InnovAge (US:INNV)2023-02-07 22:01Financial Performance - Total revenues for the three months ended December 31, 2022, were $167.456 million, a decrease of 4.9% compared to $175.350 million for the same period in 2021[16]. - Capitation revenue for the six months ended December 31, 2022, was $338.071 million, down from $347.518 million in the prior year, reflecting a decline of 2.1%[16]. - Net loss attributable to InnovAge Holding Corp. for the three months ended December 31, 2022, was $9.793 million, compared to a net income of $1.323 million for the same period in 2021[16]. - For the six months ended December 31, 2022, InnovAge reported a net loss of $24,247,000 compared to a net income of $8,730,000 for the same period in 2021, indicating a significant decline in profitability[20]. - Total revenues for the six months ended December 31, 2022, were $338.674 million, a decrease from $348.420 million in the same period of 2021, representing a decline of approximately 2.1%[113]. - The Center-Level Contribution Margin for the six months ended December 31, 2022, was $43.997 million, down from $83.736 million in the same period of 2021, indicating a decrease of about 47.5%[113]. - The net loss margin for the six months ended December 31, 2022 was (7.2)%, compared to a net income margin of 2.5% for the same period in 2021[181]. Assets and Liabilities - Total current assets decreased to $199.489 million as of December 31, 2022, from $240.956 million as of June 30, 2022, representing a decline of 17.2%[15]. - Total liabilities increased to $214.340 million as of December 31, 2022, compared to $201.852 million as of June 30, 2022, indicating a rise of 6.5%[15]. - Cash and cash equivalents decreased to $99.460 million as of December 31, 2022, from $184.429 million as of June 30, 2022, a decline of 46.0%[15]. - The company reported total lease liabilities of $36.364 million as of December 31, 2022, with operating lease liabilities of $23.468 million and finance lease liabilities of $12.896 million[75]. - The company had long-term debt totaling $71.681 million as of December 31, 2022, which included a term loan facility of $69.375 million[77]. Cash Flow and Investments - InnovAge's net cash used in operating activities for the six months ended December 31, 2022, was $21,990,000, a decrease from $31,577,000 provided in the same period in 2021[20]. - The company reported a net cash used by operating activities of $(21,990) thousand for the six months ended December 31, 2022, compared to a net cash provided of $31,577 thousand in the prior year, reflecting a change of $(53,567) thousand[200]. - The total investments held by the company as of December 31, 2022, amounted to $5.493 million[50]. - The company recorded total cash outflow from investing activities of $59,632,000 for the six months ended December 31, 2022, compared to $13,681,000 for the same period in 2021[20]. Operational Challenges - The company anticipates challenges in increasing enrollment and capacity due to ongoing audits and sanctions affecting its Sacramento center[10]. - Enrollment sanctions in Sacramento, California, and Colorado limited the company's ability to grow its participant census and impacted Center-level Contribution Margin in fiscal 2022 and the first half of fiscal 2023[131]. - The company expects elevated operating expenses to continue for the remainder of fiscal 2023 due to ongoing inflation and labor market pressures[122]. - The company has committed to pausing steps regarding de novo centers until remediation of audit deficiencies is completed[141]. Participant and Service Metrics - As of December 31, 2022, InnovAge served approximately 6,460 PACE participants, making it the largest PACE provider in the U.S. based on participants served[24]. - The average risk adjustment factor (RAF) score for participants is 2.31, indicating a higher acuity population compared to Medicare Advantage participants[1]. - The company achieved a 79% participant satisfaction rating as of October 1, 2022, with an average participant tenure of 3.2 years as of December 31, 2022[131]. - External provider costs represented approximately 87% of the company's revenue in the six months ended December 31, 2022[131]. Legal and Regulatory Matters - The Company received a civil investigative demand from the DOJ regarding its PACE programs, which is ongoing and the outcome is currently unpredictable[87]. - The company is currently involved in legal proceedings that may have a material adverse effect on its business, financial condition, or cash flows, but the outcomes are unpredictable[89]. Future Outlook and Strategic Plans - The company plans to continue investing in its centers and expects expenses to increase in absolute dollars due to compliance and regulatory costs[133]. - The company intends to execute tuck-in acquisitions once restrictions on opening new centers are lifted[131]. - The company expects to incur non-recurring implementation costs related to transitioning to a new EMR vendor over the next six months, with ongoing costs through 2026[192]. - The company may seek additional equity or debt financing in the future, depending on capital requirements[194].