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InnovAge Holding Corp. (INNV)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 delivered disciplined growth and margin expansion: revenue $221.4M (+~11% YoY), Center-level Contribution Margin (CLCM) 18.6%, and Adjusted EBITDA $11.3M, with normalized EPS above expectations; management cited cost controls, pharmacy insourcing, and improved utilization as key drivers .
  • FY26 guidance implies another step-up: revenue $900–$950M, Adjusted EBITDA $56–$65M, census 7,900–8,100, member months 91.6–94.4k; de novo losses guided to $13.4–$15.4M as Florida centers ramp .
  • Against S&P consensus, Q4 revenue modestly beat ($221.4M vs $219.8M*) and normalized EPS materially beat (≈$0.070 vs $0.01*), reinforcing a narrative of operational execution; management reaffirmed a multi-year path to 8–9% adjusted EBITDA margins * .
  • Key watch items into FY26: (1) V‑28 MA model transition (headwind during phase-in), (2) Medicaid redetermination process redesign (H1 FY26 census/member-months headwind but EBITDA-positive), and (3) ongoing scaling of in-house pharmacy and de novo center maturation .

What Went Well and What Went Wrong

  • What Went Well

    • “Fiscal 2025 was a strong year… combination of responsible growth, financial discipline, clinical performance, and compliance execution” with Q4 CLCM 18.6% and Adjusted EBITDA $11.3M (+>100% YoY) .
    • Utilization improved (inpatient, short-stay NF, hospice shifted in-house), lowering external provider cost per participant; pharmacy insourcing contributed to lower pharmacy costs and is expected to drive further savings and adherence benefits .
    • Balance sheet actions: refinanced term loan (new $50.7M facility; maturities extended to Aug 8, 2028), positive Q4 operating cash flow (~$9M), and completed $7.3M repurchase program .

  • What Went Wrong

    • FY25 GAAP net loss widened to $(35.3)M (vs $(23.2)M FY24), driven by higher cost of care, litigation accruals ($10.1M in Q3 related to class action), and asset impairments (Q4: $5.1M) .
    • Mix/risk score pressure: sequential revenue was partially offset by lower Medicare rates as newer enrollees carried lower risk scores than disenrolling participants with higher risk scores .
    • Transition/one-time costs: increased salaries/benefits and software fees, de novo occupancy/admin costs (FL openings, Crenshaw acquisition), and pharmacy logistics ramp weighed on cost of care .

Financial Results

Quarterly performance (sequential view; oldest → newest):

MetricQ2 FY25Q3 FY25Q4 FY25
Revenue ($USD Millions)$209.0 $218.1 $221.4
Net Loss ($USD Millions)$(13.5) $(11.1) $(5.0)
EPS (GAAP, basic)$(0.10) $(0.08) $(0.01)
Center-Level Contribution Margin ($M)$37.1 $40.7 $41.3
CLCM Margin %17.7% 18.7% 18.6%
Adjusted EBITDA ($M)$5.87 $10.79 $11.33
Adjusted EBITDA Margin %2.8% 4.9% 5.1%

Q4 year-over-year comparison:

MetricQ4 FY24Q4 FY25
Revenue ($USD Millions)$199.4 $221.4
Net Loss ($USD Millions)$(2.25) $(5.01)
EPS (GAAP, basic)$(0.01) $(0.01)
CLCM ($M)$36.6 $41.3
CLCM Margin %18.3% 18.6%
Adjusted EBITDA ($M)$5.24 $11.33

Results vs S&P Global consensus (estimates context; asterisks denote SPGI values):

  • Q4 FY25 revenue: $221.4M actual vs $219.8M estimate* → modest beat *.
  • Q4 FY25 normalized EPS: ≈$0.070 actual vs $0.01 estimate* → material beat*.
  • Q3 FY25 revenue: $218.1M actual vs $214.1M estimate* → beat *.
  • Q2 FY25 revenue: $209.0M actual vs $210.2M estimate* → slight miss *.
    Values retrieved from S&P Global.

Segment/Center economics (Q4 YoY):

Item ($USD Thousands)Q4 FY24 PACEQ4 FY24 All OtherQ4 FY25 PACEQ4 FY25 All Other
Total Revenues199,158 243 221,164 253
External Provider Costs102,691 —108,169 —
Cost of Care (ex-D&A)59,976 156 71,816 145
Center-Level Contribution36,491 87 41,179 108
CLCM Margin %18.3% —18.6% —

KPIs and operating drivers:

KPIQ2 FY25Q3 FY25Q4 FY25
Ending Census (participants)~7,480 ~7,530 ~7,740
Member Months (quarter)——~23,000
De Novo Losses ($M)—~3.5 ~3.9
Cash & Short-term Investments ($M)$86.9 $101.8 $105.9 (cash $64.1; ST inv. $41.8)
Total Debt ($M)$63.6 LT + $3.8 current $77.3 total ~$72.8 total

Non-GAAP adjustments and notable items:

  • Q3: $10.7M accrual related to potential class action settlement (litigation costs and settlement) .
  • Q4: $5.1M asset impairments/loss on assets held for sale; continued business optimization and litigation-related expenses within Adjusted EBITDA reconciliation .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Census (participants)FY26N/A7,900–8,100 New
Member MonthsFY26N/A91,600–94,400 New
Total RevenuesFY26N/A$900–$950M New
Adjusted EBITDAFY26N/A$56–$65M New
De Novo LossesFY26N/A$13.4–$15.4M New

Management also indicated H1 FY26 headwinds to census/member months from redesigned Medicaid redetermination processes (beneficial to EBITDA) and a V‑28 MA model transition headwind embedded in guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Margin trajectoryAdjusted EBITDA 2.8% in Q2; litigation/impairment weighed on GAAP results . Q3 Adjusted EBITDA 4.9% with stronger CLCM 18.7% .Q4 Adjusted EBITDA 5.1%; reaffirmed multi-year path to 8–9% margins .Improving; on track multi-year.
Pharmacy insourcingNoted as a cost driver ramping in Q2/Q3 (licenses, logistics) (context).Integration “going well,” improving adherence/outcomes and lowering costs; savings expected to continue .Positive execution tailwind.
Enrollment/mix & risk scoreDe novo ramp in FL; Q2 commentary on licensing and ramp execution risks . Q3 census +10% YoY .Mix normalized post-sanctions; lower risk scores from new entrants weigh on Medicare rates; redesigned redeterminations to accelerate non-eligible disenrollments in H1 FY26 .Top-line tempered near-term; EBITDA supportive.
Regulatory/legal/complianceOne-time litigation accrual in Q3; EMR implementation previously .“No material compliance deficiencies” at FY25 close; V‑28 headwind phased 2026–2029 .Compliance stabilized; payment model risk monitored.
AI/technologyEMR (Epic) implementation costs in prior periods .Leveraging Epic and Salesforce AI/automation for operations and care; best-in-class partner approach .Early-stage, efficiency upside.
Partnerships/de novoQ2 noted de novo ramp and California licensing .Florida JVs (Orlando Health; Tampa General) extend reach; Tampa partnership celebrated Nov 2025 .Expanding distribution channels.

Management Commentary

  • CEO: “Fiscal 2025 was a strong year… we delivered on commitments… Center-level contribution margin improved from 17.3% in FY24 to 18% in FY25… no material compliance deficiencies” .
  • CFO: “Pharmacy integration is going well and… expected to continue generating overall cost savings… we refinanced our term loan… extended maturities to Aug 8, 2028” .
  • On guidance: “We project census of 7,900 to 8,100… revenue $900–$950M and adjusted EBITDA $56–$65M… de novo losses $13.4–$15.4M” .
  • On V‑28: “We expect [V‑28] to be a headwind over the next couple of years… factored into our guidance” .

Q&A Highlights

  • Member mix normalization and risk scores: Mix has largely normalized; newer, healthier entrants lower risk scores and modestly pressure Medicare rates; management balancing growth and margin expansion .
  • V‑28 transition: Explicitly a headwind during phased adoption 2026–2029; incorporated into FY26 guide .
  • Margin cadence: Management reaffirmed the path to 8–9% adjusted EBITDA margins over next few years; improvements driven by medical cost management, pharmacy integration, and operating leverage .
  • Medicaid redeterminations: Process redesign accelerates disenrollment of those unlikely to regain eligibility—near-term headwind to census/member months (H1 FY26) but supportive of EBITDA .
  • AI/automation: Leveraging Epic and Salesforce capabilities to improve efficiency, compliance, and enrollment processing .

Estimates Context

  • Q4 FY25 vs S&P Global: revenue $221.4M vs $219.8M estimate (beat); normalized EPS ≈$0.070 vs $0.01 estimate (beat)*.
  • FY25 vs S&P Global: revenue $853.7M vs $852.0M estimate (slight beat); normalized EPS ≈$0.064 vs $0.03 estimate (beat)*.
  • FY26 consensus: revenue ≈$929.6M; EBITDA ≈$61.7M; normalized EPS ≈$0.21*—comparisons suggest FY26 guide brackets consensus on revenue and EBITDA*.
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential momentum with improving unit economics: CLCM held ~18.6% and Adjusted EBITDA margin improved to 5.1% in Q4; FY26 guide implies ~250 bps of margin expansion YoY on the path to 8–9% .
  • Execution levers are working: utilization down, pharmacy insourcing progressing, and cost structure tightening—supporting durable margin expansion despite payment headwinds .
  • Near-term census headwinds are by design: redetermination process changes will temper reported growth in H1 FY26 but improve EBITDA quality; monitor census trajectory into H2 .
  • Policy/payment watch: V‑28 transition is a multi-year headwind; track quarterly impacts and offsetting utilization/pharmacy gains .
  • Balance sheet/liquidity improved: refinancing extended maturities to 2028; Q4 operating cash generation helps fund de novo ramp .
  • Growth channels broadening: hospital JV partnerships (Orlando Health, Tampa General) create additional feeder paths and strengthen networks .
  • Trading setup: modest top-line beat and strong normalized EPS beat against consensus, plus FY26 guide bracketing Street on revenue/EBITDA, position the story around consistent execution vs. macro/policy headwinds; upside if margin initiatives outpace V‑28/redetermination drag * .

Notes: Non-GAAP metrics (Adjusted EBITDA, CLCM) are defined and reconciled in company materials . All estimate figures marked with an asterisk (*) are Values retrieved from S&P Global.