InnovAge Holding (NASDAQ:INNV) released third-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
Access the full call at https://edge.media-server.com/mmc/p/pkf4xpav/
Summary
InnovAge Holding reported a solid third quarter with approximately $252 million in total revenue, a center level contribution margin of $61 million, and adjusted EBITDA of $30 million.
The company has raised its fiscal year 2026 guidance for revenue and adjusted EBITDA, expecting revenue between $950 million and $975 million, and adjusted EBITDA between $85 million and $90 million.
Strategic initiatives include investment in AI to enhance care coordination, a focus on quality and participant experience, and exploring growth opportunities through partnerships, acquisitions, and potential new programs.
The company is anticipating a more challenging rate environment for fiscal 2027 but remains confident in managing cost trends and sustaining operational efficiency.
Management emphasized the importance of reinvesting in quality and operational infrastructure, highlighting the interconnectedness of financial performance and quality care in their PACE model.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the InnovAge Holding 2026 fiscal third quarter earnings call. At this time, all participants are in a listen only mode. After the speaker’s presentation, there’ll be a question and answer session. To ask a question during the session, you’ll need to press Star one one on your telephone. You will then hear an automated message advising. Your hand is raised to withdraw your question. Please press star 11 again. Please be advised that this conference is being recorded. I would like to hand the conference over to your speaker today, Ryan Kabuta. Please go ahead.
Ryan Kabuta
Thank you Operator Good afternoon and thank you all for joining the Innovage 2026 fiscal third quarter earnings call. With me today is Patrick Blair, CEO and Ben Adams, CFO. Today, after the market closed, we issued an earnings press release containing detailed information on on our fiscal third quarter results. You may access the release on the Investor Relations section of our company website, innovageholding.com for those listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, Tuesday, May 5, 2026 and have not been updated subsequent to this call. During our call we refer to certain non GAAP measures. A reconciliation of these measures to to the most directly comparable GAAP measures can be found in our earnings press release posted on our website. We will also make statements that are considered forward looking, including those related to our 2026 fiscal year projections and guidance, future growth prospects and growth strategy, our clinical and operational value initiatives, the effects of recent legislation and federal budget cuts including Medicare and Medicaid rate pressures, seasonality of cost trends, the status of current and future legal proceedings and regulatory actions and other expectations. Listeners are cautioned that all of our forward looking statements involve certain assumptions that are inherently subject to risks and uncertainties that can cause our actual results to differ materially from our current expectations. We advise listeners to review the risk factors and other discussions included in our annual report on Form 10-K for fiscal year 2025 and any subsequent reports filed with the SEC, including our most recent quarterly report on Form 10-Q. After the completion of our prepared remarks, we will open the call for questions. I will now turn the call over to our CEO, Patrick Blair.
Patrick Blair (CEO)
Patrick thank you Ryan and good afternoon everyone. I’d like to begin by thanking our Innovage colleagues, our participants and their families, our government partners and our investor community for your continued trust and support. The work our teams do every day to care for a very complex and vulnerable population is what drives our performance and I’m proud of the progress we’re making and the consistency we’re beginning to demonstrate. As an organization. We delivered a solid third quarter and continue to see steady momentum across the business. These results reflect stronger operating execution and the benefits of the investments we’ve made over the past few years to strengthen the platform. For the quarter, we reported approximately $252 million in total revenue, center level contribution margin of $61 million and adjusted EBITDA of $30 million. We ended the quarter serving approximately 8,050 participants in 6 states across 20 centers. Based on our year to date operating trends and financial performance, we are once again raising our fiscal year 2026 guidance for revenue and adjusted EBITDA. We now expect revenue in the range of 950 to 975 million dollars and adjusted EBITDA in the range of 85 million to 90 million. Overall, our performance continues to show steady year over year improvement across key operational and clinical metrics. Our performance this year has been supported by several in year factors that came in more favorably than we expected, including better than expected Medicaid rates and favorable Medicare risk scores and continued discipline across medical management. So as we think about our momentum, we believe it is real and increasingly durable. But we are also being thoughtful about our assumptions as we look ahead to fiscal 2027. Just as importantly, we view our improving financial performance as an enabler, not an endpoint. The progress we’re making is allowing us to reinvest in the business in ways that we believe directly benefit participants and strengthen the model over the long term. That includes continued investment in our clinical teams and interdisciplinary model, advancing our technology platform, including early and closely monitored applications of AI, to improve care coordination and participant experience, and strengthening how we measure and manage quality. We are also investing in growth, including our new centers in Florida, which are still maturing from an operations and financial perspective. Given the complexity of the PACE population we serve, these long term investments are essential. Our goal is to deliver strong, sustainable performance while continuing to invest in the model and be a responsible partner to states and the federal government. In the PACE model, financial performance and quality are not separate, they are directly linked. When we improve quality, we see better participant outcomes, more consistent engagement, lower unnecessary utilization, and ultimately better fiscal management for our state and federal partners. We track a wide range of required quality and utilization metrics and these remain an important part of how we manage the business day to day. But we also recognize that many of these measures, while necessary, don’t fully capture what matters most to our participants or to the full value of the model at its core, our focus is helping participants maintain their independence, remain the community for as long as possible, and receive care that is individualized and aligned with their goals. This includes supporting caregivers, coordinating care across the continuum, and intervening early before issues escalate. Over the past several years, we have made meaningful investments in our clinical teams, our CARE model, and our operational infrastructure to strengthen our ability to deliver on those outcomes. More recently, we have begun to invest more intentionally in how we measure them. We’re in the early stages of developing a more comprehensive set of outcome oriented measures focused on areas like functional trajectory, the ability of participants to remain in the community, and further aligning care with participant goals. These are areas where we believe the PACE model delivers meaningful value. Our initial focus is on building the data processes and operational consistency required to measure these outcomes reliably. As the capabilities mature, we expect to incorporate them more formally into how we manage the business. We believe this is an important step not only in demonstrating the full value of the PACE model, but also in ensuring that our continued financial progress is clearly aligned with better outcomes for the participants we serve and the partners we support. AI is another area in which we are investing more heavily when we think about the objectives we share with our regulators. Improving participant experience, enhancing outcomes for a complex population, and doing so in a cost effective way. We believe AI with the appropriate oversight has the potential to be a meaningful enabler. While still early, the work we’ve done over the past several months increases our confidence that these capabilities can have a real impact on both the quality and efficiency of our model. Much of our clinical AI work is being led by Dr. Paul Taheri. Although Paul has only been with us a short time, he has quickly stepped in to help shape our approach, bring a strong focus on practical application, clinical rigor, and ensuring these tools are designed to support, not replace, clinical judgment. We’re piloting a range of use cases designed to support our clinicians and to streamline operations in our clinical workflows. We’re piloting AI tools, to help synthesize information across the participant record to support care planning and to identify potential risks such as medication interactions or avoidable acute events. The goal is to increase the quality of the care we provide for our participants and enable our teams to operate more effectively at the top of their license. We are also applying these capabilities to operational areas such as scheduling, transportation, and care coordination, where we see meaningful opportunity to reduce friction, improve the participant experience, and better utilize our existing capacity. One area we are particularly focused on is how we schedule and deliver services across our centers. Today there are structural inefficiencies that can lead to cancellations, unused capacity and administrative burden. We believe AI enabled scheduling and coordination can help address these challenges, allowing us to improve the experience to serve more participants within our existing footprint and to increase capacity over time. Importantly, we’re approaching this work with discipline. We’re testing, learning and measuring impact before scaling, and we’re focused on use cases where we see clear alignment between improved outcomes, better participant experience, and more efficient operations over time. We believe these investments will further strengthen our platform and expand our ability to deliver high quality coordinated care at scale. Stepping Back One of the things these results and the progress we’ve made over the past several years now allow us to do is to take a more forward looking view on growth. Over the last four years, our focus has been on stabilizing and strengthening the platform, and as a result of that work, we’re now beginning to generate more consistent earnings and cash flow which gives us greater strategic flexibility as we look ahead. That flexibility allows us to take a more proactive and thoughtful approach to growth. First, we continue to see meaningful opportunity within our existing footprint by filling our current centers, strengthening our sales capabilities, and expanding our reach through new channels and partnerships. At the same time, we’re beginning to evaluate a broader set of potential growth alternatives that could allow us to expand our model to more seniors over time. These may include acquisitions, joint ventures, partnerships, or participation in new programs and demonstration models that align with our capabilities. Overall, we’re entering the next phase as an organization, one that positions us well to expand access to our model and to serve more seniors who can benefit from it. Before I conclude, I’d like to spend a few minutes on the rate environment. As we know, this is an important area of focus for everyone. Ben will provide more detailed visibility into our fiscal 2027 outlook, including rates on our fourth quarter and fiscal year earnings call in early September. But given where we sit today, we thought it would be helpful to share some early perspective on how we’re thinking about the environment, recognizing that our visibility is still evolving. Starting with Medicare, the final 2027 rate notice came in more favorable than initially proposed, particularly for Medicare Advantage plans. That improvement was driven in part by deferred changes to the V28 risk model transition, which had a more meaningful impact on MA than on pace. For pace, our rate setting framework and transition timeline are different, and given the complexity of the population we serve, the benefit from the Deferred changes to V28 is more limited. The net result is that we expect Medicare rates to increase approximately 1.5% to 2% in fiscal year 2027, which is more modest and increased than what will likely be experienced by MA plans. On the Medicaid side, we’re beginning to see early indications from our state partners that budget pressures are increasing. That said, it’s important to step back and view Medicaid rates and pace over a longer horizon. This has always been a program with some degree of year to year variability. There are periods where rates run ahead of cost trend and margins expand, and periods like the one we’re planning for where cost trends may outpace rate growth and margins can tighten without other offsetting improvements. Over time, these dynamics tend to balance out rates, have kept pace with the underlying cost of caring for this population, and have supported appropriate and sustainable margins for …
This post was originally published here
