P3 Health Partners(PIII) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Capitated revenue increased by approximately 6% year-over-year, with total capitated revenue for the quarter at $341.6 million, or about $982 per member per month [5][14] - Adjusted EBITDA loss for the quarter was $45.9 million, with a year-to-date adjusted EBITDA loss of $85.2 million [7][17] - Normalized adjusted EBITDA year-to-date was a loss of approximately $70 million, reflecting the underlying performance of the business [7][17] - Medical margin for the quarter was $4.4 million, or $13 per member per month, compared to $500,000, or $1 per member per month in the prior period [15] Business Line Data and Key Metrics Changes - Membership was approximately 116,000 members, in line with expectations [7] - The operational improvement plan achieved over $100 million in EBITDA improvement year-over-year [6] - The company is moving forward with a strategic joint venture that will add approximately 13,000 fully accredited ACO members [6] Market Data and Key Metrics Changes - The normalized medical cost trend has remained flat year-over-year, despite rising cost trends across the industry [5][8] - Tier one providers performed 17.4% higher in STARS HEDIS gap closures compared to non-tier one providers in the first half of the year [9] Company Strategy and Development Direction - The company is focused on improving stability, strengthening operating discipline, and maturing the clinical foundation [5] - There is an intentional rationalization of the provider network to improve margin performance, including exiting groups that do not align clinically or economically [6] - The company aims to achieve meaningful profitability in 2026, supported by a stable operating model and favorable macro tailwinds [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core operating model, highlighting stable medical cost trends and improved provider alignment [20] - The company anticipates favorable macroeconomic conditions heading into 2026, with payers shifting towards more sustainable benefit designs [21] - Management revised full-year adjusted EBITDA guidance to a range of minus $110 million to minus $95 million, reflecting current expectations [8][18] Other Important Information - The company ended the quarter with $37.7 million in cash, maintaining a disciplined approach to working capital management [17][18] - There are $120 million to $170 million of EBITDA opportunities identified for the next five quarters [7][10] Q&A Session Summary Question: What convinces the plans to cede margin in their MA books? - Management indicated that payers are motivated by the investment made into their membership, particularly concerning high-risk patients and quality metrics [25][30] Question: Was the guidance reduction driven by a single payer or market? - The guidance reduction was more broad-based, primarily due to mid-year settlements coming in less than expected and structural controls being put in place [34] Question: How are non-core assets performing? - There are still headwinds associated with one market, but part of the EBITDA expansion opportunities for 2026 relates to contractual adjustments in that market [36] Question: What was the unfavorable impact in Q3 related to prior periods? - The total unfavorable impact in Q3 was $24 million, with a $21 million impact from mid-year true-ups [40] Question: What are the PMPM revenue growth expectations in 2026? - The aggregate expected improvement in premium is about 5%, with further guidance on coding improvements to be provided in the next quarter [45]