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]

Group 1 - The stock price of P3 Health Partners Inc. (PIII) has experienced a bearish trend, losing 14.2% over the past two weeks, but a hammer chart pattern suggests a potential trend reversal as buying interest may be increasing [1] - The hammer chart pattern indicates a possible bottoming out of the stock price, with reduced selling pressure, signaling that bulls may be gaining control [2] - There has been a significant upward trend in earnings estimate revisions for PIII, with a 17.9% increase in the consensus EPS estimate over the last 30 days, indicating improved earnings expectations from analysts [3] Group 2 - PIII holds a Zacks Rank of 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, which typically outperform the market [3] - The Zacks Rank serves as a timing indicator, suggesting that the company's prospects are beginning to improve, further supporting the case for a potential trend reversal [3]

Momentum investors typically don't time the market or "buy low and sell high." In other words, they avoid betting on cheap stocks and waiting long for them to recover. Instead, they believe that "buying high and selling higher" is the way to make far more money in lesser time. Who doesn't like betting on fast-moving trending stocks? But determining the right entry point isn't easy. Often, these stocks lose momentum once their valuation moves ahead of their future growth potential. In such a situation, inves ...

Company Performance - P3 Health Partners Inc. reported a quarterly loss of $0.15 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.08, and compared to a loss of $0.09 per share a year ago, indicating an earnings surprise of -87.50% [1] - The company posted revenues of $379.16 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 4.02%, and showing an increase from year-ago revenues of $329.09 million [2] - Over the last four quarters, P3 Health Partners has surpassed consensus EPS estimates two times and topped consensus revenue estimates four times [2] Stock Performance - P3 Health Partners shares have declined approximately 57% since the beginning of the year, contrasting with the S&P 500's gain of 9.9% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.04 on revenues of $368.5 million, and for the current fiscal year, it is -$0.28 on revenues of $1.53 billion [7] Industry Outlook - The Medical Info Systems industry, to which P3 Health Partners belongs, is currently ranked in the bottom 42% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - The outlook for the industry can significantly impact the performance of P3 Health Partners' stock, as research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

P3 Health Partners (NASDAQ:PIII) stock is falling on Tuesday after the company sold shares and warrants to institutional investors in a recent offering. P3 Health Partners reveals in a filing with the Securities and Exchange Commission (SEC) that it issued roughly 67.4 million shares of PIII stock to institutional investors. These were sold at a price of $0.6270 each. Investors will note that each of these shares also comes with one warrant to purchase another share of PIII stock. These warrants have an exe ...

Financial Data and Key Metrics Changes - The company reported a revenue growth of approximately 29% year-over-year, with total revenue reaching $388 million for Q1 2024 [69][77] - Adjusted EBITDA for the quarter was a loss of $19.8 million, which is roughly flat compared to a loss of $19.1 million in Q1 2023 [63][74] - The medical margin was reported at $36.6 million, or $96 on a per member per month (PMPM) basis [77] Business Line Data and Key Metrics Changes - Operating expenses decreased to $26.2 million, down 26% year-over-year from $35.6 million in Q1 2023 [72][54] - Medical expenses improved to $918 PMPM, reflecting a 12% sequential decrease from $1,042 [90] Market Data and Key Metrics Changes - Medicare lives grew to approximately 126,800, representing a 23% year-over-year increase, exceeding the low end of the guidance range [70] - The percentage of persistent lives increased to approximately 90%, up from 86% the previous year [71] Company Strategy and Development Direction - The company is focused on improving utilization management to reduce unnecessary spending while enhancing patient experience [2] - A strategic partnership with Innovaccer was announced to leverage advanced AI capabilities for predictive modeling and care management [75][162] - The company aims to expand its footprint and capitalize on growth opportunities in the Medicare market [98] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the full-year guidance of positive $20 million to positive $40 million in adjusted EBITDA despite the current quarter's performance [68][92] - The company noted that it is over-conservative in its reserve estimates, suggesting potential for favorable adjustments in the future [73][159] Other Important Information - The company ended the quarter with approximately $32 million in cash and received an additional $15 million in regular cash capitated premiums [29] - The medical expense in the quarter was approximately 12% lower sequentially, indicating a normalizing utilization trend [72] Q&A Session Summary Question: What gives confidence to reaffirm the full year guidance despite EBITDA coming in below expectations? - Management highlighted the potential for significant reserve release and improvements in claims experience as reasons for confidence in the guidance [22][53] Question: Can you elaborate on the $8 million rebate recognition issue? - Management clarified that the rebate recognition is a timing issue, with expectations for recognition later in the year [39][121] Question: How does the company plan to manage growth in new markets? - Management indicated a cautious approach to growth, focusing on solid underwriting and deepening existing relationships before expanding into new markets [142][116]

[Cautionary Statement Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This statement warns readers about forward-looking information, highlighting risks and uncertainties that could cause actual results to differ [PART I—FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the period [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for P3 Health Partners Inc. and its subsidiaries, including balance sheets, statements of operations, statements of stockholders' equity and mezzanine equity, statements of cash flows, and accompanying notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%28Unaudited%29) This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------- | :------------- | :---------------- | | Total Assets | $855,925 | $860,967 | | Total Liabilities | $470,493 | $427,305 | | Total Stockholders' Equity | $146,596 | $142,130 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20%28Unaudited%29) This section details the company's revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations Highlights (in thousands) | Item | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Total Operating Revenue | $388,488 | $302,077 | | Operating Loss | $(43,831) | $(48,817) | | Net Loss | $(49,606) | $(52,448) | | Net Loss Attributable to Controlling Interest | $(18,700) | $(9,199) | [Condensed Consolidated Statements of Stockholders' Equity and Mezzanine Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20and%20Mezzanine%20Equity%20%28Unaudited%29) This section outlines changes in the company's equity and mezzanine equity over specific periods Stockholders' Equity and Mezzanine Equity Highlights (in thousands) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------- | :------------- | :---------------- | | Redeemable Non-controlling Interest | $238,836 | $291,532 | | Total Stockholders' Equity | $146,596 | $142,130 | | Accumulated Deficit | $(386,044) | $(367,344) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) This section summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Item | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net Cash Used in Operating Activities | $(20,030) | $(23,722) | | Net Cash Used in Investing Activities | $0 | $(464) | | Net Cash Provided by Financing Activities | $11,401 | $14,102 | | Cash and Restricted Cash, End of Period | $32,305 | $8,373 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1: Organization](index=12&type=section&id=Note%201:%20Organization) P3 Health Partners Inc. is a patient-centered, physician-led population health management company, operating as the successor to P3 Health Group Holdings, LLC - P3 Health Partners Inc. is a patient-centered and physician-led population health management company[33](index=33&type=chunk) - The company provides at-risk shared savings model services to insurance plans offering medical coverage to Medicare beneficiaries under Medicare Advantage programs[34](index=34&type=chunk)[35](index=35&type=chunk) - P3 also provides primary healthcare services through employed physician clinic locations, reimbursed via FFS contracts and capitated arrangements[37](index=37&type=chunk) [Note 2: Going Concern and Liquidity](index=12&type=section&id=Note%202:%20Going%20Concern%20and%20Liquidity) The Company has incurred significant net losses and negative cash flows since inception, raising substantial doubt about its ability to continue as a going concern within one year - The Company experienced net losses of **$49.6 million** (Q1 2024) and **$52.4 million** (Q1 2023)[38](index=38&type=chunk) - Unrestricted cash and cash equivalents were **$27.3 million** as of March 31, 2024, down from **$36.3 million** at December 31, 2023[39](index=39&type=chunk) - Substantial doubt exists about the Company's ability to continue as a going concern within one year due to ongoing losses and negative cash flows[39](index=39&type=chunk) [Note 3: Significant Accounting Policies](index=12&type=section&id=Note%203:%20Significant%20Accounting%20Policies) This note outlines the basis of presentation, principles of consolidation, comprehensive loss, use of estimates, and revenue recognition policies - The Company consolidates P3 LLC as its primary beneficiary and also consolidates Network VIEs (physician practices)[45](index=45&type=chunk) - Capitated revenue increased by **$7.7 million** for the three months ended March 31, 2024, due to the release of a risk adjustment revenue constraint for 2023 services[49](index=49&type=chunk) Revenue Type Breakdown (in thousands) | Revenue Type | Three Months Ended March 31, 2024 (in thousands) | % of Total (2024) | Three Months Ended March 31, 2023 (in thousands) | % of Total (2023) | | :-------------------------- | :-------------------------------- | :---------------- | :-------------------------------- | :---------------- | | Capitated revenue | $384,134 | 98.9 % | $298,704 | 98.9 % | | Other patient service revenue | $4,354 | 1.1 % | $3,373 | 1.1 % | | Total revenue | $388,488 | 100.0 % | $302,077 | 100.0 % | [Note 4: Recent Accounting Pronouncements](index=14&type=section&id=Note%204:%20Recent%20Accounting%20Pronouncements) The Company adopted ASU 2024-02 and ASU 2020-06 effective January 1, 2024, with no material impact on financial statements - ASU 2024-02 (Codification Improvements) and ASU 2020-06 (Convertible Instruments) were adopted effective January 1, 2024, with no material impact on the Company's consolidated financial statements[51](index=51&type=chunk)[52](index=52&type=chunk) - The Company is evaluating ASU 2023-09 (Income Tax Disclosures), ASU 2023-07 (Segment Reporting), and ASU 2023-06 (Disclosure Improvements), which are not yet adopted[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) [Note 5: Fair Value Measurements and Hierarchy](index=15&type=section&id=Note%205:%20Fair%20Value%20Measurements%20and%20Hierarchy) This note details the fair value measurements of financial liabilities, specifically warrant liabilities, using a three-level hierarchy Warrant Liability Fair Value (in thousands) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------- | :------------- | :---------------- | | Warrant liability (Level 3) | $24 | $29 | Key Level 3 Inputs for Warrant Valuation | Input | March 31, 2024 | December 31, 2023 | | :------------------ | :------------- | :---------------- | | Volatility | 88 % | 75 % | | Risk-free interest rate | 4.50 % | 4.01 % | | Exercise price | $11.50 | $11.50 | | Expected term | **2.7 Years** | **2.9 Years** | - The Company recorded gains on changes in the fair value of public warrants of **$0.2 million** (Q1 2024) and **$0.6 million** (Q1 2023)[58](index=58&type=chunk) [Note 6: Property and Equipment](index=17&type=section&id=Note%206:%20Property%20and%20Equipment) The net property and equipment decreased to **$8.1 million** as of March 31, 2024, from **$8.7 million** at December 31, 2023 Property and Equipment, Net (in thousands) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------- | :------------- | :---------------- | | Property and equipment, net | $8,121 | $8,686 | - Total depreciation of property and equipment was **$0.5 million** for the three months ended March 31, 2024, compared to **$0.6 million** for the same period in 2023[60](index=60&type=chunk) [Note 7: Intangible Assets](index=18&type=section&id=Note%207:%20Intangible%20Assets) Net intangible assets decreased to **$645.7 million** as of March 31, 2024, from **$666.7 million** at December 31, 2023, primarily due to amortization expense Intangible Assets, Net (in thousands) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------- | :------------- | :---------------- | | Intangible assets, net | $645,703 | $666,733 | - Amortization of intangible assets was **$21.0 million** for the three months ended March 31, 2024, consistent with **$20.9 million** in the prior year period[62](index=62&type=chunk) [Note 8: Debt](index=18&type=section&id=Note%208:%20Debt) The Company's total debt increased, primarily due to a new **$25.0 million** VGS 2 Promissory Note and short-term financing Long-term Debt, Net (in thousands) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------- | :------------- | :---------------- | | Long-term debt, net | $118,123 | $108,319 | - P3 LLC entered into a new VGS 2 Promissory Note on March 22, 2024, for up to **$25.0 million**, with **$10.0 million** drawn immediately and an additional **$15.0 million** drawn on April 5, 2024[65](index=65&type=chunk)[67](index=67&type=chunk) - The VGS 2 Promissory Note matures on September 30, 2027, with interest at **17.5%** per annum (8.0% cash, 9.5% PIK, or 17.5% PIK)[67](index=67&type=chunk) - The Company was in compliance with its debt covenants under the term loan facility and unsecured promissory notes as of March 31, 2024[72](index=72&type=chunk) [Note 9: Net Loss per Share](index=21&type=section&id=Note%209:%20Net%20Loss%20per%20Share) Basic and diluted net loss per share attributable to controlling interest improved to **$(0.16)** for Q1 2024 from **$(0.22)** in the prior year Net Loss Per Share and Shares Outstanding (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss attributable to controlling interest | $(18,700) (in thousands) | $(9,199) (in thousands) | | Basic Net Loss Per Share | $(0.16) | $(0.22) | | Diluted Net Loss Per Share | $(0.16) | $(0.22) | | Weighted Average Class A Common Shares Outstanding (Basic) | 118,887 (in thousands) | 41,579 (in thousands) | - Potentially dilutive securities totaling **288.7 million** (including stock warrants, options, RSUs, and Class V common stock) were excluded from diluted EPS calculation as their effect would have been anti-dilutive[75](index=75&type=chunk) [Note 10: Redeemable Non-controlling Interest](index=21&type=section&id=Note%2010:%20Redeemable%20Non-controlling%20Interest) Non-controlling interest holders' ownership of Common Units decreased slightly to **62.2%** as of March 31, 2024, from **62.8%** at December 31, 2023 Non-controlling Interest Holders' Ownership of Common Units (in thousands) | Date | Units (in thousands) | Ownership % | | :-------------------- | :---- | :------------ | | March 31, 2024 | 196,494 | 62.2 % | | December 31, 2023 | 196,569 | 62.8 % | - A **$20.6 million** remeasurement adjustment was recorded as of March 31, 2024, due to the fair value of redeemable non-controlling interest being less than its carrying value[78](index=78&type=chunk) [Note 11: Segment Reporting](index=22&type=section&id=Note%2011:%20Segment%20Reporting) The Company operates under a single reportable segment, with the CEO managing operations and reviewing financial information on a consolidated basis - The Company operates under one reportable segment, with the Chief Executive Officer serving as the chief operating decision maker[79](index=79&type=chunk) - All the Company's revenue was earned, and all long-lived assets were located, in the United States for the periods presented[79](index=79&type=chunk) [Note 12: Commitments and Contingencies](index=22&type=section&id=Note%2012:%20Commitments%20and%20Contingencies) The Company has a remaining settlement balance of **$2.4 million** as of March 31, 2024, related to a renegotiated health plan service agreement from 2021 - The remaining settlement balance within health plan settlements payable was **$2.4 million** as of March 31, 2024, down from **$3.0 million** at December 31, 2023, related to a renegotiated service agreement[80](index=80&type=chunk) [Note 13: Variable Interest Entities](index=22&type=section&id=Note%2013:%20Variable%20Interest%20Entities) P3 LLC is the primary beneficiary of several Network VIEs (physician practices) through Management Services Agreements and deficit funding agreements - P3 LLC is identified as the primary beneficiary of several Network VIEs (physician practices) through Management Services Agreements and deficit funding agreements[81](index=81&type=chunk) Network VIEs Financial Summary (in thousands) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------- | :------------- | :---------------- | | Total Assets | $10,529 | $8,637 | | Total Liabilities | $59,515 | $57,848 | | Members' Deficit | $(48,986) | $(49,211) | | Revenue (Q1) | $9,764 | $10,839 | | Net Loss (Q1) | $(133) | $(2,836) | [Note 14: Subsequent Events](index=23&type=section&id=Note%2014:%20Subsequent%20Events) In April 2024, the Company borrowed the remaining **$15.0 million** from the VGS 2 Promissory Note - In April 2024, the Company borrowed the remaining **$15.0 million** available on the VGS 2 Promissory Note[85](index=85&type=chunk) - On May 2, 2024, the Chief Executive Officer repaid **$0.7 million** in withholding taxes attributable to the vesting of restricted stock units[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of P3 Health Partners' business model, key factors affecting performance, non-GAAP financial measures, and a detailed analysis of financial results [Overview](index=24&type=section&id=Overview) P3 is a patient-centered and physician-led population health management company focused on the Medicare Advantage (MA) market - P3 is a patient-centered and physician-led population health management company focused on the Medicare Advantage (MA) market[90](index=90&type=chunk)[92](index=92&type=chunk) - The company operates predominantly through capitated contracts with health plans, receiving PMPM fees to manage healthcare needs for MA members[93](index=93&type=chunk) - As of March 31, 2024, P3 served approximately **126,800** at-risk members in **27** markets across **five** states, with a network of approximately **2,900** physicians[95](index=95&type=chunk) [Key Factors Affecting our Performance](index=25&type=section&id=Key%20Factors%20Affecting%20our%20Performance) This section details key factors influencing performance, such as membership growth, revenue per member, medical claims, and operating efficiencies - Growth in Medicare Advantage membership is achieved through expanding existing contracts, adding new contracts in existing markets, and entering new/adjacent markets[97](index=97&type=chunk) - Capitated revenue per member is expected to improve as the Company better understands and documents members' health status (acuity)[99](index=99&type=chunk) - Medical claims expense, representing **88%** of total operating expense, is managed by improving access to healthcare and leveraging primary care to avoid costly downstream services[102](index=102&type=chunk) - Operating efficiencies are achieved by leveraging the affiliate model and existing infrastructure, expecting corporate, general, and administrative expenses to decrease as a percentage of revenue over time[104](index=104&type=chunk)[105](index=105&type=chunk) - Operational and financial results are subject to seasonality, with largest member growth in Q1, declining revenue per member over the year, and higher medical expenses in Q1 and Q4 due to seasonal illnesses[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [Non-GAAP Financial Measures and Key Performance Metrics](index=27&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Key%20Performance%20Metrics) This section defines and reconciles non-GAAP financial measures like Adjusted EBITDA and presents key operational metrics Adjusted EBITDA Loss Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(49,606) | $(52,448) | | Adjusted EBITDA loss | $(19,770) | $(19,133) | Medical Margin (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Capitated revenue | $384,134 | $298,704 | | Less: medical claims expense | $(347,582) | $(259,458) | | Medical margin | $36,552 | $39,246 | Gross Profit (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Total operating revenue | $388,488 | $302,077 | | Less: medical claims expense | $(347,582) | $(259,458) | | Less: other medical expense | $(34,475) | $(26,112) | | Gross profit | $6,431 | $16,507 | - At-risk membership increased **23%** year-over-year to **126,800** as of March 31, 2024[127](index=127&type=chunk) - Affiliate primary care physicians increased to **2,900** as of March 31, 2024[128](index=128&type=chunk) - Platform support costs decreased from **10.1%** of total operating revenue in Q1 2023 to **5.5%** in Q1 2024[130](index=130&type=chunk) [Key Components of Results of Operations](index=31&type=section&id=Key%20Components%20of%20Results%20of%20Operations) This section describes the primary revenue and expense categories that drive the company's financial performance - Capitated revenue is the primary revenue source, based on fixed per member per month (PMPM) fees from health plans, adjusted by a risk adjustment model for patient acuity[132](index=132&type=chunk)[133](index=133&type=chunk) - Medical expenses, including incurred but not reported (IBNR) claims, are the largest expense, covering costs for services provided by non-P3 employed providers[136](index=136&type=chunk) - Corporate, general and administrative expenses include employee-related costs, technology, occupancy, and public company operational expenses[139](index=139&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the three months ended March 31, 2024, compared to the prior year Key Financial Results (Q1 2024 vs Q1 2023, in thousands) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (Amount, in thousands) | Change (%) | | :------------------------------------------ | :------ | :------ | :-------------- | :--------- | | Total Operating Revenue | $388,488 | $302,077 | $86,411 | 29 % | | Capitated Revenue | $384,134 | $298,704 | $85,430 | 29 % | | Medical Expense | $382,057 | $285,570 | $96,487 | 34 % | | Premium Deficiency Reserve | $1,000 | $5,140 | $(4,140) | (81)% | | Corporate, General and Administrative Expense | $27,401 | $37,643 | $(10,242) | (27)% | | Operating Loss | $(43,831) | $(48,817) | $4,986 | (10)% | | Net Loss Attributable to Controlling Interest | $(18,700) | $(9,199) | $(9,501) | 103% | - The **29%** increase in capitated revenue was primarily driven by a **23%** increase in at-risk members (to **126,800**) and a **5%** increase in capitated revenue rates due to higher patient acuity[150](index=150&type=chunk) - The **27%** decrease in corporate, general and administrative expense was mainly due to a **$7.1 million** reduction in professional fees and a **$2.5 million** decrease in salary and related expenses from a **20%** headcount reduction[154](index=154&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations and its sources of funding - P3 Health Partners Inc. is a holding company with no independent means of generating revenue or cash flow, relying on P3 LLC's financial results and distributions[156](index=156&type=chunk) - The Company had **$27.3 million** in unrestricted cash as of March 31, 2024, and has experienced ongoing net losses and negative cash flows, leading to substantial doubt about its ability to continue as a going concern[39](index=39&type=chunk)[160](index=160&type=chunk)[185](index=185&type=chunk) - Shelf Registration on Form S-3 for **$250 million**, with **$75 million** available for at-the-market sales; **$33,000** net proceeds from sales as of March 31, 2024[161](index=161&type=chunk)[162](index=162&type=chunk) - March 2023 Private Placement raised approximately **$86.6 million** net proceeds[163](index=163&type=chunk) - Term Loan Facility: **$65.0 million** outstanding as of March 31, 2024, with **12.0%** interest[167](index=167&type=chunk) - VGS Promissory Note: **$29.1 million** outstanding as of March 31, 2024, with **14.0%** interest[171](index=171&type=chunk) - VGS 2 Promissory Note: **$10.0 million** drawn by March 31, 2024, with an additional **$15.0 million** drawn in April 2024; **17.5%** interest[85](index=85&type=chunk) - The estimated Tax Receivable Agreement (TRA) liability is **$11.0 million** as of March 31, 2024, but no TRA liability has been recorded due to the Company's history of losses making payments not probable[181](index=181&type=chunk) [Cash Flows](index=39&type=section&id=Cash%20Flows) This section provides a detailed analysis of cash generated from or used in operating, investing, and financing activities Summary of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(20,030) | $(23,722) | | Net cash used in investing activities | $0 | $(464) | | Net cash provided by financing activities | $11,401 | $14,102 | | Net change in cash | $(8,629) | $(10,084) | | Cash at end of period | $32,305 | $8,373 | - Net cash used in operating activities decreased by **$3.7 million**, primarily due to changes in working capital[188](index=188&type=chunk) - Net cash provided by financing activities in Q1 2024 was mainly from the issuance of the VGS 2 Promissory Note and short-term financing agreements[190](index=190&type=chunk) [Critical Accounting Estimates](index=40&type=section&id=Critical%20Accounting%20Estimates) This section highlights accounting estimates that require significant judgment and could materially impact financial results - No significant changes to critical accounting estimates were disclosed from the Company's Annual Report on Form 10-K for the year ended December 31, 2023[192](index=192&type=chunk) [Recent Accounting Pronouncements](index=40&type=section&id=Recent%20Accounting%20Pronouncements) This section provides an update on recently adopted and pending accounting standards and their potential impact - For details on recent accounting standards, refer to Note 4 "Recent Accounting Pronouncements" in the unaudited condensed consolidated financial statements[194](index=194&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required for Smaller Reporting Companies - This section is not required for Smaller Reporting Companies[195](index=195&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of March 31, 2024, due to identified material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of March 31, 2024, due to identified material weaknesses in internal control over financial reporting[197](index=197&type=chunk) - Identified Material Weaknesses include: inadequate policies, procedures, or qualified resources for significant accounts; insufficient risk assessment process; ineffective evaluation of internal control components; ineffective information technology general controls (user access); insufficient segregation of duties; ineffective management review controls; and ineffective controls over estimation of claims expense and payable[199](index=199&type=chunk) - Remediation activities are ongoing and include: engaging an external advisor to enhance controls and provide training; formalizing enhanced policies and procedures; hiring qualified accounting, financial reporting, and IT personnel; implementing a revised IT general controls framework and user access reviews; and designing a segregation of duties risk framework[199](index=199&type=chunk) [PART II—OTHER INFORMATION](index=43&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section contains other information not included in the financial statements, such as legal proceedings and risk factors [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in ongoing legal proceedings, including the consolidated Hudson Action and P3 Action, challenging the 2021 Business Combinations - The Company is involved in ongoing legal proceedings, including the consolidated Hudson Action and P3 Action, challenging the 2021 Business Combinations[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) - While some claims have been dismissed, others, including bad faith breach of contract and tortious interference, are proceeding to a five-day trial scheduled for July 22, 2024[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - Former members of P3 (excluding Hudson) have agreed to indemnify the Company for damages related to the dispute[209](index=209&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's 2023 Form 10-K - There have been no material changes to the risk factors previously disclosed in Part I, Item 1A., "Risk Factors" of the Company's 2023 Form 10-K[214](index=214&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds occurred during the period - No unregistered sales of equity securities or use of proceeds occurred during the three months ended March 31, 2024[215](index=215&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable - This item is not applicable to the Company[216](index=216&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - This item is not applicable to the Company[217](index=217&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2024[220](index=220&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including merger agreements, organizational documents, debt agreements, and certifications - The report includes various exhibits such as merger agreements, organizational documents, debt agreements (e.g., Unsecured Promissory Note with VGS 2, Subordination Agreement, Fourth Amendment to Term Loan Agreement), and certifications (31.1, 31.2, 32.1, 32.2)[222](index=222&type=chunk) [SIGNATURES](index=47&type=section&id=SIGNATURES) This section contains the required signatures for the filing, certifying its accuracy and completeness