P3 Health Partners Inc.

Good day and welcome to the P3 Health Partners 4th Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Karen Blomquist, Director of Investor Relations. Please go ahead.

Thank you, Rocco, 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 operation. 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 these factors could cause actual results to differ from statements made on this call as contained in our periodic reports filed with the FCC. 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 thank you and i will now turn the call over to dr abu thanks karen good morning everyone and thank you for joining our call today i am delighted and excited to to be here today to announce our new financing

and to review the results of the year 2022. We are very excited about the progress that we've made in 2022 and the possibilities we see for our populations, our teams, and our business, and for our shareholders as well. Today, I will discuss three points. Number one, the update on the liquidity and how the capital raise that we just announced early this morning will get us through to cash flow positive and profitability in 2024. Number two, I will share with you our insight and our determination to reach profitability in the year 2024 with a clear path to that end. And finally, we'll discuss the possibility and impact and the questions that arose about the CMS advanced notice and any other changes in the risk adjustment factor calculations by the CMS. So first, let me address the capital raise that we announced earlier today. Through a deal with our largest shareholders, Chicago Pacific, founders, and other shareholders, including Lovett Partners, we have secured approximately $90 million in funding through an equity agreement. We are grateful for the support and the confidence our shareholders, Chicago Pacific Founders, Levitt Partners, and other shareholders as well. The capital that we raised will provide us the financial resources to realize our strategic vision for P3 and We believe, and we will address the details of the capital raise tool, our CFO will address those calculations, that it's sufficient to get us through to cash flow positive and profitability in 2024. As a matter of fact, we're confident that that will get us in early 2021. 2024 profitability and cash flow positives. Second, I want to share with you our clear path and insight into how we arrived to profitability in 2024. Our consistent and impressive membership growth is continuing in 2023 and in 2024 class, we've already have in the pipeline very impressive and consistent growth in all the markets that we are in already. Second, let me address the funding per members. According to the files we received, The members that were with us in January 2022 have demonstrated an average of about 15 to 16 percent increase in their funding in January 2023. And overall, all the population in 2023, new and persistent, have shown 7.7% increase in funding over January 2022. Our medical costs continue to improve by an average of 2.5% year over year. And our medical margin in 2022 and as medical margin calculated by capitated revenue minus medical claim expense, as we reported in our filing, was $62 million in 2022. And we project and believe that that will be increased by 50 to 100% in year 2023. And as we continue, and our leadership and our team performing consistent with the prior years, that will lead to a clear path to profitability with membership growth in the markets that we're in, funding consistent improvement year over year, medical margin improvement year over year. And finally, I want to address our operating expenses. we have significantly focused and improved our operating expenses year over year. If you clear all the operating expense in 2022 from all the one-time events and one-time costs related to the long audit that we had to go through in 2022 and all the professional fees attached to it, We still have shown in 2023, a 23 to 25% improvement in our operating costs year over year. So consistent demand and membership growth in the markets that we're in that allow us to grow with the existing providers and existing payer and existing engaged environment and patients. Improvement in funding in a modest way that we've shown year-over-year. Consistent improvement in the medical cost of 2 to 2.5% year-over-year. And that leads to advance of the medical margin significantly in 23 and 24. reduce operating expense. That is the clear path to our profitability. That is why where we sit here today, we're very confident that we'll reach profitability in early 2024. Finally, let me address the question about CMS advanced notice and other regulatory proposals to address the risk adjustment factor and the funding in the Medicaid Advantage Program. Our risk adjustment factor is very modest. It's 1.0 to 1.1 across the board for all populations that we are privileged and honored to serve today. We believe from all calculations that any removal of diagnoses or codes in advance notice or adjustment to the coefficient factors of calculating the risk adjustment factor will have no material impact in the population that we serve. And by checking the prevalence of the diagnoses that have been removed in our populations and the other impact factors and coding intensity, we see no material impact whatsoever on our funding in the coming years. And we will wait and see the final ruling on Monday as well. So what I shared with you today in excitement about the support of our current shareholders and the capital raise that allow us to have a solid liquidity through profitability and cash flow positive in early 2024. a clear path and insight into our path to profitability in early 2024. And finally, we addressed the question about funding by CMS. With that, I'm going to turn it over to Atul for review of our financial results and give you more detail around our new financing and guidance, as well as high-level look at our 2024 expectations.