Executive Summary
InnovAge Holding Corp delivered a solid top-line result for fiscal Q2 2025, with total revenues of $209 million, up 1.9% sequentially and 10.6% year-over-year, driven by higher member months and ongoing center expansion. Census rose to ~7,480 participants (up ~4% QoQ and ~10% YoY), underpinning continued organic growth in existing California and Colorado centers and the ramp of Florida de novo centers and Crenshaw in California. Center-level contribution margin improved to 17.7% (from 16.8% in Q1 2025), reflecting better cost control at the center level even as the company continues to incur higher operating expenses tied to growth and the de novo center ramp.
Despite the revenue strength, InnovAge reported a net loss of $13.5 million for the quarter and Adjusted EBITDA of $5.9 million, implying an EBITDA margin of roughly 2.8%. The company also recognized an $8.5 million impairment related to halting the Louisville de novo project, together with ongoing de novo losses of $4.0 million for the quarter. Management reaffirmed fiscal 2025 guidance: ending census of 7,300–7,750, member months of 86,000–89,000, total revenue of $815–$865 million, Adjusted EBITDA of $24–$31 million, and de novo losses in the $18–$20 million range. Management attributes near-term variability to enrollment and redetermination processing delays in California and to the seasonality inherent in PACE enrollments, while signaling meaningful upside from the technology-first operating model and in-sourced capabilities (notably the Denver-area pharmacy acquisition) that are intended to lift cost efficiency and care integration over the 12–18 month horizon.
Key catalysts cited by management include Medicaid rate increases in California and Pennsylvania (mid-to-high single-digits effective Jan 1, 2025), ongoing retention initiatives for Medicare enrollment, and a broader push to reimagine core processes (orders, scheduling, transportation, and payer capabilities) through Epic integration and data-driven network optimization. The company also emphasized expansion opportunities in the PACE space as a backdrop for potential future M&A and a strengthened national footprint."
Key Performance Indicators
QoQ: -156.45% | YoY:-603.42%
QoQ: -168.23% | YoY:-283.55%
QoQ: -150.00% | YoY:-233.33%
Key Insights
Revenue: $209.0 million in Q2 FY2025, up 1.9% sequentially and 10.6% YoY.
Census: ~7,480 participants, up about 4% QoQ and 10% YoY.
Center-level contribution margin: $37.1 million, 17.7% of revenue, +90 bps QoQ.
Adjusted EBITDA: $5.9 million, 2.8% margin, vs $6.9 million in Q2 FY2024.
Net loss: -$13.5 million for the quarter.
De novo losses: $4.0 million in the quarter (vs $2.2M prior-year Q2 and $4.1M in Q1 FY2025).
Impairment: $8.5 million right-of-use asset related to Louisville de novo...
Financial Highlights
Revenue: $209.0 million in Q2 FY2025, up 1.9% sequentially and 10.6% YoY.
Census: ~7,480 participants, up about 4% QoQ and 10% YoY.
Center-level contribution margin: $37.1 million, 17.7% of revenue, +90 bps QoQ.
Adjusted EBITDA: $5.9 million, 2.8% margin, vs $6.9 million in Q2 FY2024.
Net loss: -$13.5 million for the quarter.
De novo losses: $4.0 million in the quarter (vs $2.2M prior-year Q2 and $4.1M in Q1 FY2025).
Impairment: $8.5 million right-of-use asset related to Louisville de novo project.
Cash flow: Operating cash flow negative $6.8 million; capex $1.3 million; free cash flow $5.41 million.
Balance sheet: Cash & equivalents $46.1 million; short-term investments $40.8 million; total debt $78.3 million; net debt approx. $60.3 million.
Guidance (FY2025): Ending census 7,300–7,750; member months 86,000–89,000; revenue $815–$865 million; Adjusted EBITDA $24–$31 million; de novo losses $18–$20 million.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
209.00M |
10.64% |
1.88% |
| Gross Profit |
37.07M |
10.27% |
7.31% |
| Operating Income |
-12.56M |
-603.42% |
-156.45% |
| Net Income |
-13.22M |
-283.55% |
-168.23% |
| EPS |
-0.10 |
-233.33% |
-150.00% |
Key Financial Ratios
operatingProfitMargin
-6.01%
operatingCashFlowPerShare
$0.05
freeCashFlowPerShare
$0.04
priceEarningsRatio
-10.07
Management Commentary
Strategy and Transformation
- Patrick Blair highlighted a technology-first reimagination of key processes to drive productivity and margin expansion: “reimagining how we do what we do… integrate them, strengthen participant satisfaction with each of them and drive operating efficiency” and emphasized payer capabilities and data-driven optimization.
- CEO notes Epic implementation across markets and the potential for AI-enabled operational improvements as a lever for margin expansion.
Operations and Market Conditions
- Management underscored strong census growth (7,480) and 4% QoQ increase in participant months, supported by de novo centers in Tampa/Orlando and Crenshaw integration; the company remains focused on reducing enrollment delays through process improvements.
- Medicaid rate increases in CA and PA (mid-to-high single digits) took effect Jan 1, 2025, aiding the topline and cost coverage for the period.
- California enrollment/redetermination delays were acknowledged as a headwind in certain markets, prompting cautious monitoring and ongoing engagement with regulatory authorities.
Capital Allocation and Path to In-House Capabilities
- Michael Scarborough’s appointment as President and COO is framed as a catalyst for a broader tech-enabled, integrated ecosystem (sales, call center, scheduling, transportation) to improve participant experience and cost efficiency.
- The in-house pharmacy acquisition in Denver is positioned to reduce third-party costs, improve compliance, and create a more integrated end-to-end care model; ongoing transition of participants to the new platform is in progress.
- Management signaled ongoing evaluation of insourcing vs. outsourcing to optimize core capabilities and leverage external partners where advantageous.
Financial Outlook and Open Questions
- Guidance remains back-end weighted; expects margin improvement from CVIs and operational value initiatives, with a note that Q3 seasonality and enrollment cycles may temper near-term progression.
- Questions on the impact of Part D out-of-pocket changes were acknowledged but not fully quantified; Rich Feifer indicated opportunities to optimize pharmacy spend through integrated care models, with a plan to size effects over time.
“reimagining how we do what we do. It's not going to be about kind of optimizing kind of the traditional way of delivering services as both a provider and a payer.”
— Patrick Blair
“We’re fully capitated for our pharmacy benefit. Some of the typical stacking of corridors and things like that on Part D don’t apply to us.”
— Patrick Blair
Forward Guidance
Outlook and achievability:
- Census and revenue: FY2025 ending census guided 7,300–7,750; member months 86,000–89,000; total revenue $815–$865 million. The guidance implies mid-to-high single-digit topline growth modestly weighted toward H2, consistent with a back-end weighted year due to缓 transformation initiatives.
- EBITDA: Adjusted EBITDA target of $24–$31 million; de novo losses expected to be $18–$20 million for the year. The company anticipates margin expansion from center-level optimization, cost discipline, and CVIs/OVIs activities that will accrue more meaningfully in the back half of FY2025.
- Cost and operations: Anticipated benefits from the technology-first operating model (Epic, automation, data integration) and in-house pharmacy are expected to boost efficiency and quality while reducing external provider costs over time.
- Risks to watch: Enrollment and redetermination delays in California, open enrollment dynamics in Medicare Advantage, regulatory updates in California audits, and the pace of integration of new center operations.
Assessment:
- The quantitative targets are achievable if the transformation programs (CVI/OVI initiatives, payer capabilities, network optimization, and pharmacy integration) realize expected efficiency gains and if CA/PA Medicaid rate increases sustain topline growth. The near-term profitability remains challenged by de novo losses and one-time impairments, but the company’s path to margin expansion is anchored in a technology-forward operating model and vertical integration strategies. Investors should monitor: (1) progression of open enrollment retention and enrollment in Florida Crenshaw and Bakersfield centers, (2) the progress and cost benefits of the Denver-area pharmacy acquisition, (3) ongoing CA enrollment delays and AR write-offs, and (4) the company’s ability to translate Medicaid rate increases into sustainable margin improvements.