Q1 2024 P3 Health Partners Inc Earnings Call

Unknown Executive: Hello and welcome to the P3 Health Prtnrs first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Please note, this event is being recorded. I would like now to turn the conference over to your host, Mr. Ryan Halstead. You may begin.

Hello, and welcome to the P. Three health partners first quarter 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. Please note. This event is being recorded I would like now to turn the conference over.

Ryan Scott Daniels: Over to your host Mr. Ryan Halsted you may begin.

Ryan Scott Daniels: 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 being made during this call are forward looking statements under the U S Federal securities laws, including statements regarding our financial outlook and long term target.

Ryan Scott Daniels: 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 being made during this call are forward-looking statements under the U.S. federal securities laws, including statements regarding our financial outlook and long-term targets. P3 Health Prtnrs, 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. 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.

Ryan Scott Daniels: 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.

Ryan Scott Daniels: 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. The company undertakes no obligation to.

Ryan Scott Daniels: Date or revise these forward looking statements, we will refer to certain non-GAAP financial measures on this call.

Ryan Scott Daniels: We will refer to certain non-GAAP financial measures on this call, including adjusted operating expense, adjusted EBITDA, adjusted EBITDA per member per month, medical margin, medical margin per member per month, medical margin per member per month for persistent lives, and cash use. These non-GAAP financial measures are in addition to and not a substitute 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.

Ryan Scott Daniels: Including adjusted operating expense adjusted EBITDA adjusted EBITDA per member per month medical margin medical margin per member per month medical margin per member per month for persist persistent lives and cash use. These non-GAAP financial measures are in addition to.

Ryan Scott Daniels: And not a substitute 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.

Ryan Scott Daniels: Please refer to the appendix of our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures.

Ryan Scott Daniels: 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 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 and in our SEC filings, which may be accessed from the Investors page of the P3 Health PRtnrs website. I will now turn the call over to Dr. Abdou, CEO and co-founder of P3 Health.

Doctor Ido: Information presented on this call is contained in the press release that we issued today and in our SEC filings, which may be accessed from the investors page of the P. Three health partners website I will now turn the call over to Doctor I do see E O and co founder of P. Three.

Sherif Abdou: Thank you Ryan and good afternoon, and welcome everyone to our first quarter 'twenty 'twenty four earnings conference call I am joined today by Eric Amir belt and a tool.

Sherif Abdou: Thank you, Ryan. Good afternoon, and welcome everyone to our first quarter 2024 earnings conference call. I am joined today by Eric, Amir, Bill, and Atul. We would like to begin by providing an update on the tremendous progress made in the first quarter. We just reported a strong Q1, which exceeded our internal expectation on the top line but fell short of our adjusted EBITDA target. Overall, we are quite pleased with the start of the year, and therefore, we're reaffirming our previous full year guidance of positive 20 to positive 40 million of adjusted EBITDA for the year.

Sherif Abdou: We would like to begin by providing an update on the tremendous progress made in the first quarter.

Sherif Abdou: We just reported a strong Q1.

Sherif Abdou: Which exceeded our internal expectations on the top line.

Sherif Abdou: But fell short on our adjusted EBITDA target overall, we are quite pleased with the start of the year and therefore, we are reaffirming our previous full year guidance.

Sherif Abdou: <unk> 22 positive $40 million.

Sherif Abdou: Adjusted EBITDA for the year.

Sherif Abdou: Starting with the top line our revenue for the first quarter 2024 grew approximately 29% year over year supported by a strong pipeline.

Sherif Abdou: Starting with the top line, our revenue for the first quarter of 2024 grew approximately 29% year over year, supported by a strong pipeline. Additionally, as we previously indicated, our per member per month funding was up approximately 8% year over year, despite the headwinds of substantial membership growth, along with the V28 and 24 changes and the benchmark reduction. Our Medicare lives have grown to approximately 126,800 lives, or 23% growth year-over-year, which already exceeds the low end of our guidance range for the full year.

Sherif Abdou: As we previously indicated our per member per month funding was up approximately 8% year over year. Despite the headwinds of substantial membership growth along with the V 28, and 24 changes and the benchmark reduction.

Sherif Abdou: Okay.

Sherif Abdou: Our Medicare lives have grown to approximately 126800 lives or 23% growth year over year would you really exceeded the low end of our guidance range for the full year.

Sherif Abdou: This includes approximately 11,000 ACO REACH lives, up from 7,400 at the end of last year. As we said before, our percentage of persistent lives is a key driver of our pathway to profitability in 2024. I'm pleased to report on the success of our member renewal in the new year. Approximately 90% are now persistent, as defined by lives, from December 2023 that remained with us in January 2024, up from 86% last year. To date, we have launched in six new counties, adding 8,000 to 10,000 new lives with an existing payer partner, expanding our total number of counties served to 27.

Sherif Abdou: This includes approximately 11000 E C O reach lives up from 7400 at the end of last year.

Sherif Abdou: As we said before our percentage of persistent lives is a key driver of our pathway to profitability in 'twenty 'twenty four I am pleased to report on the success of our member renewal and the new year approximately 90% are now for resistant as defined by lives.

Sherif Abdou: From December 'twenty, two 'twenty three that remain with us in January 2024 up from 86% last year.

Sherif Abdou: To date, we have launched six new counties, adding eight to 10000, new lives with an existing payer partner expanding our total number of guarantee served 227.

Sherif Abdou: Operating expenses improved to $26 2 million versus $35 6 million during the first quarter of 2023, representing a 26% year over year decrease and robust operational efficiencies.

Sherif Abdou: Operating expenses improved to $26.2 million versus $35.6 million during the first quarter of 2023, representing a 26% year-over-year decrease and robust operational efficiency. Our medical expenses in the quarter were approximately 12% lower sequentially, which reflects our view of a normalizing utilization trend consistent with the commentary we made on our last quarter call. While we agree with the principle of conservatism in the current environment, we also believe that we are overly conservative to the tune of between $20 to $30 PMPM based on the actual claims run out.

Sherif Abdou: Our medical expense in the quarter were approximately 12% lower sequentially, which reflects our view of a normalizing utilization trend consistent with the commentary we made on our last quarter call.

Sherif Abdou: Well, we agree with the principal of conservatism in the current environment. We also believe that we have.

Sherif Abdou: Our.

Sherif Abdou: Over conservative to the tune between 20 to 30 dollar P. M. P. M based on the actual claims right now we've experienced year to date for 2023 data service Attune will go into much more detail, but we will continue to work with our actuary and auditor to align our reserve.

Sherif Abdou: We've experienced a year to date for 2023 data service. Atul will go into much more detail, but we will continue to work with our actuary and auditor to align our reserve with actual paid claims. With that as a context, our adjusted EBITDA was a loss of $19.8 million, roughly flat to the first quarter of 2023. On a PMPM basis, we were approximately $86 better than Q4 of last year and approximately $11 better than the first quarter of 2023.

Sherif Abdou: With actual paid claim.

Sherif Abdou: With that as a context, our adjusted EBITDA was a loss of $19 8 million roughly flat to the first quarter up do any 23 P.

Sherif Abdou: P. M. P. M basis, we were at approximately 86 dollar better than Q4 of last year and approximately $11 better than the first quarter up do any 23.

Sherif Abdou: Lastly, we are thrilled to announce our strategic partnership with <unk> to leverage their advanced AI platform through this partnership we will advance <unk> three in the areas of predictive modeling accelerates quality gap closure and provide our clinician with actionable data.

Sherif Abdou: Lastly, we are thrilled to announce our strategic partnership with Innovator to leverage their advanced AI platform. Through this partnership, we will advance P3 in the areas of predictive modeling, accelerate quality gap closure, and provide our clinicians with actionable data at the point of care. With that, I'd like to turn it over to our CFO, Atul Kavthekar.

Atul Kavthekar: At the point of care.

Atul Kavthekar: With that I'd like to turn it over to our CFO Atul cab scar.

Atul Kavthekar: Thanks, Larry I'll start today by discussing our recent quarter and how we are progressing towards our full year guidance.

Atul Kavthekar: Thanks, Sherif. I will start today by discussing our recent quarter and how we are progressing towards our full year guidance. Then I'll provide updates on our liquidity position at the end of the quarter. Top line results for the first quarter were in line with our expectations, with capitated revenue of $384 million and total revenue of $388 million, both representing growth of 29% compared to the prior year. In the first quarter, our medical margin was $36.6 million, or $96 on a PMPM basis. There are two noteworthy factors that have impacted our medical margin in court.

Atul Kavthekar: Then I'll provide updates on our liquidity position at the end of the quarter.

Atul Kavthekar: Topline results of the first quarter were in line with our expectations with <unk> revenue of 384 million and total revenue of 388 million, both representing growth of 29% compared to the prior year in the first quarter, our medical margin was $36 6 million or <unk> 96.

Atul Kavthekar: On a P M P M basis.

Atul Kavthekar: There are two noteworthy factors that impacted our medical margin in the quarter.

Atul Kavthekar: The first is the general approach of conservatism around our IV&R and medical expense accruals. As an example, as we look back at last year's activity, with the benefit of having time for the claims from that period to present themselves, we have confirmed what we suggested at that time and now estimate that we had a cushion at that time of between $20 to $30 on a PMPM basis.

Atul Kavthekar: First is the general approach of conservatism around our IBM <unk> and medical expense accruals.

Atul Kavthekar: As an example, as we look back at last year's activity with the benefit of having time for the claims from that period to present themselves.

Atul Kavthekar: We've confirmed what we suggested at that time and now estimate that we had a cushion at that time of between 20 to $30 on a P. M. P M basis.

Atul Kavthekar: We will continue to work with our actuaries over the next few quarters to observe the actual paid claims experienced in 2024.

Atul Kavthekar: We will continue to work with our actuaries over the next few quarters to observe the actual paid claims experience in 2024. Specifically, we will work to re-evaluate our reserve estimates in light of the easing of utilization in the first quarter of 2024, around which Dr. Bacchus will provide further details. Over the next few quarters, depending on the data collected, it may be appropriate to favorably adjust our reserves. The second item worth mentioning is the impact of a timing difference related to our Part D exposure.

Atul Kavthekar: Specifically, we will work to re evaluate our reserve estimates in light of the easing of utilization over the first quarter of 2024 around which Dr. Baucus will provide further detail.

Atul Kavthekar: Over the next few quarters, depending on our data collected it may be appropriate to favorably adjust our reserve.

Atul Kavthekar: The second item worth mentioning is the impact of a timing difference related to our part D exposure essentially we recognize the full expense in the quarter, but we did not recognize any credit for the rebates until subsequent quarters. When these amounts are typically provided by the health plan.

Atul Kavthekar: Essentially, we recognize the full expense in the quarter, but we do not recognize any credit for the rebates until subsequent quarters when these amounts are typically provided by the health plan. The impact of this in the quarter is approximately $8 million. As it relates to operating expense trends, our corporate general administrative expenses decreased from over 12% of revenue in the first quarter of 2023 down to just below 7% in the current quarter.

Atul Kavthekar: The impact of this in the quarter is approximately $8 million.

Atul Kavthekar: As it relates to operating expense trends, our corporate general and administrative expenses decreased from over 12% of revenue in the first quarter of 2023 down to just below 7% in the current quarter.

Atul Kavthekar: This is a sequential improvement from 8% of revenue from the fourth quarter of last year and consistent with our guidance for high single digits. We remain committed to continually improving our operating efficiency and continue to monitor spending. Adjusted EBITDA for the quarter was a loss of $19.8 million compared to a loss of $19.1 million in the first quarter of 2023.

Atul Kavthekar: This is a sequential improvement from 8% of revenue from the fourth quarter of last year and consistent with our guidance for high single digits, we remain committed to continually improving our operating efficiency and continue to monitor spending.

Atul Kavthekar: Adjusted EBITDA for the quarter was a loss of $19 8 million compared to a loss of $19 1 million in the first quarter of 2023 on a per member per month basis. Adjusted EBITDA was a loss of $52 an improvement of $11 P. M. P M compared to the first quarter of 2023.

Atul Kavthekar: On a per member per month basis, adjusted EBITDA was a loss of $52, an improvement of $11 PMPM compared to the first quarter of 2023, as we successfully improved margins and lowered costs on a per member basis. We anticipate showing improvements as benefits from medical cost reductions, operational efficiencies, and potential positive true-ups flow throughout the year. These will create a contour rather than a straight line spread of results.

Atul Kavthekar: I think successfully improved margins and lowered costs on a per member basis.

Atul Kavthekar: We anticipate showing improvements as benefits from medical cost reduction operational efficiencies and potential positive true ups flow throughout the year, the haynesville create a contour rather than a straight line spread of resolve.

Atul Kavthekar: Our net loss in the first quarter of 2024 improved by 5.7% compared to the same period in the prior year, in part due to the improvement in corporate and general expenses. For the remainder of the year, we expect these expenses to continue to taper. As for liquidity, we ended the quarter with approximately $32 million in cash. Additionally, at the start of the second quarter, we received approximately $15 million in regular cash capitated premiums and an additional $15 million of capital on our new notes.

Atul Kavthekar: Our net loss in the first quarter of 2024 improved by five 7% compared to the same period in the prior year in part due to the improvement in corporate and general expenses for.

Atul Kavthekar: For the remainder of the year, we expect these expenses to continue to taper.

Atul Kavthekar: As for our liquidity, we ended the quarter with approximately $32 million in cash. Additionally, at the start of the second quarter, we received approximately $15 million and regular cash cap attained in premiums and an additional $15 million of capital on our new notes.

Atul Kavthekar: To that end, we are reaffirming our full year 2024 guidance. We still expect our members to be between 125,000 and 135,000 and remain confident that our 2024 revenue will be between 1.45 billion and 1.55 billion. Medical margin will range between $230 million and $250 million, representing $165 and $175 on a PMPM basis. And finally, adjusted EBITDA ranging from plus $20 million to plus $40 million. We're confident in our ability to achieve our EBITDA guidance for multiple reasons.

Atul Kavthekar: And we are reaffirming our full year 2024 guidance, we still expect that MA members to be between 125000, and 135000 and remain confident that our 2020 for revenue will be between 145 billion and $1 five 5 billion.

Atul Kavthekar: Medical margin will range between $230 million and $250 million, representing 165 and $175 on a P. M. P M basis, and finally, adjusted EBITDA, ranging from plus $20 million plus $40 million.

Atul Kavthekar: We're confident in our ability to achieve our EBITDA guidance for multiple reasons.

Atul Kavthekar: First, we have the potential for a significant reserve release with our 2023 actual claims almost complete and showing strong improvement from previously booked expenses. Second, we started the year with strong membership growth, increased persistency, and overall increased funding. Third, we expect an increase in our accrual of sweeps this year. And finally, our daily key indicators point to utilization being more on par and even below what we saw in 2023. And with that, I'll turn it over to Dr. Bacchus.

Atul Kavthekar: First we have a potential of a significant reserve release with our 2023 actual claims almost complete and showing strong improvement from previously booked expenses.

Atul Kavthekar: Second we started the year with strong membership growth increased persistency and overall increase funding.

Atul Kavthekar: Third we expect an increase in our accrual of sweeps this year and finally, our daily key indicators point to utilization being more on par and even below what we saw in 2023.

Amir Bacchus: And with that I'll turn it over to the Doctor Baucus.

Amir Bacchus: Thanks, Atul. In our last earnings call, I stated that we had early indications of decreased medical expenses from December 23 to January 24. Now that that data is more mature, I can indeed report that December 23 to quarter 1 2024 continues to show a downward trend in utilization. For emits per thousand, we saw a decrease of 2%. For emergency department visits per thousand, they decreased by 6%. In addition, despite the two-midnight rule change, we continue to see improvement in our observation rate to the tune of a decrease in temperature.

Amir Bacchus: Thanks, a tool in our last earnings call I stated that we had early indications of decreased medical expenses from December 23 to January 24, now that that data is more mature I can indeed report that December of 23% quarter. One 2024 continues to show a downward trend in utilization or amidst per thousand we saw a D.

Amir Bacchus: A 2% for emergency department visits per thousand they decreased by 6%.

Amir Bacchus: In addition, despite the two midnight rule change we continue to see improvement in our observation thousand rate to the tune of a decrease of 10%.

Amir Bacchus: During the first quarter, medical expense was $918 CMPM, improving from $1,042 sequentially, a 12% decrease. In addition, P3 has continued to bend the cost curve for high-risk members by accurately projecting and implementing appropriate care plans without incurring additional costs. We continue to proactively manage utilization for cost avoidance, as well as conduct concurrent claims reviews for recoveries where we are delegated. Our effectiveness in high-risk populations has been a key driver in P3's ability to effectively manage medical cost trends.

Amir Bacchus: During the first quarter medical expense was $918 P. M. P M improving from 1042 sequentially a 12% decrease.

Amir Bacchus: In addition, <unk> has continued to bend the cost curve for high risk members by accurately projecting and implementing appropriate care plans without incurring additional costs.

Amir Bacchus: We continue to proactively manage utilization for cost avoidance as well as conduct concurrent claims reviews for recoveries, where we our delegated.

Amir Bacchus: Our effectiveness at high risk populations has been a key driver of <unk> ability to effectively manage medical cost trend.

Amir Bacchus: Our care model continues to be effective in reducing costs, working in tandem with our high-risk population through an improved focus on palliative and hospice care, increased enrollment into the COPD program, and continued provider and patient engagement. We remain focused on improving utilization management to reduce unnecessary utilization and wasteful spending while improving the patient experience. Lastly, as Sherif mentioned, we're excited to have partnered with Innovasor to ignite our AI and data capabilities.

Amir Bacchus: Our care model continues to be effective in reducing costs working in tandem with our high risk population screening improved focus on palliative and hospice care increased enrollment into the COPD program and continued provider and patient engagement.

Amir Bacchus: We remain focused on improving utilization management to reduce unnecessary utilization.

Amir Bacchus: And wasteful spending while improving the patient experience.

Amir Bacchus: Lastly, as <unk> mentioned, we're excited to have partnered with innovator to ignite our AI and data capabilities.

Amir Bacchus: We will use InNote, Innovasor's EHR-agnostic physician engagement solution, to seamlessly close coding and care gaps and use the company's population health analytics suite to achieve quality and cost goals. And we will use Innovasor's patient engagement solution to drive omni-channel patient outreach to improve the patient experience. Thank you. And with that, back to you, Sherif.

Amir Bacchus: We will use in note innovation EHR agnostic physician engagement solution to seamlessly quote coding and care gap and use the companys population health analytics suite to achieve quality and cost goal and we will use <unk> patient engagement solution to drive omnichannel patient outreach to improve the patient experience.

Sherif Abdou: Thank you and with that back to you sheree.

Speaker Change: Operator, let me make some closing comments and then I'll turn it over to Eric today reaffirmed our 2024 guidance across all our metrics and shared with you that our membership was up 23%. Our revenue was up 29% our opex was down 26.

Sherif Abdou: Operator, let me make some closing comments and then I'll turn it over to Eric. Today, we reaffirmed our 2024 guidance across all our metrics and shared with you that our membership was up 23%, our revenue was up 29%, our OPEX was down 26%, and our funding per member per month was up 8%. And despite that IVIDA is lower than expectations, we shared with you information to affirm and give confidence to myself and the team that we will achieve the targeted IVIDA positive for 2024.

Sherif Abdou: <unk> and our funding per member per month was up.

Sherif Abdou: 8%.

Eric: And despite that the EBITDA is lower than expectations, we shared with you information to affirm and give confidence to myself and the team that we will achieve the targeted EBITDA positive for 2024.

Sherif Abdou: With that said, I would like to reiterate that now is the right time for P3 to transition to our new CEO, Eric Kopp. I believe he is a perfect fit to guide P3 through this exciting new chapter. As I reflect on how far our company has come since inception, I am thrilled to welcome Eric to the team. I am filled with a deep sense of confidence that P3 is on a sound footing and poised for continued success.

Eric: With that I would like to reiterate that now is the right time for <unk> to transition to our new CEO, Eric Hoffman I believe he is a perfect fit to guide <unk> through the exciting new chapter.

Sherif Abdou: As I reflect on how far our company has come since inception, I am thrilled to welcome Eric to the team.

Sherif Abdou: I am thrilled with the deep sense of confidence that <unk> III is on a sound footing and poised for continued success.

Speaker Change: So let me answer three question is why now why Eric and how are we going to do the transition.

Sherif Abdou: So let me answer three questions, why now, why Eric, and how we're going to do the transition. As I mentioned to you, as myself and the company mature from founding to operating to growing, it's time for a fresh leadership. It's well known that the transition of founders into new CEOs and operators is a great, important step in any growing organization, and I believe it is important for us to bring in fresh blood and a fresh set of eyes and skill sets to continue to lead P3 under the same mission, vision, and values that we've built it on. Second, why Eric?

Sherif Abdou: As a as I mentioned to you as as myself and the company mature from founding to operating to growing its time to put a fresh leadership.

Sherif Abdou: It's well known that.

Sherif Abdou: That transition of founder into a new Ceos and operator is is a great and important step in any growing organization and I believe it is important for our for us to bring in fresh blood and fresh.

Sherif Abdou: Set of eyes and skill set to.

Sherif Abdou: Continued to lead the three under the same mission vision and values that we're building.

Sherif Abdou: Second is y.

Sherif Abdou: Eric.

Sherif Abdou: So I believe, for me, I have known Eric for over 10 years, 2014, I think, or 2013, the first time we met, and we worked together as healthcare partners with DaVita, and I continued to stay in touch with him through the last 10, 12 years. Two years ago, Eric and I met for lunch in the Seattle area, and I introduced the idea to him to become the successor to myself in P3. And since then, we've been working on that, and we finally came to the conclusion yesterday to make that decision. So I believe that Eric is the right leader for the next phase and chapter for P3. And like I said, check all the boxes doctors, great leader, great friend, and great experience and value base.

Sherif Abdou: So I believe he put four for me I know Eric over 10 years 2014, I think of 2013. The first time, we met and we work together and are healthy.

Sherif Abdou: Healthcare partners with Davita and and they continued to stay in touch with them through the last 10 12 years.

Sherif Abdou: Two years ago, Eric and I met had lunch and then in the Seattle area and I introduced the idea to have to become the successor to myself and <unk> three and since then we've been working on then finally came to the conclusion yesterday too.

Sherif Abdou: To make that decision.

Sherif Abdou: So so I believe that Eric is the right leader for the next.

Sherif Abdou: Chapter for <unk>, III, and like I said check all the boxes doctors, great leader, a great brand and great experience and value base.

Sherif Abdou: Finally, how we're going to do this transition. I'm going to be staying on as an advisor. I'm going to work very closely with Eric throughout the transition period, and I'll always be available for any question or any support that anybody needs during that transition period. And I'm going to remain on the board to work with the board director as well to continue to enhance value creation in P3. With that, I'm going to turn it over to Alex.

Sherif Abdou: Finally as to how we're going to do this transition.

Alex: I'm gonna be stayed on as an adviser I'm going to work very closely with Eric throughout there.

Alex: The transition period and.

Alex: I'll be always are available for any question or any sort.

Alex: Port there's anybody needed to add that transition period, and I am going to remain on the board to work with a board of director as well to continue to enhance the value creation and P. III with that I'm going to turn it over to Eric.

Alex: Thanks, <unk>, let me start by saying how excited I am to join Peachtree and how impressed I am with the capabilities and trajectory.

Eric Kopp: Thanks, Sheriff. Let me start by saying how excited I am to join P3 and how impressed I am with its capabilities and trajectory. As mentioned, I met both Sherif and Amir many years ago while serving as a medical director and a practicing surgeon at a predecessor company, Health Care Partners. They were early pioneers of value-based care, and we spent time together while at Health Care Partners. I've learned a lot from them and will continue to do so as the CEO of P3.

Eric Kopp: As was mentioned I met both Sharif in a mirror many years ago, while serving as a medical director and are practicing surgeon at a predecessor company to health care partners.

Eric Kopp: They were early pioneers of value based care. We spent time together all of health care partners I've learned a lot from them and we'll continue to do so as the CEO of <unk>.

Eric Kopp: Following my initial time at Health Care Partners as we transitioned to DaVita Medical Group, I then served as CEO of the Everett Clinic and Northwest Physicians Network in Washington State. While there, I worked closely with Bill Betterman, who served as my COO. We both stayed for a few years after the acquisition by Optum.

Speaker Change: Following my initial time in health care partners as we transition to Davita Medical group I've been served as CEO of the Everett clinic and northwest Physicians network in Washington State.

Eric Kopp: While there I worked closely with Bill betterment, who serve as my COO. We both stayed for a few years after the acquisition by Optum visa.

Eric Kopp: These experiences, along with my most recent role as CEO of Honest Medical Group, helped me develop the necessary skills for transforming care delivery from fee-for-service to value-based care. As we are all aware, our health care system continues to face significant pressure. We have an aging population, a shortage of PCPs, and high rates of physician burnout.

Eric Kopp: These experiences along with my most recent role as CEO of honest Medical group helped me develop the necessary skills and transforming care delivery from fee for service to value based care.

Eric Kopp: As we are all aware our healthcare system continues to have significant pressures, we have an aging population a shortage of pcbs and high rates of physician burnout.

Eric Kopp: We need scalable solutions that engage clinicians and patients to bend the cost curve while providing high-quality care. The P3 model, a physician-led, scalable, capital-light, value-based care platform, is a clear advantage across delegated functions, including claims and utilization management. P3 has demonstrated the ability to lower health care costs through physician and patient engagement in a growing market with significant white support. We will create depth in our existing practices by adding Medicare Advantage and Medicare ACO REACH membership to capture more mindshare of the providers we serve.

Eric Kopp: We need scalable solutions that engage clinicians and patients to bend the cost curve, while providing high quality care.

Eric Kopp: The P. Three model a physician led scalable capital light value based care platform is a clear advantage along the delegated functions, including claims and utilization management.

Eric Kopp: <unk> has demonstrated the ability to lower health care costs through physician and patient patient engagement and a growing market with significant white space.

Eric Kopp: We will create depth in our existing practices by adding Medicare advantage and Medicare ACO reach membership to capture more mind share of the providers we serve.

Eric Kopp: <unk> is also at an inflection point of achieving profitability.

Eric Kopp: P3 is also at an inflection point of achieving profitability, which will fuel our future growth. We look forward to expanding our footprint to capitalize on a tremendous opportunity. I am confident in our ability to drive long-term sustainable value for the entire health care system, our patients, as well as for our stakeholders. I look forward to the opportunity to engage with many of the participants on this call over the coming months. It will be a pleasure to connect with our talented employees and associates across the organization as well. Thank you. So with that operator, we're ready for Q&A.

Eric Kopp: Which will fuel our future growth.

Eric Kopp: We look forward to expanding our footprint to capitalize on a tremendous opportunity.

Eric Kopp: I am confident in our ability to drive long term sustainable value for the entire health care system, our patients as well as for our stakeholders.

Eric Kopp: I look forward to the opportunity to engage with many of the participants on this call over the coming months it will be a pleasure to connect with our talented employees and associates across the organization as well.

Speaker Change: Thank you.

Eric Kopp: So with that operator, we're ready for Q&A.

Speaker Change: At this time, we will conduct a question and answer session. If you would like to ask a question. Please press star one on your phone now and you will be placed in the queue in the order received once again to ask a question press star one on your phone now.

Unknown Executive: At this time, we will conduct the question and answer session. If you would like to ask a question, please press star 1 on your phone now, and you will be placed in the queue in the order received. Once again, to ask a question, press star 1 on your phone now. We are ready to begin. Our first question comes from Brooks O'Neill of Lake Street Capital Market.

Unknown Executive: We are ready to begin.

Unknown Executive: Yeah.

Brooks O'Neill: Our first question comes from Brooks O'neil of Lake Street Capital markets. Please go ahead.

Brooks O'Neill: Please go ahead. Thank you very much. Thank you.

Brooks O'Neill: Thank you very much. Good afternoon, everyone, and welcome, Eric, an interesting time to join P3. Let me start by just asking you, obviously, the company took a slowed growth, although 29% revenue growth is not exactly slow, but focused on existing counties, existing provider relationships, and existing members.

Brooks O'Neill: Thank you very much good afternoon, everyone and welcome Eric.

Brooks O'Neill: It's an interesting time to join P. Three let me start by just asking you.

Brooks O'Neill: Italy.

Brooks O'Neill: Company.

Brooks O'Neill: So more or less in the last year.

Brooks O'Neill: Slowed growth of about 29% revenue growth is not exactly slow.

Brooks O'Neill: But focused on existing county's existing of.

Brooks O'Neill: Provider relationships existing members.

Brooks O'Neill: As you think about the future, is now the time to resume growing in new markets? Or do you think the company needs more time to strengthen its base before beginning to look to a more aggressive growth posture?

Brooks O'Neill: As you think about the future.

Brooks O'Neill: Is now the time to resume growing in new markets or do you think you need the company needs more time to strict in that space before beginning to look to a more aggressive growth posture yet.

Brooks O'Neill: Hey, Brooks this is Eric Hoffman. Thanks, so much for the question.

Eric Hoffman: This is Eric Hoffman. Thanks so much for the question, as we move through the rest of this year and do that in a way where our underwriting is solid, and we're clear on how we're adding those lives to the portfolio.

Eric Hoffman: Now what I think is we have to have measured growth.

Eric Hoffman: As we move through the rest of this year and do that in a way where our underwriting is solid and we're clear on how we're adding those lives into the portfolio.

Speaker Change: That makes sense to me, let me ask you this the.

Brooks O'Neill: That makes sense to me. Let me ask you this: just listening to commentary around the industry, particularly towards the end of It was clear that many M.A. plans did not meet the standards and were seeing significant utilization pressure that put a lot of pressure on the underlying economics of their business model.

Brooks O'Neill: Just listening to commentary around the industry, particularly towards the end of 'twenty.

Brooks O'Neill: 2023.

Brooks O'Neill: It was clear.

Brooks O'Neill: Many M a plan.

Brooks O'Neill: <unk> seen significant utilization pressure that.

Brooks O'Neill: But a lot of pressure on the underlying economics of their business model.

Brooks O'Neill: In my sense, companies like 3-3, organizations like P3, you know, have the deep experience in value-based care that's so in demand in the Medicare Marketplace today. Is that your sense? Are you getting significant outreach from the MA Plans with which you guys work? Suggest that there's a huge opportunity for you to expand and bring the knowledge and experience you have to market beyond where you're currently serving.

Brooks O'Neill: And my sense is companies like three three organizations like P. Three.

Brooks O'Neill: You know have the deep experience and value based care, that's so in demand.

Brooks O'Neill: In the Medicare marketplace today.

Brooks O'Neill: Is that your sense or you're getting significant outreach.

Brooks O'Neill:

Brooks O'Neill: That MA plans with what you guys work.

Brooks O'Neill: This suggests that there's a huge opportunity for you to expand and bring the knowledge and experience you have.

Brooks O'Neill: To markets.

Speaker Change: Yeah, We're Gabriel currently Sir Yeah, Yeah Brook, saying, Hey, this is Amir how are you.

Amir Bacchus: Yeah. Yeah, Brooks. Hey, this is Amir. How are you?

Amir Bacchus: Oh absolutely.

Amir Bacchus: Absolutely not. You know, from what we see, the NCOs and Medicare Advantage plans, et cetera, continue to look for that solution in multiple different areas. And as Eric said, we want to make sure we're growing smartly, right? And we will continue to do so. But the interest is very, very high in multiple areas. So as we continue to prove the model, that the model really truly works, and create the EBITDA that we want to create, that we've said we will obtain this year, not only driving more and deeper into the practices we are in because of ACO reach, but we'll be more apt, instead of just going deeper into the counties we're in, but looking and spreading to potentially other counties outside of the states that we're in.

Amir Bacchus: Great. That makes total sense. Let me just ask one final question for Atul. I'm not sure, Atul, that I understood exactly what you were saying with regard to the $8 million credit. Would you mind helping me understand, helping us understand that just a little bit better?

Amir Bacchus: From what from what we see you know.

Amir Bacchus: The MTO the Medicare advantage plans et cetera continue to look for that solution in multiple different areas.

Amir Bacchus: And as Eric said, we want to make sure we're growing smartly right and we will continue to do that.

Amir Bacchus: But the interest is very very high in multiple areas in multiple states. So as we continue to prove the model that the model really true truly works and create the EBITDA that we want to create that we've said we will obtain this year not only driving more and deeper into the practices. We are in.

Amir Bacchus: There are also ACO reach then we'll be more apt and instead of just going deeper into the counties are in but to look and spread to potentially other counties outside of the states that we're in today.

Speaker Change: Great that makes total sense, let me just ask one final one for a tool.

Atul Kavthekar: I'm not sure a tool that I understood exactly what you were saying with regard to the $8 million credit would you mind, helping me understand helping us understand that just a little bit better.

Atul Kavthekar: Yeah, Brooks, thanks for the question. It's really pretty straightforward.

Atul Kavthekar: Yeah, Yeah Brooks.

Atul Kavthekar: For the question.

Atul Kavthekar: The it says it's really a pretty straightforward we expense the costs associated with the drugs in the current quarter as they are incurred.

Atul Kavthekar: We expense the costs associated with the drugs in the current quarter as they are incurred. The revenue that offsets that, i.e. The rebates are given to us and administered at the end of the year when we receive all that information from the health plans. So it's similar to last year, but as you recall, there was a little bit more of a timing difference in the way we recognize sweeps. And we changed that. That hasn't happened yet for the rebates. That's something we'll work on over the course of the year, but it's really as simple as, Okay, thanks.

Atul Kavthekar: The revenue that offsets that I E. The rebates.

Atul Kavthekar: Are given to us and administered at the end of the year when we receive all that information from the from the health plans. So it's similar to last year as you recall, there was a little bit more of a timing difference in the way we recognize suite.

Atul Kavthekar: And when you change that that Hasnt happened yet for the rebates, that's something we'll work on over the course of the year, but.

Atul Kavthekar: But it's really as simple as that.

Brooks O'Neill: Okay, thank you very much.

Speaker Change: Okay. Thank you very much.

Brooks O'Neill: The next question comes from Josh Raskin of Nephron Research. Please go ahead.

Joshua Richard Raskin: The next question comes from Josh Raskin of Nefron Research. Please go ahead.

Joshua Richard Raskin: Thanks. I'll start with a congratulations to Sherif on all the success so far and the building of the company and founding it. Really, really impressive. And I'll welcome Eric as well.

Joshua Richard Raskin: Thanks, I'll I'll start with the congrats to <unk> on all of the success, so far and building of the company and founding really really impressive and I'll welcome Eric as well good to hear your voice as well.

Joshua Richard Raskin: Good to hear your voice as well. My question is on revenues. I think you said PMPMs were up sort of 8 percent. I'm calculating something a couple basis points lower than that. So I'm just curious if that was sort of in line with expectations. And I know you've talked about sort of having less risk than others around the impact of V-28. But do you have a view on what the impact will be this early in the year? Do you have to wait for the M.A. Plans to kind of give you data or a better sense of your membership?

Joshua Richard Raskin: My question is on the revenues I think you said P. M. P. EMS were up sort of 8% I'm calculating something a couple basis points lower than that so I'm. Just curious if that was sort of in line with expectations and then I know you've talked about sort of having less risk than others around the impact of each one eight but do you have a view on what the <unk>.

Joshua Richard Raskin: Packed was this early in the year do you have to wait for the MA plans to kind of keep your data or a better sense on your membership risk.

Joshua Richard Raskin: Well it'll evolve over the year as you know, but I think look it's generally in line with what we expected potentially a little bit better than what we expected.

Joshua Richard Raskin: Well, it'll evolve over the years, you know. But I think, look, it's generally in line with what we expected, potentially a little bit better than what we expected. So we're very pleased to see that it came out that way. At least that's certainly what the documentation and the files are saying now.

Joshua Richard Raskin: So we're very pleased to see.

Joshua Richard Raskin: That is a that it came out that way at least that's certainly what with the with the documentation and the files are saying now.

Joshua Richard Raskin: But we'll monitor it and as far as any kind of if youre going up and the different calculation. We can certainly work that off line and get you where we are.

Sherif Abdou: But we'll monitor it. And as far as any kind of, if you're going up with a different calculation, we can certainly work that off the line and get you where we are. Yeah, I'm Josh. This is Sherif. Thank you very much for your kind words.

Speaker Change: Josh Thank you very much for your kind words.

Sherif Abdou: Right.

Sherif Abdou: We expected, if you remember last time, we said that in the middle single digits, and if you look at the RAV accrual, it's about the middle single digit; the rest of it is benchmark improvement. So it came out right, or a little bit better than we expected. The entire is 8%, some of it is benchmark, but the RAV accrual is about half to 5% from the 8%. And we still, like we said, our overall RAV is still about 1.046, so we still have a cushion and a runway to continue to improve before we see a real impact of the V20.

Sherif Abdou: We expected if you remember last time, we said that in the middle.

Sherif Abdou: Single digits.

Sherif Abdou: A few if you look at the Rab accrual it's about the middle.

Sherif Abdou: Single digit the rest of it is benchmark improvement.

Sherif Abdou: No.

Sherif Abdou: It came right or a little bit better than we expected.

Sherif Abdou: The entire 8% some of it as a benchmark, but theyre evercore is about half two 5% from the from the 8% and we still like we said our overall RAF is still about one point <unk> six so we still.

Sherif Abdou: I have a cushion and a runway to continue to improve we see a real impact of the B 28.

Joshua Richard Raskin: Gotcha. And then second question, just in discussions with your MA plan partners, as you think about 2025, you know, your MLR in the first quarter is still over 100%. I know it'll get down by the end of the year.

Speaker Change: Got you and then second question just on discussions with your MAA planned partners. As you think about 2025 your MLR in the first quarter is still over 100%. They now will get down by the end of the year, but you know what sort of changes are you looking for for 2025 is there.

Joshua Richard Raskin: But, you know, what sort of changes are you looking for in 2025? You know, is there, you know, are you guys looking for a higher percentage of the premium? Are there certain benefits that you're looking to carve out? I'm just curious, sort of, as you go into those negotiations, you know, in front of bids due next month, how are you thinking about what you're looking for?

Joshua Richard Raskin: A higher percentage of premium are there certain benefits that youre looking to carve out I'm just curious sort of as you go into those negotiations you know in front of bids due next month, how are you thinking about what you're looking for.

Sherif Abdou: Yeah, so absolutely, it's a great point Josh. We've been in serious conversation about modifying our exposure to ancillary services or the benefits in excess of medical benefits and also talking about renegotiating or eliminating the pass-through from the health plans, and we find that there is definitely receptivity to considering moderating the benefits or flattening or even decreasing them to the point where the exposure or the medical cost becomes better. But you said that MCR is over a hundred, and we looked at it, including the network expense, and we're right around 90.5 for the first quarter. Am I calculating that right? Yeah, 0.4

Speaker Change: Yes, so absolutely.

Speaker Change: Great point.

Sherif Abdou: Josh we we've been serious conversation by modifying our our exposure to the ancillary services or benefits.

Sherif Abdou: And in excess of the medical benefits and also talking about the.

Sherif Abdou: Renegotiating.

Sherif Abdou: Or eliminating their pass through from the.

Sherif Abdou: Health plans, and we find actually receptivity differently, considering moderating the benefits or flattening.

Sherif Abdou: Even decreasing it to the point, where they are the exposure on the medical cost becomes.

Sherif Abdou: The.

Sherif Abdou: Better but yeah.

Sherif Abdou: You said that the MCR is over 100, and then we looked at it including the network expense, we're right around 95 for the first quarter I calculate out for.

Sherif Abdou: Yeah.

Speaker Change: Got it.

Sherif Abdou: Gotcha. Just the last one, just the reserve methodology. I heard you talk about sort of this conservatism that may play out as you, you know, sort of pay your final claim for 2023. And once you're done with the run out, there's, there's, you know, a chance that the reserves will develop favorably. Are you reserving 1Q reserves and sort of the same methodology? Are we getting some sort of conservatism on conservatism? Is your view that, you know, you've got the same level of wiggle room, the same methodology in your 2024?

Sherif Abdou: Just a last one if I could sneak one in just the reserve methodology I heard you talk about sort of this conservatism that may play out as you sort of pay final claims for 2023 and once you're done with the run out there. There's a chance that that reserves developed favorably are you reserving <unk> reserves and sort of the same methodology or are we getting.

Sherif Abdou: Sort of conservatism on conservatism is your view that.

Sherif Abdou: Now you've got the same level of political we're on the same methodology and your 2020 for accrual.

Joshua Richard Raskin: Yeah, that's a great question. Yeah, so let me just address the methodology change and then I'll pass it on to Atul. Up until the second quarter of last year, we had calculated the IVNR according to a triangle, period. There was no additional question.

Sherif Abdou: Yes. This is Greg <unk> I'm, sorry, yeah. So let me just address the methodology change and then I'll pass it on to a to a tool.

Atul Kavthekar: Up until the second quarter of last.

Atul Kavthekar: Last year, we had.

Atul Kavthekar: Calculated the IV and are accordingly triangle period, there was no additional cushion and after that we started adding 9% to seven 5%. So we take the claims paid we calculated the triangle then we add 9% and that is what will that 9%.

Sherif Abdou: And after that, we started adding 9% to 7.5%. So we take the claims paid, we calculate the triangle, then we add 9%. And that is what we call a cushion, Josh, Atul. Yeah, Josh, I guess, you know, the punchline of this is that we suspected there may be some cushion that was larger than necessary.

Sherif Abdou: Seven 5% is what we call cushion.

Atul Kavthekar: Yes, Josh I guess the punchline of this is that we we suspected there there may be some cushion that was larger than is necessary. We have the opportunity to go back and actually study the numbers now that they have to run out and and that's indeed, what we are finding with the data so the process now.

Atul Kavthekar: We had the opportunity to go back and actually study the numbers now that they had the run out. And that's indeed what we are finding with the data. So the process now is really, and again, just to remind you and everyone else, we don't necessarily set these amounts and book the amounts and determine the amounts to book. We have a third-party actuary that does that. And so right now, we've begun to corroborate all that analysis with that third-party actuary.

Atul Kavthekar: Is really and again just to remind you and everyone else. We don't we don't necessarily set these amounts and book the amount.

Atul Kavthekar: Determine the amounts to book, we have a third party actuary that does that and so right now we've begun to corroborate all of that analysis with that third party actuary.

Atul Kavthekar: And part of that is going to be agreeing on what is a reasonable and appropriate amount of cushion to be entering into. And so that's something we'll work on over the next, hopefully, the next quarter, but certainly over the next two quarters.

Atul Kavthekar: And then part of that is going to be agreeing on what is a reasonable and appropriate amount of cushion to be entering into and so that's something we'll work on over the next.

Atul Kavthekar: Hopefully the next quarter, but certainly over the next two quarters.

Joshua Richard Raskin: Makes sense. All right, thanks.

Speaker Change: Makes sense alright. Thanks.

Joshua Richard Raskin: Okay.

Speaker Change: Thank you.

David Michael Larsen: The next question comes from David Larsen of BTIG. Please go ahead.

Joshua Richard Raskin: The next question comes from David Larsen of BT I T. Please go ahead.

Jenny Shen: Hi, this is Jenny Shen on for Dave Larsen. I'll just echo my peers and say my congratulations to both Sherif and Eric. So on the first question, Ibada came in below our model. I was just wanted to ask what gives you guys the confidence to reaffirm the full year guidance, and can you talk a little more about your visibility into that EBITDA, and how should we expect EBITDA to trend throughout the year?

David Michael Larsen: Hi, This is Jenny Chen on for Steve Larson I'll, just echo my peers.

Jenny Shen: And my congrats to both Sharif and Eric So on the first question.

Jenny Shen: EBITDA came in below our model I was just.

Jenny Shen: Wanted to ask what gives you guys the confidence to reaffirm the full year guidance I can.

Jenny Shen: Can you talk about a little more about your visibility into that EBITDA and how should we expect EBITDA to trend throughout the year.

Jenny Shen: Yeah.

Atul Kavthekar: Yeah, Jenny, that's a great question. So, let me, this is Atul. Let me just hit on a couple of things.

Speaker Change: Great question. So let me this is a tool let me just hit on a couple of things I think when we think when we talked about the rebate recognition that is strictly a timing issue. We had anticipated that that was going to be recognized in the quarter and it's just not going to be recognized until later in the year. So we're not question. It's just.

Atul Kavthekar: I think when we talked about the rebate recognition, that was strictly a timing issue. We had anticipated that that was gonna be recognized in the quarter, and it's just not going to be recognized until later in the year. So we're not questioning it; it's just an issue of, as I said, timing. But the other components that I think are really the key drivers here are really around cost reduction and the efficiencies of the business and utilization as it relates to medical expense management.

Atul Kavthekar: An issue of as I said.

Atul Kavthekar: Timing.

Atul Kavthekar: But the other components that I think are really the key drivers here is really around the cost reduction and the efficiencies in the business and the utilization as it relates to medical expense management.

Atul Kavthekar: Many, many initiatives are in place, a lot of them are gaining traction, and we haven't even seen the full effect of those yet, but we will over the remainder of the year. And then, as I mentioned, we talked about the sweeps. We had an initial opportunity to start recognizing them because we were able to predict them. I think we will continue to develop that further and work with our auditors, but those are all fundamental things that give us confidence in the outlook, and this is all outside of any potential adjustment with regard to the reserves. I hope that answers your question.

Atul Kavthekar: Many many initiatives that are in place a lot of them are gaining traction and we haven't even seen the full effect of those yet, but we will over the remainder of the year.

Atul Kavthekar: And then as I mentioned, we talked about the sweeps we had a initial opportunity to start recognize them because we were able to predict them.

Atul Kavthekar: We will continue to develop that further and work with our auditors, but those are all.

Atul Kavthekar: Fundamental things that give us confidence in the outlook and this is all outside of any potential adjustment with regards to the reserve.

Speaker Change: Hope that answered your question Yeah, that's very helpful and just a quick follow up I appreciate the detail on the 90% persistent wise just can you remind us again, what kind of greater visibility that gives you guys their margin profile any additional color there would be helpful. Thanks.

Jenny Shen: Yeah, that's very helpful. And just a quick follow-up. I appreciate the detail on the 90% persistent lives. Just can you remind us again what kind of greater visibility that gives you guys their margin profile? Any additional color there would be helpful. Thanks.

Jenny Shen: Hi, Jamie this is amir so yes, obviously the more persistent the life is the more we can help to manage the chronic care of that patient right. So if indeed, we see patients coming in at one year, Okay. That's fine, but when they start to go into the two years and three years and with greater precision persistency.

Amir Bacchus: Hi Jenny, this is Amir. So obviously, the more persistent a life is, the more we can help to manage the chronic care of that patient. Right, so if indeed we see patients coming in for one year, okay, that's fine. But when they start to go into the two years and three years, then with greater persistency, we have a much better opportunity, not only to have gained their trust but to help them manage the significant chronic diseases that we see every day, whether it be COPD, congestive heart failure, diabetes, renal disease, etc.

Amir Bacchus: We have much better opportunity.

Amir Bacchus: Not only to have gain their trust, but to help them manage the significant chronic diseases that we see every day, whether being COPD congestive heart failure diabetes.

Amir Bacchus: <unk> disease et cetera. So it's building that relationship that takes time with our care management teams, especially on those high risk rising risk patient populations to work directly with our clinician to maximize their care and where their outcomes. So that's why that persistency is always so important to us and I'm sure you've seen data as we've looked at it before and those cohort analysis.

Amir Bacchus: So it's building that relationship that takes time with our care management teams, especially in those high-risk, rising-risk patient populations, to work directly with our clinicians to maximize their care and or their outcomes. So that's why that persistency is always so important to us. I'm sure you've seen data as we've looked at it before, and those cohort analyses as we've looked at patients who've been with us for a certain period of time, we see significant reductions in overall medical costs.

Amir Bacchus: As we look at patients who've been with us for a certain period of time, we see significant reductions in the overall medical expense.

Speaker Change: Got it that's helpful. Thank you.

Jenny Shen: Got it. That's helpful. Thank you.

Jenny Shen: Our next question comes from Gary Taylor of T. D. Cohen. Please go ahead.

Gary Paul Taylor: Our next question comes from Gary Taylor of T.D. Cohen. Please go ahead.

Gary Paul Taylor: Yeah.

Gary Paul Taylor: Hi, good afternoon. I want to make sure I understood a couple of numbers. First, on Part D. The $8 million rebate you expected doesn't sound like that was typically recognized in the first quarter. Was that, would you typically recognize those rebates in the first quarter historically?

Gary Paul Taylor: Hi, Good afternoon, I wanted to make sure I understood a couple of the numbers first on the part D.

Gary Paul Taylor: The $8 million rebate you expected.

Gary Paul Taylor: It doesn't sound like that was typically recognized in the first quarter was that would you recognize those rebates in the first quarter historically.

Atul Kavthekar: We did not historically recognize them in the quarter; we sort of followed the same pattern that we had. Our anticipation was that they were going to be recognized in the first quarter. That's something we're going to work on with the auditors going forward around policy and documentation. This is Atul, by the way.

Gary Paul Taylor: We did not historically recognize them in the quarter, we sort of followed the same pattern that we had our anticipation was that they were going to be recognized in the first quarter. That's something we're going to work on with the with.

Atul Kavthekar: With the auditors going forward around policy and documentation. This is a tool by the way.

Atul Kavthekar: Got it so head you'd recognize those and EBITDA would have been like negative 12 that would've been more in line with what you thought the quarter would look like.

Atul Kavthekar: Got it. So had you recognized those, and that would have been like negative 12, that would have been more in line with what you thought the quarter would look like?

Gary Paul Taylor: Correct. That is exactly what is correct. And then on the reserve release, that $25 to $30 per member per month. Are we multiplying that by 3 for mostly coming out of the 4Q? We're multiplying that by 12 when we think about what could get released. I know in the fourth quarter, I think you said there was a $23 million reserve. 3 or 12 kind of put us in the $10-$30 million range, maybe suggesting almost all of that could come back to you. I just wondered how we could get that. Think about the cost per member per month.

Atul Kavthekar: Correct that's correct.

Atul Kavthekar: And then on the reserve release is.

Gary Paul Taylor: Is that 25 to $30 per member per month.

Gary Paul Taylor: We multiplying that by three for mostly coming out of <unk> and multiplying that by like 12, when we think about.

Gary Paul Taylor: What could get released I know in the fourth quarter. I think you said there was a $23 million reserve.

Gary Paul Taylor: In addition, so.

Gary Paul Taylor: Three or 12 kind of put us like $10 million to $30 million range, almost maybe suggesting almost all of that could come back to you I just wondered how we should.

Gary Paul Taylor: Think about.

Gary Paul Taylor: Per member per month.

Atul Kavthekar: We're thinking about that on sort of a 12-month basis on a full-year basis, so but again, before we, before we, you know, and that's what and again we're not speculating on what amount of that is actually going to be recovered because there is certainly an appropriate amount of conservatism to have in the business. But that's something we're going to determine alongside and led by the analysis that the actuaries are going to do. So there's a process of corroboration, but our position is that we've had a chance to look at the hard numbers, and this is what we're seeing over the course of the year.

Gary Paul Taylor: We're thinking about that on sort of a 12 month basis on a full year basis.

Atul Kavthekar: So, but again before we before we you know.

Atul Kavthekar: And again, we're not speculating on what amount of that is actually going to be recovered because there is certainly an appropriate amount of conservatism to have in the business, but that's something we're going to determine alongside and led by the analysis that the actuaries are going to do so there's a there's a process of collaboration but.

Atul Kavthekar: Our our position is that we've we've had a chance to look at the hard numbers and this is what we're seeing over the course of the year.

Atul Kavthekar: That's helpful last one for me on the increase sweep revenue expected at this point, that's still a <unk> 24.

Gary Paul Taylor: That's helpful. Last one for me on the increased SWEEP revenue expected. At this point, that's still a 4Q24 guess. Estimate, and could you quantify it all?

Gary Paul Taylor: Expectation and could you quantify at all.

Atul Kavthekar: This is Atul again. I'm not sure we're in a position to quantify it, but I think the way we are thinking about it this year versus last year, there are two aspects to it. And I'll talk about the timing in a minute. One reason is that the business is simply bigger. And therefore, we believe that the sweeps, the percentage, and the amount that we expect as far as the final sweeps go should grow as well versus last year.

Gary Paul Taylor: This is a tool again I'm not sure we're in a position to quantify it but I think the way we're thinking about it this year versus last year, there's two aspects to it.

Atul Kavthekar: Talk about the timing in a minute one is that the business is simply bigger and therefore, we believe that the suites the percentage and the amount that we expect as far as the final sweeps go should grow as well versus last year. The second component of that is as you recall last year that was a relatively new thing.

Atul Kavthekar: The second component of that is, as you recall last year, that was a relatively new thing for us, to accrue sweeps that won't actually be known until the future. And that is something that we've gotten not only better at, but also greater buy-in with our auditors, who have carefully reviewed it with their own actuaries. So I think there are two aspects to why that ought to be bigger this year than next.

Atul Kavthekar: For us is to accrue.

Atul Kavthekar: Sweeps that won't actually be known until the future and that is something that we've gotten.

Atul Kavthekar: Not only.

Atul Kavthekar: Better at but also greater buy in with our auditors, who have carefully reviewed it with our own actuaries.

Atul Kavthekar: And it is our expectation that we will, at least to some degree, accrue that smoothly over the four quarters. But there will still be a component of this, without getting too much into the weeds, Gary, there will still be a component of this that will be specifically recognized in the fourth quarter as we get much closer and much more refined data later in the year.

Atul Kavthekar: There's two aspects of why that ought to be bigger this year than next.

Atul Kavthekar: And it is our expectation that we will at least to some degree a crew that smoothly over the four quarters, but there will still be a component of this.

Atul Kavthekar: Getting too much into the weeds, Gary there will still be a component of this that will be specifically recognized in the fourth quarter as we get much closer and much more refined data later in the year.

Speaker Change: Great I appreciate it thank you.

Gary Paul Taylor: Great. I appreciate it. Thank you.

Speaker Change: Thank you.

Ryan Scott Daniels: The next question comes from Ryan Daniels of William Blair.

Gary Paul Taylor: The next question comes from Ryan Daniels of William Blair.

Ryan Scott Daniels: Please go ahead.

Jack A. Senft: Yeah, hey guys, this is Jack Senft on for Ryan Daniels. Thanks for taking the questions. First off, in your 10-Q filing, and I believe you said it in the prepared remarks as well, you noted that you borrowed the remaining $15 million from the promissory note, but your cash burn this quarter was still about $20 million. So I guess just with all that, how should we think about your liquidity position going forward? And just your general comfort level around the cash balance for the next few quarters? Thanks.

Ryan Scott Daniels: Yeah, Hey, guys. This is Jackson on for Ryan Daniels. Thanks for taking the questions first off in your 10-Q filing and I believe you said it in the prepared remarks as well you noted that you borrowed the remaining 15 million from the promissory note.

Jack A. Senft: But in your cash burn this quarter. It was still about 20 million. So I guess just with all of that how should we think about your liquidity position going forward and just your general comfort level around the cash balance for the next few quarters. Thanks.

Speaker Change: Yeah look I think a couple of things one is as I mentioned right. After the quarter started we receive for example, a fairly substantial premium payment.

Atul Kavthekar: Yeah, look, I think a couple of things. One is, as I mentioned, right after the quarter started, we received, for example, a fairly substantial premium payment. Had that happened literally 24 hours earlier, you would have seen a $15 million better cash flow from operations. So I think there's some timing sensitivity.

Atul Kavthekar: It had that happened literally 24 hours earlier, you would've seen a a $15 million better cash flow from operations. So I think there are some timing sensitivity. So I wouldn't read too much into any one quarter.

Atul Kavthekar: So I wouldn't read too much into any one quarter with regard to cash flow from operations. We feel that we're in a good position from a capital standpoint, as we've said in the past. But I think, as we've also said in the past, we are positioning ourselves for more rapid growth, and more rapid growth in this business simply requires more capital. And so that's something that we do think about. And we would always consider that an opportunity for purposeful growth.

Atul Kavthekar: With regards to cash flow from operations.

Atul Kavthekar: We feel that we're in a good position from a capital standpoint, as we've said in the past, but I think as we've also said in the past.

Atul Kavthekar: We are positioning ourselves for more rapid growth and more rapid growth in this business simply requires more capital and so that's something that we do think about so we would we would always consider that as an opportunity for for purposeful growth.

Jack A. Senft: Okay, perfect. Understood. Thanks.

Speaker Change: Okay perfect understood. Thanks, and then also in your prepared remarks, you mentioned the partnership with anybody Sir can you just talk a little bit more about the the reason for going with the partnership route versus in House and then just as a second parts of this can you just remind us what you were doing previously before the partnership.

Sherif Abdou: And also, in your prepared remarks, you mentioned the partnership with Innovasr. Can you just talk a little bit more about the reason for going with the partnership route versus in-house? And then, just as a second part to this, can you just remind us what you were doing previously before the partnership for the capabilities they're bringing in? I thought you were doing predictive modeling, et cetera. So is this just a more efficient route that you're deciding to go on?

Sherif Abdou: For the capabilities they bring union I thought youre doing the predictive modeling et cetera. So is this just a more efficient route.

Sherif Abdou: You're deciding to go thanks.

Sherif Abdou: Yeah, so what we've done before, we had an algorithm for predictive modeling, and we had a tech stack that was up-to-date that was doing the job. What we are mainly going to shift in Innovasr or what attracted us to the strategic partnership with Innovasr is the AI platform, and having that tool to enhance our ability to do the modeling, to enhance our ability by putting that notification, it's an EHR agnostic tool that can communicate with the providers at the point of care.

Sherif Abdou: Yes. So this is sherif.

Sherif Abdou: So what we've done before we had a an algorithm for that predictive modeling and we had a tech stack that is up to date that was doing the job what we're mainly going to shift in a vessel or what attracted for the strategic.

Sherif Abdou: Partnership with interface or is the AI platform.

Sherif Abdou: And having that tools to enhance our ability to do the model linked to enhance our ability by.

Sherif Abdou: Putting that notification.

Sherif Abdou: HR agnostic tool that can communicate with the.

Sherif Abdou: Providers at the point of care. So that's what we're doing with is accelerating closure.

Sherif Abdou: So that's what we're doing with Innovator, it's accelerating closure, improving the predictive modeling, and the communication at the point of care. It's going to take 12 to 18 months for the full partnership to be in effect, and it will be cost-neutral for us as well. So enhancing the AI, all the benefits that I mentioned, and cost-neutral, that's what attracted us to Innovator.

Sherif Abdou: Improving the predictive modeling and the.

Sherif Abdou: <unk>.

Sherif Abdou: And the communication at the point of care and.

Sherif Abdou: It's going to take 12 to 18 months to implement the full partnership to be in effect and it will be cost neutral for us as well so enhancing the AI all the benefit that I mentioned and customer through that is what attracted us to them.

Sherif Abdou: To an investor.

Jack A. Senft: Okay, perfect. That makes sense.

Speaker Change: Okay, perfect that makes sense, thanks, and if I can just sneak one final. One then in terms of the ACO reach contribution can you just talk about your longer term vision for the program and how I guess or if the ACO reach will eventually contribute to your results just kind of curious if you can just double click on what your long term vision is here.

Jack A. Senft: If I can just sneak up one final one in, in terms of the ACO REACH contribution, can you just talk about your longer-term vision for the program and how, I guess, or if ACO REACH will eventually contribute more to your results? Just kind of curious if you could just double-click on what your long-term vision is here. Thanks.

William Bettermann: Yeah, thanks so much. This is Bill.

Jack A. Senft: Yes. Thanks. So much this is bill so as you've heard in prior calls with with us.

William Bettermann: So, you know, as you've heard in prior calls with us, the ACO REACH program is something that we're getting in, not just a toehold, but we're going all in this past year. And we've grown substantially from 23 to 24 in all of our markets. With that being said, as Dr. Kauffman alluded to in the beginning, we're going to be approaching this very carefully, using our data analytics to look at where we're having success, and where we have opportunities to continue to grow in this particular platform.

Bill: The ACO reach program is something that we're getting in and not just a toehold that we're going all in this past year and we've grown substantially from 23 to 24 in all of our markets with that being said.

William Bettermann: Dr Kauffman alluded to in the beginning.

William Bettermann: We're we're very going to be approaching this very carefully.

William Bettermann: Using our data analytics to look at where we're having success, where we have opportunities to continue to grow.

William Bettermann: But we're excited about where we are. We had some nice successes last year and into this year. Dr. Bacchus, anything you'd want to add? The only thing I would add is, Jack, as you've heard us talk about before,

Speaker Change: In this particular platform, but we're excited about where we're at we've had some nice successes last year and into this year. Dr buckets anything you'd want to add the only thing I would add is.

Amir Bacchus: The only thing I would add is, Jack, as you've heard us talk about before, with our providers that we have, about 2,700 or so providers, and the MA lives that we have with them, ACL Reach just gives us a much bigger and deeper opportunity to go into each of those practices for more mindshare with those clinicians. So as those clinicians, instead of having 100, 200 with us, now we can have 300, 400 or so with us. It just creates an overall better mousetrap to drive better performance for their understanding of value-based care.

Amir Bacchus: Jack as you've heard us talk about before.

Amir Bacchus: With our providers that we have about 2700 or so providers.

Amir Bacchus: And the MA lives that we have with them the ACO reach it gives us a much bigger.

Amir Bacchus: Bigger bigger deeper opportunity to go into each of those practices for more mind share with those clinicians so as those conditions instead of having 100 200 with US now we can have three or 400 or so with us. It just creates an overall better mousetrap to drive better performance for their understanding of value based care overall.

Speaker Change: This will conclude today's conference call. Thank you for attending.

Unknown Executive: This will conclude today's conference call. Thank you for attending.

Unknown Executive: [music].

Unknown Executive: Unknown Executive, Amir Bacchus, Ryan Daniels, David Larsen, Jack Senft, Amir Bacchus, Sherif Abdou, William Bettermann, P3 Health Prtnrs, Karen Blomquist, Sherif Abdou, William Bettermann, P3 Health Prtnrs, Sherif Abdou, William Bettermann, P3 Health Prtnrs, Sherif Abdou, William Bettermann,

Unknown Executive: Yeah.

Unknown Executive: Okay.

Unknown Executive: [music].