P3 Health Partners Inc. (NASDAQ:PIII) Q1 2023 Earnings Conference Call May 10, 2023 4:30 PM ET Company Participants Karen Blomquist - Vice President, Investor Relations Sherif Abdou - Chief Executive Officer & Co-Founder Atul Kavthekar - Chief Financial Officer Amir Bacchus - Chief Medical Officer Conference Call Participants Brooks O'Neil - Lake Street Capital Markets Ryan Daniels - William Blair Josh Raskin - Nephron Research Gary Taylor - Cowen Operator Good afternoon, everyone, and welcome to the P3 Hea ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-40033 P3 Health Partners Inc. (Exact name of registrant as specified in its charter) Delaware 85-2992794 (State or other jurisdiction of i ...

P3 Health Partners Inc. (NASDAQ:PIII) Q4 2022 Earnings Conference Call March 31, 2023 8:30 AM ET Company Participants Karen Blomquist - Director, IR Sherif Abdou - CEO Atul Kavthekar - CFO Conference Call Participants Brooks O'Neil - Lake Street Capital Markets Joshua Raskin - Nephron Research Operator Good day, and welcome to the P3 Health Partners Fourth Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-40033 P3 Health Partners Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Emp ...

P3 Health Partners Inc. (NASDAQ:PIII) Q3 2022 Results Conference Call November 14, 2022 4:30 PM ET Company Participants Karen Blomquist - Vice President of Investor Relations Sherif Abdou - Chief Executive Officer Erin Darakjian - Interim Chief Financial Officer Amir Bacchus - Co-Founder and Chief Medical Officer Conference Call Participants Joshua Raskin - Nephron Research Brooks O'Neil - Lakes Treat Gary Taylor - Cowen Operator Greetings, and welcome to P3 Health Partners Third Quarter 2022 Earnings Confe ...

[Cautionary Statement Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section warns readers that the report contains forward-looking statements subject to known and unknown risks and uncertainties, which could cause actual results to differ materially - The company's ability to preserve adequate liquidity for twelve months has raised **substantial doubt about its ability to continue as a going concern**, potentially requiring additional capital or scaling back growth[10](index=10&type=chunk) - Forward-looking statements are subject to numerous risks, including the ability to recognize benefits from Business Combinations, changes in regulations, economic instability, and the **possibility of never achieving profitability**[10](index=10&type=chunk) - The company does not plan to publicly update or revise any forward-looking statements unless required by applicable law[12](index=12&type=chunk) [PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, along with detailed notes explaining accounting policies, business combinations, and other financial disclosures [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section provides the unaudited condensed consolidated financial statements for P3 Health Partners Inc and its subsidiaries, covering balance sheets, statements of operations, stockholders'/members' equity, and cash flows, along with comprehensive notes detailing the company's organization, accounting policies, and specific financial items [Condensed Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) The balance sheet shows a significant decrease in total assets from $2.36 billion at December 31, 2021, to $1.38 billion at September 30, 2022, primarily due to a large goodwill impairment Balance Sheet Summary | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | Change | | :-------------------------------- | :------------------- | :------------------- | :------- | | Total Assets | $1,383,131,449 | $2,364,108,460 | -41.5% | | Total Liabilities | $330,976,485 | $299,939,734 | +10.3% | | Total Stockholders' Equity | $78,076,015 | $273,551,441 | -71.5% | | Cash | $34,357,237 | $140,477,586 | -75.5% | | Goodwill | $463,496,191 | $1,309,750,216 | -64.6% | [Condensed Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) The company reported a significant increase in net loss for both the three and nine months ended September 30, 2022, primarily driven by a substantial goodwill impairment charge in the nine-month period and increased operating expenses Statement of Operations Summary | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 (Restated) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 (Restated) | | :------------------------------------ | :---------------------------- | :------------------------------------- | :---------------------------- | :------------------------------------- | | Total Operating Revenue | $248,260,073 | $156,185,955 | $791,258,378 | $452,070,338 | | Total Operating Expenses | $308,272,010 | $184,309,497 | $1,815,625,200 | $519,153,369 | | Operating Loss | $(60,011,937) | $(28,123,542) | $(1,024,366,822) | $(67,083,031) | | Net Loss | $(65,329,041) | $(32,054,361) | $(1,029,225,234) | $(86,169,483) | | Net Loss Attributable to Controlling Interests | $(11,173,183) | $(32,054,361) | $(176,100,636) | $(86,169,483) | | Net Loss Per Share (Basic) | $(0.27) | N/A | $(4.24) | N/A | - A **goodwill impairment charge of $851,455,754** was recorded for the nine months ended September 30, 2022, significantly impacting operating expenses and net loss[16](index=16&type=chunk) [Condensed Consolidated Statements of Stockholders'/Members' Equity (Deficit) and Mezzanine Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%2FMembers'%20Equity%20(Deficit)%20and%20Mezzanine%20Equity%20(Unaudited)) The statement shows a substantial decrease in total stockholders' equity from $273.6 million at December 31, 2021, to $78.1 million at September 30, 2022, primarily due to accumulated deficit and adjustments to redeemable non-controlling interest Stockholders' Equity Summary | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | Change | | :------------------------------------ | :------------------- | :------------------- | :------- | | Redeemable Non-Controlling Interest | $974,078,949 | $1,790,617,285 | -45.6% | | Additional Paid in Capital | $293,570,464 | $312,945,752 | -6.2% | | Accumulated Deficit | $(215,518,760) | $(39,418,124) | +446.7% | | Total Stockholders' Equity | $78,076,015 | $273,551,441 | -71.5% | - Adjustments to Redeemable Non-Controlling Interest **decreased Additional Paid in Capital by $19,375,288** for the nine months ended September 30, 2022[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) The company experienced a significant increase in net cash used in operating activities, from $39.8 million in 2021 to $94.1 million in 2022, primarily due to increased net loss and changes in working capital Cash Flow Summary | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 (Restated) | Change | | :------------------------------------ | :---------------------------- | :------------------------------------- | :------- | | Net Cash Used in Operating Activities | $(94,065,131) | $(39,827,450) | +136.2% | | Net Cash Used in Investing Activities | $(7,783,535) | $(7,884,167) | -1.3% | | Net Cash (Used in) Provided by Financing Activities | $(3,624,662) | $12,491,534 | -129.0% | | Net Change in Cash and Restricted Cash | $(105,473,328) | $(35,220,083) | +199.5% | | Cash and Restricted Cash, End of Period | $35,360,544 | $4,682,864 | +655.1% | - The significant increase in net cash used in operating activities was largely driven by a **higher net loss**, including a goodwill impairment charge, and changes in health plan receivables and payables[22](index=22&type=chunk)[283](index=283&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed disclosures on the company's accounting policies, significant events like the Business Combinations and restatements, and specific financial statement line items, offering crucial context for the reported financial performance and position [Note 1: Organization and Basis of Presentation](index=9&type=section&id=Note%201%3A%20Organization%20and%20Basis%20of%20Presentation) P3 Health Partners Inc is a patient-centered, physician-led population health management company, operating under an "Up-C" structure following the December 3, 2021 Business Combinations - P3 Health Partners Inc operates as a patient-centered, physician-led population health management company, providing services on an **at-risk basis** to Medicare Advantage programs[24](index=24&type=chunk) - The company consummated Business Combinations on December 3, 2021, resulting in an **'Up-C' structure** where P3 Health Partners Inc became the sole manager of P3 LLC, holding approximately 17.1% equity interest[25](index=25&type=chunk) - The company's contracts with health plans are based on an at-risk shared savings model, where it is financially responsible for covered services in exchange for **fixed monthly capitation payments**[26](index=26&type=chunk)[27](index=27&type=chunk) [Note 2: Restatement of Previously Issued Financial Statements](index=11&type=section&id=Note%202%3A%20Restatement%20of%20Previously%20Issued%20Financial%20Statements) The company restated its condensed consolidated financial statements for prior interim periods due to errors in accounting for non-controlling interests, preferred returns, classification of Class A Units, and capitated revenues - The company restated prior financial statements due to **incorrect allocation of Network losses** to non-controlling interests, as P3 is contractually obligated to fund these losses[37](index=37&type=chunk)[38](index=38&type=chunk) - Preferred returns on Class A and Class D Units were historically recognized as interest expense and equity but should only be accrued when legally declared, leading to a restatement[40](index=40&type=chunk)[41](index=41&type=chunk) - Class A Preferred Units were **reclassified from permanent to mezzanine equity** because their redemption upon a Sale of the Company is outside the company's control[42](index=42&type=chunk)[43](index=43&type=chunk) - Capitated revenues for 2020 were restated to recognize variable Risk Adjustment Factor (RAF) components that were previously constrained[44](index=44&type=chunk)[45](index=45&type=chunk) [Note 3: Going Concern and Liquidity](index=13&type=section&id=Note%203%3A%20Going%20Concern%20and%20Liquidity) The company has incurred significant losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern within the next year - The company experienced losses of **$65.3 million for the three months** and **$1.03 billion for the nine months** ended September 30, 2022, primarily due to growth costs and a goodwill impairment[49](index=49&type=chunk) - As of September 30, 2022, **unrestricted cash was $34.4 million**, a significant decrease from $140.5 million at December 31, 2021[51](index=51&type=chunk) - **Substantial doubt exists** about the company's ability to continue as a going concern, necessitating additional funding or a reduction in planned activities[51](index=51&type=chunk) [Note 4: Significant Accounting Policies](index=14&type=section&id=Note%204%3A%20Significant%20Accounting%20Policies) This note outlines the company's key accounting policies, including principles of consolidation for subsidiaries and Variable Interest Entities (VIEs), segment reporting, management's use of estimates, and revenue recognition - The company consolidates its subsidiaries and Variable Interest Entities (VIEs), for which it is the primary beneficiary[52](index=52&type=chunk)[54](index=54&type=chunk) - The company has **one reportable segment**, managed by the CEO based on consolidated revenues and adjusted EBITDA[54](index=54&type=chunk) - Revenue recognition for capitated revenue is based on an estimated per member per month (PMPM) transaction price, adjusted for acuity and performance incentives, and recognized monthly[71](index=71&type=chunk) - Goodwill is tested for impairment annually or more frequently if triggering events occur, with an **$851.5 million impairment charge** recorded in Q2 2022[89](index=89&type=chunk) [Note 5: Recent Accounting Pronouncements Adopted](index=22&type=section&id=Note%205%3A%20Recent%20Accounting%20Pronouncements%20Adopted) The company adopted ASU 2019-12, ASU 2021-04, and ASU 2021-10 in the first quarter of 2022, none of which had a material effect on the financial statements - ASU 2019-12, simplifying income tax accounting, was adopted prospectively in Q1 2022 with **no material impact**[94](index=94&type=chunk) - ASU 2021-04, regarding issuer's accounting for certain modifications or exchanges of freestanding equity-classified written call options (warrants), was adopted prospectively in Q1 2022 with **no material impact**[94](index=94&type=chunk) - ASU 2021-10, requiring disclosures about government assistance, was adopted prospectively on January 1, 2022, with **no material impact**[95](index=95&type=chunk) [Note 6: Recent Accounting Pronouncements Not Yet Adopted](index=23&type=section&id=Note%206%3A%20Recent%20Accounting%20Pronouncements%20Not%20Yet%20Adopted) The company is evaluating the impact of ASU 2016-13 (Credit Losses) and ASU 2020-06 (Convertible Instruments), effective in future years - The company is evaluating ASU 2016-13 (Credit Losses), effective January 1, 2023, which introduces a new model for recognizing expected credit losses[96](index=96&type=chunk) - ASU 2020-06 (Convertible Instruments and Contracts in Entity's Own Equity), effective after December 15, 2023, is under evaluation for its effect on financial statements[97](index=97&type=chunk) - ASU 2021-08 (Business Combinations), effective after December 15, 2022, is **not currently expected to have a material impact** on the company's financial statements[98](index=98&type=chunk) [Note 7: Business Combinations](index=23&type=section&id=Note%207%3A%20Business%20Combinations) On December 3, 2021, P3 Health Partners Inc completed Business Combinations, acquiring P3 Health Group Holdings, LLC, which was accounted for using the acquisition method - The Business Combinations on December 3, 2021, involved Foresight acquiring P3 Health Group Holdings, LLC, with **Foresight identified as the accounting acquirer**, leading to a new basis of accounting[99](index=99&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - The total purchase consideration for the P3 LLC acquisition was **$1.95 billion**, with goodwill recorded at **$1.28 billion** and intangible assets totaling **$835.4 million**[106](index=106&type=chunk)[108](index=108&type=chunk) - In December 2021, the company acquired Medcore Health Plan, Inc and Omni IPA Medical Group, Inc for **$40.0 million**, and in Q3 2022, acquired two medical practices for **$5.5 million**[109](index=109&type=chunk)[112](index=112&type=chunk) [Note 8: Fair Value Measurements and Hierarchy](index=27&type=section&id=Note%208%3A%20Fair%20Value%20Measurements%20and%20Hierarchy) The company measures financial instruments at fair value using a three-level hierarchy, with warrant liabilities measured using Level 3 inputs Warrant Liability Fair Value | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :-------------------------------- | :------------------- | :------------------- | | Warrant liability (Total) | $7,996,432 | $11,382,826 | | Warrant liability (Level 1) | $7,774,549 | $10,880,550 | | Warrant liability (Level 3) | $221,883 | $502,276 | Level 3 Input Summary | Level 3 Input (Private Placement Warrants) | As of Sep 30, 2022 | As of Dec 31, 2021 | | :--------------------------------------- | :----------------- | :----------------- | | Volatility | 60.00 % | 60.00 % | | Risk-Free Interest rate | 4.16 % | 1.26 % | | Exercise Price | $11.50 | $11.50 | | Expected Term | 4.2 Years | 4.9 Years | - A mark-to-market adjustment for stock warrants resulted in a **gain of $3,386,394** for the nine months ended September 30, 2022, compared to a loss of $12,063,265 in the prior year[119](index=119&type=chunk) [Note 9: Patient Fees Receivable](index=28&type=section&id=Note%209%3A%20Patient%20Fees%20Receivable) Patient fees receivable, net of contractual allowances, decreased slightly to $638,054 at September 30, 2022 Patient Fees Receivable Summary | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :-------------------------------- | :------------------- | :------------------- | | Total Receivables: Gross | $5,383,421 | $2,641,182 | | Less: Contractual Allowances | $(4,745,367) | $(1,968,750) | | Receivables Net of Contractual Allowances | $638,054 | $672,432 | - Patient fees receivable are recorded at the invoiced amount, net of expected contractual adjustments and implicit price concessions, and do not bear interest[88](index=88&type=chunk) [Note 10: Property and Equipment](index=29&type=section&id=Note%2010%3A%20Property%20and%20Equipment) Net property and equipment increased from $8.05 million to $9.52 million, driven by additions in leasehold improvements and software development Property and Equipment, Net | Category | As of Sep 30, 2022 | As of Dec 31, 2021 | | :-------------------------------- | :------------------- | :------------------- | | Leasehold Improvements | $1,809,927 | $1,537,091 | | Furniture & Fixtures | $1,450,626 | $1,108,184 | | Computer Equipment & Software | $2,852,746 | $2,700,617 | | Medical Equipment | $1,066,959 | $414,100 | | Software (Development in Process) | $3,918,615 | $2,433,470 | | Vehicles | $373,995 | — | | Other | $36,788 | $36,788 | | Total Property and Equipment, Net | $9,515,276 | $8,047,929 | [Note 11: Goodwill](index=29&type=section&id=Note%2011%3A%20Goodwill) Goodwill significantly decreased from $1.31 billion to $463.5 million due to an $851.5 million impairment charge in Q2 2022 Goodwill Balance | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :-------------------------------- | :------------------- | :------------------- | | Goodwill Balance | $463,496,191 | $1,309,750,216 | - An **$851,455,754 goodwill impairment charge** was recorded in Q2 2022, driven by a sustained 63% decline in share price, macroeconomic conditions, and increased medical expenses[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - The impairment test involved estimating fair values using discounted cash flows and market-based methods, with updated assumptions for future cash flow[124](index=124&type=chunk) [Note 12: Intangible Assets](index=30&type=section&id=Note%2012%3A%20Intangible%20Assets) Intangible assets, net, decreased from $835.8 million to $772.4 million, primarily due to $63.4 million in amortization expenses Intangible Assets, Net | Category | Balance at Dec 31, 2021 | Amortization | Balance at Sep 30, 2022 | | :---------------- | :---------------------- | :------------- | :---------------------- | | Customer Relationships | $678,300,000 | $(51,300,000) | $627,000,000 | | Trademarks | $147,369,167 | $(11,415,000) | $135,954,167 | | Payor Contracts | $4,700,271 | $(352,522) | $4,347,749 | | Provider Network | $4,769,167 | $(360,000) | $4,409,167 | | Medical Licenses | $700,000 | — | $700,000 | | Total | $835,838,605 | $(63,427,522) | $772,411,083 | - Amortization of intangible assets is anticipated to be **approximately $84 million annually** from 2022 through 2026[127](index=127&type=chunk) [Note 13: Notes Receivable, Net](index=30&type=section&id=Note%2013%3A%20Notes%20Receivable%2C%20Net) Notes receivable, net, increased from $3.59 million to $4.53 million, including accrued interest and net of valuation allowances - Notes receivable, net, totaled **$4,526,522** at September 30, 2022, up from $3,590,715 at December 31, 2021[129](index=129&type=chunk) - The company has Promissory Notes with three family medical practices, where principal and accrued interest may be forgiven if corresponding Provider Agreements remain in effect until maturity[128](index=128&type=chunk) [Note 14: Claims Payable](index=31&type=section&id=Note%2014%3A%20Claims%20Payable) Claims payable, including estimates for incurred but not reported (IBNR) claims, increased from $101.96 million to $134.71 million Claims Payable Rollforward | Metric | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :---------------------------- | | Claims Unpaid, Beginning of Period | $101,958,324 | | Incurred, Current Period | $700,236,928 | | Incurred, Prior Period(s) | $5,024,653 | | Total Incurred | $705,261,581 | | Paid, Current Period | $570,830,033 | | Paid, Prior Period(s) | $101,684,446 | | Total Paid | $672,514,479 | | Claims Unpaid, End of Period | $134,705,426 | - Estimates for incurred claims are based on historical enrollment and cost trends, with future results potentially differing due to changes in medical expenses or member mix[131](index=131&type=chunk) [Note 15: Long-Term Debt](index=31&type=section&id=Note%2015%3A%20Long-Term%20Debt) The company had $80.0 million in long-term debt at September 30, 2022, primarily from a $65.0 million Term Loan Facility and a $15.0 million unsecured note - Long-term debt totaled **$80,000,000** at September 30, 2022, consisting of a $65 million Term Loan Facility and a $15 million unsecured note[138](index=138&type=chunk)[139](index=139&type=chunk) - The Term Loan Facility bears interest at **12.0% per annum**, with an option to pay 8.0% in cash and 4.0% as 'paid in kind' (PIK) for three years[134](index=134&type=chunk) - The company received a waiver for non-compliance with a Term Loan covenant related to the 'going concern' qualification in its 2021 audit opinion and was otherwise compliant with covenants as of September 30, 2022[133](index=133&type=chunk) Debt Maturity Schedule | Debt Obligation | Principal Due by Period (in thousands) | | :-------------------------------- | :----------------------------------- | | October 1, 2022 to December 31, 2022 | $0 | | 2023 | $0 | | 2024 | $0 | | 2025 | $65,000,000 | | 2026 | $15,000,000 | | Total | $80,000,000 | [Note 16: Income Taxes](index=33&type=section&id=Note%2016%3A%20Income%20Taxes) The company did not incur income tax expenses for the nine months ended September 30, 2022 and 2021, due to its net operating loss and a full valuation allowance on deferred tax assets - **No income tax expenses** were incurred for the nine months ended September 30, 2022 and 2021, with a **0.00% effective tax rate**, due to a net operating loss and a full valuation allowance on deferred tax assets[145](index=145&type=chunk) - The company, taxed as a corporation, pays taxes on income allocated from P3 LLC (a partnership), which it consolidates for financial purposes[142](index=142&type=chunk) - A Tax Receivable Agreement (TRA) requires payment of 85% of realized tax benefits to P3 Equity holders, but **no TRA liability was recorded** as of September 30, 2022[147](index=147&type=chunk)[151](index=151&type=chunk) [Note 17: Capitalization and Management Incentive Units](index=34&type=section&id=Note%2017%3A%20Capitalization%20and%20Management%20Incentive%20Units) As of September 30, 2022, the company had 41,578,890 shares of Class A Common Stock and 201,530,796 shares of Class V Common Stock outstanding Capitalization Summary | Stock Class | Shares Authorized | Shares Issued & Outstanding (Sep 30, 2022) | Shares Issued & Outstanding (Dec 31, 2021) | | :-------------------- | :---------------- | :--------------------------------------- | :--------------------------------------- | | Class A Common Stock | 800,000,000 | 41,578,890 | 41,578,890 | | Class V Common Stock | 205,000,000 | 201,530,796 | 196,553,523 | | Preferred Stock | 10,000,000 | 0 | 0 | - Class V Common Stock holders can exchange their Common Units and Class V Common Stock for Class A Common Stock on a **one-for-one basis**[154](index=154&type=chunk) - P3 LLC had **243,603,813 Common Units outstanding** at September 30, 2022, with 202,024,923 held by non-controlling interests[156](index=156&type=chunk) [Note 18: Share-Based Compensation](index=36&type=section&id=Note%2018%3A%20Share-Based%20Compensation) The company recorded $17.21 million in stock-based compensation expense for the nine months ended September 30, 2022, with $7.23 million of unrecognized cost remaining Stock-Based Compensation Expense | Metric | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Stock-Based Compensation Cost | $1,783,994 | $17,210,974 | - As of September 30, 2022, **$7,233,627 of unrecognized equity-based compensation cost** remained[162](index=162&type=chunk) Stock Option Activity | Stock Option Activity | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | | :-------------------------------- | :---------------- | :------------------------------ | :------------------------------------------ | | Outstanding and non-vested at Dec 31, 2021 | — | $— | — | | Granted during period | 2,034,279 | $6.43 | 3.10 | | Vested | 91,667 | $5.02 | — | | Outstanding and non-vested at Sep 30, 2022 | 1,942,612 | $6.50 | 2.52 | [Note 19: Earnings (Loss) per Share](index=37&type=section&id=Note%2019%3A%20Earnings%20(Loss)%20per%20Share) For the nine months ended September 30, 2022, basic and diluted net loss per share attributable to Class A common stockholders was $(4.24) and $(4.27) respectively Net Loss Per Share | Metric | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2022 | | :------------------------------------ | :---------------------------- | :---------------------------- | | Net Loss Attributable to Class A Common Stockholders - Basic | $(11,173,183) | $(176,100,636) | | Net Loss Per Share (Basic) | $(0.27) | $(4.24) | | Net Loss Per Share (Diluted) | $(0.27) | $(4.27) | - Potentially dilutive securities were excluded from diluted EPS calculation as their effect would have been **anti-dilutive** due to net losses[164](index=164&type=chunk) [Note 20: Premium Deficiency Reserve](index=37&type=section&id=Note%2020%3A%20Premium%20Deficiency%20Reserve) The Premium Deficiency Reserve (PDR) decreased from $37.84 million to $27.72 million, reflecting a revised estimate of probable contract losses PDR Balance | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :-------------------------------- | :------------------- | :------------------- | | Premium Deficiency Reserve | $27,719,928 | $37,835,642 | - Reductions to the PDR of **$7.3 million** and **$10.1 million** were recorded for the three and nine months ended September 30, 2022, respectively, indicating a revised estimate of future contract losses[259](index=259&type=chunk) [Note 21: Leases](index=38&type=section&id=Note%2021%3A%20Leases) The company leases real estate and equipment, with lease costs for the nine months ended September 30, 2022, totaling $2.37 million Lease Costs | Metric | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2022 | | :---------------- | :---------------------------- | :---------------------------- | | Lease costs | $901,079 | $2,374,789 | - A lease amendment in June 2022 for the Henderson, NV premises expanded the space and extended the lease term by 94 months, resulting in a **$3.1 million increase in ROU Assets and Liabilities**[167](index=167&type=chunk) Lease Metrics | Lease Term & Rate | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Weighted average remaining lease term (years) | 6.42 | 5.09 | | Weighted average discount rate | 11.7 % | 11.2 % | [Note 22: Redeemable Non-Controlling Interests](index=39&type=section&id=Note%2022%3A%20Redeemable%20Non-Controlling%20Interests) Redeemable non-controlling interests, representing approximately 83% ownership in P3 LLC, were classified as temporary equity with a fair value of $974.08 million - Non-controlling interests represent approximately **83% ownership in P3 LLC**, classified as redeemable noncontrolling interest (temporary equity) due to the cash redemption feature being outside the company's control[172](index=172&type=chunk)[174](index=174&type=chunk) - The fair value of redeemable non-controlling interest was **$974,078,949** at September 30, 2022, with a **$19,375,288 remeasurement adjustment** recorded to additional paid-in capital[175](index=175&type=chunk) [Note 23: Commitments and Contingencies](index=39&type=section&id=Note%2023%3A%20Commitments%20and%20Contingencies) The company is involved in various claims and legal proceedings, and it has incurred $93.3 million in direct COVID-19 costs since March 2020 - The company is a party to various claims, legal, and regulatory proceedings, with accruals established for probable and estimable contingencies[178](index=178&type=chunk) - A renegotiation with a health plan in 2021 identified a discrepancy that could result in a **$10.6 million payment** to the health plan[179](index=179&type=chunk) - The COVID-19 pandemic did not materially impact revenues, but direct costs associated with COVID-19 claims totaled approximately **$93.3 million** from March 1, 2020, through September 30, 2022[184](index=184&type=chunk) [Note 24: Related Parties](index=40&type=section&id=Note%2024%3A%20Related%20Parties) The company has Services Agreements and Deficit Funding Agreements with its Network entities and a full-risk capitation agreement with Atrio Health Plans, a related party - The company provides management, administrative, and non-medical support services to its Network entities through Services Agreements and offers working capital loans via Deficit Funding Agreements[186](index=186&type=chunk)[187](index=187&type=chunk) Advances to Network | Metric (Advances to Network) | As of Sep 30, 2022 | As of Dec 31, 2021 | | :-------------------------------- | :------------------- | :------------------- | | Balance at Beginning of Period | $27,907,247 | N/A | | Advanced During Period | $1,742,914 | N/A | | Interest Accrued During Period | $463,905 | N/A | | Balance at End of Period | $30,114,066 | $27,907,247 | - The company has a full-risk capitation agreement with Atrio Health Plans, a related party, earning **$127.5 million in capitation revenue** for the nine months ended September 30, 2022[189](index=189&type=chunk) [Note 25: Variable Interest Entities](index=41&type=section&id=Note%2025%3A%20Variable%20Interest%20Entities) P3 LLC is considered a Variable Interest Entity (VIE) with the company as its primary beneficiary, and P3 LLC is also the primary beneficiary of the Network (physician practices) - P3 LLC is a Variable Interest Entity (VIE), with the company identified as the **primary beneficiary** due to its power to direct significant activities and obligation to absorb losses/receive benefits[191](index=191&type=chunk) - P3 LLC is also the primary beneficiary of the Network (physician practices), exercising control through Stock Transfer Restriction Agreements and economic interest via Deficit Funding Agreements[192](index=192&type=chunk)[193](index=193&type=chunk) VIE Financials (Network) | VIE Financials (Network) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 (Restated) | | :----------------------- | :---------------------------- | :------------------------------------- | | Revenue | $39,462,716 | $5,815,261 | | Expenses | $46,708,335 | $13,858,939 | | Net Loss | $(7,245,619) | $(8,043,678) | [Note 26: Warrants](index=43&type=section&id=Note%2026%3A%20Warrants) As of September 30, 2022, there were 10,819,105 Public and Private Placement Warrants outstanding, recorded as a liability with a balance of $8.0 million - As of September 30, 2022, **10,819,105 Public and Private Placement Warrants** were outstanding, exercisable at $11.50 per Class A Common Stock share[198](index=198&type=chunk) Warrant Liability Balance | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :-------------------------------- | :------------------- | :------------------- | | Warrant Liabilities Balance | $7,996,432 | $11,382,826 | - A **gain of $3,386,394** was recognized for the nine months ended September 30, 2022, from the change in fair value of warrant liabilities, compared to a loss of $12,063,265 in the prior year[199](index=199&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, liquidity, and capital resources, discussing key factors affecting operations, business model, and results of the Business Combinations [Overview](index=44&type=section&id=Overview) P3 Health Partners is a patient-centered, physician-led population health management company focused on the Medicare Advantage market, using capitated contracts to align incentives for high-quality, cost-effective care - P3 Health Partners is a patient-centered, physician-led population health management company focused on the **$830 billion Medicare market**, specifically the 42% Medicare Advantage segment[202](index=202&type=chunk)[204](index=204&type=chunk) - The 'P3 Care Model' utilizes **capitated contracts** with health plans, providing fixed per member per month (PMPM) fees for comprehensive healthcare services[203](index=203&type=chunk)[205](index=205&type=chunk) - The company has rapidly scaled, growing its PCP network to approximately **2,800 physicians** across 15 markets in 5 states, serving about **101,000 at-risk Medicare Advantage members**[208](index=208&type=chunk)[215](index=215&type=chunk) [Impact of COVID-19](index=45&type=section&id=Impact%20of%20COVID-19) The COVID-19 pandemic did not materially impact P3's revenues due to its recurring capitated revenue model, but it incurred approximately $93.3 million in direct COVID-19 related claims costs - The COVID-19 pandemic did not materially impact P3's revenues due to its **recurring capitated revenue model** (nearly 99% of total revenues)[210](index=210&type=chunk) - P3 incurred approximately **$93.3 million in direct costs** related to COVID-19 claims from March 1, 2020, through September 30, 2022[210](index=210&type=chunk) - The full impact of COVID-19 may not be reflected until future periods due to the nature of capitation arrangements and ongoing uncertainties[211](index=211&type=chunk) [Business Combinations](index=45&type=section&id=Business%20Combinations) On December 3, 2021, P3 Health Partners Inc completed Business Combinations, with Foresight Acquisition Corp as the accounting acquirer, resulting in a new basis of accounting for the Successor entity - The Business Combinations on December 3, 2021, involved Foresight Acquisition Corp acquiring P3 Health Group Holdings, LLC, with **Foresight deemed the accounting acquirer**[212](index=212&type=chunk)[213](index=213&type=chunk) - The Successor's financial statements reflect a **new basis of accounting** based on the fair value of net assets acquired, making Predecessor and Successor period financial statements non-comparable[214](index=214&type=chunk) [Key Factors Affecting our Performance](index=46&type=section&id=Key%20Factors%20Affecting%20our%20Performance) Key performance drivers include growing Medicare Advantage membership, expanding contracts, increasing capitated revenue per member, and effectively managing medical expenses - At-risk Medicare Advantage members **grew by 67% year-over-year**, reaching approximately 101,000 members at September 30, 2022[215](index=215&type=chunk)[250](index=250&type=chunk) - The company aims to grow membership by attracting Medicare age-ins, converting Medicare FFS patients to Medicare Advantage, and adding new payor and physician contracts[217](index=217&type=chunk)[218](index=218&type=chunk) - Capitated revenue per member is expected to improve as the company better understands and documents patient health status (acuity) through its P3 Care Model[223](index=223&type=chunk) - Medical expenses are managed by improving access to primary care to avoid costly downstream services, with **Arizona ED utilization 36% lower** than local FFS benchmarks in 2019[224](index=224&type=chunk)[225](index=225&type=chunk) - Operating efficiencies are achieved by leveraging existing infrastructure, expecting corporate, general, and administrative expenses to decrease as a percentage of revenue over time[226](index=226&type=chunk) [Non-GAAP Financial Measures and Key Performance Metrics](index=48&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Key%20Performance%20Metrics) The company uses Adjusted EBITDA as a non-GAAP financial measure and tracks key operating metrics including at-risk members and contracted primary care physicians - **Adjusted EBITDA** is used as a non-GAAP financial measure to understand underlying business trends, adjusting net loss for interest, taxes, depreciation, amortization, and other items[230](index=230&type=chunk)[266](index=266&type=chunk) Key Operating Metrics | Key Metric | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2021 | Sep 30, 2022 | | :------------------------ | :----------- | :----------- | :----------- | :----------- | | At-risk members | 19,700 | 50,600 | 67,000 | 101,000 | | Affiliate PCPs | 1,000 | 1,500 | 2,100 | 2,800 | - At-risk membership represents Medicare Advantage members for whom the company receives a fixed per member per month fee under capitation arrangements[232](index=232&type=chunk) [Key Components of Results of Operations](index=49&type=section&id=Key%20Components%20of%20Results%20of%20Operations) This section details the components of revenue and operating expenses, with capitated revenue being the primary source and medical expenses being the largest cost - **Capitated revenue**, the primary revenue source, is derived from at-risk contracts with health plans, based on fixed PMPM fees and adjusted by Medicare's risk adjustment model (RAF)[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk) - Other patient service revenue includes encounter-related fees from company-owned clinics and ancillary fees for care coordination/management services[240](index=240&type=chunk) - **Medical expenses**, the largest operating expense, include costs for covered services and estimates for incurred but not reported (IBNR) claims[241](index=241&type=chunk) - **Premium Deficiency Reserve (PDR)** is recognized when anticipated future variable costs exceed anticipated future revenues on at-risk arrangements[245](index=245&type=chunk) [Results of Operations](index=50&type=section&id=Results%20of%20Operations) The company reported a net loss of $1.03 billion for the nine months ended September 30, 2022, significantly higher than the prior year, primarily due to an $851.5 million goodwill impairment charge Results of Operations Summary (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 (Restated) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 (Restated) | | :------------------------------------ | :---------------------------- | :------------------------------------- | :---------------------------- | :------------------------------------- | | Total Operating Revenue | $248,260 | $156,186 | $791,258 | $452,070 | | Operating Loss | $(60,012) | $(28,123) | $(1,024,367) | $(67,083) | | Net Loss | $(65,329) | $(32,054) | $(1,029,225) | $(86,169) | | Net Loss Attributable to Controlling Interests | $(11,173) | $(32,054) | $(176,101) | $(86,169) | - **Capitated revenue increased by 76%** to $780.8 million for the nine months ended September 30, 2022, driven by a 67% increase in at-risk members[250](index=250&type=chunk)[252](index=252&type=chunk) - **Medical expenses increased by 72%** to $788.0 million for the nine months ended September 30, 2022, primarily due to a 56% increase in at-risk members[254](index=254&type=chunk) - **Corporate, general, and administrative expenses increased significantly** (118% for 9 months) due to higher stock-based compensation, professional fees, insurance, and salary expenses[255](index=255&type=chunk)[256](index=256&type=chunk) - A **goodwill impairment charge of $851.5 million** was recorded in Q2 2022, significantly contributing to the increased net loss[260](index=260&type=chunk)[263](index=263&type=chunk) [Supplemental Unaudited Presentation of Consolidated Adjusted EBITDA](index=54&type=section&id=Supplemental%20Unaudited%20Presentation%20of%20Consolidated%20Adjusted%20EBITDA) Adjusted EBITDA loss was $(87.9) million for the nine months ended September 30, 2022, compared to $(59.9) million in the prior year - Adjusted EBITDA is a non-GAAP measure that adjusts net loss for interest, income taxes, depreciation, amortization, mark-to-market warrant expense, PDR, stock-based compensation, and transaction expenses[266](index=266&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 (Restated) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 (Restated) | | :------------------------ | :---------------------------- | :------------------------------------- | :---------------------------- | :------------------------------------- | | Net loss | $(65,329) | $(32,054) | $(1,029,225) | $(86,169) | | Total adjustments to net loss | $25,022 | $6,342 | $941,325 | $26,284 | | Adjusted EBITDA loss | $(40,307) | $(25,712) | $(87,900) | $(59,885) | [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) The company's cash of $35.4 million is not sufficient to fund operations for the next 12 months, raising substantial doubt about its going concern ability - As of September 30, 2022, cash and restricted cash totaled **$35.4 million**, which is deemed **insufficient to fund operating and capital needs** for the next 12 months[270](index=270&type=chunk)[279](index=279&type=chunk) - The company expects to continue incurring operating losses and negative cash flows, raising **substantial doubt about its ability to continue as a going concern**[271](index=271&type=chunk)[281](index=281&type=chunk) - Future capital requirements depend on growth pace and medical cost management, potentially requiring **additional debt or equity financing** or adjusting growth trajectory[272](index=272&type=chunk) - The company's ability to pay taxes and make TRA payments depends on P3 LLC's financial results and distributions[274](index=274&type=chunk) [Contractual Obligations and Commitments](index=59&type=section&id=Contractual%20Obligations%20and%20Commitments) The company's principal commitments include $134.7 million in unpaid claims, $80.0 million in long-term debt, and $11.37 million in lease obligations Contractual Obligations Summary | Obligation | Total (in thousands) | Less than 1 year (in thousands) | 1-3 years (in thousands) | 3-5 years (in thousands) | More than 5 years (in thousands) | | :-------------------- | :------------------- | :------------------------------ | :----------------------- | :----------------------- | :------------------------------- | | Unpaid Claims | $134,705 | $134,705 | $— | $— | $— | | Term loan | $65,000 | $— | $— | $65,000 | $— | | Unsecured debt | $15,000 | $— | $— | $15,000 | $— | | Lease obligation | $11,370 | $571 | $3,450 | $3,648 | $3,701 | | Total | $226,075 | $135,276 | $3,450 | $83,648 | $3,701 | - The Term Loan Facility has **$65.0 million outstanding**, maturing December 31, 2025, with interest payable at 12.0% per annum[288](index=288&type=chunk) - An unsecured note of **$15.0 million** with a former equity investor carries 11.0% annual interest, due by June 30, 2026[292](index=292&type=chunk) [JOBS Act](index=61&type=section&id=JOBS%20Act) As an "Emerging Growth Company" under the JOBS Act, P3 Health Partners Inc benefits from exemptions from certain public company reporting requirements - As an Emerging Growth Company (EGC), P3 Health Partners Inc is **exempt from auditor attestation requirements** of Section 404(b) of Sarbanes-Oxley and has reduced disclosure obligations for executive compensation[294](index=294&type=chunk) - The company intends to take advantage of **longer phase-in periods** for adopting new or revised financial accounting standards[295](index=295&type=chunk) [Critical Accounting Policies and Estimates](index=61&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements require management to make significant judgments and estimates, particularly in areas like revenue recognition and claims liability - Preparation of financial statements requires significant judgments, estimates, and assumptions, especially in revenue recognition, liability for unpaid claims, and fair value of assets[56](index=56&type=chunk)[296](index=296&type=chunk) - **No material changes** to critical accounting policies and estimates were reported compared to the 2021 Form 10-K[297](index=297&type=chunk) [Recent Accounting Pronouncements](index=61&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 5 and Note 6 for details on recently adopted and not-yet-adopted accounting standards, respectively [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposure primarily stems from potential changes in inflation or interest rates, with no material changes reported since year-end 2021 - The company's primary market risk exposure is due to potential changes in **inflation or interest rates**[299](index=299&type=chunk) - **No material changes** to the market risk assessment were reported as of September 30, 2022, compared to the 2021 Form 10-K[300](index=300&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were deemed ineffective as of September 30, 2022, due to material weaknesses in internal control over financial reporting - Disclosure controls and procedures were **not effective** as of September 30, 2022, due to identified material weaknesses in internal control over financial reporting[303](index=303&type=chunk) - Material weaknesses include inadequate entity-level controls, insufficient qualified resources, and ineffective control activities over information systems, financial close, complex transactions, and claims expense estimation[305](index=305&type=chunk)[306](index=306&type=chunk)[309](index=309&type=chunk) - **Remediation activities are ongoing**, including hiring qualified personnel, engaging external advisors, and enhancing policies and procedures[307](index=307&type=chunk) [PART II – OTHER INFORMATION](index=60&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered sales of equity securities, and other information, including a recent CFO resignation [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ongoing litigation concerning challenges to the Business Combinations by a Class D Unit holder - The company is involved in ongoing litigation (Hudson Action and P3 Action) **challenging the Business Combinations**, filed by Hudson Vegas Investment SPV, LLC, a Class D Unit holder[310](index=310&type=chunk)[311](index=311&type=chunk) - The court denied Hudson's motion for preliminary injunction but allowed certain **breach of contract claims to proceed** against the company and its managers[313](index=313&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) - Former P3 members (excluding Hudson) have agreed to **indemnify the company** and P3 LLC for damages arising from this dispute[314](index=314&type=chunk) [Item 1A. Risk Factors](index=62&type=section&id=Item%201A.Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2021 Form 10-K - **No material changes** to risk factors were reported from those previously disclosed in Part I, Item 1A of the 2021 Form 10-K[322](index=322&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported in this period [Item 3. Defaults Upon Senior Securities](index=62&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable for this reporting period [Item 4. Mine Safety Disclosures](index=62&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable for this reporting period [Item 5. Other Information](index=62&type=section&id=Item%205.%20Other%20Information) On November 11, 2022, the company entered into a Confidential Separation Agreement and Release with Eric Atkins, its former Chief Financial Officer - Eric Atkins resigned as CFO on November 11, 2022, entering a Separation Agreement that allows **81,264 unvested P3 LLC Units** and Class V common stock to vest on January 20, 2023[326](index=326&type=chunk) [Item 6. Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including merger agreements, organizational documents, the CFO's separation agreement, and certifications - Exhibit 10.1 is the **Separation Agreement** between P3 Health Partners Inc and Eric Atkins[328](index=328&type=chunk) - Exhibits 31.1 and 31.2 are **Certifications of Principal Executive Officer and Principal Financial Officer**, respectively, pursuant to the Securities Exchange Act Rules[328](index=328&type=chunk) [SIGNATURES](index=65&type=section&id=SIGNATURES) The report is signed by Erin Darakjian, Interim Chief Financial Officer of P3 Health Partners Inc, on November 14, 2022 - The report was signed by **Erin Darakjian, Interim Chief Financial Officer**, on November 14, 2022[332](index=332&type=chunk)

(702) 910–3950 Commission file number: 001-40033 P3 Health Partners Inc. (Exact name of registrant as specified in its charter) Delaware 85-2992794 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 2370 Corporate Circle Suite 300 Henderson, Nevada 89074 (Address of principal executive offices) (Zip code) Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF TH ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-40033 P3 Health Partners Inc. (Exact name of registrant as specified in its charter) (Registrant's telephone number, inc ...

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-40033 P3 Health Partners Inc. (Exact name of registrant as specified in its charter) Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or (State or other jurisdiction of incorpor ...

Financial Data and Key Metrics Changes - Revenue for the first half of 2022 was $543 million, an increase of 84% compared to $296 million in the prior year period [44] - The company reported a net loss of $964 million for the first half of 2022, compared to a net loss of $54 million in the same period last year, primarily due to a goodwill impairment charge of $851 million [45][46] - Adjusted EBITDA loss was $48 million in the first half of 2022, compared to an adjusted EBITDA loss of $34 million in the same period of the prior year [47] - The adjusted EBITDA loss per member per month improved to $78, compared to a loss of $85 in the prior year [48] Business Line Data and Key Metrics Changes - The company ended the first half of 2022 with approximately 102,000 at-risk Medicare Advantage members, a 52% increase from 67,000 at the end of 2021 [17][53] - The gross margin improved by 217 basis points in the first half of 2022 compared to the same period in the prior year [28][31] Market Data and Key Metrics Changes - P3 Health Partners is now in 18 markets across five states, including a successful expansion into California and increased presence in Arizona [14] - The Medicare Advantage market is growing at an average rate of approximately 9% per year, with significant opportunities for value-based care contracts [43] Company Strategy and Development Direction - The company is focused on disciplined, purposeful growth, aiming for an average of 35% year-over-year growth over the next five years [75] - P3 Health Partners is committed to improving patient outcomes and operational excellence while managing the balance sheet prudently [31][66] - The company has been accepted into the ACO reach program for 2023, which is expected to enhance its ability to reach new members [15][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to absorb recent growth and focus on executing the business strategy [71] - The company anticipates modest operating cash flow losses in 2023 compared to 2022, driven by the maturation of its members [72][88] - Management expects to achieve adjusted EBITDA profitability by 2024 [50][88] Other Important Information - Eric Atkins, the CFO, announced his departure, and Erin Darakjian has been appointed as the Interim CFO [32][34] - The company has experienced direct costs related to COVID-19 patient admissions amounting to $84 million since the pandemic began [51] Q&A Session Summary Question: Is the restatement issue behind the company? - Management confirmed that they are excited to move forward and focus on business opportunities after resolving the restatement [71] Question: How is the capital position of the company? - The company expects more modest operating cash flow losses in 2023 and is looking at options to refinance its existing debt facility [72][74] Question: What is the outlook for membership growth during the open enrollment period? - Management is confident in maintaining strong growth and has expanded payer relationships in several states [76] Question: Can you explain the sequential revenue trends and EBITDA loss? - The revenue shift of $9 million from the second quarter was due to risk adjustment payments recognized in the prior period [82] Question: What are the drivers of growth in Medicare Advantage lives? - The company has seen increased demand and successful expansions into new markets, contributing to the growth in membership [96] Question: What is the timeframe for converting accounts receivable into operating cash? - The cash flow lag is typically six to nine months, with some improvement expected in Q4 and into 2023 [100] Question: What are the expectations for profitability in 2023? - Management reiterated a commitment to achieving adjusted EBITDA profitability by 2024, with improvements expected in 2023 [88]