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P3 Health Partners Inc. (PIII)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered 7% revenue growth to $370.7M, but profitability deteriorated: gross profit loss widened to $39.5M and adjusted EBITDA loss increased to $67.6M as elevated unit costs, premium deficiency reserves (PDR), and specific out‑of‑period items pressured results .
  • Management reaffirmed 2025 guidance (revenue $1.35B–$1.50B; adjusted EBITDA $(35)M to $5M) and added medical margin guidance ($174M–$210M; $133–$147 PMPM), stating they “expect to achieve profitability this year,” underpinned by $130M+ programmatic initiatives and early 2025 utilization and benefit‑design tailwinds .
  • Q4 missed S&P Global consensus on revenue ($370.7M vs $378.9M*) and EBITDA (actual EBITDA far worse than the consensus*), driven by higher unit costs (e.g., Part B drugs, facilities), payer true‑ups, and PDR; management cited ~$17M of one‑time negative P&L items in the quarter and an out‑of‑period true‑up with a single payer .
  • Liquidity actions and visibility improved: cash was $38.8M at year‑end (plus $15M capitation received in early Jan) and the company disclosed an additional $30M in February to fund 1H’25 operations; reaffirmed discussions and support around financing needs .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue growth: Q4 revenue rose 7% YoY to $370.7M (capitated $367.5M), with FY24 revenue up 18% to $1.50B; at‑risk membership grew ~14% to 123,800 .
    • Strategic progress: Management reaffirmed 2025 guidance including new medical margin targets and reiterated execution on $130M+ EBITDA opportunity across operational efficiencies, contract rationalization, and operational execution .
    • Early 2025 signs: CEO cited improving Medicare macro backdrop (benefit rationalization, payer bids), expecting $30–$35 PMPM of incremental medical margin over time from benefit‑design changes; leadership bench strengthened .

  • What Went Wrong

    • Profitability pressure: Q4 gross profit loss widened to $39.5M and adjusted EBITDA loss increased to $67.6M amid elevated unit costs, PDR ($37.9M), and specific out‑of‑period items and payer true‑ups .
    • Medical margin compression: Q4 medical margin fell to $7.3M (PMPM $19) vs $9.1M (PMPM $28) in Q4’23; FY medical margin decreased 37% to $85.5M, largely from elevated medical expenses (notably Part D) .
    • Consensus miss: Q4 revenue missed S&P Global consensus ($370.7M vs $378.9M*), and EBITDA underperformed consensus materially given higher costs and retroactive impacts; management cited seasonality (Q1, Q4 heavier utilization) .

Financial Results

Quarterly progression (trend: oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Total Revenue ($USD Millions)$379.2 $362.1 $370.7
Capitated Revenue ($USD Millions)$374.3 $357.7 $367.5
Gross Profit (Loss) ($USD Millions)$14.0 $(39.8) $(39.5)
Medical Margin ($USD Millions)$41.1 $0.5 $7.3
Medical Margin PMPM ($)$107 $1 $19
Net Loss ($USD Millions)$(28.8) $(102.9) $(129.1)
Diluted EPS ($)$(0.15) $(0.31) $(0.36)
Adjusted EBITDA (Loss) ($USD Millions)$(8.8) $(71.0) $(67.6)
Adjusted EBITDA PMPM ($)$(23) $(184) $(175)

Q4 YoY comparison

MetricQ4 2023Q4 2024
Total Revenue ($USD Millions)$346.9 $370.7
Capitated Revenue ($USD Millions)$342.8 $367.5
Gross Profit (Loss) ($USD Millions)$(20.8) $(39.5)
Medical Margin ($USD Millions)$9.1 $7.3
Medical Margin PMPM ($)$28 $19
Net Loss ($USD Millions)$(69.1) $(129.1)
Diluted EPS ($)$(0.22) $(0.36)
Adjusted EBITDA (Loss) ($USD Millions)$(44.3) $(67.6)
Adjusted EBITDA PMPM ($)$(138) $(175)

Q4 vs S&P Global consensus

MetricActual Q4 2024Consensus Q4 2024*
Total Revenue ($USD Millions)$370.7 $378.9*
Primary EPS (S&P “Primary EPS”) ($)n/a (company diluted EPS $(0.36)) $(5.50)*
EBITDA ($USD Millions)n/a GAAP EBITDA; Adj. EBITDA $(67.6) $(27.9)*

Values with asterisk retrieved from S&P Global. Coverage is sparse (4 estimates for revenue/EPS in Q4*).

KPIs (full-year context)

KPIFY 2023FY 2024
At‑risk Members (period-end)108,900 123,800
Total Revenue ($USD Billions)$1.27 $1.50
Medical Margin ($USD Millions)$135.1 $85.5
Medical Margin PMPM ($)$108 $75
Adjusted EBITDA (Loss) ($USD Millions)$(85.5) $(167.2)

Non‑GAAP notes: Adjusted EBITDA and Medical Margin exclude items such as PDR, warrant MTM, equity comp, and other specified adjustments; see press release reconciliations .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
At‑risk MembersFY 2025108,000–118,000 (prelim, 2/13/25) 109,000–119,000 (3/27/25) Raised range by +1k on both ends
Total Revenues ($M)FY 2025$1,350–$1,500 $1,350–$1,500 Maintained
Medical Margin ($M)FY 2025n/a (not provided prelim)$174–$210 New metric added
Medical Margin PMPM ($)FY 2025n/a$133–$147 New metric added
Adjusted EBITDA ($M)FY 2025$(35) to $5 $(35) to $5 Maintained

Management reiterated the plan to recontract 50% of payer partners in 2025 (effective 2026) and remove ~50% of Part D risk by 1/1/25, targeting remaining Part D exit by 1/1/26 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Utilization/Unit Cost PressureQ2: sequential improvement in MCR; observation stays down 22% seq; still cautious on reserves . Q3: elevated Part B costs; retroactive adjustments (~$35M); higher unit costs (ED, observation) .Q4: elevated unit costs persisted; one payer methodology issue; seasonality (RSV/COVID); PDR of $37.9M; small prior‑period IBNR development .Improving early 2025 indicators; expect benefit design to aid utilization through 2025 .
Part D ExposureQ3: Part D costs rising; plans rationalizing benefits .About half of Part D risk removed; aiming for remaining by 1/1/26 .Positive trajectory with staged exit .
Payer/Provider RationalizationQ3: trimmed 63 provider TINs; reduced payer network by 20% .Recontracting 25% of payers for 1/1/25; targeting 50% during 2025 for 2026; ongoing network hygiene .Continued pruning/renegotiation .
Hospice/Palliative & Care ProgramsQ3: hospice enrollment targeted to 4% in 2025; COPD and pharmacy initiatives .Hospice/palliative programs emphasized; high‑cost case reductions in CA/NV; SNP LOS down to 14 days .Execution underway; measurable improvements .
Data/Tools at Point of CareQ3: EMR‑integrated tools to improve coding/quality; expand in 2025 .20% YoY improvement in burden‑of‑illness assessment in largest cohort through new tools/processes .Scaling through 2025 .
Internal ControlsQ3: addressed reserves; building 2025 plan .Remediated 7 material weaknesses; maintaining strong control environment .Strengthened control posture .
LiquidityQ2: ended with $78M cash after raise . Q3: $63M cash; monitoring burn .YE cash $38.8M; +$15M capitation in early Jan; +$30M received in Feb to fund 1H’25 .Active cash management and financing .

Management Commentary

  • CEO Aric Coffman: “We are reaffirming our 2025 guidance on all metrics except for total members, which we are slightly raising… The macro environment is improving in the Medicare sector… benefit design changes are expected to… contribute an estimated $30 to $35 per member per month of incremental medical margin benefit.”
  • CFO Leif Pedersen: “At‑risk membership was 123,800… revenue of $1.5 billion… Full year medical margin of $85.5 million decreased by approximately 37% year‑over‑year… We have successfully remediated 7 previously identified material weaknesses.”
  • CMO Amir Bacchus: “We reduced our Part D exposure from certain plans… early utilization trends on par with Q4’24 and significantly improved SNP average length of stay now trending at 14 days… high‑cost selective cases trending down by 25% in California and 12.5% in Nevada.”

Q&A Highlights

  • Profitability cadence and drivers: 2025 bridge includes ~7.5% revenue uplift (burden‑of‑illness capture, base rates, contracting) and ~$16 PMPM improvement in medical costs (inflation assumptions offset by hospice/palliative, chronic programs, and contract rationalization); expect 1Q/4Q to be seasonally weaker .
  • Liquidity runway: YE24 cash $38.8M; +$15M capitation in early Jan; +$30M in Feb for 1H’25 operations; willingness to access capital markets as needed .
  • Q4 onetime headwinds: ~$17M negative onetime items unrelated to IBNR; also out‑of‑period true‑ups from a single payer pressured adjusted EBITDA .
  • Part D risk: roughly 50% removed by 1/1/25; targeting remaining by 1/1/26 .
  • Payer recontracting: 25% effective 1/1/25; targeting 50% during 2025 for 2026; supportive payer partnerships though negotiations can be difficult .

Estimates Context

  • Q4 2024: Revenue $370.7M vs S&P Global consensus $378.9M*; EBITDA materially worse than consensus* given higher unit costs, PDR, and out‑of‑period items .
  • Estimate breadth: 4 revenue/EPS estimates for Q4; consensus EPS “Primary EPS” −$5.50* is not directly comparable to company diluted EPS (−$0.36) due to methodology differences .
  • Near‑term quarters (2025): Consensus revenue for Q1–Q3 2025 sits near mid‑$300Ms* with negative EBITDA*; magnitude of estimate misses/beats may hinge on contract renegotiations, Part D exit, and benefit design flow‑through .
    Values marked with asterisk retrieved from S&P Global.

Key Takeaways for Investors

  • 2024 reset complete; 2025 is an execution year: affirmed guide and profitability target hinge on $130M+ initiatives, benefit‑design normalization, and payer/provider rationalization .
  • Watch medical cost trajectory: early 2025 indicators (SNP LOS, high‑cost cases) are improving; sustained relief in Part B drug spend and facility unit costs is key to margin recovery .
  • Contracting is the catalyst: 25% of payer contracts re‑priced for 2025; 50% targeted during 2025 for 2026; removing Part D risk and improving economics can re‑rate EBITDA faster than pure volume growth .
  • Liquidity managed but remains a focus: YE cash + January capitation + February financing support 1H’25; additional capital access remains an option .
  • Estimate revisions: Street likely lowers near‑term EBITDA after Q4 underperformance but may lift outer‑year margins if early 2025 trends and contracting progress persist .
  • Monitoring points: PDR usage, prior‑period development stability, contracting milestones, Part D risk exit pace, and PMPM medical margin trajectory .