Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased to $193 million for the quarter, marking a 2% increase from the previous quarter and a 12% increase year-over-year.
- Adjusted EBITDA rose to $3.6 million for the quarter, up from a loss of approximately $2 million in the same quarter the previous year.
- Census grew to 6,820, showing a quarter-over-quarter improvement of approximately 1%.
- Successfully opened new centers in Tampa and Orlando, expanding the company's operational footprint and potential market reach.
- Regulatory monitoring in Colorado was successfully closed out by CMS, indicating resolution of previous compliance issues.
Negative Points
- Experienced increased denovo losses due to the opening of new centers, impacting financial comparisons with previous quarters.
- Faced ongoing enrollment processing delays in Colorado, affecting the pace of participant intake and potentially impacting revenue growth.
- Encountered competitive pressures from Medicare Advantage plans offering rich supplemental benefits, which may influence participant enrollment decisions.
- Reported a net loss of $5.9 million for the quarter, an increase from a net loss of $3.8 million in the previous quarter.
- Anticipated third quarter seasonality was exacerbated by several factors, leading to underperformance in expected census growth.
Q & A Highlights
Q: Good afternoon. Given the year-to-date trends, are you considering that Q4 will shake out at least towards the higher end of the range, or are there offsets that we should be thinking about for the fourth quarter?
A: Patrick Blair, President and CEO of InnovAge, responded that the company is focused on ending fiscal year '24 with strong momentum as they head into fiscal '25. They are comfortable with their guidance range, despite some uncertainties and one-time items that could affect their financials. They aim to operate well by the end of this fiscal year to move into 2025 with positive momentum.
Q: As you have a 7% to 9% margin target over the next two to four years, can you give us a sense of the puts and takes on margin progression for next year?
A: Benjamin Adams, CFO, mentioned that the business has faced complex issues over the past year, contributing to variability in quarterly results. They expect the progress seen this year to continue into 2025, aligning with their margin targets presented during the Investor Day. The company is focused on enrollment growth and improving medical cost trends and staffing ratios.
Q: With the processing delays in Colorado, do you expect a bolus of members coming online as those issues are resolved? How should we think about the impacts of the Colorado dynamics against the fourth quarter census development?
A: Patrick Blair explained that they are actively working with the state to resolve enrollment processing delays in Colorado. Improvements are being made, but it will take some time for these to fully impact the business. They anticipate that the fourth quarter will be indicative of the rate of change in resolving these issues.
Q: Can you provide insights into the current acuity mix of the census and how it aligns with reimbursement levels? Do you expect this to normalize over multiple quarters?
A: Benjamin Adams noted that incoming participants are gradually changing the acuity mix to better align with underlying reimbursement assumptions. This process will take time as the new mix slowly integrates into the overall census, but they are moving in the right direction.
Q: Are there any specific operational strategies InnovAge is focusing on to improve margins and operational efficiency?
A: Patrick Blair highlighted ongoing efforts in enrollment growth, medical cost management, and staffing ratios as key areas of focus. These initiatives are part of their strategy to improve margins and ensure operational efficiency as they move forward.
Q: How is InnovAge addressing the competitive pressures from Medicare Advantage plans and their impact on enrollment?
A: Patrick Blair acknowledged the competitive environment but emphasized the unique value proposition of the PACE model. InnovAge is working to educate potential and existing participants about the benefits of their model compared to Medicare Advantage plans, anticipating that changes in the industry will eventually highlight their advantages.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
