InnovAge Holding (INNV)·Q2 2026 Earnings Summary

InnovAge Crushes Q2 Estimates as Turnaround Gains Momentum, Raises FY26 Outlook

February 3, 2026 · by Fintool AI Agent

InnovAge Holding Corp. (NASDAQ: INNV) delivered a blowout Q2 FY2026, with EPS of $0.08 doubling the Street's $0.04 estimate and revenue of $239.7M beating consensus by 5% . The PACE healthcare provider swung to a $11.8M net income from a $13.5M loss a year ago, demonstrating the strength of its operational turnaround . Management raised full-year guidance, signaling confidence in sustained momentum .

Did InnovAge Beat Earnings?

InnovAge delivered a triple beat across all key metrics:

This marks InnovAge's fourth consecutive earnings beat, following strong results in Q1 2026, Q4 2025, and Q3 2025.

What Changed From Last Quarter?

The year-over-year improvement is dramatic, reflecting successful execution on InnovAge's turnaround strategy:

Key drivers of the turnaround:

• Center-level Contribution Margin expanded to 22.0% from 17.7%
• External provider costs contained despite revenue growth
• Corporate, G&A expenses declined $1.5M YoY to $26.6M
• Impairment charges eliminated ($8.5M in prior year)

What Did Management Say?

CEO Patrick Blair emphasized the turnaround is structural, not one-time:

"Two years ago, at our Investor Day, we outlined an intermediate-term adjusted EBITDA margin target of 8%-9% over a 2-4-year horizon. This quarter, for the first time, we achieved that target, delivering an adjusted EBITDA margin of 9.2%."

Blair noted the financial improvement flows from operational excellence:

"Our financial performance is not the result of any single action or short-term lever. It's the natural outcome of delivering higher quality, more consistent care to a highly complex population, improving day-to-day utilization management, and operating with greater rigor and accountability."

What Did Management Guide?

InnovAge raised FY2026 guidance across all metrics except census:

The guidance raise is particularly notable for Adjusted EBITDA (+$10M at both ends), signaling management's confidence in margin sustainability.

How Did the Stock React?

The stock closed at $5.66 on the day of the report, down 1.4% from the prior close, though the earnings were released after market close. Key trading context:

INNV has rallied significantly from its 52-week low of $2.60, reflecting improving fundamentals and the turnaround story gaining credibility.

Balance Sheet Strength

InnovAge ended Q2 with a solid liquidity position:

The company has meaningfully deleveraged, with debt declining from $98M to $70M over the quarter, primarily through refinancing activities .

Forward Catalysts

1. Continued census growth - 8,010 participants with pathway to 8,100+ by year-end
2. Margin expansion - Center-level margins at 22% with room to improve
3. Capital deployment - Deleveraged balance sheet enables growth investments
4. Regulatory relationships - Management emphasizes "close partnership with regulators"

Q&A Highlights

Analysts focused on three key areas during the Q&A:

1. Back-Half Margin Expectations (Benjamin Rossi, J.P. Morgan)

With first-half EBITDA margins north of 8%, the back-half implied guidance suggests mid-7% margins. CFO Ben Adams explained the seasonality:

"The third quarter for us is always the soft quarter... the flu season, which has been particularly bad this year. The vaccine was only partially effective against the flu, and we saw a relatively high incidence going into year-end and through January."

2. Medicare V28 Rate Impact (Benjamin Rossi, J.P. Morgan)

On the CMS advance notice accelerating V28 implementation from 5-year to 3-year phase-in, CEO Patrick Blair noted PACE's structural protections:

"Only about 45% of our total per member month premium is actually Medicare... the Frailty Adjuster is not inconsequential. It captures the disability and functional status that wouldn't otherwise be reflected in a diagnosis alone."

3. Medicaid Redetermination Progress (Matthew Gilmore, KeyBanc)

CFO Adams explained the upside surprise from reinstating members who lost Medicaid coverage:

"We had a number of cases at the end of the fiscal year where people had lost their Medicaid coverage... we ended up getting a lot more of those folks reestablished on Medicaid than we originally anticipated."

4. Participant Experience & Retention (Jared Haas, William Blair)

Management revealed voluntary disenrollment runs at approximately 6% annualized . CFO Adams identified the window for improvement:

"Voluntary disenrollments really happen in the first six months of a participant's experience with us... If we can bring that down a couple of points through a bunch of these initiatives, it's very beneficial."

Rate Environment & Regulatory Update

Medicaid: Slightly more favorable blended rate environment than initially assumed, reflecting state-specific dynamics .

Medicare CY2027: CMS proposed a blended risk score using 50% of the 2017 CMS-HCC model and 50% of the proposed 2027 model, accelerating the V28 transition . PACE benefits from the frailty adjuster (floor of 0.129) which recognizes functional impairments not captured by diagnosis-based risk adjustment .

Governance Change: Tom Scully returned as chairman of the board, with Pavithra Mahesh and Sean Traynor rejoining effective January 28, 2026. Jim Carlson, who served as chairman since June 2022, remains as an independent director .

Future Value Initiatives

Management outlined several operational initiatives that could unlock additional value:

CEO Blair emphasized these are durable, multi-year opportunities:

"When we talk about participant experience and practice pattern variation... these are not one-time levers, and it's not a small one. We think of it as an opportunity to create more durable, multi-year opportunity within our model."

Risks to Monitor

• Government payor concentration - Revenues dependent on Medicare/Medicaid
• Regulatory scrutiny - Ongoing inspections, reviews, and audits
• Labor market challenges - Inflation and workforce competition pressures
• Flu season impact - Particularly bad this year with partially effective vaccine
• Disenrollment risk - 6% voluntary disenrollment rate concentrated in first 6 months

Key Takeaway

InnovAge's Q2 2026 results validate the turnaround thesis. Revenue growth of 14.7%, margin expansion of 640 bps, and a swing to profitability demonstrate the PACE model's operating leverage when executed well. The guidance raise—particularly the $10M lift to EBITDA guidance—signals management confidence in sustaining momentum through fiscal year-end.

Management's achievement of the 8-9% EBITDA margin target two years ahead of the 2-4 year timeline set at their 2024 Investor Day is particularly notable . With first-half Adjusted EBITDA of $39.8M already exceeding full-year FY2025's $34.5M , the company has demonstrated structural improvement rather than one-time gains.

The path forward includes opportunities in participant experience standardization, reducing practice pattern variation through AI-enabled tools, and optimizing the newly in-house pharmacy operations. Watch for Q3 softness due to flu seasonality and slower post-open enrollment growth, with normalization expected in Q4.

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Report updated by Fintool AI Agent on February 3, 2026. Data sourced from company filings, earnings call transcript, and S&P Global.