Privia Health Inflates Key Profitability Metric by $2.2 Million, Or 14.1%
Healthcare firm says impact of methodology change is de minimis.
November 11, 2022
Privia Health Group (PRVA), a provider of physician and medical group optimization solutions, revealed it’s adding an additional item to the list of expenses it excludes from its preferred profitability calculation. The company now excludes employer taxes on equity vesting/exercise from its Adjusted EBITDA calculation:

“Management believes that non-GAAP measures adjusted for employer payroll taxes on employee stock transactions provide investors with a basis to measure our core performance against the performance of other companies without the variability created by employer payroll taxes on employee stock transactions as a result of the stock price at the time of employee exercise.”

Under Privia’s logic, the company should also exclude payroll tax expense on employee cash compensation.

In prior periods, Privia characterizes the tax associated with equity awards as de minimis.

We disagree.

The tax associated with equity awards now added back is a significant component of Privia’s Adjusted EBITDA. In fact, the change in methodology appears to have been made in the latest quarter as a result of a substantial increase in Privia’s equity award tax expense.

Employer taxes on equity vesting/exercises in the latest quarter was $2.2 million, or 14.1% of Adjusted EBITDA. In the nine months ended September 30, 2022, the tax totaled $2.8 million, or 6% of Adjusted EBITDA.

Neither portion, in our view, is de minimis.
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