P3 Health Partners Inc. Q1 FY2025 earnings call

1. 2025 Guidance: Reiterating 2025 guidance; 3 of 4 markets are breakeven or better in Q1; operating metrics from recent initiatives expected in Q2 and to grow sequentially; one payer is an outlier but collaborative in resolving issues; insurance benefit design changes driving better financial performance; funding increased 8% PMPM. 2. Strategic Initiatives: Executing a $130 million adjusted EBITDA improvement plan across operating efficiency, contracting, and operational execution. Operating expenses declined 18% sequentially and 11% year-over-year. Contracting is ahead of schedule on $35 million incremental EBITDA. Operational execution: care enablement model reducing medical expense, Oregon on track to have 60% Tier 1 enrolled by Q3; complex care program on track for $30M savings in 2025. 3. Quality Performance: Nearly 30% improvement in Part C measures from April 2024 to March 2025. 4. ACO REACH: Membership increased 60% over the past year, growing profitably and contributing $8M EBITDA.

Total revenue for Q1 2025 was $373 million, a 4% decrease from the prior year. Average membership in Q1 2025 was approximately $116,000, an 8% year-over-year decline. Per member funding increased by 8% to $1,063 on a PMPM basis compared to full year 2024. Medical margin for Q1 2025 was approximately $17 million or $49 PMPM, down from $37 million or $96 PMPM in Q1 2024, with a $23 million negative impact from prior year claims related to a single regional payer partner. Adjusted EBITDA for the quarter was a loss of $22 million or $64 PMPM, with the majority attributable to a single underperforming contract. ACO REACH contributed $2 million of positive EBITDA in Q1 2025, representing a $5 million sequential improvement and a $2 million year-over-year increase. ACO membership has increased by 60% over the past year and is growing profitably, contributing $8 million of EBITDA as reflected in the full year guidance.

Reiterating 2025 guidance based on 3 of 4 markets being breakeven or better in Q1, operating initiatives to deliver increasing benefits from Q2, one outlier payer collaborative in resolving issues, 8% PMPM funding increase, and ACO REACH contributing $8M EBITDA as reflected in full year guidance.

One payer partner is underperforming, but is collaborative in addressing issues. There may be challenges in fully realizing operational improvements in a timely manner due to factors like V-28 changes.

Q: On the $130 million EBITDA initiative, how much materialized in Q1 and expectations for rest of year?

A: Leif said some OpEx savings were initiated in Q1 with the full run rate expected in Q2-Q4, contract rationalization would be ratably across quarters, and back-end weighting of operational execution items for larger impact in the back half.

Q: Engagement and satisfaction trends with P3 Restore program?

A: Amir said the P3 Restore program has key providers going through, becoming ambassadors, with 9 physicians having gone through the program, and expecting more as the program is disseminated to other physicians.

Q: Details on outlier payer, percentage of capitated revenue, cost drivers?

A: Aric said no single payer is more than about 22% of the overall top line revenue; Leif clarified costs were isolated to 2024 inpatient claims; Aric added the outlier payer had claims migration difficulties causing delay.

Q: Accelerated trends in Medicare Advantage and market performance?

A: Amir said not seeing accelerated trends, seeing improvement in utilization; Leif and Aric said one market with the outlier payer is underperforming, while the other three markets are operating at or near breakeven.