P3 Health Partners Inc.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from historic 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 obligations 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 our investor page of the P3 Health Partners website. I will now turn the call over to Dr. Abdu, CEO and co-founder of P3.

Good afternoon, everyone. I would like to kick us off today by saying how proud I am of our team and its performance and achievement over the last period. As you have heard me saying before, we've committed to our investor that we would deliver on a number of very impressive profitability metrics to validate the model, and we believe we have delivered. Our results will show that we have great momentum in our business model, and we are feeling very confident and optimistic how we are tracking in the second quarter and toward our 2023 overall performance. Today, we're updating our full-year 2023 adjusted EBITDA guidance to an improved range of lots of $55 to $35 million. This updated guidance from the prior range, a plus of $60 million to $40 million, reflect our confidence in the performance of the business, and all profitability data that we are sharing today will validate that. As I've shared with you in the past, 2023 is an inflection year in P3 HealthPartners' lives. We have a significant number of persistent lives that we've never had before. For the first time, 83% of our lives that we are serving today, they're persistent. And we believe that metrics is important as a first step to more clearly demonstrating the future profitability and trajectory of our model. The overall population funding had improved about 9.2%. up from $889 p.m. p.m. last year first quarter to $963 p.m. p.m. this quarter. Our medical margin for the quarter was $39 million. The medical margin percentage was 13.1, which is consistent with our guidance and with other public peers, and we view this as a validating data point for the P3 model. Our network contribution was $17 million. It is important to note that once we tip that point where network contribution exceeds operating expense, the pendulum will swing toward profitability, and we're quickly approaching that key threshold. The distance to reach that point is about $62 per member per month. And just to give you a context of this, we improve our funding by over $70 p.m. p.m. If we do that again, that will help us cross that bridge. We improved our medical costs by over $30 p.m. p.m. If we continue to do that again, we will cross into profitability. So it's important for us to see the levers that we're pulling. It's all improving about the health of our population, improving the funding, and improving the medical cost ratio. Our adjusted EBITDA showed very strong improvement, with a loss of $19.1 million compared to loss of $40.1 million in the prior quarter. Included in the Q1 2023 adjusted EBITDA is approximately $3 million in cost, that we do not expect on going forward basis. Adjusted EBITDA PMPM was a loss of $62 PMPM, an improvement of $71 PMPM compared to a loss of $133 PMPM in the fourth quarter of 2022. In our newer market, we have scaled up quickly. We are feeling optimistic and confident about what we're seeing. Oregon, for example, is quickly moving toward profitability and had a very insignificant loss in the first quarter. California has a positive adjusted EBITDA. Across all of the markets we serve, we noticed an extremely increase of the demand and a full, robust pipeline of growth opportunity, and we're very confident about our growth the rest of this year. in 2024. In Arizona, our performance is strong. Our focus is always on quality had made us the leader in the market as we serve. That focus on quality is clear, and I'll give you an example. We recently received full plus recognition from the CDC for our diabetic prevention and hemoglobin A1C program, which Dr. Bacchus will provide some color on later on. With these very solid results, we are well on our way to realizing the 200 million embedded EBITDA in our mature population and cohort, and that we believe that is inherent in the P3 model. 2023 is a year where we have committed to deliver the data points to validate the P3 model, and our first quarter results are a reflection of that. When we think about where we are as an organization, I believe that we are with the right team, in the right space, in the right business model, and we are on the right track to achieve profitability. We have done extensive financial benchmarking analysis comparing our results to our direct public peers, some of which that currently have $10 billion valuation. When they have similar revenue level, we are spot on. I will leave you with this. Our momentum is building, we're executing on our plan, and I expect to share with you more positive news in our second quarter results. I'd like now to turn the call over to Atul Kavkar, our CFO.

Thank you, Sharif, and good afternoon, everyone. I'll start today by providing detail around what we achieved in the first quarter and how we are progressing towards meeting our full-year guidance and anticipated profitability in 2024. Top line results for the first quarter were strong, with capitated revenue of $299 million and total revenue of $302 million. The capitated revenue includes a higher mix of persistent lives on our platform, which in turn improves profitability. In the first quarter of 2023, we had strong improvements in both medical margin and network contribution in the quarter. Our medical margin which represents the amounts earned from capitation revenue after medical claims are deducted, improved over the prior year period to $39 million, or $126 on a PMPM basis. Network contribution, which we define as medical margin less network expenses, improved by 114% over the year to $16.5 million. We believe that the trends in these two critical data points give a clear view of the progress we are making as we work towards reaching profitability in early 2024. Adjusted EBITDA loss was $19.1 million in the first quarter of 2023, a big improvement compared to the loss of $40 million in the prior quarter. Included in the Q1 2023 adjusted EBITDA is approximately $3 million in costs that we don't expect on a go-forward basis. The Q1 2023 adjusted EBITDA is in line with our expectations for the quarter. And as I mentioned on the last call, we anticipate the second and third quarter to show significant improvement as we begin to see the benefits from operational efficiencies and receive mid-year true-ups that will create a contour rather than a straight line spread of results. We expect the fourth quarter will be slightly softer than the second and third, as we expect to see some seasonality as we move into the colder months and into cold and flu season. That said, Q4 should still see a meaningful improvement over Q1. Our net loss in the first quarter of 2023 improved by 14% compared to the same period in the prior year, in part due to the 300 basis point improvement in SG&A as a percentage of revenue. For the remainder of the year, We expect platform expenses to continue to taper as we exit the second quarter and get to a more normalized go-forward run rate unencumbered by these costs present in Q1. We started the second quarter of 2023 with a cash balance of $95 million, although this is not reflected in the Q1 financials due to the timing of the transfer of funds from the capital raise we announced on March 31st, which were received in the first week of April. For the remainder of the year, We expect our cash burn to be significantly lower than the prior year, and we will end the year with more than adequate cash to operate until we reach positive cash flow. We are feeling really great about where we are from a liquidity perspective, even better now than we did on the last call. The capital raise put to rest our liquidity concerns, and we are now myopically focused on operational excellence. As I sit here today in mid-May, I'm feeling really good about Q2 and 2023 guidance. I want to remind you of our guidance for 2023. We still expect 2023 revenue to be between 1.2 billion and 1.25 billion, and we are increasing the adjusted EBITDA guidance to now be a loss of 55 million to 35 million, compared to the prior guidance of a loss of 60 million to 40 million. In addition to that, we are expecting our medical margin in 2023 to be in the range of 155 million to 175 million. Thank you all once again for your interest in the P3 story. And with that, I'll turn the call over to Dr. Bacchus, who will give you an example of how we are able to bend the cost curve at P3.