InnovAge Reports Mixed Earnings with Strong Growth

Innovage Holding Corp. ((INNV)) has held its Q3 earnings call. Read on for the main highlights of the call.

InnovAge Holding Corp. recently held its earnings call, revealing a mixed sentiment. The company showcased strong revenue growth and improved adjusted EBITDA, indicating successful operational transformation efforts. However, challenges such as increased net losses, corporate expenses, and difficulties with new center operations were also highlighted.

Strong Revenue Growth

InnovAge reported a revenue of $218.1 million, marking a 13% increase year-over-year. This growth reflects the company’s ability to expand its services and increase its market presence, despite the challenging economic environment.

Improved Adjusted EBITDA

The company achieved an adjusted EBITDA of $10.8 million, a significant improvement from the previous year’s $3 million. The adjusted EBITDA margin stood at 4.9%, showcasing the company’s enhanced operational efficiency and cost management strategies.

Census Growth

InnovAge’s census grew to approximately 7,530 participants, representing a 10% annual increase. This growth underscores the company’s expanding reach and its ability to attract and retain participants in its programs.

Operational Transformation

The company has transitioned from operational stabilization to enterprise transformation, focusing on operational excellence and efficiency. This shift is expected to drive further improvements in service delivery and cost management.

Pharmacy Initiative Success

InnovAge successfully completed the acquisition of a pharmacy in Colorado, with the transition of pharmacy distribution and management being effectively migrated. This initiative is expected to enhance the company’s service offerings and operational capabilities.

Cost Management

Despite pressures from seasonal illnesses, InnovAge maintained external provider costs and reduced PMPM spending from $4,857 in Q2 to $4,786 in Q3. This reflects the company’s disciplined approach to cost management.

Net Loss

The company reported a net loss of $11.1 million, compared to a net loss of $6.2 million in the same quarter of the previous fiscal year. This increase in net loss highlights ongoing financial challenges.

Increased Corporate Expenses

Corporate, general, and administrative expenses rose by 40.1%, primarily due to a $10.7 million accrual for an anticipated stockholder lawsuit settlement. This increase significantly impacted the company’s financial results.

Cost of Care Increase

The cost of care increased by 17.6% compared to the previous year, driven by higher salaries, wages, and benefits. This rise reflects the broader industry trend of increasing healthcare costs.

De Novo Center Losses

De novo losses amounted to $3.5 million, primarily related to centers in Bakersfield, Crenshaw, Tampa, and Orlando. These losses indicate ongoing challenges with the company’s new centers.

Forward-Looking Guidance

During the earnings call, InnovAge reaffirmed its fiscal year 2025 guidance. The company projects an ending census between 7,300 and 7,750 participants, with member months ranging from 86,000 to 89,000. Total revenue is expected to be between $815 million and $865 million, while adjusted EBITDA is projected to be in the range of $24 million to $31 million. De novo losses are anticipated to be between $18 million and $20 million for fiscal 2025.

In summary, InnovAge Holding Corp.’s earnings call highlighted a blend of achievements and challenges. While the company demonstrated strong revenue growth and improved operational efficiency, it also faced increased net losses and corporate expenses. Looking ahead, InnovAge remains committed to its fiscal year 2025 guidance, focusing on expanding its participant base and enhancing operational capabilities.