“The Company’s first quarter results were in line with our expectations and reflect continued improvement,” said
Financial Results
Three Months Ended | |||||||
2023 | 2022 | ||||||
in thousands, except percentages and per share amounts | |||||||
Total revenues | $ | 182,485 | $ | 171,218 | |||
Loss Before Income Taxes | 10,736 | 17,169 | |||||
Net Loss | 10,962 | 13,699 | |||||
Net Loss margin | 6.0 | % | 8.0 | % | |||
Net Loss Attributable to | 10,304 | 13,073 | |||||
Net Loss per share - basic and diluted | $ | 0.08 | $ | 0.10 | |||
Center-level Contribution Margin(1) | $ | 27,877 | $ | 21,424 | |||
Adjusted EBITDA(1) | $ | 2,226 | $ | (3,815 | ) | ||
Adjusted EBITDA margin(1) | 1.2 | % | (2.2)% |
Fiscal First Quarter 2024 Financial Performance
- Total revenue of $182.5 million, increased approximately 6.6% compared to
$171.2 million in the first quarter of fiscal year 2023 - Loss Before Income Taxes of
$10.7 million , compared to a loss before income taxes of$17.2 million in the first quarter of fiscal year 2023 - Loss Before Income Taxes as a percent of revenue of 5.9% decreased 4.1% percentage points compared to Loss Before Income Tax as a percent of revenue of 10.0% in in the first quarter of fiscal year 2023
- Center-level Contribution Margin(1) of
$27.9 million , increased 30.1% compared to$21.4 million in the first quarter of fiscal year 2023 - Center-level Contribution Margin(1) as a percent of revenue of 15.3%, increased 2.8 percentage points compared to 12.5% in the first quarter of fiscal year 2023
- Net loss of
$11.0 million , compared to net loss of$13.7 million in the first quarter of fiscal year 2023 - Net loss margin of 6.0%, a decrease of 2.0 percentage points compared to a net loss margin of 8.0% in the first quarter of fiscal year 2023
- Net loss attributable to
InnovAge Holding Corp. of$10.3 million , or a loss of$0.08 per share, compared to net loss of$13.1 million , or a loss of$0.10 per share in the first quarter of fiscal year 2023 - Adjusted EBITDA(1) of
$2.2 million , an increase of$6.0 million compared to an Adjusted EBITDA loss of$3.8 million in the first quarter of fiscal year 2023 - Adjusted EBITDA(1) margin of 1.2%, an increase of 3.4 percentage points compared to negative 2.2% in the first quarter of fiscal year 2023
- Census of approximately 6,580 participants compared to 6,540 participants in the first quarter of fiscal year 2023
- Ended the first quarter of fiscal year 2024 with
$88.4 million in cash and cash equivalents plus$46.8 million in short-term investments, and$85.5 million in debt on the balance sheet, representing debt under the Company’s senior secured term loan, convertible term loan and finance leases
(1) Center-level Contribution Margin and as a percentage of revenue, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. For a definition and reconciliation of these non-GAAP measures to the most closely comparable GAAP measures for the periods indicated, see “Note Regarding Use of Non-GAAP Financial Measures” and “Reconciliation of GAAP and Non-GAAP Measures.”
Conference Call
The Company will host a conference call this afternoon at
About
Investor Contact:
rkubota@innovage.com
Media Contact:
lhazenfield@innovage.com
Forward-Looking Statements - Safe Harbor
This press release may contain “forward-looking statements” within the meaning of the safe harbor provisions of the
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on currently available information and our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. You should not place undue reliance on our forward-looking statements. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) the viability of our growth strategy; (ii) our ability to identify and successfully complete acquisitions; (iii) our ability to attract new participants and retain existing participants and grow our revenue throughout our existing centers; (iv) the results of periodic inspections, reviews, audits, investigations under the federal and state government programs, including our ability to sufficiently cure deficiencies identified by the respective federal and state government programs; (v) the adverse impact of inspections, reviews, audits, investigations, legal proceedings, enforcement actions and litigation, including the current civil investigative demands initiated by federal and state agencies, as well as the litigation and other proceedings initiated by, or on behalf, of our stockholders; (vi) the risk that the cost of providing services will exceed our compensation under PACE; (vii) our increased costs and expenditures and our inability to execute or realize the benefits of our clinical value initiatives; (viii) the impact on our business from ongoing macroeconomic and COVID-19-related challenges, including labor shortages and inflation; (ix) the dependence of our revenues upon a limited number of government payors; (x) the risk that our submissions to government payors may contain inaccurate or unsupportable information regarding risk adjustment scores of participants; (xi) the impact on our business of renegotiation, non-renewal or termination of capitation agreements with government payors; (xii) the difficulty to predict our future results, which could cause such results to fall below any guidance we provide; (xiii) the impact of state and federal efforts to reduce healthcare spending; (xiv) the effects of a pandemic, epidemic or outbreak of an infectious disease, such as COVID-19; (xv) our dependence on our senior management team and other key employees; (xvi) the impact of failures by our suppliers or limitations on our ability to access new technology or medical products; (xvii) the concentration of our presence in
Any forward-looking statement made by the Company in this press release is based only on information currently available to us and speaks only as of the date on which it is made. Except as required by law, we undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
Note Regarding Use of Non-GAAP Financial Measures
In addition to reporting financial information in accordance with generally accepted accounting principles (“GAAP”), the Company is also reporting Center-level Contribution Margin, and as a percentage of revenue, Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial measures. Center-level Contribution Margin and as a percentage of revenue, Adjusted EBITDA and Adjusted EBITDA margin are supplemental measures of operating performance monitored by management that are not defined under GAAP and that do not represent, and should not be considered as, an alternative to net income (loss) and net income (loss) margin, respectively, as determined by GAAP. We believe that Center-level Contribution Margin and as a percentage of revenue, Adjusted EBITDA and Adjusted EBITDA margin are appropriate measures of operating performance because the metrics eliminate the impact of revenue and expenses that do not relate to our ongoing business performance, allowing us to more effectively evaluate our core operating performance and trends from period to period. We believe that Center-level Contribution Margin and as a percentage of revenue, Adjusted EBITDA and Adjusted EBITDA margin help investors and analysts in comparing our results across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, including net income (loss) and net income (loss) margin.
The Company’s management uses Center-level Contribution Margin as the measure for assessing performance of its segments. In evaluating Center-level Contribution Margin on a center-by-center basis, you should be aware that we do not allocate our sales and marketing expense or corporate, general and administrative expenses across our centers. We define Center-level Contribution Margin as total revenues less external provider costs and cost of care, excluding depreciation and amortization, which includes all medical and pharmacy costs.
In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by the types of items excluded from the calculation of Adjusted EBITDA. Our use of the term Adjusted EBITDA varies from others in our industry. We define Adjusted EBITDA as net income (loss) adjusted for interest expense, depreciation and amortization, and provision for income tax as well as addbacks for non-recurring expenses or exceptional items, including relating to management equity compensation, executive severance and recruitment, class action litigation costs and settlement, M&A and de novo center development, business optimization and electronic medical record (EMR) implementation. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of our total revenue. For a full reconciliation of Center-level Contribution Margin and Adjusted EBITDA to the most closely comparable GAAP financial measure, please see the attachment to this earnings release.
Schedule 1
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS) (UNAUDITED)
2023 | 2023 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 88,398 | $ | 127,249 | |||
Short-term investments | 46,833 | 46,213 | |||||
Restricted cash | 15 | 16 | |||||
Accounts receivable, net of allowance ( | 44,185 | 24,344 | |||||
Prepaid expenses | 16,412 | 17,145 | |||||
Income tax receivable | 262 | 262 | |||||
Total current assets | 196,105 | 215,229 | |||||
Noncurrent Assets | |||||||
Property and equipment, net | 190,060 | 192,188 | |||||
Operating lease assets | 20,454 | 21,210 | |||||
Investments | 5,493 | 5,493 | |||||
Deposits and other | 4,232 | 3,823 | |||||
124,217 | 124,217 | ||||||
Other intangible assets, net | 5,033 | 5,198 | |||||
Total noncurrent assets | 349,489 | 352,129 | |||||
Total assets | $ | 545,594 | $ | 567,358 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable and accrued expenses | $ | 46,923 | $ | 54,935 | |||
Reported and estimated claims | 42,322 | 42,999 | |||||
Due to Medicaid and Medicare | 10,282 | 9,142 | |||||
Income tax payable | 1,212 | 1,212 | |||||
Current portion of long-term debt | 3,795 | 3,795 | |||||
Current portion of finance lease obligations | 4,612 | 4,722 | |||||
Current portion of operating lease obligations | 3,577 | 3,530 | |||||
Deferred revenue | 26,090 | 28,115 | |||||
Total current liabilities | 138,813 | 148,450 | |||||
Noncurrent Liabilities | |||||||
Deferred tax liability, net | 6,462 | 6,236 | |||||
Finance lease obligations | 12,048 | 13,114 | |||||
Operating lease obligations | 18,080 | 18,828 | |||||
Other noncurrent liabilities | 1,141 | 1,086 | |||||
Long-term debt, net of debt issuance costs | 64,003 | 64,844 | |||||
Total liabilities | 240,547 | 252,558 | |||||
Commitments and Contingencies | |||||||
Redeemable Noncontrolling Interests | 12,138 | 12,708 | |||||
Stockholders’ Equity | |||||||
Common stock, | 136 | 136 | |||||
Additional paid-in capital | 333,316 | 332,107 | |||||
Retained deficit | (46,248 | ) | (35,944 | ) | |||
287,204 | 296,299 | ||||||
Noncontrolling interests | 5,705 | 5,793 | |||||
Total stockholders’ equity | 292,909 | 302,092 | |||||
Total liabilities and stockholders’ equity | $ | 545,594 | $ | 567,358 |
Schedule 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS) (UNAUDITED)
Three Months Ended | |||||||
2023 | 2022 | ||||||
Revenues | |||||||
Capitation revenue | $ | 182,173 | $ | 170,931 | |||
Other service revenue | 312 | 287 | |||||
Total revenues | 182,485 | 171,218 | |||||
Expenses | |||||||
External provider costs | 99,358 | 96,237 | |||||
Cost of care, excluding depreciation and amortization | 55,250 | 53,557 | |||||
Sales and marketing | 5,379 | 4,413 | |||||
Corporate, general and administrative | 28,947 | 30,181 | |||||
Depreciation and amortization | 4,269 | 3,433 | |||||
Total expenses | 193,203 | 187,821 | |||||
Operating Loss | (10,718 | ) | (16,603 | ) | |||
Other Income (Expense) | |||||||
Interest expense, net | (661 | ) | (603 | ) | |||
Other income (expense) | 643 | 37 | |||||
Total other expense | (18 | ) | (566 | ) | |||
Loss Before Income Taxes | (10,736 | ) | (17,169 | ) | |||
Provision (Benefit) for Income Taxes | 226 | (3,470 | ) | ||||
Net Loss | (10,962 | ) | (13,699 | ) | |||
Less: net loss attributable to noncontrolling interests | (658 | ) | (626 | ) | |||
Net Loss Attributable to | $ | (10,304 | ) | $ | (13,073 | ) | |
Weighted-average number of common shares outstanding - basic | 135,790,401 | 135,566,117 | |||||
Weighted-average number of common shares outstanding - diluted | 135,790,401 | 135,566,117 | |||||
Net loss per share - basic | $ | (0.08 | ) | $ | (0.10 | ) | |
Net loss per share - diluted | $ | (0.08 | ) | $ | (0.10 | ) |
Schedule 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
For the Three Months Ended | |||||||
2023 | 2022 | ||||||
Operating Activities | |||||||
Net loss | $ | (10,962 | ) | $ | (13,699 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||||||
Gain on disposal of assets | (18 | ) | (37 | ) | |||
Provision for uncollectible accounts | 1,077 | 1,571 | |||||
Depreciation and amortization | 4,269 | 3,433 | |||||
Operating lease rentals | 1,103 | 761 | |||||
Amortization of deferred financing costs | 107 | 107 | |||||
Stock-based compensation | 1,823 | 1,209 | |||||
Deferred income taxes | 226 | (3,470 | ) | ||||
Other | 76 | — | |||||
Changes in operating assets and liabilities | |||||||
Accounts receivable, net | (20,918 | ) | (3,180 | ) | |||
Prepaid expenses | 734 | 1,678 | |||||
Income tax receivable | — | 1,750 | |||||
Deposits and other | (591 | ) | 246 | ||||
Accounts payable and accrued expenses | (7,303 | ) | 1,155 | ||||
Reported and estimated claims | (676 | ) | (2,480 | ) | |||
Due to Medicaid and Medicare | 1,140 | 1,503 | |||||
Operating lease liabilities | (1,048 | ) | (781 | ) | |||
Deferred revenue | (2,024 | ) | 23,361 | ||||
Net cash (used) provided by operating activities | (32,985 | ) | 13,127 | ||||
Investing Activities | |||||||
Purchases of property and equipment | (2,571 | ) | (7,666 | ) | |||
Purchases of short-term investments | (570 | ) | — | ||||
Net cash used in investing activities | (3,141 | ) | (7,666 | ) | |||
Financing Activities | |||||||
Payments for finance lease obligations | (1,164 | ) | (720 | ) | |||
Principal payments on long-term debt | (948 | ) | (948 | ) | |||
Taxes paid related to net share settlements of stock-based compensation awards | (614 | ) | — | ||||
Net cash used in financing activities | (2,726 | ) | (1,668 | ) | |||
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS & RESTRICTED CASH | (38,852 | ) | 3,793 | ||||
CASH, CASH EQUIVALENTS & RESTRICTED CASH, BEGINNING OF PERIOD | 127,265 | 184,446 | |||||
CASH, CASH EQUIVALENTS & RESTRICTED CASH, END OF PERIOD | $ | 88,413 | $ | 188,239 | |||
Supplemental Cash Flows Information | |||||||
Interest paid | $ | 404 | $ | 700 | |||
Income taxes paid | $ | — | $ | 13 | |||
Property and equipment included in accounts payable | $ | 281 | $ | 2,446 | |||
Property and equipment purchased under finance leases | $ | — | $ | 80 |
Schedule 4
RECONCILIATION OF GAAP AND NON-GAAP MEASURES
(IN THOUSANDS) (UNAUDITED)
Adjusted EBITDA
Three months ended | |||||||
2023 | 2022 | ||||||
Net loss | $ | (10,962 | ) | $ | (13,699 | ) | |
Interest expense, net | 661 | 603 | |||||
Depreciation and amortization | 4,269 | 3,433 | |||||
Provision (benefit) for income tax | 226 | (3,470 | ) | ||||
Stock-based compensation | 1,823 | 1,300 | |||||
Litigation costs and settlement(a) | 1,707 | 1,668 | |||||
M&A and de novo center development(b) | 409 | 206 | |||||
Business optimization(c) | 2,159 | 5,554 | |||||
EMR implementation(d) | 1,934 | 590 | |||||
Adjusted EBITDA | $ | 2,226 | $ | (3,815 | ) | ||
Net income (loss) margin | 6.0 | % | 8.0 | % | |||
Adjusted EBITDA margin | 1.2 | % | (2.2)% |
_______________________
(a) Reflects charges/(credits) related to litigation by stockholders, litigation related to de novo center development, and civil investigative demands. Refer to Note 9, "Commitments and Contingencies" to our condensed consolidated financial statements for more information regarding litigation by stockholders and civil investigative demands. Costs reflected consist of litigation costs considered one-time in nature and outside of the ordinary course of business based on the following considerations which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) complexity of the case, (iii) nature of the remedies sought, (iv) litigation posture of the Company, (v) counterparty involved, and (vi) the Company's overall litigation strategy.
(b) Reflects charges related to M&A transaction and integrations, and de novo center developments.
(c) Reflects charges related to business optimization initiatives. Such charges related to one-time investments in projects designed to enhance our technology and compliance systems, improve and support the efficiency and effectiveness of our operations, and third party support to address efforts to remediate deficiencies in audits. For the three months ended
(d) Reflects non-recurring expenses relating to the implementation of a new EMR vendor.
Three months ended | |||
2023 | |||
Net loss | $ | (11,995 | ) |
Interest expense, net | 291 | ||
Depreciation and amortization | 4,332 | ||
Provision (benefit) for income tax | 506 | ||
Stock-based compensation | 1,272 | ||
Litigation costs and settlement(a) | 1,943 | ||
M&A and de novo center development(b) | 682 | ||
Business optimization(c) | 2,117 | ||
EMR implementation(d) | 1,568 | ||
Adjusted EBITDA | $ | 716 | |
Net income (loss) margin | (6.8)% | ||
Adjusted EBITDA margin | 0.4 | % |
(a) Reflects charges/(credits) related to litigation by stockholders, litigation related to de novo center development, and civil investigative demands. See Item 3, “Legal Proceedings” included in the Company’s Annual Report on Form 10-K. Costs reflected consist of litigation costs considered one-time in nature and outside of the ordinary course of business based on the following considerations which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) complexity of the case, (iii) nature of the remedies sought, (iv) litigation posture of the Company, (v) counterparty involved, and (vi) the Company's overall litigation strategy.
(b) Reflects charges related to M&A transaction and integrations, and de novo center development.
(c) For the three months ended
(d) Reflects non-recurring expenses relating to the implementation of a new EMR vendor.
Center-Level Contribution Margin
(In thousands) | PACE | All other | Totals | PACE | All other(a) | Totals | |||||||||||||||||
Capitation revenue | $ | 182,173 | $ | — | $ | 182,173 | $ | 170,931 | $ | — | $ | 170,931 | |||||||||||
Other service revenue | 86 | 226 | 312 | 77 | 210 | 287 | |||||||||||||||||
Total revenues | 182,259 | 226 | 182,485 | 171,008 | 210 | 171,218 | |||||||||||||||||
External provider costs | 99,358 | — | 99,358 | 96,237 | — | 96,237 | |||||||||||||||||
Cost of care, excluding depreciation and amortization | 55,097 | 153 | 55,250 | 53,411 | 146 | 53,557 | |||||||||||||||||
Center-Level Contribution Margin | 27,804 | 73 | 27,877 | 21,360 | 64 | 21,424 | |||||||||||||||||
Overhead costs(b) | 34,317 | 9 | 34,326 | 34,574 | 20 | 34,594 | |||||||||||||||||
Depreciation and amortization | 4,157 | 112 | 4,269 | 3,326 | 107 | 3,433 | |||||||||||||||||
Interest expense, net | 616 | 45 | 661 | 557 | 46 | 603 | |||||||||||||||||
Other income | (643 | ) | — | (643 | ) | (37 | ) | — | (37 | ) | |||||||||||||
Loss Before Income Taxes | $ | (10,643 | ) | $ | (93 | ) | $ | (10,736 | ) | $ | (17,060 | ) | $ | (109 | ) | $ | (17,169 | ) | |||||
Loss Before Income Taxes as a % of revenue | (5.9)% | (10.0)% | |||||||||||||||||||||
Center- Level Contribution Margin as a % of revenue | 15.3 | % | 12.5 | % |
(In thousands) | PACE | All other(a) | Totals | ||||||||
Capitation revenue | $ | 176,568 | $ | — | $ | 176,568 | |||||
Other service revenue | 84 | 222 | 306 | ||||||||
Total revenues | 176,652 | 222 | 176,874 | ||||||||
External provider costs | 94,978 | — | 94,978 | ||||||||
Cost of care, excluding depreciation and amortization | 53,252 | 138 | 53,390 | ||||||||
Center-Level Contribution Margin | 28,422 | 84 | 28,506 | ||||||||
Overhead costs(b) | 35,116 | — | 35,116 | ||||||||
Depreciation and amortization | 4,220 | 112 | 4,332 | ||||||||
Interest expense, net | 247 | 44 | 291 | ||||||||
Other income | 256 | — | 256 | ||||||||
Loss Before Income Taxes | $ | (11,417 | ) | $ | (72 | ) | $ | (11,489 | ) | ||
Loss Before Income Taxes as a % of revenue | (6.5)% | ||||||||||
Center- Level Contribution Margin as a % of revenue | 16.1 | % |
_________________________________
(a) Center-level Contribution Margin from segments below the quantitative thresholds are primarily attributable to the
(b) Overhead consists of the Sales and marketing and Corporate, general and administrative financial statement line items.
Source:
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