P3 Health Partners Inc.

Hello, and welcome to the P3 Health Partners Q2 2023 earnings 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 one on your touch-tone phone. To withdraw your question, please press star, then two. Please note, today's event is being recorded. I would now like to turn the conference over to your host today, Karen Blomquist. Ma'am, please go ahead.

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 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 factors that could cause actual results to differ from statements made on this call is contained in our periodic report file 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, including adjusted EBITDA, adjusted EBITDA per member per month, medical margin, and medical margin per member per month. 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 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 on this call is contained in the press release we issued today and in our SEC filings, which may be accessed from the Investors page of P3 HealthPartners' website. Thank you, and I will now turn the call over to Dr. Abdu, CEO and co-founder of P3.

Thank you, Karen, and welcome, everyone, to our second quarter 2023 conference call. I would like to kick off the call by saying we have had a strong second quarter, and I would like to thank our team for their hard work and contributions to this success. Adjusted EBITDA for the quarter was positive approximately $200,000 compared to a loss of $29 million in the prior year same period. As a matter of fact, adjusted EBITDA was positive in four out of the five states that we serve in this quarter. This is a reflection of what we have shared with you previously, that with more persistent lives on the P3 platform than new lives, and a higher level of maturation translate into funding improvement, medical cost improvement, and enhanced medical margin, which all flow through to the bottom line and lead to profitability. I would like to share with you a few helpful data points from this past quarter that are reflective of where the P3 model is operating now and serve as the foundation for our 2024 expectations that we have shared with you previously. Number one, medical cost ratio was 84% in the quarter, and that led to medical margin of about $50.5 million. We view this metric as the best reflection of the value we deliver to our stakeholder, the ability to bend the cost curve. and answer the key demand drivers of our business in the marketplace. Number two, medical margin was approximately $161 PMPM versus $72 PMPM in the same period of the prior year. If you were to compare that to the other value-based care provider peers, 161 PMPM or a 16% margin is squarely in the maturation range of any cohort and exceed Agilent margin of $113 PMPM for the second quarter of 2023. And we believe that we can even improve further. Number three, medical cost trend was about increase of roughly 1% for Medicare Advantage lives year over year. When you compare that to the overall market at mid-single digits or higher, it is clear that the P3 care model is working and bending the cost curve. Number four, operating expenses were $85 PMPM versus $102 PMPM in the same period prior year. That's down approximately 20% compared to the prior year. Number five, finally, Adjusted EBITDA PMPM was close to break even versus negative $95 PMPM in the same period of the prior year. An output of all great trends that I just noted and consistent with our previous remarks that we believe we are on the path to sustainable profitability on an adjusted EBITDA basis in the near term. The above metrics are just a few validating data points of P3 model. and our trajectory. And in particular, we are achieving great outcomes now and not just projecting in the future. As a result, we're updating our 2023 four-year adjusted EBITDA guidance ranges to loss of $50 to $30 million for the year from the original range that we gave in the beginning of the year of loss of $60 to $40 million. More to come from Atul on this topic. In the past, we have told you that we can expand into adjacent counties with minimal cost by leveraging the existing infrastructure. In the quarter, we did just that. We have entered Jackson and Josephine counties in the state of Oregon with a large national payer partners. Also in the second quarter, we made an important announcement. We named Bill Betterman, our chief operating officer, He recently joined us from OptumCare, where he led their Pacific Northwest operation and served as the chief operating officer of the Everett Clinic and the Seattle Poly Clinic. He was drawn to P3 because he is a strong believer in P3 mission and the affiliate model, with which he has significant prior experience running it and optimizing it. He is an exceptional operator and now runs the day-to-day operation of the company and local markets. As we think about achieving our long-term guidance for the company, operational excellence will be critical to achieving those goals. We believe that Bill is the right leader with the right experience to help us to do that. With that, I'm going to turn it over to our Chief Operating Officer, Bill Betterman. Bill?