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P3 Health Partners Inc. (PIII)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $345.3M, down 5% YoY on intentional network/payer rationalization and unfavorable mid-year settlement adjustments; medical margin improved to $4.4M ($13 PMPM) vs $0.5M in Q3 2024, while adjusted EBITDA loss was $45.9M .
  • Management cut FY25 guidance: revenues to $1.40–$1.45B (from $1.35–$1.50B), medical margin to $67–$82M (from $124–$154M in Q2), and adjusted EBITDA to a $110–$95M loss (from a $69–$39M loss in Q2) .
  • On the call, CFO cited a $21M mid-year capitation true-up plus $3M prior-period headwind (total $24M) as primary drivers of the Q3 shortfall; normalized medical cost trends remained flat YoY, and operating discipline improved (adjusted operating expense ~$21.2M) .
  • Narrative catalysts: execution on $120–$170M EBITDA expansion opportunities over the next five quarters, JV adding ~13k ACO members, and a ~5% CMS base rate uplift across P3’s markets in 2026; shares likely focus on guidance reset, normalization claims, and visibility into settlement processes .

What Went Well and What Went Wrong

What Went Well

  • Medical margin rose to $4.4M ($13 PMPM) and normalized trends were flat YoY, indicating care enablement and utilization management programs are gaining traction .
  • Adjusted operating expense fell to ~$21.2M, a 33% YoY improvement driven by targeted headcount and support cost reductions, with reinvestment in market operations and care coordination .
  • Management reiterated $120–$170M EBITDA expansion opportunity and highlighted stronger tier-1 provider alignment and HEDIS gap closures 17.4% higher vs non-tier-1 providers; “Our core business continues to demonstrate positive momentum…” — CEO Aric Coffman .

What Went Wrong

  • Average at-risk membership declined ~10% YoY to ~116k, reflecting intentional network/payer rationalization, pressuring revenue scale .
  • Q3 absorbed an unfavorable $21M mid-year settlement adjustment and $3M prior-period headwind, cutting revenue PMPM and medical margin; adjusted EBITDA loss widened to $45.9M for the quarter .
  • FY25 guidance lowered again: medical margin cut to $67–$82M and adjusted EBITDA loss widened to $110–$95M, citing settlement visibility/process issues and delayed cost initiatives in the back half .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Total Operating Revenue ($USD Millions)$373.225 $355.788 $345.253
Diluted EPS ($USD)$(6.28) $(6.23) $(9.67)
Medical Margin ($USD Millions)$17.200 $30.615 $4.412
Medical Margin PMPM ($USD)$49 $89 $13
Adjusted EBITDA ($USD Millions)$(22.190) $(17.110) $(45.911)
Adjusted EBITDA PMPM ($USD)$(64) $(50) $(132)

Revenue breakdown:

MetricQ1 2025Q2 2025Q3 2025
Capitated Revenue ($USD Millions)$369.517 $351.724 $341.555
Other Patient Service Revenue ($USD Millions)$3.708 $4.064 $3.698

KPIs and inputs:

KPIQ1 2025Q2 2025Q3 2025
Average At-Risk Membership (000s)115.9 ~115.0 ~116.0
Medical Claims Expense ($USD Millions)$352.317 $321.109 $337.143
Cash and Equivalents ($USD Millions)$40.082 $38.581 $37.714

Guidance Changes

Change from Q2 2025 to Q3 2025:

MetricPeriodPrevious Guidance (Q2)Current Guidance (Q3)Change
At-Risk MembersFY 2025109,000–119,000 112,000–117,000 Narrowed (midpoint raised)
Total Revenues ($USD Millions)FY 2025$1,350–$1,500 $1,400–$1,450 Narrowed/raised low end, lowered high end
Medical Margin ($USD Millions)FY 2025$124–$154 $67–$82 Lowered
Medical Margin PMPM ($USD)FY 2025$90–$111 $48–$59 Lowered
Adjusted EBITDA ($USD Millions)FY 2025$(69)–$(39) $(110)–$(95) Lowered

Initial guidance vs Q2 revision:

MetricPeriodInitial Guidance (Q1)Revised Guidance (Q2)Change
At-Risk MembersFY 2025109,000–119,000 109,000–119,000 Maintained
Total Revenues ($USD Millions)FY 2025$1,350–$1,500 $1,350–$1,500 Maintained
Medical Margin ($USD Millions)FY 2025$174–$210 $124–$154 Lowered
Medical Margin PMPM ($USD)FY 2025$133–$147 $90–$111 Lowered
Adjusted EBITDA ($USD Millions)FY 2025$(35)–$5 $(69)–$(39) Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Care Enablement Model & Tier-1 AlignmentTurnaround ahead of schedule; focus on provider partnerships; flat medical cost trends despite inflation Stability in medical trends; stronger tier-1 alignment; HEDIS gap closures +17.4% vs non-tier-1 Strengthening
Contracting & Settlement VisibilityAffirmed guidance; identified payment integrity initiatives Unfavorable mid-year true-up ($21M) and $3M prior-period headwind; structural controls implemented Improving controls after setback
EBITDA Expansion Opportunities+$120–$170M identified for 2026 Executing across burden-of-illness alignment (~40%), clinical ops (~30%), contracting (~20%), benefit stabilization (remainder) On track
Membership Mix/JVN/AStrategic JV to add ~13k accredited ACO members; pipeline of +25k MA lives for 2026 Positive mix shift
Macro/CMS RatesN/A~5% base rate premium improvement across P3 markets for 2026 Tailwind
Technology/OperationsIdentified payment integrity; investments in tech External ops partner Catalyst go-live across claims and provider call center; highlights AI/process improvement Operational enablement

Management Commentary

  • “Our core business continues to demonstrate positive momentum… we’re confident in our ability to execute on the $120 to $170 million in EBITDA expansion opportunities identified, positioning us for sustainable profitability in 2026 and beyond.” — CEO Aric Coffman .
  • “Total capitated revenue for the quarter was $341.6 million… The quarter reflects the recognition of unfavorable mid-year settlement adjustments… On a normalized basis… capitated revenue PMPM is ~6.4% above the 2024 full-year average.” — CFO Leif Pedersen .
  • “The prior period amount net in our P&L… was a $3 million decrement… The mid-year true-up was a $21 million impact to Q3 specifically.” — CFO Leif Pedersen .
  • “If you look at the whole country, the aggregate is about a 5% net improvement in premium… in our four markets… a 5% improvement in premium…” — CEO Aric Coffman .

Q&A Highlights

  • Payer renegotiations and incentive alignment: management emphasized bilateral accountability and full capitation model; plans retain admin margins while P3 manages medical risk and quality outcomes .
  • Guidance reduction drivers: primarily weaker-than-expected mid-year settlements and delayed back-half cost initiatives, with process fixes implemented between MRA and finance functions .
  • Prior-period normalization: total Q3 headwind ~$24M (prior-period $3M plus $21M mid-year true-up); expectation to avoid material swings in 2026 with better data cadence and JOCs with payers .
  • 2026 revenue PMPM tailwinds: ~5% base rate improvement (coding uplift guidance TBD), flat normalized Part A/B cost trends imply potential gross margin expansion into 2026 .

Estimates Context

MetricQ1 2025Q2 2025Q3 2025
Revenue Actual ($USD Millions)$373.225 $355.788 $345.253
Revenue Consensus Mean ($USD Millions)*362.066359.431346.642
Diluted EPS Actual ($USD)$(6.28) $(6.23) $(9.67)
Primary EPS Consensus Mean ($USD)*$(7.915)$(4.300)$(6.037)
  • Q3: revenue slight miss vs consensus; EPS miss vs consensus; Q2: revenue miss and EPS miss; Q1: revenue beat and EPS beat. Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • The Q3 miss was predominantly driven by settlement adjustments; normalized trends and program execution remain stable, which is critical for 2026 earnings durability .
  • Guidance reset lowers FY25 earnings expectations; focus shifts to execution confidence on the $120–$170M EBITDA expansion plan and JV/member mix improvement into 2026 .
  • Operating discipline is evident (adjusted operating expense down to ~$21.2M); continued redeployment to utilization and care coordination supports cost predictability .
  • CMS base rate tailwinds (~5%) across P3’s markets plus contracting hygiene offer visibility for PMPM improvement in 2026; watch for coding progress updates next quarter .
  • Near-term stock narrative hinges on proof points: settlement process control, avoidance of further prior-period swings, and sequential improvement in medical margin/EBITDA.
  • Liquidity remains tight (cash ~$37.7M); monitor working capital discipline, debt service, and covenant compliance disclosures in the forthcoming 10-Q/10-K .
  • For trades, watch the next quarter’s settlement cadence and normalized KPIs; confirmation of JV accretion and rate/coding uplift could catalyze estimate revisions heading into 2026 .

Additional Documents Reviewed

  • Q3 earnings 8-K and Exhibit 99.1 press release (financials, non-GAAP reconciliations, guidance) .
  • Q3 earnings call transcripts (prepared remarks and Q&A) .
  • Q2 and Q1 earnings 8-Ks and press releases for trend analysis (medical margin, adjusted EBITDA, guidance trajectory) .
  • Q3 scheduling press release and operations partner announcement from Catalyst Solutions (claims/provider call center enablement and AI/process improvements) .