P3 Health Partners Q2 2026 Earnings: Higher Per-Member Economics Offset Lower Membership

P3 Health Partners (NASDAQ: PIII) reported Q2 2026 revenue of $386.4 million, up 9% year over year, while diluted EPS improved to a loss of $0.63 from a loss of $6.23 for the quarter ended June 30. Consolidated net income reached $15.7 million and adjusted EBITDA turned positive at $54.4 million, supported by better per-member economics and lower medical claims, although payer settlements and prior-year development materially increased reported medical margin.

Core earnings data

Revenue increased despite a 10% decline in at-risk membership. Total per-member capitated revenue rose 15%, with P3 attributing the improvement to better network economics, rate progression, and burden-of-illness performance.

Profitability also improved substantially. Medical claims expense declined to $268.6 million from $321.1 million, helping P3 move from operating and net losses to positive results. However, reported medical margin included favorable payer settlements and prior-year development.

Medical margin and adjusted EBITDA are non-GAAP measures. Medical margin represents capitated revenue after deducting medical claims expense.

Membership and revenue performance

At-risk membership was approximately 105,000, down 10% because of previously disclosed intentional network and payer rationalization. Total lives under management were about 133,000, including approximately 28,000 covered through management service arrangements.

Capitated revenue increased 4% to $366.4 million even with fewer at-risk members, reflecting the 15% improvement in per-member capitated revenue. Other revenue rose to $20.0 million from $4.1 million, contributing materially to the overall 9% revenue increase, although P3 did not provide a reason for that change.

The combination of lower membership and higher revenue indicates that Q2 growth came from improved economics per member rather than member expansion. This makes the persistence of rate progression, risk-adjustment performance, and network economics important to future results.

Payer settlements magnified the medical margin improvement

Reported medical margin was $97.8 million, or $311 per member per month. Excluding favorable payer settlements and prior-year development, medical margin would have been $52.9 million, or $168 PMPM. These items therefore contributed approximately $44.9 million to the reported figure.

The adjusted amount still shows that the core operation generated a positive medical margin, but the difference between reported and adjusted results is material. It also means the headline Q2 margin should not be treated as entirely representative of recurring quarterly performance.

Profitability, cash flow, and the balance sheet

Corporate, general, and administrative expense rose 38% to $32.4 million. Adjusted operating expense increased to $31.5 million from $22.1 million, partly offsetting the benefit from lower medical claims. Separately, a $16.4 million mark-to-market loss on warrants and a purchased put option reduced GAAP earnings, compared with a $2.0 million gain a year earlier.

Although consolidated net income was positive, net income attributable to the controlling interest was $7.4 million. After $9.6 million of cumulative preferred dividends, P3 recorded a $2.1 million net loss attributable to Class A common shareholders, explaining why diluted EPS remained negative.

Cash generation did not match reported earnings. For the first six months of 2026, net cash used in operating activities was $89.4 million, compared with $50.1 million in the prior-year period. Cash outflows included changes in health plan receivables, health plan settlement payables, and claims payable.

Financing activities provided $86.0 million during the first half, including $42.7 million from preferred stock, $27.0 million from long-term debt, and $16.0 million from warrants. P3 ended June with $21.3 million of unrestricted cash and $22.2 million of cash plus restricted cash. Long-term debt declined to $98.1 million from $228.4 million at the end of 2025, while the current portion of long-term debt fell to $21.8 million from $45.0 million.

Full-year 2026 guidance

P3 raised its full-year adjusted EBITDA outlook. The company said the revision reflects first-half performance as well as payer settlements and prior-year development recognized during Q2, so the increase is not presented solely as a change in expectations for the second half.

Only adjusted EBITDA was explicitly described as raised; the release did not provide the previous range. P3 also did not provide a quantitative reconciliation of forward medical margin or adjusted EBITDA to the corresponding GAAP measures because of uncertainty around items it cannot reasonably predict.

Management’s view

CEO Dr. Aric Coffman said Q2 showed the company executing according to its plan, with the core business improving profitability sequentially. Management attributed the change to structural improvements in contracts, the provider network, and P3’s operating model, and said the quarter increased its confidence in second-half execution.

Risks investors need to watch

• A meaningful portion of Q2 medical margin came from favorable items. Approximately $44.9 million of reported medical margin reflected payer settlements and prior-year development, creating uncertainty about the repeatability of the headline result.
• Membership remains under pressure. At-risk membership declined 10%, and revenue growth depended on higher economics per member. Further membership contraction could make growth increasingly reliant on rate and risk-adjustment gains.
• Operating cash flow remains negative. P3 used $89.4 million of operating cash in the first half and relied on $86.0 million of financing inflows, while ending June with $21.3 million of unrestricted cash.
• Operating expenses are rising. Corporate G&A and adjusted operating expense grew considerably despite lower at-risk membership, which could limit the conversion of medical margin into recurring profitability.
• Preferred dividends affect common shareholders. Cumulative preferred dividends caused common shareholders to record a net loss even though consolidated net income was positive.

Summary

P3 Health Partners’ Q2 2026 results showed better per-member revenue, lower medical claims, and a shift to positive operating income and adjusted EBITDA despite fewer at-risk members. Favorable settlements and prior-year development amplified the reported margin improvement, while negative first-half operating cash flow and higher administrative expenses remain important counterweights. The main questions for the second half are whether core medical margin can remain positive without similar favorable items and whether improved earnings can begin translating into operating cash flow.