P3 Health Partners Inc. Q2 FY2025 earnings call

• Nearing full execution on the $130 million EBITDA improvement plan. • 3 of 4 markets are breakeven or better through the first half of the year. • Medical cost trends remain materially flat excluding prior period adjustments. • Successfully renegotiated a contract with a major payer for approximately $20 million in contractual improvements. • Near finalization of senior debt extension to ensure strong cash position. • Care enablement model driving almost 3x improvement in care gap closures, with 65% of membership with Tier 1 providers. • Retooled utilization management, care management, and payer reconciliation teams. • Growth pipeline exceeds 35,000 members, with anticipation of a strategic joint venture adding 13,000-14,000 lives.

Membership for Q2 totaled 115,000 members. Capitated revenue for Q2 was $352 million, with total revenue of $356 million, down 6% year-over-year. Adjusted EBITDA for the quarter was a loss of $17 million. Excluding prior period adjustments, the underlying business achieved an EBITDA loss of $8 million, which was a $5 million improvement from normalized Q1 results. Year-to-date adjusted EBITDA loss was $39 million, but excluding prior period adjustments, the loss improved to $22 million for the first half of 2025.

• Revised full-year adjusted EBITDA guidance to a range of $39 million to $69 million loss. • Anticipate $120 million to $170 million of additional EBITDA improvement in 2026, driven by base rate increases, operational levers, contract improvements, and disciplined provider network management. • 40% of the 2026 EBITDA improvement opportunity from base rate changes and burden of illness accuracy/quality; 10% from market compression of benefit design and reduction of PPO offerings; 30% from operational levers like utilization management and clinical programs; 20% from contractual improvements and provider network management.

• Prior period adjustments from claims migration issues and late data from payers. • Quality measure misses leading to revenue reductions. • Exposure to a single payer in a market, with efforts made to limit exposure for 2026. • Impact of noncore assets on financial performance.

Q: Could you give the causes of prior year catch-up and plans around data exchange?

A: Aric Coffman and Leif Pedersen explained prior year catch-up related to claims migration, late data from a payer, and quality measure misses. They discussed revamping data exchange processes with payers.

Q: How confident are you that plan partners have rebid their MA books appropriately for 2026?

A: Aric Coffman stated they'll have final bid info publicly when others do, but plans have intent and directionally positive changes in benefit design and networks.

Q: What's the delta in guidance and what are noncore assets?

A: Leif Pedersen explained guidance revision includes prior period adjustments, underperformance in the Oregon market, and other factors. Noncore assets' performance also contributed.

Q: Talk about RAF score adjustment and conversations with plans.

A: Leif Pedersen said RAF score adjustment was an isolated incident with a payer, resolved with process improvements. Aric Coffman mentioned positive collaboration in conversations with plans, with some contracts still in negotiation but progress being made.

Q: Renegotiation efforts and EBITDA opportunity timing?

A: Aric Coffman said 75% of renegotiations are complete, with changes impacting 2025 and beyond. EBITDA opportunities are broken into buckets like base rate, benefit design, operational levers, and contractual pieces, with timing varying across buckets.