Privia Health (PRVA) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Financial Statements (Unaudited) This section presents unaudited condensed consolidated financial statements and detailed notes for Q1 2022 and 2021 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Total Assets | $723,183 | $686,373 | | Total Liabilities | $265,284 | $236,192 | | Total Stockholders' Equity | $457,899 | $450,181 | | Cash and cash equivalents | $315,928 | $320,577 | | Accounts receivable | $166,238 | $117,402 | | Provider liability | $172,324 | $140,708 | - Total assets increased by $36.81 million (5.36%) from December 31, 2021, to March 31, 2022, primarily driven by an increase in accounts receivable[13] - Total liabilities increased by $29.09 million (12.32%) over the period, mainly due to a significant rise in provider liability[13] Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per share data) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenue | $313,801 | $213,607 | | Total operating expenses | $325,348 | $205,700 | | Operating (loss) income | $(11,547) | $7,907 | | Net (loss) income attributable to Privia Health Group, Inc. | $(17,510) | $5,398 | | Net (loss) income per share – basic and diluted | $(0.16) | $0.06 | - Revenue increased by 46.9% year-over-year, from $213.6 million in Q1 2021 to $313.8 million in Q1 2022[15] - The company reported an operating loss of $11.5 million in Q1 2022, a significant decline from an operating income of $7.9 million in Q1 2021[15] - Net loss attributable to Privia Health Group, Inc. was $17.5 million in Q1 2022, compared to a net income of $5.4 million in Q1 2021, resulting in a basic and diluted loss per share of $(0.16)[15] Condensed Consolidated Statements of Stockholders' Equity Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :------------------------------------------------ | :------------- | :---------------- | | Common Stock | $1,083 | $1,078 | | Additional Paid-in Capital | $659,577 | $633,902 | | Accumulated Deficit | $(225,618) | $(208,108) | | Total Privia Health Group, Inc. Stockholders' Equity | $435,042 | $426,872 | | Non-controlling Interest | $22,857 | $23,309 | | Total Stockholders' Equity | $457,899 | $450,181 | - Additional paid-in capital increased by $25.675 million, primarily due to stock-based compensation expense of $24.881 million and issuance of common stock upon exercise of stock options and vesting of restricted stock units[18] - Accumulated deficit increased by $17.51 million, reflecting the net loss attributable to Privia Health Group, Inc. for the period[18] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(5,320) | $(2,476) | | Net cash used in investing activities | $(34) | $0 | | Net cash provided by (used in) financing activities | $705 | $(219) | | Net decrease in cash and cash equivalents | $(4,649) | $(2,695) | | Cash and cash equivalents at end of period | $315,928 | $81,938 | - Net cash used in operating activities increased to $5.32 million in Q1 2022 from $2.48 million in Q1 2021, primarily due to changes in accounts receivable and provider liability[21][180][183] - Net cash provided by financing activities turned positive at $0.71 million in Q1 2022, compared to net cash used of $0.22 million in Q1 2021, driven by proceeds from exercised stock options[21][181] Notes to Condensed Consolidated Financial Statements 1. Organization and Summary of Significant Accounting Policies Details company structure, accounting policies, and recent changes including new capitated revenue arrangements - Privia Health Group, Inc. operates in nine markets across the U.S. as of March 31, 2022, forming medical groups and local management companies (MSOs) to provide healthcare and administrative services[25][26][27] - The company consolidates 'Friendly Medical Groups' and their 'friendly PCs' as Variable Interest Entities (VIEs) due to specific contractual relationships, while 'Non-Owned Medical Groups' and 'Affiliated Practices' are not consolidated[33][36][37][38] - As an emerging growth company, Privia Health has elected to delay adopting new or revised accounting standards until they apply to private companies[40] - The company operates as a single operating segment and has deferred approximately $0.8 million in Social Security taxes under the CARES Act, due by the end of 2022[45][47] - Significant accounting policy changes include the impact of new Capitated revenue payer arrangements for Florida and Mid-Atlantic ACOs, covering approximately 23,000 Medicare Advantage beneficiaries effective January 1, 2022[49][52] 2. Revenue Recognition This section disaggregates revenue by source and payer, highlighting the growth of value-based care revenue streams Revenue Disaggregated by Source (in thousands) | Revenue Source | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------ | :-------------------------------- | :-------------------------------- | | FFS-patient care | $204,344 | $169,578 | | FFS-administrative services | $23,006 | $15,411 | | Capitated revenue | $48,330 | $0 | | Shared savings | $27,959 | $17,833 | | Care management fees | $8,804 | $8,570 | | Other revenue | $1,358 | $2,215 | | Total revenue | $313,801 | $213,607 | FFS-Patient Care Revenue by Payer Source (Approximate Percentages) | Payer Source | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------- | :-------------------------------- | :-------------------------------- | | Commercial insurers | 71% | 69% | | Government payers | 14% | 15% | | Patient | 15% | 16% | | Total | 100% | 100% | - Capitated revenue, a new stream in 2022, contributed $48.33 million, reflecting the company's at-risk contracts for Medicare Advantage beneficiaries[58][59] - FFS-patient care remains the largest revenue component, increasing by 20.5% YoY, while VBC revenue (Capitated, Shared Savings, Care Management Fees) significantly grew to 27.1% of total revenue in Q1 2022 from 12.4% in Q1 2021[58][109][110] 3. Goodwill and Intangible Assets, Net This section details the carrying value of goodwill and intangible assets, including amortization expenses - Goodwill carrying value remained stable at approximately $127.9 million as of March 31, 2022, with no impairment indicators identified[62] Intangible Assets, Net (in thousands) | Intangible Asset | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Trade names | $4,600 | $4,600 | | Consumer customer relationships | $2,500 | $2,500 | | PMG customer relationships | $600 | $600 | | Management Service Agreement (Complete MD) | $2,200 | $2,200 | | Physician network | $1,520 | $1,520 | | Payer contracts | $2,750 | $2,750 | | MSO Service Agreement (BPMC) | $50,800 | $50,800 | | Less accumulated amortization | $(6,044) | $(5,232) | | Intangible assets, net | $58,926 | $59,738 | - Amortization expense for intangible assets increased significantly to $0.8 million for Q1 2022 from $0.2 million for Q1 2021, primarily due to recent acquisitions[64] 4. Leases Outlines lease expense components, weighted-average terms, discount rates, and future lease payment obligations Lease Expense Components (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Operating lease cost | $664 | $446 | | Cash paid for operating leases | $706 | $529 | | Weighted-average remaining lease term - operating leases | 5.1 Years | 5.3 Years | | Weighted-average discount rate - operating leases | 3.0% | 3.5% | Aggregate Future Lease Payments for Operating Leases (in thousands) | Period | Amount | | :---------------- | :------- | | Remainder of 2022 | $2,033 | | 2023 | $2,962 | | 2024 | $2,996 | | 2025 | $2,980 | | 2026 | $2,173 | | Thereafter | $1,231 | | Total future lease payments | $14,375 | | Imputed interest | $(1,040) | | Total | $13,335 | 5. Property and Equipment, Net Presents the net carrying value of property and equipment, including furniture, computer equipment, and leasehold improvements Property and Equipment, Net (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Furniture and fixtures | $1,402 | $1,110 | | Computer equipment | $1,592 | $1,864 | | Leasehold improvements | $4,850 | $4,827 | | Less accumulated depreciation and amortization | $(3,615) | $(3,299) | | Property and equipment, net | $4,229 | $4,502 | - Net property and equipment decreased slightly from $4.502 million at December 31, 2021, to $4.229 million at March 31, 2022[66] 6. Accounts Payable and Accrued Expenses This section details the composition of accounts payable and accrued expenses, including employee compensation and bonuses Accounts Payable and Accrued Expenses (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Accounts payable | $8,463 | $2,973 | | Accrued employee compensation and benefits | $7,034 | $7,491 | | Bonuses payable | $3,127 | $12,292 | | Other accrued expenses | $25,619 | $23,229 | | Total accounts payable and accrued expenses | $44,243 | $45,985 | - Total accounts payable and accrued expenses decreased by $1.742 million from December 31, 2021, to March 31, 2022, primarily due to a significant reduction in bonuses payable[67] 7. Provider Liability This section defines provider liability and details the estimation methods for unpaid medical claims under capitation arrangements - Provider liability represents costs payable to physicians, hospitals, and other providers, including medical claims costs for attributed beneficiaries under at-risk capitated revenue arrangements[68] - Estimates for provider liability are developed using actuarial methods, considering utilization trends, membership changes, cost trends, and historical claim patterns[69] Liabilities for Unpaid Medical Claims under At-Risk Capitation Arrangements (in thousands) | Item | Amount | | :-------------------------- | :------- | | Balance at December 31, 2021 | $0 | | Incurred health care costs: Current year | $48,330 | | Claims paid: Current year | $(33,476) | | Balance at March 31, 2022 | $14,854 | 8. Note Payable This section details the company's note payable, credit facilities, and future principal payment obligations Note Payable (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :------------------------ | :------------- | :---------------- | | Note payable | $33,031 | $33,250 | | Less debt issuance costs | $(649) | $(687) | | Less current portion | $(875) | $(875) | | Note payable, net | $31,507 | $31,688 | - The company's Credit Facilities include a Term Loan Facility of $35.0 million (maturing Nov 2024) and a Revolving Loan Facility increased to $65.0 million (maturing Aug 2026)[72][75] - As of March 31, 2022, $33.0 million in principal was outstanding under the Term Loan Facility, with no amounts outstanding under the Revolving Loan Facility[75][76] Annual Aggregate Principal Payments for Note Payable (in thousands) | Year | Amount | | :---------------- | :------- | | Remainder of 2022 | $656 | | 2023 | $875 | | 2024 | $1,313 | | 2025 | $1,750 | | 2026 | $28,437 | | Total | $33,031 | 9. Income Taxes This section presents the provision for income taxes and the effective tax rate, explaining factors influencing the rate Provision for Income Taxes (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Provision for income tax | $6,308 | $2,000 | | Effective tax rate | (53.6)% | 26.2% | - The effective tax rate for Q1 2022 was negative (53.6%) due to the impact of non-deductible stock-based compensation expense on the pre-tax loss[79] - No valuation allowance was recorded against the deferred tax asset, as management determined it is more likely than not that all or some portion will be realized[80] 10. Stockholders' Equity Details changes in stockholders' equity, including stock option and RSU activity, and stock-based compensation expense - Anthem acquired 4,000,000 shares of common stock for $92 million in a private placement concurrent with the IPO on May 3, 2021, holding approximately 3.9% of outstanding common stock[81] - The PH Group Parent Corp. Stock Option Plan was amended in April 2021, accelerating vesting conditions for certain stock options, resulting in $195.1 million in stock-based compensation recognized in Q2 2021[84] - The 2021 Omnibus Incentive Plan permits awards up to 10,278,581 shares and allows for annual increases, with 1,183,871 restricted stock units and 3,683,217 options issued at IPO[85] Stock Option Activity (as of March 31, 2022) | Item | Number of Shares | Weighted Average Exercise Price | | :-------------------------- | :--------------- | :------------------------------ | | Balance at December 31, 2021 | 19,916,202 | $5.90 | | Granted | 28,911 | $25.50 | | Exercised | (431,796) | $2.02 | | Forfeited | (49,728) | $16.64 | | Balance at March 31, 2022 | 19,463,589 | $5.99 | | Exercisable at March 31, 2022 | 10,391,972 | $2.01 | RSU Activity (as of March 31, 2022) | Item | Number of Shares | Grant Date Fair Value | | :-------------------------------- | :--------------- | :-------------------- | | Unvested and outstanding at Dec 31, 2021 | 984,901 | $23.23 | | Granted | 374,959 | $25.13 | | Forfeited | (8,343) | $23.00 | | Unvested and outstanding at Mar 31, 2022 | 1,351,517 | $23.76 | - Total stock-based compensation expense for Q1 2022 was $24.9 million, a significant increase from $0.1 million in Q1 2021, with $77.5 million unrecognized expense remaining[89] 11. Commitments and Contingencies This section confirms no material commitments and contingencies as of the reporting date - There were no material commitments and contingencies as of March 31, 2022[91] 12. Concentrations of Credit Risk This section identifies significant concentrations of cash and payer relationships, assessing associated credit risks - Substantially all cash and cash equivalents were held at two financial institutions as of March 31, 2022, with minimal credit risk believed to exist[92] - Six payers accounted for approximately 74% of medical service payments for Q1 2022 and 69% of accounts receivable as of March 31, 2022, indicating significant payer concentration[93] 13. Net (Loss) Income Per Share This section reconciles net (loss) income to per share amounts, detailing weighted average shares outstanding Net (Loss) Income Per Share Reconciliation (in thousands, except per share amounts) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net (loss) income attributable to common stockholders | $(17,510) | $5,398 | | Weighted average common shares outstanding | 108,059,064 | 95,985,817 | | Earnings per share – basic and diluted | $(0.16) | $0.06 | - Potentially dilutive stock options and RSUs totaling 20,815,106 shares were excluded from diluted loss per share calculation for Q1 2022 as their inclusion would have been antidilutive[94] 14. Segment Financial Information This section confirms the company operates as a single operating segment with all assets and revenue in the U.S. - The company operates and reports as a single operating segment, Privia Health Group, Inc., with all long-lived assets and revenue located/earned in the United States[95][96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, results of operations, key business drivers, revenue streams, and non-GAAP measures for Q1 2022 Overview This section provides an overview of Privia Health's business model, focusing on physician enablement and value-based care - Privia Health is a technology-driven, national physician-enablement company focused on optimizing physician practices, improving patient experiences, and rewarding high-value care[99] - The company addresses challenges in the healthcare industry by facilitating the transition to Value-Based Care (VBC), managing administrative requirements, and engaging patients with modern technology[99] - Privia operates through a unique practice model combining large regional Medical Groups with local autonomy, including Owned, Non-Owned, and Friendly Medical Groups, and offers management services via MSOs[100][101] GAAP Financial Measures This section presents key GAAP financial measures, including revenue, operating income, and net income attributable to the company Key GAAP Financial Measures (in millions) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $313.8 | $213.6 | | Operating (loss) income | $(11.5) | $7.9 | | Net (loss) income attributable to Privia Health Group, Inc. | $(17.5) | $5.4 | Coronavirus Aid, Relief and Economic Stimulus Act ("CARES Act") This section details the company's deferral of Social Security taxes under the CARES Act and the remaining repayment obligation - The company deferred its portion of Social Security taxes in 2020 under the CARES Act, with approximately $0.8 million recorded in accrued expenses as of March 31, 2022, to be repaid by the end of 2022[107] Our Revenue This section disaggregates revenue by source, highlighting the increasing contribution from value-based care arrangements - Revenue is generated from FFS-patient care (65.1% of total revenue in Q1 2022), FFS-administrative services (7.3%), Value-Based Care (VBC) revenue (27.1%), and other services (0.4%)[109][110][111] - VBC revenue significantly increased from 12.4% of total revenue in Q1 2021 to 27.1% in Q1 2022, driven by Capitated revenue, Shared Savings, and Care Management fees[110] - FFS-patient care revenue is expected to grow due to annual rate inflators, enhanced commercial FFS rates, and expansion of the provider base, supported by a 95% provider retention rate[109] Key Factors Affecting Our Performance Identifies key growth drivers: provider and patient expansion, new market entry, and the launch of new ACOs and affiliation models - Growth is driven by adding new providers (27.3% increase YoY to 3,370 in Q1 2022) and new patients (17.6% increase in Attributed Lives YoY to 848,000 in Q1 2022)[112][113][128][129] - Expansion into new markets, such as West Texas (Oct 2021), California (Oct 2021), and Montana (Feb 2022), is a key growth strategy, leveraging an asset-light operating model[114][115][116][117] - The company launched three new Accountable Care Organizations (ACOs) in Maryland, Florida, and Tennessee at the beginning of 2022, expanding its ACO network to seven[121] - Privia Health launched 'Privia Care Partners' on January 1, 2022, a flexible affiliation model for providers seeking VBC solutions without changing EHRs, starting with over 300 providers and 25,000 attributed lives[125] Key Metrics and Non-GAAP Financial Measures Presents key operational metrics and non-GAAP financial measures, including Care Margin, Platform Contribution, and Adjusted EBITDA Key Metrics (as of end of period, in millions/thousands) | Metric | March 31, 2022 | March 31, 2021 | Change (%) | | :---------------------- | :------------- | :------------- | :--------- | | Implemented Providers | 3,370 | 2,648 | 27.3% | | Attributed Lives (in thousands) | 848 | 721 | 17.6% | | Practice Collections ($) | $561.9 | $344.1 | 63.3% | Non-GAAP Financial Measures (in thousands, except percentages) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (%) | | :------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Care Margin ($) | $71,614 | $52,494 | 36.4% | | Platform Contribution ($) | $34,965 | $25,532 | 36.9% | | Platform Contribution Margin (%) | 48.8% | 48.6% | 0.2 pp | | Adjusted EBITDA ($) | $14,801 | $9,947 | 48.8% | | Adjusted EBITDA Margin (%) | 20.7% | 18.9% | 1.8 pp | Reconciliation of Operating (Loss) Income to Care Margin (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Operating (loss) income | $(11,547) | $7,907 | | Depreciation and amortization | $1,118 | $445 | | General and administrative | $36,110 | $13,996 | | Sales and marketing | $4,661 | $3,184 | | Cost of platform | $41,272 | $26,962 | | Care margin | $71,614 | $52,494 | Reconciliation of Operating (Loss) Income to Platform Contribution (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Operating (loss) income | $(11,547) | $7,907 | | Depreciation and amortization | $1,118 | $445 | | General and administrative | $36,110 | $13,996 | | Sales and marketing | $4,661 | $3,184 | | Stock-based compensation (Cost of Platform) | $4,623 | $0 | | Platform contribution | $34,965 | $25,532 | Reconciliation of Net (Loss) Income to Adjusted EBITDA (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net (loss) income | $(17,510) | $5,398 | | Net (loss) income attributable to non-controlling interests | $(577) | $218 | | Provision for income taxes | $6,308 | $2,000 | | Interest expense | $232 | $291 | | Depreciation and amortization | $1,118 | $445 | | Stock-based compensation | $24,881 | $101 | | Other expenses | $349 | $1,494 | | Adjusted EBITDA | $14,801 | $9,947 | Components of Results of Operations Describes revenue streams and operating expense categories that comprise the company's results of operations - FFS-patient care revenue is derived from healthcare services provided, with payments from government and commercial payers, and patients[148] - FFS-administrative services revenue comes from management services agreements (MSAs) with Non-Owned Medical Groups, typically based on a fixed percentage of net collections or cost-plus-margin[149] - VBC revenue is earned through capitated fees, shared savings, and care management fees from government and large payer organizations, reflecting the company's clinically integrated network and ACOs[150][151] - Operating expenses include provider expenses (claims, guaranteed payments), cost of platform (EMR, software, salaries, stock-based compensation), sales and marketing, general and administrative, and depreciation and amortization[152][153][154][155][156] Results of Operations Provides a detailed comparative analysis of consolidated statements of operations for Q1 2022 versus Q1 2021 Consolidated Statements of Operations Data (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Revenue | $313,801 | $213,607 | $100,194 | 46.9% | | Provider expense | $242,187 | $161,113 | $81,074 | 50.3% | | Cost of platform | $41,272 | $26,962 | $14,310 | 53.1% | | Sales and marketing | $4,661 | $3,184 | $1,477 | 46.4% | | General and administrative | $36,110 | $13,996 | $22,114 | 158.0% | | Depreciation and amortization | $1,118 | $445 | $673 | 151.2% | | Total operating expenses | $325,348 | $205,700 | $119,648 | 58.2% | | Operating (loss) income | $(11,547) | $7,907 | $(19,454) | (246.0)% | | Net (loss) income attributable to Privia Health Group, Inc. | $(17,510) | $5,398 | $(22,908) | (424.4)% | - Revenue increased by $100.2 million (46.9%) YoY, primarily driven by $48.3 million in new capitated revenue, $34.7 million in FFS-patient care, and $10.2 million in shared savings[161][162] - Total operating expenses increased by $119.6 million (58.2%) YoY, leading to an operating loss of $11.5 million, compared to an operating income of $7.9 million in the prior year[159] - General and administrative expenses surged by $22.1 million (158.0%) due to $19.4 million in stock-based compensation expense related to IPO awards[167] - Cost of platform increased by $14.3 million (53.1%) due to higher salaries and benefits ($6.6 million), stock-based compensation ($4.6 million), and consulting costs ($3.0 million)[165] Liquidity and Capital Resources Assesses liquidity, including cash, IPO proceeds, and credit facility capacity, and analyzes cash flow changes - As of March 31, 2022, the company had $315.9 million in cash and cash equivalents, with $211.0 million net proceeds from its IPO and Anthem private placement in May 2021[172] - The company believes its cash, IPO proceeds, and Revolving Loan Facility capacity ($65.0 million, with no outstanding amounts) will be adequate to fund short-term and long-term operating and capital needs[173][175] Condensed Consolidated Statements of Cash Flows Data (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(5,320) | $(2,476) | | Net cash used in investing activities | $(34) | $0 | | Net cash provided by (used in) financing activities | $705 | $(219) | | Net decrease in cash and cash equivalents | $(4,649) | $(2,695) | - Net cash used in operating activities increased by $2.8 million YoY, primarily due to a $31.2 million increase in accounts receivable and a $14.6 million increase in provider liability[180][183] - Net cash provided by financing activities increased by $0.9 million YoY, mainly from $0.8 million in proceeds from exercised stock options[181] Critical Accounting Policies and Estimates Discusses critical accounting policies and estimates, particularly those related to capitated revenue and provider expense recognition - No material changes to critical accounting policies were reported, other than those impacted by the Florida and Mid-Atlantic ACOs entering into Capitated revenue payer arrangements effective January 1, 2022[185] - Capitated revenue is recognized monthly based on fixed fees for providing healthcare services to Medicare Advantage beneficiaries, with adjustments for CMS's risk adjustment methodology and quality metrics[187][188] - Provider expense includes medical claims costs for attributed beneficiaries under at-risk capitation arrangements, recognized in the period services are provided[190] Item 3. Quantitative and Qualitative Disclosures About Market Risk Discusses the company's exposure to market risks, specifically interest rate and inflation risks, and their potential financial impact - The company's primary market risk is interest rate risk, as its Credit Agreement bears interest at a floating rate (LIBOR plus 2.0% or ABR plus 1.0%)[192] - A 100 basis point increase or decrease in market interest rates would result in a $0.3 million change to interest expense, based on $33.0 million outstanding debt as of March 31, 2022[192] - Inflation has not had a material effect on operating results for the periods presented, though future impacts cannot be assured[193] Item 4. Controls and Procedures Confirms effectiveness of disclosure controls and procedures and reports no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2022[194] - There were no changes to the company's internal control over financial reporting during Q1 2022 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[195] PART II - OTHER INFORMATION Item 1. Legal Proceedings Addresses the company's involvement in ordinary course legal proceedings, anticipating no material adverse financial effect - The company is involved in ordinary course legal proceedings, including medical malpractice and consumer claims[196] - The final outcome of current legal matters is not believed to have a material adverse effect on the business, financial condition, or results of operations[196] Item 1A. Risk Factors Refers to risk factors from the Annual Report on Form 10-K, noting no material changes for the current period - There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K[197] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Confirms no material changes to the planned use of proceeds from the company's Initial Public Offering (IPO) - No material change in the planned use of proceeds from the IPO has occurred since the final prospectus filing and the Annual Report on Form 10-K[198] Item 3. Defaults Upon Senior Securities States that no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred[199] Item 4. Mine Safety Disclosures Indicates that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[200] Item 5. Other Information States that no other information is to be reported for the period - No other information to report[201] Item 6. Exhibits Lists exhibits filed as part of the Form 10-Q, including certifications and XBRL documents - Exhibits include certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2) and various XBRL taxonomy documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[202] Signatures Contains official signatures, certifying the report's submission - The report was signed on May 12, 2022, by David Mountcastle, Executive Vice President, Chief Financial Officer, and Authorized Officer of Privia Health Group, Inc[207]