P3 Health Partners Inc.

Good afternoon, everyone, and welcome to the P3 Health Partners third quarter results conference call. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference is being recorded. I will now turn the conference over to Karen Blomquist, Vice President of Investor Relations of P3, 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 Law, 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 these statements made on this call is contained in our periodic report 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, including adjusted operating expense, adjusted EBITDA, adjusted EBITDA per member per month, medical margin, medical margin per member per month for persistent lives, and cash burn. these non-GAAP financial measures are in addition to and not a substitute or superior to the 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 that we issued today and in our SEC filings, which may be accessed from the Investors page of the P3 Health Partners website. I will now turn the call over to Dr. Abdu, CEO and co-founder of P3.

Thanks, Karen, and thank you all for joining our third quarter 2023 conference call. I would like to update you all on our third quarter financial results. 2023 guidance as well as provide preliminary 2024 guidance. I will start off with some few big picture comments. We are pleased to be able to report that we are tracking towards our 2023 full year guidance as expected. Our overall momentum remains very strong. While our third quarter EBITDA is lower than anticipated by approximately 15 million, This is predominantly due to some timing elements impacting our EBITDA realization, which Atul will provide further details on shortly. The key point is that we expect about $15 to $20 million of final payment for 2023 for 2022 data services to be realized in the fourth quarter, and that will drop down to adjusted EBITDA. I'm also pleased to be able to report that our cash burn defined as cash flow from operation list CapEx for the third quarter was $8 million, and we are on track to be cash flow breakeven in 2024 as previously discussed. We are providing a preliminary 2024 adjusted EBITDA guidance of positive 20 to positive $40 million. The guidance range assumes $60 million EBITDA from Persistent Life that's our baseline. We will provide more detailed guidance in January 2024. On to our third quarter and year-to-date highlights. Revenue for the quarter was $288 million. an increase of approximately 16% over the prior year's quarter. And year-to-date revenue of $920 million also grew 16% versus the prior year period. Medical margin for the quarter was $36 million, $126 million year-to-date, on track to meet our guidance of $155 to $175 million for the year. Medical margin per member per month for the quarter on all lives was $115 per member per month and $135 PM-PM on a year-to-date basis. Medical margin PM-PM for our persistent life was $241 PM-PM on a year-to-date basis. that is consistent with the mature market range of 150 to 200 plus PMPM reported by our peer Agilent, which we consider valuable benchmark. Resistant lives are defined as the lives were on our platform in December 2022 and are on our platform in January 2023. Medical claim expense, PMPM, for our Medicare advanced lives were approximately negative 2% year-to-date. That is a reflection of the power of the P3 model and ability to bend the cost curve with more persistent lives on our platform. Adjusted EBITDA for the quarter was negative 22.3 million compared to a negative 40.3 million in the prior year. The $22.3 million includes the impact of a non-cash in the quarter $3.8 million through-up of employee health care costs and does not take into account the accrual for the revenue recognition for final payment of 2023 for data service 2022 that we expect will be captured in the fourth quarter. Year-to-date adjusted EBITDA was negative 41.2 million compared to the prior year of negative 87.9 million, which is 53% improvement. Said differently, we cut our losses in half. As we look forward to 2024, we would like to provide you with some insight as to how we see next year shaping up. As I just shared, our baseline for 2024 starts with the expectation that our persistent lives will contribute approximately $60 million of EBITDA in a year. Additionally, we expect to take on meaningful new lives and growth in 2024. We are expecting to achieve this growth in a very capital efficient manner. by continuing to focus on existing and adjacent markets while leveraging our existing infrastructure in a meaningful way. We have various conversations ongoing with payers, providers, and health systems, including potential JV and strategic partnership opportunities. Based on all this, I remain bullish on our opportunities to thrive in the years to come. Now, I would like to turn the call over to Bill Betterman, our Chief Operating Officer.