InnovAge Holding Corp. Q2 FY2026 earnings call

• Revenue integrity improvement: Made progress strengthening revenue integrity, particularly around Medicaid eligibility and redeterminations, reducing reserves and reinstating coverage for some participants.
• Medical cost management: Demonstrated strong medical cost management, with strength in managing inpatient and skilled nursing utilization through proactive care coordination.
• Center efficiency: Operating centers more efficiently as the platform matures, improving consistency in staffing models, scheduling, and throughput.
• SG&A performance: SG&A performance reflects structural work to simplify organization and improve accountability.
• Rate environment: Medicaid has a more favorable blended rate environment than initial assumptions. On Medicare, discussed CMS advance notice for 2027 rates and PACE's unique elements like the frailty adjuster.
• Clinical and operational initiatives: Focus on participant experience, reducing unwarranted variation in provider practice patterns, stabilizing pharmacy insourcing, and optimizing center productivity using advanced analytics and AI.

Total revenues for the second quarter were $239.7 million. Center-level contribution margin was $52.8 million. Adjusted EBITDA was $22.2 million, and net income was $11.8 million. As of 12/31/2025, InnovAge served approximately 8,010 participants across 20 centers, a 7.1% growth compared to 2025 and 1.5% sequential quarter growth. Second-quarter member months were 23,960, an increase of approximately 7.9% compared to 2025. Total revenues increased 14.7% compared to 2025 due to an increase in member months and capitation rates. External provider costs increased 3.8% compared to 2025, driven by increased member months partially offset by a decrease in cost per participant. Central level contribution margin was $52.8 million in the quarter, up from $37.1 million in 2025, and as a percentage of revenue, it was 22%, an increase from 17.7% in 2025.

• For fiscal year 2026, expected member months between 92,900 and 95,700.
• Total revenue projected in the range of $925 million to $950 million.
• Adjusted EBITDA expected to be between $70 million and $75 million.
• De novo losses anticipated to be in the $11.5 to $13.5 million range. Guidance revised based on continued operational improvement, success in reinstating Medicaid participants, higher Medicaid rates, and less impact from Medicare risk score changes than expected.

• Flu season impact: Potential additional pressure on costs in Q3 due to the flu season.
• Medicaid redeterminations: Still a work in progress with continued effort needed to ensure timely enrollment processing.
• Medicare risk scores: Variability in Medicare risk scores due to phased-in implementation of risk adjustment model version 28 and state processing delays.

Q: After the back half EBITDA progression following the raise, walk through variables going into margin expectations and margin progression for remainder of year?

A: Ben Adams mentioned Q3 is typically a soft quarter with slower enrollment gains in first couple months and potential flu season pressure; Patrick Blair added continued work on Medicaid redeterminations is a work in progress.

Q: Shift in v28 beginning earlier this year, impact on raw risk scores and flow through to rates?

A: Patrick Blair noted PACE is less exposed to v28 compared to other MA plans and the frailty adjuster's role; Ben Adams said they factored in latest thinking on impact in guidance.

Q: Census growth and success in Medicaid return redeterminations, where success seen?

A: Patrick Blair said success includes rigorous patient accounting system and workflow management; Ben Adams mentioned more folks reenrolled in Medicaid than expected providing enrollment cushion.

Q: Reduction in revenue write-offs, magnitude and nature?

A: Ben Adams explained new patient accounting system allows more methodical revenue reserve setting, tracking participants rigorously; process working well but patterns adjust month by month.

Q: Participant experience and retention, specific areas and impact on MLR?

A: Patrick Blair discussed participant experience from enrollment to onboarding, grievances, service recovery; retention tied to cohort analysis and understanding participant needs, with potential MLR improvement as cohorts mature