P3 Health Partners Inc.

Greetings. Welcome to P3 Health Partners first half 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Karen Blomquist, Vice President of Investor Relations. Thank you. You may begin.

Thank you, operator, and thank you for joining us today. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under the U.S. federal securities laws, including statements regarding our financial outlook and long-term targets. These forward-looking statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC. The forward-looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements. We will refer to certain non-GAAP financial measures on this call. These non-GAAP financial measures are in addition to and not a substitute or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures. For example, other companies may calculate similarly titled non-GAAP financial measures differently. refer to the appendix of our earnings release for reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. Information presented on this call is contained in the press release we issued today and in our SEC filings, which may be accessed from the investor page of the P3 Health Partners website. Joining me today on the call are Dr. Sharif Abdu, Chief Executive Officer, Eric Atkins, Chief Financial Officer, Dr. Amir Bakas, Chief Medical Officer, and Erin Duraxian, Chief Accounting Officer. Dr. Abdu will provide a summary of the company's progress during the past year and in recent weeks before turning it over to Eric for a review of the company's financial results. Following their prepared remarks, the management team will be available for your questions. I will now turn the call over to Dr. Abdu.

Thank you, Karen. Hello, everyone, and thank you for joining us on the P3 Health Partners first half 2022 earnings conference call. We're very excited to get everyone up to speed on the significant progress we've made since our IPO in December 2021, and wanted to assure you that it is our intention to normalize the cadence of our earnings, to formalize our investment outreach and to provide regular opportunity for interactive dialogue. We appreciate your attendance and interest today and look forward to our discussion on this and the future quarterly calls. In the first half of 2022, we are off to a strong start and have made significant progress in our mission to be the best health partners for our patients, our providers, and our payers. On today's call, I will update you on the significant growth we have executed on since our IPO and how that growth will shape our strategic initiatives over the next 12 months. Then I would like to describe the mission that Dr. Bacchus and myself have been on for more than two decades before turning the call over to Eric Adkins, for a review of our financial results. And finally, over to Dr. Bacchus to provide you an example of P3 in action. Today, we are increasing our revenue guidance for full year 2022 as a result of our strong membership growth. By June, we had already exceeded our prior year end 2022 guidance that we gave in March of between 90,000 and 95,000 patients. We ended the first half of 2022 with approximately 102,000 at-risk Medicaid Advantage members on our platform. We are now in 18 markets in five states. which includes our successful expansion into California in January of 2022, the addition of new facility in Pahrump, Nevada, and our expanded presence in Arizona. We now have more than 2,600 primary care physician in our network, and we have maintained a 98% physician group retention rate since 2018. In addition, We were recently accepted into the Accountable Care Organization or ACO REACH program for 2023, and we are excited to open the door to this new way to reach new members. This growth reflects the drive, commitment, and passion of our P3 team to lead the transformation of healthcare. Our care model works, evidenced by the population and the cohort that are on our platform for over 36 months. The data shows that these populations' medical costs had improved on an average about 11% per member per year. We are seeing consistent improvement in our medical margin, calculated as capitated revenue minus medical expense. as we continue to grow and gain efficiency across our platform. We also had 217 basis point improvement in gross margin in the first half of 2022, comparing the first half of the prior year. Our year-to-date results for 2022 demonstrate the success of our model. Revenue for the first six months of 2022 was $543 million, an increase of 84% over the first six months of the prior year. At the end of June 2022, we grew our at-risk Medicaid Advantage membership to approximately 102,000, a 52% increase compared to 67,000 patients at the end of 2021, We also have roughly 26,000 patients on our platform beyond those enrolled in Medicaid Advantage. And we have invested across the enterprise to accommodate our disciplined, purposeful growth strategy. Now the current objective is to empower and engage the roughly 35,000 new patients under our care and to provide their physician with the team tools and technologies to improve the care for those patients. By serving as an expansion of the provider's practice, our team collaborate with the patient's caregivers and provides wraparound services to patients which help them navigate the healthcare system and help them achieve the best possible clinical outcome. We believe we have built the necessary infrastructure to onboard these new patients, adding roughly 80 new P3ers since the beginning of the year to provide the necessary care for these new patients and fill the roles necessary for life as a public company. Our care model works, evidenced by the population and the cohort that are on our platform for over 36 months. The data shows that these populations' medical costs had improved on an average about 11% per member per year. So the priority for the next 12 to 24 months, as always, will be realizing better health for those new patients, thus improving our profitability. We are extremely focused on the cash flow and meeting the near-term liquidity needs of the business. As an affiliate model, we believe we are the most capital efficient model and we do not require significant funding for bricks and mortars as some of our peers do. The significant growth we have seen over the past two quarters requires additional investment for personnel, infrastructure, training, and IT. These investments are critical to support our recent growth. As I said, We have shown incredible growth in the first six months of 2022, and now we need to integrate that growth into our platform as we empower and engage patients with the team's tools to support better clinical outcomes. Now, for those of you new to our story, I'd like to describe why our model works. Value-based care arrangements seek to address the biggest challenges facing the U.S. healthcare system. Out-of-control costs, suboptimal quality, and poor patient access to primary care. For these reasons, the U.S. healthcare system spends significantly more while generating poorer quality indicators than other industrialized nations. At P3, our cater model seeks to address these problems by navigating, coordinating, and integrating care for our patients. Once our network is established, we deploy our teams, tools, and technologies around the existing provider-patient relationship in the local market to engage and support them in providing wraparound care for our collective patients that we are privileged and honored to serve. Our care model begins with identifying the needs for all of our patients, old and new. We leverage our proprietary technology and tools to assist us in identifying the high risk, rising risk, and high cost patients. These patients make up approximately 10% of our network membership, but ultimately make up approximately 70% of our medical costs. Our P3 care management teams serve as an extension of our provider offices to assure better navigation, integration, and coordination of care for these patients across the care continuum. So who wins in our model? Number one, patients win. With measurable improvement in clinical outcome through better patient access to primary care physician, our care plans are individualized and catered to the specific need of our patients. We provide patient support service that allow for holistic patient-focused care to provide the best possible outcome for the patients we are privileged and honored to serve. Number two, providers win. With incentives that align better medicine with coordinated care, our providers are incentivized to focus on the wellness and disease prevention, allowing them to focus on the quality of care rather than the quantity of services. It is our mission to align the social, moral, and economic incentive between physician and patient they serve. Keep the patients happy and healthy. Costs will be lower. In turn, the physicians are provided with economic incentive so they share in the savings achieved when patients have better health outcomes. Number three, payers want. As payer partners enjoy higher healthcare quality scores, improved patient documentation, and ultimately the ability and resources to offer improved benefit to their members, which improves member retention and drives higher growth. And finally, we believe our model will enable the company and ultimately our investor and shareholders to win. As I mentioned earlier, Evidence by the population and the cohort that are on our platform for over 36 months, the data shows that these populations' medical costs had improved on an average about 11% per member per year. We also had 217 basis point improvement in gross margin in the first half of 2022, comparing to the first half of the prior year. We believe that over the long term, our model of care and operating model will generate adjusted EBITDA margin of 20%, and we continue to expect to reach positive adjustment EBITDA in 2024. We are very excited about the opportunities in front of us, including being recently accepted in the ACO REACH program for 2023. and we believe we are in the right space with the right team and the right model. In summary, P3 is off to a great start in 2022. We exceeded for full year 2022 patient life guidance by the middle of the year of 2022. We increased our full year revenue guidance. Adjusted EBITDA loss improved $41 per member per month since year end, a 33% improvement over the same period last year. We had 217 basis point improvement in gross margin in the first half of 2022 compared to the same period in the prior year. For the remainder of 2022, we will continue to focus on operational excellence, delivering improved patient outcomes, and executing in our disciplined, purposeful growth strategy, which focus not only on growth, but prudent management of the balance sheet, garnering the necessary liquidity to achieve our vision and maintaining a clear path towards profitability. Now, I'd like to mention that we announced earlier today that Eric Adkins, our CFO, will be leaving P3 for a new opportunity at the beginning of November. He has been commuting to Henderson, Nevada from Colorado and has taken a new role in Colorado near his home. Though I am sad to see him go, I know that there is no price that can be placed on the time with one's family, especially since the recent arrival of his third child. I'm grateful for his many contributions and for being part of the transition from a private company to a public one. He has built infrastructure necessary for us to move forward as a public company and a solid finance team. One of the key members of that team is Aaron Dharakjian, who joined P3 earlier this year as a chief accounting officer. Her leadership has been instrumental in working to get P3's filing current, and we announced today that we have appointed Erin as an interim CFO. Her expertise in technical accounting, capital markets, external reporting, and SOX compliance will provide the stability through the transition. We have begun a CFO search with the help of National Recruiting Agency, and we will continue to have our outside advisors, Creativity and E&Y, supporting our effort. I want to wish Eric well as he begins the new chapter of his career and enjoy his young family and new baby. I also wanted to thank the finance team for their hard work and effort to get us here today. With that, I will now turn it over to Eric Adkins to our financial services.