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InnovAge Holding Corp. (INNV)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue beat and margin improvement: Q3 revenue was $218.14M, up 13% y/y and above consensus ($214.09M). Center-level contribution margin rose to 18.7% (vs. 17.6% y/y), and Adjusted EBITDA improved to $10.79M (4.9% margin), reflecting cost discipline and pharmacy in-sourcing benefits .
  • EPS optics: S&P Global Primary EPS normalized “actual” was $0.02 versus a GAAP net loss per share of $(0.08); GAAP EPS was pressured by a $10.7M litigation accrual tied to a potential stockholder class action settlement .
  • Guidance maintained: FY25 guidance reaffirmed for census (7,300–7,750), member months (86,000–89,000), total revenue ($815M–$865M), and Adjusted EBITDA ($24M–$31M), indicating confidence in trajectory amid policy uncertainty .
  • Operational catalysts: External provider PMPM declined sequentially (from ~$4,857 to ~$4,786), driven by lower ALF/SNF utilization, in-sourced hospice, and early pharmacy integration, positioning InnovAge for continued margin improvement .
  • Stock reaction catalyst: Revenue beat, visible Adjusted EBITDA inflection, maintained guidance, and narrative around resilient medical cost trends despite “quad-demic” highlight improving fundamentals likely to drive sentiment .

What Went Well and What Went Wrong

What Went Well

  • Cost control despite seasonal illness: “Despite what many are calling a quad-demic… we kept external provider costs essentially flat q/q at $108M,” with PMPM down to $4,786 in Q3 from $4,857 in Q2 .
  • Pharmacy in-sourcing momentum: “We successfully migrated almost all of our pharmacy distribution and management to the new organization… improve medication adherence, enhance outcomes, reduce costs” .
  • Policy engagement and PACE advocacy: “We’ve stepped up our engagement with both state and federal policymakers… PACE stands out as a proven, high-value solution” .

What Went Wrong

  • GAAP EPS pressure from legal accruals: Corporate G&A rose 40% y/y, including $10.7M accrued settlement of a stockholder lawsuit; GAAP net loss widened to $(11.1)M .
  • Enrollment processing delays: California backlog impacted allowances and timing; though improving, variability remains a near-term headwind .
  • Cost of care step-up: Sequential increase due to in-sourcing and annual resets (benefits/taxes), shipping/fleet costs, and de novo ramp; leverage expected to normalize in future periods .

Financial Results

P&L Summary (Quarterly)

MetricQ1 2025Q2 2025Q3 2025
Revenues ($USD Millions)$205.142 $208.999 $218.142
Net Loss ($USD Millions)$(5.710) $(13.491) $(11.133)
Net Loss Margin (%)2.8% 6.5% 5.1%
Net Loss per Share ($)$(0.04) $(0.10) $(0.08)
External Provider Costs ($USD Millions)$107.214 $107.873 $107.896
Cost of Care ex D&A ($USD Millions)$63.387 $64.061 $69.499
Center-Level Contribution ($USD Millions)$34.541 $37.065 $40.747
Center-Level Contribution Margin (%)16.8% 17.7% 18.7%
Adjusted EBITDA ($USD Millions)$6.476 $5.869 $10.792
Adjusted EBITDA Margin (%)3.2% 2.8% 4.9%

Segment Breakdown (Center-Level Contribution)

MetricQ2 2025 (PACE)Q2 2025 (All other)Q2 2025 TotalQ3 2025 (PACE)Q3 2025 (All other)Q3 2025 Total
Capitation Revenue ($USD Thousands)$208,674 — $208,674 $217,819 — $217,819
Other Service Revenue ($USD Thousands)$77 $248 $325 $79 $244 $323
Total Revenues ($USD Thousands)$208,751 $248 $208,999 $217,898 $244 $218,142
External Provider Costs ($USD Thousands)$107,873 — $107,873 $107,896 — $107,896
Cost of Care ex D&A ($USD Thousands)$63,916 $145 $64,061 $69,372 $127 $69,499
Center-Level Contribution ($USD Thousands)$36,962 $103 $37,065 $40,630 $117 $40,747
Center-Level Contribution Margin (%)17.7% —17.7% 18.7% —18.7%

KPIs and Balance Sheet Snapshots

KPIQ1 2025Q2 2025Q3 2025
Census (# participants)~7,210 ~7,480 ~7,530
Member Months (#)21,380 22,200 22,550
Cash & Equivalents ($USD Millions)$39.019 $46.078 $60.454
Short-term Investments ($USD Millions)$46.659 $40.775 $41.279
Total Debt ($USD Millions)$81.3 $78.3 $77.3

Estimates vs. Actuals (S&P Global)

MetricQ3 2025 ConsensusQ3 2025 ActualOutcome
Revenue ($USD Millions)$214.091*$218.142 Beat
Primary EPS (Normalized, $)$(0.013)*$0.020*Beat vs normalized
GAAP EPS ($)—$(0.08) GAAP reflects $10.7M legal accrual

Values retrieved from S&P Global. (*)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Census (#)FY 20257,300–7,750 7,300–7,750 Maintained
Total Member Months (#)FY 202586,000–89,000 86,000–89,000 Maintained
Total Revenues ($USD Millions)FY 2025$815–$865 $815–$865 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$24–$31 $24–$31 Maintained
De Novo Losses ($USD Millions)FY 2025$18–$20 (call) $18–$20 (call) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/Technology (Epic EMR, payer ops)Epic across markets; EMR-driven risk capture; tech-first ops, scheduling, transportation Building scalable, tech-enabled PACE platform; payer capabilities, claims integrity Expanding scope and integration
Pharmacy initiativeAnnounced acquisition; in-sourcing benefits expected Transition largely complete; lower pharmacy expense via rebates and in-house ops Execution/benefit realization
Medical cost trendCVIs reducing inpatient, SNF; PMPM down despite system utilization PMPM declines q/q; external provider costs flat; flu vax 77% vs 47% national Improving resilience
Regulatory/legalCA audits ongoing; Louisville de novo impairment; risk score true-up commentary $10.7M litigation accrual; ongoing advocacy with policymakers Legal accrual impact; policy engagement
Enrollment & state processingBacklogs and redetermination delays (CA); improving signs Backlog normalizing in CA; proactive education vs MA AEP churn Improving throughput
De novo centersFlorida & Crenshaw growing; losses $4.1M (Q1), $4.0M (Q2) Losses $3.5M (Q3); momentum building; Orlando JV partner strong Losses narrowing

Management Commentary

  • Strategic focus: “We are focused on building a PACE platform that delivers better outcomes… and creates long-term value for our shareholders.” — CEO Patrick Blair
  • Resilience amid seasonality: “Despite… flu, COVID, RSV and Norovirus, we kept external provider costs essentially flat q/q… PMPM declined from $4,857 in Q2 to $4,786 in Q3.” — CEO
  • Pharmacy integration: “We successfully migrated almost all of our pharmacy distribution… we’re seeing tangible benefits.” — CEO
  • Balance sheet and guidance reaffirmation: “Ended the quarter with $60.5M in cash and cash equivalents plus $41.3M in short-term investments… reaffirming FY25 guidance.” — CFO Ben Adams

Q&A Highlights

  • Rates into FY26: Early view that Medicare should be “reasonable”; Medicaid indications “okay” where set early, with limited visibility in CA; policy changes could alter net impact .
  • Pharmacy utilization/Part D max: Out-of-pocket costs don’t apply to PACE; no trend change observed; mechanics differ from MA .
  • Guidance conservatism: Q4 variability from risk score true-ups; management comfortable maintaining ranges rather than tilting to midpoint .
  • De novo trajectory: Losses trending lower ($3.5M in Q3); operational progress across Florida and Crenshaw; transportation costs higher than planned in Florida .
  • Cost of care step-up: One-time in-sourcing and annual resets drive q/q increase; underlying core trend is low single digits when stripping insourcing effects .

Estimates Context

  • Revenue beat: $218.14M actual vs $214.09M consensus; positive surprise supports FY25 revenue guidance confidence .
  • EPS optics: S&P Global Primary EPS normalized actual of $0.02 vs consensus $(0.013)* contrasts with GAAP loss per share $(0.08), reflecting non-recurring litigation accrual effects; models should reconcile GAAP vs normalized presentation .
  • EBITDA estimates: S&P Global “EBITDA” construct differs from company’s Adjusted EBITDA; use company-reported Adjusted EBITDA for margin trajectory, and disclose estimate basis when comparing .
    Values retrieved from S&P Global. (*)

Key Takeaways for Investors

  • Revenue momentum and margin expansion are intact; Q3 delivered a clear top-line beat and Adjusted EBITDA inflection, supported by PMPM improvements and pharmacy in-sourcing .
  • GAAP EPS headwind (litigation accrual) is non-operational; normalized EPS beats suggest underlying run-rate improvement; expect volatility around risk score true-ups in Q4 .
  • Operational initiatives (CVIs/OVIs) continue to reduce inpatient/SNF utilization and strengthen payer capabilities; these should support sustained margin gains into FY26 .
  • De novo losses are narrowing and tracking expectations; growth from Florida and Crenshaw enhances mix and medium-term unit economics .
  • Guidance reaffirmation across all metrics signals management confidence despite policy uncertainty; monitor Medicaid rate cycles and CA visibility .
  • Near-term trading: Revenue beat and Adjusted EBITDA momentum are positive catalysts; GAAP EPS optics may cap near-term enthusiasm but are explainable; focus on PMPM and center-level margin trajectory .
  • Medium-term thesis: Scalable, tech-enabled PACE platform, pharmacy integration, and payer capabilities offer operating leverage and defensibility; policy engagement and state processing normalization reduce risk .