InnovAge Holding Corp.

Ladies and gentlemen, thank you for standing by, and welcome to the N of H first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker for today. Ryan Cabuto, you may begin.

Thank you, Operator. Good afternoon, and thank you all for joining Innovate's fiscal 2022 first quarter earnings call. With me today are Maureen Hewitt, President and CEO, and Barb Gutierrez, CFO. Today, after the market closed, we issued a press release containing detailed information on our quarterly results. You may access the release on our company website, innovage.com. For those listening to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, Tuesday, November 9th, 2021, and have not been updated subsequent to the initial earnings call. During this 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 fiscal first quarter 2022 press release, which is posted on the investor relations section of our website. During the call, we will be making forward-looking statements, including statements related to our growth prospects, regulatory, and other expectations, and our outlook on fiscal year 2022. Listeners are cautioned that all of our forward-looking statements involve certain assumptions and 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 Form 10-K Annual Report for Fiscal Year 2021 and subsequent reports filed with the SEC. After the completion of our prepared remarks, we will open the call to take your questions. I will now turn the call over to our President and CEO, Maureen Hewitt. Maureen?

Thank you, Ryan, and thank you all for joining us this afternoon. I am pleased to report that we have a strong start to our 2022 fiscal year and that we are reaffirming the guidance that we provided on our last earnings call in September for fiscal year 2022. As of the end of the quarter, Innovate served approximately 6,990 participants This represents an increase of approximately 7.2% compared to the first quarter of fiscal year 2021, when including Sacramento Census, which was not consolidated in the first quarter of fiscal 2021. We reported strong first quarter revenue of approximately $173 million, an increase of nearly 13.5% compared to the previous fiscal year as a result of census growth and an increase in rates. We also reported a center level contribution margin of more than $42 million and corresponding center level contribution margin ratio of 24.5%. I will now provide an update on our growth strategy. We remain on track with the three de novo centers we expect to open in fiscal 2023, two in Florida, Tampa, and Orlando, and one in Louisville, Kentucky. All three of the sites that we have selected are in the process of being renovated, and we continue to work diligently through the development process. While currently on track, as with every development, there are factors beyond our control that may impact our expected timeline. We also continue to evaluate locations for two additional centers, and our current plan is to have those two additional centers operational in fiscal year 2024, subject to factors beyond our control. Regarding acquisitions, we continue to pursue acquisition opportunities in new markets with experienced community partners who have established footprints and where the economics make sense. We are also continuing to look for joint venture opportunities that provide strong strategic value. Regarding vaccinations, last week, the Biden administration announced that COVID-19 vaccinations will be required for healthcare facilities that participate in the Medicare and Medicaid programs, and that all eligible employees must be fully vaccinated by January 4th, 2022. I am pleased to announce that we continue to increase our employee and participant vaccination rates. As of November 1st, 98% of our employees and 89% of our participants have been fully vaccinated. We are pleased that we continue to increase our vaccination rates, and we are targeting a 90% vaccination rate for our participants, as we did with employees. During the quarter, we also began flu vaccinations for our employees and participants, and we are targeting a 90% vaccination rate for the flu vaccine as well. We continue to carefully monitor COVID trends in each of our markets and centers. All of our 18 centers are open with the appropriate COVID safety protocols in place. If COVID cases rise to a level where it is no longer safe to operate a center, We have the protocols in place to close the centers fully or partially and deliver our comprehensive care model in the home and virtually and ultimately reopen centers in a phased approach. Participant health and safety remain our primary focus, and we believe we have the appropriate protocols should any of our staff or our participants test positive for COVID. Enrollment growth continues to improve and has surpassed pre-pandemic levels. Our participants continue to serve as ambassadors for the InnovAge brand, and referrals we receive from our own InnovAge participants have historically made up approximately 25% of census growth. In addition, our recently launched digital marketing strategy has continued to grow our referral base. In the first quarter, digital referrals grew 65% compared to the previous quarter, and we continue to invest in this channel and refine our strategies to maximize the impact on census growth. I now want to briefly discuss labor and wage inflation as we continue to receive questions about this topic. As we mentioned on the last call, it is no secret that the healthcare sector has historically faced a shortage of licensed practical nurses, registered nurses, certified nursing assistants, and other frontline healthcare workers, like drivers. And the COVID pandemic has not helped the situation. The historical shortage of healthcare workers has long required us to think outside the box, to fill our recruiting needs, and that adaptability is a strength that we continue to use as we grow our business. To mitigate potential labor disruption, we have made wage adjustments for key positions throughout our centers, which we have factored into our fiscal year 2022 guidance. We are also continuing to evaluate our recruiting competitiveness on an ongoing basis. We are experiencing longer lead times for recruiting new talent. As a result, we are focused on expanding our employee referral program. and we have developed our own pilot program in Colorado to train certified nursing assistants that we can then employ. Our top priority is ensuring that we are appropriately staffed to care for our participants. In markets where recruitment has been slower than anticipated, we have been able to supplement with temporary labor in order to maintain appropriate staffing levels. Importantly, our guidance for fiscal year 2022 reflects our expectation that the labor market continues to remain tight. I will now provide a brief update on the regulatory environment. We continue to see positive federal and state legislative activity reflecting bipartisan support of PACE. Regarding the current federal legislative activity, the pending budget reconciliation package is still being discussed in the House and Senate The package could provide additional funding for PACE providers through home and community-based services known as HCBS and beneficial policy changes that would increase access to PACE. The House Committee on Energy and Commerce has recommended $190 billion of HCBS funding. We believe this increase in funding will ultimately benefit the PACE program, and we remain strong advocates for program support that will help increase market awareness and participant access for PACE beneficiaries. On October 20th, the Centers for Medicare and Medicaid Innovation, or CMMI, published its Strategy Refresh Plan that charts a path for the next 10 years. The first objective in the strategic plan is to drive accountable care. CMMI cites PACE specifically as a program that could be included as an accountable care entity. We also believe the PACE model of care lines up well with CMMI's key priorities as we provide a more holistic approach to care, incorporate social determinants of health in participant care plans, empower beneficiaries as consumers, and improve outcomes. As we prepare for new programs from CMMI, we have begun to work with the National PACE Association, or NPA, and other PACE organizations to evaluate models that may fit within the key themes that CMMI is looking for. Also, in late October, the Federal Department of Health and Human Services announced each state's plan for how they will spend the additional 10% increase to the state federal match for Medicaid home and community-based services. This announcement, which is part of the American Rescue Plan Act, is expected to add approximately $12.7 billion nationally and provide additional funding to encourage states to expand home and community-based services and strengthen their Medicaid programs. Regarding state legislation, in Michigan, Pending Senate Bill 203 remains active and is pending committee vote, and they have until the legislature adjourns in December 2022 to vote on it. I will now provide a brief update on the status of our audits in Sacramento and Colorado. We have worked and continue to work collaboratively with our regulators as we seek to constantly improve our processes and outcomes to better serve our participants and their families. In Sacramento, we submitted our corrective action plan last month, and we received an additional request for information in early November. We expect to provide the requested information in the next few weeks, and at that time, the corrective action plan will be under review by CMS and the state. We began implementing the proposed corrective actions even prior to submitting the plan. If and when CMS accepts the corrective action plan, they will then begin monitoring its execution, and if satisfied, will then allow the center to run unmonitored for an unspecified amount of time. Once and if CMS is satisfied that the issues raised have been remediated and are not likely to reoccur, they may lift the freeze. While we can provide a general overview of the expected process, there is no standard timeframe for these events to occur, and there is no guarantee that CMS will be satisfied with the corrective actions or will not impose additional sanctions. For context, there were less than 200 participants in our Sacramento Center as of the beginning of this month. In Colorado, as previously indicated, The state and CMS completed their audit work in July, and in October, we received validation results from CMS. In conjunction with the validation results, the agencies referred our case to the Compliance and Enforcement Division of CMS for review and possible further action. With respect to the Colorado audits, to date, we have no indication of whether the agencies intend to freeze or otherwise curtail our program or impose other sanctions. Additionally, given the recent referral to the compliance and enforcement division, we do not have an indication of what further action, if any, the division may take. We cannot guarantee the outcomes of these audits. Finally, we will begin a routine audit in New Mexico that will be handled remotely. We are committed to the quality improvement and comprehensive care coordination in each of our centers We believe the audit process is important to the integrity of the program, and each audit we undergo is an opportunity for us to improve the PACE program, improve our services, and ultimately the outcomes of our participants. These audits will continue to make our program better over the long term, and we are taking lessons we have learned from these audits and applying them as we continue to grow. And before I turn the call over to Barb to review our financial performance in more detail, I want to thank all of our employees for their hard work and dedication providing high-quality care for the participants that we serve every day. Barb?