InnovAge Holding Corp.

Good day and thank you for standing by. Welcome to the InnovAge fourth quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during a session, you will 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 will now hand the conference over to your first speaker today, Ryan Kubota, Director of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and thank you all for joining the InnoVAGE 2024 Fiscal Fourth Quarter and Fiscal Year-End Earnings Call. With me today is Patrick Blair, President and CEO, and Ben Adams, CFO. Today, after the market closed, we issued a press release containing detailed information on our fourth quarter and annual results. you may access the release on the investor relations section of our company website, Innovate.com. For those listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, Tuesday, September 10, 2024, 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 GAAP measures can be found in our earnings press release posted on our website. We will also be making forward-looking statements, including statements related to our full fiscal 2025 year projections, future growth prospects and growth strategy, our clinical and operational value initiatives, Medicare rate increases, census headwinds, 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 annual report on Form 10-K for fiscal year 2024 and any subsequent reports filed with the SEC. After the completion of our prepared remarks, we will open the call for questions. I will 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 continued appreciation to our colleagues, participants, government partners, and investor community who support InnovAge. Today, we will provide several updates on our financial results for the fourth quarter and full year fiscal 2024, initial guidance for fiscal year 2025, and progress in our key focus areas. Let me start with our fourth quarter performance. Today, we reported revenue of approximately $199 million, a sequential improvement of approximately 3.3% compared to the third quarter. Center-level contribution margin was $36.6 million, which represents an 18.3% margin. As Ben will cover in more detail, we have revised our definition of adjusted EBITDA this year, resulting in fourth quarter adjusted EBITDA of approximately $5.2 million, which represents a 2.6% margin. We finished the year with a census of approximately 7,020, just shy of the company's high watermark of 7,074 in mid-fiscal 2022. Our fourth quarter completes a solid year of operating and financial performance. Moving to full-year performance, we reported total revenue of approximately $764 million, an increase of approximately 11% compared to fiscal year 2023. Center-level contribution margin was approximately $132 million, which represents a 17.3% margin. Year-over-year center-level contribution margin increased by approximately 260 basis points from 14.7% to 17.3%, driven by census growth, disciplined medical cost management, and administrative cost controls. Consolidated adjusted EBITDA was $16.5 million under our revised presentation, which represents a 2.2% margin. compared to negative $3.4 million in fiscal 2023, an improvement of approximately $20 million. Under the previous presentation, our fiscal 2024 EBITDA would have been $19.8 million, which compares favorably to our full-year guidance of $12 to $18 million. We are proud of the strong year-over-year financial results and the positive momentum as we move out of the rebuilding period of our transformation and into the next phase of responsible growth and margin recapture. To recap a few fiscal 24 operating performance milestones, we exceeded our employee engagement, participant satisfaction, and quality targets. We acquired two California centers. We executed a joint venture with Orlando Health. We opened two new state-of-the-art centers in Florida. We further strengthened the essential payer capabilities in areas such as Medicaid rate actuarial soundness, risk score accuracy, provider network optimization, and medical cost management. We increased center utilization by 440 basis points in our established centers. We completed the epic EMR rollout in all 20 centers. And we sold a non-core senior living facility and reinvested in our core business. We outlined an ambitious agenda last year, and we believe we delivered. I'm proud of our team for their perseverance while keeping high-quality, compliant care as our top priority. We plan to do the same in fiscal 2025. We feel confident that we have created a differentiated and powerful platform from which to grow responsibly and profitably in fiscal 2025, and we believe we are on track to achieve the full potential of the organization in the years to come. Turning now to our fiscal year 2025 guidance, we projected a census range of 7,300 to 7,750, member months of 86,000 to 89,000, total revenue of $815 million to $865 million, consolidated adjusted EBITDA of $24 to $31 million, and de novo losses of $18 to $20 million. We anticipate seeing improvement in our profitability as the year progresses and exiting the year with a higher run rate earnings. Consistent with the targets we provided at our February Investor Day, we expect our adjusted EBITDA margins to reach 8 to 9% over the intermediate term. Ben will take you through a more detailed fiscal 2025 guidance review in a few minutes. Now on to existing center growth. We used fiscal 2024 to test and learn. We launched a new telephonic inside sales team to handle the increased lead volume from our referral partners and digital marketing campaigns. We built new referral partnerships, which have created greater awareness of the PACE program and extended our reach into the communities we serve. We also optimized our digital campaigns, which increased the volume and yield of qualified leads. And we invested in tools and technology to make our enrollment teams more effective and productive. However, as we mentioned on the last couple of quarterly calls, challenges persist with enrollment processing times in some states. Specifically, we have been experiencing state delays completing the level of care assessments required for enrollment and pace. We continue working closely with our state partners to address these delays and are beginning to see improvement. Despite this headwind, we anticipate healthy overall top-line growth and remain encouraged by robust demand for the PACE model of care. While we remain confident that these challenges will be resolved, the exact timing is not clear, and the uncertainty is reflected in our guidance. Should these challenges abate more quickly than anticipated, we would expect modest upside to our census this year. In our de novo centers, we continue to make progress despite a slower start than we anticipated. Our new centers in Florida are gaining traction as we build awareness of pace and innovate. And in Orlando specifically, we have created a joint venture with Orlando Health, consistent with our strategy, to find new avenues for growth by establishing partnerships with leading health system brands in our communities. The partnership is in the early stages, but we're excited by the potential, and we're honored to be working with such an outstanding organization. In our new Crenshaw Center, we're beginning to see our enrollment trend up on a month-over-month basis, and we're largely hitting the mark on our expectations. It's important to note that the full-year impact of these new centers will create additional year-over-year operating losses in fiscal 2025 as we work through the maturity curve of each of these de novo centers. On the regulatory front, our focus is on bringing our California audits to conclusions. The San Bernardino state audit commenced in March, and the exit interviews anticipated within the next two months. In Sacramento, we submitted our corrective action plans to the state in March and are still awaiting final feedback. Recall in March, CMS officially closed its portion of the audit. Following resolution of the audits and corrective actions in San Bernardino and Sacramento, we expect to resume discussions with the state regarding the reinstatement of our Downey and Bakersfield expansion plan. Operationally, we remain laser-focused on delivering compliant, high-quality care with strong medical management and operating discipline at every center. To that end, our fiscal 2024 external provider cost, PMPM, increased by approximately 3% in an inflationary environment where core health care cost trends significantly exceeded this level. This provides confidence that our operational and clinical teams are focused on the right levers which drive high-quality care while reducing unnecessary utilization. While we implemented several new clinical value initiatives last year, we expect to see the full-year impact this year and will accelerate actions to drive continuous improvement in new initiatives in fiscal 2025. As we enter year two on the EPIC system, we are beginning to experience the benefits in care coordination, documentation, compliance, and risk score accuracy. Further, we have introduced operational value initiatives, or OVIs, to complement our clinical value initiatives. These initiatives are focused on identifying value creation opportunities at the center level and the corporate SG&A level to drive staff productivity, operating efficiency, and improve vendor unit economics from better leveraging people, process, and technology. The foundations for operational excellence are in place across the organization. Now we must execute a little better every day. In closing, we continue to make tangible progress every quarter. We have more top and bottom line work to do, but we're pleased with our fiscal year 2024 performance and are confident in our fiscal year 2025 guidance. We view fiscal 2025 as an important year to achieving our long-term goals, and you can expect the same execution focus that you've seen from this team for the last two years. Lastly, I want to extend my deepest gratitude to our more than 2,000 employees who embrace our mission every day and enable our participants to have more healthy days. With that, I'll turn it over to Ben. Ben?