P3 Health Partners Inc.
11/14/2025 | Press release | Distributed by Public on 11/14/2025 05:03
Quarterly Report for Quarter Ending September 30, 2025 (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 2024 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 $1,030 billion Medicare market, which covers more than 69 million eligible lives as of April 2025. Our core focus is the MA market, which makes up approximately 51% of the overall Medicare market, or nearly 35 million Medicare eligible lives in 2025. 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 2,700 physicians, in 24 markets (counties) across four states in over eight full years of operations as of September 30, 2025. As of September 30, 2025, our PCP network served approximately 116,000 at-risk members.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
Reverse Stock Split
On April 11, 2025, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the "Charter Amendment") with the Secretary of State of Delaware to effect a 1-for-50 reverse stock split (the "Reverse Stock Split") of the Company's outstanding Class A common stock, $0.0001 par value per share, and Class V common stock, $0.0001 par value per share, as of that date.
The Reverse Stock Split resulted in 163,159,548 shares of Class A common stock being converted to 3,263,093 shares of Class A common stock and 195,956,984 shares of Class V common stock being converted to 3,919,124 shares of Class V common stock. The Board of Directors of the Company approved the Charter Amendment to meet the share bid price requirements of the Nasdaq Capital Market. The Company's stockholders approved the Charter Amendment at a special meeting held on March 31, 2025.
No fractional shares were issued as a result of the Reverse Stock Split. Each stockholder was entitled to receive a cash payment equal to the fraction of a share to which such stockholder would otherwise have been entitled multiplied by the closing price per share of the Class A common stock as reported by The Nasdaq Capital Market (as adjusted to give effect to the Reverse Stock Split) on the effective date of the Reverse Stock Split. Proportional adjustments were made to the number of shares of Class A common stock underlying the Company's outstanding equity awards and warrants, as well as the exercise or conversion price, as applicable, and to the number of shares issuable under the Company's equity incentive plans and other existing agreements. All options and restricted stock awards of the Company outstanding immediately prior to the split have been adjusted in accordance with the terms of the plans, agreements or arrangements governing such options and restricted stock awards.
Each stockholder's percentage ownership interest in the Company and proportional voting power remained unchanged by the split, except for minor changes and adjustments that resulted from the treatment of fractional shares. The rights and privileges of the holders of shares of the Company's common stock were substantially unaffected. Unless otherwise noted, all references in the condensed consolidated financial statements and notes to condensed consolidated financial statements to the number of shares, per share data, restricted stock and stock option data have been retroactively adjusted to give effect to the Reverse Stock Split.
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.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
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. From 2018 through September 30, 2025, we experienced a 93% physician retention rate in our affiliate provider network. 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 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 92% of our total operating expense for the nine months ended September 30, 2025. 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
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
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.
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.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
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 loss to Adjusted EBITDA set forth below and not rely on any single financial measure to evaluate our business.
The following table sets forth a reconciliation of our net loss, the most directly comparable GAAP metric, to Adjusted EBITDA loss:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net loss | $ | (69,461) | $ | (102,850) | $ | (157,372) | $ | (181,230) | |||||||||||||||
| Interest expense, net | 20,527 | 5,647 | 39,397 | 15,339 | |||||||||||||||||||
| Depreciation and amortization | 21,033 | 21,673 | 63,168 | 64,905 | |||||||||||||||||||
| Income tax provision (benefit) | 11 | (3,605) | 3,065 | (565) | |||||||||||||||||||
| Mark-to-market of stock warrants | 2,540 | (5,737) | (2,784) | (14,626) | |||||||||||||||||||
| Premium deficiency reserve | (23,736) | 18,168 | (36,665) | 15,771 | |||||||||||||||||||
| Equity-based compensation | 1,211 | 1,958 | 4,482 | 5,031 | |||||||||||||||||||
|
Other(1)
|
1,964 | (6,254) | 1,498 | (4,242) | |||||||||||||||||||
| Adjusted EBITDA loss | $ | (45,911) | $ | (71,000) | $ | (85,211) | $ | (99,617) | |||||||||||||||
_____________________________________________
(1)Other during the three and nine months ended September 30, 2025 consisted of (i) interest income partially offset by (ii) severance expense in connection with reorganization of workforce and (iii) legal settlements and valuation allowance on our notes receivable. Other during the three and nine months ended September 30, 2024 consisted of (i) interest income partially offset by (ii) severance and related expense in connection with our chief executive officer transition and (iii) 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.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
The following table presents our medical margin:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Capitated revenue | $ | 341,555 | $ | 357,706 | $ | 1,062,796 | $ | 1,116,146 | |||||||||||||||
| Less: medical claims expense | (337,143) | (357,166) | (1,010,569) | (1,037,965) | |||||||||||||||||||
| Medical margin | $ | 4,412 | $ | 540 | $ | 52,227 | $ | 78,181 | |||||||||||||||
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, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
|
Gross profit
|
$ | (24,536) | $ | (39,796) | $ | (18,916) | $ | (19,379) | |||||||||||||||
| Other patient service revenue | (3,698) | (4,418) | (11,470) | (13,623) | |||||||||||||||||||
| Other medical expense | 32,646 | 44,754 | 82,613 | 111,183 | |||||||||||||||||||
| Medical margin | $ | 4,412 | $ | 540 | $ | 52,227 | $ | 78,181 | |||||||||||||||
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, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Total operating revenue | $ | 345,253 | $ | 362,124 | $ | 1,074,266 | $ | 1,129,769 | |||||||||||||||
| Less: medical claims expense | (337,143) | (357,166) | (1,010,569) | (1,037,965) | |||||||||||||||||||
| Less: other medical expense | (32,646) | (44,754) | (82,613) | (111,183) | |||||||||||||||||||
| Gross profit | $ | (24,536) | $ | (39,796) | $ | (18,916) | $ | (19,379) | |||||||||||||||
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 115,900 and 128,400 average at-risk members for the three months ended September 30, 2025 and 2024, respectively.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
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 2,700 and 3,100 primary care physicians as of September 30, 2025 and 2024, 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.
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, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Platform support costs | $ | 17,325 | $ | 26,604 | $ | 54,380 | $ | 68,064 | |||||||||||||||
| % of total operating revenue | 5.0 | % | 7.3 | % | 5.1 | % | 6.0 | % | |||||||||||||||
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 patient service revenue.Other patient service revenue is comprised primarily of encounter-related fees to treat patients outside of our at-risk arrangements at company owned clinics. Other patient service 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.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
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.
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.
Sales and marketing expense.Sales and marketing expenses consist of costs related to patient and provider marketing and community outreach. These expenses capture all costs for both our local and enterprise sales and marketing efforts.
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. 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.
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, such as the Oregon corporate activity tax, a quasi-gross receipts tax that is levied on our Oregon sourced revenue. 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.
Non-controlling Interest
We consolidate the financial results of P3 LLC and report a non-controlling interest on our condensed consolidated statements of operations, representing the portion of net income or loss attributable to the non-controlling interest. 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 interest.
P3 Health Partners Inc.| Q3 2025 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, 2025 |
% of Revenue |
Three Months Ended September 30, 2024 |
% of Revenue | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Operating revenue: | |||||||||||||||||||||||
| Capitated revenue | $ | 341,555 | 99 | % | $ | 357,706 | 99 | % | |||||||||||||||
| Other patient service revenue | 3,698 | 1 | 4,418 | 1 | |||||||||||||||||||
| Total operating revenue | 345,253 | 100 | 362,124 | 100 | |||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||
| Medical expense | 369,789 | 107 | 401,920 | 111 | |||||||||||||||||||
| Premium deficiency reserve | (23,736) | (7) | 18,168 | 5 | |||||||||||||||||||
| Corporate, general and administrative expense | 22,139 | 6 | 27,219 | 7 | |||||||||||||||||||
| Sales and marketing expense | 251 | - | 134 | - | |||||||||||||||||||
| Depreciation and amortization | 21,033 | 6 | 21,673 | 6 | |||||||||||||||||||
| Total operating expense | 389,476 | 112 | 469,114 | 129 | |||||||||||||||||||
| Operating loss | (44,223) | (12) | (106,990) | (29) | |||||||||||||||||||
| Other (expense) income: | - | ||||||||||||||||||||||
| Interest expense, net | (20,527) | (6) | (5,647) | (2) | |||||||||||||||||||
| Mark-to-market of stock warrants | (2,540) | (1) | 5,737 | 2 | |||||||||||||||||||
| Other | (2,160) | (1) | 445 | - | |||||||||||||||||||
| Total other income (expense) | (25,227) | (8) | 535 | - | |||||||||||||||||||
| Loss before income taxes | (69,450) | (20) | (106,455) | (29) | |||||||||||||||||||
| Income tax (provision) benefit | (11) | - | 3,605 | 1 | |||||||||||||||||||
| Net loss | (69,461) | (20) | (102,850) | (28) | |||||||||||||||||||
| Net loss attributable to redeemable non-controlling interest | (37,874) | (11) | (56,338) | (15) | |||||||||||||||||||
| Net loss attributable to controlling interest | $ | (31,587) | (9) | % | $ | (46,512) | (13) | % | |||||||||||||||
P3 Health Partners Inc.| Q3 2025 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, 2025 |
% of Revenue |
Nine Months Ended September 30, 2024 |
% of Revenue | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Operating revenue: | |||||||||||||||||||||||
| Capitated revenue | $ | 1,062,796 | 99 | % | $ | 1,116,146 | 99 | % | |||||||||||||||
| Other patient service revenue | 11,470 | 1 | 13,623 | 1 | |||||||||||||||||||
| Total operating revenue | 1,074,266 | 100 | 1,129,769 | 100 | |||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||
| Medical expense | 1,093,182 | 102 | 1,149,148 | 102 | |||||||||||||||||||
| Premium deficiency reserve | (36,665) | (3) | 15,771 | 1 | |||||||||||||||||||
| Corporate, general and administrative expense | 70,433 | 6 | 81,230 | 7 | |||||||||||||||||||
| Sales and marketing expense | 583 | - | 870 | - | |||||||||||||||||||
| Depreciation and amortization | 63,168 | 6 | 64,905 | 6 | |||||||||||||||||||
| Total operating expense | 1,190,701 | 111 | 1,311,924 | 116 | |||||||||||||||||||
| Operating loss | (116,435) | (11) | (182,155) | (16) | |||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest expense, net | (39,397) | (4) | (15,339) | (1) | |||||||||||||||||||
| Mark-to-market of stock warrants | 2,784 | - | 14,626 | 1 | |||||||||||||||||||
| Other | (1,259) | - | 1,073 | - | |||||||||||||||||||
| Total other income (expense) | (37,872) | (4) | 360 | - | |||||||||||||||||||
| Loss before income taxes | (154,307) | (15) | (181,795) | (16) | |||||||||||||||||||
|
Income tax (provision) benefit
|
(3,065) | - | 565 | - | |||||||||||||||||||
| Net loss | (157,372) | (15) | (181,230) | (16) | |||||||||||||||||||
| Net loss attributable to redeemable non-controlling interest | (84,943) | (8) | (103,998) | (9) | |||||||||||||||||||
| Net loss attributable to controlling interest | $ | (72,429) | (7) | % | $ | (77,232) | (7) | % | |||||||||||||||
Comparison of the Three Months Ended September 30, 2025 and 2024
Revenue
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Capitated revenue | $ | 341,555 | $ | 357,706 | $ | (16,151) | (5) | % | |||||||||||||||
| Other patient service revenue | 3,698 | 4,418 | (720) | (16) | % | ||||||||||||||||||
| Total operating revenue | $ | 345,253 | $ | 362,124 | $ | (16,871) | (5) | % | |||||||||||||||
Capitated revenue was $341.6 million for the three months ended September 30, 2025, a decrease of $16.2 million, or 5%, compared to $357.7 million for the three months ended September 30, 2024. This decrease was primarily driven by a 10% decrease in the average number of at-risk members from 128,400 for the three months ended September 30, 2024 to 115,900 for the three months ended September 30, 2025 driven by the strategic termination of underperforming payor contracts and affiliate providers in the current year. Capitated revenue was approximately 99% of total operating revenue for each of the three months ended September 30, 2025 and 2024.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
Other patient service revenue was $3.7 million for the three months ended September 30, 2025, a decrease of $0.7 million, or 16%, compared to $4.4 million for the three months ended September 30, 2024. Other patient service revenue was approximately 1% of total operating revenue for each of the three months ended September 30, 2025 and 2024.
Medical Expense
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Medical expense | $ | 369,789 | $ | 401,920 | $ | (32,131) | (8) | % | |||||||||||||||
Medical expense was $369.8 million for the three months ended September 30, 2025, a decrease of $32.1 million, or 8%, compared to $401.9 million for the three months ended September 30, 2024. The decrease was driven primarily by a decrease in the total number of at-risk members year-over-year resulting in part from termination of two health plans.
Premium Deficiency Reserve
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Premium deficiency reserve | $ | (23,736) | $ | 18,168 | $ | (41,904) | (231) | % | |||||||||||||||
Premium deficiency reserve was a benefit of $23.7 million for the three months ended September 30, 2025, an increase of $41.9 million, or 231%, compared to an expense of $18.2 million for the three months ended September 30, 2024. The change 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.
Corporate, General and Administrative Expense
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Corporate, general and administrative expense | $ | 22,139 | $ | 27,219 | $ | (5,080) | (19) | % | |||||||||||||||
Corporate, general and administrative expense was $22.1 million for the three months ended September 30, 2025, a decrease of $5.1 million, or 19%, compared to $27.2 million for the three months ended September 30, 2024. The decrease was primarily driven by a decrease in salary and related expense resulting from a reduction in head count and sale of the Company's Florida operations.
Comparison of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024
Revenue
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Capitated revenue | $ | 1,062,796 | $ | 1,116,146 | $ | (53,350) | (5) | % | |||||||||||||||
| Other patient service revenue | 11,470 | 13,623 | (2,153) | (16) | % | ||||||||||||||||||
| Total operating revenue | $ | 1,074,266 | $ | 1,129,769 | $ | (55,503) | (5) | % | |||||||||||||||
Capitated revenue was $1.1 billion for the nine months ended September 30, 2025, a decrease of $53.4 million, or 5%, compared to $1.1 billion for the nine months ended September 30, 2024. This decrease was primarily driven by an 9% decrease in the average number of at-risk members of 115,700 for the nine months ended September 30, 2025 to 126,500 for the nine months ended September 30, 2024, which was primarily due to the strategic termination of underperforming
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
payor contracts and affiliate providers in the current year. Capitated revenue was approximately 99% of total operating revenue for each of the nine months ended September 30, 2025 and 2024.
Other patient service revenue was $11.5 million for the nine months ended September 30, 2025, a decrease of $2.2 million, or 16%, compared to $13.6 million for the nine months ended September 30, 2024. Other patient service revenue was approximately 1% of total operating revenue for each of the nine months ended September 30, 2025 and 2024.
Medical Expense
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Medical expense | $ | 1,093,182 | $ | 1,149,148 | $ | (55,966) | (5) | % | |||||||||||||||
Medical expense was $1.1 billion for the nine months ended September 30, 2025, a decrease of $56.0 million, or 5%, compared to $1.1 billion for the nine months ended September 30, 2024. The decrease was driven by a decrease in the total number of at-risk members year-over-year resulting in part from termination of two health plans.
Premium Deficiency Reserve
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Premium deficiency reserve | $ | (36,665) | $ | 15,771 | $ | (52,436) | (332) | % | |||||||||||||||
Premium deficiency reserve was a benefit of $36.7 million for the nine months ended September 30, 2025, an increase of $52.4 million, or 332%, compared to an expense of $15.8 million for the nine months ended September 30, 2024. The change 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.
Corporate, General and Administrative Expense
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | Amount | % | ||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||
| Corporate, general and administrative expense | $ | 70,433 | $ | 81,230 | $ | (10,797) | (13) | % | |||||||||||||||
Corporate, general and administrative expense was $70.4 million for the nine months ended September 30, 2025, a decrease of $10.8 million, or 13%, compared to $81.2 million for the nine months ended September 30, 2024. The decrease was primarily driven by a decrease in salary and related expense resulting from a reduction in head count and sale of the Company's Florida operations.
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. 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.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
Cash Sources
To date, we have financed our operations principally through the cash we obtained as a result of 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, 2025, we had $37.7 million of unrestricted cash and cash equivalents available to fund future operations.
We have experienced losses since our inception, and net losses of $69.5 million and $157.4 million for the three and nine months ended September 30, 2025, respectively. 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.
VGS 4 Promissory Note
On February 13, 2025, we entered into a financing transaction with VBC Growth SPV 4, LLC ("VGS 4"), consisting of the issuance by P3 LLC of an unsecured promissory note (the "VGS 4 Promissory Note") to VGS 4 and the entry into a warrant agreement and the VGS 4 Subordination Agreement (defined below). The VGS 4 Promissory Note provides for funding of up to $30.0 million, available for us to draw in (i) a first tranche of $15.0 million, which was drawn on February 18, 2025, and (ii) a second tranche of up to $15.0 million which was drawn on March 14, 2025. In addition, we paid VGS 4 an up-front fee of 1.5% of $30.0 million, the maximum draw amount, in-kind. The VGS 4 Promissory Note matures on August 13, 2028. Interest on the VGS 4 Promissory Note is payable at 19.5% per annum on a quarterly cycle (in arrears) beginning March 31, 2025. We may elect to pay interest 11.5% in-kind and 8.0% in cash, but if the terms of the VGS 4 Subordination Agreement do not permit us to pay interest in cash, interest will be paid entirely in-kind.
The VGS 4 Promissory Note may be prepaid, at our option, either in whole or in part, without penalty or premium, at any time and from time to time, subject to the payment of the back-end fee described below; provided that prepayments must be in increments of at least $1.5 million. The VGS 4 Promissory Note provides for mandatory prepayments with the proceeds of certain asset sales, and VGS 4 has the right to demand payment in full upon (i) a change of control of the Company and (ii) certain qualified financings (as defined in the VGS 4 Promissory Note).
The VGS 4 Promissory Note restricts our ability to, among other things, incur indebtedness and liens, and make investments and restricted payments. The maturity date may be accelerated as a remedy under the certain default provisions in the agreement, or in the event a mandatory prepayment event occurs.
In addition, we will pay VBC 4 a back-end fee at the time the loans issued under the VGS 4 Promissory Note are repaid as follows: (i) if repaid prior to March 31, 2025, 2.25% of the aggregate principal amount of the loans advanced to us on or prior to such date; (ii) if repaid from April 1, 2025 through June 30, 2025, 4.5% of the aggregate principal amount of the loans advanced to us on or prior to such date; (iii) if repaid from July 1, 2025 through September 30, 2025, 6.75% of the aggregate principal amount of the loans advanced to us on or prior to such date; and (iv) if repaid on October 1, 2025 or later, 9.0% of the aggregate principal amount of the loans advanced to us on or prior to such date.
In connection with the issuance of the VGS 4 Promissory Note, we also entered into a subordination agreement, dated as of February 13, 2025 (the "VGS 4 Subordination Agreement"), with VGS 4 which subordinates VGS 4's right of payment under the VGS 4 Promissory Note to the right of payment and security interests of the lenders under the Term Loan and Security Agreement with CRG Servicing, LLC (the "Term Loan Facility"). Under the terms of the VGS 4 Subordination Agreement, we will be effectively required to pay all interest under the VGS 4 Promissory Note in-kind.
VGS 5 Promissory Note
On May 29, 2025, we entered into a financing transaction with VBC Growth SPV 5, LLC ("VGS 5"), consisting of the issuance by P3 LLC of an unsecured promissory note (the "VGS 5 Promissory Note") to VGS 5 and the entry into a warrant agreement and the VGS 5 Subordination Agreement (defined below). The VGS 5 Promissory Note provides for funding of up to $70.0 million, available for us to draw in three tranches, as follows: (i) a first tranche of $15.0 million which was drawn on May 29, 2025, (ii) a second tranche of up to $15.0 million available at the Company's sole option in a
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
single draw, on or prior to June 22, 2025, and (iii) a third tranche of $40.0 million available upon mutual agreement of P3 LLC and VGS 5 in one or more draws no later than December 31, 2025. The VGS 5 Promissory Note matures on August 13, 2028. Interest on the VGS 5 Promissory Note is payable at 19.5% per annum on a quarterly cycle (in arrears) beginning June 30, 2025. We may elect to pay interest 11.5% in-kind and 8.0% in cash, but if the terms of the VGS 5 Subordination Agreement do not permit us to pay interest in cash, interest will be paid entirely in-kind.
On June 21, 2025, we delivered a request to VGS 5 for $15.0 million in funding related to the second tranche, in July 2025 VGS 5 funded $8.5 million with the additional $6.5 million funded on August 12, 2025.
On October 3, 2025, the Company delivered a request to VGS 5 for $13.0 million in funding related to the third tranche, which was funded on October 7, 2025.
The VGS 5 Promissory Note may be prepaid, at our option, either in whole or in part, without penalty or premium, at any time and from time to time, subject to the payment of the back-end fee described below; provided that prepayments must be in increments of at least $3.5 million. The VGS 5 Promissory Note provides for mandatory prepayments with the proceeds of certain asset sales, and VGS 5 has the right to demand payment in full upon (i) a change of control of the Company and (ii) certain qualified financings (as defined in the VGS 5 Promissory Note).
The VGS 5 Promissory Note restricts P3 LLC's ability and the ability of its subsidiaries to, among other things, incur indebtedness and liens, and make investments and restricted payments. The maturity date may be accelerated as a remedy under certain default provisions in the agreement, or in the event a mandatory prepayment event occurs.
In addition, we will pay VGS 5 a back-end fee at the time the VGS 5 Promissory Note is redeemed as follows: (i) if paid prior to June 30, 2025, 2.25%; (ii) if repaid from July 1, 2025 through September 30, 2025, 4.50%; (iii) if paid after October 1, 2025 through December 31, 2025, 6.75% and (iv) if paid after December 31, 2025, 9.00%.
In connection with the issuance of the VGS 5 Promissory Note, we entered into a subordination agreement, dated as of May 29, 2025 (the "VGS 5 Subordination Agreement"), with VGS 5 which subordinates VGS 5's right of payment under the VGS 5 Promissory Note to the right of payment and security interests of the lenders under the Term Loan Facility. Under the terms of the VGS 5 Subordination Agreement, we will be effectively required to pay all interest under the VGS 5 Promissory Note in-kind.
As of September 30, 2025, we were in compliance with the covenants under our Term Loan Facility, VBC Growth SPV LLC promissory note ("VGS Promissory Note"), VBC Growth SPV 2, LLC unsecured promissory note ("VGS 2 Promissory Note"), VBC Growth SPV 3 LLC unsecured promissory note ("VGS 3 Promissory Note"), VGS 4 Promissory Note, and VGS 5 Promissory Note; however, there can be no assurance that we will be able to maintain compliance with these covenants in the future or that the lenders under the Term Loan Facility and unsecured promissory notes 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.
Asset sale
On May 1, 2025, our subsidiary, P3 Health Partners-Florida, LLC ("P3 Florida"), entered into an asset purchase agreement with Invictus Equity Group, LLC ("Invictus") for the purchase of the remaining assets previously held for sale. Pursuant to the asset purchase agreement, P3 Florida sold to Invictus the assets, clinical and non-clinical, exclusively or primarily used by our MA-related businesses operated out of Apollo Beach and Clearwater, Florida, for a purchase price of approximately $0.1 million.
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.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
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 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.
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 $11.5 million as of September 30, 2025. 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, 2025.
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 2024 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.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
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.
Cash Flows
The following table summarizes our cash flows:
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Net cash used in operating activities | $ | (65,511) | $ | (52,890) | |||||||
| Net cash (used in) provided by investing activities | (69) | 15,000 | |||||||||
| Net cash provided by financing activities | 59,940 | 65,054 | |||||||||
| Net change in cash and restricted cash | $ | (5,640) | $ | 27,164 | |||||||
Operating Activities
Net cash used in operating activities was $65.5 million for the nine months ended September 30, 2025, compared to net cash used in operating activities of $52.9 million for the nine months ended September 30, 2024. Significant changes impacting net cash used in operating activities during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 were primarily due to changes in working capital and an increase in net loss.
Investing Activities
Net cash used in investing activities was $0.1 million for the nine months ended September 30, 2025 compared to net cash provided by investing activities of $15.0 million for the nine months ended September 30, 2024, consisting of purchase price received in advance of the sale of our Florida operations.
Financing Activities
Net cash provided by financing activities was $59.9 million for the nine months ended September 30, 2025, primarily 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. Net cash provided by financing activities was $65.1 million for the nine months ended September 30, 2024, consisting of proceeds from the sale of Class A common stock and warrants in May 2024 with aggregate proceeds of $39.8 million, net of $2.4 million in offering costs, borrowings on the VGS 2 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. There have been no significant changes to our critical accounting estimates as disclosed in our 2024 Form 10-K.
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.
P3 Health Partners Inc.| Q3 2025 Form 10-Q|
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