InnovAge Holding Corp. Common Stock 2026 Q4 Earnings Call

Please go ahead. Thank you, operator.

Good afternoon, and thank you all for joining the InnovAge 2026 fourth quarter and fiscal year-end earnings call. With me today is Patrick Blair, CEO, and Ben Adams, CFO. Jenn Browne, President and COO, will also be joining the Q&A portion of the call. Today, after the market closed, we issued an earnings press release containing detailed information on our 2026 fiscal fourth quarter and year-end results. You may access the release on the investor relations section of our company website, innovage.com. For those listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, Tuesday, September 8th, 2026, and have not been updated subsequent to this call. During our call, we will refer to certain non-GAAP measures.

A reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings press release posted on our website. We may also make statements that are considered forward-looking, including those related to our 2027 fiscal year projections and guidance, future growth prospects and growth strategy, our clinical and operational value initiatives, the impact of ongoing macroeconomic, geopolitical, and industry-related challenges, reductions in PACE reimbursement rates, and changes in risk adjustment methodologies, legal proceedings, enforcement actions, and litigation and disputes, including civil investigative demands and other expectations. Listeners are cautioned that all of our forward-looking statements involve certain assumptions that are inherently subject to risks and uncertainties that can cause our actual results to differ materially from our current expectations.

We advise listeners to review the risk factors discussed in our annual report on Form 10-K for fiscal year 2026 and any subsequent reports filed with the SEC. After the completion of our prepared remarks, we will open the call for questions. I will now turn the call over to our CEO, Patrick Blair.

Patrick. Thank you, Ryan, and good afternoon, everyone.

I'd like to begin by thanking our InnovAge colleagues, our participants and their families, our government partners, and our shareholders for their continued trust and support. As we close fiscal 2026 and begin fiscal 2027, I want to spend a little more time than usual today putting our results and our outlook into a broader context. Fiscal 2026 was an exceptional year for InnovAge and a key milestone in the transformation of the company. We entered the year with clear objectives, deliver high-quality care for our participants, grow census, continue strengthening the operating foundation of the business, maintain a strong culture of compliance, and translate the investments we've made over the last several years into improved financial performance. We delivered against those objectives.

Adjusted EBITDA increased approximately 175% compared with fiscal 2025, and we believe we are ahead of schedule to achieve our 10%-plus long-term adjusted EBITDA margin target. Importantly, we would have generated strong net income for the year, which was ultimately impacted by one-time legal accruals. The rate environment also developed somewhat more favorably than we anticipated during the year, which contributed to our performance. But the larger story of fiscal 2026 is the continued improvement and growing durability in the underlying business. We're operating with stronger leadership, better technology and data, and substantially more discipline around how we manage medical costs, operating costs, and performance. I've said for some time that the best measure for the health of our company is when employee engagement, participant satisfaction, quality outcomes, census growth, and financial performance, our five pillars, all improve together.

We believe they can, and fiscal 2026 provides evidence of that. I'm incredibly proud of what our team accomplished, but I'm even more focused on what the progress of the last several years now enables us to achieve. Internally, we have begun describing the evolution of the company in three chapters. InnovAge 1.0 was about building the platform. The organization transitioned from its not-for-profit roots to become a for-profit, and ultimately a publicly traded company. We expanded geographically, opened and acquired centers, invested significant capital, and established a national PACE platform capable of serving thousands of seniors. InnovAge 2.0 was about strengthening that platform. It began during a difficult period for the company when operational compliance needed to be strengthened.

Over the last four years, we have worked to address those issues, executed operational improvement opportunities, improved relationships with our regulatory partners, strengthened clinical and operational leadership, implemented a PACE-specific Epic EMR across the enterprise, standardized processes, invested in our people and infrastructure, and developed substantially greater visibility into the performance of the business. At the same time, we returned to growth and significantly improved our financial performance. Much of that progress occurred faster and created more value in a shorter period than we anticipated when we began the work. We're now entering what we think of as InnovAge 3.0. If 1.0 was about building the platform and 2.0 was about strengthening it, 3.0 is about scaling its capabilities and capitalizing on the opportunity in front of us.

Our objective is to build an increasingly sophisticated value-based care platform capable of serving meaningfully more seniors while delivering strong, sustainable performance that allows us to reinvest in the business and earn an appropriate return. This starts with our core PACE business. There remains considerable opportunity to grow census within our existing footprint, expand the capacity of our centers, and diversify the channels through which eligible seniors learn about and access PACE. InnovAge 3.0 also means looking across a longer time horizon. We're strengthening our capabilities as both a payer and a provider so that we can better manage quality, total cost of care, and participant outcomes. We're investing in technology and AI to improve clinical decision-making, productivity, and the participant experience. We're evaluating opportunities to increase the physical and operating capacity of our existing centers.

We're beginning to more actively evaluate de novo markets, M&A opportunities, joint ventures, and other partnership models that could expand our reach over time. We intend to remain energetically engaged with policymakers as they consider ways to expand PACE and potentially apply some of the capabilities of the model more broadly. Not every opportunity we evaluate will become part of our strategy, and we will continue to be disciplined about where we invest our time and capital. What has changed is our ability to look further ahead at a broader set of opportunities while continuing to execute within the core business. There's an essential point I want to emphasize as we talk about this next chapter. Our ambitions for InnovAge 3.0 do not change the foundation on which we operate. Quality of care and compliance remain non-negotiable.

PACE participants are among the most medically and socially complex individuals in the healthcare system. Our participants, their families, CMS, and other state partners place extraordinary trust in us. We take this responsibility very seriously. The lessons of the last several years are deeply embedded in how we operate the company today. As we grow, we intend to continue investing in operations and clinical leadership, compliance infrastructure, data and monitoring, and the systems necessary to identify risk and variation earlier. We will not compromise those standards. An important part of preparing for this next chapter was strengthening the operating leadership of the company. Earlier this summer, Jenn Browne joined us as President and Chief Operating Officer. Jenn brings significant experience leading complex multi-site healthcare and value-based care organizations, including senior leadership roles at Optum and Stride Health.

She has experience across clinical operations, quality, growth, and performance improvement, and understands what it takes to build scalable operating systems. Although Jenn has only been with us for a few months, she has moved quickly to understand our centers, our people, our opportunities, and the areas where we can continue to improve. Her addition gives us significantly greater leadership capacity at precisely the time we're asking the organization to take another step forward. Her immediate priorities include driving greater consistency across centers, strengthening center-level accountability, improving our use of Epic across the entire interdisciplinary care team, improving the participant experience, and building the operating and analytical capabilities necessary to support our next phase of growth. There are several investments underway in fiscal 2027 that illustrate how we're thinking about InnovAge 3.0. Let's start with participant experience.