P3 Health Partners Inc. (NASDAQ:PIII) Q4 2024 Earnings Conference Call March 27, 2025 4:30 PM ET Company Participants Ryan Halsted - IR Aric Coffman - CEO Leif Pedersen - CFO Amir Bacchus - Chief Medical Officer Conference Call Participants Josh Raskin - Nephron Research David Larsen - BTIG Ryan Langston - TD Cowen Jack Senft - William Blair Operator Good day and welcome to the P3 Health Partners’ Fourth Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instruc ...

Core Viewpoint - P3 Health Partners Inc. reported a quarterly loss of $0.32 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.17, indicating significant underperformance in earnings expectations [1][2]. Financial Performance - The company posted revenues of $370.69 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 3.92%, but showing an increase from $346.86 million in the same quarter last year [2]. - Over the last four quarters, P3 Health Partners has surpassed consensus EPS estimates only once [2]. Stock Performance - P3 Health Partners shares have declined approximately 20.8% since the beginning of the year, contrasting with the S&P 500's decline of 2.9% [3]. - The stock's immediate price movement will largely depend on management's commentary during the earnings call [3]. Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.09 on revenues of $379.5 million, and for the current fiscal year, it is -$0.37 on revenues of $1.42 billion [7]. - The estimate revisions trend for P3 Health Partners is currently favorable, resulting in a Zacks Rank 2 (Buy) for the stock, suggesting it is expected to outperform the market in the near future [6]. Industry Context - The Medical Info Systems industry, to which P3 Health Partners belongs, is currently ranked in the top 17% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [8].

P3 Health Partners (PIII) Q4 2024 Earnings Call March 27, 2025 04:30 PM ET Company Participants Ryan Halsted - Managing DirectorAric Coffman - CEOLeif Pedersen - Chief Financial OfficerAmir Bacchus - Co-Founder and Chief Medical OfficerAaron Wukmir - Healthcare Equity Research AssociateJoshua Raskin - Partner - Managed Care & ProvidersDavid Larsen - Managing Director Conference Call Participants Ryan Langston - Director & Senior Analyst - Healthcare ResearchJack Sampson - Analyst Operator Good day and welco ...

Revenue Performance - Total revenue for Q4 2024 was $370.7 million, a 7% increase from $346.9 million in Q4 2023[5] - Full-year 2024 total revenue reached $1.50 billion, an 18% increase compared to $1.27 billion in 2023[5] - Total operating revenue for the year ended December 31, 2024, was $1,500,455,000, an increase of 18.4% from $1,266,375,000 in 2023[20] - Capitated revenue for Q4 2024 was $367,456,000, up 7.2% from $342,836,000 in Q4 2023[20] - Capitated revenue for the year ended December 31, 2024, reached $1.484 billion, up from $1.252 billion in 2023, reflecting a growth of 18.5%[28] Membership and Guidance - At-risk membership increased by approximately 14% to 123,800 from 108,900 in the prior year[5] - The company affirmed its 2025 guidance with total revenues projected between $1.35 billion and $1.50 billion[7] - The expected at-risk members for 2025 are between 109,000 and 119,000[7] Losses and Expenses - Net loss for Q4 2024 was $129.1 million, compared to a net loss of $69.1 million in Q4 2023[5] - The net loss for the year ended December 31, 2024, was $310,378,000, compared to a net loss of $186,426,000 in 2023, representing a 66.4% increase in losses[22] - Adjusted EBITDA loss for Q4 2024 was $67.6 million, compared to a loss of $44.3 million in Q4 2023[5] - Adjusted EBITDA loss for the year ended December 31, 2024, was $167.199 million, compared to a loss of $85.504 million in 2023, showing an increase of 95.4%[25] - Total operating expense for Q4 2024 was $509.189 million, compared to $411.121 million in Q4 2023, an increase of 23.9%[32] - Medical expenses for the year ended December 31, 2024, were $1,559,372,000, an increase of 26.3% from $1,234,740,000 in 2023[20] - Medical claims expense for the year ended December 31, 2024, totaled $1.398 billion, up from $1.117 billion in 2023, representing a rise of 25.1%[28] Profitability Metrics - Full-year 2024 gross profit was a loss of $58.9 million, compared to a profit of $31.6 million in the prior year[5] - Medical margin for full-year 2024 was $85.5 million, a 37% decrease from $135.1 million in the prior year[5] - Medical margin for Q4 2024 was $7.278 million, down from $9.075 million in Q4 2023, indicating a decrease of 20%[28] - Medical margin PMPM for the year ended December 31, 2024, was $75, down from $108 in 2023, a decrease of 30.6%[28] Assets and Liabilities - Total current assets increased to $184,140,000 in 2024 from $166,017,000 in 2023, reflecting an increase of 10.9%[18] - Total liabilities rose significantly to $633,891,000 in 2024 from $427,305,000 in 2023, marking a 48.3% increase[18] - Cash and restricted cash at the end of 2024 totaled $44,102,000, up from $40,934,000 at the end of 2023, indicating a 5.3% increase[23] Reserves and Interest Expenses - The company reported a premium deficiency reserve of $67,368,000 in 2024, compared to $13,670,000 in 2023, reflecting a significant increase[20] - Premium deficiency reserve for Q4 2024 was $37.927 million, compared to a reserve of $(3.344) million in Q4 2023, indicating a significant change[25] - The company incurred interest expense of $22,173,000 for the year ended December 31, 2024, compared to $15,985,000 in 2023, representing a 38.5% increase[22] - Interest expense, net for the year ended December 31, 2024, was $22.173 million, compared to $15.985 million in 2023, reflecting a rise of 38.5%[25] Shareholder Metrics - The weighted average common shares outstanding for the year ended December 31, 2024, were 145,175,000, compared to 94,889,000 in 2023, an increase of 53%[20]

Core Viewpoint - P3 Health Partners Inc. (PIII) has experienced a decline of 7.6% over the past week, but the formation of a hammer chart pattern suggests potential support and a possible trend reversal in the future [1][2]. Technical Analysis - The hammer chart pattern indicates a potential bottom, suggesting that selling pressure may be subsiding [2][4]. - A hammer pattern forms when there is a small candle body with a long lower wick, indicating that despite a downtrend, buying interest has emerged [3][4]. - This pattern is significant when it occurs at the bottom of a downtrend, signaling that bears may have lost control [4]. Fundamental Analysis - There has been a recent upward trend in earnings estimate revisions for PIII, which is a bullish indicator [6]. - The consensus EPS estimate for the current year has increased by 11.9% over the last 30 days, reflecting analysts' agreement on the company's improved earnings potential [7]. - PIII holds a Zacks Rank of 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, indicating strong potential for outperformance [8].

Core Viewpoint - Kuehn Law, PLLC is investigating potential breaches of fiduciary duties by officers and directors of P3 Health Partners Inc. related to self-dealing, which may entitle shareholders to damages and corporate governance reforms [1]. Group 1 - The investigation focuses on whether certain officers and directors of P3 Health Partners Inc. have engaged in self-dealing that could harm shareholder interests [1]. - Shareholders are encouraged to contact Kuehn Law for a free consultation regarding their rights and potential claims [2]. - The firm emphasizes the importance of shareholder participation in maintaining the integrity and fairness of financial markets [3].

Financial Data and Key Metrics Changes - The third quarter top line performance included capitated revenue of $357.7 million and total revenue of $362.1 million, representing a 26% year-over-year growth driven by a 22% increase in member base to over 128,900 members and a 6% rise in funding year-over-year [35][36] - The medical margin was $540,000 or $1 on a PMPM basis, while adjusted EBITDA loss for the quarter was $71 million or $184 on a PMPM basis, impacted by $5 million to $10 million in elevated medical claims costs and $35 million in retroactive adjustments [36][39] - Cash flow from operations for the quarter was approximately negative $20 million, with the company ending Q3 with about $63 million in cash [41][56] Business Line Data and Key Metrics Changes - The company experienced elevated medical utilization primarily in Part B medical claims, with negative prior period development contributing about $10 million additional expense during the quarter [39][46] - High-cost claims greater than $50,000 rose 23% year-over-year, with Part B oncological medications leading the increase [48] Market Data and Key Metrics Changes - The Medicare Advantage repricing cycle and benefit design changes are expected to serve as catalysts for profitability in 2025, with anticipated recalibration of CMS benchmarks reflecting ongoing elevated utilization [16][17] - The company noted that many health plan partners are targeting margin recapture, expecting plan benefits to be less robust in 2025, which should lead to decreased utilization [17][30] Company Strategy and Development Direction - The company is executing on a plan involving over $130 million in initiatives aimed at positively impacting EBITDA and cash flow, with benefits expected to begin in Q4 and more prominently in 2025 [9][14] - Key areas of focus include enhancing payer and provider networks, improving operational discipline, increasing operating efficiency, and advancing data and analytics capabilities [15][43] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in 2024 but expressed optimism about the future, emphasizing the importance of value-based care in controlling medical costs and preserving margins [53][30] - The leadership team is focused on setting reliable targets that reflect the current market landscape while providing opportunities for outperformance [42] Other Important Information - The company has trimmed 63 provider tax ID numbers and reduced its payer network by 20% to enhance profitability and simplify operations [23][22] - A partnership with Innovaccer is on track for full implementation in 2025, aimed at improving data visibility and supporting decision-making [26][27] Q&A Session Summary Question: How does the company see its capital availability to execute initiatives? - The company ended the quarter with $63 million in cash, supporting core operations and strategic growth initiatives, while actively monitoring cash burn and focusing on optimizing working capital [57] Question: Is the company pursuing additional capital raise in the fourth quarter? - Currently, the company is not pursuing an immediate capital raise and is evaluating its overall cash position [60] Question: Will 2025 revenues be down due to risk exposure reduction? - There will be a slight reduction in membership associated with revenue reduction due to payer and provider rationalization, but increases from operational improvements are expected to offset this [62][64] Question: Can the company provide specifics on chronic disease improvement opportunities? - The company is focusing on operational efficiency by providing more support to high-value providers and enhancing coding and documentation practices [66][70] Question: Why was there a spike in the medical cost ratio (MCR) this quarter? - The spike was attributed to delayed information from plans, particularly in non-delegated plans, leading to unexpected cost escalations [72][74] Question: Will the MCR remain elevated in Q4 and will there be a sudden step down in Q1 2025? - The company expects immediate effects from benefit design changes starting in January, but specifics on the magnitude of impact will be clearer after open enrollment [75][76] Question: Can the company elaborate on enhancing payer and provider contracts? - The company is looking to change its position in Part D across most contracts and has exited subscale contracts that were not strong performers [78][81] Question: Is the company considering exiting certain markets entirely? - The company plans to exit the Florida market due to its small size and lack of investment potential [83]

Core Insights - P3 Health Partners Inc. reported a quarterly loss of $0.31 per share, significantly worse than the Zacks Consensus Estimate of a loss of $0.03, marking an earnings surprise of -933.33% [1] - The company's revenues for the quarter ended September 2024 were $362.12 million, missing the Zacks Consensus Estimate by 1.76%, but showing an increase from $288.35 million year-over-year [2] - P3 Health Partners shares have declined approximately 71.9% year-to-date, contrasting with the S&P 500's gain of 25.8% [3] Financial Performance - Over the last four quarters, P3 Health Partners has surpassed consensus EPS estimates only once [2] - The current consensus EPS estimate for the upcoming quarter is $0.02 on revenues of $391.1 million, and for the current fiscal year, it is -$0.23 on revenues of $1.54 billion [7] Market Outlook - The earnings outlook for P3 Health Partners is mixed, with the stock currently holding a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] - The Medical Info Systems industry, to which P3 Health Partners belongs, is currently ranked in the top 19% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

Financial Performance - Total operating revenue for Q3 2024 was $362.1 million, a 25.6% increase from $288.4 million in Q3 2023[32] - Capitated revenue reached $357.7 million in Q3 2024, up 25.4% from $285.2 million in the same quarter last year[32] - Operating loss for Q3 2024 was $107.0 million, compared to a loss of $33.8 million in Q3 2023, reflecting a significant increase in operating expenses[32] - Total operating expenses for Q3 2024 were $469.1 million, a 45.6% increase from $322.2 million in Q3 2023[32] - Net loss attributable to controlling interest for Q3 2024 was $46.5 million, compared to a loss of $13.3 million in Q3 2023[32] - For the nine months ended September 30, 2024, the company reported a net loss of $181.2 million, compared to a net loss of $117.3 million for the same period in 2023, reflecting an increase in losses of approximately 54.5%[43] - The company reported a comprehensive loss that was consistent with its net loss, indicating no significant changes in equity from transactions other than those with stockholders[50] - The company reported net losses of $102.9 million and $181.2 million for the three and nine months ended September 30, 2024, respectively[170] Cash and Liquidity - Cash and cash equivalents increased to $62.9 million as of September 30, 2024, up from $36.3 million at the end of 2023[29] - The company had $63.0 million in unrestricted cash and cash equivalents as of September 30, 2024, compared to $36.3 million at the end of 2023, showing improved liquidity[44] - As of September 30, 2024, the company had cash and restricted cash of $68.1 million, including a $15 million refundable good faith deposit for the sale of its Florida operations[169] - Cash at the end of the period was $68.1 million, an increase from $57.4 million at the end of the same period in 2023[199] Assets and Liabilities - Total current assets rose to $215.1 million as of September 30, 2024, compared to $166.0 million at the end of 2023[29] - Total liabilities increased to $569.4 million as of September 30, 2024, up from $427.3 million at the end of 2023[30] - The company reported a premium deficiency reserve of $29.4 million as of September 30, 2024, compared to $13.7 million at the end of 2023[30] - Long-term debt as of September 30, 2024, was $134.5 million, an increase from $109.1 million as of December 31, 2023[72] Revenue Composition - Capitated revenue accounted for 98.8% of total revenue in Q3 2024, slightly down from 98.9% in Q3 2023, indicating stable revenue composition[54] - Capitated revenue for the nine months ended September 30, 2024, was $1,116.1 million, an increase of $206.7 million, or 23%, compared to $909.5 million for the same period in 2023[163] - Total revenue for the nine months ended September 30, 2024, was $1,129.8 million, a 23% increase from $919.5 million in the prior year[163] Membership and Growth - At-risk membership increased to 128,900 members as of September 30, 2024, compared to 105,600 members in the same period of 2023, reflecting a growth of 22%[136] - The number of affiliate primary care physicians rose to 3,100 as of September 30, 2024, up from 2,700 in the same period of 2023, marking an increase of 14.8%[137] - The company experiences the largest portion of at-risk member growth during the first quarter due to new contracts with payors starting on January 1[118] Medical Expenses - Medical expenses for the three months ended September 30, 2024, were $401.9 million, up $122.7 million, or 44%, from $279.2 million in the same period last year[159] - Medical expenses rose by $282.1 million, or 33%, to $1,149.1 million for the nine months ended September 30, 2024, compared to $867.1 million for the same period in 2023[164] - Medical claims expenses for Q3 2024 totaled $357,166 thousand, compared to $248,918 thousand in Q3 2023, an increase of 43.5%[130] Internal Controls and Compliance - Material weaknesses in internal control over financial reporting were identified, impacting the reliability of financial statements[208] - The company has identified material weaknesses in internal control over financial reporting, including inadequate policies and insufficient qualified resources[207] - The company is actively engaged in a comprehensive remediation plan, having completed the design phase and enhanced existing controls[209] - There were no changes in internal control over financial reporting during the quarter ended September 30, 2024, that materially affected the internal control[212] Legal and Regulatory Matters - A Confidential Settlement and Mutual Release Agreement was executed on August 22, 2024, resolving legal disputes related to business combinations[217] - The company maintains general and professional liability insurance to mitigate risks associated with legal proceedings[214] - The company believes that the disposition of ongoing legal matters will not have a material adverse effect on its consolidated financial position[214]

Financial Performance - Total revenue for Q3 2024 was $362.1 million, a 26% increase from $288.4 million in Q3 2023[3] - Capitated revenue reached $357.7 million, up 25% compared to $285.2 million in the same quarter last year[3] - Gross profit was a loss of $39.8 million, compared to a profit of $9.1 million in the prior year[3] - Net loss for the quarter was $102.9 million, worsening from a net loss of $37.3 million in Q3 2023[3] - Adjusted EBITDA loss was $71.0 million, compared to a loss of $22.3 million in the prior year[3] - Medical margin was $0.5 million, significantly down from $36.2 million in the prior year[3] - Total operating revenue for the three months ended September 30, 2024, was $362,124, a 25.6% increase from $288,351 in the same period of 2023[15] - Medical expenses for the three months ended September 30, 2024, were $401,920, up 43.8% from $279,220 in the prior year[15] - The net loss attributable to controlling interest for the three months ended September 30, 2024, was $46,512, compared to a net loss of $13,296 in the same period of 2023[15] - Adjusted EBITDA loss for the three months ended September 30, 2024, was $(71,000), compared to $(22,332) in the same period of 2023[17] - Capitated revenue for Q3 2024 reached $357,706 thousand, up from $285,153 thousand in Q3 2023, representing a 25.4% increase[18] - Medical claims expense for Q3 2024 was $357,166 thousand, compared to $248,918 thousand in Q3 2023, reflecting a 43.4% increase[18] - Medical margin for Q3 2024 decreased to $540 thousand from $36,235 thousand in Q3 2023, indicating a significant decline[18] - Total operating expense for Q3 2024 was $469,114 thousand, compared to $322,171 thousand in Q3 2023, marking a 45.6% increase[20] - Nine months ended September 30, 2024, capitated revenue totaled $1,116,146 thousand, compared to $909,473 thousand for the same period in 2023, a 22.8% increase[18] - Nine months ended September 30, 2024, medical margin was $78,181 thousand, down from $125,976 thousand in the same period of 2023[18] Cash and Liabilities - Cash and cash equivalents increased to $62.96 million as of September 30, 2024, up from $36.32 million at the end of 2023[12] - Total current liabilities increased to $405,318 as of September 30, 2024, from $299,372 in the previous year[13] - Long-term debt, net, rose to $133,228 as of September 30, 2024, compared to $108,319 in the prior year[13] - Cash and restricted cash at the end of the period was $68,098, an increase from $57,440 at the end of September 2023[16] - The company reported a net cash used in operating activities of $(52,890) for the nine months ended September 30, 2024, compared to $(60,150) in the prior year[16] Operational Insights - The company has identified over $130 million in potential improvement opportunities for future growth[2] - P3 Health Partners is withdrawing its previous guidance for fiscal year 2024 due to lower-than-expected risk adjustments and elevated medical cost pressures[3] - The company operates with a network of over 3,100 affiliated primary care providers across five states[5] - The weighted average common shares outstanding for the three months ended September 30, 2024, was 161,890, up from 114,198 in the same period of 2023[14] - Adjusted operating expense for Q3 2024 was $31,552 thousand, slightly up from $31,461 thousand in Q3 2023[20] - Other medical expense for Q3 2024 was $44,754 thousand, up from $30,302 thousand in Q3 2023[19] - Medical margin PMPM (per member per month) for Q3 2024 was $1, down from $115 in Q3 2023[18] - Gross profit (loss) for Q3 2024 was $(39,796) thousand, compared to $9,131 thousand in Q3 2023, indicating a negative shift[19]