UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 27, 2024
(Exact name of registrant as specified in its charter)
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| (Address of principal executive offices) | (Zip Code) | |||||||
(844 ) 803-8745
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Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Item 7.01 Regulation FD Disclosure.
On February 27, 2024, InnovAge Holding Corp. (the “Company”) is hosting an investor conference via live webcast. The slide presentation to be used in conjunction with the investor conference is furnished herewith as Exhibit 99.1 and will be posted on the Company’s website.
The information in this Item 7.01, including the exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. This information shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference to such disclosure in this Form 8-K in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit | Description | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| INNOVAGE HOLDING CORP. | ||||||||
Date: February 27, 2024 | By: | /s/ Benjamin C. Adams | ||||||
Name: | Benjamin C. Adams | |||||||
Title: | Chief Financial Officer | |||||||
2024 Investor Day February 2024 d
Disclaimer Cautionary Note Regarding Forward-Looking Statements: These presentation materials contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, including, without limitation, estimates of and goals for future operating, financial and tax performance and results, as well as the expected execution and effect of our business strategies, including our growth strategies in new and existing centers, ongoing macroeconomic challenges, including an increased competitive labor market and inflation, our growth initiatives, including our M&A activity and de novo centers and our ability to integrate the same, and strategic collaborations. Forward-looking statements can often be identified by the use of terminology such as “expect,” “likely,” “outlook,” “forecast,” “would,” “could,” “should,” “project,” “intend,” “plan,” “opportunity,” “goal,” “target,” “aim,” “continue,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” and variations of such words and similar expressions. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, that could cause actual results to vary materially from those indicated or anticipated. Examples of forward-looking statements include, among others, statements we may make regarding our ability or expectations to increase the number of participants we serve, to grow enrollment and capacity within existing and new centers, to build additional de novo centers, to expand into new geographies, to execute on tuck-in acquisitions, to recruit new participants and directly contract with government payors, quarterly or annual guidance, our financial outlook, including future revenues and future earnings, expectation regarding legal proceedings or ongoing audits, reimbursement and regulatory developments, market developments, new products and growth strategies, integration activities and the effects of any of the foregoing on our future results of operations or financial conditions. For a detailed discussion of the risks and uncertainties that could affect our actual results, please refer to the risk factors identified in our periodic reports filed with the SEC, including, but not limited to our most recent Annual Report on Form 10-K, and Quarterly Report on Form 10-Q, as may be supplemented or amended. We do not undertake, and expressly disclaim, any duty or obligation to update publicly any forward- looking statement after the date of this presentation, except as required by law. Non-GAAP Financial Measures: This presentation includes certain non-GAAP financial measures, including center-level contribution margin and all measures whose label includes the words “adjusted” or variations of such words and similar expressions, and we refer you to the Appendix to the presentation materials available on our investor relations website for reconciliations to the most directly comparable U.S. GAAP financial measures and related information. We believe the non-GAAP numbers included in these presentation materials are helpful to understand the company’s operating performance, but has limitations, and you should not consider non-GAAP numbers in isolation or as a substitute for analysis of the company’s financial measures determined in accordance with GAAP. These presentation materials, the Appendix hereto and the related management presentation are integrally related and are intended to be presented, considered and understood together. † We do not provide reconciliations for future projections of Adjusted EBITDA. The Company is unable to provide guidance for net income (loss) or a reconciliation of the Company’s Adjusted EBITDA guidance because it cannot provide a meaningful or accurate calculation or estimation of certain reconciling items without unreasonable effort. The Company’s inability to do so is due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including variations in effective tax rate, expenses to be incurred for acquisition activities and other one-time or exceptional items. 2
Investor Day Agenda 3 1 Re-Introduction To InnovAge PATRICK BLAIR
Investment highlights With focus and execution, we believe InnovAge can deliver attractive top-line growth at a long-term sustainable margin Focus on a largely untapped and growing market enabling frail seniors to remain independent by fully integrating Medicare and Medicaid services Powerful unit economics and quality outcomes driven by controlling more of the healthcare dollar than any other value-based care model Most sophisticated national PACE platform with best-in-class provider AND payor capabilities Management bench with extensive senior care experience in compliance and performance-oriented cultures 4 Recent investments coupled with meaningful center capacity create significant embedded earnings with visibility into strong organic growth and considerable margin expansion
InnovAge at a glance We are A PACE organization which keeps people living independently as long as safely possible (nursing home avoidance) We Deliver Comprehensive, personalized, interdisciplinary care for high-cost, dual-eligible seniors We Leverage A center-based model that is the hub of care coordination and the provision of services through a standardized operating model We Create Value for participants, their families, government payors and providers 19 6 ~6,780 ~2,100 ~2.2M ~$235B care centers (plus 3 under development) participants1 addressable lives3 states employees2 addressable core market4 Note: FYE as of June 30. 1. As of December 31, 2023. 2. As of June 30, 2023. 3. Estimated PACE eligible population in the U.S. based on data from the U.S. Census Bureau from 2018, representing seniors who we believe are dually eligible for Medicare and Medicaid and meet the nursing home eligibility criteria for PACE. 4. Based on our estimated market of 2.2 million PACE eligible participants in the U.S. in 2022. 5. Reflects improvement from 13.0% in 1HFY23 to 16.6% in 1HFY24. Consolidated Center-Level Contribution Margin is a non-GAAP measure. See Appendix for a reconciliation to the most directly comparable U.S. GAAP measure. 5 $725 - $775M $12 - $18M FY 2024E revenue FY 2024E adj. EBITDA guidance $10 - $12M FY 2024E De novo losses +13% +360bps Revenue Growth (2QFY24 vs 2QFY23) CLCM margin improvement (1HFY24 vs 1HFY23)5
InnovAge delivers value to all stakeholders 6 Savings to Medicare and Medicaid Capitated payment aligns incentives and provides fiscal certainty Provides comprehensive solution to underserved aging population Ability to live independently in their homes and communities Seamless integration of Medicare and Medicaid benefits Improved health outcomes Reduced caregiver burden Peace of mind Increased job satisfaction – more time with patients Concierge care model Focus on improving the lives of their patients Government Partners FamiliesProvidersParticipants
1. As of December 31, 2023. 2. NPS defined as rating of who would recommend InnovAge to a friend. Average NPS of Heath Plans is 27 per Satmetrix NICE 2021 industry report. 3. As reported by the National PACE Association (NPA), PACE by the Numbers, January 2024. Based on an analysis by the NPA, 2021 of PACE Upper Payment Limits and Capitation Rates. 4. Average low- to medium-severity emergency department visits and hospital admissions relative to a comparable Medicare fee-for-service population with similar risk scores based on most recently available data from 2018. Based on InnovAge estimates as of June 30, 2022. 5. Defined as total inpatient admissions to total member months for the 12-months ending June 30, 2023. 6. InnovAge data as of December 31, 2023. 7 Our model of care drives superior health outcomes and lower healthcare costs Participants remain in the community1 Net Promoter Score2 Lower cost to Medicaid3 Reduction in low-to-medium severity ER visits4 90% 47 73% 12% Independent Living Patient Satisfaction Lower Costs High Engagement 5.5% 10.3Appropriate Utilization Risk Prevention Inpatient Admits5 Falls per 100 participants6
InnovAge is a PACE market leader in a large, growing senior market Addressable Market PACE Enrollment (000s)6 35 70 2015 2023 2028 CAGR: 20%+ CAGR: 9% Projected growth acceleration driven by increased PACE awareness, growing support for capitated models, and geographic expansion Government Healthcare Spend $1.5tn+2 Annual U.S. Healthcare Spend ~$4.3tn1 Current PACE enrollment: ~72k5 (~3% penetration across 32 states) PACE TAM $235bn+4 Duals Spend ~$500bn3 Medicare Eligible Dual Eligible PACE Eligible ~62.5 Milllion2 ~12.8 Million3 ~2.2 Million4 8 Note: TAM represents total addressable market. 1. CMS Office of the Actuary, National Health Expenditures in the U.S. in 2021. 2. CMS Office of the Actuary, represents Medicare Eligibles and Medicare and Medicaid spending as of 2021. 3. Based on January 2024 MACPAC Dually Eligible Data Book for calendar year 2021. 4. InnovAge estimate in 2022 based on data from the U.S. Census Bureau from 2018. 5. National Pace Association (NPA) PACE In the States, December 2023. 6. 2028E represents national target per NPA presentation as of November 2023. 200
Market EvolutionHistorical Barriers Market landscape for PACE is evolving 9 Regulatory structure only allowed not-for-profit entities (changed in 2015) Largely comprised of single-center, single-market not-for-profit providers less oriented to geographic expansion Capital intensity created barriers to new PACE program growth Regulatory agencies focused on the launch of larger programs (e.g. Medicare Advantage, Medicaid Managed Long-Term Care Services, ACO, Exchanges) Demographics continue to support market growth Ongoing shift to care being delivered at lower cost in ambulatory settings and in the home COVID-19 put spotlight on the advantages of PACE and the risks of nursing homes Emergence of for-profit entrants with the capital to execute on multi-faceted growth strategy Regulatory stakeholders more open to remove barriers for enrollment and expansion PACE programs can only enroll individuals on the first of the month (and CMS only accepts applications once per quarter)1 1. Applies to both new PACE programs and service area expansions.
PACE is positioned towards the end of the healthcare continuum 1. As reported by the National PACE Association (NPA), PACE by the Numbers, January 2024. Younger, healthier, individual with Commercial Insurance (or uninsured) Becomes Medicare eligible due to age (65+) or disability (<65) Becomes Medicaid eligible due to income and/or disability Becomes eligible for Medicaid home and community- based services due to activities of daily living assistance (e.g., requires assistance with 1-2 ADLs) Becomes nursing home eligible due to increased ADL needs (e.g., requires help with 2-4 ADLs as determined by state) Becomes PACE participant to remain independent (Avg Age: 761) 10
The PACE model offers the most comprehensive healthcare benefits 11 Original Medicare Medicare Advantage Medicaid Long-Term Services & Supports PACE Physician Care Hospital Care Pharmacy Supplemental Benefits (e.g., Vision, Dental) Home Health (Skilled) Transportation1 Home Care (Unskilled) Adult Day Services Assisted Living (when required) Nursing Facility (when required) 1. Frequently offered as a supplemental benefit through Medicare Advantage.
Medicare Advantage (MA) Original Medicare (FFS) No Medicare1 Managed Long-Term Care Medicaid Fee For Service (FFS) No Medicaid Prior Medicare Coverage InnovAge competes effectively against other models and provides access to a large addressable market Note: Sample size of 581 InnovAge survey respondents taken in in Q4 FY2023. Does not sum to 100% due to rounding. 1. Represents Medicaid only portion of population which includes under 65 population who qualify for Medicaid based on ADL support requirement, a disability, or immigration status. Why We Win 1 2 3 Individuals coming from an MA plan More expansive benefit package and integrated care team Individuals coming from FFS Coordinated and fully integrated system of care Individuals without Medicaid PACE assists individuals with applying for Medicaid benefits 13% 5% 17%4% 2% 3% 22%25% 1 2 8% 3 12 Pr io r M ed ic ai d C ov er ag e Participant health insurance prior to joining InnovAge
In the last 2 years, we have built a best-in-class PACE management team Patrick Blair President & CEO* 2 years at InnovAge; 20+ years in industry Ben Adams Chief Financial Officer* Joined InnovAge in 2023; 30+ years in industry Chris Bent Chief Operations Officer* Joined InnovAge in 2023; 30+ years in industry Richard Feifer, MD, MPH, FACP Chief Medical Officer* Joined InnovAge in 2022; 25+ years in industry Nicole D'Amato Chief Legal Officer & Corporate Secretary* Joined InnovAge in 2021 Dustin Lee Chief People Officer Joined InnovAge in 2022 Cara Babachicos Chief Information Officer Joined InnovAge in 2022; 25+ years in industry Rob Borella Chief Sales & Marketing Officer Joined InnovAge in 2022 Matt Huray Chief Strategy & Corp. Dev. Officer Joined InnovAge in 2022; 15+ years in industry Olivia Patton Chief Compliance Officer Joined InnovAge in 2021; 10+ years in industry Prior Work Experience Prior Work Experience 13 * Denotes Section 16 officer.
We are supported by a world-class Board of Directors James Carlson Chairman Joined board in 2022 Richard Zoretic Board Member Joined board in 2021 Marilyn Tavenner Board Member Joined board in 2021 Patty Fontneau Board Member Joined board in 2023 Jeb Bush Board Member Joined board in 2021 Teresa Sparks Board Member Joined board in 2023 Ted Kennedy, Jr. Board Member Joined board in 2021 Andy Cavanna Board Member Joined board in 2020 Tom Scully Board Member Joined board in 2016 Relevant Experience 14
Transformation Scalable Growth & Margin Recapture • Standardized operations, quality, and compliance processes • Rebuilt executive leadership team • Implemented culture of compliance and accountability • Developed foundational “payor capabilities” to optimize quality, compliance, revenue, and medical costs • Co-developed first PACE-specific instance of Epic EMR • Strengthened and expanded regulator / stakeholder relationships • Enrollment playbook to drive consistent growth with long-term visibility • Scalable technology, processes, and operating model support rapid scaling • Best-in-class “payor equivalent” capabilities to address unnecessary utilization and emerging cost trends • Pipeline of de novo centers under development to create long-term embedded earnings • M&A execution and integration expertise to further supplement velocity of growth, responsibly • Center capacity to support higher marginal profitability in near-term 2024+ 2024+2022-2023 Internal transformation has created a stronger foundation from which to grow responsibly and profitably 15
Investor Day Agenda 16 2 Operating Platform DR. RICH FEIFER
Higher acuity More chronic conditions Higher healthcare costs result in meaningfully higher revenue PMPM InnovAge serves a more complex population than traditional value-based primary care providers Traditional Value-Based Primary Care Provider1 Average Age: 1. Traditional VBC data based on publicly-available documents of InnovAge peer. 2. Based on InnovAge participant data for the 12-months ended September 30, 2023. 3. Based on InnovAge participant data for the 12-months ended June 30, 2023. 65–70 years 1+ chronic condition 6+ average number of medications Some participants dually eligible for Medicare and Medicaid 76 years2 >10 12 91% VS Differentiators 17 Require homecare to remain independent Direct relationship with consumer (i.e., not sub- capitated from payors) Higher touch model required to manage care effectively
InnovAge is unique in that it operates at the intersection of being a provider and a payor (“payvider”) 18 Provider Capabilities Fully integrated, comprehensive care delivered by an interdisciplinary care team Payor Capabilities At full risk for all Medicare and Medicaid services, including supportive housing Competencies Provider • Personalized plans of care • Integrated physical, behavioral, social needs • High levels of family engagement • Physical center as care coordination hub • More time spent with participants • PCP plus 10 other disciplines on care team • Better access and higher frequency of engagement • Home care, scheduling, transportation Payor • Government relations • Rate advocacy / actuarial • Sales & Marketing (field and digital) • Risk-score accuracy • Site of care management • Pharmacy integration • Provider network management and unit costs • Claims payment integrity
Centers are purpose built to effectively manage our population 1. Based on all InnovAge centers (operational and under development). 19 • Primary medical care • Nursing care • Dental services • Personal care • Mental health services • Physical, occupational and speech therapy services • Dedicated day-rooms plus dining spaces or recreation and socialization • Exercise and wellness space • Durable medical equipment • Medications Average square feet per center1 Average participant capacity per center1 Participant capacity in existing centers (~2.4x current census)2 Average visits per participant per month3 ~28K ~750 ~16.3K 4 • Inpatient & ER • Specialist care • Labs and Imaging • Supportive housing (when necessary) Centers Serve as Care Coordination Hub Average Specifications Services provided externally 2. Based on census as of December 31, 2023. Capacity includes 19 centers and 3 under development. 3. Based on InnovAge data for the 12-months ended June 30, 2023
We have invested in our people, processes, and tools to deliver a better experience for our participants, employees, and government partners Significant technology investments to drive standardization (e.g., Epic, ERP, transportation, telephony, CRM) Investments made in the last 2+ years are driving sustainable improvement in Participant and Employee experience across all centersImplemented Five Pillar performance management framework (people, service, quality, growth, financials) and KPIs Created “OneInnovAge” way for key operational processes (IDT, scheduling, orders, transportation, documentation, home care, wound care) ImpactHired 350+ center-level staff (net) over last 2 years including 66 new center leaders Created Triad Leadership Model to drive operating results and accountability 20
We use a “Five Pillar” performance framework to drive accountability for results at all levels of the organization 21 1. As of December 31, 2023. Adjusted EBITDA is a non-GAAP measure. See Appendix at the end of this presentation for a reconciliation to the most directly comparable U.S. GAAP measure. 2. Propriety composite represents equal weighting of falls, advance directives, St. Louis University Mental Status Examination (SLUMS), flu vaccine, and inpatient rates. 3. Adjusted EBITDA is a non-GAAP measure † People Service Quality Growth Financials Pillar Overview We have a robust talent engine to attract, engage, retain, develop, and recognize caring people with an owners’ mindset Highly-engaged employees with clarity of the vision which leads to higher participant satisfaction, which leads to higher job satisfaction In turn, increased job satisfaction leads to increased staff retention, higher quality care, and compliance excellence Motivated employees and satisfied participants enable us to further distinguish the value of the InnovAge platform which drives census growth Great people deliver great service and quality which leads to growth and strong financial performance Pillar Metric Employee Engagement Net Promoter Score (NPS) Quality and Compliance Composite Scores Enrollment Growth Adj. EBITDA YTD 2QFY24 Results 77% 47 4.4 Current census: 6,7801 $10M Adj. EBITDA YTD1 FY24 Targets 75% 35 4 Stars (out of 5) proprietary composite2 Census: 6,800-7,400 $12-18M Adj. EBITDA3
We use a Triad Leadership Model to deliver strong operational and clinical performance Enhanced communication Leadership model encourages collaboration through shared Five Pillar Goals Better and faster decision making Each discipline’s voice is heard and valued enabling transparency and diverse perspectives Improved participant care Ensures strong focus on clinical, operational and compliance excellence to deliver high quality care Greater efficiency and cost savings Team-based approach enables greater operational effectiveness and reduced medical costs 22 Triad Model BenefitsTriad Leadership Model Medical Director Center Director Nursing Director People Service Quality Growth Financials
The Triad Leadership Model is in place at each level of the organization and supported by robust enterprise solutions Purpose-Built Structure Leadership at center level driven by Triad model which is replicated at regional and national levels • Center director owns the P&L • Medical Director owns overall clinical care • Nursing Director owns condition management and care coordination Enterprise functions support each center in pursuit of high quality, compliance, and financial performance FinanceIT Legal HR Sales & Marketing Strategy & Corporate Development 23 Note: Center level count above does not include 3 centers under development. East Region Triad National Triad West Region Triad Center Level Triads n=10 Center Level Triads n=9 Compliance
Clinical Analytics Physician Orders & Documentation Data Sharing Compliance Notifications Transportation and Logistics Medication Management and Delivery Risk Score Capture and Management Participant Scheduling Single source of truth for care coordination Why it Matters • Built first PACE-specific EMR partnering with Epic • Best Practice guidelines built into clinical workflow • Real time documentation sharing • One record for all of participants shared across all centers • Population Health tools and other analytics to manage care • Advanced integration with complementary services • AI capabilities to automate previously manual tasks • Patient engagement application (MyChart) to stay connected outside of center We run our business on a single Electronic Health System (Epic) 24 Note: Crenshaw center EMR conversion in process.
VIDEO PLACEHOLDER
Investor Day Agenda 26 3 Clinical Model and Results DR. RICH FEIFER
We serve a frail, highly complex population 1. Based on InnovAge data as of December 31, 2023. 2. Based on analysis of individuals enrolled in Medicare Fee-for-Service non-dual enrollees, as calculated in an analysis by Avalere Health in June 2020. 3. Based on InnovAge participant data for the 12-months ended September 30, 2023. 4. Based on InnovAge participant data for the fiscal year ended June 30, 2023. 5. Based on InnovAge’s most recently available data from the 2022 Modified Health Outcome Survey, on average, assistance with two or more Activities of Daily Living. 27 Home 65-74 • Diabetes with chronic complications • Major depressive, bipolar and paranoid disorders • Chronic obstructive pulmonary disease (COPD) • Polyneuropathy • Dementia • Chronic kidney disease • Congestive Heart Failure (CHF) • Vascular disease • Hypertension Medicare Average2 Number of Medications4 Number of Chronic Conditions3 Activities of daily living requiring assistance5 Average 4 visits to PACE center per month Common Chronic Conditions Participant Interactions >10 IDT touchpoints on average per month Uncapped individualized therapy sessions ~10 InnovAge- provided transports per participant per month4 1 Participant Demographics4Who We Serve Average Risk Adjustment Factor Average Participant Statistics 2.42 1.08 >10 12 2+ Age (Years) Living Situation 33% 75-84 32% 85+ 21% 55-64 14% 58% Nursing Home 10% Assisted Living 32%
We employ a more comprehensive care team than traditional primary care providers 1. Traditional primary care providers may use these or other types on as needed basis but generally not employed and core to daily delivery model. 2. Represents InnovAge cost of care as % of revenue for the 6-months ended December 31, 2023. Traditional primary care spend per AAFP.org 2020 survey. Traditional Primary Care1 IDT Primary Care Physician ✓ ✓ Registered Nurse ✓ ✓ Master’s level Social Worker X ✓ Center Manager X ✓ Physical Therapist X ✓ Recreational Therapist X ✓ Occupational Therapist X ✓ Dietician X ✓ Home Care Coordinator X ✓ Personal Care Attendant X ✓ Driver X ✓ Care delivered by employees as a % of revenue2 ~5% ~30% • Interdisciplinary care teams (“IDTs”) serve as core care team (11 personnel) and coordinate all medical care and benefits through staff-model concierge practice • Address each participant's medical, physical, social, and emotional needs through assessing each person as an individual, and not making coverage decisions with generic rules • Create and refine custom care plans to help ensure participants receive optimal treatment • Seek to mitigate challenges presented by participants’ social determinants of health • Meet daily to discuss center operations and plans for new participants PACE model of care benefits 28
Key roles of the interdisciplinary care team 1. Roles as defined by the National PACE association. 29 Primary Care Provider Manages all aspects of medical care Registered Nurse Monitors for evolving care needs, coordinates care, and supports chronic condition management Home Care Coordinator Ensures in-home nursing and personal care needs are met Physical Therapist Optimizes physical function and rehabilitation, improving quality of life and reducing falls Occupational Therapist Identifies / addresses opportunities to increase participant independence and functional ability Recreational Therapist Plans day center activities to encourage socialization and maintain mental acuity Master’s-level Social Worker Identifies and addresses psycho-social determinants of health Dietician Ensures that participants’ nutritional needs are met Personal Care Attendant Assists with activities of daily living, in the home and in the day center Center Director Leads center operations, ensures overall participant satisfaction, care quality, and growth Driver Helps participants to / from vehicles and transports to the day center and outside appointmentsOperations Care Support Medical Role in IDT1Select Roles
VB: reformatThe InnovAge clinical care model is unique and comprehensive 30 Target Panel Size (compares to 500+ for trad. VBC providers) Average time PCP spends with a participant in their first month InnovAge Differentiators • Integrated approach and execution • Epic tech stack • 24/7 Care (e.g. after-hours nursing) • Monthly self-audit (“CMS-inside” approach) PCP • Drive all care decisions • Concierge practice model • 360-degree view of each participant • Durable relationships with participants On site care • PT/OT/Speech • Integrated BH • Recreation • Dental • Nutrition • Social Services <100 7 hrs Enterprise Support • Population health department • Infection control specialists • Best practices sharing through training / internal clinician community Our model aligns incentives for physicians to spend significant time with each participant and to optimize quality and the total cost of care PCP visits per day2 3-7 100% Patient Engagement1 Concierge Model 1. Defined as the percentage of participants with direct interaction and assessment by their primary care provider at least twice yearly. 2. Defined as the number of participant clinic visits per day worked by primary care providers in January 2024.
We’ve standardized each phase of the participant journey to ensure continuity of care Enrollment White glove enrollment model from initial assessment and eligibility to enrollment Care Delivery & Ongoing Support Care managers lead IDT-approved protocols for proactive care End of Life Care Support participant through palliative and end of life care (when required) Care Planning Customized care plan based on unique needs of the participant Coordinate Follow- Up Care IDT Re-evaluate and iterate Develop Care Plan Schedule Care Coordinate Transport Provide Care (in-center & outside specialists) Assessment Enrollment 31 Why It Matters Highly tailored and customized care plans keep each participant safe and independent for as long as safely possible
We rigorously track, measure, and act on clinical KPIs in every center, every month Core Clinical Metrics 1. Proprietary composite represents InnovAge internal methodology. Composite scores are compiled quarterly. COVID vaccine data pending. 2. InnovAge participant data as of December 31, 2023. NPA benchmark as of December 2022, which is the latest available. 3. InnovAge participant data as of December 31, 2023. 4. From the Center for Disease Control, based on data as of March 2023, https://www.cdc.gov/flu/fluvaxview/dashboard/vaccination-coverage-adults-65-over.htm. 32 Falls 10.3 falls per 100-member months vs. NPA average of 12.3 falls per 100-member months2 Flu InnovAge flu vaccination rate of 78%3 vs. community baseline of 54% for adults 65+4 ER Utilization Target 7.0% SPOTLIGHT Managing Key Risks IP Utilization Target 5.4% Quality Composite Score1 Target 4 out of 5 stars (based on proprietary composite) SNF Utilization Target 1.9% ALF/NF Utilization Target <33% & <10% respectively
We are building a portfolio of “payor capabilities” to improve quality, clinical standardization, and reduce medical cost trends 33 Claims Payment Integrity Provider Network Management Resource Management Risk Payment Accuracy Overview • Create and manage high value networks through standardized contracts • Ensure contracts reflect market- based unit cost pricing • Ensuring appropriate payment to external providers for billed procedures • Improving automation of processes to minimize manual intervention • Choosing optimal care settings for quality and value • Ensuring appropriateness of utilization of services • Accurately match the risk- based payments we receive with the acuity level of our participants Select Examples • Relationship management and service • Contract renegotiation (inpatient, outpatient, and ancillary services) • Clinical validation • Claims edits optimization • Inpatient utilization reduction (IP) • Emergency room (ER) avoidance • Chronic condition recapture rate • Prospective chart review • RAPS submission optimization Progress Towards Target Performance (compared to high performing health plans)
Investor Day Agenda Growth Strategy MATT HURAY & ROB BORELLA 4 34
M&A Augment organic initiatives through strategic M&A Extend PACE presence into new markets and new geographies via de novos New Center Drive census growth in existing centers through enrollment activities and strategic partnerships Existing Center 35 We are pursuing a multi-pronged growth strategy to drive attractive long-term growth
1,700 5,300 32% 2,800 3,850 73% 480 650 74% - 2,600 -% 700 1,800 39% 1,100 2,050 54% Note: Based on census as of December 31, 2023. Capacity includes 19 centers, plus 3 under development. Priority #1 remains responsible growth in existing markets We believe our meaningful investments over past 2+ years will enable us to grow overall census and revenue at a faster rate than cost growth 36 Existing and under development center capacity can support ~2.4x growth relative to our current census Near-Term Focus InnovAge Overall: CENSUS CAPACITY UTILIZATION % 6,780 16,250 ~42%
Significant embedded revenue opportunity within existing footprint 37 ~14,625 6,780 Current Future ~2.2x 22 centers3 90% utilization ~$108K / PMPY4 Census capacity within existing footprint Significant organic upside opportunity 1. As of December 31, 2023. 2. 90% utilization based on highest existing center utilization across portfolio. 3. Includes 3 centers under development. 4. Calculated based off total revenue for the year ended June 30, 2023. 1 42% utilization 90% utilization2 = ~$845M+ potential incremental Revenue x x
Seniors choose InnovAge for the comprehensive benefits, unique experience, and sense of community we create at each center The care [my mother] received has been phenomenal. Everything is done professionally and within a warm, caring atmosphere. It’s a family here. And, I know our care model is critical to our success. All the departments work together, whether its transportation, physical therapy, behavioral health, and so on. Care coordination across all settings 24/7 access to care PCPs have time to spend with participants Dedicated social worker as advocate No out-of- pocket costs1 Transportation Net Promoter Score (“NPS”) of 47 38 Our mother loved it here and we loved the care she was given. We knew when we got older, we wanted to be InnovAge participants, too, and here we are! The staff is tremendous. There is no other program we could have gone to that would have given us all these benefits and where we’d be so well taken care of. I took care of my mom, but I also needed to work full time. With InnovAge PACE’s support I was able to continue to work full-time, and not worry about her being home alone. My mom loved it here. You walk into this center, people are smiling and they’re handing out hugs like candy. 1. Dual eligible individuals have no out-of- pocket costs once enrolled in PACE. Participant Testimonials
Participant acquisition is supported by a robust set of capabilities Internal and external agency partners design on and offline campaigns to generate leads Resources deployed across the community to educate and build awareness for PACE and drive leads from referral organizations Receives leads from community outreach specialists and qualifies individuals for the program and prepares enrollment package for State application processing Enterprise Marketing Community Outreach Field Enrollment Receives inbound interest generated from online participant acquisition campaigns; performs pre-qualification and directs to field enrollment Inside Sales • Upgraded ~50% of sales reps with significant healthcare experience • Overhauled incentive & compensation program • Launched 3x/month sales training program • Improved data and analytics • Engaged top healthcare lead gen marketing firm • Built new inside sales call center team 39 Transformation
We source participants from a variety of referral channels Targeted direct-to- consumer marketing Increased focus on digital channels Outreach to community partners and prospects Friends and family are key advocates Participant and community education 1. External costs exists for digital / advertising and awareness partner channels. Other channels have internal costs only. 2. Awareness partners represent 3rd parties (e.g., brokers) who curate lists of potential eligible participants. Data as of December 31, 2023. MULTI-MODAL MARKETING STRATEGY 40 Gross Enrollments by Referral Channel1 25% 20% 13% 13% 11% 8% 4% 6% Digital / Advertising Government Agency Care Providers / Service Providers Assisted Living Independent Living Other Awareness Partners2 Friends and Family
PACE enrollment involves both a physical and financial eligibility assessment 1. Collaborative effort between InnovAge and state (employed or contracted) to determine level of care assessment and financial suitability. Physical Assessment to confirm clinical eligibility Financial Assessment to ensure financial eligibility Prospect is guided through more comprehensive eligibility assessment Conducts initial assessment to pre-qualify referrals Prospect referred to InnovAge Enterprise marketing Field enrollment Registered nurse and IDT team State partners1 Lead Generation Lead Development Intake Assessment ONGOING ~1 WEEK <1 WEEK 1-8 WEEKS Community Outreach representative Inside sales Field enrollment 41 Physical and financial assessment simultaneously coordinated by enrollment representative PR O C ES S R es po ns ib le P ar tie s Pr oc es s
Continuous improvement in strength and velocity of enrollment funnel resulting in improved growth, cost effectiveness, and speed to impact We’ve made our sales engine more efficient and productive Sales Qualified Lead Growth Gross Enrollment Growth Sales Cycle2 Reduction 42 Note: Metrics provided in circles represent compound annual growth rates (CAGRs). 1. Defined as sales and marketing costs divided by gross enrollments. 2. Defined as time from initial engagement to enrollment. Participant Acquisition Cost1 2,995 5,323 6,000 FY22 FY23 FY24E +42% 14,261 14,634 9,898 FY22 FY23 FY24E -17% 1,689 1,332 2,400 FY22 FY23 FY24E +19% 114 92 75 FY22 FY23 FY24E -19%
Our new healthy independence campaign launched in late 2023 Since launching campaign in November 2023, lead growth is up 10% while cost per lead is down 28% 43
TV commercial https://vimeo.com/882302001/b85a4680df 44
Market Dynamics • Flagship market • Strong market share built over many years • Opportunity in new MSAs remain • Leader in PACE adoption and support • Largest number of eligibles • Competition exists in territories • Only PACE program operating in state • Relatively challenging rate environment • Friendly regulatory environment • Significant runway for growth in existing centers • Highly competitive market for long-term care services • Majority of eligibles reside in Philadelphia market • Large number of PACE eligibles • State is highly supportive of advancing and growing PACE model De novo centers (year opened) • Lakewood (‘03) • Aurora (‘03) • Pueblo (‘10) • Thornton (‘11) • Denver (‘14) • Loveland ('15) • San Bernardino (‘14) • Sacramento (‘20) • Downey (TBD)1 • Henry (‘19) • Pennypack (‘20) • Tampa (‘24) • Orlando (‘24E)1 Acquired centers (year acquired) • Crenshaw (‘23) • Bakersfield (TBD)1 • Albuquerque (‘07) • Roanoke (‘17) • Richmond / Newport News (‘18) • Charlottesville (‘18) • Allegheny (‘18) • St. Bart (‘18) Track record of growth from de novo expansion and acquisitions CA NMCO VA PA FL 1. Under development 45
Relative cost of care and labor inform optimal size of center Assessment of PACE supportiveness overall, for expansion, and especially in areas of unmet need Understanding existing plans and relative integration Service area size and relative density provide visibility to growth Ensuring appropriate Medical dual rates in PACE Understanding provider consolidation as it relates to network rates and adequacy Real estate availability, relative cost, and lease environment in target neighborhoods inform site selection and build vs buy We utilize a very disciplined approach to evaluate new markets 46 PACE Political Climate Real Estate Existing DUALS Programs Labor / Supply Costs Potential PACE Eligibles Medicaid Rates Provider Landscape Each driver underpins evaluation of unit economics and ROI for the center Pro Forma Model Thorough evaluation of local market incumbents as strategic accelerant Partnerships
($5) $0 $5 $10 $15 $20 0 1 2 3 4 5 6 De novo maturity curve Center Level Contribution Margin ($M) De Novo Growth Model (Tampa) 47 Margin growth continues to year 5 Adj. EBITDA margin breakeven ~24–36 months CLCM margin breakeven ~18 months Selected Highlights Upfront Capex ~$12.5M Estimated Time to CLCM Breakeven ~18 months Census Capacity (at Maturity) ~1,300 Target Center-level Contribution (Mature) ~$20M Years
CASE STUDY Driving Adoption of PACE in California 1. Bakersfield remains under development. 2. Demographic data reflects estimates for San Bernardino county from Claritas Pop Facts 2018, US Census Bureau, American Community Survey (ACS 16 5yr, C18106 & 18107). 3. Measured as InnovAge census as a % of PACE-eligible duals in the InnovAge San Bernardino service area”, not the entire metropolitan statistical area. InnovAge Participants (San Bernardino) 48 85 240 303 458 609 843 991 1,129 1,310 1,433 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 +36% CAGR Market Penetration3 Market History What’s Driving PACE Adoption in California? CA Expansion Post San Bernardino • Opened Sacramento in 2020 • Acquired two PACE centers (one operational) in Dec. 2023 • Downey de novo under development 2014: InnovAge opens first center in San Bernardino county 2016-2019: PACE Modernization Act changes CA’s rate- setting methodology and accelerates PACE enrollment 2020: Expands San Bernardino center and opens new facility in Sacramento 2021-23: Legislation passes requiring PACE to be presented as an option to Medi-Cal beneficiaries 2023-24: Acquired 2 new centers Crenshaw and Bakersfield in Southern California market 1 ~95k Dual-Eligibles ~13k PACE-Eligibles ~2k PACE Enrollment ~5k Nursing Beds Proven ability to save costs Size / growth of overall frail senior market Government support given demonstrated track record San Bernardino Market Demographics2 Long history of risk-based models Expanded facility in 2020 Opened in 2014 ~2% ~7% ~11%
“Day 1” Checklists Layout and functionality RFP or first come first serve process Dedicated team and standardized approach supports ‘franchise model’ for new center openings Application Process Site Selection (in parallel with application) Construction / Build Out State Readiness ~3-6 months ~1-3 months ~12+ months ~3-6 months Hiring and Training ~3 months Post Opening Support ~12 months Opening Hiring and training Year 1 Execution Blueprint • PACE eligible heatmaps, demographic information, and transportation patterns to determine street corner • Lease vs buy analysis Location identification • Beginning community stakeholder outreach to educate on PACE and InnovAge (pre- RFP) • State application drives assurances from Medicaid agency followed by application to CMS • Size specific blueprints • Customizations to meet unique needs of each community • Trusted regional construction firm roster • Adapt and apply compliance policies to match state specific regulations • Contracted provider network • Onsite readiness review with State • Final application submission to CMS • Triad leadership positions hired and trained first to set tone • Sales and enrollment teams cultivate referral channels and build awareness • Ramp up full IDT and training • Clear definitions of success from Day 1 leveraging enterprise best practices • Continuous optimization of IDT and in-center efficiencies • Regional and enterprise 1x1 support Corporate Dev. RFP “Win” Team Real Estate Business Dev. Ops. Center-level Staff Enterprise Services Sales & Marketing 49
PACE landscape remains highly fragmented for future consolidation WA 3 OR 2 CA 24 ND 1 WY 0 NM 1 OK 3 TX 3 NE 1 CO 5 KS 3 IA 2 WI 1 MI 14 OH 1IN 5 PA 19 NY 9 LA 2 AR 3 TN 1 VA 8 NC 11 SC 3 FL 6 MD 1 DE 2 NJ 6 RI 1 AL 1 MA 8 KY 3 AZ 0 NV 0 UT 0 ID 0 MT 0 MN 0 IL 0 MO 1 SD 0 MS 0 GA 0 WV 0 ME 0 NH 0 VT 0 CT 0 Source: “PACE in the States,” National PACE Association, December 2023. Centerlight Altamed Trinity Providence SeniorLIFE (Grane) San Diego PACE WelbeHealth On Lok PACE Innovative Integrated Health PACE of Southeast Michigan Fallon Health 112 others ~6.8K ~5.6K ~4.5K ~3.9K ~3.1K ~2.6K ~2.6K ~2.4K ~1.8K ~1.7K ~1.7K ~1.6K ~300 # of States 6 1 1 9 3 1 1 1 1 1 1 2 - - # of Centers 19 11 11 13 17 12 4 7 7 3 8 6 - - For-ProfitSelected PACE Organizations Not-for-Profit 50 156 PACE organizations nationally 374 centers 72k PACE enrollees AK 0 HI 0
Investor Day Agenda Financial Update BEN ADAMS 5 51
Key financial takeaways Significant number of operational enhancements have already been identified / implemented and are beginning to have an impact Clinical value, and other margin improvement initiatives are on track to realize targeted savings, but exact short-term timing remains less clear Our sequential financial performance improvement gives us confidence that our operational efforts are bearing fruit Significant embedded earnings opportunity driven by: • Accelerating responsible census growth • Leveraging fixed overhead costs • Utilizing excess center capacity • Increasing technology and data efficiencies • Continuing our commitment to high quality participant care 52 • Investments made across the enterprise are on track and yielding results • Margin improvement initiative target remain on track • We have a clear path for embedded earnings growth Why It Matters
Continued momentum post sanction release creates foundation for repeatable top line growth 53 6,460 6,310 6,400 6,580 6,780 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 $167.1 $172.5 $176.9 $182.5 $188.9 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 Total Revenue (at Quarter End)Census at Quarter End +13.0%+7.5%
Adjusted EBITDA is building momentum 1. Adjusted EBITDA is a non-GAAP measure. See Appendix at the end of this presentation for a reconciliation to the most directly comparable U.S. GAAP measure. 54 TTM Adjusted EBITDA and De Novo Losses ($M)1Key Factors Driving Margin Improvement Responsible census growth • Higher marginal profitability on untapped center capacity • Aligns participant mix with rate structure Executing on Clinical Value Initiatives (CVIs) • Improves quality of patient care, creates efficiency and partially offsets medical cost trend Leverage fixed operating costs • Approximately 20% of InnovAge cost of care and 75% corporate general and administrative costs are fixed Improving rate accuracy • Accurately capture risk score data to ensure appropriate payment Implementing best-in-class data analytics • Co-developed and implemented PACE-specific instance of Epic EMR $(4.5) $(2.6) $(1.3) $4.8 $14.5 Adjusted EBITDA Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 $3.2 $3.0 $4.0 $4.8 $6.1 De Novo Losses
Our full-risk model enables us to capture a portion of the value we create 1. Calculated based off total revenue for the year ended June 30, 2023. 2. Excludes D&A 3. Intermediate-term defined as 2-4 years and long-term defined as greater than 4 years. Time to achievement will be subject to rate of de novo openings and magnitude of operating losses and other factors. 55 Illustrative InnovAge Economics External Provider Costs Center-Level Contribution Margin Target Cost of Care2 Corporate, General and Administrative Adj. EBITDA Margin Target 1 2 3~$9,000 PMPM1 Risk-Adjusted PMPM Payment for Participant Care 1 2 3 Care provided by non-InnovAge providers • Inpatient care, housing (e.g., assisted living), outpatient care and pharmacy Care provided by InnovAge staff in our centers • Primary care, nursing, dental, home care, PT/OT, etc. provided by InnovAge staff (e.g., IDTs) • Other center-level costs enabling care delivery (e.g., facility costs, transportation, supplies, etc.) 20%+ target center-level contribution margin 4 Corporate, general and administrative costs are largely fixed • Include Executive, Legal, Finance, IT, etc. 4 20%+ • 8-9%+ Intermediate-term • 10%+ Long-term Adj. EBITDA Margin Target3
Building blocks for intermediate-term Adjusted EBITDA margin target 56 External Provider Costs (~2/3 of medical costs) • Generally increase with census, but we expect increases in PMPM costs to be offset partially through CVIs and other initiatives Internal Cost of Care (~1/3 of medical costs) • Approximately 80% of Cost of Care (e.g., salaries, wages, benefits, purchased services and supplies) are variable and are largely driven by census growth, center-level staffing targets, and trends in wage rates • Approximately 20% of cost of care (e.g., administrators and InnovAge facility costs) are fixed and represent an embedded margin opportunity Center-Level Contribution Margin (CLCM) • Highest performing centers operate in the 20%-25%+ range Sales & Marketing • Cost are expected to generally grow at a lower rate compared to overall census growth Corporate, General & Administrative • Approximately 75% of expenses are fixed – Include corporate level costs (e.g., Executive, Finance, Legal, and IT) – Significant technology investments (e.g., Epic EMR and planned Oracle Fusion Cloud) increase efficiency Adjusted EBITDA Margin External Provider Costs 52-54% 8-9%+ CLCM Ratio 16-20%+ Corporate General and Administrative 9-11% Sales & Marketing 2-3% Cost of Care 28-30%
Significant proportion of centers at/or above target levels Improvement in census drives disproportionate contribution margin Clinical Value Initiatives starting to bend medical cost trend Target goal: 20%+ CLCM at every center in portfolio Unused capacity offers significant embedded CLCM opportunity 57 1. Based on the six months ended December 31, 2023. Cohort Analysis of CLCM Margin by Center1 Key Observations 20% 25% 14% 27% 4% 26% 6% 17% 7% 23% 16% 18% 16% 20% 9% 10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 0% 20% 40% 60% 80% 100% (1)% 2Q FY24 17.8% CLCM CLCM % of Revenue (Bubbles Denote CLCM $) Current Occupancy %
InnovAge receives three monthly payments per participant from government partners 1. Calculated based off total revenue for the year ended June 30, 2023. 58 + + = ~$3k PMPM ~$1k PMPM ~$5k PMPM ~$9k PMPM Medicare Part C Medicare Part D Medicaid to manage total cost of care for each participant1
Uniqueness of the PACE rate setting process 59 Medicare Rate DevelopmentMedicaid Rate Development Covered services and rate setting process differ by state Rates are based on a discount to the Amount that Would Otherwise be Paid (AWOP) Actual PACE experience may or may not be included in the rate development process Utilizes CMS-HCC1 v22 to calculate risk score • CMS has indicated that PACE would continue to use v22 in CY25 • Medicare Advantage currently utilizes CMS-HCC v24 Rates are based on county-specific rates multiplied by risk score and frailty factor PACE organizations are not currently subject to RADV2 audits Risk adjustment is done through RAPS3 • Medicare Advantage plans submit risk adjustment through EDS3. CMS is transitioning PACE to EDS, but timing is TBD 1. CMS-HCC, Centers for Medicare & Medicaid Services-Hierarchical Condition Categories. 2. RADV, Risk adjustment Data Validation. 3. RAPS, Risk Adjustment Processing System. EDS, Encounter Data System Rates impacted by underlying living mix assumption (e.g., independent living vs supportive housing)
Balance sheet and capital deployment 1. As of December 31, 2023. 60 Cash and Cash Equivalents Short Term Investments Revolving Credit Facility Total $54.1M $44.7M $96.9M $195.7M Capital Deployment Priorities 1 2 3 Invest in our business Continued investment in our PACE platform Expand via de novos Growth into new markets Enhance portfolio Targeted growth through partnerships and M&A Liquidity1 + + =
Re-confirmed fiscal 2024 guidance 61 1. We define Member Months as the total number of participants as of period end multiplied by the number of months within a year in which each participant was enrolled in our program. 2. Adjusted EBITDA is a non-GAAP measure †. 6.8K – 7.4K 79K - 83K $725M - $775M $12M - $18M $10M - $12M De Novo LossesCensus Member Months1 Total Revenue Adjusted EBITDA2
Investment highlights With focus and execution, we believe InnovAge can deliver attractive top-line growth at a long-term sustainable margin Focus on a largely untapped and growing market enabling frail seniors to remain independent by fully integrating Medicare and Medicaid services Powerful unit economics and quality outcomes driven by controlling more of the healthcare dollar than any other value-based care model Most sophisticated national PACE platform with best-in-class provider AND payor capabilities Management bench with extensive senior care experience in compliance and performance-oriented cultures 62 Recent investments coupled with meaningful center capacity create significant embedded earnings with visibility into strong organic growth and considerable margin expansion
Appendix
Non-GAAP Adjusted EBITDA ($ in thousands) 1. Reflects charges related to litigation by shareholders. 2. Reflects charges related to M&A transaction and integrations, and de novo center developments. 3. Reflects charges related to business optimization initiatives. Such charges relate to one-time investments in projects designed to enhance our technology and compliance systems and improve and support the efficiency and effectiveness of our operations. For the three months ended March 31, 2022 this includes (i) $0.6 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $0.1 million of charges related to government investigations, (iii) $0.8 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities, (iv) $0.5 million related to Epic readiness, and (v) $0.5 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the three months ended June 30, 2022 this includes (i) $1.3 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $1.5 million of charges related to government investigations, (iii) $2.5 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk- bearing payor capabilities, and strengthen our enterprise capabilities, and (iv) $0.4 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the three months ended September 30, 2022 this includes (i) $0.7 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $1.6 million of charges related to government investigations, and (iii) $4.3 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities. For the three months ended December 31, 2022 this includes (i) $0.5 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $1.4 million of charges related to government investigations, (iii) $0.8 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities, and (iv) $0.1 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. 4. Reflects non-recurring expenses relating to the implementation of a new electronic medical record (“EMR”) vendor. Adjusted EBITDA For the 3 months ended March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Net income (loss) $ (3,158) $ (13,532) $ (13,699) $ (10,547) Interest expense, net 709 596 603 223 Depreciation and amortization 3,850 3,489 3,433 3,662 Provision for income tax -4,116 642 -3,470 -2,912 Stock-based compensation 845 1,153 1,300 1,212 Class action litigation1 246 116 -46 1,282 M&A diligence, transaction and integration2 693 231 286 336 Business optimization3 2,460 5,735 7,188 2,846 EMR transition4 402 928 590 1,944 Adjusted EBITDA $ 1,931 $ (642) $ (3,815) $ (1,954) Adjusted EBITDA Margin % 1.1% (0.4)% (2.2)% (1.2)% 64
Non-GAAP Adjusted EBITDA ($ in thousands) 1. For the 3-months ended March 31, 2023, and June 30, 2023, reflects a $1.2 million reserve for a wage and hour class action settlement and, for all periods, reflects charges/(credits) related to litigation by stockholders, litigation related to de novo center development, and civil investigative demands. 2. Reflects charges related to M&A transaction and integrations, and de novo center developments. 3. Reflects charges related to business optimization initiatives. Such charges related to one-time investments in projects designed to enhance our technology and compliance systems, improve and support the efficiency and effectiveness of our operations, and third-party support to address efforts to remediate deficiencies in audits. For the three months ended March 31, 2023 this includes (i) $0.3 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $0.2 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities, (iii) $0.6 million in the consolidation of the Germantown, Pennsylvania center, and (iv) $0.3 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the three months ended June 30, 2023 includes (i) $0.3 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $0.4 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities, (iii) $1.1 million related to organizational restructure, and (iv) $0.3 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the three months ended September 30, 2023, this includes (i) $1.8 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities and (ii) $0.4 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the three months ended December 31, 2023, this includes (i) $0.3 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities (ii) $0.3 million of costs related to severance and other organizational costs and (iii) $0.2 million related to other non-recurring charges. 4. Reflects non-recurring expenses relating to the implementation of a new EMR vendor. 5. Reflects impairment charges related to our minority equity interest in Jetdoc, Inc. For the 3 months ended March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Net income (loss) $ (7,310) $ (11,995) $ (10,962) $ (3,821) Interest expense, net 405 291 661 935 Depreciation and amortization 3,992 4,332 4,269 4,290 Provision for income tax (1,365) 506 226 93 Stock-based compensation 1,208 1,272 1,823 1,766 Litigation costs and settlement1 3,274 1,943 1,707 198 M&A diligence, transaction and integration2 146 682 409 284 Business optimization3 1,394 2,117 2,159 774 EMR transition4 2,045 1,568 1,934 1,370 Loss on minority equity interest5 - - - 1,882 Adjusted EBITDA $ 3,789 $ 716 $ 2,226 $ 7,771 Adjusted EBITDA Margin % 2.2% 0.4% 1.2% 4.1% 65 Adjusted EBITDA
Non-GAAP Adjusted EBITDA ($ in thousands) 1. Reflects charges/(credits) related to litigation by stockholders, litigation related to de novo center development, and civil investigative demands. Reflects charges related to M&A transaction and integrations, and de novo center developments. Costs reflected consist of litigation costs considered one-time in nature and outside of the ordinary course of business based on the following considerations which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) complexity of the case, (iii) nature of the remedies sought, (iv) litigation posture of the Company, (v) counterparty involved, and (vi) the Company's overall litigation strategy. 2. Reflects charges related to M&A transaction and integrations, and de novo center developments. 3. Reflects charges related to business optimization initiatives. Such charges related to one-time investments in projects designed to enhance our technology and compliance systems, improve and support the efficiency and effectiveness of our operations, and third-party support to address efforts to remediate deficiencies in audits. For the six months ended December 31, 2023 this includes (i) $2.1 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities (ii) $0.3 million of costs related to severance and other organizational costs and (iii) $0.5 million related to charges for technology improvements, environmental, sustainability, and governance reporting, and other non-recurring charges. 4. Reflects non-recurring expenses relating to the implementation of a new EMR vendor. 5. Reflects impairment charges related to our minority equity interest in Jetdoc, Inc. For the 6 months ended December 31, 2023 Net loss $ (14,783) Interest expense, net 1,596 Depreciation and amortization 8,559 Provision for income tax 319 Stock-based compensation 3,589 Litigation costs and settlement1 1,905 M&A diligence, transaction and integration2 693 Business optimization3 2,933 EMR transition4 3,304 Loss on minority equity interest5 1,882 Adjusted EBITDA $ 9,997 Adjusted EBITDA Margin % 2.7% 66 Adjusted EBITDA
Non-GAAP Trailing 12-Month Adjusted EBITDA ($ in thousands) 1. Reflects charges/(credits) related to litigation by stockholders, litigation related to de novo center development, and civil investigative demands. 2. Reflects charges related to M&A transaction and integrations, and de novo center developments. 3. Reflects charges related to business optimization initiatives. Such charges related to one-time investments in projects designed to enhance our technology and compliance systems, improve and support the efficiency and effectiveness of our operations, and third-party support to address efforts to remediate deficiencies in audits. For the 12 months ended December 31, 2022 this includes (i) $2.8 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $1.6 million of charges related to government investigations, (iii) $8.1 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities, (iv) $2.7 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the 12 months ended March 31, 2023 this includes (i) $2.4 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $1.5 million of charges related to government investigations, (iii) $7.8 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities, (iv) $1.9 million related to other non-recurring projects aimed at reducing costs and improving efficiencies, and (v)$0.6 million in the consolidation of the Germantown, Pennsylvania center. For the 12-months ended June 30, 2023 includes (i) $1.8 million related to consultants and contractors performing audit and other related services at sanctioned centers, (iii) $5.7 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities, (iii) $1.4 million related to other non-recurring projects aimed at reducing costs and improving efficiencies, (iv) $0.6 million in the consolidation of the Germantown, Pennsylvania center, and (v) $1.1 million related to organizational restructure. For the 12 months ended September 30, 2023, this includes (i) $2.9 million related to consultants and contractors performing audit and other related services at sanctioned centers, (iii) $1.4 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities and (iv) $1.2 million related to other non-recurring projects aimed at reducing costs and improving efficiencies, (v) $0.6 million in the consolidation of the Germantown, Pennsylvania center, and (vi) $1.1 million related to organizational restructure. For the 12 months ended December 31, 2023, this includes (i) $2.4 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $0.9 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities, (iii) $0.6 million in the consolidation of the Germantown, Pennsylvania center, (iv) $1.4 million related to organizational restructure, (v) $1.2 million related to other non-recurring projects aimed at reducing costs and improving efficiencies, 4. Reflects non-recurring expenses relating to the implementation of a new EMR vendor. 5. Reflects impairment charges related to our minority equity interest in Jetdoc, Inc. Adjusted EBITDA For the 12 months ended December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Net income (loss) (40,936) (45,088) (43,552) (40,815) (34,089) Interest expense, net 2,131 1,827 1,522 1,580 2,292 Depreciation and amortization 14,434 14,576 15,419 16,255 16,883 Provision for income tax (9,856) (7,105) (7,241) (3,545) (540) Stock-based compensation 4,510 4,873 4,993 5,516 6,070 Class action litigation1 4,927 7,955 9,782 9,820 7,123 M&A diligence, transaction and integration2 1,231 684 1,134 1,336 1,520 Business optimization3 15,219 14,153 10,535 7,139 6,444 EMR transition4 3,865 5,508 6,147 7,491 6,917 Loss on minority equity interesst5 - - - - 1,882 Adjusted EBITDA (4,475) (2,617) (1,261) 4,777 14,502 Adjusted EBITDA Margin % (0.7)% (0.4)% (0.2)% 0.7% 2.0% 67
Non-GAAP Center-Level Contribution Margin ($ in thousands) 1. Center-Level Contribution Margin from segments below the quantitative thresholds are primarily attributable to the Senior Housing operating segment of the Company. This segment has never met any of the quantitative thresholds for determining reportable segments. 2. Overhead consists of the Sales and marketing and Corporate, general and administrative financial statement line items. Center-Level Contribution Margin For the 6 months ended December 31, 2022 For the 6 months ended December 31, 2023 PACE All other(1) Totals PACE All other(1) Totals Capitation revenue $338,071 $ — $338,071 $370,734 $- $370,734 Other service revenue 176 427 603 153 495 648 Total revenues 338,247 427 338,674 370,887 495 371,382 External provider costs 189,744 — 189,744 200,322 - 200,322 Cost of care, excluding depreciation and amortization 104,595 338 104,933 109,267 303 109,570 Center-Level Contribution Margin 43,908 89 43,997 61,298 192 61,490 Overhead costs(2) 67,107 79 67,186 65,425 9 65,434 Depreciation and amortization 6,881 214 7,095 8,334 225 8,559 Interest expense, net 735 91 826 1,506 90 1,596 Other income (480) — (480) (1,517) - (1,517) Other expense — — — 1,882 - 1,882 Income (Loss) Before Income Taxes $(30,335) $(295) $(30,630) $(14,332) $(132) $(14,464) 68