P3 Health Partners Inc.

Good day and welcome to the P3 Health Partners second quarter 2024 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ryan Halstead, Jr., Investor Relations, Gilmartin Group. 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 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 file 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 these 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, medical margin per member per month for persistent lives and cash used. These non-GAAP financial measures are in addition to and not a substitute for 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. Please refer to the appendix of our earnings release for a 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 Eric Kaufman, CEO of P3 Health Partners.

Good afternoon, everyone. Let me start by expressing how thrilled I am to be at the helm of P3 as CEO from our first quarter. P3 Health Partners is a scaled, capital-light platform comprising 2,900 PCPs in five states across 27 counties, and we are taking full risk at scale on 128,100 lives. I would first like to emphasize some key aspects of P3 that give me confidence that we're in a great position to deliver value to our patients providers, payers, along with our investors over a multi-year time horizon. First, we are operating in a large and rapidly growing market with our total addressable market approaching $1 trillion, further accelerated by CMS's goal to have 100% of Medicare fee-for-service beneficiaries in value-based care arrangements by 2030. Our core focus is the Medicare market, of which Medicare Advantage represents approximately 51% of the overall market or nearly 31 million Medicare eligible lives in 2023. Less than 15% of contracts in the Medicare space are full risk today, which means we have tremendous opportunity to expand our reach through new contracts and geographies over time. Our unique business model is built on a fully delegated risk strategy, which offers three key advantages. First, It directly links our company into the daily operations of our health plans, creating avenues for collaboration and building strong partnerships. Secondly, it facilitates meaningful interactions with clinicians, essential for success in value-based care. Lastly, it provides early upstream insights into requested services, ensuring consistent and best practice protocols are followed for a superior patient experience. Next, our diversified payer mix puts us in a position of strength. Today, no one payer makes up greater than 20% of our revenue. We're partnered across local, regional, and national health plans, and we're seeing a clear trend in this volatile MA market. Health plans are turning to P3. They value our expertise in managing senior populations and our proven ability to help primary care physicians succeed in value-based care. This positions us as a key partner to their continued success. Similar to our strong position with the top health plans in our markets, we enjoy excellent relationships with many of the leading independent primary care groups that serve our patients. One of the key aspects I've identified early on is the dedication among the clinicians in our network. We partner with 2,900 primary care physicians, but our reach goes well beyond that with thousands of additional clinicians, such as specialty physicians, to round out the entire patient care continuum. and all are motivated by their own independence and ability to provide excellent value-based care to their patients. Building on these key strengths, I have identified several initiatives during my first 90 days as CEO that will further enhance our capabilities and drive sustainable profitability. First, we are intensifying our focus on star ratings performance. We are targeting care quality gaps, such as improving medication adherence, increasing preventative screenings, and enhancing chronic disease management. At the same time, we are ensuring patients with chronic conditions are being linked back to their primary care physician to ensure that they get the care that they need. We know what the unique needs of our patients are. There are geographical nuances that allow us to develop targeted interventions to address needs and get them the care that they need. Upon evaluating our existing risk contract portfolio, I've identified substantial opportunities to better align our agreements with payers. Our goal is to ensure these contracts accurately reflect our enhanced value proposition, which has significantly evolved over the past two years. In doing so, we are ensuring better care for our members while improving the financial prospects of our business. Transitioning to our provider network performance, While our provider network is an incredible asset we enjoy, we have identified opportunities to elevate our provider partners to an even higher level of differentiated patient outcomes. We've always focused on our efforts on those provider groups that show the most potential for improvement, and we will continue to put energy and effort behind our partners. However, going forward, when those best efforts don't lead to improved performance, we will adjust these network relationships with underperforming provider groups accordingly. We've already begun addressing these provider groups and will be further scrutinizing our partnerships in the coming quarters. Next, we're pursuing smart growth strategies with a particular focus on increasing member density within our existing PCPs. For example, in ACO REACH, we are enhancing the depth of our existing practices by adding Medicare ACO REACH membership to capture more mindshare of the providers we serve. This quarter, we recorded 1,700 new voluntarily aligned ACO Lives, bringing our total ACO Lives to 12,700, up from 7,400 at the end of last year. Additionally, we submitted 200 PCPs into ACO REACH in this last cycle for a January of 2025 start date. One of the first principles of my management team is to deliver the highest level of service to our partners, providers, and patients, and to do so profitably. The company has worked hard over the past quarters to make our operations more efficient, and I expect a continued evolution of our business. We are seeing an increasing amount of momentum with medical cost reduction initiatives. I'm looking at every part of our operations across people, process, and technology for opportunities to improve efficiency. we will employ an even higher level of rigor, accountability, and focus on return on invested capital in the future. Turning to our second quarter financial performance, we reported strong Q2 results, which were in line with our expectations. Starting with the top line, our revenue for the second quarter of 2024 grew approximately 15% year over year, supported by a strong pipeline, an increased retention rate of our PCPs of 96%, and an improving persistency rate at 90% of patients. Turning next to our medical cost ratio, medical costs per member per month were $869, a decrease of 6% sequentially, supporting our view of a normalizing utilization trend and reflecting strong execution. Moving on to adjusted EBITDA, we continue to show improvement on a quarter-over-quarter basis, improving our adjusted EBITDA loss by approximately 50%. For the second quarter, our adjusted EBITDA loss was $9 million. The improvement in our medical cost ratio was offset by a conservative reserve approach. Atul will expand on this in his section. Overall, we are on track with the initiative set forth and acknowledge the work that needs to be done to be able to drive us towards sustained profitability. Accordingly, we are reiterating our previous full-year guidance of adjusted EBITDA in the range of positive $20 million to positive $40 million. With that, I would like to turn it over to our CFO, Atul Kapikar.