InnovAge (US:INNV)2022-11-12 03:58Financial Data and Key Metrics Changes - The company reported revenue of $171.2 million, a sequential decline of approximately 1% compared to the previous quarter, driven by census attrition in Colorado and Sacramento, which represent about half of the total census [40] - The center-level contribution margin was $21.4 million, with a contribution margin ratio of 12.5%, compared to $23.6 million in the previous quarter [40][69] - Net loss was $13.7 million, compared to net income of $7.6 million in the same quarter last year, resulting in a net loss per share of $0.10 [74] Business Line Data and Key Metrics Changes - The company served approximately 6,540 participants across 18 centers, reflecting a 6.4% decrease year-over-year and a 1.8% decrease sequentially [59] - External provider costs increased by 6.9% compared to the first quarter of the previous year, primarily due to increased cost per participant [63] - The cost of care, excluding depreciation and amortization, was $53.6 million, which is 31.5% higher than the same quarter last year [66] Market Data and Key Metrics Changes - The combined capitation rate increase for Medicare and Medicaid in the first quarter compared to the prior year was 4.9% [63] - The company experienced a decrease in member months by 5.6% year-over-year, attributed to the enrollment freeze in Colorado [59][60] - Average daily center attendance improved by an estimated 10% through September [37] Company Strategy and Development Direction - The company is focused on strengthening operations to earn the right to be released from sanctions and to position itself for future growth [10][11] - Plans to fuel new participant growth include rebuilding momentum in currently sanctioned markets and accelerating growth in others [12] - Significant investments have been made in compliance processes and technology, including the implementation of EPIC, aimed at enhancing operational efficiency [30][66] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's next chapter, emphasizing the importance of compliance and transformational initiatives [55][56] - The company is preparing for a post-sanction environment and expects to resume growth once sanctions are lifted [83] - Management highlighted the challenges posed by the current labor market and the need to convert temporary labor to permanent positions [89] Other Important Information - The company has invested nearly $30 million in the build-out of two new centers in Florida, which will serve approximately 2,000 new participants at maturity [50] - The company has made significant efforts to reengineer enrollment processes, reducing the time from inquiry to enrollment by approximately 36% year-over-year [53] Q&A Session Summary Question: About additional investments at the center level and potential offsets - Management discussed investments in staffing and compliance resources, including the implementation of EPIC to improve efficiency [87][88] Question: Visibility on temporary versus permanent labor costs - Management indicated that the conversion of temporary labor to permanent positions is dependent on the labor market, but progress is being made [89] Question: Patient mix and cost differentials between legacy and newer patients - Management estimated that newer participants have costs approximately 20% lower than legacy patients, with COVID-affected participants having costs about 88% higher on average [93][95] Question: Status of Florida De Novo centers - Management stated that the facilities are nearly complete and progress on sanctions will be crucial to restart the application process [98] Question: Competitive positioning post-audit remediation - Management expressed confidence that improvements from audit remediation will enhance competitive positioning and operational efficiency [104] Question: Managing costs amid flu season - Management noted sporadic flu cases in the population but emphasized high vaccination rates among participants and staff as a protective measure [112][113]