Executive Summary

INNV delivered a clean top-line and EPS beat and posted its first positive net income since 2021: revenue $236.1M vs ~$226.9M consensus*, diluted EPS $0.06 vs ~$0.02 consensus*; Adjusted EBITDA rose to $17.6M with margin expansion to 7.5% .
Momentum was driven by higher member months, July 1 rate increases, and lower medical cost trends (notably SNF utilization and pharmacy costs following in‑house pharmacy transition) .
FY26 guidance reaffirmed (revenue $900–$950M, Adjusted EBITDA $56–$65M; census 7,900–8,100; member months 91.6K–94.4K) despite near‑term lumpiness from Medicaid redeterminations and seasonal utilization .
Strategic catalysts: improving cost discipline via clinical value initiatives, ongoing technology enablement (Epic/Oracle), Florida de novo ramp and JV with Tampa General; new CMO appointment supports clinical standardization push .

What Went Well and What Went Wrong

What Went Well
- Broad-based beat and margin expansion: revenue +15.1% YoY to $236.1M; net income $7.7M (3.2% margin) vs loss in prior year; Adjusted EBITDA $17.6M (7.5% margin) .
- Medical cost control: lower SNF utilization and higher pharmacy rebates post in‑house transition; total participant expense per month declined sequentially vs Q4 FY25 .
- Census reached ~7,890 (+1.9% QoQ), aided by better-than-expected reinstatements during Medicaid redetermination cleanup; strong early traction in Florida centers (Tampa JV) .
What Went Wrong
- Cost of care line increased 19.7% YoY on higher SWB, pharmacy logistics, and transportation; some geography mix shift from pharmacy insourcing obscured ex‑pharmacy trends .
- Management flagged front-half “lumpiness” from redeterminations, risk score seasonality, and higher utilization (cold/flu season), complicating quarterly margin progression .
- De novo losses persist ($3.9M in Q1; FY26 outlook $13.4M–$15.4M) as Florida centers ramp, still a drag until scale achieved .

Financial Results

Main P&L and margin trend (oldest → newest)

Metric	Q3 FY2025	Q4 FY2025	Q1 FY2026	Q1 FY2026 Consensus*
Revenue ($M)	$218.1	$221.4	$236.1	~$226.9*
Diluted EPS ($)	$(0.08)	$(0.01)	$0.06	~$0.02*
Adjusted EBITDA ($M)	$10.8	$11.3	$17.6	N/A
Adjusted EBITDA margin (%)	4.9%	5.1%	7.5%	N/A
Center-level Contribution Margin ($M)	$40.7	$41.3	$51.4	N/A
Center-level Contribution Margin (%)	18.7%	18.6%	21.8%	N/A

Q1 FY2026: Actual vs Wall Street Consensus (S&P Global)

Metric	Actual	Consensus*	Surprise
Revenue ($M)	$236.1	~$226.9*	+~$9.2M
Diluted EPS ($)	$0.06	~0.022*	+~$0.04

Segment/center contribution snapshot (Q1 FY2026)

Metric	PACE	All Other	Total
Total revenues ($000s)	$235,848	$257	$236,105
External provider costs ($000s)	$108,863	—	$108,863
Cost of care excl. D&A ($000s)	$75,735	$151	$75,886
Center-level Contribution Margin ($000s)	$51,250	$106	$51,356
Center-level Contribution Margin (%)	—	—	21.8%

KPIs and balance sheet (oldest → newest)

KPI	Q4 FY2025	Q1 FY2026
Census (participants)	~7,740	~7,890
Member months (000s)	~23.0	~23.5
Cash & equivalents ($M)	$64.1	$67.1
Short-term investments ($M)	$41.8	$42.3
Total debt ($M)	$72.8	$71.5

Notes on non‑GAAP: Q1 Adjusted EBITDA includes add-backs such as litigation costs ($1.0M), business optimization ($0.9M), and loss on assets held for sale ($0.1M); investment income is deducted in the bridge .

Guidance Changes

Metric	Period	Previous Guidance (9/9/2025)	Current Guidance (11/4/2025)	Change
Census (participants)	FY2026	7,900–8,100	7,900–8,100	Maintained
Total Member Months	FY2026	91,600–94,400	91,600–94,400	Maintained
Total revenues ($M)	FY2026	$900–$950	$900–$950	Maintained
Adjusted EBITDA ($M)	FY2026	$56–$65	$56–$65	Maintained
De novo losses ($M)	FY2026	$13.4–$15.4	$13.4–$15.4	Maintained

Earnings Call Themes & Trends

Topic	Q3 FY2025 (Mar-25)	Q4 FY2025 (Jun-25)	Q1 FY2026 (Sep-25)	Trend
Medical cost mgmt/CVIs	Emphasized disciplined cost control; Adjusted EBITDA inflected	Continued CVIs; margin expansion path reiterated	Lower SNF utilization; pharmacy rebates; center-level margin +320 bps QoQ	Improving
Pharmacy insourcing	Noted as part of cost efforts	Ramp “going well,” driving savings and control	Benefits continuing; income statement geography shift noted	Positive
Medicaid redeterminations	—	Front-half FY26 headwind but EBITDA-accretive enrollment process redesign	Better‑than‑expected reinstatements in Q1; still causing lumpiness	Transitional
V‑28 payment model	—	V‑28 transition a multi‑year headwind; FY26 embedded in guidance	No change; reminder of risk score seasonality	Mild headwind
Tech/AI enablement	—	Epic/Oracle/Salesforce; exploring AI to improve efficiency and accuracy	Continued use of Epic; operational standardization under new CMO	Building
De novo Florida centers	—	Tampa/Orlando ramp; de novo losses $15.4M in FY25	Tampa JV momentum highlighted	Scaling

Management Commentary

CEO: “We’re off to a strong start in fiscal 2026… disciplined execution… growing momentum in the business.”
CEO: “While many plans are retreating… PACE offers a fundamentally different approach… our total participant expense per month declined sequentially relative to the fourth quarter.”
CEO: “90% overall satisfaction and 97% of participants said they would choose InnovAge over a nursing home.”
CFO: “External provider costs increased only 1.5% YoY despite ~10% member month growth… driven by lower short-stay SNF and pharmacy expense,” while cost-of-care rose on SWB and pharmacy logistics .
CFO: Reaffirmed FY26 guidance and cited de novo loss range $13.4–$15.4M; positive operating cash flow $3.9M and capex $4.1M in Q1 .

Q&A Highlights

Margin cadence/seasonality: Management doesn’t guide quarterly, but flagged Q2 headwinds (risk score decay, merit increases, seasonal utilization) and open-enrollment effects in Q3; lumpy front half due to redeterminations, but full-year guide intact .
Competitive dynamics vs MA SNPs: Market remains competitive; PACE differentiated through fully integrated, zero out-of-pocket model for clinically eligible seniors; early open-enrollment trends “going well” .
Medical cost run-rate: Gains tied to discharge optimization, tighter ordering behavior, partner alignment, and in‑house pharmacy; company ~50% through standardizing CVIs, with next leg focused on clinical guidelines/variation reduction under new CMO .

Estimates Context

Q1 FY2026 beats: revenue $236.1M vs ~$226.9M consensus*; diluted EPS $0.06 vs ~$0.022 consensus* — driven by higher member months, July 1 rate increases, and favorable utilization (lower SNF, pharmacy savings) .
Forward consensus points (quarters ahead): revenue ~$228.0M–$229.7M* and EPS ~$0.03–$0.04* suggest modest sequential growth into Q2–Q3; management cautioned against annualizing Q1 due to seasonality/redeterminations .

Consensus values marked with an asterisk (*) are retrieved from S&P Global.

Forward consensus snapshot (S&P Global)

Metric	Q1 FY2026	Q2 FY2026	Q3 FY2026
Revenue Consensus Mean ($M)*	~226.9	~228.0	~229.7
Primary EPS Consensus Mean ($)*	~0.022	~0.03	~0.04
Revenue – # of Estimates*	2	2	3
Primary EPS – # of Estimates*	3	2	2

Key Takeaways for Investors

Q1 delivered a high-quality beat with accelerating margin expansion; center-level contribution and Adjusted EBITDA margins improved sequentially and YoY, validating CVIs and pharmacy insourcing .
Management reaffirmed FY26 guidance despite redetermination headwinds, signaling confidence in underlying drivers and the ramp of Florida centers/JVs .
Expect near-term volatility (Q2 seasonality, risk score decay, utilization) but a favorable full-year setup given cost controls and census growth; avoid extrapolating Q1 straight-line .
Strategic execution levers for medium-term upside: standardizing ordering behavior and clinical guidelines under the new CMO, continued technology leverage (Epic/Oracle/Salesforce), and scale benefits as de novos mature .
Regulatory/watch items: V‑28 phase-in is a multi-year revenue headwind but embedded in FY26; track Medicaid eligibility processing, risk score mix, and de novo losses .
Trading setup: positive estimate revisions likely on EPS/revenue beat and margin trajectory; watch Q2 seasonality and any updates on utilization trends/redeterminations on the next call .

References:

Q1 FY2026 8‑K/press release and financials
Q1 FY2026 earnings call transcript (prepared remarks and Q&A)
Prior quarters for trend: Q4 FY2025 earnings call and Q3 FY2025 press release
Additional Q1-related press releases: Tampa General JV progress ; CMO appointment