InnovAge (NASDAQ:INNV) reported fiscal 2026 revenue growth, higher census and a sharp increase in adjusted EBITDA as the provider of Program of All-Inclusive Care for the Elderly, or PACE, services said it has moved beyond a multiyear operational turnaround and is focusing on scalable growth.
For the fiscal year ended June 30, InnovAge’s adjusted EBITDA rose to $94.6 million from $34.5 million in fiscal 2025, an increase of about 175%. Adjusted EBITDA margin reached 9.6%, approaching the company’s stated long-term target of more than 10%.
“Fiscal 2026 was an exceptional year for InnovAge and a key milestone in the transformation of the company,” Chief Executive Officer Patrick Blair said. He said the company had strengthened its leadership, technology, data capabilities and discipline around medical and operating costs.
Profitability Improved Despite Legal Expenses
InnovAge reported a fiscal-year net loss of $700,000, compared with a $35.3 million loss in fiscal 2025. The company said its results were affected by one-time legal accruals, while Blair said InnovAge otherwise would have generated strong net income for the year.
Corporate, general and administrative expense increased 36.4% to $166.5 million, primarily reflecting a $36.8 million net increase in litigation and settlement expense related to various legal matters. The increase also included costs tied to organizational restructuring, executive severance, headcount and wage rates.
In the fourth quarter, InnovAge returned to profitability, reporting net income of $9.8 million, or $0.06 per share, compared with a $29.9 million net loss in the preceding quarter. Fourth-quarter adjusted EBITDA was $24.3 million, down from $30.5 million in the third quarter.
Center-level contribution margin increased 48.2% for the full year to $227.8 million. As a share of revenue, the measure improved 500 basis points to 23.0% from 18.0% a year earlier.
External provider costs rose 4.3% to $449.8 million, driven by enrollment growth but partly offset by lower costs per participant. Chief Financial Officer Ben Adams attributed the per-participant improvement primarily to lower permanent and short-stay nursing facility utilization and reduced pharmacy expense following the transition to in-house pharmacy services.
Cost of care, excluding depreciation and amortization, rose 16.1% to $312.1 million. InnovAge cited higher wages and benefits, pharmacy-related third-party fees and shipping costs, contract services, supplies, administrative expenses and fleet costs.
At year-end, the company held $97.9 million of cash and cash equivalents and $43.4 million of short-term investments, against $63.3 million of total debt.
Fiscal 2027 Outlook Calls for Continued Growth
InnovAge projected fiscal 2027 ending census of approximately 8,625 to 8,850 participants, representing growth of roughly 5% to 7.5%. The company forecast member months of 101,000 to 102,500, revenue of $1.05 billion to $1.085 billion, and adjusted EBITDA of $105 million to $115 million.
Management expects a more moderate rate environment than in fiscal 2026. Adams said the company anticipates a Medicare rate increase of approximately 1.5% to 2%, including the effect of the continuing transition to the V28 risk-adjustment model, and low-single-digit Medicaid rate increases.
The company will move to a 50/50 blend of the V22 and V28 Medicare payment models effective Jan. 1, compared with a 10% V28 and 90% legacy-model blend in the current year. Adams said InnovAge’s participant population has a high prevalence of dementia, which is treated favorably under V28.
California and Colorado, which collectively account for about 70% of InnovAge’s census, remain important uncertainties because their PACE rate-setting processes have not concluded. Management said its guidance incorporates what it considers responsible assumptions for those states.
Adams said management expects margin progress to come from utilization management, efficiencies in internal care operations and continued improvement in general and administrative costs. Fiscal 2027 de novo losses are expected to be $400,000 to $800,000, primarily related to the Bakersfield, California, center. The company’s Florida centers and Crenshaw, California, center have transitioned out of de novo status.
Company Outlines ‘InnovAge 3.0’ Growth Strategy
Blair described the company’s next strategic phase, “InnovAge 3.0,” as an effort to scale the platform after building it and then strengthening its operating and compliance foundations. The strategy includes growing enrollment at existing centers, expanding center capacity and evaluating de novo markets, acquisitions, joint ventures and other partnerships.
However, Blair said InnovAge has a high bar for new center development and believes the right acquisitions could provide better returns on invested capital than de novos over a three- to five-year period. He said the company is actively reviewing opportunities but intends to remain disciplined on acquisitions.
InnovAge is also investing in participant communication, scheduling, transportation, data integration and artificial intelligence tools. The company completed pilots of an AI-enabled physician consultation tool and a medication optimization tool. Blair said the consultation tool was associated with fewer external specialist referrals during the pilot, although management said it is too early to quantify broader effects on quality, utilization or economics.
New President and Chief Operating Officer Jenn Browne is focused on increasing consistency across centers, strengthening accountability, improving use of the company’s Epic electronic medical record system and enhancing the participant experience, Blair said.
Management also discussed early policy conversations with CMS, the Center for Medicare and Medicaid Innovation and the National PACE Association regarding ways to reduce barriers to PACE enrollment and expansion. Blair said policymakers are also considering whether aspects of the PACE model could be applied to Medicare-only adults with functional impairments who may be on a path toward institutional care, though he stressed that those discussions are preliminary and InnovAge’s outlook assumes no policy changes.
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.
