Management to Host Conference Call and Webcast
August 7, 2023 at 4:30 PM ET
P3 Health Partners Inc. (“P3” or the “Company”) (NASDAQ: PIII),
a patient-centered and physician-led population health management
company, today announced its financial results for the second
quarter ended June 30, 2023.
“The results for the second quarter of 2023 show the power and
trajectory of the P3 model. I’m delighted to say we had solid
improvement across all key metrics. The strength we have seen in
2023 has given us the stability and momentum to drive our next
phase of success in 2024, and beyond,” said Dr. Sherif Abdou, CEO
of P3.
“We experienced approximately 1% medical cost trend for the
quarter. That is a reflection of the effectiveness of P3’s model
and the increasing maturity of the membership on P3’s platform. The
value we deliver and demand for P3’s model is rooted in our ability
to bend the cost curve for our patients, providers, and payor
clients,” said Bill Bettermann, COO of P3.
Second-Quarter 2023 Financial Results
- Capitated revenue was $325.6 million, an increase of 21.9%
compared to $267.1 million in the second quarter of the prior
year
- Net loss was $27.6 million, compared to a net loss of $903.1
million in the second quarter of the prior year. The second quarter
of 2022 was negatively impacted by a goodwill impairment charge of
$851.5 million
- Net loss PMPM was $88 compared to a net loss PMPM of $2,995 the
second quarter of the prior year
- Adjusted EBITDA(1) was $0.2 million, compared to an Adjusted
EBITDA loss of $28.7 million in the second quarter of the prior
year
- Adjusted EBITDA PMPM(1) was roughly breakeven, compared to an
Adjusted EBITDA loss PMPM of $95 in the second quarter of the prior
year
- Gross profit was $26.8 million, an improvement of $24.8 million
compared to $2.0 million in the second quarter of the prior
year
- Gross profit PMPM was $86, an improvement of $79 compared to $7
in the prior year
- Medical margin(1) was $50.5 million, an increase of 132.1%
compared to $21.8 million in the second quarter of the prior
year
- Medical margin PMPM(1) was $161, an increase of 123.2% compared
to a medical margin PMPM of $72 in the prior year
First-Half 2023 Financial Results
- Capitated revenue was $624.3 million, an increase of 16.3%
compared to $536.8 million in the first half of the prior year
- Net loss was $80.0 million, compared to a net loss of $963.9
million in the first half of the prior year. The first half of 2022
was negatively impacted by a goodwill impairment charge of $851.5
million
- Net loss PMPM was $129 compared to a net loss PMPM of $1,613 in
the first half of the prior year
- Adjusted EBITDA(1) loss was $18.9 million, compared to an
Adjusted EBITDA loss of $47.6 million in the first half of the
prior year
- Adjusted EBITDA PMPM(1) loss was $30, compared to an Adjusted
EBITDA loss of $80 PMPM in the first half of the prior year
- Gross profit was $43.3 million, an improvement of 345% compared
to $9.7 million in the first half of the prior year
- Gross profit PMPM was $70, an increase of 329% compared to $16
in the first half of the prior year
- Medical margin(1) was $89.7 million, an increase of 92.6%
compared to $46.6 million in the first half of the prior year
- Medical margin PMPM(1) was $145, an increase of 85.9% compared
to a medical margin PMPM of $78 in the prior year
Full-Year 2023
Guidance
Year Ending December 31,
2023
Low
High
Medicare Advantage Members
115,000
120,000
Total Revenues (in millions)
$
1,200
$
1,250
Medical margin(2) (in millions)
$
155
$
175
Medical margin(2)PMPM
$
120
$
130
Adjusted EBITDA(2) Loss (in millions)
$
(50
)
$
(30
)
(1) Adjusted EBITDA, Adjusted EBITDA per member, per month
(“PMPM”), medical margin and medical margin PMPM are non-GAAP
financial measures. For reconciliations of these measures to the
most directly comparable GAAP measures and more information
regarding the Company’s use of non-GAAP financial measures, please
see the section titled “Non-GAAP Financial Measures” and the tables
at the end of this press release. (2) The Company is not able to
provide a quantitative reconciliation of guidance for Adjusted
EBITDA loss, medical margin and medical margin PMPM to net income
(loss), gross profit and gross profit PMPM, the most directly
comparable GAAP measures, respectively, and has not provided
forward-looking guidance for net income (loss), gross profit (loss)
or gross profit (loss) PMPM because of the uncertainty around
certain items that may impact net income (loss), gross profit
(loss) or gross profit (loss) PMPM that are not within our control
or cannot be reasonably predicted without unreasonable effort. For
more information regarding the non-GAAP financial measures
discussed in this press release, please see “Non-GAAP Financial
Measures” below.
Title & Webcast
P3 Health Second-Quarter Earnings
Conference Call
Date & Time
August 7, 2023, 4:30pm Eastern Time
Conference Call Details
Toll-Free 1-877-270-2148 (US)
International 1-412-902-6510
Ask to be joined into the P3 Health
Partners call
The conference call will also be webcast
live in the "Events & Presentations" section of the Investor
page of the P3 website (ir.p3hp.org). The Company’s press release
will be available on the Investor page of P3’s website in advance
of the conference call. An archived recording of the webcast will
be available on the Investor page of P3’s website for a period of
90 days following the conference call.
About P3 Health Partners (NASDAQ: PIII):
P3 Health Partners Inc. is a leading population health
management company committed to transforming healthcare by
improving the lives of both patients and providers. Founded and led
by physicians, P3 has an expansive network of more than 2,600
affiliated primary care providers across the country. Our local
teams of health care professionals manage the care of thousands of
patients in 18 counties across five states. P3 supports primary
care providers with value-based care coordination and
administrative services that improve patient outcomes and lower
costs. Through partnerships with these local providers, the P3 care
team creates an enhanced patient experience by navigating,
coordinating, and integrating the patient’s care within the
healthcare system. For more information, visit www.p3hp.org and
follow us on LinkedIn and Facebook.com/p3healthpartners.
Non-GAAP Financial Measures
In addition to the financial results prepared in accordance
accounting principles generally accepted in the U.S. ("GAAP"), this
press release contains certain non-GAAP financial measures as
defined by the SEC rules, including Adjusted EBITDA, Adjusted
EBITDA PMPM, medical margin and medical margin PMPM. EBITDA is
defined as GAAP net income (loss) before (i) interest, (ii) income
taxes and (iii) depreciation and amortization. Adjusted EBITDA is
defined as EBITDA, further adjusted to exclude the effect of
certain supplemental adjustments, such as (i) mark-to-market
warrant gain/loss, (ii) premium deficiency reserves, (ii)
equity-based compensation expense and (vi) certain other items that
we believe are not indicative of our core operating performances.
Adjusted EBITDA PMPM is defined as Adjusted EBITDA divided by the
number of Medicare Advantage members each month divided by the
number of months in the period. We believe these non‐GAAP financial
measures provide an additional tool for investors to use in
evaluating ongoing operating results and trends and in comparing
our financial measures with other similar companies. Medical margin
represents the amount earned from capitation revenue after medical
claims expenses are deducted and medical margin PMPM is defined as
medical margin divided by the number of Medicare Advantage members
each month divided by the number of months in the period. Medical
claims expenses represent costs incurred for medical services
provided to our members. As our platform grows and matures over
time, we expect medical margin to increase in absolute dollars;
however, medical margin PMPM may vary as the percentage of new
members brought onto our platform fluctuates. New membership added
to the platform is typically dilutive to medical margin PMPM. We do
not consider these non‐GAAP measures in isolation or as an
alternative to financial measures determined in accordance with
GAAP. These non-GAAP financial measures are subject to inherent
limitations as they reflect the exercise of judgments by management
about which expense and income are excluded or included in
determining these non‐GAAP financial measures. In addition, other
companies may calculate non-GAAP financial measures differently or
may use other measures to evaluate their performance, all of which
could reduce the usefulness of our non-GAAP financial measures as
tools for comparison. The tables at the end of this press release
present a reconciliation of Adjusted EBITDA to net income (loss)
and Adjusted EBITDA PMPM to net income (loss) PMPM, and medical
margin to gross profit and medical margin PMPM to gross profit
PMPM, which are the most directly comparable financial measures
calculated in accordance with GAAP.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. We intend such
forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in Section 27A
of the Securities Act of 1933, as amended, Section 21E of the
Securities Exchange Act of 1934, as amended. Words such as
"anticipate," "believe," "budget," "contemplate," "continue,"
"could," "envision," "estimate," "expect," "guidance," "indicate,"
"intend," "may," "might," "plan," "possibly," "potential,"
"predict," "probably," "pro-forma," "project," "seek," "should,"
"target," or "will," or the negative or other variations thereof,
and similar words or phrases or comparable terminology, are
intended to identify forward-looking statements. These
forward-looking statements address various matters, including the
Company’s future expected growth strategy and operating
performance; current expectations regarding the Company’s outlook
as to revenue, at-risk Medicare Advantage membership, medical
margin, medical margin PMPM and Adjusted EBITDA loss for the full
year 2023, all of which reflect the Company’s expectations based
upon currently available information and data. Because such
statements are based on expectations as to future financial and
operating results and are not statements of fact, actual results
may differ materially from those projected or estimated and you are
cautioned not to place undue reliance on these forward-looking
statements. These forward-looking statements are not guarantees of
future performance, conditions or results, and involve a number of
known and unknown risks, uncertainties, assumptions and other
important factors, many of which are outside the Company's control,
that could cause actual results or outcomes to differ materially
from those discussed in the forward-looking statements.
Important risks and uncertainties that could cause our actual
results and financial condition to differ materially from those
indicated in forward-looking statements include, among others, our
ability to continue as a going concern; our potential need to raise
additional capital to fund our existing operations or develop and
commercialize new services or expand our operations; our ability to
achieve or maintain profitability; our ability to maintain
compliance with our debt covenants in the future, or obtain
required waivers from our lenders if future operating performance
were to fall below current projections of if there are material
changes to management’s assumptions, we could be required to
recognize non-cash charges to operating earnings for goodwill
and/or other intangible asset impairment; our ability to identify
and develop successful new geographies, physician partners, payors
and patients; changes in market or industry conditions, regulatory
environment, competitive conditions, and receptivity to our
services; our ability to fund our growth and expand our operations;
changes in laws and regulations applicable to our business; our
ability to maintain our relationships with health plans and other
key payers; the impact of COVID-19, including the impact of new
variants of the virus, or another pandemic, epidemic or outbreak of
infectious disease on our business and results of operation;
increased labor costs; our ability to recruit and retain qualified
team members and independent physicians; and other factors
discussed in Part I, Item 1A. “Risk Factors” of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2022
filed with the SEC on March 31, 2023, as updated by Part II, Item
1A. “Risk Factors” in the Company’s Quarterly Report on Form 10-Q
for the period ended June 30, 2023 to be filed with the SEC, and in
the Company’s other filings with the SEC. All information in this
press release is as of the date hereof, and we undertake no duty to
update or revise this information unless required by law. You are
cautioned not to place undue reliance on any forward-looking
statements contained in this press release.
P3 HEALTH PARTNERS INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except per
share amounts)
(unaudited)
June 30, 2023
December 31, 2022
ASSETS
CURRENT ASSETS:
Cash
$
59,924
$
17,537
Restricted cash
5,575
920
Health plan receivable, net of allowance
for credit losses of $150 and $0, respectively
102,482
72,092
Clinic fees, insurance and other
receivable
1,937
7,500
Prepaid expenses and other current
assets
2,231
2,643
TOTAL CURRENT ASSETS
172,149
100,692
Property and equipment, net
9,521
8,839
Intangible assets, net
709,018
751,050
Other long-term assets
18,271
15,990
TOTAL ASSETS (1)
$
908,959
$
876,571
LIABILITIES,
MEZZANINE EQUITY and STOCKHOLDERS’ (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable
$
9,196
$
11,542
Accrued expenses and other current
liabilities
22,471
16,647
Accrued payroll
5,138
8,224
Health plans settlements payable
6,878
13,608
Claims payable
158,528
151,207
Premium deficiency reserve
29,503
26,375
Accrued interest
18,686
14,061
TOTAL CURRENT LIABILITIES
250,400
241,664
Operating lease liability
11,796
11,516
Warrant liabilities
2,599
1,517
Contingent consideration
4,907
4,794
Long-term debt, net
108,188
94,421
TOTAL LIABILITIES (1)
377,890
353,912
COMMITMENTS AND CONTINGENCIES (Note
12)
MEZZANINE EQUITY:
Redeemable non-controlling interest
667,235
516,805
STOCKHOLDERS’ (DEFICIT) EQUITY:
Class A common stock, $.0001 par value;
800,000 shares authorized; 114,098 shares and 41,579 shares issued
and outstanding, respectively
11
4
Class V common stock, $.0001 par value;
205,000 shares authorized; 198,505 shares and 201,592 shares issued
and outstanding, respectively
20
20
Additional paid in capital
192,389
315,375
Accumulated deficit
(328,586
)
(309,545
)
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY
(136,166
)
5,854
TOTAL LIABILITIES, MEZZANINE EQUITY &
STOCKHOLDERS’ (DEFICIT) EQUITY
$
908,959
$
876,571
____________________
(1) The Company’s condensed consolidated balance sheets include
the assets and liabilities of its consolidated variable interest
entities (“VIEs”). As discussed in Note 13 “Variable Interest
Entities,” P3 LLC is itself a VIE. P3 LLC represents substantially
all the assets and liabilities of the Company. As a result, the
language and amounts below refer only to VIEs held at the P3 LLC
level. The condensed consolidated balance sheets include total
assets that can be used only to settle obligations of the P3 LLC’s
VIEs totaling $10.6 million and $3.1 million as of June 30, 2023
and December 31, 2022, respectively, and total liabilities of the
P3 LLC’s consolidated VIEs for which creditors do not have recourse
to the general credit of the Company totaled $14.5 million and $9.9
million as of June 30, 2023 and December 31, 2022, respectively.
These VIE assets and liabilities do not include $44.6 million and
$33.0 million of net amounts due to affiliates as of June 30, 2023
and December 31, 2022, respectively, as these are eliminated in
consolidation and not presented within the condensed consolidated
balance sheets. See Note 13 “Variable Interest Entities.”
P3 HEALTH PARTNERS INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share data)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
OPERATING REVENUE:
Capitated revenue
$
325,616
$
267,102
$
624,320
$
536,787
Other patient service revenue
3,470
2,352
6,843
6,211
TOTAL OPERATING REVENUE
329,086
269,454
631,163
542,998
OPERATING EXPENSE:
Medical expense
302,271
267,448
587,841
533,269
Premium deficiency reserve
(2,012
)
(1,490
)
3,128
(2,814
)
Corporate, general and administrative
expense
27,223
41,099
64,866
79,697
Sales and marketing expense
857
1,408
1,858
2,273
Depreciation and amortization
21,780
21,720
43,320
43,472
Goodwill impairment
—
851,456
—
851,456
TOTAL OPERATING EXPENSE
350,119
1,181,641
701,013
1,507,353
OPERATING LOSS
(21,033
)
(912,187
)
(69,850
)
(964,355
)
OTHER INCOME (EXPENSE):
Interest expense, net
(3,851
)
(2,700
)
(7,937
)
(5,455
)
Mark-to-market of stock warrants
(1,731
)
11,815
(1,082
)
5,954
Other
(741
)
(34
)
(645
)
(40
)
TOTAL OTHER EXPENSE
(6,323
)
9,081
(9,664
)
459
LOSS BEFORE INCOME TAXES
(27,356
)
(903,106
)
(79,514
)
(963,896
)
PROVISION FOR INCOME TAXES
(226
)
—
(516
)
—
NET LOSS
(27,582
)
(903,106
)
(80,030
)
(963,896
)
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE
NON-CONTROLLING INTEREST
(17,766
)
(748,756
)
(61,015
)
(798,969
)
NET LOSS ATTRIBUTABLE TO CONTROLLING
INTEREST
$
(9,816
)
$
(154,350
)
$
(19,015
)
$
(164,927
)
NET LOSS PER SHARE (Note 9):
Basic
$
(0.09
)
$
(3.71
)
$
(0.25
)
$
(3.97
)
Diluted
$
(0.09
)
$
(3.73
)
$
(0.29
)
$
(4.01
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
(Note 9):
Basic
107,454
41,579
74,699
41,579
Diluted
107,454
242,053
276,028
240,362
P3 HEALTH PARTNERS INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June
30,
2023
2022
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss
$
(80,030
)
$
(963,896
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
43,320
43,472
Equity-based compensation
2,008
15,427
Goodwill impairment
—
851,456
Amortization of original issue discount
and debt issuance costs
340
—
Accretion of contingent consideration
113
188
Mark-to-market adjustment of stock
warrants
1,082
(5,954
)
Premium deficiency reserve
3,128
(2,814
)
Changes in assets and liabilities:
Health plan receivable
(30,540
)
(49,555
)
Clinic fees, insurance, and other
receivable
5,563
(376
)
Prepaid expenses and other current
assets
139
1,890
Other long-term assets
(1,289
)
—
Accounts payable, accrued expenses, and
other current liabilities
1,924
1,163
Accrued payroll
(3,086
)
(3,041
)
Health plan settlements payable
(6,730
)
(4,526
)
Claims payable
7,321
37,364
Accrued interest
4,625
2,559
Operating lease liability
(452
)
3,555
Net cash used in operating activities
(52,564
)
(73,088
)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property and equipment
(1,652
)
(1,401
)
Net cash used in investing activities
(1,652
)
(1,401
)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from long-term debt, net of
original issuance discount
14,102
—
Proceeds from private placement offering,
net of offering costs paid
87,329
—
Repayment of long-term debt
—
(2,446
)
Payment of debt issuance costs
(173
)
—
Net cash provided by (used in) financing
activities
101,258
(2,446
)
Net change in cash and restricted cash
47,042
(76,935
)
Cash and restricted cash, beginning of
period
18,457
140,834
Cash and restricted cash, end of
period
$
65,499
$
63,899
RECONCILIATION OF NET LOSS TO
ADJUSTED EBITDA (LOSS)
(in thousands, except
PMPM)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Net loss
$
(27,582
)
$
(903,106
)
$
(80,030
)
$
(963,896
)
Interest expense, net
3,851
2,700
7,937
5,455
Depreciation and amortization expense
21,780
21,720
43,320
43,472
Provision for income taxes
226
—
516
—
Mark-to-market of stock warrants
1,731
(11,815
)
1,082
(5,954
)
Premium deficiency reserve
(2,012
)
(1,490
)
3,128
(2,814
)
Equity-based compensation
1,031
3,716
2,008
15,427
Transaction and other related costs(1)
—
8,010
70
9,112
Goodwill impairment
—
851,456
—
851,456
Other(2)
1,192
143
3,053
149
Adjusted EBITDA (loss)
$
217
$
(28,666
)
$
(18,916
)
$
(47,593
)
Adjusted EBITDA (loss) PMPM
$
1
$
(95
)
$
(30
)
$
(80
)
_____________________
(1) Transaction and other related costs during the six months
ended June 30, 2023 consisted of legal fees incurred related to
acquisition-related litigation.
(2) Other during the three and six months ended June 30, 2023
consisted of (i) interest income offset by (ii) cybersecurity
incident loss, (iii) restructuring and other charges, including
severance and benefits paid to employees pursuant to workforce
reduction plans, (iv) the disposition of our Pahrump operations,
(v) expenses for third-party consultants to assist us with the
development, implementation, and documentation of new and enhanced
internal controls and processes for compliance with Sarbanes-Oxley
Section 404(b) with respect to the six months ended June 30, 2023,
(vi) a legal settlement outside of the ordinary course of business
with respect to the six months ended June 30, 2023, and (vii)
valuation allowance on our notes receivable.
MEDICAL MARGIN
(in thousands, except
PMPM)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Capitated revenue
$
325,616
$
267,102
$
624,320
$
536,787
Less: medical claims expense
(275,121
)
(245,344
)
(534,579
)
(490,202
)
Medical margin
$
50,495
$
21,758
$
89,741
$
46,585
Medical margin PMPM
$
161
$
72
$
145
$
78
RECONCILIATION OF GROSS PROFIT
TO MEDICAL MARGIN
(in thousands)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Gross profit(1)
$
26,815
$
2,006
$
43,322
$
9,729
Other patient service revenue
(3,470
)
(2,352
)
(6,843
)
(6,211
)
Other medical expense
27,150
22,104
53,262
43,067
Medical margin
$
50,495
$
21,758
$
89,741
$
46,585
_____________________
(1) Effective for the quarter ended June 30, 2023, we modified the
method by which we reconcile medical margin. Previously, we
reconciled medical margin to operating loss as the most directly
comparable measure calculated in accordance with GAAP. In the
current period and on a go-forward basis we will reconcile to gross
profit as we have determined that gross profit is the most directly
comparable GAAP measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230807910979/en/
Investor Relations
Karen Blomquist Vice President, Investor Relations P3 Health
Partners kblomquist@p3hp.org
Kassi Belz Executive Vice President, Communications P3 Health
Partners (904) 415-2744 kbelz@p3hp.org
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