InnovAge (INNV) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenue of $209 million for the quarter, a 10.6% increase compared to$ 188.9 million in the second quarter of fiscal year 2024 [14][36] - Adjusted EBITDA was $5.9 million for the quarter, compared to$ 6.9 million in the second quarter of fiscal year 2024, with an adjusted EBITDA margin of 2.8% [48] - The net loss was $13.5 million, compared to a net loss of$ 3.8 million in the second quarter of fiscal year 2024 [46] Business Line Data and Key Metrics Changes - Center level contribution margin was $37.1 million for the quarter, representing a 17.7% margin, which is a 90 basis point increase compared to the first quarter of fiscal year 2025 [15][44] - Census grew to approximately 7,480 participants, reflecting over 10% year-over-year growth compared to the second quarter of fiscal 2024 [20][36] - External provider costs increased by 6.8% compared to the second quarter of fiscal year 2024, driven by an increase in member months [39] Market Data and Key Metrics Changes - The company experienced Medicaid rate increases in California and Pennsylvania for 2025, which positively impacted revenue [11][52] - Approximately 50 new PACE centers have opened nationwide over the past three years, indicating a 16% increase from roughly 300 centers operating in January 2022 [13] Company Strategy and Development Direction - The company is focused on transformation over the next 18 months, emphasizing a technology-first mindset to improve operational efficiency and participant satisfaction [19][61] - The acquisition of a small pharmacy in Denver is aimed at enhancing compliance, improving participant outcomes, and reducing costs [28] - The company aims to build a differentiated and scalable platform in the PACE market, enhancing its competitive position for future M&A opportunities [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive sustainable census growth while managing financial variability [23] - The company is optimistic about the impact of new retention-focused efforts during the Medicare open enrollment period [52] - Management acknowledged ongoing enrollment processing delays in California but stated that these have not materially impacted financial results [38] Other Important Information - The company reaffirmed its fiscal year 2025 guidance, projecting total revenue in the range of$ 815 million to $865 million [51] - The company recorded an impairment of approximately$ 8.5 million related to halting development on a previously planned de novo center in Louisville, Kentucky [47] Q&A Session Summary Question: What does the transformation over the next 18 months entail? - The transformation involves reimagining operational processes with a technology-first mindset to enhance productivity and efficiency [59][61] Question: Can you provide details on the funding model for revenue per member per month? - The funding model consists of approximately $3,000 from Medicare Part C,$ 1,000 from Part D, and $5,000 from Medicaid, with state and federal contributions varying [67] Question: How does the company plan to address the challenges in the Medicare Advantage environment? - The company has proactively invested in marketing to educate prospects on the unique services offered by PACE, which has led to improved retention and enrollment [78] Question: What drove the decision to impair the Louisville facility? - The decision was made due to the inability to reenter the market after sanctions and the lack of viable paths for competition in Louisville [81] Question: How will the new pharmacy acquisition impact costs and operations? - The acquisition is expected to improve integration between care teams and pharmacy operations, enhancing service quality and potentially reducing costs over time [96][106]