InnovAge (NASDAQ:INNV) reported fiscal second-quarter 2026 results that management said reflected continued momentum across the business, driven by improvements in revenue integrity, medical cost management, and operating efficiency. For the quarter ended Dec. 31, 2025, the company posted total revenue of $239.7 million, center-level contribution margin of $52.8 million, adjusted EBITDA of $22.2 million, and net income of $11.8 million.
CEO Patrick Blair said InnovAge generated $39.8 million of adjusted EBITDA in the first half of fiscal 2026, exceeding its full-year fiscal 2025 adjusted EBITDA of $34.5 million. He also highlighted that InnovAge achieved an adjusted EBITDA margin of 9.2% during the quarter, reaching the company’s intermediate-term target range of 8% to 9% that had been outlined previously.
What management said drove the quarter
- Revenue integrity progress, particularly around Medicaid eligibility and redeterminations. Blair said the company has invested in people, workflows, data and reporting, and technology, which contributed to improved timeliness and accuracy, reduced reserves, and reinstated coverage for some participants.
- Medical cost management, including strength in managing inpatient and skilled nursing utilization through proactive care coordination, earlier interventions, length-of-stay management, and site-of-care decisions.
- Center operating efficiency, including improved staffing consistency, scheduling, and throughput, aided by standardizing best practices and leveraging Epic.
- Lower SG&A, which Blair tied to prior organizational simplification work (spans and layers) to streamline decision-making and improve accountability.
Blair also discussed the rate backdrop. On Medicaid, he said InnovAge is seeing a “slightly more favorable blended rate environment” than initial assumptions due to state-specific dynamics and timing. On Medicare, he noted that PACE is subject to the same core payment mechanics as Medicare Advantage, while also having unique features such as the frailty adjuster based on activities of daily living.
Financial and operating metrics
CFO Ben Adams said InnovAge served approximately 8,010 participants across 20 centers as of Dec. 31, 2025, representing 7.1% growth versus the year-ago quarter and 1.5% sequential growth. The company reported 23,960 member months in the quarter, up 7.9% year over year and up about 2% from the prior quarter.
Adams said census growth exceeded expectations primarily due to success reinstating participants who had previously lost Medicaid coverage.
Revenue rose 14.7% year over year to $239.7 million, which Adams said was driven by higher member months and higher capitation rates. He noted that capitation rate increases came from annual Medicaid and Medicare increases, partially offset by revenue reserve impacts.
On costs, InnovAge reported external provider costs of $112.0 million, up 3.8% from the year-ago quarter, with Adams citing higher member months offset in part by a decrease in cost per participant. He said the cost-per-participant decline was driven primarily by lower permanent nursing facility utilization and lower pharmacy expense associated with the transition to in-house pharmacy services, partially offset by higher assisted living and nursing facility unit costs, increased assisted living utilization, and higher inpatient unit costs.
Cost of care (excluding depreciation and amortization) was $74.9 million, up 16.9% year over year, driven by higher cost per participant and higher member months. Adams cited higher salaries, wages and benefits due to wage rates and costs tied to organizational restructuring, partly offset by lower headcount. He also cited higher third-party fees and shipping associated with in-house pharmacy services and higher fleet and contract transportation costs.
Center-level contribution margin increased to $52.8 million from $37.1 million a year earlier, with margin as a percentage of revenue improving to 22% from 17.7%.
Corporate, general and administrative expense fell 5.3% year over year to $26.6 million, which Adams attributed primarily to lower legal and consulting fees. Sales and marketing expense rose to about $8.1 million, up 4.9% year over year, due to higher wage rates.
Adjusted EBITDA increased to $22.2 million from $5.9 million a year earlier. The company reported de novo center losses of $4.7 million in the quarter, primarily related to Tampa and Orlando, compared to $4.0 million in the year-ago quarter.
Balance sheet and cash flow
InnovAge ended the quarter with $83.2 million in cash and cash equivalents and $42.8 million in short-term investments. Total debt was $69.9 million, which Adams said included the senior secured term loan, revolving credit facility, and finance leases.
The company reported positive cash flow from operations of $21.4 million and capital expenditures of $2.4 million in the quarter.
Raised full-year guidance and second-half considerations
Management raised fiscal 2026 guidance, now projecting:
- Member months: 92,900 to 95,700
- Total revenue: $925 million to $950 million
- Adjusted EBITDA: $70 million to $75 million
- Ending census: 7,900 to 8,100 participants (unchanged)
- De novo losses: $11.5 million to $13.5 million
Adams said the increased outlook reflected continued operational improvement, better-than-expected Medicaid reinstatements that reduced the expected impact to member months and revenue, higher Medicaid rates than originally estimated, and Medicare risk scores being “less effective” than anticipated due to the phased-in implementation of risk adjustment model version 28 (effective Jan. 1).
During Q&A, Adams said InnovAge typically experiences a softer fiscal third quarter, citing seasonality tied to the open enrollment period and potential pressure from flu season. Blair also noted that Medicaid redetermination work remains ongoing and that the company remained mindful of processing and state-level resource constraints as it set guidance.
Participant experience and retention initiatives
Blair said InnovAge sees “substantial opportunity” ahead tied to participant experience and reducing unwarranted variation in provider practice patterns, including potential use of AI for peer benchmarks and evidence-based guidance to support physicians.
On retention, Blair said voluntary disenrollment runs about 6% annualized. He said InnovAge is focused on aligning expectations set during the sales and enrollment process with the experience once participants begin using PACE services, including standardized onboarding, grievance tracking as an “eyes and ears” mechanism, and improved service recovery. Adams added that voluntary disenrollments tend to occur within the first six months of a participant’s time in the program, making early tenure a key focus area.
Blair also discussed governance changes, noting that Tom Scully returned as chairman of the board and Pavithra Mahesh and Sean Traynor rejoined the board effective Jan. 28, while Jim Carlson will continue as an independent director.
About InnovAge (NASDAQ:INNV)
InnovAge Holdings, Inc (NASDAQ:INNV) is a healthcare services company that specializes in caring for seniors through the Program of All-Inclusive Care for the Elderly (PACE). Designed for individuals who are eligible for both Medicare and Medicaid, the PACE model integrates medical care, social services and long-term care—delivered primarily in participants’ homes and community-based centers. InnovAge’s approach centers on interdisciplinary care teams that coordinate everything from primary and specialty medical services to nutritional counseling and recreational activities.
The company’s core offerings include comprehensive in-home assessments, physician and nursing services, physical and occupational therapy, prescription medication management, and transportation to medical appointments.
