P3 Health Partners (NASDAQ:PIII) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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Summary

P3 Health Partners reported $26 million in adjusted EBITDA for Q1 2026, exceeding internal expectations and marking an inflection point in their business model.

The company raised its full-year 2026 EBITDA outlook to a range of $20 million to $60 million, reflecting confidence in structural contract improvements and clinical execution.

Key strategic initiatives include improved payer contract structures, enhanced medical margin, and operational execution, with a focus on expanding delegated functions across 63% of membership.

Q1 revenue was $386 million, with a medical loss ratio of 85.2 when adjusted for favorable prior year development and payer settlements.

Operational highlights include significant improvements in payment integrity, utilization management, and clinical programs, contributing to a nearly flat Medicare Advantage medical cost trend.

Notable management comments emphasized the importance of aligning operational and economic accountability, with a focus on disciplined market expansion and delegation pathways.

Full Transcript

OPERATOR

Welcome to the call. Good morning and welcome to the P3 Health Partners first quarter 2026 earnings conference call. All participants will be in the listen only mode. Should you need assistance, please signal a conference specialist by pressing the star then zero on your telephone keypad. After today's presentation there will be an opportunity to ask questions. To ask a question you may press STAR and then one on your telephone keypad. To withdraw your question you may press STAR and then two. Please note this event is being recorded. I would now like to turn the conference over to Gabby Gabel, our host. Thank you and over to you.

Gabby Gabel

Thank you Operator and thank you for joining us today. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward looking statements under the US Federal SECurities laws, including statements regarding our financial outlook and long term target. These forward looking statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business financial condition and results of operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC. The forward looking statements made during this call speak only as of the date hereof and the Company undertakes no obligation to update or revise these forward looking statements. We will refer to certain non GAAP financial measures on this call including adjusted operating Expense, adjusted ebitda, adjusted EBITDA per member per month, normalized adjusted EBITDA medical margin, medical margin per member per month and cash flow. These non GAAP financial measures are in addition to and not a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non GAAP financial measures. For example, other companies may calculate similarly titled non GAAP financial measures differently. Please refer to the appendix of our earnings release for a reconciliation of of these non GAAP financial measures to the most directly comparable GAAP measures. Information presented on this call is contained in the press release that we issued today in our SEC filings, which may be accessed from the Investors page of the P3 Health Partners website. I will now turn the call over to Eric Kaufman, CEO of P3 Health Partners.

Eric Kaufman (Chief Executive Officer)

Thanks Abby, Good afternoon and thank you for joining us today to discuss our first quarter results. Q1 represents an inflection point for the business and reflects the continued execution of the two year framework we have discussed over the past several quarters, the results of which delivered $26 million of adjusted EBITDA in Q1 exceeding internal expectations. The strength of the first quarter combined with the momentum we are carrying into the rest of the year provide us confidence to raise our full year 2026 outlook. It has been 24 months since I began leading P3 and we have fundamentally repositioned the organization through contract restructuring, market optimization, operational redesign and tighter alignment between our clinical and financial infrastructure. The financial results this quarter demonstrate that these structural changes are now translating into measurable economic performance. Importantly, the improvements we are seeing here are not being driven by temporary factors. It is the result of deliberate operational and strategic actions that are now embedded within the business model. The underlying business generated significant positive earnings during the quarter and our operating fundamentals continue to mature. I would like to acknowledge the hard work and dedication from our teams that made this happen day in and day out. They deepen the relationships with our clinical and payer partners to unlock the potential in the business supported by the improvement in the macro environment. From here our focus is straightforward. Continue expanding medical margin, Continue improving contract economics Continuously improve operating execution and scale the platform and markets and partnerships where our model performs best. Three primary drivers contributed to the improved underlying performance this quarter. First is the improvement in our payer contract structures. Over the past 18 months we have significantly redesigned how risk, funding and cost accountability are structured across our payer and network relationships. This includes improved alignment around medical cost accountability, enhanced funding mechanisms, revised risk sharing structures, greater operational coordination with our payer partners, and a path to delegation in our go forward contracts. These are not temporary tailwinds. They represent a structural repositioning of the economic framework of the business. We are increasingly seeing payers recognize the value our model creates when operational accountability and economic incentives are fully aligned. As a result, MA funding rates improved approximately 15% year over year, delegated functions expanded across 63% of membership in 2026 and contract alignment improved meaningfully across several of our largest relationships. These changes position the business for more durable and sustainable profitability going forward. Second is operational execution. Over the last two years we have focused heavily on building a disciplined operating model centered around medical cost management, quality, execution, provider engagement and risk accuracy. We are now seeing those efforts translate into improved financial performance across the organization, burden of illness capture and documentation accuracy continue to improve. Star's performance is tracking ahead of our internal glide path. Tier 1 provider concentration continues to increase, care management engagement amongst our highest acuity populations continues to expand operational workflows across utilization management and payment integrity are increasingly effective across markets. Q1MA medical expense trend was roughly flat compared to full year 2025 medical expense trend at a time when payers and peer organizations have generally guided to a 7% trend or higher. Our trend reflects the compounding impact of Tier 1 provider concentration, delegated utilization management, disciplined payment integrity and we expect it to remain a durable point of differentiation. This isn't a 1/4 result evidenced by our full year 2025 MedX trend which was under 2% across both Medicare Advantage and ACO populations. At the same time, our operating expense structure remains controlled. We continue to invest selectively in frontline clinical capabilities, provider engagement and data infrastructure while maintaining focus on overall cost efficiency. The third item is the improving macro environment. The 2026 CMS benchmark update improved the underlying economics of the Medicare Advantage market and reinforced the sustainability of value based care models that can effectively manage quality and medical cost performance. In addition, benefit design rationalization across the industry is creating more sustainable utilization dynamics across MA populations. We believe the current environment increasingly favors organizations that have the strong provider alignment, local market operating capabilities, effective medical cost management and a scalable clinical infrastructure. P3 is well positioned within that group. Looking forward, we believe Medicare Advantage environment continues to move in a constructive direction for organizations like P3 that effectively manage medical costs and execute on quality. This environment increasingly supports long term margin expansion opportunities. The industry has moved into a period where operational execution and the ability to manage that cost of care effectively is what matters, not simply scale. As we look toward the rest of 26 and 2027, the actions we have taken over the last two years position us to compete and win. In that environment, our payer relationships remain central to our success. One of the clearest lessons we have learned is that our model performs best when operational accountability and economic accountability are aligned through delegation. When we control key delegated functions, particularly claims, payment, utilization management and care management, we consistently produce stronger medical cost performance, better quality outcomes, improved member engagement and more favorable economic outcomes for both P3 and our payer partners. As a result, we will prioritize markets and payer relationships with a clear pathway toward deeper delegation, stronger economic alignment density and long term partnership stability. The depth of operational control this model affords us, particularly the integration of claims, payment, utilization management and care management within our platform is a structural differentiator within the value based care landscape and one that is difficult to replicate. This level of delegation simplifies our data sharing and meaningfully improves our cash flows to help us realize surplus more quickly this disciplined approach materially improves long term margin quality, predictability and shareholder value creation. Our Nebraska partnership, which added an additional 28,600 lives under management, reflects exactly this type of disciplined expansion strategy. The implementation remains on track, operational readiness milestones continue to progress as planned and the partnership reinforces our ability to enter new geographies through structured delegation oriented growth pathways. Over time, partnerships structured in this manner will become meaningful contributors to long term earnings growth and market expansion. These partnerships solve for one of the major issues around growth in value based care, establishing cash flow to the business and contractual elements that are mutually beneficial for P3 and the payer partner. Overall, our first quarter was strong. We have three quarters ahead of us and our focus remains on sustaining execution. The results reinforce our confidence that the business has moved into a phase of improving operational consistency and earnings quality. The core economic levers that drive the business are increasingly within our control and while our work is never done, the economic framework for 2026 is solid within the business. We remain focused on executing with discipline against that opportunity. With that, I'll turn the call over to Amir to discuss our clinical performance. Thank you Eric.

Amir

I want to spend a few minutes on the clinical work that is driving the financial performance Leif will discuss shortly. The nearly flat MA medical cost trend that we are seeing in the quarter is not accidental. It is a result of deliberate clinical programs, improved utilization management workflows and enhanced payment integrity capabilities. The clinical foundation driving our approach centers on our care enablement model embedded within our Tier one provider network. Execution across four areas is tracking ahead of plan. First, our star's performance is tracking ahead of our internal glide path for gap closures across all markets, signaling that our quality trajectory is on track heading into the second half of the year and provides confidence in achieving our goals. Second, total members seen across all markets through quarter one is ahead of plan by approximately 5%, which directly supports burden of illness documentation and our ability to manage care for the highest complexity members. Third, our Tier 1 provider concentration continues to deepen. The share of members attributed to Tier 1 providers has increased from 56% in Q1 25 to 62% in 26, reflecting continued progress in aligning our network around practices with the highest level of clinical integration and accountability. These providers consistently demonstrate more effective chronic disease management and better overall cost performance. And lastly, our high Risk program provides intensive support for our most complex members. A core feature of the program is a dedicated 24.7clinical call center, giving members and their caregivers direct access to clinical guidance before seeking higher cost care. This capability is designed to reduce avoidable ED visits and inpatient admissions by ensuring members have a supported lower acuity pathway when issues arise. This program was introduced in late 2025 and continues to ramp in the early part of 2026. In addition to our clinical foundation, we have strengthened our utilization management infrastructure across the network with a focus on high cost settings including inpatient, post acute care and readmissions. The result is a more consistent cost effective care experience across our markets. We've also made meaningful progress on payment integrity, implementing process improvements that ensure we are paying accurately for the services our members receive. This is an area where operational discipline translates directly to medical margin and the work we have done over the past several quarters is now showing up in our results. Lastly, our P3 Restore program where we provide a three month individualized coaching engagement to provider partners, has reached across all of our markets with lasting impact on provider engagement and practice sustainability. With that, I'll turn the call over to Leif to walk you through our financials.

Leif

Thank you Amir and good afternoon. Q1 was a strong start to the year. We delivered 26 million of adjusted EBITDA exceeding internal expectations for the quarter. The results reflect the cumulative impact of the work Eric described, including improved payer economics, disciplined clinical execution, and strategic portfolio decisions such as smart deliberate market growth. This afternoon I will cover three areas. First, our financial performance for the quarter, including an update on our medical cost trends second, our capital position and liquidity and third, our revised outlook for the remainder of 2026 starting with membership total at risk Membership at The end of Q1 was approximately 106,000 compared to 118,000 in Q1 2025. The year over year decline reflects the deliberate portfolio actions that we took throughout 2025, including the exit of arrangements that did not meet our economic thresholds. The membership base we are operating from today is more concentrated in relationships where our model performs. In addition to our at risk membership, we currently manage approximately 29,000 lives under management service arrangements, bringing the total lives under management to approximately 135,000. Going forward, we intend to provide total managed lives as an additional operating metric to better reflect the broader scale of our platform and the expanding scope of services we provide across our payer and provider relationships. Moving to revenue Q1 revenue was 386 million compared to 373 million in the same period of 2025. Despite a lower membership base per member, funding for our Medicare Advantage population improved approximately 15% year over year, reflecting rate progression, contractual restructuring and continued maturation of our burden of illness documentation across our networks. Medical claims expense for the quarter was 306 million. The results include approximately 17 million of favorable prior year development and payer settlements. Q1 2026 MA Medical Cost Trend is approximately flat to the full year 2025 baseline when adjusted for the prior year items. Medical margin for the quarter was 74 million. Medical loss ratio for the quarter was 85.2 when adjusted for the favorable prior year development and payer settlement noted above. These results reflect the structural contract improvements, clinical execution and enhanced payment integrity workflows along with utilization management progression previously described. Adjusted operating expense for the quarter was 25 million consistent with the cost structure we have established over the prior 18 months. We continue to direct investments towards frontline capabilities that drive medical costs and quality performance. Adjusted EBITDA for Q1 was 26 million compared to a loss of 22 million in the same period of 2025. Excluding the prior year items, underlying Q1 adjusted EBITDA was $8 million reflecting the core operating performance of the business. On the balance sheet, we ended the quarter with $25 million in cash and equivalents. Consistent with the liquidity framework we have communicated, we continue to manage capital with discipline while maintaining focus on operational execution and financial stability. Of additional note, we recently completed a series of strategic capital structure transactions designed to improve financial flexibility and address the Nasdaq minimum stockholders equity requirement. On April 28, approximately $250 million of debt was converted to preferred equity. While not reflected on the 331-202-6 back balance sheet, it materially improves stockholders equity. Separately, we have an agreement to issue up to 70 million in additional preferred equity, 30 million of which has been issued to date. Collectively, we believe these actions bring stockholders equity above the Nasdaq minimum compliance threshold, materially strengthening the company's financial position and enhance the long term balance sheet flexibility. Now moving to our updated 2026 outlook, we are revising our full year 2026 adjusted EBITDA outlook to a range of 20 million to 60 million with a midpoint of 40 million. The revision reflects both the favorable prior year development and payer settlements recognized in Q1 and our confidence in the underlying operating trajectory of the business through the remainder of the year. Our confidence in the full year is rooted in the same pillars we outlined at the start of 2026, the structural contract improvements now flowing through our economics, continued clinical execution across cost management, quality and STARS performance, and the operating discipline we have established across the business. The width of the range reflects the normal Variability in claims development and full year cost expectations. Results within the range are contingent on cost trend development throughout the year and execution against medical cost initiatives. With that, I'll turn it back to Eric for closing comments.

Eric Kaufman (Chief Executive Officer)

Thank you, Leif. Before we open the line for questions, I want to leave you with three takeaways from this quarter. First, the structural work is producing results. The contract restructuring, network concentration and operational redesign we have executed over the past two years are showing up in our economics. Additional structural work remains a priority in 2026 and we are executing against it. Second, our clinical model, utilization management and payment integrity processes are differentiators at a time when the industry is broadly guiding to 7% or higher medical cost trend. P3 delivered flat trend in the quarter following a sub 2% trend in 2025. That outcome is driven by the clinical and operational infrastructure Amir described. We expect it to remain a point of differentiation as we move forward. Third, the setup for the remainder of 2026 is strong. We are raising our full year outlook. Our operating fundamentals continue to mature and the predictability of our performance has improved. We have plenty of work ahead, but we are executing with confidence with that operator. Please open the line for questions.

OPERATOR

Thank you. We will now begin the question and answer session. To ask a question, we press STAR and then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press STAR and then two. At this time, we will pause momentarily to assemble our roster. We have a first question from the line of Ryan Langston from TD Govin. Please go ahead.

Ryan Langston (Equity Analyst)

Hey, thanks. On the utilization point, can you maybe just talk about what you saw in the first quarter in terms of A and B versus Part D? And then I guess, is it still logical to expect that part D MLRs are going to trend higher as we move through the year just as members hit their out of pocket maximums? Hey Ryan, thanks for the question. This is Eric. I'll have Leif give a little more detail. One thing I want to remind on that part D part is we've significantly reduced our part D exposure and are continuing to reduce our part exposure in all of our contracts beyond 2026.

Leif

But we'll still. I think Leif is is looking for an answer here for you. Okay, thank you Ryan. And oh hey Les. Hey, how's it going? Thanks for the question. Appreciate it. On kind of the medics trend side of things, we actually saw a Bigger reduction across part B in our book of business collectively, when we look at in year 2025 versus in year 2026, it was where part A was predominantly flat.

Ryan Langston (Equity Analyst)

Okay. And then can you break out, I think it was around 18 million of positive PYD and payer settlement. Are you able to tell us what each of those were? And in terms of the good to see, was anything reestablished back in reserves above and beyond what the amount was that was included in the results for one. Q. Thanks, Ryan.

Leif

I didn't catch the last half of that, but let me answer the first half of the question. The first half of the question is that split between those two items is about 65, 35, meaning 65% of that $17 million is related to to change related to prior year favorable prior year development of our reserves and about 35% relates to some payer settlements.

Ryan Langston (Equity Analyst)

Okay, the second part was just did you reestablish any positive PYD back into reserves or did that all flow through into the results for the first quarter?

Leif

What we disclosed is what flowed through the period in the quarter and we stayed consistent with our reserve methodology. We did not reduce any of our pads or our estimates from an IVNR process perspective.

Ryan Langston (Equity Analyst)

Okay, got it. Thank you very much.

OPERATOR

Thank you. We have an question online of Benjamin Hainer from Lake Street Capital. Please go ahead.

Benjamin Hainer (Equity Analyst)

Good afternoon gentlemen. Thanks for taking the questions and congrats on the quarter. First off, for me, just thinking about potential payer partners expansion with the existing ones. Do you think that or to what extent do you think that they take notice of, you know, kind of the results for the quarter? Just reported the conversion to preferred stock and kind of see, you know, much more financially sound partner. And does that benefit you guys? To what degree might that benefit you guys? Hey Ben, thanks for being on. Appreciate the question. Yeah, I think, you know, our ability to demonstrate positive momentum and an improved balance sheet, it does help prospects as you think about growth to have a healthy balance sheet. It also supports part of our strategy as we move forward in expanding delegation. And that one is so important not just for the data side of it, but for claims delegation. It also speeds up the timing that you have to get the dollars that you've impacted in the business as well as improves cash flow in the business obviously as well. Makes sense. And then, you know, just you mentioned the delegation. I guess what's kind of the pathway? I know you have the set pathway and the newer managed services contract, but otherwise what's kind of the pathway to get that beyond 63%? Yes, good question. And so the standout market, we have one particular geography in which our current delegation is very, very limited. And so we've approached that contractually with those payers. And we have a glide path to get to delegation with each one of those payers based on the internal timetables that they have. So that's not, not something that will just flip on. Each one of these needs things like a pre delegation audit and then there's, you know, testing that has to happen and then you move into a full delegation. So I expect that to be stair stepped over the next, you know, probably two years, to be honest. Okay, that's helpful. That's all I had. Gentlemen, congrats again on the quarter. That's very nice. Thanks so much, man. Appreciate it. Thank you.

OPERATOR

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Eric Kaufman for any closing remarks.

Eric Kaufman (Chief Executive Officer)

Thank you so much. Appreciate everyone joining and thanks for listening to our first quarter results.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.