0001834376-26-000013
SEC filingRevenue grew 14.9% YoY driven by census and rate increases, with improved profitability and operating leverage.
For the six months ended December 31, 2025, total revenues increased 14.9% to $475.8 million from $414.1 million in the prior year period. Capitation revenue drove the growth, rising 15.0% to $475.4 million due to a 5.6% increase in capitation rates (Medicare +3.9%, Medicaid +8.0% partially offset by revenue reserve) and an 8.9% increase in member months. The census expansion was broad-based, led by centers in California, Florida, and Colorado.
Operating income swung from a loss of $17.5 million to a profit of $21.6 million. The improvement was driven by revenue growth outpacing expense increases, particularly in external provider costs which rose only 2.7% (vs. 14.9% revenue growth). Cost of care (excluding D&A) increased 18.3%, mainly due to higher wages, fleet costs, and third-party fees from in-house pharmacy transition. Sales and marketing rose 10.5% to support growth, while corporate G&A increased 2.2%. Net income attributable to InnovAge reached $18.6 million versus a loss of $18.2 million in the prior year. Adjusted EBITDA margin expanded to 8.4% from 3.0%, reflecting operating leverage.
The PACE segment is the primary operating unit, contributing essentially all revenue. Center-level Contribution Margin increased to $104.2 million (21.9% of revenue) from $71.6 million (17.3% of revenue) in the prior year. The improvement was driven by revenue growth (14.7%) outpacing combined external provider costs and cost of care (8.7% increase). The Senior Housing segment (non-PACE) generated negligible revenue and was sold in September 2025; its impact on ongoing operations is immaterial.
Management highlighted several headwinds and priorities. Labor market pressures persist, with competition for nurses and caregivers driving wage inflation and reliance on agency staffing. The company is implementing retention programs and operational measures to improve productivity. Regulatory uncertainties include the California moratorium on new PACE applications (effective November 2025) which could limit expansion in the state. The OBBBA may reduce federal Medicaid spending and increase compliance costs, though specific impacts are not yet quantifiable. The company continues to invest in clinical value initiatives and in-house pharmacy to manage cost trends. While no formal guidance was provided, trends in census growth, rate increases, and cost containment suggest continued margin improvement, subject to macro and regulatory risks.
As of December 31, 2025, InnovAge held $83.2M in cash and cash equivalents and $42.8M in short-term investments (mutual funds), totaling $125.9M in liquid assets. This compares to $105.9M at June 30, 2025. Total assets stood at $527.5M, with $164.6M in property and equipment net, $142.0M goodwill, and $24.8M operating lease assets. Total liabilities were $238.7M, including $62.4M in reported and estimated claims and $59.4M in debt. Stockholders' equity was $261.2M.
The Notes disclose no material purchase commitments. Operating lease obligations total $33.3M ($26.4M lease liability), and finance lease obligations total $12.3M ($10.4M liability). The company is involved in several legal proceedings (CIDs, stockholder lawsuits, arbitration), but no accruals have been recorded as losses are not probable or estimable. Notably, the securities class action was settled for $27.0M, with $10.1M paid by the company (net of insurance).
Share repurchases: No activity in the six months ended Dec 31, 2025, vs $5.9M in prior year; no remaining authorization disclosed. Dividends: None. Debt: Total debt decreased $0.6M from June 2025, with $60.1M issued (Term Loan A refinancing) and $60.6M repaid. Capex: $6.4M in six months (1.3% of revenue). Stock-based compensation: $3.5M.
The company operates as one reportable segment, PACE. Two operating segments (East and West) are aggregated. For the three months ended Dec 31, 2025, PACE generated $239.7M revenue (all capitation except $0.1M other). Center-Level Contribution Margin was $52.8M (22.0% of revenue), up from $37.0M (17.8%) in prior year. External provider costs were $112.0M, cost of care $74.9M. All other (Senior Housing) was immaterial and sold in Sep 2025. Revenue by payer: Medicaid 56%, Medicare 44%, private pay <1%.
Net income of $19.5M was supported by operating cash flow of $25.3M, indicating healthy cash conversion. Key adjustments: depreciation ($10.0M), stock-based compensation ($3.5M), and impairments ($0.1M). Working capital changes contributed positively, notably accounts receivable decline of $15.1M, offset by a $19.6M decrease in accounts payable. Capex of $6.4M consumed 25% of CFO. No dividends or share repurchases were paid. The company raised $60.1M in long-term debt while repaying $60.6M, resulting in minimal net financing. Overall, cash flow from operations improved sharply from a prior-year loss, driven by profitability and working capital management.