InnovAge Holding Corp. (NASDAQ:INNV) Q2 2024 Earnings Call Transcript

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Jamie Perse: Okay, thanks for that. And then just on the seasonality comments, you talked about in-patient in the quarter. Any way to put numbers to that just in terms of how that impacted external provider costs in the quarter? And then as we think about your third fiscal quarter, how should we be modelling that rolling off? What’s typical from a seasonality perspective as some of those inpatient costs come down?

Patrick Blair: First I would say the seasonality, the relevance of a seasonality consideration is probably more appropriate through the lens of the third quarter versus the second quarter, because people are going through the annual election period and it’s really going to hit us if people decided to leave PACE for Medicare Advantage. We’re just now kind of seeing that in the numbers. I don’t think we actually have a good read yet on, what’s the right seasonality, sort of cycle for the business. One day we will see information that I think gives us confidence that the seasonality could be muted, and the next day we see something to the contrary. And so I think we’re still trying to figure out exactly what’s the right guidance around seasonality and it’s just going to take — it’s going to take some experience, real time to offer that. Ben, anything you would add in terms of?

Benjamin Adams: No, I think the second part of your question, I think was really geared towards how do I think about census and member months for the back half of the year? And I guess I would tell you that, we’re not really providing any guidance on a quarter-by-quarter basis. You’ve got the data now on enrolment and member months for Q1 and Q2. If there’s any seasonality in enrolment, it’s really probably related to the third quarter, which tends to be a little bit lower for the reasons that Patrick just articulated. But then if you think about where we are in terms of our guidance targets being unchanged from where we were originally, I think you can take those three pieces of information, put them together and come up with a reasonable expectation for how we might perform over the back half of the year.

Jamie Perse: Okay, and then last quick one for me, just on maybe longer term gross margin progression, you’ve talked in the past about rebuilding that, maybe with different building blocks between the COGS lines. How are you feeling broadly about that margin recovery? Any areas you’d flag as being ahead or behind of your expectations and level of confidence in rebuilding that over the next 12 months to 18 months?

Patrick Blair: Yeah, great question. I’ll start and let Ben weigh in. I would, when I think about margin, I think we’re beginning to think about it across two dimensions in the business. I think the first priority is to get our overall center level contribution margin above 20%. And we want to do that across the portfolio and that’s inclusive of the investments we’ve made to fortify quality and compliance technology over the last year. And then I think, sort of the next consideration is more around this adjusted EBITDA target and we believe we can substantially achieve a high single digit, low double digit adjusted EBITDA. But as we’ve talked about before, it could have a little different composition on how it’s achieved, because we’re running a little heavier on the salaries, wages and benefits in the market, not only because of we’ve hired more staff and fortified our operating model, but there’s national, excuse me, natural inflationary factors that are a part of that as well that we and other healthcare organizations are dealing with.

And the long-term margin targets, I think we think of those inclusive of additional scale over time, because as we grow, we’re going to continue to leverage our corporate G&A, our Epic investment, etcetera. So at this stage, I think we’re feeling confident, but we’re very focused on the CLCM as sort of that leading indicator of what’s achievable further down on the P&L. Ben, anything to add?

Benjamin Adams: No, I think you’ve captured it perfectly.

Jamie Perse: Appreciate it, thank you.

Operator: Thank you. I’m not showing any further questions at this time. I would now like to turn it back to Patrick Blair for any closing remarks.

Patrick Blair: Well, appreciate those of you who took the time to dial in and hear more about our progress. I think I’ll close with how I opened. We’re improving the business every quarter. Delivering on that commitment is extremely important to myself and to the team. And, you know, I think the second is just transparency. We’re trying to provide as much information as possible to help you really understand how the business is operating and you can count on us to be as transparent as possible with everything that we face as we transform the company. And then I just would like to encourage everyone to join us, whether that’s in person or through a recorded call, Investor Day on February 27 and the goal there is to sort of reintroduce you to the company with a bit more detail than we’re able to provide here on these calls and answer your questions and give you just a deeper look at the business and introduce you to what I think is a fantastic leadership team that can run a much larger company and we’re excited to share the story with you.

Operator: Thank you for participation in today’s conference. This does conclude the program. You may now disconnect. Everyone have a great day.

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