousands) 2021 2020 2021 2020

Operating income $ 7,907 $ 6,496

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

Depreciation and amortization 440 594 885 932

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Platform Contribution

We define Platform Contribution as total revenue less the sum of (i) physician and practice expense and (ii) cost of platform.

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.

We define Platform Contribution as total revenue less the sum of (i) physician and practice expense, (ii) cost of platform and (iii) stock-based compensation expense included in Cost of platform.

The following table provides a reconciliation of operating income, the most closely comparable GAAP financial measure, to Platform Contribution.

For the three months ended June 30, 2021, Sales and marketing included $7.7 million of stock-based compensation expense, and general and administrative included $158.9 million of stock-based compensation expense, and $36.0 million of stock-based compensation from to Cost of Platform.

$195.1 million of this stock-based compensation expense was recognized for the modification of outstanding options in connection with our IPO.We consider platform contribution to be an important measure to monitor our performance, specific to pricing of our services, direct costs of delivering care, and cost of our platform and associated services.

As a provider spends a longer time on the Privia Platform, we expect the Platform Contribution from that provider to increase both in terms of absolute dollars as well as a percent of Care Margin.

We expect that this increase will be driven by improving per provider revenue economics over time as well as our ability to generate operating leverage on our in-market infrastructure costs.

Platform Contribution increased 25.9% for the three months ended March 31, 2021 when compared to the same period in 2020 due to organic growth of our medical practice business.

Platform Contribution increased 32.8% for the three months ended June 30, 2021 when compared to the same period in 2020 and increased 29.1% for the six months ended June 30, 2021 when compared to the same period in 2020 due to organic growth of our medical practice business.

Platform Contribution Margin

We define Platform Contribution as total revenue less the sum of (i) physician and practice expense and (ii) cost of platform calculated as a percentage of Care Margin.

We define Platform Contribution (as defined above) 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.

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We expect that this increase will be driven by improving per provider revenue economics over time as well as our ability to generate operating leverage on our in-market infrastructure costs.

Platform Contribution Margin was 48.6% for three months ended March 31, 2021 an increase from 42.4% during the same period in 2020 as 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.

Platform Contribution Margin was 41.4% for three months ended June 30, 2021 compared to 41.7% during the same period in 2020 and 44.9% for the six months ended June 30, 2021 an increase from 42.1% during the same period in 2020 as we continue to make strategic investments to provide better service to both our patients and physicians at a pace slower than the increase in revenue.

In addition to our financial results determined in accordance with GAAP, we believe platform contribution, a non-GAAP measure, is useful in evaluating our operating performance.

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

For the Three Months Ended March 31,

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

(unaudited and amounts in thousands) 2021 2020 2021 2020

Operating income $ 7,907 $ 6,496

Depreciation and amortization expense 445 338

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

Depreciation and amortization 440 594 885 932

General and administrative 168,657 8,419 182,653 19,408

Sales and marketing 11,178 2,220 14,362 4,672

Stock-based compensation (1)

$ 36,040 $ — $ 36,040 $ —

Platform contribution $ 23,128 $ 17,412 $ 48,660 $ 37,687

(1) Amount represents stock-based compensation expense included under Cost of Platform.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) excluding interest income, interest expense, minority interest expense / income, stock-based compensation, severance, other one time or non-recurring expenses and the provision for income taxes.

We define Adjusted EBITDA as net (loss) income excluding interest income, interest expense, minority interest expense / income, depreciation and amortization, stock-based compensation, severance, other one time or non-recurring expenses and the provision for income taxes.

We include Adjusted EBITDA because it is an important measure on which our management assesses and believes investors should assess our operating performance.

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Adjusted EBITDA has limitations as an analytical tool including:

(i) Adjusted EBITDA does not include the dilution that results from stock-based compensation or any cash outflows included in stock-based compensation, including from our purchases of shares of outstanding common stock, and (ii) Adjusted EBITDA does not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments.

Adjusted EBITDA increased 41.0% for the three months ended March 31, 2021 when compared to the same period in 2020 due to organic growth of our medical practice business.

(i) Adjusted EBITDA does not reflect the impact of stock-based compensation expense or the impact of withholding shares of outstanding common stock upon vesting, 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 43.0% for the three months ended June 30, 2021, when compared to the same period in 2020, and 42.0% for the six months ended June 30, 2021, when compared to the same period in 2020 due to organic growth of our medical practice business.

Adjusted EBITDA Margin

We define Adjusted EBITDA Margin as net income (loss) excluding interest income, interest expense, minority interest expense/income, stock-based compensation, severance, other one time or non-recurring expenses and the provision for income taxes calculated as a percentage of Care Margin.

We define Adjusted EBITDA Margin as net (loss) income excluding interest income, interest expense, minority interest expense/income, depreciation and amortization, stock-based compensation, severance, other one time or non-recurring expenses and the provision for income taxes calculated as a percentage of Care Margin.

We included Adjusted EBITDA Margin because it is an important measure on which our management assesses and believes investors should assess our operating performance.

We consider Adjusted EBITDA Margin to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis.

Adjusted EBITDA Margin was 18.9% for three months ended March 31, 2021 an increase from 14.7% for the same period in 2020 due to of organic growth of our medical practice business.

Adjusted EBITDA Margin was 18.0% for three months ended June 30, 2021 an increase from 16.8% for the same period in 2020 and 18.4% for the six months ended June 30, 2021 an increase from 15.7% for the same period in 2020 due to of organic growth of our medical practice business.

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

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In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance.

The following table provides a reconciliation of net income (loss) attributable to Privia Health Group, Inc.

and subsidiaries, the most closely comparable GAAP financial measure, to Adjusted EBITDA:

For the Three Months Ended March 31,

The following table provides a reconciliation of net (loss) income attributable to the Company, the most closely comparable GAAP financial measure, to Adjusted EBITDA:

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

(unaudited and amounts in thousands) 2021 2020 2021 2020

Net income $ 5,398 $ 5,414

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

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

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

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

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Other expenses (1)

223 122 1,717 222

Adjusted EBITDA $ 10,036 $ 7,016 $ 19,983 $ 14,071

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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.

Software development costs that do not meet capitalization criteria are expensed as incurred.

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Sales and marketing

Sales and marketing expenses consist of employee-related expenses, including salaries, commissions, and employee benefits costs, for all of our employees engaged in marketing, sales, community outreach, and sales support.

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.

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Corporate, general and administrative expenses include employee-related expenses, including salaries and related costs and stock-based compensation, technology infrastructure, occupancy costs, operations, clinical and quality support, finance, legal, human resources, and development departments.

We expect our general and administrative expenses to increase over time following the closing of the IPO due to the additional legal, accounting, insurance, investor relations and other costs that we will incur as a public company, as well as other costs associated with continuing to grow our business.

We expect our general and administrative expenses to increase over time following the IPO due to the additional legal, accounting, insurance, investor relations and other costs that we will incur as a public company, as well as other costs associated with continuing to grow our business.

However, we anticipate general and administrative expenses to decrease as a percentage of revenue over the long term, although they may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.

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Results of Operations

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

For the Three Months Ended March 31,

2021 2020 Change ($) Change (%)

The following table sets forth our condensed consolidated statements of operations data for the three and six months ended June 30, 2021 and 2020.

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

2021 2020 Change ($) Change (%) 2021 2020 Change ($) Change (%)

(in thousands)

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Total operating expenses 418,943 177,085 241,858 136.6 % 624,643 383,531 241,112 62.9 %

Operating income 7,907 6,496 1,411 21.7 %

Operating (loss) income (193,187) 6,179 (199,366) (3226.5) % (185,280) 12,675 (197,955) (1561.8) %

Interest expense 302 509 (207) (40.7) % 593 976 (383) (39.2) %

Income before provision for income taxes 7,616 6,029 1,587 26.3 %

Provision for income taxes 2,000 700 1,300 185.7 %

Net income 5,616 5,329 287 5.4 %

Net income (loss) attributable to non-controlling interests 218 (85) 303 (356.5) %

Net income attributable to Privia Health Group, Inc.

(Loss) income before (benefit from) provision for income taxes (193,489) 5,670 (199,159) (3512.5) % (185,873) 11,699 (197,572) (1688.8) %

(Benefit from) Provision for income taxes (20,004) 474 (20,478) (4320.3) % (18,004) 1,174 (19,178) (1633.6) %

Net (loss) income (173,485) 5,196 (178,681) (3438.8) % (167,869) 10,525 (178,394) (1695.0) %

Loss attributable to non-controlling interests (951) (85) (866) 1018.8 % (733) (170) (563) 331.2 %

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

$ (172,534) $ 5,281 $ (177,815) (3367.1) % $ (167,136) $ 10,695 $ (177,831) (1662.7) %

Comparison of the three months ended March 31, 2021 and 2020.

Revenue was $213.6 million for the three months ended March 31, 2021, a slight increase of $0.7 million or 0.3%, compared to $212.9 million for the three months ended March 31, 2020.

Key drivers of this revenue growth were care management fees (PMPM), which increased $2.3 million or 37.6%, shared savings revenue, which increased $1.4 million or 8.5%, other revenue which increased $1.4 million or 161.2%, and FFS-Administrative services revenue which increased $0.9 million or 5.9%, partially offset by a decrease in FFS–patient care revenue of $5.3 million or 3.0%.

Growth in FFS–administrative services revenue was due mainly to the addition of a new market for the first quarter of 2021(Tennessee) and the ramp up of the Florida market.

Care management fees (PMPM) growth was due mainly to an increase in the total number of VBC contracts that include the payment of care management fees and an increase in Attributed Lives in government programs.

Shared savings growth was mainly due to more Attributed Lives in government programs.

The increase in other revenue was primarily due to the rise of direct to employer business.

The decrease in FFS – patient care revenue was mainly attributed to visit volume declines related to certain state and local initiatives imposed as a result of COVID-19, such as social distancing guidelines partially offset by the addition of new providers.

The following table presents our revenues disaggregated by source:

For the Three Months Ended March 31,

(Dollars in Thousands) 2021 2020 Change ($) Change (%)

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

(Dollars in Thousands) 2021 2020 Change ($) Change (%) 2021 2020 Change ($) Change (%)

FFS-patient care $ 180,821 $ 131,324 $ 49,497 37.7 % $ 350,398 $ 306,194 $ 44,204 14.4 %

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Total Revenue $ 225,756 $ 183,264 $ 42,492 23.2 % $ 439,363 $ 396,206 $ 43,157 10.9 %

Three months ended June 30, 2021 and 2020.

Revenue was $225.8 million for the three months ended June 30, 2021, an increase of $42.5 million or 23.2%, compared to $183.3 million for the three months ended June 30, 2020.

Key drivers of this revenue growth were FFS–patient care revenue which increased $49.5 million or 37.7%, care management fees (PMPM), which increased $2.3 million or 32.7%, shared savings revenue, which increased $1.8 million or 10.4%, and FFS-administrative services which increased $1.7 million or 12.7%, partially offset by a decrease in other revenue of $12.8 million or (90.6)%.

Growth in FFS-patient care revenue and FFS-administrative services was primarily attributed to an increase in visit volumes as COVID-19 restrictions, including temporary lockdowns, were lifted in certain states as well as the addition of new providers.

June 30, 2021, we had 2,692 implemented providers compared to 2,531 in June 30, 2020, an increase of 6.4%.

Shared savings growth was mainly due to an increase in Attributed Lives in government programs.

Six months ended June 30, 2021 and 2020.

Revenue was $439.4 million for the six months ended June 30, 2021, an increase of $43.2 million or 10.9% compared to $396.2 million for the six months ended June 30, 2020.

Key drivers of this revenue growth were FFS–patient care revenue which increased $44.2 million or 14.4%, care management fees (PMPM), which increased $4.6 million or 35.0%, shared savings revenue, which increased $3.2 million or 9.5%, and FFS-administrative services which increased $2.6 million or 9.2%, partially offset by a decrease in other revenue of $11.5 million or 76.3%.

Growth in FFS - patient care revenue was mainly attributed to an increase in visit volumes as COVID-19 restrictions are lifted in certain states as well as the addition of new providers.

Shared savings growth was mainly due to more Attributed Lives in government programs.

Growth in FFS - administrative services revenue was due mainly to easing of COVID-19 restriction in addition to the ramp up of the Florida and Tennessee markets.

The decrease in other revenue was driven by the grant funds received as part of the CARES Act Provider Relief Fund in 2020 as additional funds were not received in 2021 as part of the CARES Act Provider Relief Fund partially offset by increases in virtual health services, behavior health, and clinical research.

Operating Expenses

For the Three Months Ended March 31,

(Dollars in Thousands) 2021 2020 Change ($) Change (%)

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

(Dollars in Thousands) 2021 2020 Change ($) Change (%) 2021 2020 Change ($) Change (%)

Operating Expenses:

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Cost of platform 68,731 24,331 44,400 182.5 % 95,693 51,892 43,801 84.4 %

Sale and marketing 3,184 2,452 732 29.9 %

Sales and marketing 11,178 2,220 8,958 403.5 % 14,362 4,672 9,690 207.4 %

General and administrative 168,657 8,419 160,238 1903.3 % 182,653 19,408 163,245 841.1 %

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Physician and practice expenses

Physician expenses were $161.1 million for the three months ended March 31, 2021, a decrease of $4.0 million, or 2.4%, compared to $165.1 million for the three months ended March 31, 2020.

This decrease was driven primarily by lower FFS-patient care revenue partially offset by the growth in Implemented Providers.

Physician expenses were $169.9 million for the three months ended June 30, 2021, an increase of $28.4 million, or 20.1%, compared to $141.5 million for the three months ended June 30, 2020.

This increase was driven primarily by higher FFS-patient care revenue and growth in Implemented Providers partially offset by a decrease in grant expense.

Physician expenses were $331.1 million for the six months ended June 30, 2021, an increase of $24.4 million or 8.0%, compared to $306.6 million for the six months ended June 30, 2020.

This increase was driven primarily by higher FFS-patient care revenue and growth in Implemented Providers partially offset by a decrease in grant expense.

Cost of platform

Cost of platform expenses were $27.0 million for the three months ended March 31, 2021, a slight decrease of $0.6 million, or 2.2%, compared to $27.6 million for the three months ended March 31, 2020.

This decrease was driven primarily by a decrease in consulting costs of $0.3 million, and a decrease in travel of $0.2 million.

Cost of platform expenses were $68.7 million for the three months ended June 30, 2021, an increase of $44.4 million, or 182.5%, compared to $24.3 million for the three months ended June 30, 2020.

This increase was primarily driven by the recognition of $36.0 million of stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO and increased investment in salaries and benefits of $1.2 million as we continue to grow.

Cost of platform expenses were $95.7 million for the six months ended June 30, 2021, an increase of $43.8 million, or 84.4% compared to $51.9 million for the six months ended June 30, 2020.

Sales and marketing

Sales and marketing expenses were $3.2 million for the three months ended March 31, 2021, an increase of $0.7 million, or 29.9%, compared to $2.5 million for the three months ended March 31, 2020.

This increase was driven primarily by an increase in salaries and benefits of $0.9 million related to opening a new market in Tennessee.

Sales and marketing expenses were $11.2 million for the three months ended June 30, 2021, an increase of $9.0 million, or 403.5%, compared to $2.2 million for the three months ended June 30, 2020.

This increase was driven primarily by the recognition of $7.7 million of stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO.

Sales and marketing expenses were $14.4 million for the six months ended June 30, 2021, an increase of $9.7 million, or 207.4%, compared to $4.7 million for the six months ended June 30, 2020.

This increase was primarily driven by the recognition of $7.7 million of stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO.

General and administrative

General and administrative expense was $14.0 million for the three months ended March 31, 2021, an increase of $3.0 million, or 27.4%, compared to $11.0 million for the three months ended March 31, 2020.

The increase was primarily driven by an increase in salaries and benefits of $1.4 million and an increase of $1.4 million in consulting services due to preparing to be a public company.

General and administrative expenses was $168.7 million for the three months ended June 30, 2021, an increase of $160.2 million, or 1903.3%, compared to $8.4 million for the six months ended June 30, 2020.

The increase was primarily driven by the recognition of $158.9 million of stock-based compensation expense related to the modification of vesting terms of option in connection with the Company’s IPO and an increase of $0.2 million in consulting services primarily related to the Company’s IPO.

General and administrative expenses were $182.7 million for the six months ended June 30, 2021, an increase of $163.2 million, or 841.1%, compared to $19.4 million for the six months ended June 30, 2020.

This increase was primarily driven by the recognition of $158.9 million of stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO and an increase of $1.6 million in consulting services primarily related to the Company’s IPO.

Depreciation and amortization expense

Depreciation and amortization expense was $0.4 million for the three months ended March 31, 2021, an increase of $0.1 million, or 31.7%, compared to $0.3 million for the three months ended March 31, 2020.

This increase was driven primarily by an increase in the amortization of leasehold improvements related to the build out of our Physician Operated Laboratory.

Depreciation and amortization expenses was $0.4 million for the three months ended June 30, 2021, a decrease of $0.2 million or 25.9%, compared to $0.6 million for the same periods in 2020.

The decrease is primarily related to various immaterial items.

Depreciation and amortization expenses remained relatively consistent for the six months ended June 30, 2021 as compared to the same periods in 2020.

Interest expense

Interest expense was $0.3 million for the three months ended March 31, 2021, a decrease of $0.2 million, or 37.7%, compared to $0.5 million for the three months ended March 31, 2020.

Interest expense was $0.3 million for the three months ended June 30, 2021, a decrease of $0.2 million, or 40.7%, compared to $0.5 million for the same period in 2020.

The decrease was primarily driven by the repayment of a note payable to related parties in 2020.

Provision for income taxes

Provision for income taxes increased $1.3 million for the three months ended March 31, 2021, when compared to the same period in 2020.

The expense for the three months ended March 31, 2020 is primarily related to an increase in the deferred tax liability related to the tax amortization of an indefinite live intangible with the remaining deferred tax balances fully offset with a valuation allowance.

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

Net income (loss) attributable to non-controlling interest

Net loss attributable to non-controlling interest increased $0.3 million for the three months ended March 31, 2021, when compared to the same period in 2020 primarily due to an increase in net income before non-controlling interest in these markets.

Interest expense was $0.6 million for the six months ended June 30, 2021, a decrease of $0.4 million, or 39.2%, compared to $1.0 million for the six months ended June 30, 2020.

The decrease was primarily driven by the repayment of a note payable to related parties in 2020.

(Benefit from) Provision for income taxes

The benefit from income taxes of $20.0 million for the three months ended June 30, 2021 increased $20.5 million when compared to the provision for income taxes of $0.5 million for the same period in 2020.

The expense for the three months ended June 30, 2020 is primarily related to an increase in the deferred tax liability related to the tax amortization of an indefinite live intangible with the remaining net deferred tax asset balances fully offset with a valuation allowance.

The benefit for the three months ended June 30, 2021 is primarily the result of the pre-tax loss offset by the non-deductible stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO.

The benefit from income taxes of $18.0 million for the six months ended June 30, 2021 increased $19.2 million when compared to the provision for income taxes of $1.2 million for the same period in 2020.

The provision for the six months ended June 30, 2020 is primarily related to an increase in the deferred tax liability related to the tax amortization of an indefinite live intangible with the remaining net deferred tax asset balances fully offset with a valuation allowance.

The benefit for the six months ended June 30, 2021 is primarily the result of the pre-tax loss offset by the non-deductible stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO.

Net loss attributable to non-controlling interests

Net loss attributable to non-controlling interests was $1.0 million for the three months ended June 30, 2021, an increase of $0.9 million, compared to $0.1 million for the same period in 2020 and is primarily due to an increase in net loss before non-controlling interest.

Net loss attributable to non-controlling interests was $0.7 million for the six months ended June 30, 2021, an increase of $0.5 million, compared to $0.2 million for the same period in 2020 and is primarily due to an increase in net loss before non-controlling interest.

Liquidity and Capital Resources

General and Note Payable

To date, we have financed our operations principally through sale of our equity, payments received from various payers and through the issuance of a note payable to a third-party financial institution.

As of March 31, 2021, we had cash and cash equivalents of $81.9 million.

We received an additional $212.0 million of net proceeds following the closing of the Company’s IPO and Anthem private placement on May 3, 2021.

As of June 30, 2021, we had cash and cash equivalents of $299.8 million.

We received $211.0 million of net proceeds received from the Company’s IPO and Anthem private placement on May 3, 2021.

Our cash and cash equivalents primarily consist of highly liquid investments in money market funds and cash.

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After the first year from any borrowing, the debt may be repaid without the pre-payment fee.

As of March 31, 2021 and December 31, 2020, total term loans outstanding was $33.9 million and $34.1 million.

As of June 30, 2021 and December 31, 2020, total term loans outstanding was $33.7 million and $34.1 million.

The Company is in compliance with its debt covenants as of June 30, 2021.

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

No balance is outstanding under the revolving loan as of March 31, 2021.

No balance is outstanding under the revolving loan as of June 30, 2021.

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

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(in thousands)

Condensed Consolidated Statements of Cash Flows Data:

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

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

Net cash used in investing activities (199) (379)

Net cash (used in) provided by financing activities (219) 10,000

Net cash provided by financing activities 210,590 9,562

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

Operating Activities

Net cash used in operating activities was $2.5 million for the three months ended March 31, 2021, a decrease of $4.6 million, compared to $7.1 million for the same period in 2020.

Significant changes impacting net cash used in operating activities for the three months ended March 31, 2021 compared to the same period in 2020 were as follows:

• Increase of $9.7 million due to liability owed by medical practices and providers, which was an increase for the three months ended March 31, 2021 of $17.0 million compared to the same period in 2020 of $7.3 million.

This change is primarily driven by the increase in Implemented Providers and additional physician and practice expenses associated with the increase in shared savings revenue.

• Increase of $2.7 million related to accounts receivable, net, which was a decrease for the three months ended March 31, 2021 of $17.6 million compared to the same period in 2020 of $14.9 million, primarily driven by the increase in Implemented Providers and an increase in the receivable related to shared savings revenue.

• Increase of $1.3 million related to deferred tax benefit which was an increase for the three months ended March 31, 2021 of $2.0 million compared to the same period in 2020 of $0.7 million, primarily due to the release of the valuation allowance and the tax provision for Q1 2021.

• Decrease of $4.0 million related to accounts payable and accrued expenses which was an increase of for the three months ended March 31, 2021 of $10.5 million compared to the same period in 2020 of $6.5 million.

This change is primarily driven by IPO related costs

Net cash provided by operating activities was $4.7 million for the six months ended June 30, 2021, a decrease of $2.0 million, compared to $6.7 million for the same period in 2020.

Significant changes impacting net cash provided by operating activities for the six months ended June 30, 2021 compared to the same period in 2020 were as follows:

• Decrease in (loss) income of $(178.4) million from $10.5 million during the six months ended June 30, 2020 to $(167.9) million during the same period in 2021, primarily driven the recognition of $202.7 million of stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO.

• Increase of $202.5 million related to stock-based compensation, which was an increase for the six months ended June 30, 2021 of $202.7 million compared to the same period in 2020 of $0.2 million driven by recognition of stock-based compensation related to the modification of vesting terms of options in connection with the Company’s IPO.

• Increase of $7.1 million in the decrease related to accounts receivable, net, which was a decrease for the six months ended June 30, 2021 of $27.8 million compared to the same period in 2020 of $20.7 million, primarily driven by an increase in accounts receivable, net due to higher sales as compared to the prior year end.

• Decrease of $19.5 million related to deferred tax benefit which was an increase for the six months ended June 30, 2021 of $18.2 million compared to the same period in 2020 of $1.3 million of tax expense, primarily due to the tax benefit generated as a result of the stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO, which the majority is not currently deductible for tax purposes

Investing Activities

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

Net cash used in investing activities remained relatively consistent for the six months ended June 30, 2021 and 2020 and related to purchases of property and equipment in both periods.

Financing Activities

Net cash used in financing activities was $0.2 million for the three months ended March 31, 2021, a decrease of $10.2 million, compared to $10.0 million provided for financing activities for the same period in 2020.

This decrease primarily related to the draw of $10.0 million from the Company's revolver during the first quarter of 2020 in response to COVID-19.

Net cash provided by financing activities was $210.6 million for the six months ended June 30, 2021, an increase of $201.0 million, compared to $9.6 million provided for financing activities for the same period in 2020.

This increase primarily related net proceeds from the Company’s IPO of $211.0 million during six months ended June 30, 2021, partially offset by the draw of $10.0 million from the Company's revolver during the first quarter of 2020 in response to COVID-19.

Contractual Obligations, Commitments and Contingencies

2 unchanged sentences

The initial terms of these leases range from 2 to 7 years and generally provide for periodic rent increases, renewal, and termination operations.

Total rent expense under operating leases was $0.4 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively.

Total rent expense under operating leases was $0.5 million and $0.6 million for the three months ended June 30, 2021 and 2020, respectively, and $0.9 million and $1.2 million for the six months ended June 30, 2021 and 2020, respectively.

Off Balance Sheet Obligations.

We do not have any off-balance sheet arrangements as of March 31, 2021.

We do not have any off-balance sheet arrangements as of June 30, 2021.

Commitments and Contingencies.

3 unchanged sentences

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;

5 unchanged sentences

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 2. Management’s Discussion and Analysis