P3 Health Partners (PIII -2.25%), a physician-led healthcare group focused on value-based care for Medicare Advantage members, reported results for Q2 FY2025 on August 14, 2025. The most notable news was a miss on both top- and bottom-line expectations: revenue (GAAP) came in slightly below analyst projections at $355.8 million, while diluted earnings per share (EPS) posted a GAAP loss of $(6.23). The deeper-than-expected adjusted EBITDA loss (non-GAAP) and ongoing decline in at-risk membership highlighted the company’s operational challenges. Both revenue (GAAP) and EPS (non-GAAP) fell short of consensus estimates by small but material amounts. The quarter reflected progress in medical cost management, but overall results pointed to persistent weaknesses that the company has yet to fully address.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS, Diluted (GAAP) | $(6.23) | N/A | $(7.37) | 15.5 % |
| Revenue (GAAP) | $355.8 million | $358.18 million | $379.2 million | (6.2 %) |
| Medical Margin | $30.6 million | $41.1 million | (25.5 %) | |
| Adjusted EBITDA Loss | $(17.1) million | $(8.8) million | (94.3 %) | |
| Average At-Risk Membership | 115,000 | N/A | N/A |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Focus Areas
P3 Health Partners specializes in coordinating care for Medicare Advantage members using a value-based care model. This approach focuses on improving patient health outcomes and lowering costs, rather than billing for each service. The company operates largely by partnering with primary care physicians, providing care management and support through its own technology platform.
Currently, the company concentrates on several key priorities. These include expanding its use of value-based care, deepening relationships with physicians and payors, and deploying technology to manage patient care more efficiently. Performance in the Medicare Advantage market is especially important, as this is the company’s primary revenue source. Success here relies on aligning payments and risks, improving per-member margins, and effectively controlling medical costs.
Quarterly Performance and Trends
The latest quarter saw declines in both revenue and membership, extending trends management previously indicated. Total revenue (GAAP) decreased 6% compared to the prior-year quarter, primarily due to intentional network and payer rationalization. The company’s average at-risk membership stood at 115,000, down 9% year over year as P3 continued to exit less-profitable contracts.
Capitated revenue, which is a fixed per-member per-month payment made to manage patient care, remained the company’s dominant revenue stream. Other revenue sources saw a steeper decline as fewer patients flowed through traditional payment models.
The company reported a medical margin, which is capitation revenue minus the cost of medical care, of $30.6 million (non-GAAP). Although medical expense held nearly flat, medical margin (non-GAAP) dropped because the base of covered lives shrank. Medical margin per member per month (non-GAAP) was $89, but total dollars declined. When adjusted for prior-period items, medical margin (non-GAAP) improved further, highlighting stabilization in cost trends and effectiveness in clinical management programs.
P3's adjusted EBITDA loss deepened to $(17.1) million as losses narrowed outside of a single underperforming market. Management attributed most of the company-wide losses to one problematic payer contract, while the rest of the business achieved breakeven or positive results. Operating expenses declined year over year, thanks to specific efficiency programs and contract renegotiations. Still, the combination of revenue shrinkage and the single-market drag kept the company’s bottom line in the red.
These adjustments affected margins and contributed to continued volatility in consolidated results. Dividend payments were not discussed.
Clinical initiatives gained traction during the quarter and completed further rollout of the Innovaccer analytics platform to standardize data and improve care management. Quality measures around hospital admissions and emergency visits saw improvement compared to FY2024, with management crediting new care management programs and better provider collaboration. The company also worked with payors to renegotiate contracts, especially in areas like Medicare Part D exposure and supplemental benefits, and reduced exposure to high claims risk by exiting underperforming groups.
Looking Ahead: Guidance and Watch Items
Looking forward, management reiterated full-year guidance, expecting at-risk membership to remain within 109,000 to 119,000 and total revenues to fall between $1.35 billion and $1.5 billion. Medical margin (non-GAAP) is forecast between $124 million and $154 million, while adjusted EBITDA (non-GAAP) is projected to show a loss in the range of $(69) million to $(39) million. Management highlighted the identification of an additional $120 million to $170 million in EBITDA improvement opportunities for 2026, with the bulk of improvement expected from operational enhancements scheduled for later in 2025. While core operations are delivering stable cost trends and margin per member is on the rise (non-GAAP), profitability will depend on resolution of the underperforming market and continued discipline in membership selection and care management.
Investors should monitor several critical areas. The company's liquidity remains a watch point, with $39.3 million in cash and restricted cash as of June 30, 2025, and sustained operating cash outflows. NASDAQ:PIII does not currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
