InnovAge Holding Corp. Q1 FY2026 earnings call

• Progress against strategic priorities, continued strength of the model, and momentum for fiscal year 2026 were highlighted.
• Q1 results included total revenue of $236.1M, center-level contribution margin of $51.4M, and adjusted EBITDA of $17.6M.
• Census reached an all-time high of 7,890 participants, up nearly 2% quarter-over-quarter.
• The PACE model remained resilient despite challenges in the managed care environment, with unique accountability for participant care.
• Leadership changes: Dr. Paul Taheri joined as Chief Medical Officer, Meredith Delk as Chief Administrative Officer, Matt Huray expanded roles; Michael Scarbrough is leaving.
• Completed spans and layers review to streamline shared services, improving decision-making and alignment with benchmarks.
• High participant satisfaction: 90% overall satisfaction and 97% of participants would choose InnovAge over a nursing home.

Total revenue for the first quarter was $236.1 million, an increase of 15% compared to the first quarter of fiscal 2025. Center-level contribution margin was $51.4 million. Adjusted EBITDA was $17.6 million, more than doubling from the first quarter of fiscal 2025. Census grew to an all-time high of 7,890 participants, up nearly 2% quarter-over-quarter. Total revenue contributed 100% to the overall financials, center-level contribution margin was approximately 21.8% of revenue, and adjusted EBITDA was 7.5% of revenue.

• Reaffirmed fiscal year 2026 guidance: Ending census expected to be between 7,900 and 8,100 participants.
• Member months projected to be in the range of 91,600 to 94,400.
• Total revenue projected in the range of $900 million to $950 million.
• Adjusted EBITDA projected in the range of $56 million to $65 million.
• De novo losses for fiscal year 2026 anticipated to be in the $13.4 million to $15.4 million range.

• Managed care challenges: Lower or declining reimbursement levels, higher-than-expected medical service utilization, and growing regulatory scrutiny around risk adjustment and quality measures.
• Medicaid redetermination processing delays.
• Seasonality of cost trends.
• Effects of recent legislation and federal budget cuts.

Q: How are you thinking about margin progression for the remainder of the year, considering factors like Medicaid eligibility changes, cost savings initiatives, and MA V28 model?

A: Ben Adams mentioned there are factors causing noise in margin progression, including Medicaid eligibility issues taking longer than anticipated, October Medicare fee schedule increases, risk score decay in Q2, merit increases in the back half of Q1, and higher utilization in cold and flu season. This makes the front half of the year more lumpy but guidance remains intact.

Q: What would you attribute the lower SNF utilization to in terms of clinical efforts?

A: Patrick Blair stated they put work into optimizing discharges from hospitals to appropriate levels of care, worked on contracts to optimize unit costs, did prior authorization to ensure appropriate care levels, and PACE's strength in building home support structures. Also, clinical value initiatives and operating value initiatives across inpatient hospitalizations, ER, pharmacy, etc., have contributed.