InnovAge Holding Corp.

Diane, thank you for standing by. Welcome to Innovate's first quarter 2024 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 a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ryan Kubota, Director of Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, and thank you all for joining the Innovate Fiscal 2024 First Quarter Earnings Call. With me today is Patrick Blair, President and CEO, and Ben Adams, CFO. Dr. Rich Pfeiffer, our Chief Medical Officer, will also be joining the Q&A portion of the call. 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 call, we remind you that the remarks made herein are as of today, Tuesday, November 7, 2023, and have not been updated subsequent to this call. During our call, we will refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable gap measures can be found in our fiscal first quarter 2024 earnings release, which is posted on the investor relations section of our website. We will also be making forward-looking statements, including statements related to our future growth prospects, Florida de novo centers, potential acquisitions, repair capabilities and clinical value initiatives, the status of current and future regulatory actions, and other expectations. 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 2023 and our subsequent reports filed with the SEC, including our quarterly report on Form 10-Q for our fiscal first quarter 2024. After the completion of our prepared remarks, We'll open the call for questions. We'll now turn the call over to our president and CEO, Patrick Blair. Patrick?

Thank you, Ryan, and good afternoon, everyone. I want to begin by expressing my ongoing gratitude to our InnovAge colleagues, participants, government partners, and the investor community who support the organization. As it's only been two months since we reported fiscal year 23 results on September 12th, my remarks will be brief and hit on our results for the first quarter of fiscal year 2024 and progress in our key focus areas. The company's first quarter results were in line with our expectations and reflect continued momentum in our people, service, quality, growth, and financial performance measures. Our progress in these areas gives us confidence that we're growing our business in a financially responsible way, delivering high-quality service to our participants, all while ensuring our employees are engaged and committed to our mission. I'll spend more time on these areas in a moment. we reported revenue of $182.5 million, an increase of approximately 3.2% compared to the fourth quarter of fiscal year 23, and center-level contribution margin of $27.9 million, which represents a 15.3% margin. Adjusted EBITDA was $2.2 million for the quarter, which represents a significant improvement compared to the fourth quarter of fiscal year 2023, which was approximately $700,000. since its increase to 6,580, which represents a quarter over quarter improvement of 2.8%. The results represent continued sequential improvement, and we remain convinced that we have the capacity to deliver even more value to our federal, state, and shareholder partners over time. We have the right team in place, and we continue to build and enhance our processes and technology. It now boils down to driving consistent execution That said, we're still in the early innings post-sanctions and on the path back to unlocking the full potential of the organization. We remain focused on growing into the slack capacity at our existing centers, which is creating operating leverage and enabling contribution margin improvement through incremental enrollments until we reach targeted staffing ratios. Particularly in the Colorado market, enrollment growth is driving better center labor utilization, and this is also helping rebalance our mix of new and tenured participants. which should improve participant PMPM expense over time. While we remain steadfast in our sense of urgency, it will take us time to achieve . For example, while overall external provider costs were modestly higher than fourth quarter of fiscal year 2023, we observed positive trends within the quarter, which indicates the clinical value initiatives we launched in earnest late last year are starting to impact our medical cost. As we noted in our last call, we expect improvement in our medical costs throughout the fiscal year as our initiatives mature and growth positively impacts our participant mix. Turning back to our performance across people, service, quality, growth, and financial measures, we've just concluded our quarterly reporting for employee engagement, our people measure, participant net promoter score, or NPS, our service measure, and clinical quality. Our employee engagement score increased by 5% to 77%, reflecting increases in 12 of our centers. Our participant NPS increased by 13 points to 47, reflecting improvement in 15 of our centers. And based on the NPS methodology, we believe our score positions us comparatively among the top tier of health care organizations. From a quality perspective, we're seeing solid results in inpatient utilization, fall rates, and cognitive screens, among others. and we believe our results reflect top-tier performance among PACE organizations. It's our strong belief that when you have highly engaged employees delivering great service and quality, growth and financial performance will follow. I'll now spend a few minutes walking through our key focus areas. Starting with existing center growth, new participant monthly gross enrollment is back to pre-sanctioned levels. We enrolled over 200 participants across all of our centers in both August and September. which is consistent with the company's best pre-sanction periods. Specifically, the enrollment ramp in our previously sanctioned markets continues to gain momentum as Sacramento is now at pre-sanction levels and Colorado has seen monthly sequential improvement over the last six months. Further, our East Region gross enrollments are up 33% for the first quarter of fiscal year 24 compared to the first quarter of fiscal year 23. Contributing to our post-sanction enrollment ramp is the success of our new digital marketing initiative. We've seen first quarter sales qualified leads increase by approximately 75% year over year, which gives us increasing confidence that our marketing messages are reaching our target audiences and there is strong interest in our value proposition from underserved seniors looking for services and supports to help them stay safely in their homes as they age. Given the increased digital lead volume, we've made a modest investment in an inside sales team that is working the digital lead which allows our field enrollment teams to remain focused on self-generated leads from our community referral partners. While it's still early days for the inside sales capability, we're optimistic about the impact on growth, field enrollment productivity, and reducing participant acquisition costs. You'll recall last quarter we touched on enrollment as a joint effort between InnovAge and our state partners and the state subcontractors who may perform assessments, validate our assessments, and ultimately process the applications and activate new enrollments. We continue to observe situational delays in some markets in the processing of enrollment applications, and we primarily attribute this to state resource constraints. While this doesn't impact the eligibility of our prospective participants, it can delay enrollments and cause eligible participants to seek other solutions. We are working collaboratively with all the stakeholders for which we have some dependency to address delays proactively as they surface to ensure we can enroll deserving seniors as quickly as possible. I'd like to take a moment to thank our partners for their ongoing support and collaboration as we work together to help more seniors benefit from PACE. In Florida, we continue to make progress on the administrative requirements to open centers in Tampa and Orlando. We recently moved to the next stage of the process in Tampa, which is the final review by CMS. In Orlando, we conducted the state readiness review in October and anticipate feedback imminently. You'll recall from last quarter's update that we're targeting opening around the end of the calendar year. While we are doing everything in our control to open these centers as quickly as we can, not all the steps are in our locus of control, and it is becoming increasingly likely that opening dates for Tampa and Orlando could shift early in the new year. Overall, we remain enthusiastic that these two centers will expand our total center and census capacity by over 20% and believe each center with census capacity of 1,300 will meaningfully increase our overall organic growth curve over the next couple of years. Regarding our de novo center in Downey, California, a large market southeast of Los Angeles, we continue to work with the Department of Healthcare Services in California toward a mid-year calendar 2024 opening. In addition to same-center organic growth, we believe these new locations create visibility into multi-year, double-digit, top-line growth and embedded future earnings. Operationally, we continue to make meaningful progress improving how we're managing our centers according to what we call the One End of Age Way. We're reducing variation in business processes, policies, and procedures among our centers, which is leading to improvements in operational compliance, productivity, clinical quality, and unit economics across our platform. Clinically, we continue to strengthen our payer capabilities through our clinical value initiatives. This quarter, we achieved meaningful improvements in inpatient utilization, which was 5.3% relative to 5.8% in the fourth quarter of fiscal year 23. We've kept our short-stay skilled nursing utilization rate below 2% this quarter, which you'll recall was down approximately 23% in fiscal year 23 relative to fiscal year 2022. and we've begun transitioning our assisted living facility and nursing home providers into high-performing networks, which include providers who consistently deliver more compliant and higher-quality care, lower costs, and are more collaborative with our care teams. We're excited about the impact this will have on the quality of care we can offer our participants. Further, we continue to work with our vendors to identify improvements in risk score capture accuracy. Counterbalancing the improvements in utilization that we're seeing We have observed some modest increase in inpatient unit cost and higher outpatient services utilization in the first quarter, which isn't unexpected as we continue to work through the lingering risk pool impacts of the Colorado sanction on participant acuity. We continue to work through the multiple levers to get to targeted levels and ensure a financially attractive margin overall. Regarding technology, we have 14 of our 17 centers live on MPIC, with the remainder scheduled for the second fiscal quarter. Though it takes time to realize the full extent of anticipated benefits of our new system, we're encouraged by the operational efficiencies that are emerging and the positive feedback our administrative and clinical teams are sharing. For example, since going live in Pennsylvania, Virginia, and Colorado, we've exchanged over 200,000 participant health records with specialists and hospital partners using Epic's interoperability capability within their provider ecosystem. Previously, this level of health information exchange consumed significant labor and time and was prone to inefficiency and rework. Now, we have a single record source which is shared and available real time with many of our external partners. We expect that in time, the network effect will grow and it will enable better service, access, quality, costs, and labor efficiency. Epic ranks its users against the overall Epic community as our clinicians go live and features are implemented. As a testament to our early progress, Epic has shared with us that we're in the top quartile of feature adoption in the areas of physician productivity, nurse productivity, and population health management. As I've mentioned, these are all dials and not switches, but we're pleased to see these activities starting to have an impact and ultimately value on our business. In summary, we're just beginning to unlock the full potential of the organization. I greatly appreciate the continued commitment from our more than 2,100 colleagues nationally and the ongoing support of our valued government partners. We remain focused on demonstrating incremental improvement quarter over quarter in each of our focus areas. I believe there is momentum building from our team's work, and in time, this will translate to improved financial performance and enable us to return to normalized margins. We are humbled by the responsibility to serve the many underserved PACE eligibles in our communities and are thrilled to be returning to responsible growth. With that, I'll turn it over to Ben to review the financials in detail. Thank you, Patrick.