P3 Health Partners Inc.
11/09/2026 | Press release | Distributed by Public on 11/09/2026 15:46
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is intended to provide the reader with an understanding of our business, including an overview of our results of operations and liquidity and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q, as well as our audited financial statements and related notes and in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2025 Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties. Our actual results may differ materially from those anticipated in any forward-looking statements as a result of many factors, including those set forth under "Cautionary Statement Regarding Forward-Looking Statements," in Part II, Item 1. "Legal Proceedings." in Part II, Item 1A, "Risk Factors." and elsewhere in this Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any periods in the future.
Overview
P3 is a patient-centered and physician-led population health management company. We strive to offer superior care to all those in need. We believe that the misaligned incentives in the fee-for-service ("FFS") healthcare payment model and the fragmentation between physicians and care teams has led to sub-optimal clinical outcomes, limited access, high spending and unnecessary variability in the quality of care. We believe that a platform such as ours, which helps to realign incentives and focuses on treating the full patient, is uniquely positioned to address these healthcare challenges.
We have leveraged the expertise of our management team's more than 20 years of experience in population health management, to build our "P3 Care Model." The key attributes that differentiate P3 include: 1) patient-focused model, 2) physician-led model, and 3) our broad delegated model. Our model operates by entering into arrangements with payors providing for monthly payments to manage the total healthcare needs of members attributed to our primary care physicians. In tandem, we enter into arrangements directly with existing physician groups or independent physicians in the community to join our value-based care ("VBC") network. In our model, physicians are able to retain their independence and entrepreneurial spirit, while gaining access to the tools, teams and technologies that are key to success in a VBC model, all while sharing in the savings from successfully improving the quality of patient care and reducing costs.
We operate in the $1,118 billion Medicare market, which covers more than 71 million eligible lives as of July 2026. Our core focus is the Medicare Advantage ("MA") market, which covers approximately 36 million Medicare eligible lives as of July 2026. Medicare beneficiaries may enroll in an MA plan, under which payors contract with the Centers for Medicare and Medicaid Services ("CMS") to provide a defined range of healthcare services that are comparable to Medicare FFS (which is also referred to as "traditional Medicare").
We predominantly enter into capitated contracts with the nation's largest health plans to provide holistic, comprehensive healthcare to MA members. Under the typical capitation arrangement, we are entitled to per member per month ("PMPM") fees from payors to provide a defined range of healthcare services for MA health plan members attributed to our primary care physicians ("PCPs"). These PMPM fees comprise our capitated revenue and are determined as a percent of the premium ("POP") payors receive from CMS for these members. Our contracted recurring revenue model offers us highly predictable revenue and rewards us for providing high-quality care rather than driving a high volume of services. In this capitated arrangement, our goals are well-aligned with payors and patients alike-the more we improve health outcomes, the more profitable we will be over time.
Under this capitated contract structure, we are generally responsible for all members' medical costs across the care continuum, including, but not limited to emergency room and hospital visits, post-acute care admissions, prescription drugs, specialist physician spend, and primary care spend. Keeping members healthy is our primary objective. When they need medical care, delivery of the right care in the right setting can greatly impact outcomes. When our members need care outside of our network of PCPs, we utilize a number of tools including network management, utilization management, and claims processing to ensure that the appropriate quality care is provided.
Our company was formed in 2017 and our first at-risk contract became effective on January 1, 2018. We have demonstrated an ability to rapidly scale, primarily entering markets with our affiliate physician model, and expanding to a PCP network of approximately 2,000 physicians, in 26 markets (counties) across five states in over nine full years of operations as of September 30, 2026. As of September 30, 2026, our PCP network served approximately 104,800 at-risk members.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
Key Factors Affecting our Performance
Growing Medicare Advantage Membership on Our Platform
Membership and revenue are tied to the number of members attributed to our physician network by our payors. We believe we have multiple avenues to serve additional members, including through:
•Growth in membership under our existing contracts and existing markets:
◦Patients who are attributed to our physician network who (a) age into Medicare and elect to enroll in MA or (b) elect to convert from Medicare FFS to MA.
•Adding new contracts (either payor contracts or physician contracts) in existing markets.
•Adding new contracts (either payor contracts or physician contracts) in adjacent and new markets.
Growing Existing Contract Membership
As new patients age-in to Medicare and enroll in MA through our payors, they become attributed to our network of physicians with little incremental cost to us.
In addition to age-ins, Medicare eligible patients can change their enrollment selections during select periods throughout the year. Our sales and marketing teams actively work with local community partners to connect with Medicare eligible patients and make them aware of their healthcare choices and the services that we offer with our VBC model, including greater access to their physicians and customized care plans catered to their needs. The ultimate effect of our marketing efforts is increased awareness of P3 and additional patients choosing us as their primary care provider. We believe that our marketing efforts also help to grow our payor partners' membership base as we grow our own patient base and help educate patients about their choices on Medicare, further aligning our model with that of healthcare payors.
Growing Membership in Adjacent and New Markets
Our affiliate model allows us to quickly and efficiently enter into new and adjacent markets in two ways: (1) partnering with payors and (2) partnering with providers. Because our model honors the existing patient-provider relationship, we are able to deploy our care model around existing physicians in a given market. By utilizing the local healthcare infrastructure, we can quickly build a network of PCPs to serve the healthcare needs of contracted members.
We maintain an active pipeline of new partnership opportunities for both providers and payors. These potential opportunities are developed through significant inbound interest and the deep relationships our team has developed with their more than 20 years of experience in the VBC space and our proactive assessment of expansion markets. When choosing a market to enter, we make our decision on a county-by-county basis across the United States. We look at various factors including: (i) population size, (ii) payor participants and concentration, (iii) health system participants and concentration, and (iv) competitive landscape.
When entering a new market, we supplement the existing physician network with local market leadership teams and support infrastructure to drive the improvement in medical cost and quality. When entering an adjacent market, we are able to leverage the investments we previously made to have a faster impact on our expanded footprint.
Growing Membership in Existing Markets
Once established in a market, we have an opportunity to efficiently expand both our provider and payor contracts. Given the benefits PCPs experience from joining our P3 Care Model, which offers providers the teams, tools and technologies to better support their patient base, we often experience growth in our affiliate network after entering a market. Because of the benefits, we have also historically experienced high retention with our affiliate providers. By expanding our affiliate provider network and adding new physicians to the P3 network, we can quickly increase the number of contracted at-risk members under our existing health plan arrangements.
Additionally, by expanding the number of contracted payors, we can leverage our existing infrastructure to quickly increase our share of patients within our physician network. However, we have and intend to continue to conduct
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
periodic strategic reviews of our provider and payor contracts, as a result of which we may elect to periodically exit underperforming provider and payor contracts from our network.
Growing Capitated Revenue Per Member
Medicare pays capitation using a risk adjusted model, which compensates payors based on the health status, or acuity, of each individual member. Payors with higher acuity members receive a higher payment and those with lower acuity members receive a lower payment. Moreover, some of our capitated revenue also includes adjustments, which may increase or decrease revenue, for performance incentives or penalties based on the achievement of certain clinical quality metrics as contracted with payors. Given the prevalence of FFS arrangements, our patients often have historically not participated in a VBC model, and therefore their health conditions are poorly documented. Through the P3 Care Model, we determine and assess the health needs of our patients and create an individualized care plan consistent with those needs. We capture and document health conditions as a part of this process. We expect that our PMPM revenue will continue to improve the longer members participate in our care model as we better understand and assess their health status (acuity) and coordinate their medical care.
Effectively Managing Member Medical Expense
Our medical expense is our largest expense category, representing 90% of our total operating expense for the nine months ended September 30, 2026. We manage our medical costs by improving our members' access to healthcare. Our care model focuses on maintaining health and leveraging the primary care setting as a means of avoiding costly downstream healthcare costs, such as emergency department visits and acute hospital inpatient admissions.
Achieving Operating Efficiencies
As a result of our affiliate model and ability to leverage our existing local and national infrastructure, we aim to generate operating efficiencies at both the market and enterprise level. Our local corporate, general and administrative expense, which includes our local leadership, care management teams and other operating costs to support our markets, is expected to decrease over time as a percentage of revenue as we add members to our existing contracts, grow membership with new payor and physician contracts, and our revenue subsequently increases. Our corporate general and administrative expenses at the enterprise level include resources and technology to support payor contracting, quality, data management, delegated services, finance and legal functions. While we expect our absolute investment in our enterprise resources to increase over time, we expect our investment will decrease as a percentage of revenue when we are able to leverage our infrastructure across a broader group of at-risk members. We expect our corporate, general and administrative expenses to increase in absolute dollars in the future as we continue to invest to support growth of our business, as well as due to the costs required to operate as a public company, including insurance coverage, investments in internal audit, investor relations and financial reporting functions, fees paid to the Nasdaq Stock Market, and increased legal and audit fees.
Impact of Seasonality
Our operational and financial results reflect some variability depending upon the time of year in which they are measured. This variability is most notable in the following areas:
At-Risk Member Growth. While new members are attributed to our platform throughout the year, we experience the largest portion of our at-risk member growth during the first quarter. Contracts with new payors typically begin on January 1, at which time new members become attributed to our network of physicians. Additionally, new members are attributed to our network on January 1, when plan enrollment selections made during the prior Annual Enrollment Period from October 15 through December 7 of the prior year take effect.
Revenue Per Member. Our revenue is based on percentage of premium we have negotiated with our payors as well as our ability to accurately and appropriately document the acuity of a member's health status. We experience some seasonality with respect to our per member revenue as it will generally decline over the course of the year. In January of each year, CMS revises the risk adjustment factor for each patient based upon health conditions documented in the prior year, leading to an overall increase in per-patient revenue. As the year progresses, our per-patient revenue declines as new patients join us typically with less complete or accurate documentation (and therefore lower risk-adjustment scores) and patients with more severe acuity profiles (and, therefore, higher per member revenue rates) expire.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
Medical Costs. Medical expense is driven by utilization of healthcare services by our attributed membership. Medical expense will vary seasonally depending on a number of factors, including the weather and the number of business days. Certain illnesses, such as the influenza virus, are far more prevalent during colder months of the year, which will result in an increase in medical expenses during these time periods. We would therefore expect to see higher levels of per-member medical expense in the first and fourth quarters. Business days can also create year-over-year comparability issues if one year has a different number of business days compared to another.
Non-GAAP Financial Measures and Key Performance Metrics
We use certain financial measures, which are not calculated in accordance with accounting principles generally accepted in the U.S. ("GAAP"), as well as key performance metrics, to supplement our condensed consolidated financial statements. The measures set forth below should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures and key performance metrics as used by us may not be comparable to similarly titled measures used by other companies. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. The presentation of non-GAAP financial measures and key performance metrics provides additional information to investors regarding our results of operations that our management believes is useful for identifying trends, analyzing and benchmarking the performance of our business.
Non-GAAP Financial Measures
Adjusted EBITDA
The key non-GAAP metric we utilize to measure our profitability and performance is Adjusted EBITDA. We present Adjusted EBITDA because we believe it helps investors understand underlying trends in our business and facilitates an understanding of our operating performance from period to period because it facilitates a comparison of our recurring core business operating results.
By definition, EBITDA consists of net income (loss) before interest, income taxes, depreciation, and amortization. We define Adjusted EBITDA as EBITDA, further adjusted to exclude the effect of certain supplemental adjustments, such as mark-to-market warrant gain/loss, premium deficiency reserves, equity-based compensation expense, and certain other items that we believe are not indicative of our core operating performance. Our definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements.
Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP. It is unaudited and should not be considered an alternative to, or more meaningful than, net income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, debt principal repayments, and other expenses defined above, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity.
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net income (loss) to Adjusted EBITDA set forth below and not rely on any single financial measure to evaluate our business.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
The following table sets forth a reconciliation of our net income (loss), the most directly comparable GAAP metric, to Adjusted EBITDA (loss):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net income (loss) | $ | 30,777 | $ | (69,461) | $ | 49,468 | $ | (157,372) | |||||||||||||||
| Interest expense, net | 5,042 | 20,527 | 29,670 | 39,397 | |||||||||||||||||||
| Depreciation and amortization | 21,038 | 21,033 | 63,156 | 63,168 | |||||||||||||||||||
| Income tax provision (benefit) | 23 | 11 | (9,709) | 3,065 | |||||||||||||||||||
| Mark-to-market of stock warrants and purchased put option | (7,612) | 2,540 | 8,424 | (2,784) | |||||||||||||||||||
| Premium deficiency reserve | (27,950) | (23,736) | (41,324) | (36,665) | |||||||||||||||||||
| Equity-based compensation | (421) | 1,211 | 1,496 | 4,482 | |||||||||||||||||||
|
Other(1)
|
(24) | 1,964 | (104) | 1,498 | |||||||||||||||||||
|
Adjusted EBITDA (loss)
|
$ | 20,873 | $ | (45,911) | $ | 101,077 | $ | (85,211) | |||||||||||||||
_____________________________________________
(1)Other during the three and nine months ended September 30, 2026 consisted of interest income partially offset by valuation allowance on our notes receivable. Other during the three and nine months ended September 30, 2025 consisted of interest income partially offset by severance expense in connection with reorganization of workforce and legal settlements and valuation allowance on our notes receivable.
Medical Margin
Medical margin is a non-GAAP financial metric. We present medical margin because we believe it helps investors understand underlying trends in our business and facilitates an understanding of our operating performance from period to period by facilitating a comparison of our recurring core business operating results.
Medical margin represents the amount earned from capitated revenue after medical claims expenses are deducted. Medical claims expenses represent costs incurred for medical services provided to our members. As our platform grows and matures over time, we expect medical margin to increase in absolute dollars; however, medical margin PMPM may vary as the percentage of new members brought onto our platform fluctuates. New membership added to the platform is typically dilutive to medical margin PMPM.
Medical margin should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using medical margin on a supplemental basis. You should review the reconciliation of gross profit to medical margin set forth below and not rely on any single financial measure to evaluate our business.
The following table presents our medical margin:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Capitated revenue | $ | 366,291 | $ | 341,555 | $ | 1,112,188 | $ | 1,062,796 | |||||||||||||||
| Less: medical claims expense | (322,357) | (337,143) | (896,794) | (1,010,569) | |||||||||||||||||||
| Medical margin | $ | 43,934 | $ | 4,412 | $ | 215,394 | $ | 52,227 | |||||||||||||||
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
The following table sets forth a reconciliation of our gross profit, the most directly comparable GAAP metric, to medical margin:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
|
Gross profit
|
$ | 50,343 | $ | (24,536) | $ | 186,713 | $ | (18,916) | |||||||||||||||
|
Other revenue
|
(30,053) | (3,698) | (56,927) | (11,470) | |||||||||||||||||||
| Other medical expense | 23,644 | 32,646 | 85,608 | 82,613 | |||||||||||||||||||
| Medical margin | $ | 43,934 | $ | 4,412 | $ | 215,394 | $ | 52,227 | |||||||||||||||
Key Performance Metrics
We monitor the following operating metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.
Gross Profit
Gross profit represents the amount earned from total operating revenue less the sum of: (i) medical claims expenses and (ii) other medical expenses including physician compensation expense related to surplus sharing and bonuses and other direct medical expenses incurred to improve care for our members. We believe this metric provides insight into the economics of the P3 Care Model, as it includes all medical claims expense associated with our members' care as well as partner compensation and additional medical costs we incur as part of our aligned partnership model. Other medical expenses are largely variable and proportionate to the level of surplus in each respective market, among other cost factors.
The following table presents our gross profit:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Total operating revenue | $ | 396,344 | $ | 345,253 | $ | 1,169,115 | $ | 1,074,266 | |||||||||||||||
| Less: medical claims expense | (322,357) | (337,143) | (896,794) | (1,010,569) | |||||||||||||||||||
| Less: other medical expense | (23,644) | (32,646) | (85,608) | (82,613) | |||||||||||||||||||
| Gross profit | $ | 50,343 | $ | (24,536) | $ | 186,713 | $ | (18,916) | |||||||||||||||
At-Risk Membership
At-risk membership represents the approximate number of Medicare members for whom we receive a fixed percentage of premium under capitation arrangements as of the end of the reporting period. We had 105,000 and 115,900 average at-risk members for the three months ended September 30, 2026 and 2025, respectively.
Affiliate Primary Care Physicians
Affiliate primary care physicians represent the approximate number of primary care physicians included in our affiliate network, with whom members may be attributed under our capitation arrangements, as of the end of the reporting period. We had 2,000 and 2,700 primary care physicians as of September 30, 2026 and 2025, respectively.
Platform Support Costs
Our platform support costs, which include regionally based support personnel and other operating costs to support our markets, are expected to decrease over time as a percentage of revenue as our physician partners add members and our revenue grows. Our operating expenses at the enterprise level include resources and technology to support payor contracting, clinical program development, quality, data management, finance, and legal functions. We exclude costs related to the operations of our owned medical clinics and wellness centers.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
The table below represents costs to support our markets and enterprise functions, which are included in corporate, general and administrative expenses:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Platform support costs | $ | 30,238 | $ | 17,325 | $ | 77,955 | $ | 54,380 | |||||||||||||||
| % of total operating revenue | 7.6 | % | 5.0 | % | 6.7 | % | 5.1 | % | |||||||||||||||
Key Components of Results of Operations
Revenue
Capitated revenue. We contract with health plans using an at-risk model. Under the at-risk model, we are responsible for the cost of all covered health care services provided to members assigned by the health plans to the Company in exchange for a fixed payment, which generally is a POP based on health plans' premiums received from CMS. Through this capitation arrangement, we stand ready to provide assigned MA members all their medical care via our directly employed and affiliated physician/specialist network.
The premiums that health plans receive are determined via a competitive bidding process with CMS and are based on the costs of care in local markets and the average utilization of services by enrolled patients. Medicare pays capitation using a "risk adjustment model," which compensates providers based on the health status (acuity) of each individual patient. MA plans with higher acuity patients receive higher premiums. Conversely, MA plans with lower acuity patients receive lesser premiums. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after final data is compiled. As premiums are adjusted via this risk adjustment model (using a Risk Adjustment Factor, "RAF"), our PMPM payments change commensurately with how our contracted Medicare Advantage plans' premiums change with CMS.
The transaction price for these contracts is variable as it primarily includes PMPM fees, which can fluctuate throughout the course of the year based on the acuity of each individual enrollee. In certain contracts, PMPM fees also include adjustments for items such as performance incentives or penalties based on the achievement of certain clinical quality metrics as contracted with payors. Capitated revenue is recognized based on a PMPM transaction price to transfer the service for a distinct increment of the series and is recognized net of projected acuity adjustments and performance incentives or penalties. We recognize revenue in the month in which attributed members are entitled to receive healthcare benefits during the contract term. The capitation amount is subject to possible retroactive premium risk adjustments based on the member's individual acuity.
Other revenue. Other revenue includes encounter-related fees to treat patients outside of our at-risk arrangements at Company-owned or affiliated clinics. Other revenue also includes ancillary fees earned under contracts with certain payors for the provision of certain care coordination and other care management services. These services are provided to patients covered by these payors regardless of whether those patients receive their care from our directly employed or affiliated medical groups. Other revenue also includes incentive-sharing arrangements related to Part D program incentive initiatives under which a third-party administrator facilitates the collection and distribution of incentive proceeds, and the Company receives a portion of those proceeds based on covered utilization activity.
Operating Expense
Medical expense. Medical expenses primarily include costs of all covered services provided to members by non-P3 employed providers. This also includes an estimate of the cost of services that have been incurred, but not yet reported ("IBNR"). IBNR is recorded as claims payable on the accompanying condensed consolidated balance sheets. Estimates for incurred claims are based on historical enrollment and cost trends while also taking into consideration operational changes. Future and actual results typically differ from estimates. Differences could result from an overall change in medical expenses per member, changes in member mix or simply due to the addition of new members. IBNR estimates are made on an accrual basis and adjusted in future periods as required. To the extent we revise our estimates of incurred but not reported claims for prior periods up or down, there would be a correspondingly favorable or unfavorable effect on our current period results that may or may not reflect changes in long term trends in our performance.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
Premium deficiency reserve. Premium deficiency reserves ("PDR") are recognized when it is probable that expected future health care costs and maintenance costs under a group of existing contracts will exceed anticipated future premiums and stop-loss insurance recoveries on those contracts. PDR represents the advance recognition of a probable future loss in the current period's financial statements.
Corporate, general and administrative expense. Corporate, general and administrative expenses include employee-related expenses, including salaries and related costs and equity-based compensation for our executive, technology infrastructure, operations, clinical and quality support, finance, legal, and human resources departments. In addition, general and administrative expenses include all corporate technology and occupancy costs.
Depreciation and amortization expense. Depreciation expense is associated with our property and equipment, including leasehold improvements, computer equipment and software, furniture and fixtures, medical equipment, and internally developed software. Amortization expense is associated with definite lived intangible assets, including trademarks and tradenames, customer contracts, provider network agreements, and payor contracts.
Other Income (Expense)
Interest expense, net. Interest expense primarily consists of interest on our Term Loan Facility (as defined below) and unsecured promissory notes and amortization of debt issuance costs and original issue discount.
Mark-to-market of stock warrants and purchased put option. Mark-to-market of stock warrants consists of the change in the fair value on the revaluation of warrant liabilities associated with our public and private placement Class A common stock warrants. Mark-to-market of purchased put option consists of the change in the fair value on the revaluation of unissued Series D Units and Series D-1 Units as described in Note 12 "Preferred Stock and Stockholders' Equity".
Other. Other consists of gains and losses resulting from other transactions.
Income Taxes
P3 LLC is treated as a partnership for U.S. federal and most applicable state and local income tax jurisdictions. As a partnership, P3 LLC is generally not subject to taxes, other than entity level state income taxes. Any taxable income or loss generated by P3 LLC is passed through to and included within the taxable income or loss of its members, including us, on a pro rata basis. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss generated by P3 LLC.
The Company is taxed as a corporation and pays corporate federal, state, and local taxes on income allocated to it from P3 LLC based on the Company's economic interest held in P3 LLC. While the Company consolidates P3 LLC for financial purposes as a VIE, the Company will not be taxed on the earnings attributed to the non-controlling interests. As a result, the income tax burden on the earnings taxed on the non-controlling interests is not reported by the Company in its consolidated financial statements.
Non-controlling Interests
We consolidate the financial results of P3 LLC and report a redeemable non-controlling interest on our condensed consolidated statements of operations, representing the portion of net income or loss attributable to the non-controlling interests. The weighted average ownership percentages during the period are used to calculate the net income or loss attributable to P3 Health Partners Inc. and the non-controlling interests.
Additionally, starting January 1, 2026, we consolidate the financial results of CPC ACO and report a non-controlling interest on our condensed consolidated statements of operations, representing the 20% of net income attributable to the non-controlling interest.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
Results of Operations
The following tables set forth our consolidated statements of operations data for the periods indicated. Amounts may not sum due to rounding.
|
Three Months Ended September 30, 2026 |
% of Revenue |
Three Months Ended September 30, 2025 |
% of Revenue | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Operating revenue: | |||||||||||||||||||||||
| Capitated revenue | $ | 366,291 | 92 | % | $ | 341,555 | 99 | % | |||||||||||||||
|
Other revenue
|
30,053 | 8 | 3,698 | 1 | |||||||||||||||||||
| Total operating revenue | 396,344 | 100 | 345,253 | 100 | |||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||
| Medical expense | 346,001 | 87 | 369,789 | 107 | |||||||||||||||||||
| Premium deficiency reserve | (27,950) | (7) | (23,736) | (7) | |||||||||||||||||||
| Corporate, general and administrative expense | 34,275 | 9 | 22,390 | 6 | |||||||||||||||||||
| Depreciation and amortization | 21,038 | 5 | 21,033 | 6 | |||||||||||||||||||
| Total operating expense | 373,364 | 94 | 389,476 | 112 | |||||||||||||||||||
|
Operating income (loss)
|
22,980 | 6 | (44,223) | (12) | |||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest expense, net | (5,042) | (1) | (20,527) | (6) | |||||||||||||||||||
| Mark-to-market of stock warrants and purchased put option | 7,612 | 2 | (2,540) | (1) | |||||||||||||||||||
| Other | 5,250 | 1 | (2,160) | (1) | |||||||||||||||||||
| Total other income (expense) | 7,820 | 2 | (25,227) | (8) | |||||||||||||||||||
| Income (loss) before income taxes | 30,800 | 8 | (69,450) | (20) | |||||||||||||||||||
| Income tax benefit (provision) | (23) | (1) | (11) | - | |||||||||||||||||||
|
Net income (loss)
|
30,777 | 7 | (69,461) | (20) | |||||||||||||||||||
|
Net income (loss) attributable to non-controlling interests
|
15,156 | 4 | (37,874) | (11) | |||||||||||||||||||
|
Net income (loss) attributable to controlling interest
|
$ | 15,621 | 3 | % | $ | (31,587) | (9) | % | |||||||||||||||
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
Results of Operations
The following tables set forth our condensed consolidated statements of operations data for the periods indicated. Amounts may not sum due to rounding.
|
Nine Months Ended September 30, 2026 |
% of Revenue |
Nine Months Ended September 30, 2025 |
% of Revenue | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Operating revenue: | |||||||||||||||||||||||
| Capitated revenue | $ | 1,112,188 | 95 | % | $ | 1,062,796 | 99 | % | |||||||||||||||
|
Other revenue
|
56,927 | 5 | 11,470 | 1 | |||||||||||||||||||
| Total operating revenue | 1,169,115 | 100 | 1,074,266 | 100 | |||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||
| Medical expense | 982,402 | 84 | 1,093,182 | 102 | |||||||||||||||||||
| Premium deficiency reserve | (41,324) | (4) | (36,665) | (3) | |||||||||||||||||||
| Corporate, general and administrative expense | 92,438 | 8 | 71,016 | 6 | |||||||||||||||||||
| Depreciation and amortization | 63,156 | 5 | 63,168 | 6 | |||||||||||||||||||
| Total operating expense | 1,096,672 | 93 | 1,190,701 | 111 | |||||||||||||||||||
| Operating income (loss) | 72,443 | 7 | (116,435) | (11) | |||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest expense, net | (29,670) | (3) | (39,397) | (4) | |||||||||||||||||||
| Mark-to-market of stock warrants and purchased put option | (8,424) | (1) | 2,784 | - | |||||||||||||||||||
| Other | 5,410 | - | (1,259) | - | |||||||||||||||||||
| Total other expense | (32,684) | (4) | (37,872) | (4) | |||||||||||||||||||
| Income (loss) before income taxes | 39,759 | 3 | (154,307) | (15) | |||||||||||||||||||
|
Income tax (provision) benefit
|
9,709 | 1 | (3,065) | - | |||||||||||||||||||
| Net income (loss) | 49,468 | 4 | (157,372) | (15) | |||||||||||||||||||
| Net income (loss) attributable to redeemable non-controlling interest | 25,180 | 2 | (84,943) | (8) | |||||||||||||||||||
| Net income (loss) attributable to controlling interest | $ | 24,288 | 2 | % | $ | (72,429) | (7) | % | |||||||||||||||
Comparison of the Three Months Ended September 30, 2026 and 2025
Revenue
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Capitated revenue | $ | 366,291 | $ | 341,555 | $ | 24,736 | 7 | % | |||||||||||||||
|
Other revenue
|
30,053 | 3,698 | 26,355 | 713 | % | ||||||||||||||||||
| Total operating revenue | $ | 396,344 | $ | 345,253 | $ | 51,091 | 15 | % | |||||||||||||||
This increase in capitated revenue was primarily driven by an increase in the average rate resulting from ongoing strategic contractual restructuring, as well as from rate progression and burden of illness performance. The increase was partially offset by a 9% decrease in the average number of at-risk members from 115,900 for the three months ended September 30, 2025 to 105,000 for the three months ended September 30, 2026, resulting from previously disclosed intentional network and payer rationalization. Capitated revenue was approximately 92% and 99% of total operating revenue for the three months ended September 30, 2026 and 2025, respectively.
Other revenue was approximately 8% of total operating revenue for the three months ended September 30, 2026 and approximately 1% of total operating revenue for the three months ended September 30, 2025. The increase was
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
attributable to management fees for new delegated service contracts and an increase in revenue from incentive-sharing arrangements related to Part D program incentive initiatives. Of the total increase, $12.7 million was attributable to a change in estimate related to revenue recognized for such incentive-sharing arrangements, as further described in Note 3, "Significant Accounting Policies".
Medical Expense
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Medical expense | $ | 346,001 | $ | 369,789 | $ | (23,788) | (6) | % | |||||||||||||||
The decrease in medical expense was driven primarily by a decrease in the total number of at-risk members year-over-year as well as favorable reserve development and claims true-up activity.
Premium Deficiency Reserve
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Premium deficiency reserve | $ | (27,950) | $ | (23,736) | $ | (4,214) | 18 | % | |||||||||||||||
The change in premium deficiency reserve was due to management's assessment of the profitability of contracts, wherein maturation of our overall contractual arrangements is expected to reduce our future losses.
Corporate, General and Administrative Expense
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Corporate, general and administrative expense | $ | 34,275 | $ | 22,390 | $ | 11,885 | 53 | % | |||||||||||||||
The increase in corporate, general and administrative expense was primarily driven by an increase in consulting and legal expenses, as well as an increase in payroll expenses, including an increase in accrued performance bonuses and higher expenses for employee health insurance.
Other Income (Expense)
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest expense, net | $ | (5,042) | $ | (20,527) | $ | 15,485 | (75) | % | |||||||||||||||
| Mark-to-market of stock warrants and purchased put option | 7,612 | (2,540) | $ | 10,152 | (400) | % | |||||||||||||||||
| Other | 5,250 | (2,160) | $ | 7,410 | (343) | % | |||||||||||||||||
| Total other income (expense) | $ | 7,820 | $ | (25,227) | $ | 33,047 | (131) | % | |||||||||||||||
The decrease in interest expense, net was primarily due to the conversion of certain of the Company's unsecured promissory notes to preferred stock that was effected on April 27, 2026. Refer to Note 8 "Debt" for further discussion of the related Exchange Agreement.
The Company recorded a gain of $4.7 million related to its liability-classified stock warrants during the three months ended September 30, 2026, compared to a loss of $2.5 million for three months ended September 30, 2025. The
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
Company recorded a gain of 2.9 million related to its Series D-1 purchased put option during the three months ended September 30, 2026, compared to no activity for the three months ended September 30, 2025.
The Company recorded other income of $5.1 million upon the write-off of a liability assumed upon the formation of P3 Commonwealth Innovation MSO, LLC (the "MSO"), which was estimated at $5.1 million as of the accounting acquisition date. During the three months ended September 30, 2026, the Company revised its estimate based on final reconciliation data from CMS.
Comparison of the Nine Months Ended September 30, 2026 to the Nine Months Ended September 30, 2025
Revenue
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Capitated revenue | $ | 1,112,188 | $ | 1,062,796 | $ | 49,392 | 5 | % | |||||||||||||||
|
Other revenue
|
56,927 | 11,470 | 45,457 | 396 | % | ||||||||||||||||||
| Total operating revenue | $ | 1,169,115 | $ | 1,074,266 | $ | 94,849 | 9 | % | |||||||||||||||
The increase in capitated revenue was primarily driven by an increase in the average rate resulting from ongoing strategic contractual restructuring, as well as from rate progression and burden of illness performance. The increase was partially offset by a 9% decrease in the average number of at-risk members of 105,700 for the nine months ended September 30, 2026 compared to 115,700 for the nine months ended September 30, 2025, resulting from previously disclosed intentional network and payer rationalization. Capitated revenue was approximately 95% and 99% of total operating revenue for the nine months ended September 30, 2026 and 2025, respectively.
Other revenue was approximately 5% and 1% of total operating revenue for the nine months ended September 30, 2026 and 2025, respectively. The increase was attributable to management fees for new delegated service contracts and an increase in revenue from incentive-sharing arrangements related to Part D program incentive initiatives. Of the total increase, $12.7 million was attributable to a change in estimate related to revenue recognized for such incentive-sharing arrangements, as further described in Note 3, "Significant Accounting Policies".
Medical Expense
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Medical expense | $ | 982,402 | $ | 1,093,182 | $ | (110,780) | (10) | % | |||||||||||||||
The decrease in medical expense was driven by a decrease in the total number of at-risk members year-over-year as well as favorable reserve development and claims true-up activity. Additionally, medical expense for the nine months ended September 30, 2026 included a $56.0 million reduction of prior period medical claims expense.
Premium Deficiency Reserve
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Premium deficiency reserve | $ | (41,324) | $ | (36,665) | $ | (4,659) | 13 | % | |||||||||||||||
The change in premium deficiency reserve was due to management's assessment of the profitability of contracts, wherein maturation of our overall contractual arrangements are expected to reduce our future losses.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
Corporate, General and Administrative Expense
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Corporate, general and administrative expense | $ | 92,438 | $ | 71,016 | $ | 21,422 | 30 | % | |||||||||||||||
The increase in corporate, general and administrative expense was primarily driven by an increase in consulting expenses, as well as an increase in accrued performance bonuses. The increase was partially offset by the reversal of $2.0 million of expense related to certain indirect tax returns for which the Company filed amended returns during the period.
Other Income (Expense)
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest expense, net | $ | (29,670) | $ | (39,397) | $ | 9,727 | (25) | % | |||||||||||||||
| Mark-to-market of stock warrants and purchased put option | (8,424) | 2,784 | $ | (11,208) | (403) | % | |||||||||||||||||
| Other | 5,410 | (1,259) | $ | 6,669 | (530) | % | |||||||||||||||||
| Total other expense | $ | (32,684) | $ | (37,872) | $ | 5,188 | (14) | % | |||||||||||||||
The decrease in interest expense, net was due to the conversion of certain of the Company's unsecured promissory notes to preferred stock that was effected on April 27, 2026. Refer to Note 8 "Debt" for further discussion of the related Exchange Agreement.
The Company recorded a loss of $3.3 million related to its liability-classified stock warrants during the nine months ended September 30, 2026, compared to a gain of $2.8 million for nine months ended September 30, 2025. The Company recorded a net loss of $5.2 million related to its purchased put options during the nine months ended September 30, 2026, compared to no activity for nine months ended September 30, 2025.
The Company recorded other income of $5.1 million upon the write-off of a liability assumed upon the formation of P3 Commonwealth Innovation MSO, LLC (the "MSO"), which was estimated at $5.1 million as of the accounting acquisition date. During the three months ended September 30, 2026, the Company revised its estimate based on final reconciliation data from CMS.
Income Tax Benefit (Provision)
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Income tax benefit (provision) | $ | 9,709 | $ | (3,065) | $ | 12,774 | 417 | % | |||||||||||||||
The increase in income tax benefit was primarily driven by the release of $6.4 million of uncertain tax positions related to the reassessment of open state tax positions and changes in the interpretation of recently enacted state tax law, as well as the release of $2.4 million of accrued interest and penalties associated with those positions.
Liquidity and Capital Resources
P3 Health Partners Inc. is a holding company and has no material assets other than its ownership of equity interests in P3 LLC. As such, we have no independent means of generating revenue or cash flow, and our ability to pay taxes, make payments under the Tax Receivable Agreement ("TRA"), and to pay dividends will depend on the financial results and cash flows of P3 LLC and the distributions received from P3 LLC. Deterioration in the financial condition, earnings or cash flow of P3 LLC for any reason could limit or impair P3 LLC's ability to pay such distributions.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
Additionally, to the extent that we need funds and P3 LLC is restricted from making such distributions under applicable law or regulation or under the terms of any financing arrangements, or P3 LLC is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition. It is anticipated that the distributions we will receive from P3 LLC may, in certain periods, exceed the actual tax liabilities and obligations to make payments under the TRA.
Cash Sources
To date, we have financed our operations principally through the cash we obtained upon the consummation of a series of business combinations in December 2021 with Foresight Acquisition Corp. (the "Business Combinations"), private placements of our equity securities, payments from our payors, issuances of promissory notes, and borrowings under the Term Loan Facility. We generate cash from our operations, generally from our contracts with payors. As of September 30, 2026, we had $43.9 million of unrestricted cash available to fund future operations.
We have experienced losses since our inception until the three months ended March 31, 2026. Our future capital requirements will depend on many factors, including the pace of our growth, ability to manage medical costs, the maturity of our members, and our ability to raise capital and refinance our indebtedness as it matures. We may need to raise additional capital through a combination of debt and/or equity financing and to the extent we are unsuccessful at doing so, we may need to curtail planned activities, discontinue certain operations, or sell certain assets, which could materially and adversely affect our business, financial condition, results of operations, and prospects.
On April 27, 2026, the Company entered into a Debt Exchange Agreement (the "Exchange Agreement") with various affiliates of Chicago Pacific Founders ("CPF"), the largest stockholder and debtholder, directly or through affiliates (such affiliates, the "Holders"). Pursuant to the Exchange Agreement, approximately $252.5 million, representing the full outstanding balances of the Company's VGS 1 through VGS 5 unsecured promissory notes, including principal, accrued interest, and back-end fees (collectively, the "Debt"), was exchanged for preferred stock that is not convertible, does not have voting or preemptive rights, is not registered or listed, and has a stated value of $100 per share. The Company may redeem the preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $100.00 per share, plus any accumulated and unpaid dividends.
The Debt was converted into several series of preferred stock having identical terms, other than the dividend rate, with dividends payable only when, as and if declared by the Company's board of directors or on the occurrence of certain specified liquidity events. At the sole election of the Company, such dividends may be paid in cash legally available for the payment of dividends or in-kind in the form of the issuance of additional shares of preferred stock. Debt exchanges included $49.8 million of the Debt for 0.5 million shares of Series A 13.5% Cumulative Preferred Stock; $39.6 million of the Debt for 0.4 million shares of Series B 17.5% Cumulative Preferred Stock; and $163.1 million of the Debt for 1.6 million shares of Series C 19.5% Cumulative Preferred Stock.
As of September 30, 2026, we were in compliance with the covenants under our Term Loan Facility; however, there can be no assurance that we will be able to maintain compliance with these covenants in the future or that the lender under the Term Loan Facility or the lenders of any future indebtedness we may incur will grant any waiver or forbearance with respect to such covenants that we may request in the future. The Term Loan Facility matures in September 2027.
Series D Preferred Stock Issuance
On April 27, 2026, the Company entered into a Securities Purchase Agreement (the "Series D Purchase Agreement") with affiliates of CPF pursuant to which the Company agreed to issue up to $70 million of units (the "Series D Units") in multiple tranches. The Series D Units consist of (i) shares of the Company's Series D 19.5% Cumulative Preferred Stock (the "Series D Preferred Stock"), and (ii) warrants to purchase Class A Common Stock (the "Common Stock"), exercisable for a number of shares of Common Stock equal to 0.66333% of the outstanding Class A and Class V Common Stock of the Company per $1,000,000 of amount funded, with an exercise price equal to the Nasdaq Minimum Price on the date of issuance of the applicable warrant and a term of seven (7) years from the date of issuance. The Company sold $51.3 million of Series D Units during the three months ended June 30, 2026, and the remaining $18.7 million of Series D Units during the three months ended September 30, 2026. The Company issued equity-classified warrants to purchase 0.9 million shares of Class A common stock at a weighted average exercise price of $10.73 per share in connection with the Series D Purchase Agreement during the nine months ended September 30, 2026. Such warrants had a fair value of $21.5 million and were classified within additional paid-in capital on the Company's condensed consolidated balance sheets. As of September 30, 2026, there were no units available for issuance under the Series D Purchase Agreement.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
In connection with the Purchase Agreement, the Company entered into a third amended and restated letter agreement (the "Third Amended and Restated Letter Agreement") with Chicago Pacific Founders GP, L.P., a Delaware limited partnership ("CPF GP I"), Chicago Pacific Founders GP III, L.P., a Delaware limited partnership ("CPF GP III"), and Chicago Pacific Founders GP IV, L.P., a Delaware limited partnership ("CPF GP IV") (on behalf of the funds of which CPF GP I is the general partner, certain funds of which CPF GP III is the general partner, certain funds of which CPF GP IV is the general partner and/or certain of their affiliated entities and funds (collectively, the "CPF Parties")). Pursuant to the Third Amended and Restated Letter Agreement, (i) for as long as the CPF Parties own 40% of the Company's outstanding common stock, CPF will be entitled to designate one additional independent member of the Company's board of directors, who must be independent and satisfy all applicable requirements regarding service as a director of the Company under applicable law and SEC and stock exchange rules, (ii) for as long as the CPF Parties own 40% of the Company's outstanding common stock, CPF will be entitled to certain information rights and protective provisions, and (iii) the CPF Parties agreed to extend the standstill restriction from January 1, 2026 to January 1, 2027 that limits the ownership of the CPF Parties to 49.99% of the Company's issued and outstanding shares of common stock.
Series D-1 Preferred Stock Issuance
On September 8, 2026, the Company entered into a Securities Purchase Agreement (the "Series D-1 Purchase Agreement") with affiliates of CPF pursuant to which the Company agreed to issue up to $70 million of units (the "Series D-1 Units") in multiple tranches. The Series D-1 Units consist of (i) shares of the Company's Series D-1 19.5% Cumulative Preferred Stock (the "Series D-1 Preferred Stock"), and (ii) warrants to purchase Class A Common Stock (the "Common Stock"), exercisable for a number of shares of Common Stock equal to 0.66333% of the outstanding Class A and Class V Common Stock of the Company per $1,000,000 of amount funded, with an exercise price equal to the Nasdaq Minimum Price on the date of issuance of the applicable warrant and a term of seven (7) years from the date of issuance. The Company sold $14 million of Series D-1 Units on September 9, 2026. The Company issued equity-classified warrants to purchase 0.7 million shares of Class A common stock at an exercise price of $8.98 per share in connection with the Series D-1 Purchase Agreement during the nine months ended September 30, 2026. Such warrants had a fair value of $4.7 million and were classified within additional paid-in capital on the Company's condensed consolidated balance sheets. As of September 30, 2026, there were $56.0 million units available for issuance under the Series D-1 Purchase Agreement.
In connection with the Series D-1 Purchase Agreement, the Company entered into a fourth amended and restated letter agreement (the "Fourth Amended and Restated Letter Agreement") with the CPF Parties. Pursuant to the Fourth Amended and Restated Letter Agreement, (i) for as long as the CPF Parties own 40% of the Company's outstanding common stock, CPF will be entitled to designate one additional independent member of the Company's board of directors, who must be independent and satisfy all applicable requirements regarding service as a director of the Company under applicable law and SEC and stock exchange rules, (ii) for as long as the CPF Parties own 40% of the Company's outstanding common stock, CPF will be entitled to certain information rights and protective provisions, and (iii) the CPF Parties agreed to extend the standstill restriction from January 1, 2026 to January 1, 2027 that limits the ownership of the CPF Parties to 49.99% of the Company's issued and outstanding shares of common stock.
Cash Uses
Our primary uses of cash include payments for medical expenses, administrative expenses, cost associated with our care model, and debt service. Final reconciliation and receipts of amounts due from payors are typically settled in arrears.
Pursuant to our election under Section 754 of the Internal Revenue Code (the "Code"), we expect to obtain an increase in our share of the tax basis in the net assets of P3 LLC when its units are redeemed or exchanged. We intend to treat any redemptions and exchanges of P3 LLC units as direct purchases of the units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that we would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent the tax basis is allocated to those capital assets.
In connection with the Business Combinations, we entered into a tax receivable agreement ("TRA") that provides for the payment by us of 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of P3 LLC resulting from any redemptions or exchanges of P3 LLC, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the "TRA Payments"). We expect to benefit from the remaining 15% of any tax benefits that we may actually realize.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
The estimation of a liability under the TRA is, by its nature, imprecise and subject to significant assumptions regarding a number of factors, including (but not limited to) the amount and timing of taxable income generated by the Company each year as well as the tax rate then applicable. The TRA liability is estimated to be $32.2 million as of September 30, 2026. Due to the Company's history of losses, the Company has not recorded tax benefits associated with the increase in tax basis as a result of the Business Combinations. As a result, the Company determined that payments to TRA holders are not probable and no TRA liability has been recorded as of September 30, 2026.
As non-controlling interest holders exercise their right to exchange their units in P3 LLC, a TRA liability may be recorded based on 85% of the estimated future tax benefits that the Company may realize as a result of increases in the tax basis of P3 LLC. The amount of the increase in the tax basis, the related estimated tax benefits, and the related TRA liability to be recorded will depend on the price of the Company's Class A common stock at the time of the relevant redemption or exchange.
Outside of the aforementioned, and any routine transactions made in the ordinary course of business, there have been no material changes to our primary short-term and long-term requirements for liquidity and capital as disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2025 Form 10-K.
Liquidity and Going Concern
As of the date of this Form 10-Q, we believe that our existing cash resources are not sufficient to support planned operations for at least the next year from the issuance of the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q. As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern within one year after the date the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q are issued. In evaluating our ability to continue as a going concern and meet our obligations, we considered our current projections of future cash flows, current financial condition, sources of liquidity, and debt obligations for at least one year from the date of issuance of this Form 10-Q. This evaluation of our cash resources available over the next year from the date of issuance of the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q does not take into consideration the potential mitigating effect of our ongoing efforts to raise capital or our plans that have not been fully implemented or the many factors that determine our capital requirements, including the pace of our growth, ability to manage medical costs and the maturity of our members. We continue to explore raising additional capital through a combination of debt financing and equity issuances. If we raise funds by issuing debt securities or preferred stock, or by incurring loans, these forms of financing would have rights, preferences, and privileges senior to those of holders of our common stock. If we raise capital through the issuance of additional equity, such sales and issuance would dilute the ownership interests of the existing holders of our Class A common stock. The availability and the terms under which we may be able to raise additional capital could be disadvantageous, and the terms of debt financing or other non-dilutive financing may involve restrictive covenants and dilutive financing instruments, which could place significant restrictions on our operations. Macroeconomic conditions and credit markets could also impact the availability and cost of potential future debt financing. There can be no assurances that any additional debt, other non-dilutive and/or equity financing would be available to us on favorable terms, or potentially at all. We expect to continue to incur net losses, comprehensive losses, and negative cash flows from operating activities in accordance with our operating plan. If we are unable to obtain additional funding when needed, we will need to curtail planned activities, divest certain operations, sell certain assets or reduce our costs, which will likely have an unfavorable effect on our ability to execute on our business plan, and have an adverse effect on our business, results of operations, and future prospects.
The unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q have been prepared assuming we will continue as a going concern and do not include any adjustments that might result from the outcome of these uncertainties.
P3 Health Partners Inc. | Q3 2026 Form 10-Q |
Cash Flows
The following table summarizes our cash flows:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in thousands) | |||||||||||
| Net cash used in operating activities | $ | (90,066) | $ | (65,511) | |||||||
| Net cash used in investing activities | (251) | (69) | |||||||||
| Net cash provided by financing activities | 110,312 | 59,940 | |||||||||
| Net change in cash and restricted cash | $ | 19,995 | $ | (5,640) | |||||||
Operating Activities
Net cash used in operating activities was $90.1 million for the nine months ended September 30, 2026, compared to net cash used in operating activities of $65.5 million for the nine months ended September 30, 2025. Significant changes impacting net cash used in operating activities during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 were decreases in claims payable and health plan settlements payable and an increase in health plan receivables.
Investing Activities
Net cash used in investing activities was $0.3 million for the nine months ended September 30, 2026 compared to net cash used in investing activities of $0.1 million for the nine months ended September 30, 2025.
Financing Activities
Net cash provided by financing activities was $110.3 million for the nine months ended September 30, 2026, primarily consisting of proceeds from the borrowings on the VGS 5 Promissory Note and issuance of Series D and Series D-1 Preferred Stock and related warrants, and short-term financing agreements for the funding of certain insurance policies. Net cash provided by financing activities was $59.9 million for the nine months ended September 30, 2025, consisting of proceeds from the borrowings on the VGS 4 Promissory Note, VGS 5 Promissory Note, and short-term financing agreements for the funding of certain insurance policies.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires management to use judgment in the application of accounting policies, including making estimates and assumptions that could affect assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. Management bases its estimates on the best information available at the time, its experiences and various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. On an ongoing basis, we evaluate the continued appropriateness of our accounting estimates to make adjustments we consider appropriate under the facts and circumstances. Refer to Note 3 "Significant Accounting Policies" for further disclosure.
Recent Accounting Pronouncements
See Note 4 "Recent Accounting Pronouncements" to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q for a description of recent accounting standards issued and the anticipated effects on our unaudited condensed consolidated financial statements.
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