P3 Health Partners Inc. Q1 FY2024 earnings call

• Top line growth: Revenue for Q1 2024 grew ~29% YOY, supported by a strong pipeline and 8% YOY increase in per member per month funding despite membership growth and benchmark changes.
• Medicare lives: Grew to ~126,800 lives (23% YOY), exceeding the low end of full-year guidance range, including ~11,000 ACO REACH lives up from 7,400 at year-end 2023.
• Member renewal: Approximately 90% of lives from December 2023 remained with the company in January 2024, up from 86% last year.
• Operating expenses: Decreased 26% YOY to $26.2 million, reflecting robust operational efficiencies.
• Medical expense: Down 12% sequentially, with downward trends in admits per 1,000, emergency department visits per 1,000, and observation rate per 1,000.
• Partnership: Strategic partnership with Innovaccer to leverage advanced AI platform for predictive modeling, quality gap closure, and actionable data at point of care.
• Leadership transition: Sherif Abdou stepping down as CEO, with Aric Coffman taking over, and Sherif serving as adviser and remaining on the board.

In the first quarter of 2024, P3 Health Partners' revenue grew approximately 29% year-over-year to $388 million. Medicare lives grew to approximately 126,800 lives, a 23% year-over-year increase, including approximately 11,000 ACO REACH lives. Operating expenses improved to $26.2 million in Q1 2024 compared to $35.6 million in Q1 2023, a 26% year-over-year decrease. Medical expense in the quarter was $918 per member per month (PMPM), down 12% sequentially from $1,042 PMPM. Revenue contribution from various segments isn't explicitly broken down beyond the overall top line growth and Medicare life details.

• Reaffirmed full-year 2024 guidance: Adjusted EBITDA ranging from +$20 million to +$40 million, revenue between $1.45 billion and $1.55 billion, MA members between 125,000 and 135,000, and medical margin between $230 million and $250 million ($165 to $175 PMPM).
• Expectations: Potential significant reserve release with 2023 actual claims nearly complete, strong membership growth, increased persistency, expected increase in sweep accruals, and daily key indicators pointing to more normalized utilization compared to 2023.

• Timing difference in Part D rebate recognition: Expenses for drugs are recognized in the current quarter, but rebate revenue is deferred to subsequent quarters, impacting EBITDA in the short term.
• Reserve conservatism: Initial conservatism in IBNR and medical expense accruals may need alignment with actuaries as actual claims run out data becomes more mature.
• Dependence on market conditions: Membership growth, utilization trends, and rebate recognition are subject to market dynamics and plan-specific data.

Q: Brooks O'Neil asked about resuming growth in new markets and outreach from MA plans.

A: Aric Coffman stated growth should be measured with solid underwriting, and Amir Bacchus mentioned high interest from MCOs and MA plans in multiple areas.

Q: Joshua Raskin inquired about PMPM increase, V28 impact, and reserve methodology.

A: Aric Coffman said PMPM was generally in line with expectations, Sherif Abdou discussed RAV accrual and reserve methodology changes, and Atul Kavthekar explained rebate timing and reserve corroboration with actuaries.

Q: Gary Taylor asked about Part D rebate recognition and reserve release.

A: Atul Kavthekar explained timing of rebate recognition and reserve release potential, noting collaboration with third-party actuaries to align cushion amounts.

Q: Jack Dunston asked about liquidity and partnership with Innovaccer.

A: Atul Kavthekar discussed cash position and timing sensitivity, while Sherif Abdou explained the partnership with Innovaccer for AI and data capabilities, and Bill Bettermann and Amir Bacchus talked about the long-term vision for ACO REACH.