Revenue increased 26% year-over-year to $362.1
million
Third quarter results were affected by lower
risk adjustments, higher medical expenses in the current year, and
retroactive adjustments
Executing key 2025 initiatives with a focus on
improvements in profitability metrics
Management to Host Conference Call and Webcast
November 12, 2024 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 third
quarter ended September 30, 2024.
“As we execute on our strategic initiatives, we believe P3 will
be well-positioned to unlock the value built within our platform
and generate sustainable, profitable growth in the medium and long
term,” said Aric Coffman, CEO of P3. “We have identified more than
$130 million of potential improvement opportunities, and while
near-term dynamics have negatively affected our financial results,
demand for our platform has never been stronger as we continue to
deliver value to patients, payors and our PCP partners. Our
business model is fundamentally strong, as shown by our member and
top-line growth, quality outcomes, and provider retention.”
Third Quarter 2024 Financial Results
- Total revenue was $362.1 million, an increase of 26% compared
to $288.4 million in the third quarter of the prior year
- Capitated revenue was $357.7 million, an increase of 25%
compared to $285.2 million in the third quarter of the prior
year
- Gross profit was a loss of $39.8 million, as compared to gross
profit of $9.1 million in the prior year. Gross profit PMPM was a
loss of $103, compared to $29 PMPM in the prior year
- Medical margin(1) was $0.5 million compared to $36.2 million in
the prior year. Medical margin PMPM(1) was $1, compared to a
medical margin PMPM of $115 in the prior year
- Net loss was $102.9 million compared to a net loss of $37.3
million in the third quarter of the prior year. Net loss PMPM was
$267 compared to a net loss PMPM of $119 in the prior year
- Adjusted EBITDA loss(1) was $71.0 million compared to $22.3
million in the third quarter of the prior year. Adjusted EBITDA
loss PMPM(1) was $184, compared to Adjusted EBITDA loss PMPM of $71
in the third quarter of the prior year
- In light of a lower-than-expected 2024 risk adjustment,
continued elevated medical cost pressures, and retroactive
adjustments, the Company is withdrawing its previous guidance for
fiscal year ending December 31, 2024, provided on its second
quarter 2024 earnings call on August 7, 2024, and investors should
no longer rely on it.
(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, if
applicable, and more information regarding the Company’s use of
non-GAAP financial measures, please see the section titled
“Non-GAAP Financial Measures.”
(2) See “Key Performance Metrics” for
additional information on how the Company defines “at-risk
members.”
Management to Host Conference Call and Webcast on November
12, 2024 at 4:30 PM ET
Title & Webcast
P3 Health Third Quarter Earnings
Conference Call
Date & Time
November 12, 2024, 4:30pm Eastern Time
Conference Call Details
Toll-Free 1-833-316-0546 (US)
International 1-412-317-0692 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 at ir.p3hp.org website in advance of the
conference call. An archived recording of the webcast will be
available at ir.p3hp.org 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 3,100
affiliated primary care providers across the country. Our local
teams of health care professionals manage the care of thousands of
patients in 27 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 @p3healthpartners and
Facebook.com/p3healthpartners.
Non-GAAP Financial Measures
In addition to the financial results prepared in accordance with
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 and 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, (iii)
equity-based compensation expense, (iv) certain transaction and
other related costs and (v) 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 at-risk
Medicare 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 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, 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.
Key Performance Metrics
In addition to our GAAP and non-GAAP financial information, the
Company also monitors “at-risk members” to help us evaluate our
business, identify trends affecting our business, formulate
business plans and make strategic decisions. At-risk membership
represents the approximate number of Medicare members for whom we
receive a fixed percentage of premium under capitation arrangements
as of the end of a particular period.
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; and the Company’s ability to execute on its identified
strategic improvement opportunities, 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, and 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 payors; the impact of fluctuations in risk adjustments; our
ability to establish and maintain effective internal controls and
the impact of material weaknesses we have identified; our ability
to maintain the listing of our securities on Nasdaq; increased
labor costs and medical expense; our ability to recruit and retain
qualified team members and independent physicians; and the factors
described under Part I, Item 1A. “Risk Factors” and Part II, Item
7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our Annual Report on Form 10-K for the
year ended December 31, 2023, filed with the SEC on March 28, 2024,
and in our subsequent 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)
September 30, 2024
December 31, 2023
ASSETS
CURRENT ASSETS:
Cash
$
62,962
$
36,320
Restricted cash
5,136
4,614
Health plan receivable, net of allowance
for credit losses of $150
123,325
118,497
Clinic fees, insurance and other
receivable
2,495
2,973
Prepaid expenses and other current
assets
11,032
3,613
Assets held for sale
10,123
—
TOTAL CURRENT ASSETS
215,073
166,017
Property and equipment, net
6,315
8,686
Intangible assets, net
594,865
666,733
Other long-term assets
17,080
19,531
TOTAL ASSETS (1)
$
833,333
$
860,967
LIABILITIES,
MEZZANINE EQUITY, AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
$
13,468
$
8,663
Accrued expenses and other current
liabilities
49,205
36,884
Accrued payroll
4,409
3,506
Health plan settlements payable
41,169
34,992
Claims payable
230,736
178,009
Premium deficiency reserve
29,441
13,670
Accrued interest
35,929
23,648
Short-term debt
208
—
Liabilities held for sale
753
—
TOTAL CURRENT LIABILITIES
405,318
299,372
Operating lease liability
11,158
13,622
Warrant liabilities
19,718
1,085
Contingent consideration
—
4,907
Long-term debt, net
133,228
108,319
TOTAL LIABILITIES (1)
569,422
427,305
COMMITMENTS AND CONTINGENCIES
MEZZANINE EQUITY:
Redeemable non-controlling interest
143,397
291,532
STOCKHOLDERS’ EQUITY:
Class A common stock, $0.0001 par value;
800,000 shares authorized; 161,972 and 116,588 shares issued and
outstanding as of September 30, 2024 and December 31, 2023,
respectively
16
12
Class V common stock, $0.0001 par value;
205,000 shares authorized; 195,957 and 196,569 shares issued and
outstanding as of September 30, 2024 and December 31, 2023,
respectively
20
20
Additional paid in capital
565,054
509,442
Accumulated deficit
(444,576
)
(367,344
)
TOTAL STOCKHOLDERS’ EQUITY
120,514
142,130
TOTAL LIABILITIES, MEZZANINE EQUITY, AND
STOCKHOLDERS’ EQUITY
$
833,333
$
860,967
____________________
(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 P3 LLC’s consolidated VIEs totaling $13.0 million
and $8.6 million as of September 30, 2024 and December 31, 2023,
respectively, and total liabilities of P3 LLC’s consolidated VIEs
for which creditors do not have recourse to the general credit of
the Company totaled $15.8 million and $13.6 million as of September
30, 2024 and December 31, 2023, respectively. These VIE assets and
liabilities do not include $46.9 million and $44.2 million of net
amounts due to affiliates as of September 30, 2024 and December 31,
2023, respectively, as these are eliminated in consolidation and
not presented within the condensed consolidated balance sheets.
P3 HEALTH PARTNERS INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
OPERATING REVENUE:
Capitated revenue
$
357,706
$
285,153
$
1,116,146
$
909,473
Other patient service revenue
4,418
3,198
13,623
10,041
TOTAL OPERATING REVENUE
362,124
288,351
1,129,769
919,514
OPERATING EXPENSE:
Medical expense
401,920
279,220
1,149,148
867,061
Premium deficiency reserve
18,168
(12,489
)
15,771
(9,361
)
Corporate, general and administrative
expense
27,219
33,065
81,230
97,931
Sales and marketing expense
134
654
870
2,512
Depreciation and amortization
21,673
21,721
64,905
65,041
TOTAL OPERATING EXPENSE
469,114
322,171
1,311,924
1,023,184
OPERATING LOSS
(106,990
)
(33,820
)
(182,155
)
(103,670
)
OTHER INCOME (EXPENSE):
Interest expense, net
(5,647
)
(4,002
)
(15,339
)
(11,939
)
Mark-to-market of stock warrants
5,737
755
14,626
(327
)
Other
445
190
1,073
(455
)
TOTAL OTHER INCOME (EXPENSE)
535
(3,057
)
360
(12,721
)
LOSS BEFORE INCOME TAXES
(106,455
)
(36,877
)
(181,795
)
(116,391
)
INCOME TAX BENEFIT (PROVISION)
3,605
(412
)
565
(928
)
NET LOSS
(102,850
)
(37,289
)
(181,230
)
(117,319
)
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE
NON-CONTROLLING INTEREST
(56,338
)
(23,993
)
(103,998
)
(85,008
)
NET LOSS ATTRIBUTABLE TO CONTROLLING
INTEREST
$
(46,512
)
$
(13,296
)
$
(77,232
)
$
(32,311
)
NET LOSS PER SHARE (Note 9):
Basic
$
(0.29
)
$
(0.12
)
$
(0.55
)
$
(0.37
)
Diluted
$
(0.31
)
$
(0.12
)
$
(0.64
)
$
(0.41
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
(Note 9):
Basic
161,890
114,198
139,292
88,010
Diluted
164,701
312,679
141,723
288,379
P3 HEALTH PARTNERS INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September
30,
2024
2023
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss
$
(181,230
)
$
(117,319
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
64,905
65,041
Equity-based compensation
5,031
4,259
Amortization of original issue discount
and debt issuance costs
13
405
Accretion of contingent consideration
—
113
Gain on write off of contingent
consideration
(4,907
)
—
Mark-to-market adjustment of stock
warrants
(14,626
)
327
Premium deficiency reserve
15,771
(9,361
)
Changes in operating assets and
liabilities:
Health plan receivable
(4,828
)
(45,258
)
Clinic fees, insurance, and other
receivable
445
5,275
Prepaid expenses and other current
assets
(7,402
)
(429
)
Other long-term assets
(2
)
(1,214
)
Accounts payable, accrued expenses, and
other current liabilities
1,780
2,758
Accrued payroll
903
2,405
Health plan settlements payable
6,177
21,814
Claims payable
52,727
4,290
Accrued interest
12,281
7,092
Operating lease liability
72
(348
)
Net cash used in operating activities
(52,890
)
(60,150
)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property and equipment
—
(2,039
)
Purchase price received in advance of
asset sale
15,000
—
Net cash provided by (used in) investing
activities
15,000
(2,039
)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from long-term debt, net of
original issue discount
25,000
14,101
Payment of debt issuance costs
(100
)
(173
)
Proceeds from liability-classified
warrants and private placement offering, net of offering costs
paid
40,547
87,244
Proceeds from at-the-market sales, net of
offering costs paid
33
—
Deferred offering costs paid
(507
)
—
Payment of tax withholdings upon
settlement of restricted stock unit awards
(127
)
—
Repayment of short-term and long-term
debt
(1,663
)
—
Proceeds from short-term debt
1,871
—
Net cash provided by financing
activities
65,054
101,172
Net change in cash and restricted cash
27,164
38,983
Cash and restricted cash, beginning of
period
40,934
18,457
Cash and restricted cash, end of
period
$
68,098
$
57,440
RECONCILIATION OF NET LOSS TO
ADJUSTED EBITDA LOSS
(in thousands, except
PMPM)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net loss
$
(102,850
)
$
(37,289
)
$
(181,230
)
$
(117,319
)
Interest expense, net
5,647
4,002
15,339
11,939
Depreciation and amortization
21,673
21,721
64,905
65,041
Income tax (benefit) provision
(3,605
)
412
(565
)
928
Mark-to-market of stock warrants
(5,737
)
(755
)
(14,626
)
327
Premium deficiency reserve
18,168
(12,489
)
15,771
(9,361
)
Equity-based compensation
1,958
2,251
5,031
4,259
Other(1)
(6,254
)
(185
)
(4,242
)
2,868
Transaction and other related costs(2)
—
—
—
70
Adjusted EBITDA loss
$
(71,000
)
$
(22,332
)
$
(99,617
)
$
(41,248
)
Adjusted EBITDA loss PMPM
$
(184
)
$
(71
)
$
(87
)
$
(44
)
_____________________________________________
(1)
Other during the three and nine months
ended September 30, 2024 consisted of (i) interest income and (ii)
gain recognized upon the settlement and write-off of contingent
consideration related to an acquisition completed in a prior year
partially offset by (iii) severance and related expense in
connection with our chief executive officer transition and (iv)
valuation allowance on our notes receivable. Other during the three
and nine months ended September 30, 2023 consisted of (i) interest
income offset by (ii) cybersecurity incident loss with respect to
the nine months ended September 30, 2023, (iii) restructuring and
other charges, including severance and benefits paid to employees
pursuant to workforce reduction plans with respect to the nine
months ended September 30, 2023, (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 nine months
ended September 30, 2023, (vi) a legal settlement outside of the
ordinary course of business with respect to the nine months ended
September 30, 2023, and (vii) valuation allowance on our notes
receivable.
(2)
Transaction and other related costs during
the nine months ended September 30, 2023 consisted of legal fees
incurred related to acquisition-related litigation.
MEDICAL MARGIN
(in thousands, except
PMPM)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Capitated revenue
$
357,706
$
285,153
$
1,116,146
$
909,473
Less: medical claims expense
(357,166
)
(248,918
)
(1,037,965
)
(783,497
)
Medical margin
$
540
$
36,235
$
78,181
$
125,976
Medical margin PMPM
$
1
$
115
$
69
$
135
RECONCILIATION OF GROSS PROFIT
(LOSS) TO MEDICAL MARGIN
(in thousands)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Gross profit (loss)
$
(39,796
)
$
9,131
$
(19,379
)
$
52,453
Other patient service revenue
(4,418
)
(3,198
)
(13,623
)
(10,041
)
Other medical expense
44,754
30,302
111,183
83,564
Medical margin
$
540
$
36,235
$
78,181
$
125,976
RECONCILIATION OF TOTAL
OPERATING EXPENSE TO ADJUSTED OPERATING EXPENSE
(in thousands)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Total operating expense
$
469,114
$
322,171
$
1,311,924
$
1,023,184
Medical expense
(401,920
)
(279,220
)
(1,149,148
)
(867,061
)
Depreciation and amortization
(21,673
)
(21,721
)
(64,905
)
(65,041
)
Premium deficiency reserve
(18,168
)
12,489
(15,771
)
9,361
Equity-based compensation
(1,958
)
(2,251
)
(5,031
)
(4,259
)
Other
6,157
(7
)
3,564
(2,404
)
Transaction and other related costs
—
—
—
(70
)
Adjusted operating expense
$
31,552
$
31,461
$
80,633
$
93,710
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241112304615/en/
Ryan Halsted Investor Relations Gilmartin Group ir@p3hp.org
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