Full Press Release Details
INNOVAGE ANNOUNCES FINANCIAL RESULTS FOR THE
FISCAL FIRST QUARTER ENDED SEPTEMBER 30, 2022
DENVER, CO., November 8, 2022 - InnovAge Holding Corp. (the "Company" or "InnovAge") (Nasdaq: INNV), a market leading healthcare delivery platform for high-cost, dual-eligible seniors, announced financial results for its fiscal first quarter ended September 30, 2022.
"We have continued to make solid progress this quarter on our regulatory and operational priorities and are now beginning to look forward to the time when we can serve more deserving seniors with the PACE model," said Patrick Blair, President, and CEO of InnovAge.
| Three Months Ended | |||||||
| September 30, 2022 | September 30, 2021 | ||||||
| in thousands, except percentages and per share amounts | |||||||
| Total revenues | $ | 171,218 | $ | 173,070 | |||
| Center-level Contribution Margin (1) | 21,424 | 42,330 | |||||
| Net Income (Loss) | (13,699) | 7,624 | |||||
| Net Income (Loss) margin | (8.0) | % | 4.4 | % | |||
| Net Income (Loss) Attributable to InnovAge Holding Corp. | (13,073) | 7,686 | |||||
| Net income (Loss) per share - basic and diluted | $ | (0.10) | $ | 0.06 | |||
| Adjusted EBITDA (1) | $ | (3,815) | $ | 18,212 | |||
| Adjusted EBITDA margin (1) | (2.2) | % | 10.5 | % |
Fiscal First Quarter 2023 Financial Performance
(1) Management uses Center-level Contribution Margin as the measure for assessing performance of its segments. Center-level Contribution Margin is defined as total revenues less external provider costs and cost of care, excluding depreciation and amortization, which include all medical and pharmacy costs. 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."
The Company will host a conference call this afternoon at 5:00 PM Eastern Time. A live audio webcast of the call will be available on the Company's website, https://investor.innovage.com/. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for a limited time. To access the call by phone, please go to this link (registration link), for dialing instructions and a unique access pin. We encourage participants to dial into the call fifteen minutes ahead of the scheduled start time.
InnovAge is a market leader in managing the care of high-cost, dual-eligible seniors. Our mission is to enable seniors to age independently in their own homes for as long as possible. Our patient-centered care model is designed to improve the quality of care our participants receive, while reducing over-utilization of high-cost care settings. InnovAge believes its healthcare model is one in which all constituencies - participants, their families, providers and government payors- "win." As of September 30, 2022, InnovAge served approximately 6,540 participants across 18 centers in five states. https://www.innovage.com/.
Sarah Rasmussen, APR
Forward-Looking Statements - Safe Harbor
This press release may contain "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "believe," "project," "estimate," "expect," "may," "should," "will" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Forward-looking statements may be identified by the fact that they do not relate strictly to historical or current facts. Examples of forward-looking statements include, among others, statements we may make regarding our expectations with respect to current audits, legal proceedings and government investigations and actions; relationships and discussions with regulatory agencies; our expectations with respect to correcting deficiencies raised in audits and other processes; our ability to effectively implement remediation measures, including creating operational excellence as a provider, expanding our payer capabilities and strengthening enterprise functions; our expectations to increase the number of participants we serve, to grow enrollment and capacity within existing centers, to build de novo centers, or execute acquisitions; quarterly or annual guidance; financial outlook, including future revenues and future earnings; reimbursement and regulatory developments; market developments; new products; integration activities; and the effects of any of the foregoing on our future results of operations or financial conditions.
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 results of periodic inspections, reviews, audits, investigations under the federal and state government programs, including sanctions currently in place on our centers in Colorado and in our Sacramento center in California; (ii) our ability to sufficiently cure any deficiencies identified by the respective federal and state government programs, in the states of California, Colorado and New Mexico; (iii) 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; (iv) the risk that the cost of providing services will exceed our compensation under PACE; (v) the dependence of our revenues upon a limited number of government payors, particularly Medicare and Medicaid; (vi) changes in the rules governing the Medicare, Medicaid or PACE programs; (vii) the risk that our submissions to government payors may contain inaccurate or unsupportable information regarding risk adjustment scores of participants, which could cause us to overstate or understate our revenue and subjecting us to payment obligations and penalties; (viii) viability of our business strategy and our ability to realize expected results; (ix) the impact on our business of non-renewal or termination of capitation agreements with government payors; (x) the impact of state and federal efforts to reduce healthcare spending; (xi) the impact on our business from an economic downturn; (xii) the effects of a pandemic, epidemic or outbreak of an infectious disease, including the ongoing effects of COVID-19; (xiii) our dependence on our senior management team and other key employees; (xiv) the effects of sustained inflation and increased costs of labor on our business; (xv) the impact of failures by our suppliers, sustained material price increases on supplies or limitations on our ability to access new technology or medical products; (xvi) the effect of our relatively limited operating history as a for-profit company on investors' ability to evaluate our current business and future prospects; (xvii) our ability to enroll or attract new participants and grow our revenue, especially as a result of the sanctions currently in place on our centers in Colorado and in our Sacramento center in California and actions from other states; (xviii) the concentration of our presence in Colorado; (xix) our ability to establish a presence in new geographic markets, especially as a result of the actions taken by certain states and us in light of our ongoing audit processes; (xx) the impact on our business of security breaches, loss of data or other
disruptions causing the compromise of sensitive information or preventing us from accessing critical information; and (xxi) our existing indebtedness and access to capital markets. For a detailed discussion of the risks and uncertainties that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to our most recent Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q, in each case, as filed with the SEC.
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 Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial measures. 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 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 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. 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 charges relating to management equity compensation, class action litigation, M&A transaction and integration, business optimization and electronic medical record (EMR) implementation. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of our total revenue less any exceptional, one time revenue items. For a full reconciliation of Adjusted EBITDA to the most closely comparable GAAP financial measure, please see the attachment to this earnings release.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands) (UNAUDITED)
| September 30, | June 30, | |||||
| 2022 | 2022 | |||||
| Assets | ||||||
| Current Assets | ||||||
| Cash and cash equivalents | $ | 188,222 | $ | 184,429 | ||
| Restricted cash | 17 | 17 | ||||
| Accounts receivable, net of allowance ($4,264 - September 30, 2022 and $3,403 - June 30, 2022) | 37,517 | 35,907 | ||||
| Prepaid expenses | 12,165 | 13,842 | ||||
| Income tax receivable | 5,010 | 6,761 | ||||
| Total current assets | 242,931 | 240,956 | ||||
| Noncurrent Assets | ||||||
| Property and equipment, net | 181,086 | 176,260 | ||||
| Operating lease assets | 22,995 | - | ||||
| Investments | 5,493 | 5,493 | ||||
| Deposits and other | 2,565 | 2,812 | ||||
| Goodwill | 124,217 | 124,217 | ||||
| Other intangible assets, net | 5,693 | 5,858 | ||||
| Total noncurrent assets | 342,049 | 314,640 | ||||
| Total assets | $ | 584,980 | $ | 555,596 | ||
| Liabilities and Stockholders' Equity | ||||||
| Current Liabilities | ||||||
| Accounts payable and accrued expenses | $ | 50,858 | $ | 50,562 | ||
| Reported and estimated claims | 35,974 | 38,454 | ||||
| Due to Medicaid and Medicare | 10,633 | 9,130 | ||||
| Current portion of long-term debt | 3,793 | 3,793 | ||||
| Current portion of finance lease obligations | 3,376 | 3,368 | ||||
| Current portion of operating lease obligations | 3,420 | - | ||||
| Deferred revenue | 23,361 | - | ||||
| Total current liabilities | 131,415 | 105,307 | ||||
| Noncurrent Liabilities | ||||||
| Deferred tax liability, net | 14,290 | 17,761 | ||||
| Finance lease obligations | 8,792 | 9,440 | ||||
| Operating lease obligations | 20,725 | - | ||||
| Other noncurrent liabilities | 1,135 | 1,134 | ||||
| Long-term debt, net of debt issuance costs | 67,369 | 68,210 | ||||
| Total liabilities | 243,726 | 201,852 | ||||
| Commitments and Contingencies | ||||||
| Redeemable Noncontrolling Interests | 14,734 | 15,278 | ||||
| Stockholders' Equity | ||||||
| Common stock, $0.001 par value; 500,000,000 authorized as of September 30, 2022 and June 30, 2022; 135,570,078 and 135,532,811 issued shares as of September 30, 2022 and June 30, 2022, respectively | 136 | 136 | ||||
| Additional paid-in capital | 328,708 | 327,499 | ||||
| Retained earnings (deficit) | (8,344) | 4,729 | ||||
| Total InnovAge Holding Corp. | 320,500 | 332,364 | ||||
| Noncontrolling interests | 6,020 | 6,102 | ||||
| Total stockholders' equity | 326,520 | 338,466 | ||||
| Total liabilities and stockholders' equity | $ | 584,980 | $ | 555,596 |
CONDENSED CONSOLIDATED STATEMENTS OF Operations
(IN THOUSANDS) (UNAUDITED)
| Three Months Ended | |||||
| September 30, 2022 | September 30, 2021 | ||||
| Revenues | |||||
| Capitation revenue | $ | 170,931 | $ | 172,554 | |
| Other service revenue | 287 | 516 | |||
| Total revenues | 171,218 | 173,070 | |||
| Expenses | |||||
| External provider costs | 96,237 | 90,012 | |||
| Cost of care, excluding depreciation and amortization | 53,557 | 40,728 | |||
| Center-level Contribution Margin | 21,424 | 42,330 | |||
| Sales and marketing | 4,413 | 6,293 | |||
| Corporate, general and administrative | 30,181 | 21,084 | |||
| Depreciation and amortization | 3,433 | 3,293 | |||
| Total expenses | 187,821 | 161,410 | |||
| Operating Income (Loss) | (16,603) | 11,660 | |||
| Other Income (Expense) | |||||
| Interest expense, net | (603) | (547) | |||
| Other expense | 37 | (493) | |||
| Total other expense | (566) | (1,040) | |||
| Income (Loss) Before Income Taxes | (17,169) | 10,620 | |||
| Provision for Income Taxes | (3,470) | 2,996 | |||
| Net Income (Loss) | (13,699) | 7,624 | |||
| Less: net loss attributable to noncontrolling interests | (626) | (62) | |||
| Net Income (Loss) Attributable to InnovAge Holding Corp. | $ | (13,073) | $ | 7,686 | |
| Weighted-average number of common shares outstanding - basic | 135,566,117 | 135,516,513 | |||
| Weighted-average number of common shares outstanding - diluted | 135,566,117 | 135,516,513 | |||
| Net income (loss) per share - basic | $ | (0.10) | $ | 0.06 | |
| Net income (loss) per share - diluted | $ | (0.10) | $ | 0.06 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands) (UNAUDITED)
| For the Three Months Ended September 30, | ||||||
| 2022 | 2021 | |||||
| Operating Activities | ||||||
| Net income (loss) | $ | (13,699) | $ | 7,624 | ||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||||||
| (Gain) Loss on disposal of assets | (37) | 493 | ||||
| Provision for uncollectible accounts | 1,571 | 1,268 | ||||
| Depreciation and amortization | 3,433 | 3,293 | ||||
| Noncash lease expense | 761 | - | ||||
| Amortization of deferred financing costs | 107 | 107 | ||||
| Stock-based compensation | 1,209 | 958 | ||||
| Deferred income taxes | (3,470) | 1,230 | ||||
| Changes in operating assets and liabilities, net of acquisitions | ||||||
| Accounts receivable, net | (3,180) | 2,929 | ||||
| Prepaid expenses | 1,678 | (1,597) | ||||
| Income tax receivable | 1,750 | 1,766 | ||||
| Deposits and other | 246 | (309) | ||||
| Accounts payable and accrued expenses | 1,155 | 1,248 | ||||
| Reported and estimated claims | (2,480) | 106 | ||||
| Due to Medicaid and Medicare | 1,503 | 1,443 | ||||
| Operating lease liabilities | (781) | - | ||||
| Deferred revenue | 23,361 | - | ||||
| Net cash provided by operating activities | 13,127 | 20,559 | ||||
| Investing Activities | ||||||
| Purchases of property and equipment | (7,666) | (3,042) | ||||
| Purchase of cost method investment | - | (2,000) | ||||
| Net cash used in investing activities | $ | (7,666) | $ | (5,042) | ||
| Financing Activities | ||||||
| Payments for finance lease obligations | (720) | (505) | ||||
| Principal payments on long-term debt | (948) | (947) | ||||
| Net cash used in financing activities | (1,668) | (1,452) | ||||
| INCREASE IN CASH, CASH EQUIVALENTS & RESTRICTED CASH | 3,793 | 14,065 | ||||
| CASH, CASH EQUIVALENTS & RESTRICTED CASH, BEGINNING OF PERIOD | 184,446 | 203,700 | ||||
| CASH, CASH EQUIVALENTS & RESTRICTED CASH, END OF PERIOD | $ | 188,239 | $ | 217,765 | ||
| Supplemental Cash Flows Information | ||||||
| Interest paid | $ | 700 | $ | 573 | ||
| Income taxes paid | $ | 13 | $ | - | ||
| Property and equipment included in accounts payable | $ | 2,446 | $ | 272 | ||
| Property and equipment purchased under finance leases | $ | 80 | $ | 127 |
RECONCILIATION OF GAAP AND NON-GAAP MEASURES
(In Thousands) (UNAUDITED)
| Three Months Ended | ||||||
| September 30, 2022 | September 30, 2021 | |||||
| Net income (loss) | $ | (13,699) | $ | 7,624 | ||
| Interest expense, net | 603 | 547 | ||||
| Depreciation and amortization | 3,433 | 3,293 | ||||
| Provision for income tax | (3,470) | 2,996 | ||||
| Stock-based compensation | 1,300 | 958 | ||||
| Class action litigation(a) | (46) | - | ||||
| M&A and de novo development(b) | 286 | 327 | ||||
| Business optimization(c) | 7,188 | 2,117 | ||||
| EMR implementation(d) | 590 | 350 | ||||
| Adjusted EBITDA | $ | (3,815) | $ | 18,212 | ||
| Net income (loss) margin | (8.0) | % | 4.4 | % | ||
| Adjusted EBITDA margin | (2.2) | % | 10.5 | % |