Greetings. Welcome to P3 Health Partners' First Half 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to Karen Blomquist, Vice President of Investor Relations. Thank you. You may begin.

Thank you, operator, and thank you for joining us today. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under the U.S. federal securities laws including statements regarding our financial outlook and long-term targets. These forward-looking statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC. The forward-looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements. We will refer to certain non-GAAP financial measures on this call. These non-GAAP financial measures are in addition to and not a substitute or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures. For example, other companies may calculate similarly titled non-GAAP financial measures differently. Refer to the appendix of our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. Information presented on this call is contained in the press release we issued today and in our SEC filings, which may be accessed from the Investors page of the P3 Health Partners' website. Joining me today on the call are Dr. Sherif Abdou, Chief Executive Officer; Eric Atkins, Chief Financial Officer; Dr. Amir Bacchus, Chief Medical Officer; and Erin Darakjian, Chief Accounting Officer. Dr. Abdou will provide a summary of the company's progress during the past year and in recent weeks before turning it over to Eric for a review of the company's financial results. Following their prepared remarks, the management team will be available for your questions. I will now turn the call over to Dr. Abdou.

Thank you, Karen. Hello, everyone, and thank you for joining us on the P3 Health Partners first half 2022 earnings conference call. We're very excited to get everyone up to speed on the significant progress we've made since our IPO in December 2021, and I wanted to assure you that it is our intention to normalize the cadence of our earnings to formalize our investment outreach and to provide regular opportunities for interactive dialogue. We appreciate your attendance and interest today and look forward to our discussion on this in the future quarterly calls. In the first half of 2022, we are off to a strong start and have made significant progress in our mission to be the best health partners for our patients, our providers, and our payers. On today's call, I will update you on the significant growth we have executed on since our IPO and how that growth will shape our strategic initiatives over the next 12 months. Then I would like to describe the mission that Dr. Bacchus and I have been on for more than two decades before turning the call over to Eric Atkins for a review of our financial results; and finally, over to Dr. Bacchus to provide you an example of P3 in action. Today, we are increasing our revenue guidance for the full year 2022 as a result of our strong membership growth. By June, we had already exceeded our prior year-end 2022 guidance that we gave in March of between 90,000 and 95,000 patients. We ended the first half of 2022 with approximately 102,000 at-risk Medicare Advantage members on our platform. We are now in 18 markets in five states, which includes our successful expansion into California in January of 2022, the addition of a new facility in Pahrump, Nevada, and our expanded presence in Arizona. We now have more than 2,600 primary care physicians in our network and we have maintained a 98% physician group retention rate since 2018. In addition, we were recently accepted into the accountable care organization, or ACO reach program for 2023, and we are excited to open the door to this new way to reach new members. This growth reflects the drive, commitment, and passion of our P3 team to lead the transformation of healthcare. Our care model works, evidenced by the populations and the cohorts that have been on our platform for over 36 months. The data shows that these populations' medical costs have improved on an average of about 11% per member per year. We are seeing consistent improvement in our medical margin calculated as capitated revenue minus medical expense, as we continue to grow and gain efficiency across our platform. We also had a 217 basis point improvement in gross margin in the first half of 2022 compared to the first half of the prior year. Our year-to-date results for 2022 demonstrate the success of our model. Revenue for the first six months of 2022 was $543 million, an increase of 84% over the first six months of the prior year. At the end of June 2022, we grew our at-risk Medicare Advantage membership to approximately 102,000, a 52% increase compared to 67,000 patients at the end of 2021. We also have roughly 26,000 patients on our platform beyond those enrolled in Medicare Advantage. And we have invested across the enterprise to accommodate our disciplined, purposeful growth strategy. Now the current objective is to empower and engage the roughly 35,000 new patients under our care and to provide their physicians with the team's tools and technologies to improve the care for those patients. By serving as an expansion of the provider's practice, our team collaborates with the patient caregivers and provides wrap-around services to patients, which help them navigate the healthcare system and achieve the best possible clinical outcome. We believe we have built the necessary infrastructure to onboard these new patients, adding roughly 80 new P3 employees since the beginning of the year to provide the necessary care for these new patients and fill the roles necessary for life as a public company. Our care model works as evidenced by the populations and cohorts that have been on our platform for over 36 months. The data shows that these populations' medical costs have improved on average by about 11% per member per year. So the priority for the next 12 to 24 months, as always, will be realizing the health of those new patients, thus improving our profitability. We are extremely focused on cash flow and meeting the near-term liquidity needs of the business. As an affiliate model, we believe we are the most capital-efficient model, and we do not require significant funding for bricks-and-mortar as some of our peers do. The significant growth we have seen over the past two quarters requires additional investment for personnel, infrastructure, training, and IT. These investments are critical to support our recent growth. As I said, we have shown incredible growth in the first six months of 2022, and now we need to integrate that growth into our platform as we empower and engage patients with the team's tools to support better clinical outcomes. Now, for those of you new to our story, I'd like to describe why our model works. Value-based care arrangements seek to address the biggest challenges facing the U.S. healthcare system: out-of-control costs, suboptimal quality, and poor patient access to primary care. For this reason, the U.S. healthcare system spends significantly more while generating poorer quality indicators than other industrialized nations. At P3, our care model seeks to address these problems by navigating, coordinating, and integrating care for our patients. Once our network is established, we deploy our teams, tools, and technologies around the existing provider-patient relationship in the local market to engage and support them in providing wrap-around care for our collective patients that we are privileged and honored to serve. Our care model begins with identifying the needs of all of our patients, all the new ones. We leverage our proprietary technology and tools to assist us in identifying the high-risk, rising-risk, and high-cost patients. These patients make up approximately 10% of our network membership but ultimately account for approximately 70% of our medical costs. Our P3 care management teams serve as an extension of our provider offices to assure navigation, integration, and coordination of care for these patients across the care continuum. So who wins in our model? Number one, patients win with measurable improvements in clinical outcomes through better patient access to primary care physicians. Our care plans are individualized and cater to the specific needs of our patients. We provide patient support services that allow for realistic, patient-focused care to provide the best possible outcomes for the patients we are privileged and honored to serve. Number two, providers win, with incentives that align better medicine with coordinated care. Our providers are incentivized to focus on wellness and disease prevention, allowing them to concentrate on quality rather than quantity. It is our mission to align the social, moral, and economic incentives between physicians and the patients they serve. Keep the patients happy and healthy, and costs will be lower. In turn, the physicians receive economic incentives so they share in the savings achieved when patients have better health outcomes. Number three, payers win. As payer partners enjoy higher healthcare quality scores, improved patient documentation, and ultimately the ability and resources to offer improved benefits to their members, which enhances member retention and drives higher growth. Finally, we believe our model will enable the company and ultimately our investors and shareholders to win. As I mentioned earlier, evidenced by the populations and cohorts that have been on our platform for over 36 months, the data shows that these populations' medical costs have improved on average by about 11% per member per year. We also had a 217 basis point improvement in gross margin in the first half of 2022 compared to the same period last year. We believe that over the long term, our model of care and operating model will generate an adjusted EBITDA margin of 20% and we continue to expect to reach positive adjusted EBITDA in 2024. We are very excited about the opportunities in front of us, including being recently accepted into the ACO reach program for 2023, and we believe we are in the right space with the right team and the right model. In summary, P3 is off to a great start in 2022. We exceeded our full-year 2022 patient lives guidance by the middle of the year. We increased our full-year revenue guidance. Adjusted EBITDA loss improved by $41 per member per month since year-end, a 33% improvement over the same period last year. We had a 217 basis point improvement in gross margin in the first half of 2022 compared to the same period in the prior year. For the remainder of 2022, we will continue to focus on our operational excellence, delivering improved patient outcomes and executing our disciplined, purposeful growth strategy, which focuses not only on growth but prudent management of the balance sheet, garnering the necessary liquidity to achieve our vision and maintaining a clear path towards profitability. Now, I would like to mention that we announced earlier today that Eric Atkins, our CFO, will be leaving P3 for a new opportunity at the beginning of November. He has been commuting to Henderson, Nevada from Colorado and has taken a new role in Colorado near his home. Though I am sad to see him go, I know that there is no price that can be placed on time with one’s family, especially since the recent arrival of his third child. I'm grateful for his many contributions and for being part of the transition from a private company to a public one. He has built the infrastructure necessary for us to move forward as a public company and a solid finance team. One of the key members of that team is Erin Darakjian, who joined P3 earlier this year as the Chief Accounting Officer. Her leadership has been instrumental in working to get P3's filing current, and we announced today that we have appointed Erin as an Interim CFO. Her expertise in technical accounting, capital markets, external reporting, and SOX compliance will provide stability through the transition. We have begun a CFO search with the help of a national recruiting agency, and we will continue to have our outside advisers supporting our efforts. I want to wish Eric well as he begins the new chapter of his career and enjoys his young family and new baby. I also wanted to thank the finance team for their hard work and effort to get us here today. With that, I will now turn it over to Eric Atkins for our financial business.

Thanks, Sherif. As Sherif mentioned, we issued an announcement earlier today regarding my pending departure as Chief Financial Officer. This decision was difficult for me to make and in no way is a reflection of my feelings about the mission, vision, or strength of P3 and its leadership team. It also has nothing to do with disagreements with our auditors or management regarding our accounting policies. Now, that isn't to say that the last 12 months have been easy, as the finance team has been working tirelessly to get us to today. I'm very proud of what we've accomplished in the last two years and of the team I helped build. And I know now that we're through the restatement and we're current, P3 will continue to execute on strong growth and a forward path to profitability. Now, let's talk about our results. Today, I'll be discussing our year-to-date June 2022 results and updated guidance for the full year 2022. As Sherif mentioned, the team is focused on returning to a normal cadence of earnings releases, and I'd like to thank you for your patience as we work through the restatement of our financial statements for fiscal years 2020 and 2019 and addressed any adjustments deemed necessary by the company and our predecessor and successor auditors. The technical changes are clear in the filing, but largely relate to changes in prior debt and equity instruments that were settled when the company went public in December 2021. Additionally, in June 2022, we received risk adjustment revenue in the form of interim final payments related to our 2021 at-risk Medicare Advantage members. Due to the duration of the audit, our fiscal 2021 books were still open. This resulted in a revenue shift of $9 million from the first half of 2022, which we would not have historically recorded. Our GAAP financials and reconciliation to non-GAAP financials have been included in our earnings press release, our annual report on Form 10-K, and our quarterly reports on Form 10-Q for the first and second quarters of 2022 and filed with the SEC. P3 is a population health management company delivering value-based care in the $350 billion Medicare Advantage space. We take on global risk, and we benefit from the value we create for our patients through enhanced access to care providers, stronger integration of clinical care, and improved clinical outcomes. Approximately 98% of our revenue is derived from global risk Medicare Advantage, capitated contracts. Over the past four years, we've established a strong track record of high organic growth and high patient and provider satisfaction by improving on and enhancing the existing healthcare infrastructure and partnering with providers to deliver value-based care. The Medicare Advantage market is large and growing, averaging approximately 9% per year. For companies like P3, this is a market with a lot of white space. Of the 28 million Medicare Advantage enrollees, only a small fraction of the market is covered for value-based care contracts. We are off to a strong start in the first half of 2022. Total revenue for our first half was $543 million, an increase of 84% compared to $296 million in the prior year period. In the first half, approximately 97% of our revenue was derived from capitated arrangements related to our at-risk Medicare Advantage members. For the first half of 2022, we reported a net loss of $964 million, compared to a net loss of $54 million in the first half of the prior year. The increase in the loss was primarily driven by a goodwill impairment charge, which increased the net loss by $851 million. As of June 30, 2022, our stock was trading below $4 per share. This caused us to reassess the value of our goodwill. In the second quarter, we took a charge of approximately $851 million to reflect the decrease in our market cap relative to the book value of goodwill. This was a non-cash charge to our income statement during the period. Excluding the impairment charge, our net loss reflects costs associated with the onboarding of roughly 35,000 new at-risk Medicare Advantage members to our platform during 2022, including adding new employees to support that growth. We also incurred considerable costs as a result of the restatement. Adjusted EBITDA loss, a non-GAAP measure, was $48 million in the first half of 2022 compared to an adjusted EBITDA loss of $34 million in the same period of the prior year. On a per member per month basis, the adjusted EBITDA loss for the first half of 2022 was $78, a solid improvement over a loss of $85 in the comparable prior year period, and $119 in the full year of 2021. We ended the first half of 2022 with cash and cash equivalents of approximately $63 million, a decrease of $77 million from the end of 2021. The use of cash reflects increased costs as a result of our strong growth as well as the addition of new employees to support that growth and to provide the infrastructure necessary to be a public company. We also had one-time costs due to the restatement. I'd like to note that our receivables have increased by $50 million in the second quarter of 2022 over the same period in the prior year, reflecting the delayed timing of payments from our health plan partners and the positive trajectory of our business. Furthermore, we're very focused on near-term expense control while onboarding new patients to our care model so that we can realize adjusted EBITDA profitability as referenced in our previous guidance by 2024. During the first half of 2022, we continued to experience headwinds related to COVID-19. In terms of direct patient admission costs, P3 has experienced $84 million of direct costs related to COVID patient admissions since the pandemic began, and we anticipate continued costs in the remainder of 2022 related to COVID. We anticipate that those continued COVID costs will be less than those experienced in 2021, but that assessment is very dependent on the evolution and progression of the COVID disease burden in the markets in which we operate. For additional detail, please refer to our Form 10-K. For the full year 2022, we are increasing our revenue guidance. We are increasing revenue to a range between $1.025 billion and $1.075 billion, representing a 61% to 69% increase over 2021. We now expect at-risk Medicare Advantage members to be greater than 100,000 as of December 31, 2022, compared to 67,000 at-risk Medicare Advantage members at December 31, 2021. On a per member per month basis, we are maintaining our full year 2022 adjusted EBITDA loss outlook and expect it to improve to a range of $75 per member per month to $45 per member per month. That compares to an adjusted EBITDA loss of $119 per member per month in the prior year, representing a 37% to 62% improvement, respectively, driven by continued improvements in our underlying operating performance, offset by incremental labor expenses related to investments to support our growth, including staffing and tools, as well as continued expenses related to COVID-19. We now anticipate our adjusted EBITDA loss to range between $90 million and $55 million, reflecting our higher at-risk Medicare Advantage member growth rate. With that, I'll turn the call over to Dr. Bacchus to give you an example of P3 in action.

Thank you, Eric. Before we go to Q&A, I'd like to leave you with a simple story that demonstrates the power of the P3 model. Earlier this year, we had a patient who went to the ER because he had a fever and just wasn't feeling very well. He got there in the late afternoon and by almost midnight, he still hadn't been seen. So he decided to leave and thought he'd go back at a more convenient time. Because P3 receives data feeds from hospitals and our third-party vendors, we knew about the ER visit within 24 hours, literally that morning. This information allowed our care team to immediately reach out to the patient, and when we did, we found that he was headed back to the ER for the same symptoms he had the previous evening, plus he wanted refills on his medication. Our care team then educated the patient that we could expedite his visit that morning with his PCP to get the care he needed without having to wait in the emergency department. So, a three-way call was coordinated within an hour between the patient, the care manager, and the PCP to understand what was occurring and prep for his visit later that morning. Lo and behold, the patient was found to have a serious wound infection of the leg, which was causing his fevers and required antibiotics and wound care for treatment. Home health was often necessary to manage the wound and the wound back to treat the drainage and improve healing over the coming days at his home. This simple example of comprehensive coordinated care saved him expensive emergency department visits, a possible hospitalization, and allowed the patient to get the right care in the right place with a much less cumbersome outcome for the patient. That's the power of the P3 Care model, the ability to coordinate care through the continuum of care, whether through our contracted hospitals or post-acute facilities, our specialists, or our primary care providers. We believe our entry into the public markets will enable P3 to continue supporting whole patient wellness and preventative care with our value-based model while expanding our reach into more markets across the U.S. Thanks. And now I'll turn it over to Sherif for closing remarks.

Thanks, Amir. In summary, P3 is off to a great start in 2022. And we exceeded our full year 2022 patient lives guidance by the middle of the year. We increased our full year revenue guidance. Adjusted EBITDA loss improved $41 per member per month since year-end, a 33% improvement over the prior year. We had a 217 basis point improvement in gross margin in the first half of 2022 compared to the same period in the prior year. For the remainder of 2022, we will continue to focus on operational excellence, delivering improved patient outcomes and executing our disciplined purposeful growth strategy, which focuses not only on growth but prudent management of the balance sheet, garnering the necessary liquidity to achieve our vision and maintaining a clear path to our profitability. Operator, we are ready to take questions.

Thank you. Our first question is from Brooks O'Neil with Lake Street Capital Markets. Please proceed.

Good afternoon, everyone. Eric, I'm going to miss you. You can't imagine how happy I am to be talking to you all today and hopefully to have the saga behind us. So I guess my first question is, would it be accurate to say you believe that the debacle we've all gone through so far this year is now behind us, and we can just focus forward on the business and the opportunities in front of you?

Yes. Sure. Hey, Brooks. Nice to hear from you again. I know it feels like we've been living under a rock for the last six months or so. To answer your question, yes, we are excited to put this restatement behind us and be talking with you today. I mentioned earlier, it certainly hasn't been easy for the finance team, but we're very excited to be where we are today. And we have this challenge behind us, and we're now very much focused on absorbing the tremendous growth that we've experienced here in 2022 and executing on the business.

Great. I'm going to just ask two more, hopefully quick questions. First is given all that's going on and the growth in the outlook, how would you assess your capital position? And do you feel you have the capital you need to continue to run the company on the trajectory you seem to be at?

Sure. I can take that question as well, Brooks. Certainly, we're expecting our operating cash flow loss to be more modest, particularly in 2023, compared to 2022. That's driven by a couple of things that's driven in part by the continued maturation of our members. You heard Sherif mention earlier that for our patients that have been with us for more than 36 months, we've seen an average 11% annual decrease in their medical cost on a per member per year basis. Right now, we're focused on absorbing the tremendous growth that we experienced in 2022. With our updated guidance, we're now expecting year-over-year revenue growth of 61% to 69%. And in 2023, we expect our growth to be more in line with the long-term expectations that we shared with you when we went public. So we were expecting a more modest operating cash flow loss going forward. And we have an existing debt facility in place today. Now that we are current on our filings, again, we're actively looking at potentially refinancing that or enlarging it. And I'd just also add that we have highly supportive shareholders of the company who are very big believers in the P3 model.

Great. And given all the growth in everything and recognizing that we're on the cusp of the open enrollment period for Medicare Advantage plans, can you just share with us your outlook for continued membership growth, and what your sense is of what the appetite is for P3 during open enrollment and how that will affect you?

Sure. Brooks, good talking to you again. This is Sherif Abdou. So we will continue to execute on the growth. And as Eric mentioned, when we told everybody when we went public that we're going to maintain an average of 35% year-over-year growth over the next five years, and we will deliver on that. That's number one. Number two, we are very strong in this upcoming AEP and OEP. We have expanded payer relationships in Nevada, Oregon, and Arizona, and we increased our presence in Yavapai County, Arizona. So we're going to maintain our strong, steady organic growth, and we will maintain our average of 35% year-over-year over the next five years.

Great. Fantastic. Thank you for taking the questions and excited for the future.

Thank you, Brooks.

Our next question is from Josh Raskin with Nephron Research. Please proceed.

Hi. Thanks. Good evening folks. Congrats to Eric as well. I guess you were nervous that the next couple of quarters would be too easy to report. So certainly understandable. My first question would be a current trend question. So just trying to get the numbers together in our model, but it looks like revenues in 2Q were down a little bit sequentially from 1Q. But the EBITDA loss, excluding the write-off, et cetera, was actually a little bit higher. So what exactly was going on there? Can you give us some color on the business trends and were there some specific one-time costs for the restatements that hit in 2Q more and maybe if you could size those? Just trying to understand a little bit more sequentially from 1Q to 2Q what happened.

Yes. I mentioned in my comments, open up the call, Josh, as part of the restatement because we had the 2021 period still open. There were certain risk adjustments payments that we received in June of 2022 that we recognized into the 2021 period. This had the impact of removing $9 million out of our second quarter. Just in terms of sequential revenue. Our membership has been pretty consistent throughout the year. It's not uncommon for our average funding to decrease slightly just as we move forward in a year, it's just a natural phenomenon in the Medicare Advantage space.

Okay. All right. So it's a $9 million, I think is probably the big difference there, right? I'm looking at sort of a change in EBITDA, which of almost exactly like $8.5 million, $9 million. So maybe that's the difference. That makes more sense. And then sort of looking out towards 2023 and 2024, it sounds like you guys are confident. I don't want to put words in your mouth if I heard it wrong, but 35% top line growth for 2023. And as we think about that sort of breakeven EBITDA in 2024, will 2023 get us mostly there, or is 2023 going to look a lot more like 2024 million because you've got another year of big growth? How do we sort of think about an outlook for next year and admittedly trying to juxtapose that with the capital position and where your cash balance is?

Yes. Sure, Josh. Thanks for that question. So we're not providing specific 2023 guidance on this call. We're reporting out on the first half of 2022. I think what we said is both Sherif and I, in 2023, we certainly expect our growth to be more in line with long-term expectations. And that long-term expectation is a 35% average compound annual growth rate. We've just seen tremendous growth here in 2022. In 2023, we expect growth over those combined periods to be more in line with our long-term expectations of 35%.

Okay. I understand. So next year's numbers will be significantly lower? As we work towards profitability, we're focusing on our membership, and we should see some improvement in gross margin. However, the overall EBITDA outlook for next year seems to resemble 2022 more than it does 2024. That said, there's quite a bit of variability in that projection.

Yes. What we reiterated in our earnings release today is we're committed to being adjusted EBITDA profitable by 2024. And what I'd say again is we certainly expect improvements in profitability in 2023, compared to 2022, and more modest operating cash flow loss in 2023 versus 2022, driven by the continued maturation in our members. It's also driven by our focus on absorbing that growth that we've had here in 2022. And again, a growth rate in 2023 that would be more in line with our long-term expectations.

Thanks.

Our next question is from Ryan Daniels with William Blair. Please proceed.

Yes, thanks for taking the questions and Eric, congratulations and best wishes as well. I'm hoping you could go into a little bit more detail on the MA lives on the platform. Obviously, a very strong metric and bodes well for continued growth. I'm curious if you could talk about either what the largest driver of that upside is or perhaps you could break it down for us in regards to the components as it relates to same market growth and new market versus M&A.

So thank you very much, Ryan, for your question. And it's a great question, really. So we always said that our medical class would improve with the health of our patients. What we're seeing in this population, Ryan, is less emergency wound visits, fewer hospital admissions and readmissions, less utilization of excessive diagnostic testing of the patient, and more preventive testing with more controlled blood pressure and blood glucose. This population health is improving that stays in our platform for six months or more. And we significantly improved utilization, improved acuity, and that results in an improvement in gross profit and gross margin in the population. And as we see more of those populations mature and improve the metrics in the same way, that's when the cross intersection into profitability would happen, when we have more people that have been with us for 36 months or more than new ones that just came last year.

Okay. That's helpful color. And what about the actual pure growth in lives on the platform though, your 102,000 at the midpoint of the year. You're already well north of your budget for the full year. What drove the upside there in your view?

It's a great question, Ryan. Our business model and our care model and a tremendous demand. I can tell you, if we respond to every demand and opportunity, we would double the lives that we have in every six months. We have great leadership from Dr. Bacchus, Lorie Glisson, who are impacting the outcome, impacting the quality scoring, impacting the integrity of documentation and managing the disease burden on the patients. Improving clinical outcomes is clearly the payer and provider seeing improved patient outcomes. So the calls and the demand that we get from all corners of the country is increasing. And that’s why we had the term disciplined purposeful growth moving forward. So we experienced tremendous success in our AEP last year and the Annual Enrollment Period, and we expanded our payer contracts in existing markets. This increased the number of lives we managed. We expanded into California successfully, adding about 12,000 or 13,000 lives there. We expanded into a new county in Arizona, Yavapai, where we added 12,000 lives because the payer and providers had asked us to come and convert into a value-based contract. And these goals continue to come, and we continue to appropriately manage our disciplined growth.

Perfect. That's very helpful color. I appreciate that. And then maybe one for Eric. Just you mentioned the AR buildup year-over-year with some of the growth you've had in new payer partnerships. How should we think about the timeframe on converting that into operating cash? Is that something that we should see a little bit more of a flush in Q4, or will that resolve early in 2023?

Yes. Hey Ryan, good to speak to you again. When we think about the lag in cash flow with most of our health plan partners that tends to be a six- to nine-month lag in cash flow. So certainly, we will start to realize some of that improvement in profitability in Q4 of this year, but that's something that will trail into 2023 as well. But you're right, in June of this year compared to, I think, year-end last year, our health plan receivables are up roughly $50 million, and that really speaks to the underlying improvement in the performance of the business.

Okay, perfect. And then final question for me. I know you talked about in order to manage this growth, 80-plus new staff and some new IT investments. I'm curious if there are other big investments you have on the horizon either to scale, especially as we look into 2023 and ACO Reach and some of the requirements there. Do you guys feel pretty good about kind of the run rate on the expense front at this point to continue to grow the business at your longer-term goal of that 35%?

Yes. Ryan, what I'd say is we've built this company to scale, obviously, and we've added to the infrastructure to accommodate that growth. I mean we're focused on absorbing that growth today. As you think about the run rate of expenses, certainly, we've had enough of one-time expenses in the first half of this year. We've had certain transaction-related bonuses as well as costs associated with the restatement. Those obviously won't continue going forward. But outside of those, we certainly feel like we have the infrastructure in place to manage the phenomenal growth that we have achieved here in 2022.

Okay. That's all for me. Congrats on the strong start to the year. Thanks.

Our next question is from Gary Taylor with Cowen & Company. Please proceed.

Hi, good afternoon. I wonder, could you just update us on the debt facility availability that you spoke to earlier, what is that current availability?

Yes, Gary. Just I think what I said earlier is we have an existing debt facility in place today. We have roughly $100 million of debt on our balance sheet. Now that we're current, we're obviously looking at our options to refinance and enlarge that. When I say current, now that we're current on our filings and as we think about our operating cash flow, certainly, we expect our operating cash flow losses to be much more modest in 2023 compared to 2022, for all the reasons that we've talked about, continued maturation of our members and growth in 2023 that's more in line with our long-term expectations. Right now, we're very much focused on absorbing the tremendous growth that we've experienced here in 2022.

I see $81 million on the balance sheet. So you're saying it's $100 million current, but you're saying there's not additional availability on that facility at this moment?

Yes, that's right, Gary. The current debt that we have on our balance sheet, all in, is roughly $100 million. Now that we're current on our filings, we're actively looking at options and discussions with our Board on potentially refinancing or enlarging that debt facility.

And I just want to go to cash flow statement for a moment, but the six to nine-month lag you're talking about. I suppose you're talking about PCP capitation lag, or are you just talking about net settlement of the contracts? Because I would think the portion of your business that's fully delegated, there's no way you could operate with the six to nine-month lag. So is it really on the contracts where you're taking, presumably current month PCP capitation with a net settlement with the health plan that's six to nine months down the road? Is that correct?

That is correct, Gary. Yes. So you mentioned delegation. For certain of our contracts, we are delegated to process claims, and in that case, the cash flow lag is actually much lower than what I mentioned. But for the majority of our business, we work on a settlement basis with our health plan partners, and that net settlement can have a lag of as much as six to nine months from the current period.

And then just one other thing I wanted to help understand. I know you talked about an 11% reduction in cost per member per month on an annual basis. But your first-half MLR is still about 100%. So if those aging cohorts are improving fairly materially, yet you're still running 100% MLR. It does imply that the new contracts are still well over 100% MLR in year one. I just want to understand why that makes sense to be that aggressive on the contracting?

Yes. So that's a great question, Gary. This is Sherif, good talking to you again. So our growth about 4% to 20% came out of anyone in rolling period and opened a rolling period. So that's not necessarily a contract. It's just patients that joined an ongoing contract. So in this population, as you know, lately, the CMS has allowed infectious diseases to not only stay but also to join. So you've got a lot of sicker people that have not been seen before, have not been appropriately identified for their disease burden and they’re coded appropriately. So their funding is very low and their costs are very high. So you're right. The patients that are in the cohorts are seeing that improvement of 11% on average per member per year are about 8,000 to 9,000 lives, out of the 102,000. You can see the newcomers' upside on economics would impact. However, with all this, we very much have every contract now that has about the contribution margin. We have seen our gross profit improve by 217 basis points, like I said, in the first half of 2022 over the first half of the prior year.

Last one for me. Any sense on when you'll report Q3 2022? I presume, it will be back on a current reporting schedule, but third quarter, presumably in the next month or so?

Yes, Gary. There is no reason for us not to be unplanned on time on/or before November 14.

We have reached the end of our question-and-answer session. I will now turn the call over to Dr. Sherif Abdou for closing comments.

Thank you, Sherry, very much. Thanks, everyone, for your interest and your presence today. Now I would like to take a moment to introduce Erin Darakjian. So Erin, if you don’t mind.

Thank you, Sherif. I will miss working with Eric, but I want to wish him the best. I'm happy to step in to lead the finance team to continue driving the future mission of being the best health partner for our patients, our providers, and our payers.

Thanks, Erin. So in closing, we are more than 10 months through 2022. 2022 has been a remarkable year for P3, and we have accomplished so much. We've had tremendous growth in our business. The P3 model is originating in the marketplace, with incredible demand from payers, large health systems, and doctor groups wanting help to move into value-based contracting. We have proven our medical management capability with the data as evidenced by our cohort members who have been with us for over 36 months. We have invested in our people, processes, and technologies to build and scale a world-class value-based care platform. That's where we sit today, and I could not be prouder of what our team has built. As 2022 is a year for investment and rapid growth, 2023 will be a year where we begin to leverage our platform with growth more in line with the long-term expectation that we shared with you when we went public. With that, I will thank you all very much, and have a wonderful evening.

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.