InnovAge (US:INNV)2025-11-04 22:05Operations and Growth - As of September 30, 2025, InnovAge served approximately 7,890 PACE participants and operated 20 PACE centers across six states[116] - InnovAge has acquired four PACE organizations since fiscal year 2019, expanding into one new state and five new markets[130] - The company plans to continue investing in its centers and value-based care model, expecting expenses to increase in absolute dollars to support growth[130] - The company plans to continue investing in resources and initiatives to enhance service quality for participants[167] - The company may pursue acquisitions or investments in complementary businesses, services, and technologies in the future[171] Financial Performance - Total revenues for the three months ended September 30, 2025, were $236.1 million, an increase of $30.9 million, or 15.1%, compared to $205.1 million for the same period in 2024[142] - Capitation revenue was $235.8 million for the three months ended September 30, 2025, reflecting a $31.0 million increase, or 15.1%, driven by a 4.7% increase in capitation rates and a 9.9% increase in member months[143] - For the three months ended September 30, 2025, net income was $7.7 million, compared to a net loss of $5.7 million for the same period in 2024, representing a significant turnaround[161] - The increase in net income margin to 3.2% in 2025 from a net loss margin of 2.8% in 2024 reflects improved operational efficiency[162] - Operating income for the three months ended September 30, 2025, was $8.3 million, compared to a loss of $4.9 million for the same period in 2024[142] Costs and Expenses - Cost of care, excluding depreciation and amortization, represented approximately 78% of revenue for the three months ended September 30, 2025[127] - The company experienced increased costs due to labor market pressures and competition, impacting staffing and enrollment capacity[118] - Sales and marketing expenses increased to $7.6 million for the three months ended September 30, 2025, up $1.1 million, or 17.1%, compared to $6.5 million for the same period in 2024[146] - Corporate, general and administrative expenses rose to $30.3 million for the three months ended September 30, 2025, an increase of $2.7 million, or 9.9%, compared to $27.5 million for the same period in 2024[147] - Cost of care (excluding depreciation and amortization) was $75.9 million for the three months ended September 30, 2025, an increase of $12.5 million, or 19.7%, compared to $63.4 million for the same period in 2024[145] Cash Flow and Liquidity - The company had cash and cash equivalents of $67.1 million as of September 30, 2025, an increase of $3.0 million from June 30, 2025[166] - For the three months ended September 30, 2025, net cash provided by operating activities was $3,924,000, a significant increase of $11,440,000 compared to a net cash used of $7,516,000 in the same period of 2024[176] - The overall net change in cash, cash equivalents, and restricted cash improved to $3,099,000 in 2025 from a decrease of $17,928,000 in 2024, reflecting a positive cash flow trend[176] - The net cash used in investing activities decreased to $814,000 in 2025 from $2,790,000 in 2024, primarily due to $3.7 million of net proceeds from asset sales[177] - Net cash used in financing activities decreased significantly from $7,622,000 in 2024 to $11,000 in 2025, attributed to a lack of share repurchases in the current year[178] Regulatory and Market Environment - The OBBBA, adopted in July 2025, mandates significant reductions in federal Medicaid spending, which may decrease Medicaid enrollment among PACE participants[121] - The company continues to monitor processing delays in Medicaid redetermination applications, which could impact financial performance[120] - There have been no material changes to the company's quantitative and qualitative disclosures about market risk for the three months ended September 30, 2025[185] - The company emphasizes that actual results may differ from estimates and assumptions used in financial reporting, which could impact reported results of operations and financial condition[182] Future Outlook - The company anticipates general and administrative expenses to decrease as a percentage of revenue over the long term, despite expected increases in absolute dollars due to public company costs[139] - The company intends to retain substantially all available funds and future earnings for business development and debt repayment, with no anticipated cash dividends in the foreseeable future[174] - The company qualifies as an "emerging growth company" and expects to maintain this status through the end of fiscal year 2026, allowing it to take advantage of certain reporting exemptions[179] - The company plans to utilize longer phase-in periods for adopting new accounting standards under the JOBS Act, which may affect comparability with other companies[180]